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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): AUGUST 6, 1995
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FIRST BANK SYSTEM, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 1-6880 41-0255900
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(State or other jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
601 SECOND AVENUE SOUTH, MINNEAPOLIS, MINNESOTA 55402
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 612-973-1111
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NOT APPLICABLE
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(Former name or former address, if changed since last report)
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Item 2. On August 6, 1995, First Bank System, Inc. ("FBS") and FirsTier
Financial, Inc. ("FFI") entered into an Agreement of Merger and
Consolidation (the "Merger Agreement"), pursuant to which FFI will be
merged into FBS. In connection with the merger, each outstanding share
of Common Stock of FFI will be converted into .8829 shares of Common
Stock of FBS. The merger will be accounted for as a purchase.
In connection with the Merger Agreement, FBS and FFI entered into a
Stock Option Agreement pursuant to which FBS has the right to purchase
up to 19.9 percent of FFI's outstanding Common Stock at a price of
$37.00 per share if, under certain circumstances, FFI enters into (or
the FFI Board of Directors recommends that the FFI stockholders approve
or accept) an agreement to be merged with or acquired by a third party
(including the acquisition of 20 percent or more of FFI's outstanding
Common Stock) or a third party acquires 20 percent or more of the
outstanding FFI Common Stock.
The merger is subject to various conditions, including the approval of
the stockholders of FFI and required regulatory approvals.
The Merger Agreement and the Stock Option Agreement are attached hereto
as Exhibits 2.1 and 2.2 and are incorporated herein by reference.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
As permitted by Item 7 of Form 8-K, because it is impracticable to file
the required historical financial statements of FFI and the required pro
forma financial information reflecting the acquisition of FFI on the
filing date of this Form 8-K, such information will be filed not later
than 60 days after the filing date of this Form 8-K.
(c) Exhibits
2.1 Agreement of Merger and Consolidation, dated August 6, 1995, by
and between First Bank System, Inc. and FirsTier Financial,
Inc. Omitted from this Exhibit, as filed, are the schedules and
exhibits referenced in such agreement. FBS will furnish
supplementally a copy of any such exhibits to the Commission
upon receipt.
2.2 Stock Option Agreement, dated August 7, 1995, by and between
First Bank System, Inc. and FirsTier Financial, Inc.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIRST BANK SYSTEM, INC.
Date: August 18, 1995 By /s/ David J. Parrin
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David J. Parrin
Senior Vice President & Controller
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AGREEMENT OF MERGER AND CONSOLIDATION
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BY AND BETWEEN
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FIRST BANK SYSTEM, INC.
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AND
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FIRSTIER FINANCIAL, INC.
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DATED: AUGUST 6, 1995
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TABLE OF CONTENTS
Page
ARTICLE 1
MERGER...............................................................
1.1. Effect of Merger...............................................
1.2. Effect on Outstanding Shares of FFI Capital Stock..............
1.3. FBS Common Stock Adjustments...................................
1.4. Rights of Holders of FFI Capital Stock; Capital Stock of FBS...
1.5. No Fractional Shares...........................................
1.6. Procedure for Exchange of Stock................................
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF FBS................................
2.1. Organization...................................................
2.2. Authority Relative to this Agreement; Non-Contravention........
2.3. Validity of FBS Common Stock...................................
2.4. Capital Stock..................................................
2.5. 1934 Act Reports...............................................
2.6. No Material Adverse Changes....................................
2.7. Prospectus/Proxy Statement.....................................
2.8. Litigation.....................................................
2.9. Reports and Filings............................................
2.10. Regulatory Approvals...........................................
2.11. Compliance with Laws; Permits..................................
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF FFI................................
3.1. Organization and Qualification.................................
3.2. Authority Relative to this Agreement; Non-Contravention........
3.3. Capitalization.................................................
3.4. 1934 Act Reports...............................................
3.5. Financial Statements...........................................
3.6. Loans..........................................................
3.7. Reports and Filings............................................
3.8. Subsidiaries...................................................
3.9. Absence of Undisclosed Liabilities.............................
3.10. No Material Adverse Changes....................................
3.11. Absence of Certain Developments................................
3.12. Properties.....................................................
3.13. Tax Matters....................................................
3.14. Contracts and Commitments......................................
3.15. Litigation.....................................................
3.16. No Brokers or Finders..........................................
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3.17. Employees......................................................
3.18. Employee Benefit Plans.........................................
3.19. Insurance......................................................
3.20. Compliance with Laws; Permits..................................
3.21. Administration of Fiduciary Accounts...........................
3.22. Prospectus/Proxy Statement.....................................
3.23. Regulatory Approvals...........................................
3.24. Interest Rate Risk Management Instruments......................
3.25. Rights Agreement...............................................
3.26. Antitakeover Provisions Inapplicable...........................
ARTICLE 4
CONDUCT OF BUSINESS PENDING THE MERGER...............................
4.1. Conduct of Business of FFI.....................................
4.2. Conduct of Business of FBS.....................................
ARTICLE 5
ADDITIONAL COVENANTS AND AGREEMENTS..................................
5.1. Filings and Approvals..........................................
5.2. Certain Loans and Related Matters..............................
5.3. Expenses.......................................................
5.4. No Negotiations, etc. .........................................
5.5. Notification of Certain Matters................................
5.6. Access to Information; Confidentiality.........................
5.7. Filing of Tax Returns and Adjustments..........................
5.8. Registration Statement.........................................
5.9. Affiliate Letters..............................................
5.10. Establishment of Accruals......................................
5.11. Employee Matters...............................................
5.12. Tax Treatment..................................................
5.13. Stock Options..................................................
5.14. Indemnification and Insurance..................................
5.15. FBS SEC Reports................................................
5.16. SEC Reports....................................................
5.17. Stock Exchange Listing.........................................
5.18. Shareholder Approval...........................................
5.19. Conversion of Customer Data Files and Records..................
5.20. Employment Agreement...........................................
5.21. Pre-Acquisition Investigation..................................
5.22. Disclosure Schedules...........................................
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ARTICLE 6
CONDITIONS...........................................................
6.1. Conditions to Obligations of Each Party........................
6.2. Additional Conditions to Obligation of FFI.....................
6.3. Additional Conditions to Obligation of FBS.....................
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER....................................
7.1. Termination....................................................
7.2. Effect of Termination..........................................
7.3. Amendment......................................................
7.4. Waiver.........................................................
ARTICLE 8
GENERAL PROVISIONS...................................................
8.1. Public Statements..............................................
8.2. Notices........................................................
8.3. Interpretation.................................................
8.4. Severability...................................................
8.5. Miscellaneous..................................................
8.6. Survival of Representations, Warranties and Covenants..........
SIGNATURES................................................................
EXHIBIT A Form of Stock Option Agreement
EXHIBIT B Plan of Merger
EXHIBIT C Form of Affiliate Letter
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AGREEMENT OF MERGER AND CONSOLIDATION
AGREEMENT OF MERGER AND CONSOLIDATION dated August 6, 1995, by and between
FIRST BANK SYSTEM, INC., a Delaware corporation ("FBS"), and FIRSTIER FINANCIAL,
INC., a Nebraska corporation ("FFI").
WHEREAS, the Boards of Directors of FBS and FFI have determined that it is
in the best interests of FBS and FFI and their respective shareholders to
consummate the merger of FFI with and into FBS as described in Article 1 of this
Agreement (the "Merger");
WHEREAS, as a result of the Merger, all of the outstanding common stock,
$5.00 par value, of FFI ("FFI Common Stock") will be converted into common
stock, $1.25 par value, of FBS ("FBS Common Stock") on the terms and subject to
the conditions set forth in this Agreement;
WHEREAS, (a) FFI directly or indirectly owns all of the issued and
outstanding capital stock of the national banking associations listed on
Schedule 3.8 hereto (the "National Banks") and the state banking corporations
listed on Schedule 3.8 hereto (the "State Banks" and together with the National
Banks, the "Banking Subsidiaries") and (b) FFI directly or indirectly owns all
of the issued and outstanding capital stock of the corporations listed on
Schedule 3.8 hereto (the "Nonbanking Subsidiaries," and, together with the
Banking Subsidiaries, the "Subsidiaries");
WHEREAS, as a condition and inducement to FBS's willingness to enter into
this Agreement, FBS and FFI are entering into, on the day after the execution
and delivery hereof, a Stock Option Agreement in the form attached hereto as
Exhibit A (the "Stock Option Agreement") pursuant to which FFI shall grant to
FBS an option to purchase shares of FFI Common Stock; and
WHEREAS, FBS and FFI desire that the Merger be made on the terms and
subject to the conditions set forth in this Agreement and qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the representations, warranties and
covenants contained herein, the parties hereto agree as follows:
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ARTICLE 1
MERGER
Subject to the satisfaction or waiver of the conditions set forth in
Article 6, on a date mutually satisfactory to the parties as soon as practicable
following receipt of all necessary federal and state bank regulatory approvals
(including waiting periods), FFI will merge with and into FBS. FBS, in its
capacity as the corporation surviving the Merger, is sometimes referred to
herein as the "Surviving Corporation." The Merger will be effected pursuant to
the provisions of, and with the effect provided in Section 21-2076 of the
Nebraska Business Corporation Act (the "NBCA") and Section 252 of the Delaware
General Corporation Law (the "DGCL").
1.1. Effect of Merger.
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(a) On the Effective Date (as defined in Section 1.1(d)), FFI shall be
merged with and into FBS, and the separate existence of FFI shall cease. The
Charter (as defined in Section 2.2) and Bylaws of FBS, as in effect immediately
prior to the Effective Date, shall be the Charter and the Bylaws of the
Surviving Corporation until further amended as provided therein and in
accordance with law. The directors and officers of FBS immediately prior to the
Effective Date will be the directors and officers of the Surviving Corporation
until their successors are elected and qualify.
(b) The Surviving Corporation shall thereupon and thereafter be responsible
and liable for all the liabilities, debts, obligations and penalties of each of
FBS and FFI.
(c) The Surviving Corporation shall thereupon and thereafter possess all
the rights, privileges, immunities and franchises, of a public as well as of a
private nature, of each of FBS and FFI; all property, real, personal and mixed,
and all debts due on whatever account, and all and every other interest, of or
belonging to or due to each of FBS and FFI, shall be taken and deemed to be
transferred to and vested in the Surviving Corporation without further act or
deed; and the title to any real estate or any interest therein, vested in FBS
and FFI, shall not revert or be in any way impaired by reason of the Merger.
(d) To effect the Merger, the parties hereto will cause appropriate
certificates of merger relating to the Merger to be filed with the Secretary of
State of Delaware and the Secretary of State of Nebraska. In addition, pursuant
to Sections 21-2070 and 21-2073 of the NBCA, a Plan of Merger (the "Plan of
Merger") containing certain terms of this Merger Agreement, in substantially the
form attached hereto as Exhibit B, shall be filed with the certificate of merger
filed by FBS and FFI with the Secretary of State of Nebraska. The Merger shall
be effective upon the filing of the later of such certificates of merger to be
filed. As used herein, the term "Effective Date" shall mean the date on which
the Merger shall become effective as provided in the preceding sentence.
1.2. Effect on Outstanding Shares of FFI Capital Stock.
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To effectuate the Merger and subject to the terms and conditions of this
Agreement:
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(a) each issued and outstanding share of FFI Common Stock (other than
shares held as treasury stock of FFI or shares held directly or indirectly by
FBS, other than shares held in a fiduciary capacity or in satisfaction of a debt
previously contracted) shall be converted into .8829 shares of FBS Common Stock,
and FBS shall issue to holders of FFI Common Stock .8829 shares of FBS Common
Stock subject to adjustment as provided in Section 1.3 (the "Exchange Ratio"),
in exchange for each such share of FFI Common Stock;
(b) to the extent permitted by applicable plans and agreements, all
outstanding options and warrants to purchase shares of FFI Common Stock shall be
exchanged for options and warrants to purchase FBS Common Stock, or shares of
FBS Common Stock, as provided in Section 5.13;
(c) each share of FFI Common Stock held as treasury stock of FFI or held
directly or indirectly by FBS, other than shares held in a fiduciary capacity or
in satisfaction of a debt previously contracted, shall be canceled, retired and
cease to exist, and no exchange or payment shall be made with respect thereof;
and
(d) shares of FBS Common Stock issued in the Merger shall have attached to
them rights as set forth in the Rights Agreement dated as of December 21, 1988,
between FBS and First Chicago Trust Company of New York, as Rights Agent, as
amended (the "FBS Rights Agreement").
1.3. FBS Common Stock Adjustments. If, between the date hereof and the
Effective Date, shares of FBS Common Stock shall be changed into a different
number of shares or a different class of shares by reason of any
reclassification, recapitalization, split-up, combination, exchange of shares or
readjustment, or if a stock dividend or extraordinary cash dividend thereon
shall be declared with a record date within such period, then the number of
shares of FBS Common Stock issued to holders of FFI Common Stock pursuant to
this Agreement will be appropriately and proportionately adjusted so that the
number of such shares of FBS Common Stock (or such class of shares into which
shares of FBS Common Stock have been changed) that will be issued to holders of
FFI Common Stock will equal the number of such shares and other consideration
that holders of FFI Common Stock would have received pursuant to such
classification, recapitalization, split-up, combination, exchange of shares or
readjustment had the record date therefor been immediately following the
Effective Date.
1.4. Rights of Holders of FFI Capital Stock; Capital Stock of FBS.
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(a) On and after the Effective Date and until surrendered for exchange,
each outstanding stock certificate which immediately prior to the Effective Date
represented shares of FFI Common Stock shall be deemed for all purposes, except
as provided in Section 1.6(b), to evidence ownership of and to represent the
number of whole shares of FBS Common Stock into which such shares of FFI Common
Stock shall have been converted, and the record holder of such outstanding
certificate shall, after the Effective Date, be entitled to vote the shares of
FBS Common Stock into which such shares of FFI Common Stock shall have been
converted on any matters on which the holders of record of FBS Common Stock, as
of any date subsequent to the Effective Date, shall be entitled to vote. In any
matters relating to such certificates, FBS may rely conclusively upon the record
of shareholders
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maintained by FFI containing the names and addresses of the holders of record of
FFI Common Stock on the Effective Date.
(b) On and after the Effective Date, each share of FBS Common Stock issued
and outstanding immediately prior to the Effective Date shall remain an issued
and existing share of common stock of the Surviving Corporation and shall not be
affected by the Merger.
1.5. No Fractional Shares. No fractional shares of FBS Common Stock, and no
certificates representing such fractional shares, shall be issued upon the
surrender for exchange of certificates representing FFI Common Stock. In lieu of
any fractional share, FBS shall pay to each holder of FFI Common Stock who
otherwise would be entitled to receive a fractional share of FBS Common Stock an
amount of cash (without interest) determined by multiplying (a) the closing
price per share of FBS Common Stock on the Effective Date times (b) the
fractional share interest to which such holder would otherwise be entitled.
1.6. Procedure for Exchange of Stock.
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(a) After the Effective Date, holders of certificates theretofore
evidencing outstanding shares of FFI Common Stock, upon surrender of such
certificates to an exchange agent appointed by FBS (the "Exchange Agent"), shall
be entitled to receive certificates representing the number of whole shares of
FBS Common Stock into which shares of FFI Common Stock theretofore represented
by the certificates so surrendered shall have been converted as provided in
Section 1.2(a) and cash payments in lieu of fractional shares, if any, as
provided in Section 1.5. As soon as practicable after the Effective Date, FBS
shall cause the Exchange Agent to mail appropriate and customary transmittal
materials (which shall specify that delivery shall be effected, and risk of loss
and title to the certificates theretofore representing shares of FFI Common
Stock shall pass, only upon proper delivery of such certificates to the Exchange
Agent) to each holder of FFI Common Stock of record as of the Effective Date
advising such holder of the effectiveness of the Merger and the procedure for
surrendering to the Exchange Agent outstanding certificates formerly evidencing
FFI Common Stock in exchange for new certificates for FBS Common Stock. FBS
shall not be obligated to deliver the consideration to which any former holder
of shares of FFI Common Stock is entitled as a result of the Merger until such
holder surrenders the certificate or certificates representing such shares for
exchange as provided in such transmittal materials and this Section 1.6(a). In
addition, certificates surrendered for exchange by any person deemed an
"affiliate" of FFI (as defined in Section 5.9), shall not be exchanged for such
consideration until FBS has received a written agreement from such person as
provided in Section 5.9. Upon surrender, each certificate evidencing FFI Common
Stock shall be canceled.
(b) Until outstanding certificates formerly representing FFI Common Stock
are surrendered as provided in Section 1.6(a), no dividend or distribution
payable to holders of record of FBS Common Stock shall be paid to any holder of
such outstanding certificates, but upon surrender of such outstanding
certificates by such holder there shall be paid to such holder the amount of any
dividends or distributions (without interest) theretofore paid with respect to
such whole shares of FBS Common Stock, but not paid to such holder, and which
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dividends or distributions had a record date occurring on or subsequent to the
Effective Date.
(c) After the Effective Date, there shall be no further registration of
transfers on the records of FFI of outstanding certificates formerly
representing shares of FFI Common Stock and, if a certificate formerly
representing such shares is presented to FFI or FBS, it shall be forwarded to
the Exchange Agent for cancellation and exchange for certificates representing
shares of FBS Common Stock as herein provided.
(d) All shares of FBS Common Stock and cash for any fractional shares
issued and paid upon the surrender for exchange of FFI Common Stock in
accordance with the above terms and conditions shall be deemed to have been
issued and paid in full satisfaction of all rights pertaining to such shares of
FFI Common Stock.
(e) If outstanding certificates for shares of FFI Common Stock are not
surrendered prior to the date on which the consideration to which any holder of
such shares is entitled as a result of the Merger would otherwise escheat to or
become the property of any governmental unit or agency, the unclaimed
consideration shall, to the extent permitted by abandoned property and any other
applicable law, become the property of FBS (and to the extent not in its
possession shall be paid over to it), free and clear of all claims or interest
of any person previously entitled to such claims. None of FBS, the Exchange
Agent or any other person shall be liable to any former holder of FFI Common
Stock for any amount delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(f) In the event any certificate for FFI Common Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue and pay in exchange for such
lost, stolen or destroyed certificate, upon the making of an affidavit of that
fact by the holder thereof in form satisfactory to FBS, such shares of FBS
Common Stock and cash for fractional shares, if any, as may be required pursuant
to this Agreement; provided, however, that FBS may, in its discretion and as a
condition precedent to the issuance and payment thereof, require the owner of
such lost, stolen or destroyed certificate to deliver a bond in such sum as it
may direct as indemnity against any claim that may be made against FBS, FFI, the
Exchange Agent or any other party with respect to the certificate alleged to
have been lost, stolen or destroyed.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF FBS
FBS hereby represents and warrants to FFI as follows:
2.1. Organization. FBS is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and has the
requisite corporate power to carry on its business as now conducted. FBS is
registered as a bank holding company under the Bank Holding Company Act of 1956,
as amended (the "Bank Holding Company Act").
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2.2. Authority Relative to this Agreement; Non-Contravention. FBS has the
requisite corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement by FBS and the consummation by FBS of the transactions contemplated
hereby have been duly authorized by the Board of Directors of FBS, and no other
corporate proceedings on the part of FBS are necessary to authorize this
Agreement and such transactions. This Agreement has been duly executed and
delivered by FBS and constitutes a valid and binding obligation of FBS,
enforceable in accordance with its terms. FBS is not subject to, or obligated
under, any provision of (a) its Charter (as hereinafter defined) or Bylaws, (b)
any agreement, arrangement or understanding, (c) any license, franchise or
permit or (d) subject to obtaining the approvals referred to in the next
sentence, any law, regulation, order, judgment or decree, which would be
breached or violated, or in respect of which a right of termination or
acceleration or any encumbrance on any of its or any of its subsidiaries' assets
would be created, by its execution, delivery and performance of this Agreement
and the consummation by it of the transactions contemplated hereby, other than
any such breaches or violations which will not, individually or in the
aggregate, have a material adverse effect on the business, operations, results
of operations or financial condition of FBS and its subsidiaries, taken as a
whole, or the consummation of the transactions contemplated hereby. Other than
in connection with obtaining any approvals required by the Bank Holding Company
Act, the Securities Act of 1933, as amended, and the rules and regulations
thereunder (the "1933 Act"), the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder (the "1934 Act"), rules of the New York
Stock Exchange (the "NYSE"), state securities or blue sky laws, and the rules
and regulations thereunder ("Blue Sky Laws"), rules and regulations of any
applicable state insurance regulatory authority ("Applicable Insurance
Regulations"), the Nebraska Department of Banking and Finance, the
Superintendent of Banking of Iowa, the Banking Commissioner of Wyoming and the
filing of certificates of merger with the Secretary of State of Delaware and the
Secretary of State of Nebraska, no authorization, consent or approval of, or
filing with, any public body, court or authority is necessary on the part of FBS
for the consummation by it of the transactions contemplated by this Agreement
and the Stock Option Agreement, except for such authorizations, consents,
approvals and filings as to which the failure to obtain or make would not,
individually or in the aggregate, have a material adverse effect on the
business, operations, results of operations or financial condition of FBS and
its subsidiaries, taken as a whole, or the consummation of the transactions
contemplated hereby or by the Stock Option Agreement. As used in this
Agreement, the term "Charter" with respect to any corporation or banking
association shall mean those instruments that at that time constitute its
charter as filed or recorded under the general corporation or other applicable
law of the jurisdiction of incorporation or association, including the articles
or certificate of incorporation or association, any amendments thereto and any
articles or certificate of merger or consolidation.
2.3. Validity of FBS Common Stock. The shares of FBS Common Stock to be
issued pursuant to this Agreement will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and subject to no preemptive rights.
2.4. Capital Stock. The authorized capital stock of FBS consists of
200,000,000 shares of FBS Common Stock and 10,000,000 shares of preferred stock,
par value $1.00 per
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share (the "FBS Preferred Stock"). As of June 30, 1995, (a) 135,632,324 shares
of FBS Common Stock were issued and outstanding (including 2,212,758 shares of
FBS Common Stock, par value $1.25 per share, held in treasury), 8,293,286 shares
of FBS Common Stock were reserved for issuance pursuant to FBS's 1987 Stock
Option Plan, 1991 Stock Incentive Plan, 1994 Stock Incentive Plan, Restated
Employee Stock Purchase Plan and Dividend Reinvestment Plan, the Western Capital
Investment Corp. 1984 Stock Option and Incentive Plan, the 1988 Equity
Participation Plan, the MFC Stock Warrants and the Edina Realty, Inc. 1995 Sales
Associate Stock Purchase Plan and 3,952,000 shares of FBS Common Stock were
reserved for issuance upon conversion of FBS's $3.5625 Cumulative Preferred
Stock, Series 1991A (the "Series 1991A Preferred"); (b) 2,113,700 shares of
Series 1991A Preferred were outstanding; (c) 12,750 shares of Adjustable Rate
Cumulative Preferred Stock, Series 1990A were reserved for issuance pursuant to
certain periodic stock purchase rights and risk event warrants issued by FBS;
and (d) 1,400,000 shares of Series A Junior Participating Preferred Stock were
reserved for issuance upon exercise of rights to purchase shares of Junior
Participating Preferred Stock of FBS pursuant to the FBS Rights Agreement.
2.5. 1934 Act Reports.
----------------
(a) Prior to the execution of this Agreement, FBS has delivered or made
available to FFI complete and accurate copies of (a) FBS's Annual Reports on
Form 10-K for the years ended December 31, 1992, 1993 and 1994, as amended (the
"FBS 10-K Reports"), as filed under the 1934 Act with the Securities and
Exchange Commission (the "SEC"), (b) all FBS proxy statements and annual reports
to shareholders used in connection with meetings of FBS shareholders held since
January 1, 1993, and (c) FBS's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995 (the "FBS 10-Q Report"), as filed under the 1934 Act with
the SEC. As of their respective dates, such documents (i) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading and (ii) complied as to
form in all material respects with the applicable laws and rules and regulations
of the SEC. Since January 1, 1992, FBS has filed in a timely manner all reports
that it was required to file with the SEC pursuant to the 1934 Act. After the
date hereof and prior to the Effective Date, documents filed by FBS pursuant to
Section 13, 14 or 15(d) of the 1934 Act (i) will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading and (ii) will comply as
to form in all material respects with the applicable laws and rules and
regulations of the SEC.
(b) The FBS financial statements (including any footnotes thereto)
contained in the FBS 10-K Reports and the FBS 10-Q Report were, and FBS
financial statements (including any footnotes thereto) contained in any
documents filed by FBS after the date hereof and prior to the Effective Date
pursuant to Section 13, 14 or 15(d) of the 1934 Act will be, prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved and fairly present, or will fairly present, as
the case may be, the consolidated financial position of FBS and its subsidiaries
as of the dates thereof and the consolidated results of operations, changes in
shareholders' equity and cash flows for the periods then ended.
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2.6. No Material Adverse Changes. Since March 31, 1995, there has been no
material adverse change in, and no event, occurrence or development in the
business of FBS or its subsidiaries that, taken together with other events,
occurrences and developments with respect to such business, has had or would
reasonably be expected to have a material adverse effect on, the business,
operations, results of operations or financial condition of FBS and its
subsidiaries, taken as a whole, or the ability of FBS to consummate the
transactions contemplated hereby.
2.7. Prospectus/Proxy Statement. At the time the Registration Statement
(as defined in Section 5.8(a)) becomes effective and at the time the
Prospectus/Proxy Statement (as defined in Section 5.8(a)) is mailed to the
shareholders of FFI for purposes of obtaining the approvals referred to in
Section 5.8(a) and at all times subsequent to such mailing up to and including
the times of such approvals, the Registration Statement and the Prospectus/Proxy
Statement (including any amendments or supplements thereto), with respect to all
information set forth therein relating to FBS, the FBS Common Stock, this
Agreement, the Merger and all other transactions contemplated hereby, will (a)
comply in all material respects with applicable provisions of the 1933 Act and
the 1934 Act and (b) not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
2.8. Litigation. There are no actions, suits, proceedings, orders or
investigations pending or, to the best knowledge of FBS, threatened against FBS
or any of its subsidiaries which if determined adversely to FBS or its
subsidiaries could reasonably be expected to have a material adverse effect on
the financial condition, business, operations or results of operations of FBS
and its subsidiaries, taken as a whole, or would have a material adverse effect
on the ability of FBS to consummate the transactions contemplated hereby.
2.9. Reports and Filings. Since January 1, 1992, each of FBS and its
subsidiaries has filed each report or other filing it was required to file with
any federal or state banking or bank holding company or other regulatory
authority having jurisdiction over it (together with all exhibits thereto, the
"FBS Regulatory Reports"), except for such reports and filings which the failure
to so file would not have a material adverse effect on the business, operations,
results of operations or financial condition of FBS and its subsidiaries, taken
as a whole, or the ability of FBS to consummate the transactions contemplated
hereby. As of their respective dates or as subsequently amended prior to the
date hereof, each of the FBS Regulatory Reports was true and correct in all
material respects and complied in all material respects with applicable laws,
rules and regulations.
2.10. Regulatory Approvals. As of the date hereof, FBS is not aware of
any reason that the regulatory approvals specified in Section 5.1 and required
to be obtained by FBS would not be obtained.
2.11. Compliance with Laws; Permits. FBS has complied in all respects
with all applicable laws and regulations of foreign, federal, state and local
governments and all agencies thereof which affect the business or any owned or
leased properties of FBS and to which FBS may be subject (including, without
limitation, the Occupational Safety and Health
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Act of 1970, the Federal Deposit Insurance Act, the Real Estate Settlement
Procedures Act, the Home Mortgage Disclosure Act of 1975, the Fair Housing Act,
the Equal Credit Opportunity Act and the Federal Reserve Act, each as amended,
and any other state or federal acts (including rules and regulations thereunder)
regulating or otherwise affecting employee health and safety or the
environment), except where failure to so comply would not, individually or in
the aggregate, have a material adverse effect on the business, operations,
results of operations or financial condition of FBS, or FBS's ability to
consummate the transactions contemplated hereby; and no claims have been filed
by any such governments or agencies against FBS alleging such a violation of any
such law or regulation which have not been resolved to the satisfaction of such
governments or agencies. FBS holds all of the permits, licenses, certificates
and other authorizations of foreign, federal, state and local governmental
agencies required for the conduct of its business, except where failure to
obtain such authorizations would not, individually or in the aggregate, have a
material adverse effect on the business, operations, results of operations or
financial condition of FBS, or the ability of FBS to consummate the transactions
contemplated hereby. FBS is not subject to any cease and desist order, written
agreement or memorandum of understanding with, nor is it a party to any
commitment letter or similar undertaking to, nor is it subject to any order or
directive by, nor is it a recipient of any extraordinary supervisory agreement
letter from, nor has it adopted any board resolutions at the request of, federal
or state governmental authorities charged with the supervision or regulation of
banks or bank holding companies or engaged in the insurance of bank deposits
(collectively, the "Bank Regulators"), nor has FBS been advised by any Bank
Regulator that it is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, directive, written
agreement, memorandum of understanding, extraordinary supervisory letter,
commitment letter, board resolutions or similar undertaking.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF FFI
FFI hereby represents and warrants to FBS as follows:
3.1. Organization and Qualification. FFI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nebraska.
Each of the National Banks is a national banking association duly organized,
validly existing and in good standing under the laws of the United States and
has the requisite corporate power to carry on its business as now conducted.
Each of the State Banks is a state banking corporation duly organized, validly
existing and in good standing under the laws of the state of its organization
and has the requisite corporate power to carry on its business as now conducted.
Each of the Nonbanking Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
The copies of the Charter and Bylaws of each of FFI and the Subsidiaries which
have been made available to FBS prior to the date of this Agreement are correct
and complete and reflect all amendments made thereto through such date. Each of
FFI and the Subsidiaries is licensed or qualified to do business in every
jurisdiction in which the nature of its respective business or its ownership of
property requires it to be licensed or qualified, except where the failure to be
so licensed or qualified would not have or would not reasonably be expected to
have a material adverse effect on the
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business, operations, results of operations or financial condition of FFI and
the Subsidiaries, taken as a whole.
3.2. Authority Relative to this Agreement; Non-Contravention. FFI has the
requisite corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement by FFI and the consummation by FFI of the transactions contemplated
hereby have been duly authorized by the Board of Directors of FFI and, except
for approval of this Agreement and the Merger by the affirmative vote of at
least two-thirds of the outstanding shares of FFI Common Stock, no other
corporate proceedings on the part of FFI are necessary to authorize this
Agreement and such transactions. This Agreement has been duly executed and
delivered by FFI and constitutes a valid and binding obligation of FFI,
enforceable in accordance with its terms. None of FFI or the Subsidiaries is
subject to, or obligated under, any provision of (a) its Charter or Bylaws, (b)
any agreement, arrangement or understanding, (c) any license, franchise or
permit or (d) subject to obtaining the approvals referred to in the next
sentence, any law, regulation, order, judgment or decree, which would be
breached or violated, or in respect of which a right of termination or
acceleration or any encumbrance on any of its assets would be created, by the
execution, delivery or performance of this Agreement, the Stock Option Agreement
or the consummation of the transactions contemplated hereby or thereby, other
than any such breaches or violations which will not, individually or in the
aggregate, have a material adverse effect on the business, operations, results
of operations or financial condition of FFI and the Subsidiaries, taken as a
whole, or the consummation of the transactions contemplated hereby or thereby.
Other than in connection with obtaining any approvals required by the Bank
Holding Company Act, the 1933 Act, the 1934 Act, the rules of the NYSE, Blue Sky
Laws, Applicable Insurance Regulations, the Nebraska Department of Banking and
Finance, the Superintendent of Banking of Iowa, the Banking Commissioner of
Wyoming and the filing of certificates of merger with the Secretary of State of
Delaware and the Secretary of State of Nebraska, no authorization, consent or
approval of, or filing with, any public body, court or authority is necessary on
the part of FFI or any of the Subsidiaries for the consummation by FFI of the
transactions contemplated by this Agreement or the Stock Option Agreement,
except for such authorizations, consents, approvals and filings as to which the
failure to obtain or make would not, individually or in the aggregate, have a
material adverse effect on the business, operations, results of operations or
financial condition of FFI and the Subsidiaries, taken as a whole, or the
consummation of the transactions contemplated hereby or by the Stock Option
Agreement.
3.3. Capitalization. The authorized and issued and outstanding capital
stock of each of FFI and the Subsidiaries as of the date hereof is correctly set
forth on Schedule 3.3. The issued and outstanding shares of capital stock of
each of FFI and the Subsidiaries are duly authorized, validly issued, fully paid
and nonassessable and have not been issued in violation of any preemptive
rights. Except as disclosed on Schedule 3.3 and as permitted in Section 4.1,
there are no options, warrants, conversion privileges or other rights,
agreements, arrangements or commitments obligating FFI or any Subsidiary to
issue, sell, purchase or redeem any shares of its capital stock or securities or
obligations of any kind convertible into or exchangeable for any shares of its
capital stock or of any of its subsidiaries or affiliates, nor are there any
stock appreciation, phantom or similar rights outstanding based upon the book
value or any other attribute of any of the capital stock of
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<PAGE>
FFI or any of the Subsidiaries, or the earnings or other attributes of FFI or
any of the Subsidiaries. FFI has heretofore delivered to FBS true and correct
copies of all such agreements, arrangements (including all stock option plans)
or commitments identified on Schedule 3.3.
3.4. 1934 Act Reports. Prior to the execution of this Agreement, FFI has
delivered or made available to FBS complete and accurate copies of (a) FFI's
Annual Reports on Form 10-K for the years ended December 31, 1992, 1993 and 1994
(the "FFI 10-K Reports") as filed under the 1934 Act with the SEC, (b) all FFI
proxy statements and annual reports to shareholders used in connection with
meetings of FFI shareholders held since January 1, 1992 and (c) FFI's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1995 (the "FFI 10-Q Report")
as filed under the 1934 Act with the SEC. As of their respective dates, such
documents (i) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (ii) complied as to form in all material respects with the
applicable laws and rules and regulations of the SEC. Since January 1, 1992,
FFI has filed in a timely manner all reports that it was required to file with
the SEC pursuant to the 1934 Act. After the date hereof and prior to the
Effective Date, documents filed by FFI pursuant to Section 13, 14 or 15(d) of
the 1934 Act (i) will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they are made,
not misleading and (ii) will comply as to form in all material respects with the
applicable laws and rules and regulations of the SEC.
3.5. Financial Statements. The FFI financial statements (including any
footnotes thereto) contained in the FFI 10-K Reports and the FFI 10-Q Report
have been, and FFI financial statements (including any footnotes thereto)
contained in any documents filed by FFI after the date hereof and prior to the
Effective Date pursuant to Section 13, 14 or 15(d) of the 1934 Act will be,
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved and fairly present or will fairly
present, as the case may be, the consolidated financial position of FFI and the
Subsidiaries as of the dates thereof and the results of operations, changes in
shareholders' equity and cash flows for the periods then ended. FFI has
furnished FBS with copies of the consolidated balance sheet of FFI as of June
30, 1995 (the "Latest FFI Balance Sheet") and the related statements of income
and changes in shareholders' equity for the six months ended June 30, 1995 (the
"Related FFI Statements"). The Latest FFI Balance Sheet and the Related FFI
Statements have been prepared in accordance with generally accepted accounting
principles and fairly present the consolidated financial position of FFI and the
Subsidiaries, subject to normal recurring year-end adjustments, as of the date
thereof and the results of operations and changes in shareholders' equity for
the six-month period then ended.
3.6. Loans.
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(a) The documentation relating to each loan made by each Banking Subsidiary
and relating to all security interests, mortgages and other liens with respect
to all collateral for
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each such loan, taken as a whole, are adequate in all material respects for the
enforcement of the material terms of each such loan and of the related security
interests, mortgages and other liens. The terms of each such loan and of the
related security interests, mortgages and other liens comply in all material
respects with all applicable laws, rules and regulations (including, without
limitation, laws, rules and regulations relating to the extension of credit).
(b) Except as set forth in Schedule 3.6, (i) as of June 30, 1995, there are
no loans, leases, other extensions of credit or commitments to extend credit of
any Banking Subsidiary that have been or, to FFI's knowledge, should have been
classified by any such Banking Subsidiary as non-accrual, as restructured, as 90
days past due, as still accruing and doubtful of collection or any comparable
classification, (ii) FFI has provided to FBS true, correct and complete in all
material respects written information concerning the loan portfolios of the
Banking Subsidiaries, and (iii) no material information with respect to the loan
portfolios of the Banking Subsidiaries has been withheld from FBS.
3.7. Reports and Filings. Since January 1, 1992, each of FFI and the
Subsidiaries has filed each report or other filing that it was required to file
with any federal or state banking, bank holding company or other applicable
regulatory authorities having jurisdiction over it (together with all exhibits
thereto, the "FFI Regulatory Reports"). As of their respective dates or as
subsequently amended prior to the date hereof, each of the FFI Regulatory
Reports was true and correct in all material respects and complied in all
material respects with applicable laws, rules and regulations.
3.8. Subsidiaries. Schedule 3.8 correctly sets forth the jurisdiction of
incorporation of each Subsidiary. All of the issued and outstanding shares of
capital stock of each Subsidiary are owned by FFI free and clear of any lien,
pledge, security interest, encumbrance or charge of any kind, other than
encumbrances arising as a result of requisite regulatory approvals for transfer.
Except for the stock of the Subsidiaries owned by FFI and as otherwise disclosed
on Schedule 3.8, neither FFI nor any of the Subsidiaries owns any stock,
partnership interest, joint venture interest or any other security issued by any
other corporation, organization or entity, except securities owned by the
Banking Subsidiaries in the ordinary course of its business.
3.9. Absence of Undisclosed Liabilities. All of the obligations or
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise,
whether due or to become due, and regardless of when asserted) arising out of
transactions or events heretofore entered into, or any action or inaction,
including Taxes (as defined in Section 3.13) with respect to or based upon
transactions or events heretofore occurring ("Liabilities"), required to be
reflected on the Latest FFI Balance Sheet in accordance with generally accepted
accounting principles have been so reflected. FFI and the Subsidiaries have no
Liabilities except (a) as reflected on the Latest FFI Balance Sheet, (b)
Liabilities which have arisen after the date of the Latest FFI Balance Sheet in
the ordinary course of business or (c) Liabilities which would not have,
individually or in the aggregate, a material adverse effect on the business,
operations, results of operations or financial condition of FFI and the
Subsidiaries, taken as a whole. As of June 30, 1995, Schedule 3.9 sets forth
all agreements or commitments binding the Banking Subsidiaries to extend credit
in the amount per "one borrower" (as defined in 12 C.F.R. (S) 563.93) of
$500,000 or more.
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<PAGE>
3.10. No Material Adverse Changes. Since the date of the Latest FFI
Balance Sheet, there has been no material adverse change in, and no event,
occurrence or development in the business of FFI or the Subsidiaries that, taken
together with other events, occurrences and developments with respect to such
business, has had or would reasonably be expected to have a material adverse
effect on the business, operations, results of operations or financial condition
of FFI and the Subsidiaries, taken as a whole, or the ability of FFI to
consummate the transactions contemplated hereby.
3.11. Absence of Certain Developments. Except as set forth in the
Latest FFI Balance Sheet and the Related FFI Statements or on Schedule 3.11,
unless otherwise expressly contemplated or permitted by this Agreement, in the
period from June 30, 1995 to the date hereof, neither FFI nor any of the
Subsidiaries has (i) sold or issued any corporate debt securities or sold,
issued, reissued or increased its shares of its capital stock other than in
connection with the exercise of stock options; (ii) granted any option, phantom
stock unit, stock appreciation right for or related to the purchase of capital
stock; (iii) declared or set aside or paid any dividend or other distribution in
respect of its capital stock, except as permitted pursuant to Section 4.1(a)
(and except for declaration and payment of its regular quarterly dividend for
the second quarter of 1995) hereof, or directly or indirectly purchased,
redeemed or otherwise acquired any shares of such stock; (iv) incurred any
obligation or liability (absolute or contingent) except obligations or
liabilities incurred in the ordinary course of business, or mortgaged, pledged
or subjected to lien or encumbrance (other than statutory liens for taxes not
yet delinquent and banking transactions conducted in the ordinary course of
business) any of its assets or properties with an aggregate market value in
excess of $250,000; (v) discharged or satisfied any material lien or encumbrance
or paid any obligation or liability (absolute or contingent), other than current
liabilities included in the Latest FFI Balance Sheet, current liabilities
incurred since the date thereof in the ordinary course of business and
liabilities incurred in carrying out the transactions contemplated by this
Agreement; (vi) sold, exchanged or otherwise disposed of capital assets with an
aggregate market value in excess of $250,000; or acquired any single or group of
related capital assets with an aggregate market value in excess of $250,000;
(vii) made any extraordinary officers' salary increase or wage increase, entered
into any employment contract with any officer or salaried employee or instituted
or amended any employee welfare, bonus, stock option, profit-sharing, retirement
or other benefit plan or arrangement; (viii) suffered any damage, destruction or
loss, whether or not covered by insurance, that has had a material adverse
effect on the business, operations, results of operations or financial condition
of FFI and the Subsidiaries, taken as a whole, or waived any rights of value
which, in the aggregate, have had such a material adverse effect; (ix) entered
into any agreement or arrangement granting any preferential right to purchase
any of its material assets, properties or rights or requiring the consent of any
party to the transfer and assignment of any such material assets, properties or
rights; (x) entered into any other material transaction (other than in the
ordinary course of business) except as expressly contemplated by this Agreement;
or agreed to do any of the foregoing.
3.12. Properties.
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(a) Each of FFI and the Subsidiaries owns good and marketable title to all
of the real property and all of the personal property, fixtures, furniture and
equipment reflected on
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the Latest FFI Balance Sheet or acquired since the date thereof (other than real
property reflected on the Latest FFI Balance Sheet as REO), free and clear of
all liens and encumbrances, except for (i) mortgages on real property set forth
on Schedule 3.12(a), (ii) encumbrances which do not materially affect the value
of, or interfere with the past or future use or ability to convey, the property
subject thereto or affected thereby, (iii) liens for current taxes and special
assessments not yet due and payable, (iv) leasehold estates with respect to
multi-tenant buildings owned by FFI or any of the Subsidiaries, which leases are
identified on Schedule 3.12(a), and (v) property disposed of since the date of
the Latest FFI Balance Sheet in the ordinary course of business.
(b) Schedule 3.12(b) correctly sets forth a brief description, including
the term, of each lease for real or personal property to which FFI or any of the
Subsidiaries is a party as lessee with respect to (i) each individual lease
which involves a remaining aggregate balance of lease payments payable of more
than $100,000 or any group of related leases which involves a remaining
aggregate balance of lease payments payable of more than $100,000, (ii) each
lease which is a "material contract" within the meaning of Item 601(b)(10) of
Regulation S-K promulgated by the SEC or (iii) each lease which was not entered
into in the ordinary course of business. FFI has delivered or made available to
FBS complete and accurate copies of each of the leases described on Schedules
3.12(a) and 3.12(b), and none of such leases has been modified in any material
respect, except to the extent that such modifications are disclosed by the
copies delivered to FBS. The leases described on Schedules 3.12(a) and 3.12(b)
are in full force and effect. FFI or one of the Subsidiaries (if lessee under
such lease) has a valid and existing leasehold interest under each lease
described on Schedule 3.12(b) for the term set forth therein. With respect to
the leases described on Schedule 3.12(b), neither FFI nor any of the
Subsidiaries is in default, nor, to the best knowledge of FFI and the
Subsidiaries, are any of the other parties to any of such leases in default,
and, to the best knowledge of FFI and the Subsidiaries, no circumstances (not in
the control of FFI and the Subsidiaries) exist which could result in such a
default under any of such leases. To the best knowledge of FFI and the
Subsidiaries, there has been no cancellation, breach or anticipated breach by
any other party to any lease described on Schedule 3.12(a) or 3.12(b).
(c) All of the buildings, fixtures, furniture and equipment necessary for
the conduct of the business of FFI and each of the Subsidiaries are in good
condition and repair in all material respects, ordinary wear and tear excepted,
and are usable in the ordinary course of business. Each of FFI and the
Subsidiaries owns, or leases under valid leases, all buildings, fixtures,
furniture, personal property, land improvements and equipment necessary for the
conduct of its business as it is presently being conducted.
(d) Except as set forth in Schedules 3.12(d) and 3.12(e), neither FFI nor
any of the Subsidiaries nor any of the buildings owned or leased by FFI or any
of the Subsidiaries is in violation of any applicable zoning ordinance or other
law, regulation or requirement relating to the operation of any properties used
in the operation of its business, including, without limitation, applicable
environmental protection laws and regulations, which violations would,
individually or in the aggregate, have a material adverse effect on the
business, operations, results of operations or financial condition of FFI and
the Subsidiaries taken as a whole; and neither FFI nor any of the Subsidiaries
has received any notice of any such
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violation, or of the existence of any condemnation proceeding with respect to
any properties owned or leased by FFI or any of the Subsidiaries. Except as set
forth in Schedule 3.12(d), no Hazardous Materials (as defined below) have been
deposited or disposed of in, on or under FFI's or any of the Subsidiaries' owned
or leased properties (including properties owned, managed or controlled by any
Banking Subsidiary in connection with its lending or fiduciary operations)
during the period in which FFI or any of the Subsidiaries has owned, occupied,
managed, controlled or operated such properties. Except as set forth on Schedule
3.12(d), to the best knowledge of FFI and the Subsidiaries, no prior owners,
occupants or operators of all or any part of FFI's or any of the Subsidiaries'
owned or leased properties (including properties owned, managed or controlled by
any Banking Subsidiary in connection with its lending or fiduciary operations)
ever used such properties as a dump or gasoline service station, or deposited,
disposed of or allowed to be deposited or disposed of in, on or under such
properties any hazardous substances, Hazardous Materials. No asbestos or any
material amount of ureaformaldehyde materials exists in or on any of FFI's or
the Subsidiaries' owned or leased properties (including properties owned,
managed or controlled by any Banking Subsidiary in connection with its lending
or fiduciary operations), and no electrical transformers or capacitors, other
than those owned by public utility companies, on such properties contain any
PCBs.
As used in this Section 3.12(d), the following terms shall have the
following meanings:
(i) "Hazardous Materials" means any dangerous, toxic or hazardous
pollutant, contaminant, chemical, waste, material or substance as defined
in or governed by any federal, state or local law, statute, code,
ordinance, regulation, rule or other requirement relating to such substance
or otherwise relating to the environment or human health or safety,
including without limitation any waste, material, substance, pollutant or
contaminant that might cause any injury to human health or safety or to the
environment or might subject FFI or any Subsidiary or, after the Effective
Date, FBS or any of its affiliates, or any of their respective directors or
officers, to any imposition of costs or liability under any Environmental
Laws.
(ii) "Environmental Laws" means all applicable federal, state, local
and foreign laws, rules, regulations, codes, ordinances, orders, decrees,
directives, permits, licenses and judgments relating to pollution,
contamination or protection of health, safety or the environment
(including, without limitation, all applicable federal, state, local and
foreign laws, rules, regulations, codes, ordinances, orders, decrees,
directives, permits, licenses and judgments relating to Hazardous Materials
in effect as of the date of this Agreement).
(e) Except as set forth in Schedule 3.12(e), there are no aboveground or
underground tanks (excluding hot water storage or propane tanks) located under,
in or about, nor, to the best knowledge of FFI and the Subsidiaries, have there
ever been any such tanks located under, in or about, any of FFI's or any of the
Subsidiaries' owned or leased properties (including properties owned, managed or
controlled by any Banking Subsidiary in connection with its lending or fiduciary
operations).
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3.13. Tax Matters. Except as disclosed on Schedule 3.13, each of FFI,
the Subsidiaries and all members of any consolidated, affiliated, combined or
unitary group of which FFI or any of the Subsidiaries is a member have filed or
will file all Tax (as hereinafter defined) and Tax information returns or
reports required to be filed (taking into account permissible extensions) by
them on or prior to the Effective Date, and have paid (or have accrued or will
accrue, prior to the Effective Date, amounts for the payment of) all Taxes
relating to the time periods covered by such returns and reports. Except as
disclosed on Schedule 3.13, the accrued taxes payable accounts for Taxes
reflected on the Latest FFI Balance Sheet (or the notes thereto) are sufficient
for the payment of all unpaid Taxes of FFI and the Subsidiaries accrued for or
applicable to all periods ended on or prior to the date of the Latest FFI
Balance Sheet or which may subsequently be determined to be owing with respect
to any such period. Except as disclosed on Schedule 3.13, neither FFI nor any
of the Subsidiaries has waived any statute of limitations with respect to Taxes
or agreed to any extension of time with respect to an assessment or deficiency
for Taxes. Each of FFI and the Subsidiaries has paid or will pay in a timely
manner and as required by law all Taxes due and payable by it or which it is
obligated to withhold from amounts owing to any employee or third party. Except
as disclosed on Schedule 3.13, all Taxes which will be due and payable, whether
now or hereafter, for any period ending on, prior to or including the Effective
Date, shall have been paid by or on behalf of FFI and the Subsidiaries or shall
be reflected on the books of FFI and the Subsidiaries as an accrued Tax
liability determined in a manner which is consistent with past practices and the
Latest FFI Balance Sheet, without taking account of the Merger. The aggregate
amount of all such accruals for Tax liability as of the date hereof will be set
forth on Schedule 3.13 (and a good faith estimate of such accruals as of the
Effective Date shall be provided in writing to FBS at least 10 days prior to the
Effective Date). In the five years prior to the date of this Agreement, no Tax
returns of FFI or the Subsidiaries have been audited by any governmental
authority other than as disclosed on Schedule 3.13; and, except as set forth on
Schedule 3.13, there are no unresolved questions, claims or disputes asserted by
any relevant taxing authority concerning the liability for Taxes of FFI or the
Subsidiaries. Neither FFI nor any of the Subsidiaries has made an election
under Section 341(f) of the Code for any taxable years not yet closed for
statute of limitations purposes. In the five years prior to the date of this
Agreement, no demand or claim has been made against FFI or the Subsidiaries with
respect to any Taxes arising out of membership or participation in any
consolidated, affiliated, combined or unitary group of which FFI or the
Subsidiaries was at any time a member. For purposes of this Agreement, the term
"Tax" shall mean any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
property or windfall profits tax, environmental tax, customs duty, capital
stock, deposits, franchise, employees' income withholding, foreign or domestic
withholding, social security, unemployment, disability, workers' compensation,
employment-related insurance, real property, personal property, sales, use,
transfer, value added, alternative or add-on minimum or other tax, fee,
assessment or charge of any kind whatsoever, including any interest, penalties
or additions to, or additional amounts in respect of the foregoing, for each of
FFI, the Subsidiaries and all members of any consolidated, affiliated, combined
or unitary group of which FFI or any Subsidiary is a member.
3.14. Contracts and Commitments.
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(a) Except as set forth on Schedule 3.14, neither FFI nor any of the
Subsidiaries (i) is a party to any collective bargaining agreement or contract
with any labor union, (ii) is a party to any written or oral contract for the
employment of any officer, individual employee or other person on a full-time or
consulting basis, or relating to severance pay for any such person, (iii) is a
party to any written or oral agreement or understanding to repurchase assets
previously sold (or to indemnify or otherwise compensate the purchaser in
respect of such assets), except for securities sold under a repurchase agreement
providing for a repurchase date 30 days or less after the purchase date, (iv) is
a party to any (A) contract or group of related contracts with the same party
for the purchase or sale of products or services, under which the undelivered
balance of such products and services has a purchase price in excess of $250,000
for any individual contract or $250,000 for any group of related contracts in
the aggregate, (B) other contract which is a "material contract" within the
meaning of Item 601(b)(10) of Regulation S-K promulgated by the SEC, or (C)
other agreement which is not entered into in the ordinary course of business and
which is not disclosed on Schedules 3.12(a) or 3.12(b), or (v) has any
commitments for capital expenditures in excess of $250,000.
(b) Except as disclosed on Schedule 3.14, (i) to the best knowledge of FFI
and the Subsidiaries, since the date of the Latest FFI Balance Sheet, no
customer has indicated that it will stop or decrease the rate of business done
with FFI or any of the Subsidiaries (except for changes in the ordinary course
of such business) that would, individually or in the aggregate, have a material
adverse effect on the business, operations, results of operations or financial
condition of FFI and the Subsidiaries, taken as a whole; (ii) each of FFI and
the Subsidiaries has performed all obligations required to be performed by it
prior to the date hereof in connection with the contracts or commitments set
forth on Schedule 3.14, and none of FFI or any of the Subsidiaries is in receipt
of any claim of default under any contract or commitment set forth on Schedule
3.14, except for any failures to perform, breaches or defaults which would not,
individually or in the aggregate, have a material adverse effect on the
business, operations, results of operations or financial condition of FFI and
the Subsidiaries taken as a whole; (iii) none of FFI or any of the Subsidiaries
has any present expectation or intention of not fully performing any material
obligation pursuant to any contract or commitment set forth on Schedule 3.14;
and (iv) to the best knowledge of FFI and the Subsidiaries, there has been no
cancellation, breach or anticipated breach by any other party to any contract or
commitment set forth on Schedule 3.14, except for any cancellation, breach or
anticipated breach which would not, individually or in the aggregate, have a
material adverse effect on the business, operations, results of operations or
financial condition of FFI and the Subsidiaries, taken as a whole.
3.15. Litigation. Except as set forth on Schedule 3.15, there are no
actions, suits, proceedings, orders or investigations pending or, to the best
knowledge of FFI and the Subsidiaries, threatened against FFI or any of the
Subsidiaries, at law or in equity, or before or by any federal, state or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, except for such actions, suits, proceedings, orders or
investigations which are not reasonably likely to result in losses or expenses
that would have a material adverse effect on the business, operations, results
of operations or financial condition of FFI and the Subsidiaries, taken as a
whole. Except as set forth on Schedule 3.15, none of the matters set forth on
such Schedule, individually or in the
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aggregate, will have or could reasonably be expected to have a material adverse
effect on the business, operations, results of operations or financial condition
of FFI and the Subsidiaries, taken as a whole.
3.16. No Brokers or Finders. Except as disclosed on Schedule 3.16,
there are no claims for brokerage commissions, finders' fees, investment
advisory fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement, understanding,
commitment or agreement made by or on behalf of FFI or any of the Subsidiaries.
3.17. Employees. FFI and each of the Subsidiaries has complied with all
laws relating to the employment of labor, including provisions thereof relating
to wages, hours, equal opportunity, collective bargaining, non-discrimination
and the payment of social security and other taxes, except where failure to so
comply would not, individually or in the aggregate, have a material adverse
effect on the business, operations, results of operations or financial condition
of FFI and the Subsidiaries, taken as a whole.
3.18. Employee Benefit Plans.
(a) Definitions. For the purposes of this Section 3.18, unless the context
clearly requires otherwise, the term "Plan" or "Plans" includes all employee
benefit plans as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and all other benefit arrangements
(including, without limitation, any employment agreement or any program,
agreement, policy or commitment providing for insurance coverage of employees,
workers' compensation, disability benefits, supplemental unemployment benefits,
vacation benefits, retirement benefits, life, health, disability or accidental
benefits) applicable to the employees of FFI or any of the Subsidiaries, to
which FFI or any of the Subsidiaries contribute, or which FFI or any of the
Subsidiaries have committed to implement for their employees prior to the date
of this Agreement. Unless the context clearly requires otherwise, "Plan" or
"Plans" shall also include any similar program or arrangement maintained by any
organization affiliated by ownership with FFI or any of the Subsidiaries for
which FFI or any of the Subsidiaries are or could be completely or partially
liable for the funding or the administration either as a matter of law or by
agreement but excluding customers of the trust departments of affiliates of FFI
where there is no ownership affiliation between such customers and FFI.
(b) Except as disclosed on Schedule 3.18:
(i) Full Disclosure of All Plans. With respect to all employees and
former employees of FFI and the Subsidiaries (and all dependents and
beneficiaries of such employees and former employees):
(A) Neither FFI nor any of the Subsidiaries maintain or contribute to
any nonqualified deferred compensation or retirement plans, contracts or
arrangements;
(B) Neither FFI nor any of the Subsidiaries maintain or contribute to
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any qualified defined contribution plans (as defined in Section 3(34) of ERISA
or Section 414(i) of the Code);
(C) Neither FFI nor any of the Subsidiaries maintain or contribute to
any qualified defined benefit plans (as defined in Section 3(35) of ERISA or
Section 414(j) of the Code) ("Defined Benefit Plans"); and
(D) Neither FFI nor any of the Subsidiaries maintain or contribute to
any employee welfare benefit plans (as defined in Section 3(1) of ERISA).
(ii) Funding. With respect to the Plans, (A) all required
contributions which are due have either been made or properly accrued and
(B) neither FFI nor any of the Subsidiaries is liable for any "accumulated
funding deficiency" as that term is defined in Section 412 of the Code or
any penalty or excise tax in connection therewith.
(iii) Plan Documents. With respect to all Plans sponsored or
administered by FFI or any Subsidiary and with respect to any other Plan if
available to FFI or any Subsidiary, FFI has furnished FBS with true and
complete copies of (A) the most recent determination letter, if any,
received by FFI or any of the Subsidiaries from the Internal Revenue
Service regarding each qualified Plan, (B) the Form 5500 and all Schedules
and accompanying financial statements, if any, for each Plan for which such
form is required to be filed for the three most recent fiscal Plan years,
(C) the most recently prepared actuarial valuation report, if any, for each
Plan, and (D) copies of the current Plan documents, trust agreements,
insurance contracts and all related contracts and documents (including any
material employee communications) with respect to each Plan.
(iv) Defined Benefit Plans. Neither FFI nor any of the Subsidiaries
nor any affiliate of FFI or any of the Subsidiaries maintains or has
maintained any Defined Benefit Plans for which FFI, any of the Subsidiaries
or FBS have or will have any liability or, which if terminated, could
result in any liability to FFI, the Subsidiaries or FBS under Title IV of
ERISA. There are no unfunded vested liabilities (determined using the
assumptions used by the Plan for funding and without regard to future
salary increases) with respect to Defined Benefit Plans sponsored by FFI or
any Subsidiary. There have been no reportable events under Section 4043 of
ERISA (with respect to which the 30-day notice requirement has not been
waived by regulation) with respect to any Defined Benefit Plan maintained
by FFI or any of the Subsidiaries. No Defined Benefit Plan has been
terminated that will result in a material liability by FFI or any of the
Subsidiaries to the Pension Benefit Guaranty Corporation.
(v) Multiemployer Plans. Neither FFI nor any of the Subsidiaries has
any actual or potential liabilities under Sections 4201 or 4205 of ERISA
for any complete or partial withdrawal from any multiemployer plan.
(vi) Fiduciary Breach; Claims. Neither FFI nor any of the
Subsidiaries nor
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any of its directors, officers, employees or other "fiduciaries" (as such
term is defined in Section 3(21) of ERISA) has committed any breach of
fiduciary duty imposed by ERISA or any other applicable law with respect to
the Plans which would subject FFI or any of the Subsidiaries, directly or
indirectly, to any liability under ERISA or any applicable law. There are
no actions, suits or claims pending against FFI or any Subsidiary relating
to benefits other than routine, uncontested claims for benefits.
(vii) Prohibited Transaction. Neither FFI nor any of the
Subsidiaries nor any officer, director, employee, agent or fiduciary of any
Plan has incurred any liability for any civil penalty imposed by Section
4975 of the Code or Section 502(i) of ERISA.
(viii) Material Compliance With Law. All Plans have been
consistently administered in accordance with their terms in all material
respects. To the extent required either as a matter of law or to obtain
the intended tax treatment and tax benefits, all Plans comply in all
material respects with the requirements of ERISA and the Code. All Tax
information returns or reports and all other required filings, disclosures
and contributions have been made with respect to all Plans. No condition
exists that limits the right of FFI or any of the Subsidiaries to amend or
terminate any such Plan (except as provided in such Plans or limited under
ERISA or the Code).
(ix) VEBA Funding. No Plan is funded in whole or in part through a
voluntary employees' beneficiary association exempt from tax under Section
501(c)(9) of the Code. The limitations under Sections 419 and 419A of the
Code have been computed, all unrelated business income tax returns have
been filed and appropriate adjustments have been made on all other Tax
returns.
(x) Retirement and COBRA Benefits. Neither FFI nor any of the
Subsidiaries have actual or potential liability under current law for
benefits after separation from employment other than (i) benefits under
Plans described in clauses (A), (B) or (C) of Section 3.18(b)(i), and (ii)
health care continuation benefits described in Section 4980B of the Code or
Part G of Subtitle B of Title I of ERISA or any comparable provisions under
the laws of any state.
(xi) Collective Bargaining. No Plan is maintained in whole or in part
pursuant to collective bargaining.
(xii) Parachute Payments. No Plan requires or would result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code, and the
consummation of the transactions contemplated by this Agreement will not be
a factor in causing payments to be made by FBS, FFI or any of the
Subsidiaries that are not deductible (in whole or in part) under Section
280G of the Code.
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3.19. Insurance. Schedule 3.19 hereto lists and summarizes each
insurance policy maintained by FFI or any of the Subsidiaries with respect to
its properties and assets. All such insurance policies are in full force and
effect, and neither FFI nor any of the Subsidiaries is in default with respect
to its obligations under any of such insurance policies.
3.20. Compliance with Laws; Permits. Each of FFI and the Subsidiaries
has complied in all respects with all applicable laws and regulations of
foreign, federal, state and local governments and all agencies thereof which
affect the business or any owned or leased properties of FFI or any of the
Subsidiaries and to which FFI or any of the Subsidiaries may be subject
(including, without limitation, the Occupational Safety and Health Act of 1970,
the Federal Deposit Insurance Act, the Real Estate Settlement Procedures Act,
the Home Mortgage Disclosure Act of 1975, the Fair Housing Act, the Equal Credit
Opportunity Act and the Federal Reserve Act, each as amended, and any other
state or federal acts (including rules and regulations thereunder) regulating or
otherwise affecting employee health and safety or the environment), except where
failure to so comply would not, individually or in the aggregate, have a
material adverse effect on the business, operations, results of operations or
financial condition of FFI and the Subsidiaries, taken as a whole, or FFI's
ability to consummate the transactions contemplated hereby; and no claims have
been filed by any such governments or agencies against FFI or any of the
Subsidiaries alleging such a violation of any such law or regulation which have
not been resolved to the satisfaction of such governments or agencies. Each of
FFI and the Subsidiaries holds all of the permits, licenses, certificates and
other authorizations of foreign, federal, state and local governmental agencies
required for the conduct of its business, except where failure to obtain such
authorizations would not, individually or in the aggregate, have a material
adverse effect on the business, operations, results of operations or financial
condition of FFI and the Subsidiaries, taken as whole, or the ability of FFI to
consummate the transactions contemplated hereby. Except as disclosed in
Schedule 3.20, neither FFI nor any of the Subsidiaries is subject to any cease
and desist order, written agreement or memorandum of understanding with, or is a
party to any commitment letter or similar undertaking to, or is subject to any
order or directive by, or is a recipient of any extraordinary supervisory
agreement letter from, or has adopted any board resolutions at the request of,
federal or state governmental authorities charged with the supervision or
regulation of banks or bank holding companies or engaged in the insurance of
bank deposits (collectively, the "Bank Regulators"), nor have any of FFI or any
of the Subsidiaries been advised by any Bank Regulator that it is contemplating
issuing or requesting (or is considering the appropriateness of issuing or
requesting) any such order, directive, written agreement, memorandum of
understanding, extraordinary supervisory letter, commitment letter, board
resolutions or similar undertaking.
3.21. Administration of Fiduciary Accounts. Each Subsidiary has
properly administered, in all respects material and which could reasonably be
expected to be material to the business, operations, results of operations or
financial condition of FFI and the Subsidiaries, taken as a whole, all accounts
for which it acts as a fiduciary, including but not limited to accounts for
which it serves as a trustee, agent, custodian, personal representative,
guardian, conservator or investment advisor, in accordance with the terms of the
governing documents and applicable state and federal law and regulation and
common law. Neither FFI, any Subsidiary, nor any director, officer or employee
of FFI or any Subsidiary has committed any breach of trust with respect to any
such fiduciary account which is material to
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or could reasonably be expected to be material to the business, operations,
results of operations or financial condition of FFI and the Subsidiaries, taken
as a whole, and the accountings for each such fiduciary account are true and
correct in all material respects and accurately reflect the assets of such
fiduciary account in all material respects.
3.22. Prospectus/Proxy Statement. At the time the Prospectus/Proxy
Statement is mailed to the shareholders of FFI in order to obtain approvals
referred to in Section 5.8(a) and at all times subsequent to such mailing up to
and including the times of such approvals, such Prospectus/Proxy Statement
(including any supplements thereto), with respect to all information set forth
therein relating to FFI (including the Subsidiaries) and its shareholders, FFI
Common Stock, this Agreement, the Merger and all other transactions contemplated
hereby, will (a) comply in all material respects with applicable provisions of
the 1933 Act and the 1934 Act, and (b) not contain any untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements contained therein, in light of the
circumstances under which they are made, not misleading.
3.23. Regulatory Approvals. As of the date hereof, FFI is not aware of
any reason that the regulatory approvals specified in Section 5.1 would not be
obtained.
3.24. Interest Rate Risk Management Instruments.
(a) Schedule 3.24 sets forth a true, correct and complete list of all
interest rate swaps, caps, floors and option agreements and other interest rate
risk management arrangements to which FFI or any of the Subsidiaries is a party
or by which any of their properties or assets may be bound. FFI has delivered
or made available to FBS true, correct and complete copies of all such interest
rate risk management agreements and arrangements.
(b) All interest rate swaps, caps, floors and option agreements and other
interest rate risk management arrangements to which FFI or any of the
Subsidiaries is a party or by which any of their properties or assets may be
bound were entered into in the ordinary course of business and, to FFI's
knowledge, in accordance with prudent banking practice and applicable rules,
regulations and policies of the Bank Regulators and with counterparties believed
to be financially responsible at the time and are legal, valid and binding
obligations enforceable in accordance with their terms (except as may be limited
by bankruptcy, insolvency, moratorium, reorganization or similar laws affecting
the rights of creditors generally and the availability of equitable remedies),
and are in full force and effect. FFI and each of the Subsidiaries has duly
performed in all material respects all of its obligations thereunder to the
extent that such obligations to perform have accrued; and to FFI's knowledge,
there are no breaches, violations or defaults or allegations or assertions of
such by any party thereunder.
3.25 Rights Agreement. The execution of this Agreement and the Stock
Option Agreement, the acquisition of FFI Common Stock pursuant to the Agreement
and the Stock Option Agreement and the consummation of the other transactions
contemplated hereby and thereby do not and will not result in FBS or any of its
existing or future affiliates or associates becoming an "Acquiring Person" (as
such term is defined in the Rights Agreement, dated as of December 19, 1994,
between State Street Bank & Trust Company
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and FFI (the "FFI Rights Agreement")) under the FFI Rights Agreement, result in
any Triggering Event (as such term is defined in the FFI Rights Agreement) or
enable or require the Rights (as such term is defined in the FFI Rights
Agreement) to become exercisable, distributable or triggered.
3.26 Antitakeover Provisions Inapplicable. The provisions of Article 24 of
the Nebraska Revised Statutes do not and will not apply to this Agreement or the
Stock Option Agreement or the transactions contemplated thereby because the
required approval of FFI's Board of Directors with respect to such agreements
has been obtained prior to the execution of this Agreement and prior to the date
of the Stock Option Agreement. FFI has taken all actions required to exempt
this Agreement and the Stock Option Agreement and the transactions contemplated
hereby and thereby from the provisions of Article X of the FFI Charter and any
state anti-takeover laws.
ARTICLE 4
CONDUCT OF BUSINESS PENDING THE MERGER
4.1. Conduct of Business of FFI. From the date of this Agreement to the
Effective Date, unless FBS shall otherwise consent in writing, which consent
will not be unreasonably withheld, or as otherwise expressly contemplated or
permitted by other provisions of this Agreement, including this Section 4.1:
(a) Beginning with the third calendar quarter of 1995 and for each
succeeding calendar quarter thereafter prior to that calendar quarter in which
the Effective Date shall occur, FFI
(i) will not declare or pay any dividends or make any distributions on
shares of FFI Common Stock, except cash dividends which shall be equal to
either: (A) $.30 per share per quarter or (B) that amount per share per
quarter calculated by multiplying the amount paid by FBS on each share of
FBS Common Stock for such quarter times the Exchange Ratio; and
(ii) except as hereinbelow provided, will not declare any dividends or
distributions in any amount on FFI Common Stock in the quarter in which the
Effective Date shall occur and in which the shareholders of FFI Common
Stock are entitled to receive quarterly dividends on the shares of FBS
Common Stock into which the shares of FFI Common Stock have been converted.
It is the intent of this subparagraph (ii) to provide that the holders of
FFI Common Stock will receive, with respect to the quarter in which the
Effective Date occurs, either cash dividends on their shares of FFI Common
Stock with respect to such quarter or cash dividends with respect to such
quarter as the holders of shares of FBS Common Stock received in exchange
for the shares of FFI Common Stock, but will not receive and will not
become entitled to receive with respect to the same calendar quarter both a
cash dividend as shareholders of FFI and a cash dividend as the holders of
the shares of FBS Common Stock received in exchange for the shares of FFI
Common Stock. In the event that FFI does not declare cash dividends on its
FFI Common Stock in a
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particular calendar quarter because of FFI's reasonable expectation that
the Effective Date would occur in said calendar quarter wherein the holders
of FFI Common Stock would have become entitled to receive cash dividends
with respect to such calendar quarter on the shares of FFI Common Stock,
and the Effective Date does not in fact occur effective in such calendar
quarter, then, as a result thereof, FFI shall be entitled to declare a cash
dividend (within the limitations of this Section 4.1) on said shares of FFI
Common Stock with respect to such calendar quarter as soon as reasonably
practicable.
(b) FFI will not issue, sell, grant any warrant, option, phantom stock
option, stock appreciation right or commitment of any kind for, or related to,
or acquire for value, any shares of its capital stock or otherwise effect any
change in connection with its equity capitalization, except as set forth on
Schedule 3.3 and except pursuant to the Stock Option Agreement.
(c) Except as otherwise set forth in or contemplated by this Agreement, FFI
will carry on its businesses in substantially the same manner as heretofore,
keep in full force and effect insurance comparable in amount and scope of
coverage to that now maintained by it and use its best efforts to maintain and
preserve its business organization intact.
(d) Neither FFI nor any Subsidiary will (i) enter into any new line of
business or incur or agree to incur any obligation or liability except
liabilities and obligations (including corporate debt issuances) incurred in the
ordinary course of business, except as may be directed by any regulatory agency;
(ii) except as may be directed by any regulatory agency, change its or the
Subsidiaries' lending, investment, liability management and other material
banking policies in any material respect; (iii) except in the ordinary course of
business and consistent with prior practice, grant any general or uniform
increase in the rates of pay of employees; (iv) establish any new employee
benefit plan or bonus plan or arrangement, or amend any existing employee
benefit or bonus plan or arrangement (except as required by law); (v) incur or
commit to any single or group of related capital expenditures or commitment
therefor with an aggregate market value in excess of $250,000 other than in the
ordinary course of business (which will in no event include the establishment of
new branches and other facilities or any capital expenditures for such purpose);
or (vi) merge into, consolidate with or permit any other corporation to be
merged or consolidated with it or any of its Subsidiaries or acquire outside of
the ordinary course of business part of or all the assets or stock of any other
corporation or person.
(e) FFI will not change its or its Subsidiaries' methods of accounting in
effect at December 31, 1994, except as required by changes in generally accepted
accounting principles as concurred in by Ernst & Young LLP, or change any of its
methods of reporting income and deductions for Federal income tax purposes from
those employed in the preparation of FFI's Federal income tax returns for the
taxable years ending December 31, 1993 and 1994, except as required by changes
in law.
(f) FFI will promptly advise FBS in writing of all material corporate
actions taken by the directors and shareholders of FFI and furnish FBS with
copies of all monthly and other interim financial statements of FFI as they
become available.
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(g) FFI, its Subsidiaries and their respective officers, directors and
employees will not contract for or acquire, at the expense of FFI or any of its
Subsidiaries, a policy or policies providing for insurance coverage for
directors, officers and/or employees of FFI and/or its Subsidiaries for any
period subsequent to the Effective Date for events occurring before or after the
Effective Date; provided, however, that FFI may renew, extend or replace
existing policies in the ordinary course consistent with past practices for
periods of not greater than one year.
(h) Neither FFI nor any of the Subsidiaries shall, directly or indirectly,
amend or propose to amend its Charter or Bylaws.
(i) Neither FFI nor any of the Subsidiaries shall sell, assign, transfer,
mortgage or pledge any of its assets with an aggregate market value in excess of
$200,000, except (x) in the ordinary course of business, including REO, (y)
liens and encumbrances for current property taxes not yet due and payable and
(z) liens and encumbrances which do not materially affect the value of, or
interfere with the past or future use or ability to convey, the property subject
thereto or affected thereby.
(j) Neither FFI nor any of the Subsidiaries shall enter into any settlement
or similar agreement involving payments of more than $250,000 with respect to
any action, suit, proceeding, order or investigation or take any other
significant action with respect to the conduct of any action, suit, proceeding,
order or investigation to which FFI or any of the Subsidiaries is a party or
becomes a party after the date of this Agreement, in each case without prior
consultation with FBS.
(k) Neither FFI nor any of the Subsidiaries shall agree to do any of the
foregoing.
For purposes of this Agreement, the words "prior consultation" with respect to
any action means advance notice of such proposed action and a reasonable
opportunity to discuss such action in good faith prior to taking such action.
4.2 Conduct of Business of FBS. From the date of this Agreement to the
Effective Date, unless FFI shall otherwise consent in writing, which consent
will not be unreasonably withheld or as otherwise expressly contemplated or
permitted by other provisions of this Agreement, including this Section 4.2:
(a) FBS will not adopt or implement any amendment to its Charter or any
plan or reorganization which would affect in any manner the terms and provisions
of the shares of FBS Common Stock or the rights of the holders of such shares or
reclassify the FBS Common Stock; provided that nothing in this Section 4.2(a)
shall be construed to prohibit FBS from amending its Charter to increase the
number of authorized shares of its capital stock.
(b) FBS will not, and will cause its subsidiaries not to, intentionally
make or agree to make any acquisition, or take any other action, that materially
adversely affects its ability to consummate the transactions contemplated by
this Agreement.
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ARTICLE 5
ADDITIONAL COVENANTS AND AGREEMENTS
5.1. Filings and Approvals. Each party will use all reasonable efforts and
will cooperate with the other party in the preparation and filing, within 45
days of the date of this Agreement, of all applications or other documents
required to obtain regulatory approvals and consents from the Board of Governors
of the Federal Reserve System (the "FRB"), the Nebraska Department of Banking
and Finance, the Superintendent of Banking of Iowa, the Banking Commissioner of
Wyoming and any other applicable regulatory authorities (including any
applications with the Office of the Comptroller of the Currency and the Office
of Thrift Supervision deemed by FBS to be necessary to allow it to consolidate
the operations of the Banking Subsidiaries with the operations of FBS's bank and
thrift subsidiaries) and provide copies of such applications, filings and
related correspondence to the other party. Prior to filing each application,
registration statement or other document with the applicable regulatory
authority, each party will provide the other party with an opportunity to review
and comment on the nonconfidential portions of each such application,
registration statement or other document. Each party will use all reasonable
efforts and will cooperate with the other parties in taking any other actions
necessary to obtain such regulatory or other approvals and consents, including
participating in any required hearings or proceedings. Subject to the terms and
conditions herein provided, each party will use all reasonable efforts to take,
or cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement.
5.2. Certain Loans and Related Matters. FFI will continue to prepare,
consistent with past practices, and will furnish to FBS, a complete and accurate
list as of the end of each calendar month after June 1995 of (a) all of the
Banking Subsidiaries' periodic internal credit quality reports prepared during
such calendar month, (b) all loans of any Banking Subsidiary classified as non-
accrual, as restructured, as 90 days past due, as still accruing and doubtful of
collection or any comparable classification, (c) all REO, including in-substance
foreclosures and real estate in judgment, (d) any current repurchase obligations
of any Banking Subsidiary with respect to any loans, loan participations or
state or municipal obligations or revenue bonds and (e) any standby letters of
credit issued by any Banking Subsidiary.
5.3. Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
5.4. No Negotiations, etc. FFI will not, and will cause the Subsidiaries
and FFI's and the Subsidiaries' respective officers, directors, employees,
agents and affiliates, not to, directly or indirectly, solicit, authorize,
initiate or encourage submission of, any proposal, offer, tender offer or
exchange offer from any person or entity (including any of its or their officers
or employees) relating to any liquidation, dissolution, recapitalization,
merger, consolidation or acquisition or purchase of all or a material portion of
the assets or deposits of, or any equity interest in, FFI or any of the
Subsidiaries or other similar transaction or
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business combination involving FFI or any of the Subsidiaries, or, unless FFI
shall have determined, after receipt of a written opinion of counsel to FFI (a
copy of which opinion shall be delivered to FBS), that the Board of Directors of
FFI has a fiduciary duty to do so, (a) participate in any negotiations in
connection with or in furtherance of any of the foregoing or (b) permit any
person other than FBS and its representatives to have any access to the
facilities of, or furnish to any person other than FBS and its representatives
any non-public information with respect to, FFI or any of the Subsidiaries in
connection with or in furtherance of any of the foregoing. FFI shall promptly
notify FBS if any such proposal or offer, or any inquiry from or contact with
any person with respect thereto, is made, and shall promptly provide FBS with
such information regarding such proposal, offer, inquiry or contact as FBS may
request.
5.5. Notification of Certain Matters. Each party shall give prompt notice
to the other party of (a) the occurrence or failure to occur of any event or the
discovery of any information, which occurrence, failure or discovery would be
likely to cause any representation or warranty on its part contained in this
Agreement to be materially untrue or inaccurate when made at the Effective Date
or at any time prior to the Effective Date and (b) any material failure of such
party to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder.
5.6. Access to Information; Confidentiality.
(a) FFI shall permit and shall cause each of the Subsidiaries to permit FBS
full access on reasonable notice and at reasonable hours to its properties and
shall disclose and make available (together with the right to copy) to FBS and
to the internal auditors, loan review officers, employees, attorneys,
accountants and other representatives of FBS all books, papers and records
relating to the assets, stock, properties, operations, obligations and
liabilities of FFI and the Subsidiaries, including, without limitation, all
books of account (including, without limitation, the general ledger), tax
records, minute books of directors' and shareholders' meetings, organizational
documents, bylaws, contracts and agreements, filings with any regulatory
authority, accountants' work papers, litigation files (including, without
limitation, legal research memoranda), documents relating to assets and title
thereto (including, without limitation, abstracts, title insurance policies,
surveys, environmental reports, opinions of title and other information relating
to the real and personal property), plans affecting employees, securities
transfer records and shareholder lists, and any books, papers and records
relating to other assets, business activities or prospects in which FBS may have
a reasonable interest, including, without limitation, its interest in planning
for integration and transition with respect to the business of FFI and the
Subsidiaries; provided, however, that the foregoing rights granted to FBS shall,
whether or not and regardless of the extent to which the same are exercised, in
no way affect the nature or scope of the representations, warranties and
covenants of FFI set forth herein. In addition, FFI shall cause each of the
Subsidiaries to instruct its officers, employees, counsel and accountants to be
available for, and respond to any questions of, such FBS representatives at
reasonable hours and with reasonable notice by FBS to such individuals, and to
cooperate fully with FBS in planning for the integration of the business of FFI
and the Subsidiaries with the business of FBS and its subsidiaries.
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(b) FBS shall permit reasonable access to its properties and shall disclose
and make available (together with the right to copy) to FFI and to its
representatives FBS's financial books and records, minute books of directors'
and shareholders' meetings, organizational documents, bylaws, and filings with
any regulatory authority; provided, however, that the foregoing rights granted
to FFI shall, whether or not and regardless of the extent to which the same are
exercised, in no way affect the nature or scope of the representations,
warranties and covenants of FBS set forth herein. In addition, FBS shall
instruct its officers, employees, counsel and accountants to be available for,
and respond to reasonable questions of, representatives of FFI at reasonable
hours and with reasonable notice by FFI to such individuals.
(c) All information furnished by FFI or FBS pursuant hereto shall be
treated as the sole property of the party furnishing the information until the
Effective Date, and, if the Effective Date shall not occur, the receiving party
shall return to the party which furnished such information, or destroy, all
documents or other materials (including copies thereof) containing, reflecting
or referring to such information. In addition, the receiving party shall keep
confidential all such information and shall not directly or indirectly use such
information for any competitive or other commercial purpose. In the event that
this Agreement shall terminate, neither party shall disclose, except as required
by law or pursuant to the request of an administrative agency or other
regulatory body, the basis or reason for such termination, without the consent
of the other party. The obligation to keep such information confidential shall
not apply to (i) any information which (A) was already in the receiving party's
possession prior to the disclosure thereof to the receiving party by the party
furnishing the information, (B) was then generally known to the public, (C)
became known to the public through no fault of the receiving party or its
representatives or (D) was disclosed to the receiving party by a third party not
bound by an obligation of confidentiality or (ii) disclosures required by law,
governmental or regulatory authority.
5.7. Filing of Tax Returns and Adjustments.
(a) FFI, on behalf of FFI and each of the Subsidiaries, shall file (or
cause to be filed) at their own expense, on or prior to the due date, all Tax
returns, including all Plan returns and reports, for all Tax periods ending on
or before the Effective Date where the due date for such returns or reports
(taking into account valid extensions of the respective due dates) falls on or
before the Effective Date; provided, however, that neither FFI nor any of the
Subsidiaries shall file any such Tax returns, or other returns, elections or
information statements with respect to any liabilities for Taxes (other than
federal, state or local sales, use, withholding or employment tax returns or
statements), or consent to any adjustment or otherwise compromise or settle any
matters with respect to Taxes, without prior consultation with FBS; provided,
further, that neither FFI nor any of the Subsidiaries shall make any election or
take any other discretionary position with respect to Taxes, in a manner
inconsistent with past practices, without the prior written approval of FBS,
which approval shall not be unreasonably withheld. In the event the granting or
withholding of such approval by FBS results in additional Taxes owing for any
Tax period ending on or before the Effective Date, liability for such additional
Taxes shall not cause any representation of FFI relating to Taxes to be untrue.
FFI shall provide FBS with a copy of appropriate workpapers, schedules, drafts
and final copies of each federal and state income Tax return or
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election of FFI and each of the Subsidiaries (including returns of all Plans) at
least ten days before filing such return or election and shall reasonably
cooperate with any request by FBS in connection therewith.
(b) FBS, in its sole and absolute discretion, will file (or cause to be
filed) all Tax returns of FFI and each of the Subsidiaries due after the
Effective Date. After the Effective Date, FBS, in its sole and absolute
discretion and to the extent permitted by law, shall have the right to amend,
modify or otherwise change all Tax returns of FFI and each of the Subsidiaries
for all Tax periods.
5.8. Registration Statement.
(a) For the purposes (i) of holding a meeting of the shareholders of FFI to
approve this Agreement and the Merger and (ii) of registering the FBS Common
Stock to be issued to holders of FFI Common Stock in connection with the Merger
with the SEC and with applicable state securities authorities, the parties
hereto shall cooperate in the preparation of an appropriate registration
statement (such registration statement, together with all and any amendments and
supplements thereto, being herein referred to as the "Registration Statement"),
which shall include a prospectus/proxy statement satisfying all applicable
requirements of the 1933 Act, the 1934 Act, applicable state securities laws and
the rules and regulations thereunder (such prospectus/proxy statement, together
with any and all amendments or supplements thereto, being herein referred to as
the "Prospectus/Proxy Statement").
(b) FBS shall furnish such information concerning FBS as is necessary in
order to cause the Prospectus/Proxy Statement, insofar as it relates to FBS, to
be prepared in accordance with Section 5.8(a). FBS agrees promptly to advise
FFI if at any time prior to the FFI shareholders' meeting any information
provided by FBS in the Prospectus/Proxy Statement becomes incorrect or
incomplete in any material respect, and to provide the information needed to
correct such inaccuracy or omission.
(c) FFI shall furnish FBS with such information concerning FFI and the
Subsidiaries as is necessary in order to cause the Prospectus/Proxy Statement,
insofar as it relates to FFI and the Subsidiaries, to be prepared in accordance
with Section 5.8(a). FFI agrees promptly to advise FBS if at any time prior to
the FFI shareholders' meeting any information provided by FFI in the
Prospectus/Proxy Statement becomes incorrect or incomplete in any material
respect, and to provide FBS with the information needed to correct such
inaccuracy or omission.
(d) FBS will use reasonable efforts to file the Registration Statement with
the SEC and applicable state securities agencies within 45 days of the date of
this Agreement. FBS shall use reasonable efforts to cause the Registration
Statement to become effective under the 1933 Act and applicable state securities
laws at the earliest practicable date. FFI authorizes FBS to utilize in the
Registration Statement the information concerning FFI and the Subsidiaries
provided to FBS for the purpose of inclusion in the Prospectus/Proxy Statement.
FFI shall have the right to review and comment on the form of proxy statement
included in the Registration Statement. FBS shall advise FFI promptly when the
Registration Statement
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has become effective and of any supplements or amendments thereto, and FBS shall
furnish FFI with copies of all such documents. Prior to the Effective Date or
the termination of this Agreement, each party shall consult with the other with
respect to any material (other than the Prospectus/Proxy Statement) that might
constitute a "prospectus" relating to the Merger within the meaning of the 1933
Act.
(e) FBS shall use reasonable efforts to cause to be delivered to FFI a
letter relating to the Registration Statement from Ernst & Young LLP, FBS's
independent auditors, dated a date within two business days before the date on
which the Registration Statement shall become effective and addressed to FFI, in
form and substance reasonably satisfactory to FFI and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the Registration Statement.
(f) FFI shall use reasonable efforts to cause to be delivered to FBS a
letter relating to the Registration Statement from Arthur Andersen LLP, FFI's
independent auditors, dated a date within two business days before the date on
which the Registration Statement shall become effective and addressed to FBS, in
form and substance reasonably satisfactory to FBS and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the Registration Statement.
(g) FBS shall bear the costs of all SEC filing fees with respect to the
Registration Statement and the costs of qualifying the shares of FBS Common
Stock under Blue Sky Laws to the extent necessary. FFI shall bear all printing
and mailing costs in connection with the preparation and mailing of the
Prospectus/Proxy Statement to FFI shareholders. FBS and FFI shall each bear
their own legal and accounting expenses in connection with the Registration
Statement.
5.9. Affiliate Letters. FFI shall use its best efforts to obtain and
deliver to FBS at least 31 days prior to the Effective Date a signed
representation letter substantially in the form of Exhibit C hereto from each
shareholder of FFI who may reasonably be deemed an "affiliate" of FFI within the
meaning of such term as used in Rule 145 under the 1933 Act. FBS may place
appropriate legends on the stock certificates of affiliates of FFI.
5.10. Establishment of Accruals. If requested by FBS, on the business
day immediately prior to the Effective Date, FFI shall, consistent with
generally accepted accounting principles, establish such additional accruals and
reserves as may be necessary to conform FFI's accounting and credit loss reserve
practices and methods to those of FBS (as such practices and methods are to be
applied to FFI or its Subsidiaries from and after the Effective Date) and
reflect FBS's plans with respect to the conduct of FFI's business following the
Merger and to provide for the costs and expenses relating to the consummation by
FFI of the transactions contemplated by this Agreement; provided, however, that
FFI shall not be required to take such action (A) if such action is prohibited
by applicable law or (B) unless FBS informs FFI that it has no reason to believe
that all conditions to FBS's obligations to consummate the transactions
contemplated by this Agreement set forth in Article 6 hereof will not be
satisfied or waived. The establishment of such accruals and reserves shall not,
in and of itself, constitute a breach of any representation or warranty of
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FFI contained in this Agreement or constitute a material adverse change in the
business, operations, results of operations or financial condition of FFI and
the Subsidiaries, taken as a whole.
5.11. Employee Matters.
(a) General. Subject to the following agreements, after the Effective Date
FBS shall have the right to continue, amend or terminate any of the Plans (as
defined in Section 3.18) in accordance with the terms thereof and subject to any
limitation arising under applicable law. Until FBS shall take such action,
however, such Plans shall continue in force for the benefit of present and
former employees of FFI or the Subsidiaries who have any present or future
entitlement to benefits under any of the Plans ("FFI Employees").
(b) FFI 401(k) Plan. After the Effective Date, FBS will terminate the
accrual of benefits under the FFI 401(k) plans listed on Schedule 3.18(b)(i)(B)
and sponsored by FFI or any Subsidiary not more than two years after the
Effective Date. Benefits accruing between the Effective Date and the date on
which the accrual of benefits is terminated shall be fully and immediately
vested as of that time. Distributions shall not be permitted from the FFI 401(k)
plans merely because of the discontinuance of accruals or the transfer of assets
and liabilities.
(c) FBS Plans.
(i) FBS CAP (401(k)) Plan. After the Effective Date, FBS shall take
such actions as may be necessary to cause eligible FFI Employees to become
qualified to participate in the FBS Capital Accumulation Plan ("CAP")
concurrent with the date that FBS causes accruals to cease under the FFI
401(k) plan. All service with FFI and any of the Subsidiaries (whether
before or after the Effective Date) since an individual's most recent date
of hire shall be recognized under the CAP for eligibility and vesting
purposes but shall not be recognized for contribution and allocation
purposes.
(ii) Welfare and Other Benefits. Following the Effective Date, at
such time as FBS shall determine, FBS shall use its best efforts to cause
FFI Employees to be covered by the welfare and other generally applicable
benefit plans and practices of FBS; and, pending such coverage, FBS will
use its best efforts to provide welfare and other generally applicable
benefit plans that, taken as a whole, provide coverage substantially
similar to the then current plans and practices of FBS or those of FFI
immediately prior to the Effective Date; provided, that during any such
interim period, FBS shall not be obligated to continue any particular
welfare or other benefit plans or practices of FFI or any Subsidiary, as
the case may be, applicable to FFI Employees.
(d) Vested Rights. FBS will honor the obligations of FFI with respect to
vested rights under Plans and agreements of FFI relating to FFI Employees in
accordance with the terms of such vested rights and subject to the provisions of
Section 5.11(a).
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(e) Limitation on Enforcement. This Section 5.11 is an agreement solely
between FFI and the Subsidiaries and FBS. Nothing in this Section 5.11, whether
express or implied, confers upon any employee of FFI, any of the Subsidiaries or
FBS or any other person, any rights or remedies, including, but not limited to:
(i) any right to employment or recall, (ii) any right to continued employment
for any specified period, or (iii) any right to claim any particular
compensation, benefit or aggregate of benefits, of any kind or nature
whatsoever, as a result of this Section 5.11.
5.12. Tax Treatment. Neither FFI nor any of the Subsidiaries nor FBS
shall take any action which would disqualify the Merger as a "reorganization"
that would be tax free to the shareholders of FFI pursuant to Section 368(a) of
the Code.
5.13. Stock Options.
-------------
(a) Stock Option Plans. On the Effective Date, and to the extent
permitted by applicable plans and agreements, each outstanding option to
purchase shares of FFI Common Stock (a "Stock Option") issued pursuant to the
stock option plans listed on Schedule 3.3 (collectively, the "FFI Stock Option
Plans") shall be assumed by FBS and shall thereafter be deemed to constitute an
option to acquire, on the same terms and conditions as were applicable under
such option, the same number of shares of FBS Common Stock as the holder of such
option would have been entitled to receive pursuant to the Merger had such
holder exercised such option in full immediately prior to the Effective Date, at
a price per share equal to (x) the aggregate exercise price for the shares of
FFI Common Stock otherwise purchasable pursuant to such option divided by (y)
the number of full shares of FBS Common Stock deemed purchasable pursuant to
such option; provided, however, that in the case of any option to which Section
421 of the Code applies by reason of its qualification under Section 422 of the
Code ("incentive stock options"), the option price, the number of shares
purchasable pursuant to such option and the terms and conditions of exercise of
such options shall be determined in order to comply with Section 424(a) of the
Code.
(b) Registration of Stock Option Plans. FBS shall take all corporate
action necessary to reserve for issuance a sufficient number of shares of FBS
Common Stock for delivery upon exercise of Stock Options assumed by it in
accordance with this Section 5.13. As soon as practicable after the Effective
Date, FBS shall file a registration statement on Form S-3 or Form S-8, as the
case may be (or any successor or other appropriate forms), or another
appropriate form with respect to the shares of FBS Common Stock subject to such
options and shall use its best efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
options remain outstanding.
5.14. Indemnification and Insurance.
-----------------------------
(a) From and after the Effective Date, FBS shall indemnify, defend and hold
harmless each person who is now, or has been at any time prior to the date
hereof or who becomes prior to the Effective Date, an officer, director or
employee of FFI or any of the Subsidiaries (the "Indemnified Parties") against
all losses, claims, damages, costs, expenses
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(including attorney's fees), liabilities or judgments or amounts that are paid
in settlement (which settlement shall require the prior written consent of FBS,
which consent shall not be unreasonably withheld) of or in connection with any
claim, action, suit, proceeding or investigation (a "Claim") in which an
Indemnified Party is, or is threatened to be made, a party or a witness based in
whole or in part on or arising in whole or in part out of the fact that such
person is or was a director, officer or employee of FFI or any of the
Subsidiaries if such Claim pertains to any matter or fact arising, existing or
occurring prior to the Effective Date (including, without limitation, the Merger
and other transactions contemplated by this Agreement or the Stock Option
Agreement), regardless of whether such Claim is asserted or claimed prior to, at
or after the Effective Date (the "Indemnified Liabilities") to the full extent
permitted under applicable Nebraska or federal law as of the date hereof or as
amended prior to the Effective Date and under FFI's Charter and Bylaws as in
effect on the date hereof (and FBS shall pay expenses in advance of the final
disposition of any such action or proceeding to each Indemnified Party to the
full extent permitted by law and under such Charter or Bylaws, upon receipt of
any undertaking required by such Charter, Bylaws or applicable law). Any
Indemnified Party wishing to claim indemnification under this Section 5.14(a),
upon learning of any Claim, shall notify FBS (but the failure so to notify FBS
shall not relieve it from any liability which FBS may have under this Section
5.14(a) except to the extent such failure prejudices FBS) and shall deliver to
FBS any undertaking required by such Charter, Bylaws or applicable law. FBS
shall use its best efforts to assure, to the extent permitted under applicable
law, that all limitations of liability existing in favor of the Indemnified
Parties as provided in the FFI Charter and Bylaws, as in effect as of the date
hereof, with respect to claims or liabilities arising from facts or events
existing or occurring prior to the Effective Date (including, without
limitation, the transactions contemplated by this Agreement), shall survive the
Merger. The obligations of FBS described in this Section 5.14(a) shall continue
in full force and effect, without any amendment thereto, for a period of not
less than six years from the Effective Date; provided, however, that all rights
to indemnification in respect of any Claim asserted or made within such period
shall continue until the final disposition of such Claim.
(b) From and after the Effective Date, the directors, officers and
employees of FFI and the Subsidiaries who become directors, officers or
employees of FBS or any of its subsidiaries, except for the indemnification
rights set forth in Section 5.14(a) or as otherwise provided by applicable law,
shall have indemnification rights with prospective application only. The
prospective indemnification rights shall consist of such rights to which
directors, officers and employees of FBS are entitled under the provisions of
the Charter or similar governing documents of FBS and its subsidiaries, as in
effect from time to time after the Effective Date, as applicable, and provisions
of applicable law as in effect from time to time after the Effective Date.
(c) The obligations of FBS provided under Sections 5.14(a) and 5.14(b) are
intended to benefit, and be enforceable against FBS directly by, the Indemnified
Parties, and shall be binding on all respective successors of FBS.
(d) For a period of five years after the Effective Date, FBS shall use its
best efforts to provide that portion of directors' and officers' liability
insurance that serves to reimburse officers and directors of FFI or any of the
Subsidiaries (as opposed to FBS or FFI)
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with respect to claims against such officers and directors arising from facts or
events which occurred before the Effective Date of at least the same coverage
and amounts, and containing terms and conditions no less advantageous, as that
coverage currently provided by FFI; provided, however, that the annual premiums
for such coverage will not exceed 200% of the annual premiums currently paid by
FFI for such coverage; provided, further, that officers and directors of FFI or
any Subsidiary may be required to make application and provide customary
representations and warranties to FBS's insurance carrier for the purpose of
obtaining such insurance; and provided, further, that such coverage will have a
single aggregate for such three-year period in an amount not less than the
annual aggregate of such coverage currently provided by FFI.
5.15. FBS SEC Reports. FBS shall continue to file all reports with the
SEC necessary to permit the shareholders of FFI who are "affiliates" of FFI
(within the meaning of such term as used in Rule 145 under the 1933 Act) to sell
the FBS Common Stock received by them in connection with the Merger pursuant to
Rules 144 and 145(d) under the 1933 Act if they would otherwise be so permitted.
After the Effective Date, FBS will file with the SEC reports and other materials
required by the federal securities laws on a timely basis.
5.16. SEC Reports. Each of FBS and FFI agree to provide to the other
party copies of all reports and other documents filed with the SEC by it between
the date hereof and the Effective Date within five days after the date such
reports or other documents are filed with the SEC.
5.17. Stock Exchange Listing. FBS shall use its best efforts to list
on the New York Stock Exchange, subject to official notice of issuance, the
shares of FBS Common Stock to be issued to the holders of FFI Common Stock in
the Merger.
5.18. Shareholder Approval. FFI shall call a meeting of its
shareholders for the purpose of voting upon this Agreement and the Merger, and
shall schedule such meeting based on consultation with FBS. The Board of
Directors of FFI shall recommend approval of this Agreement and the Merger, and
use its best efforts (including, without limitation, soliciting proxies for such
approvals) to obtain such shareholder approval, unless the Board of Directors of
FFI determines, after receipt of a written opinion of counsel to FFI (a copy of
which shall be delivered to FBS), that recommending such approval or using its
best efforts to obtain such shareholder approval would be a breach of its
fiduciary duties.
5.19. Conversion of Customer Data Files and Records. As of the
Effective Date, FFI shall use reasonable efforts to cause its existing customer
data files and records to be in such format as is necessary to allow the then
existing FBS loan and deposit application systems to process FFI's customer
data. FBS agrees to cooperate with FFI to exchange information and data
regarding the respective procedures, records and systems with the objective of
assisting FFI in developing and implementing such a conversion of data files and
records. Customer data files and records shall include all customer
information, accounting information, statement records and data regularly
maintained by FFI on electronic information systems or electronic media
(including, without limitation, data relating to all deposit and loan customers,
ACH and ATM transactions, cash management and collection
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services, wire transfers, credit card processing systems and other related or
similar systems). In the event that this Agreement is terminated pursuant to the
terms of Section 7.1 hereof, FBS shall promptly reimburse FFI for its expenses
directly relating to its effort to comply with the provisions of this Section
5.19.
5.20. Employment Agreement. As of the Effective Date, FBS shall
expressly assume and agree to perform the Employment Agreement dated August 4,
1995 between FFI and David A. Rismiller as in effect on the date of this
Agreement or as amended with the prior written consent of FBS.
5.21. Pre-Acquisition Investigation. FBS will initiate a pre-
acquisition review of the books, records and facilities of FFI and the
Subsidiaries and will complete such investigation as soon as reasonably
possible, but in any event, not later than September 5, 1995. FFI will use its
best efforts to provide FBS as soon as reasonably practicable but in any event
not later than August 14, 1995, the information requested on the due diligence
request list provided prior to the date of this Agreement by FBS to FFI in
connection with such review. FBS shall advise FFI at the conclusion of such
pre-acquisition investigation of all matters then known to FBS which involve
credit risk, litigation, loss contingencies or financial exposures, interest
rate risk, operations or data processing exposures or environmental exposures
and, in the reasonable judgment of the Board of Directors of FBS, are of such
significance as to be reasonably likely to materially and adversely affect the
financial condition or the results of operations of FFI and the Subsidiaries,
taken as a whole. FBS shall have the right to terminate this Agreement set
forth in Section 7.1(g) hereof notwithstanding the fact that such matters may
have been disclosed in the Schedules to this Agreement. The provisions of this
Section 5.21 are in addition to the rights of FBS pursuant to Section 5.6
hereof.
5.22. Disclosure Schedules. FFI will deliver to FBS all Schedules
referred to in the representations and warranties contained in Article 3 of this
Agreement containing exceptions to such representations and warranties and all
documents required to be delivered to FBS by FFI pursuant to such Article 3
(other than those required in Sections 3.3 and 3.8, and the Charter and Bylaws
of FFI and FFI's Annual Report on Form 10-K for the year ended December 31,
1994, which have been delivered prior to the execution of this Agreement) as
soon as practicable but in any event no later than August 14, 1995. Such
Schedules shall in each case describe the nature of each exception in reasonable
detail, and in a form reasonably acceptable to FBS. Such Schedules shall be
deemed to speak as of the date of delivery thereof to FBS and shall be true and
correct as of such date. Any document described or referred to in such
Schedules shall be delivered to FBS by FFI within two days after a request
therefor by FBS, which request shall be made no later than two days following
receipt of such Schedules.
ARTICLE 6
CONDITIONS
6.1. Conditions to Obligations of Each Party. The respective obligations
of each party to effect the transactions contemplated hereby shall be subject to
the fulfillment at or
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prior to the Effective Date of the following conditions:
(a) Regulatory Approval. Regulatory approval for the consummation of
the transactions contemplated hereby shall have been obtained from the FRB,
the Nebraska Department of Banking and Finance, the Superintendent of
Banking of Iowa, the Banking Commissioner of Wyoming and any other
governmental authority from whom approval is required, the applicable
waiting period, if any, under the Bank Holding Company Act shall have
expired or been terminated, and all other statutory or regulatory waiting
periods shall have lapsed. None of such approvals shall contain any
conditions or restrictions, except as set forth on Schedule 6.1, that FBS
reasonably believes will materially restrict or limit the business or
activities of FBS or FFI and the Subsidiaries, taken as a whole, or have a
material adverse effect on, or would be reasonably likely to have a
material adverse effect on, the business, operations, results of operations
or financial condition of FBS and its subsidiaries, taken as a whole, on
the one hand, or FFI and the Subsidiaries, taken as a whole, on the other
hand.
(b) No Injunction. No injunction or other order entered by a state or
federal court of competent jurisdiction shall have been issued and remain
in effect which would impair the consummation of the transactions
contemplated hereby.
(c) No Termination. No party hereto shall have terminated this
Agreement as permitted herein.
(d) Registration Statement. The Registration Statement shall have
been declared effective and shall not be subject to a stop order of the
SEC, and, if the offer and sale of FBS Common Stock in the Merger pursuant
to this Agreement is required to be registered under the securities laws of
any state, the Registration Statement shall not be subject to a stop order
of securities commission in such state.
(e) Federal Tax Opinion. An opinion of Wachtell, Lipton, Rosen & Katz
shall have been obtained with respect to the Merger, based on customary
reliance and subject to customary qualifications, to the effect that for
federal income tax purposes:
(i) The Merger will qualify as a "reorganization" under Section
368(a) of the Code;
(ii) No gain or loss will be recognized by any FFI shareholder
(except in connection with the receipt of cash) upon the exchange of
FFI Common Stock for FBS Common Stock in the Merger;
(iii) The basis of the FBS Common Stock received by a FFI
shareholder who exchanges FFI Common Stock for FBS Common Stock will
be the same as the basis of the FFI Common Stock surrendered in
exchange therefor (subject to any adjustments required as the result
of receipt of cash in lieu of a fractional share of FBS Common Stock);
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(iv) The holding period of the FBS Common Stock received by a FFI
shareholder receiving FBS Common Stock will include the period during
which the FFI Common Stock surrendered in exchange therefor was held
(provided that the FFI Common Stock of such FFI shareholder was held
as a capital asset at the Effective Date); and
(v) Cash received by a FFI shareholder in lieu of a fractional
share interest of FBS Common Stock will be treated as having been
received as a distribution in full payment in exchange for the
fractional share interest of FBS Common Stock which the FFI
shareholder would otherwise be entitled to receive, and will qualify
as capital gain or loss (assuming the FFI Common Stock was a capital
asset in his hands at the Effective Date).
Such opinion shall be delivered on and dated as of the Effective Date
and on and as of such earlier date as may be required by the SEC in
connection with the Registration Statement.
(f) The FBS Common Stock to be issued to holders of FFI Common Stock
in the Merger shall have been approved for listing on the NYSE on official
notice of issuance.
6.2. Additional Conditions to Obligation of FFI. The obligation of FFI to
consummate the transactions contemplated hereby in accordance with the terms of
this Agreement is also subject to the following conditions:
(a) Representations and Compliance. The representations and
warranties of FBS set forth in Article 2 shall have been true and correct
as of the date hereof, and shall be true and correct as of the Effective
Date as if made at and as of the Effective Date, except where the failure
to be true and correct would not have, or would not reasonably be expected
to have, individually or in the aggregate, a material adverse effect on the
business, operations, results of operations or financial condition of FBS
and its subsidiaries, taken as a whole; and FBS shall in all material
respects have performed each obligation and agreement and complied with
each covenant to be performed and complied with by it hereunder at or prior
to the Effective Date.
(b) Officer's Certificate. FBS shall have furnished to FFI a
certificate of the Chief Financial Officer of FBS, dated as of the
Effective Date, in which such officer shall certify that he has no reason
to believe that the conditions set forth in Section 6.2(a) have not been
fulfilled.
(c) Shareholder Approval. This Agreement and the Merger shall have
been approved by the affirmative vote of the holders of the percentage of
FFI capital stock required for such approval under the provisions of FFI's
Charter and Bylaws and the NBCA.
(d) Material Adverse Change. Since the date of this Agreement, there
has been no material adverse change in, and no event, occurrence or
development in the
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business of FBS or its subsidiaries that, taken together with other events,
occurrences and developments with respect to such business, would have or
would reasonably be expected to have a material adverse effect on, the
business, operations, results of operations or financial condition of FBS
and its subsidiaries, taken as a whole.
(e) FBS Rights Agreement. No event shall have occurred resulting in
the Rights (as defined in the FBS Rights Agreement) being distributed or
becoming exercisable or triggered.
6.3. Additional Conditions to Obligation of FBS. The obligation of FBS to
consummate the transactions contemplated hereby in accordance with the terms of
this Agreement is also subject to the following conditions:
(a) Representations and Compliance. The representations and
warranties of FFI in this Agreement shall have been true and correct as of
the date hereof, and such representations and warranties shall be true and
correct as of the Effective Date as if made at and as of the Effective
Date, except where the failure to be true and correct would not have, or
would not reasonably be expected to have, individually or in the aggregate,
a material adverse effect on the business, operations, results of
operations or financial condition of FFI and the Subsidiaries taken as a
whole; and FFI shall in all material respects have performed each
obligation and agreement and complied with each covenant to be performed
and complied with by it hereunder at or prior to the Effective Date.
(b) Officers' Certificate of FFI. FFI shall have furnished to FBS a
certificate of the Chief Executive Officer of FFI, dated as of the
Effective Date, in which such officer shall certify that such officer has
no reason to believe that the conditions set forth in Section 6.3(a) have
not been fulfilled.
(c) Affiliate Letters. FFI shall have delivered to FBS the letters
required to be delivered pursuant to Section 5.9.
(d) Governmental Action. There shall not be any action taken, or any
statute, rule, regulation, judgment, order (other than an order issued in
connection with the regulatory approvals described in Section 6.1) or
injunction proposed, enacted, entered, enforced, promulgated, issued or
deemed applicable to the transactions contemplated hereby by any federal,
state or other court, government or governmental authority or agency, which
would reasonably be expected to, directly or indirectly, (i) challenge or
seek to make illegal, or to delay or otherwise directly or indirectly to
restrain or prohibit, the consummation of the transactions contemplated
hereby or seek to obtain material damages in connection with the
transactions contemplated hereby, (ii) seek to prohibit direct or indirect
ownership or operation by FBS of all or a material portion of the business
or assets of FFI or any of the Subsidiaries or of FBS or any of its
subsidiaries, or to compel FBS or any of its subsidiaries or FFI or any of
the Subsidiaries to dispose of or to hold separately all or a material
portion of the business or assets of FBS or any of its subsidiaries or of
FFI and the Subsidiaries, taken as a whole, as a result of the transactions
contemplated
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hereby, or (iii) seek to require direct or indirect
divestiture by FBS of any material portion of its business or assets or of
the business or assets of FFI and the Subsidiaries, taken as a whole.
(e) Material Adverse Change. Since the date of this Agreement, there
has been no material adverse change in, and no event, occurrence or
development in the business of FFI or the Subsidiaries that, taken together
with other events, occurrences and developments with respect to such
business, would have or would reasonably be expected to have a material
adverse effect on, the business, operations, results of operations or
financial condition of FFI and the Subsidiaries, taken as a whole.
(f) FFI Rights Agreement. No event shall have occurred resulting in
the Rights (as defined in the FFI Rights Agreement) being distributed or
becoming exercisable or triggered.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
7.1. Termination. This Agreement may be terminated prior to the Effective
Date:
(a) by mutual consent of FBS and FFI;
(b) by either FBS or FFI, if any of the conditions to such party's
obligation to consummate the transactions contemplated in this Agreement shall
have become impossible to satisfy;
(c) by either FBS or FFI, if this Agreement and the Merger are not duly
approved by the shareholders of FFI at a meeting of shareholders (or any
adjournment thereof) duly called and held for such purpose;
(d) by FBS or FFI if the Effective Date is not on or before March 31, 1996
(unless the failure to consummate the Merger by such date shall be due to the
action or failure to act of the party seeking to terminate this Agreement in
breach of such party's obligations under this Agreement);
(e) by FBS if, after the date hereof, the Board of Directors of FFI shall
have withdrawn, modified or changed its recommendation of this Agreement or the
Merger;
(f) by FBS if after the date hereof, there shall have occurred a
"Subsequent Triggering Event" as defined in the Stock Option Agreement;
(g) by FBS in the event that the pre-acquisition investigation and review
described in Section 5.21 of this Agreement discloses matters that involve
credit risk, litigation loss contingencies or financial exposures, interest rate
risk, operations or data processing exposures or environmental exposures and
that, in the reasonable judgment of the Board of Directors of FBS, are of such
significance as to materially and adversely affect, or be
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reasonably likely to materially and adversely affect, the reasonable expected
financial or business benefits to FBS of the transactions contemplated by this
Agreement; or
(h) by FFI if there shall have occurred, since the date of this
Agreement, a Significant Decline (as defined below) in the Average Closing Price
(as defined below) of FBS Common Stock as compared to the price of $43.0417 (the
"Conversion Price"). The "Average Closing Price" of FBS Common Stock shall mean
the average of the closing price of FBS Common Stock as reported on the NYSE for
the 20 consecutive trading days ending on the date the FRB issues an order
approving the Merger (the "Final Calculation Period"). A "Significant Decline"
shall be deemed to have occurred if (i) the FBS Average Closing Price is less
than 80% of the Conversion Price and (ii) the number obtained by dividing the
FBS Average Closing Price by the Conversion Price is less than the number
obtained by dividing the average of the closing prices of the Morgan Stanley 35-
Bank Regional Peer Group during the Final Calculation Period by the average of
the closing prices of the Morgan Stanley 35-Bank Regional Bank Peer Group for
the 20 consecutive trading days ending on the day prior to the date hereof and
subtracting .20 from the quotient.
(i) by FBS if on the date following the execution and delivery of this
Agreement, FFI does not execute and deliver the Stock Option Agreement.
(j) by FBS if, within three business days of receipt of the Schedules and
documents required to be delivered pursuant to Section 5.22, the Board of
Directors of FBS determines in its reasonable judgment that such Schedules or
documents disclose matters that are of such significance as to materially and
adversely affect, or be reasonably likely to materially and adversely affect,
the reasonable expected financial or business benefits to FBS of the
transactions contemplated by this Agreement.
Any party desiring to terminate this Agreement shall give written notice of such
termination and the reasons therefor to the other party. Termination pursuant
to Section 7.1(g) shall only be effective if written notice thereof is given not
more than 21 days after the date FBS receives all of the information on the due
diligence list referenced in Section 5.21.
7.2. Effect of Termination. If this Agreement is terminated as permitted
by Section 7.1, such termination shall be without liability or obligation of any
party (or any shareholder, officer, employee, agent, consultant or
representative of such party) to any other party to this Agreement, except as
provided in Section 8.6 and except that neither party to this Agreement shall be
released from any liabilities or damages arising out of its willful and material
breach of any provision of this Agreement.
7.3. Amendment. This Agreement may not be amended except by an instrument
in writing approved by the parties to this Agreement and signed on behalf of
each of the parties hereto.
7.4. Waiver. At any time prior to the Effective Date, any party hereto may
(a) extend the time for the performance of any of the obligations or other acts
of any other party hereto or (b) waive compliance with any of the agreements of
any other party or with any conditions to its own obligations, in each case only
to the extent such obligations, agreements
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and conditions are intended for its benefit.
ARTICLE 8
GENERAL PROVISIONS
8.1. Public Statements. Neither FFI nor FBS shall make any public
announcement or statement with respect to the Merger, this Agreement or any
related transactions without the approval of the other party; provided, however,
that either FBS or FFI may, upon reasonable notice to the other party, make any
public announcement or statement that it believes is required by federal
securities law. To the extent practicable, each of FBS and FFI will consult
with the other with respect to any such public announcement or statement.
8.2. Notices. All notices and other communications hereunder shall be in
writing and shall be sufficiently given if made by hand delivery, by fax, by
telecopier, by overnight delivery service, or by registered or certified mail
(postage prepaid and return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by it by
like notice):
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if to FBS:
First Bank System, Inc.
First Bank Place
601 Second Avenue South
Minneapolis, Minnesota 55402-4302
Attention: Richard A. Zona, Vice Chairman
and Chief Financial Officer
Fax: (612) 973-0410
with a copy to:
Dorsey & Whitney P.L.L.P.
220 South Sixth Street
Minneapolis, Minnesota 55402
Attention: Lee R. Mitau, Esq.
Fax: (612) 340-8738
if to FFI:
FirsTier Financial, Inc.
1700 Farnam Street
Omaha, Nebraska 68102-2183
Attention: David A. Rismiller
Chairman, President and
Chief Executive Officer
Fax: (402) 348-6221
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Edward D. Herlihy, Esq.
Fax: (212) 403-2000
All such notices and other communications shall be deemed to have been duly
given as follows: when delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if delivered by mail;
when receipt acknowledged, if faxed or telecopied; and the next day after being
delivered to an overnight delivery service.
8.3. Interpretation. When a reference is made in this Agreement to
subsidiaries of FBS, the word "subsidiary" means any "majority-owned subsidiary"
(as defined in Rule 12b-2 under the 1934 Act) of FBS, as the context requires;
provided, however, that neither
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FFI nor any of the Subsidiaries shall at any
time be considered a subsidiary of FBS for purposes of this Agreement. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
References to Sections and Articles refer to Sections and Articles of this
Agreement unless otherwise stated. Words such as "herein," "hereinafter,"
"hereof," "hereto," "hereby" and "hereunder," and words of like import, unless
the context requires otherwise, refer to this Agreement (including the Exhibits
and Schedules hereto). As used in this Agreement, the masculine, feminine and
neuter genders shall be deemed to include the others if the context requires.
8.4. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated, and the parties shall negotiate
in good faith to modify this Agreement and to preserve each party's anticipated
benefits under this Agreement.
8.5. Miscellaneous. This Agreement (together with all other documents and
instruments referred to herein): (a) constitutes the entire agreement, and
supersedes all other prior agreements and undertakings, both written and oral,
among the parties, with respect to the subject matter hereof; (b) is not
intended to confer upon any person other than each party hereto any rights or
remedies hereunder, except as provided in Section 5.14; (c) shall be governed in
all respects, including validity, interpretation and effect, by the internal
laws of the State of Minnesota, without giving effect to the principles of
conflict of laws thereof; and (d) shall not be assigned by operation of law or
otherwise. This Agreement may be executed in two or more counterparts which
together shall constitute a single agreement.
8.6. Survival of Representations, Warranties and Covenants. The
representations and warranties of the parties set forth herein shall not survive
the consummation of the Merger, but covenants that specifically relate to
periods, activities or obligations subsequent to the Merger shall survive the
Merger. In addition, if this Agreement is terminated pursuant to Section 7.1,
the covenants contained in Sections 5.3, 5.6(c) and 7.2 shall survive such
termination.
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IN WITNESS WHEREOF, FBS and FFI have caused this Agreement to be
executed on the date first written above by their respective officers.
FIRST BANK SYSTEM, INC.
By /s/ Richard A. Zona
----------------------------------------------------
Its Vice Chairman and Chief Financial Officer
------------------------------------------------
FIRSTIER FINANCIAL, INC.
By /s/ David A. Rismiller
----------------------------------------------------
Its Chairman, President and Chief Executive Officer
------------------------------------------------
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(Not a part of agreement)
EXHIBITS AND SCHEDULES TO
AGREEMENT OF MERGER AND CONSOLIDATION
DATED AUGUST 6, 1995, BY AND BETWEEN
FIRST BANK SYSTEM, INC. AND
FIRSTIER FINANCIAL, INC.
EXHIBIT OR
SCHEDULE SUBJECT REFERENCE IN AGREEMENT
Exhibit A Form of Stock Option Agreement Recitals
Exhibit B Plan of Merger Section 1.1(d)
Exhibit C Form of Affiliate Letter Section 5.9
Schedules 3.3, 3.6, 3.8, Disclosure Schedules Articles 3 and 6
3.9, 3.11, 3.12, 3.13,
3.14, 3.15, 3.16, 3.18,
3.19, 3.20, 3.24 and 6.1
<PAGE>
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated August 7, 1995, between FIRST BANK SYSTEM,
INC., a Delaware corporation ("Grantee"), and FIRSTIER FINANCIAL, INC., a
Nebraska corporation ("Issuer").
W I T N E S S E T H:
-------------------
WHEREAS, Grantee and Issuer have entered into an Agreement of Merger
and Consolidation prior to the date hereof (the "Merger Agreement"); and
WHEREAS, as a condition and inducement to Grantee's pursuit of the
transactions contemplated by the Merger Agreement and in consideration therefor,
Issuer has agreed to grant Grantee the Option (as hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 3,680,036
fully paid and nonassessable shares of the common stock, $5.00 par value, of
Issuer ("Common Stock") at a price per share equal to the last reported sale
price per share of Common Stock on the Nasdaq National Market System on the date
of the announcement of the execution of the Merger Agreement; provided, however,
that in the event Issuer issues or agrees to issue any shares of Common Stock at
a price less than such last reported sale price per share (as adjusted pursuant
to subsection (b) of Section 5) other than in connection with the options,
rights or plans disclosed on Schedule 3.3 to the Merger Agreement, such price
shall be equal to such lesser price (such price, as adjusted if applicable, the
"Option Price"); provided further that in no event shall the number of shares
for which this Option is exercisable exceed 19.9% of the issued and outstanding
shares of Common Stock. The number of shares of Common Stock that may be
received upon the exercise of the Option and the Option Price are subject to
adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement), the number of shares of Common Stock subject
to the Option shall be increased so that, after such issuance, it equals 19.9%
of the number of shares of Common Stock then issued and outstanding without
giving effect to any shares subject or issued pursuant to the Option. Nothing
contained in this Section 1(b) or elsewhere in this Agreement shall be deemed to
authorize Issuer or Grantee to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option,
in whole or part, if, but only if, both an Initial Triggering Event (as
hereinafter defined) and a
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Subsequent Triggering Event (as hereinafter defined) shall have occurred prior
to the occurrence of an Exercise Termination Event (as hereinafter defined),
provided that the Holder shall have sent the written notice of such exercise (as
provided in subsection (e) of this Section 2) within 12 months following such
Subsequent Triggering Event (or such later period as provided in Section 10).
Each of the following shall be an Exercise Termination Event: (i) the Effective
Date of the Merger; (ii) termination of the Merger Agreement in accordance with
the provisions thereof if such termination occurs prior to the occurrence of an
Initial Triggering Event; or (iii) the passage of 18 months (or such longer
period as provided in Section 10) after termination of the Merger Agreement if
such termination follows the occurrence of an Initial Triggering Event (provided
that if an Initial Triggering Event continues or occurs beyond such termination,
the Exercise Termination Event shall be 18 months (or such longer period as
provided in Section 10) from the expiration of the Last Triggering Event (as
defined below) but in no event more than 24 months (or such longer period as
provided in Section 10) after such termination). The "Last Triggering Event"
shall mean the last Initial Triggering Event to occur. The term "Holder" shall
mean the holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (as hereinafter
defined) (each an "Issuer Subsidiary"), without having received
Grantee's prior written consent, shall have entered into an
agreement to engage in an Acquisition Transaction (as hereinafter
defined) with any person (the term "person" for purposes of this
Agreement having the meaning assigned thereto in Sections 3(a)(9)
and 13(d)(3) of the Securities Exchange Act of 1934 (the "1934
Act"), and the rules and regulations thereunder) other than
Grantee or any of its Subsidiaries (each a "Grantee Subsidiary")
or the Board of Directors of Issuer shall have recommended that
the shareholders of Issuer approve or accept any Acquisition
Transaction other than as contemplated by the Merger Agreement or
this Agreement. For purposes of this Agreement, (a) "Acquisition
Transaction" shall mean (x) a merger or consolidation, or any
similar transaction, involving Issuer or any Significant
Subsidiary (as defined in Rule 1-02 of Regulation S-X promulgated
by the Securities and Exchange Commission (the "SEC")) of Issuer,
(y) a purchase, lease or other acquisition of all or
substantially all of the assets or deposits of Issuer or any
Significant Subsidiary of Issuer, or (z) a purchase or other
acquisition (including by way of merger, consolidation, share
exchange or otherwise) of securities representing 10% or more of
the voting power of Issuer or any Significant Subsidiary of
Issuer, and (b) "Subsidiary" shall have the meaning set forth in
Rule 12b-2 under the 1934 Act;
(ii) Any person other than Grantee or any Grantee
Subsidiary shall have acquired beneficial ownership or the right
to acquire beneficial ownership of 10% or more of the outstanding
shares of Common Stock (the term "beneficial ownership" for
purposes of this Agreement having the meaning assigned thereto in
Section 13(d) of the 1934 Act, and the rules and
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regulations thereunder);
(iii) The shareholders of the Issuer shall not have
approved the transactions contemplated by the Merger Agreement at
the meeting held for that purpose or any adjournment thereof, or
such meeting shall not have been held or shall have been
cancelled prior to termination of the Merger Agreement, in either
case, after Issuer's Board of Directors shall have withdrawn or
modified (or publicly announced its intention to withdraw or
modify or interest in withdrawing or modifying) its
recommendation that the shareholders of Issuer approve the
transactions contemplated by the Merger Agreement, or Issuer or
any Issuer Subsidiary, without having received Grantee's prior
written consent, shall have authorized, recommended, proposed (or
publicly announced its intention to authorize, recommend or
propose or interest in authorizing, recommending or proposing) an
agreement to engage in an Acquisition Transaction with any person
other than Grantee or a Grantee Subsidiary;
(iv) Any person other than Grantee or any Grantee
Subsidiary shall have made a bona fide proposal to Issuer or its
shareholders to engage in an Acquisition Transaction;
(v) Issuer shall have willfully breached any covenant or
obligation contained in the Merger Agreement in anticipation of
engaging in an Acquisition Transaction, and such breach would
entitle Grantee to terminate the Merger Agreement; or
(vi) Any person other than Grantee or any Grantee
Subsidiary, other than in connection with a transaction to which
Grantee has given its prior written consent, shall have filed an
application or notice with the Federal Reserve Board or other
federal or state bank regulatory authority, which application or
notice has been accepted for processing, for approval to engage
in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership
of 20% or more of the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event
described in clause (i) of subsection (b) of this Section 2, except
that the percentage referred to in clause (z) shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event
(together, a "Triggering Event"), it being understood that the giving of such
notice by Issuer shall not be a condition to the right of the Holder to exercise
the Option.
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(e) In the event the Holder is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice (the date of which
being herein referred to as the "Notice Date") specifying (i) the total number
of shares it will purchase pursuant to such exercise and (ii) a place and date
not earlier than three business days nor later than 60 business days from the
Notice Date for the closing of such purchase (the "Closing Date"); provided that
if prior notification to or approval of the Federal Reserve Board or any other
regulatory agency is required in connection with such purchase, the Holder shall
promptly file the required notice or application for approval, shall promptly
notify the Issuer of such filing, and shall expeditiously process the same and
the period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which any required notification periods have expired or
been terminated or such approvals have been obtained and any requisite waiting
period or periods shall have passed. Any exercise of the Option shall be deemed
to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section
2, the Holder shall pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer,
provided that failure or refusal of Issuer to designate such a bank account
shall not preclude the Holder from exercising the Option.
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(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (f) of this Section 2,
Issuer shall deliver to the Holder a certificate or certificates representing
the number of shares of Common Stock purchased by the Holder and, if the Option
should be exercised in part only, a new Option evidencing the rights of the
Holder thereof to purchase the balance of the shares purchasable hereunder.
(h) Certificates for Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that shall read
substantially as follows:
"The transfer of the shares represented by this certificate
is subject to certain provisions of an agreement between the
registered holder hereof and Issuer and to resale
restrictions arising under the Securities Act of 1933, as
amended. A copy of such agreement is on file at the
principal office of Issuer and will be provided to the
holder hereof without charge upon receipt by Issuer of a
written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933 (the "1933 Act") in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
Holder shall have delivered to Issuer a copy of a letter from the staff of the
SEC, or an opinion of counsel, in form and substance satisfactory to Issuer, to
the effect that such legend is not required for purposes of the 1933 Act; (ii)
the reference to the provisions of this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required by
law.
(i) Upon the giving by the Holder to Issuer of the written
notice of exercise of the Option provided for under subsection (e) of this
Section 2 and the tender of the applicable purchase price in immediately
available funds, the Holder shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered to
the Holder. Issuer shall pay all expenses, and any and all United States
federal, state and local taxes and other charges that may be payable in
connection with the preparation, issue and delivery of stock certificates under
this Section 2 in the name of the Holder or its assignee, transferee or
designee.
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3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all premerger notification, reporting and waiting
period requirements specified in 15 U.S.C. (S)18a and regulations promulgated
thereunder and (y) in the event, under the Bank Holding Company Act of 1956, as
amended, or any state or other federal banking law, prior approval of or notice
to the Federal Reserve Board or to any state or other federal regulatory
authority is necessary before the Option may be exercised, cooperating fully
with the Holder in preparing such applications or notices and providing such
information to the Federal Reserve Board or such state or other federal
regulatory authority as they may require) in order to permit the Holder to
exercise the Option and Issuer duly and effectively to issue shares of Common
Stock pursuant hereto; and (iv) promptly to take all action provided herein to
protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of the Issuer, for other Agreements
providing for Options of different denominations entitling the holder thereof to
purchase, on the same terms and subject to the same conditions as are set forth
herein, in the aggregate the same number of shares of Common Stock purchasable
hereunder. The terms "Agreement" and "Option" as used herein include any
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common
Stock that are purchasable upon exercise of the Option pursuant to Section 1 of
this Agreement, the number of shares of Common Stock purchasable upon the
exercise of the Option shall be subject to adjustment from time to time as
provided in this Section 5.
(a) In the event of any change in Common Stock by reason of
stock dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares or the like, the type
and number of shares of Common Stock purchasable upon exercise hereof
shall be appropriately adjusted and proper provision shall be made so
that, in the event that any additional shares of Common Stock are to
be issued or otherwise become outstanding as a result of any
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such change (other than pursuant to an exercise of the Option), the
number of shares of Common Stock that remain subject to the Option
shall be increased so that, after such issuance and together with
shares of Common Stock previously issued pursuant to the exercise of
the Option (as adjusted on account of any of the foregoing changes in
the Common Stock), it equals 19.9% of the number of shares of Common
Stock then issued and outstanding.
(b) Whenever the number of shares of Common Stock purchasable
upon exercise hereof is adjusted as provided in this Section 5, the
Option Price shall be adjusted by multiplying the Option Price by a
fraction, the numerator of which shall be equal to the number of
shares of Common Stock purchasable prior to the adjustment and the
denominator of which shall be equal to the number of shares of Common
Stock purchasable after the adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within 12 months (or such later period as provided in Section 10) of
such Subsequent Triggering Event (whether on its own behalf or on behalf of any
subsequent holder of this Option (or part thereof) or any of the shares of
Common Stock issued pursuant hereto), promptly prepare, file and keep current a
registration statement under the 1933 Act covering any shares issued and
issuable pursuant to this Option and shall use its best efforts to cause such
registration statement to become effective and remain current in order to permit
the sale or other disposition of any shares of Common Stock issued upon total or
partial exercise of this Option ("Option Shares") in accordance with any plan of
disposition requested by Grantee. Issuer will use its best efforts to cause
such registration statement first to become effective and then to remain
effective for such period not in excess of 180 days from the day such
registration statement first becomes effective or such shorter time as may be
reasonably necessary to effect such sales or other dispositions. Grantee shall
have the right to demand two such registrations. The Issuer shall bear the
costs of such registrations (including, but not limited to, attorneys' fees,
printing costs and filing fees). The foregoing notwithstanding, if, at the time
of any request by Grantee for registration of Option Shares as provided above,
Issuer is in registration with respect to an underwritten public offering of
shares of Common Stock, and if in the good faith judgment of the managing
underwriter or managing underwriters, or, if none, the sole underwriter or
underwriters, of such offering the inclusion of the Option Shares would
interfere with the successful marketing of the shares of Common Stock offered by
Issuer, the number of Option Shares otherwise to be covered in the registration
statement contemplated hereby may be reduced; provided, however, that after any
such required reduction the number of Option Shares to be included in such
offering for the account of the Holder shall constitute at least 25% of the
total number of shares to be sold by the Holder and Issuer in the aggregate; and
provided further, however, that if such reduction occurs, then the Issuer shall
file a registration statement for the balance as promptly as practicable
thereafter as to which no reduction pursuant to this Section 6 shall be
permitted or occur and the Holder shall thereafter be entitled to one additional
registration. Each such Holder shall provide all information reasonably
requested by Issuer for inclusion in any registration statement to be filed
hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating itself in
respect of
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<PAGE>
representations, warranties, indemnities and other agreements customarily
included in such underwriting agreements for Issuer. Upon receiving any request
under this Section 6 from any Holder, Issuer agrees to send a copy thereof to
any other person known to Issuer to be entitled to registration rights under
this Section 6, in each case by promptly mailing the same, postage prepaid, to
the address of record of the persons entitled to receive such copies.
7. (a) Upon the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Event, (i) at the request of the Holder,
delivered within 12 months of such occurrence (or such later period as provided
in Section 10), Issuer shall repurchase the Option from the Holder at a price
(the "Option Repurchase Price") equal to (x) the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which this Option may then be exercised plus (y)
Grantee's Out-of-Pocket Expenses (as defined below) (to the extent not
previously reimbursed), and (ii) at the request of the owner of Option Shares
from time to time (the "Owner"), delivered within 12 months of such occurrence
(or such later period as provided in Section 10), Issuer shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "Option Share Repurchase Price") equal to (x) the market/offer price
multiplied by the number of Option Shares so designated plus (y) Grantee's Out-
of-Pocket Expenses (to the extent not previously reimbursed). The term "Out-of-
Pocket Expenses" shall mean Grantee's reasonable out-of-pocket expenses incurred
in connection with the transactions contemplated by the Merger Agreement,
including without limitation legal, accounting, investment banking and
consulting fees. The term "market/offer price" shall mean the highest of (i) the
price per share of Common Stock at which a tender or exchange offer therefor has
been made, (ii) the price per share of Common Stock to be paid by any third
party pursuant to an agreement with Issuer, (iii) the highest closing price for
shares of Common Stock within the six-month period immediately preceding the
date the Holder gives notice of the required repurchase of this Option or the
Owner gives notice of the required repurchase of Option Shares, as the case may
be, or (iv) in the event of a sale of all or substantially all of Issuer's
assets or deposits, the sum of the net price paid in such sale for such assets
or deposits and the current market value of the remaining net assets of Issuer
as determined by a nationally recognized investment banking firm selected by the
Holder or the Owner, as the case may be, divided by the number of shares of
Common Stock of Issuer outstanding at the time of such sale. In determining the
market/offer price, the value of consideration other than cash shall be
determined by a nationally recognized investment banking firm selected by the
Holder or Owner, as the case may be.
(b) The Holder and the Owner, as the case may be, may exercise
its right to require Issuer to repurchase the Option and any Option Shares
pursuant to this Section 7 by surrendering for such purpose to Issuer, at its
principal office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. As promptly as practicable, and in any event within five business
days after the surrender of the Option and/or certificates representing Option
Shares and the receipt of such notice or notices relating thereto, Issuer shall
deliver or cause to be delivered to the Holder the Option Repurchase Price
and/or to the Owner the Option Share Repurchase Price therefor or the portion
thereof that Issuer is not then prohibited under applicable law and regulation
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<PAGE>
from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer shall immediately so notify the
Holder and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to the Holder and/or the Owner, as appropriate, the portion of the
Option Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five business days after
the date on which Issuer is no longer so prohibited; provided, however, that if
Issuer at any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to the
Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to accomplish such repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option or the Option Shares whether in whole or to the extent
of the prohibition, whereupon, in the latter case, Issuer shall promptly (i)
deliver to the Holder and/or the Owner, as appropriate, that portion of the
Option Purchase Price or the Option Share Repurchase Price that Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Holder, a new Agreement evidencing the right of the Holder to purchase that
number of shares of Common Stock obtained by multiplying the number of shares of
Common Stock for which the surrendered Agreement was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of which is
the Option Repurchase Price less the portion thereof theretofore delivered to
the Holder and the denominator of which is the Option Repurchase Price, or (B)
to the Owner, a certificate for the Option Shares it is then so prohibited from
repurchasing. If an Exercise Termination Event shall have occurred prior to the
date of the notice by Issuer described in the first sentence of this subsection
(c), or shall be scheduled to occur at any time before the expiration of a
period ending on the thirtieth day after such date, the Holder shall nonetheless
have the right to exercise the Option until the expiration of such 30-day
period.
8. (a) In the event that prior to an Exercise Termination Event,
Issuer shall enter into an agreement (i) to consolidate with or merge into any
person, other than Grantee or a Grantee Subsidiary, and shall not be the
continuing or surviving corporation of such consolidation or merger, (ii) to
permit any person, other than Grantee or a Grantee Subsidiary, to merge into
Issuer and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of Common Stock shall
be changed into or exchanged for stock or other securities of any other person
or cash or any other property or the then outstanding shares of Common Stock
shall after such merger represent less than 50% of the outstanding shares and
share equivalents of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its or any Significant Subsidiary's assets or
deposits to any person, other than Grantee or a Grantee Subsidiary, then, and in
each such case, the agreement governing such transaction shall make proper
provision so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be converted
into, or exchanged for, an option (the "Substitute Option"), at the election of
the Holder, of either (x) the Acquiring Corporation
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<PAGE>
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if
other than Issuer), (ii) Issuer in a merger in which Issuer is the
continuing or surviving person, and (iii) the transferee of all or
substantially all of Issuer's assets or deposits (or the assets or
deposits of a Significant Subsidiary of Issuer).
(ii) "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(iii) "Assigned Value" shall mean the market/offer price, as
defined in Section 7.
(iv) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for one year immediately
preceding the consolidation, merger or sale in question, but in no
event higher than the closing price of the shares of Substitute Common
Stock on the day preceding such consolidation, merger or sale;
provided that if Issuer is the issuer of the Substitute Option, the
Average Price shall be computed with respect to a share of common
stock issued by the person merging into Issuer or by any company which
controls or is controlled by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to the Holder. The issuer of the Substitute Option shall
also enter into an agreement with the then Holder or Holders of the Substitute
Option in substantially the same form as this Agreement (after giving effect for
such purpose to the provisions of Section 9), which agreement shall be
applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value multiplied
by the number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of the Substitute
Option per share of Substitute Common Stock shall then be equal to the Option
Price multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock for which the Option is then exercisable and the
denominator of which shall be the number of shares of Substitute Common Stock
for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute Option.
In the event that the Substitute Option would be exercisable for more than 19.9%
of the shares of Substitute Common Stock
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<PAGE>
outstanding prior to exercise but for this clause (e), the issuer of the
Substitute Option (the "Substitute Option Issuer") shall make a cash payment to
Holder equal to the excess of (i) the value of the Substitute Option without
giving effect to the limitation in this clause (e) over (ii) the value of the
Substitute Option after giving effect to the limitation in this clause (e). This
difference in value shall be determined by a nationally recognized investment
banking firm selected by the Holder.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase Price")
equal to (x) the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by
the number of shares of Substitute Common Stock for which the Substitute Option
may then be exercised plus (y) Grantee's Out-of-Pocket Expenses (to the extent
not previously reimbursed), and at the request of the owner (the "Substitute
Share Owner") of shares of Substitute Common Stock (the "Substitute Shares"),
the Substitute Option Issuer shall repurchase the Substitute Shares at a price
(the "Substitute Share Repurchase Price") equal to (x) the Highest Closing Price
multiplied by the number of Substitute Shares so designated plus (y) Grantee's
Out-of-Pocket Expenses (to the extent not previously reimbursed). The term
"Highest Closing Price" shall mean the highest closing price for shares of
Substitute Common Stock within the six-month period immediately preceding the
date the Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as
the case may be, may exercise its respective right to require the Substitute
Option Issuer to repurchase the Substitute Option and the Substitute Shares
pursuant to this Section 9 by surrendering for such purpose to the Substitute
Option Issuer, at its principal office, the agreement for such Substitute Option
(or, in the absence of such an agreement, a copy of this Agreement) and
certificates for Substitute Shares accompanied by a written notice or notices
stating that the Substitute Option Holder or the Substitute Share Owner, as the
case may be, elects to require the Substitute Option Issuer to repurchase the
Substitute Option and/or the Substitute Shares in accordance with the provisions
of this Section 9. As promptly as practicable and in any event within five
business days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase Price
and/or to the Substitute Share Owner the Substitute Share Repurchase Price
therefor or the portion thereof which the Substitute Option Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited
under
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<PAGE>
applicable law or regulation, or as a consequence of administrative policy, from
repurchasing the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer shall immediately so notify the Substitute
Option Holder and/or the Substitute Share Owner and thereafter deliver or cause
to be delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Share
Repurchase Price, respectively, which it is no longer prohibited from
delivering, within five business days after the date on which the Substitute
Option Issuer is no longer so prohibited; provided, however, that if the
Substitute Option Issuer is at any time after delivery of a notice of repurchase
pursuant to subsection (b) of this Section 9 prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the
Substitute Option Repurchase Price and the Substitute Share Repurchase Price,
respectively, in full (and the Substitute Option Issuer shall use its best
efforts to receive all required regulatory and legal approvals as promptly as
practicable in order to accomplish such repurchase), the Substitute Option
Holder or Substitute Share Owner may revoke its notice of repurchase of the
Substitute Option or the Substitute Shares either in whole or to the extent of
prohibition, whereupon, in the latter case, the Substitute Option Issuer shall
promptly (i) deliver to the Substitute Option Holder or Substitute Share Owner,
as appropriate, that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Option Shares it is then so prohibited
from repurchasing. If an Exercise Termination Event shall have occurred prior
to the date of the notice by the Substitute Option Issuer described in the first
sentence of this subsection (c), or shall be scheduled to occur at any time
before the expiration of a period ending on the thirtieth day after such date,
the Substitute Option Holder shall nevertheless have the right to exercise the
Substitute Option until the expiration of such 30-day period.
10. The 30-day, 12-month or 18-month periods for exercise of certain
rights under Sections 2, 6, 7, 9 and 12 shall be extended: (i) to the extent
necessary to obtain all regulatory approvals for the exercise of such rights
(for so long as the Holder is using commercially reasonable efforts to obtain
such regulatory approvals), and for the expiration of all statutory waiting
periods; and (ii) to the extent necessary to avoid liability under Section 16(b)
of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other
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<PAGE>
corporate proceedings on the part of Issuer are necessary to authorize this
Agreement or to consummate the transactions so contemplated. This Agreement has
been duly and validly executed and delivered by Issuer. This Agreement is the
valid and legally binding obligation of Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant thereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder within 12 months
following such Subsequent Triggering Event (or such later period as provided in
Section 10); provided, however, that until the date 30 days following the date
on which the Federal Reserve Board has approved applications by Grantee to
acquire the shares of Common Stock subject to the Option, Grantee may not assign
its rights under the Option except in (i) a widely dispersed public
distribution, (ii) a private placement in which no one party acquires the right
to purchase in excess of 2% of the voting shares of Issuer, (iii) an assignment
to a single party (e.g., a broker or investment banker) for the purpose of
conducting a widely dispersed public distribution on Grantee's behalf, or (iv)
any other manner approved by the Federal Reserve Board.
13. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including without limitation applying to the Federal Reserve
Board under the Bank Holding Company Act for approval to acquire the shares
issuable hereunder, but Grantee shall not be obligated to apply to state banking
authorities for approval to acquire the shares of Common Stock issuable
hereunder until such time, if ever, as it deems appropriate to do so.
14. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto and that
the obligations of the parties hereto shall be enforceable by either party
hereto through injunctive or other equitable relief.
15. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory
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<PAGE>
agency determines that the Holder is not permitted to acquire, or Issuer is not
permitted to repurchase pursuant to Section 7, the full number of shares of
Common Stock provided in Section 1(a) hereof (as adjusted pursuant to Section
1(b) or 5 hereof), it is the express intention of Issuer to allow the Holder to
acquire or to require Issuer to repurchase such lesser number of shares as may
be permissible, without any amendment or modification hereof.
16. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
17. This Agreement shall be governed by and construed in accordance
with the laws of the State of Minnesota, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
18. This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
19. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
20. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contain the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assignees.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assignees, any rights, remedies, obligations or liabilities under or by reason
of this Agreement, except as expressly provided herein.
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<PAGE>
21. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all of the
date first above written.
FIRST BANK SYSTEM, INC.
By /s/ Richard A. Zona
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Its Vice Chairman and Chief Financial Officer
------------------------------------------------
FIRSTIER FINANCIAL, INC.
By /s/ David A. Rismiller
-------------------------------------------------------
Its Chairman, President, and Chief Executive Officer
------------------------------------------------
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