<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
Commission file number 0-7818
---------
INDEPENDENT BANK CORPORATION
-----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Michigan 38-2032782
- ----------------------------------- -----------------------------------------
(State or jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) Number)
230 West Main Street, P.O. Box 491, Ionia, Michigan 48846
- ------------------------------------------------------------------------------
(Address of principal executive offices)
(616) 527-9450
--------------
(Registrant's telephone number, including area code)
NONE
- ------------------------------------------------------------------------------
Former name, address and fiscal year, if changed since last report.
Indicate by check mark whether the registrant (1) has filed all documents
and reports required to be filed by Sections 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at May 10, 1999
- --------------------------------- -------------------------------------------
Common stock, par value $1 7,448,683
<PAGE> 2
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
Number(s)
---------
<S> <C> <C>
PART I - Financial Information
Item 1. Consolidated Statements of Financial Condition
March 31, 1999 and December 31, 1998 2
Consolidated Statements of Operations
Three-month periods ended March 31, 1999 and 1998 3
Consolidated Statements of Cash Flows
Three-month periods ended March 31, 1999 and 1998 4
Consolidated Statements of Shareholders' Equity
Three-month periods ended March 31, 1999 and 1998 5
Notes to Interim Consolidated Financial Statements
Three-month periods ended March 31, 1999 and 1998 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-18
Item 3. Quantitative and Qualitative Disclosures about Market Risk 18
PART II - Other Information
Item 6. Exhibits & Reports on Form 8-K 19
</TABLE>
<PAGE> 3
Part I.
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---------------- -----------------
Assets (unaudited)
---------------- -----------------
<S> <C> <C>
Cash and due from banks $ 33,174,000 $ 42,846,000
Securities available for sale 88,793,000 99,515,000
Securities held to maturity (Fair value of $16,674,000 at March
31, 1999; $19,029,000 at December 31, 1998) 16,100,000 18,349,000
Federal Home Loan Bank stock, at cost 12,589,000 12,589,000
Loans held for sale 29,564,000 39,741,000
Loans
Commercial and agricultural 245,457,000 238,863,000
Real estate mortgage 439,969,000 449,114,000
Installment 137,317,000 134,627,000
---------------- ----------------
Total Loans 822,743,000 822,604,000
Allowance for loan losses (9,989,000) (9,714,000)
---------------- ----------------
Net Loans 812,754,000 812,890,000
Property and equipment, net 28,379,000 27,255,000
Accrued income and other assets 33,187,000 32,073,000
---------------- ----------------
Total Assets $ 1,054,540,000 $ 1,085,258,000
================ ================
Liabilities and Shareholders' Equity
Deposits
Non-interest bearing $ 98,293,000 $ 112,930,000
Savings and NOW 382,744,000 377,592,000
Time 335,418,000 339,992,000
---------------- ----------------
Total Deposits 816,455,000 830,514,000
Federal funds purchased 16,100,000 22,650,000
Other borrowings 118,823,000 130,964,000
Guaranteed preferred beneficial interests in Company's subordinated
debentures 17,250,000 17,250,000
Accrued expenses and other liabilities 14,038,000 14,175,000
---------------- ----------------
Total Liabilities 982,666,000 1,015,553,000
---------------- ----------------
Shareholders' Equity
Preferred stock, no par value--200,000 shares authorized; none
outstanding
Common stock, $1.00 par value--14,000,000 shares authorized;
issued and outstanding: 7,426,991 shares at March 31, 1999
and 7,382,506 shares at December 31, 1998 7,427,000 7,383,000
Capital surplus 38,464,000 37,658,000
Retained earnings 24,474,000 22,749,000
Accumulated other comprehensive income 1,509,000 1,915,000
---------------- ----------------
Total Shareholders' Equity 71,874,000 69,705,000
================ ----------------
Total Liabilities and Shareholders' Equity $ 1,054,540,000 $ 1,085,258,000
================ ================
</TABLE>
See notes to interim consolidated financial statements.
2
<PAGE> 4
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
-------------- --------------
(unaudited)
-----------------------------
<S> <C> <C>
Interest Income
Interest and fees on loans $ 19,508,000 $ 18,383,000
Securities
Taxable 1,067,000 1,479,000
Tax-exempt 823,000 609,000
Other investments 249,000 247,000
------------ -----------
Total Interest Income 21,647,000 20,718,000
------------ -----------
Interest Expense
Deposits 6,444,000 5,839,000
Other borrowings 2,334,000 3,119,000
------------ -----------
Total Interest Expense 8,778,000 8,958,000
------------ -----------
Net Interest Income 12,869,000 11,760,000
Provision for loan losses 525,000 633,000
------------ -----------
Net Interest Income After Provision for Loan Losses 12,344,000 11,127,000
------------ -----------
Non-interest Income
Service charges on deposit accounts 1,038,000 823,000
Net gains on asset sales
Real estate mortgage loans 1,248,000 907,000
Securities 14,000 137,000
Other income 1,391,000 761,000
------------ -----------
Total Non-interest Income 3,691,000 2,628,000
------------ -----------
Non-interest Expense
Salaries and employee benefits 6,810,000 5,911,000
Occupancy, net 870,000 699,000
Furniture and fixtures 745,000 579,000
Other expenses 3,721,000 3,142,000
------------ -----------
Total Non-interest Expense 12,146,000 10,331,000
------------ -----------
Income Before Federal Income Tax 3,889,000 3,424,000
Federal income tax expense 1,124,000 991,000
------------ -----------
Net Income $ 2,765,000 $ 2,433,000
============ ===========
Net income per common share
Basic $ .37 $ .33
Diluted .37 .33
Dividends Per Common Share
Declared $ .140 $ .124
Paid .130 .117
</TABLE>
See notes to interim consolidated financial statements.
3
<PAGE> 5
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three months ended
March 31,
1999 1998
--------------- ---------------
(unaudited)
-------------------------------
<S> <C> <C>
Net Income $ 2,765,000 $ 2,433,000
--------------- ------------
Adjustments to Reconcile Net Income
to Net Cash from Operating Activities
Proceeds from sales of loans held for sale 74,186,000 58,421,000
Disbursements for loans held for sale (62,761,000) (78,914,000)
Provision for loan losses 525,000 633,000
Deferred loan fees 14,000 70,000
Amortization of intangible assets 442,000 379,000
Depreciation and amortization of premiums and accretion of
discounts on securities and loans 777,000 664,000
Net gains on sales of real estate mortgage loans (1,248,000) (907,000)
Net gains on sales of securities (14,000) (137,000)
Increase in accrued income and other assets (1,556,000) (652,000)
Increase in accrued expenses and other liabilities 617,000 2,187,000
--------------- ------------
Total Adjustments 10,982,000 (18,256,000)
--------------- ------------
Net Cash from Operating Activities 13,747,000 (15,823,000)
--------------- ------------
Cash Flow from Investing Activities
Proceeds from the sale of securities available for sale 267,000 4,366,000
Proceeds from the maturity of securities available for sale 7,000,000 3,027,000
Proceeds from the maturity of securities held to maturity 2,255,000 1,034,000
Principal payments received on securities available for sale 4,398,000 3,341,000
Principal payments received on securities held to maturity 306,000 621,000
Purchases of securities available for sale (1,817,000) (2,232,000)
Principal payments on portfolio loans purchased 3,995,000 4,830,000
Portfolio loans made to customers, net of principal payments received (4,398,000) (2,065,000)
Capital expenditures (1,909,000) (1,417,000)
--------------- ------------
Net Cash from Investing Activities 10,097,000 11,505,000
--------------- ------------
Cash Flow from Financing Activities
Net increase (decrease) in total deposits (14,059,000) 10,284,000
Net decrease in short-term borrowings (7,191,000) (4,371,000)
Proceeds from Federal Home Loan Bank advances 11,000,000
Payments of Federal Home Loan Bank advances (11,000,000) (11,000,000)
Retirement of long-term debt (500,000) (500,000)
Dividends paid (960,000) (848,000)
Proceeds from issuance of common stock 194,000 227,000
--------------- ------------
Net Cash from Financing Activities (33,516,000) 4,792,000
--------------- ------------
Net Increase (Decrease) in Cash and Cash Equivalents (9,672,000) 474,000
Cash and Cash Equivalents at Beginning of Period 42,846,000 30,371,000
--------------- ------------
Cash and Cash Equivalents at End of Period $ 33,174,000 $ 30,845,000
=============== ============
Cash paid during the period for
Interest $ 8,703,000 $ 8,932,000
Income taxes 200,000
Transfer of loans to other real estate 642,000 399,000
</TABLE>
See notes to interim consolidated financial statements
4
<PAGE> 6
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Three months ended
March 31,
1999 1998
-------------- -------------
(unaudited)
-----------------------------
<S> <C> <C>
Balance at beginning of period $ 69,705,000 $ 59,516,000
Net income 2,765,000 2,433,000
Cash dividends declared (1,040,000) (902,000)
Issuance of common stock 850,000 1,129,000
Net change in unrealized gain on securities
available for sale, net of related tax effect (note 4) (406,000) (62,000)
------------- -------------
Balance at end of period $ 71,874,000 $ 62,114,000
============= ==============
</TABLE>
See notes to interim consolidated financial statements.
5
<PAGE> 7
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. In the opinion of management of the Registrant, the accompanying unaudited
consolidated financial statements contain all the adjustments (consisting only
of normal recurring accruals) necessary to present fairly the consolidated
financial condition of the Registrant as of March 31, 1999 and December 31,
1998, and the results of operations for the three-month periods ended March 31,
1999 and 1998.
2. Management's assessment of the allowance for loan losses is based on an
evaluation of the loan portfolio, recent loss experience, current economic
conditions and other pertinent factors. Loans on non-accrual status, past due
more than 90 days, or restructured amounted to $5,370,000 at March 31, 1999, and
$6,641,000 at December 31, 1998. (See Management's Discussion and Analysis of
Financial Condition and Results of Operations).
3. The provision for income taxes represents federal income tax expense
calculated using annualized rates on taxable income generated during the
respective periods.
4. The Registrant adopted Statement of Financial Accounting Standards, No. 130,
"Reporting Comprehensive Income", (SFAS #130) effective January 1, 1998. SFAS
#130 establishes standards for reporting and displaying comprehensive income and
its components, including but not limited to unrealized gains and losses on
securities available for sale.
Comprehensive income for the three-month periods ending March 31 follows:
<TABLE>
<CAPTION>
Three months ended
March 31,
1999 1998
--------------- -------------
<S> <C> <C>
Net income $ 2,765,000 $ 2,433,000
Net change in unrealized gain on securities available for sale,
net of related tax effect (406,000) (62,000)
============ ============
Comprehensive income $ 2,359,000 $ 2,371,000
============ ============
</TABLE>
5. The Registrant adopted Statement of Financial Accounting Standards, No. 131,
"Disclosures about Segments of an Enterprise and Related Information", (SFAS
#131) on January 1, 1998. SFAS #131 establishes standards for the way that
public entities report information about operating segments in financial
statements.
The Registrant's reportable segments are based upon legal entities. The
Registrant has four reportable segments: Independent Bank ("IB"), Independent
Bank West Michigan ("IBWM"), Independent Bank South Michigan ("IBSM") and
Independent Bank East Michigan ("IBEM"). The Registrant evaluates performance
based principally on net income of the respective reportable segments.
6
<PAGE> 8
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
A summary of selected financial information for the Registrant's reportable
segments at March 31, follows:
<TABLE>
<CAPTION>
IB IBWM IBSM IBEM OTHER(1) TOTAL
-------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
1999
Total assets $ 358,112 $ 268,308 $ 161,955 $ 260,757 $ 5,408 $ 1,054,540
Interest income 7,217 6,207 3,357 4,861 5 21,647
Net interest income 4,466 3,875 2,068 3,022 (562) 12,869
Provision for loan losses 150 135 90 150 525
Income (loss) before
Income tax 1,667 1,436 793 905 (912) 3,889
Net income (loss) 1,150 989 577 680 (631) 2,765
1998
Total assets $ 342,843 $ 247,351 $ 157,810 $ 238,725 $ 6,406 $ 993,135
Interest income 6,954 5,791 3,324 4,644 5 20,718
Net interest income 4,122 3,584 1,890 2,766 (602) 11,760
Provision for loan losses 165 195 75 198 633
Income (loss) before
Income tax 1,573 1,327 755 774 (1,005) 3,424
Net income (loss) 1,087 929 548 551 (682) 2,433
</TABLE>
(1) Includes items relating to the Registrant and certain insignificant
operations.
6. A reconciliation of basic and diluted earnings per share for the three-month
periods ending, March 31 follows:
<TABLE>
<CAPTION>
Three months ended
March 31,
1999 1998
------------- -------------
<S> <C> <C>
Net income $ 2,765,000 $ 2,433,000
============ ============
Shares outstanding (Basic) (1) 7,411,000 7,264,000
Effect of dilutive securities - stock options 62,000 94,000
------------ ------------
Shares outstanding (Diluted) 7,473,000 7,358,000
============ ============
Earnings per share
Basic $ .37 $ .33
Diluted .37 .33
</TABLE>
(1) Shares outstanding have been adjusted for a three-for-two stock
split and a 5% stock dividend in 1998.
7
<PAGE> 9
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
7. The Financial Accounting Standards Board adopted Statement of Financial
Accounting Standards, No. 133, "Accounting for Derivative Instruments and
Hedging Activities", ("SFAS #133") in June 1998.
SFAS #133 requires companies to record derivatives on the balance sheet as
assets and liabilities measured at fair value. The accounting for increases and
decreases in the value of those derivatives will depend upon the use of those
derivatives and whether or not they qualify for hedge accounting.
This statement is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999 with earlier application allowed and is to be applied
prospectively. The adoption of this statement is not expected to have a material
impact on the Registrant's financial statements.
8. The results of operations for the three-month period ended March 31, 1999,
are not necessarily indicative of the results to be expected for the full year.
8
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis of financial condition and results of
operations contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Actual results could differ materially
from those projected in such forward-looking statements.
The following section presents additional information that may be necessary to
assess the financial condition and results of operations of the Registrant and
its subsidiary banks (the "Banks"). This section should be read in conjunction
with the consolidated financial statements contained elsewhere in this report as
well as the Registrant's 1998 Annual Report on Form 10-K.
FINANCIAL CONDITION
SUMMARY Assets totaled $1,054.5 million at March 31, 1999. The $30.8 million
decline in total assets from $1,085.3 million at December 31, 1998, principally
reflects a $13.0 million decrease in the Bank's securities portfolios as well as
a $10.2 million decrease in loans held for sale. (See "Securities.") Loans,
excluding loans held for sale ("Portfolio Loans"), were largely unchanged from
December 31, 1998, as an increase in commercial and agricultural loans largely
offset a decline in real estate mortgage loans. (See "Asset/liability
management.")
Deposits totaled $816.5 million at March 31, 1999, compared to $830.5 million at
December 31, 1998. The $14.0 million decline in total deposits principally
reflects the cash management needs of the Banks' corporate and municipal
depositors. (See "Deposits and borrowings.")
SECURITIES The Banks maintain diversified securities portfolios that include
obligations of the U.S. Treasury and government-sponsored agencies as well as
securities issued by states and political subdivisions, corporate notes and
mortgage-backed securities. Management continually evaluates the Banks'
asset/liability management needs and attempts to maintain a portfolio structure
that provides sufficient liquidity and cash flow. (See "Asset/liability
management.")
SECURITIES
<TABLE>
<CAPTION>
Unrealized
----------------------------
Amortized Fair
Cost Gains Losses Value
-------------- -------------- ------------- -------------
(in thousands)
<S> <C> <C> <C> <C>
Securities available for sale
March 31, 1999 $ 86,471 $ 2,322 $ 0 $ 88,793
December 31, 1998 96,614 2,948 47 99,515
Securities held to maturity
March 31, 1999 $ 16,100 $ 576 $ 2 $ 16,674
December 31, 1998 18,349 688 8 19,029
</TABLE>
The sale of securities available for sale is dependent upon Management's
assessment of reinvestment opportunities and the Banks' asset/liability
management needs. As a result of such ongoing evaluations, the Banks sold
securities with an aggregate market value of approximately
9
<PAGE> 11
$267,000 during the three-month period ended March 31, 1999, compared to $4.4
million during the comparable period in 1998. The Banks realized net gains on
the sale of such securities totaling $14,000 and $137,000 during the three
months ended March 31, 1999 and 1998, respectively.
SALES OF SECURITIES AVAILABLE FOR SALE
<TABLE>
<CAPTION>
Three months ended
March 31,
1999 1998
----------- -------------
<S> <C> <C>
Proceeds $ 267,000 $ 4,366,000
========= ===========
Gross gains $14,000 $137,000
Gross losses
--------- -----------
Net Gains (losses) $14,000 $137,000
========= ===========
</TABLE>
ASSET QUALITY Management believes that the Registrant's decentralized structure
provides important advantages in serving the credit needs of the Banks'
principal lending markets. In addition to the communities served by the Banks'
branch networks, principal lending markets include nearby communities and
metropolitan areas. Subject to established underwriting criteria, the Banks also
participate in commercial lending transactions with certain non-affiliated banks
and may also purchase real estate mortgage loans from third-party originators.
Although the Management and Board of Directors of each Bank retain authority and
responsibility for credit decisions, each of the Banks has adopted uniform
underwriting standards. Further, the Registrant's loan committee as well as the
centralization of commercial loan credit services and loan review functions
promote compliance with such established underwriting standards. The
centralization of retail loan services also provides for consistent service
quality and facilitates compliance with consumer protection laws and
regulations.
NON-PERFORMING ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------------- -----------------
<S> <C> <C>
Non-accrual loans $ 3,276,000 $ 4,106,000
Loans 90 days or more past due and
still accruing interest 1,814,000 2,240,000
Restructured loans 280,000 295,000
----------- -----------
Total non-performing loans 5,370,000 6,641,000
Other real estate 1,578,000 936,000
=========== ===========
Total non-performing assets $ 6,948,000 $ 7,577,000
=========== ===========
As a percent of Portfolio Loans
Non-performing loans 0.65 % 0.81 %
Non-performing assets 0.84 0.92
Allowance for loan losses 1.21 1.18
Allowance for loan losses as a percent of
non-performing loans 186 146
</TABLE>
10
<PAGE> 12
Impaired loans totaled approximately $3,400,000 at March 31, 1999. At that same
date, certain impaired loans with a balance of approximately $1,400,000, had
specific allocations of the allowance for loan losses calculated in accordance
with Statement of Financial Accounting Standards #114 totaling approximately
$300,000. The Banks' average investment in impaired loans was approximately
$3,400,000, for the three-month period ending March 31, 1999. Cash receipts on
impaired loans on non-accrual status are generally applied to the principal
balance. Interest recognized on impaired loans during that three-month period
was approximately $40,000.
Loans charged against the allowance for loan losses, net of recoveries, were
equal to .12% of average loans during the three months ended March 31, 1999,
compared to .18% during the comparable period of 1998.
ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
Three months ended
March 31,
1999 1998
--------------- --------------
<S> <C> <C>
Balance at beginning of period $9,714,000 $7,670,000
Additions (deduction)
Provision charged to operating expense 525,000 633,000
Recoveries credited to allowance 162,000 119,000
Loans charged against the allowance (412,000) (447,000)
========== ==========
Balance at end of period $9,989,000 $7,975,000
========== ==========
Net loans charged against the allowance to
average Portfolio Loans (annualized) 0.12% 0.18%
</TABLE>
Management's assessment of the allowance for loan losses is based on the
composition of the loan portfolio, an evaluation of specific credits, historical
loss experience as well as the level of non-performing and impaired loans. Based
upon such assessment, Management does not believe there has been a material
change in the adequacy of the allowance for loan losses. (See "Provision for
loan losses.")
DEPOSITS AND BORROWINGS The Banks' competitive position within many of the
markets served by the branch networks limits the ability to materially increase
deposits without adversely impacting the weighted-average cost of core deposits.
Accordingly, Management employs pricing tactics that are intended to enhance the
value of core deposits and the Banks' have implemented funding strategies that
incorporate other borrowings and brokered certificates of deposits ("Brokered
CDs") to finance a portion of the Portfolio Loans. The use of such alternate
sources of funds is also an integral part of the Banks' asset/liability
management efforts.
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
------------------------------- ---------------------------------
Average Average
Amount Maturity Rate Amount Maturity Rate
------ -------- ---- ------ -------- ----
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Brokered CDs $52,905 5.1 years 5.71% $54,885 4.4 years 5.64%
Fixed rate FHLB advances 50,569 3.3 years 5.75 50,569 3.5 years 5.75
Variable rate FHLB advances 57,500 0.4 years 5.05 68,500 0.5 years 5.21
</TABLE>
11
<PAGE> 13
Other borrowed funds, principally advances from the Federal Home Loan Bank (the
"FHLB"), decreased to $118.8 million at March 31, 1999, from $131.0 million at
December 31, 1998. To diversify the Banks' funding sources, the Banks also
employ Brokered CDs. Brokered CDs totaled $52.9 million and $54.9 million at
March 31, 1999 and December 31, 1998, respectively.
INTEREST-RATE DERIVATIVE FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
SWAPS
-----------------------------------------
CAPS COLLARS PAY FIXED PAY VARIABLE
- -------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Notional amount $ 26,000 $ 10,000 $ 58,500 $ 29,000
Weighted-average maturity 1.0 years 1.5 years 2.9 years 8.9 years
Cap strike 6.69% 6.42%
Floor strike 5.71
Rate paying 5.29% 5.18%
Rate receiving 5.00 5.91
Premium paid $ 246
Annual cost .26%
Amortized cost $ 76
Fair value 9 $ (85) $ 89 $ (567)
</TABLE>
Derivative financial instruments are employed to reduce the cost of alternate
funding sources and manage the Banks' exposure to changes in interest rates.
(See "Asset/liability management.") At March 31, 1999, the Company employed
interest-rate caps and collars with a notional amount of $26.0 million and $10.0
million, respectively. The Banks also employed interest-rate swaps with an
aggregate notional amount of $87.5 million.
LIQUIDITY AND CAPITAL RESOURCES Effective management of the Registrant's capital
resources is critical to Management's mission to create value for the
Registrant's shareholders. To profitably deploy capital within existing markets,
the Banks have implemented balance sheet management strategies that combine
effective loan origination efforts with disciplined funding strategies. Although
the Banks' balance sheet management strategies provide profitable opportunities
to leverage the balance sheet, Management believes that its acquisition strategy
may provide greater value to the Registrant's shareholders.
The Registrant's cost of capital is also an important factor in creating
shareholder value. Accordingly, the Registrant's capital structure includes
unsecured debt and Preferred Securities.
CAPITALIZATION
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------------ ------------------
<S> <C> <C>
Unsecured debt $ 9,500,000 $10,000,000
Preferred Securities 17,250,000 17,250,000
Shareholders' Equity
Preferred stock, no par value
Common Stock, par value $1.00 per share 7,427,000 7,383,000
Capital surplus 38,464,000 37,658,000
Retained earnings 24,474,000 22,749,000
Accumulated other comprehensive income 1,509,000 1,915,000
----------- -----------
Total shareholders' equity 71,874,000 69,705,000
---------- -----------
Total capitalization $98,624,000 $96,955,000
=========== ===========
</TABLE>
12
<PAGE> 14
Shareholders' equity totaled $71.9 million at March 31, 1999. In addition to the
retention of earnings, the $2.2 million increase from $69.7 million at December
31, 1998, reflects the issuance of common stock pursuant to various equity-based
incentive compensation plans. Shareholders' equity was equal to 6.82% of total
assets at March 31, 1999, compared to 6.42% at December 31, 1998.
CAPITAL RATIOS
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
------------------- ----------------------
<S> <C> <C>
Equity capital 6.82% 6.42%
Average shareholders equity to average assets(1) 6.73 6.42
Tier 1 leverage (tangible equity capital) 6.70 6.23
Tier 1 risk-based capital 9.18 8.72
Total risk-based capital 10.43 9.97
</TABLE>
(1) Based on year to date average balances for the respective periods
ASSET/LIABILITY MANAGEMENT Interest-rate risk is created by differences in the
pricing characteristics of the Banks' assets and liabilities. Options embedded
in certain financial instruments, including caps on adjustable-rate loans as
well as borrowers' rights to prepay fixed-rate loans also create interest-rate
risk.
The asset/liability management efforts of the Registrant and the Banks are
intended to identify sources of interest-rate risk and to evaluate opportunities
to structure the balance sheet in a manner that is consistent with Management's
mission to maintain profitable financial leverage. The marginal cost of funds is
a principal consideration in the implementation of the Bank's balance sheet
management strategies, but such evaluations further consider interest-rate and
liquidity risk as well as other pertinent factors.
Management employs simulation analyses to monitor the Banks' interest-rate risk
profiles and evaluate potential changes in the Bank's net interest income and
market value of portfolio equity that result from changes in interest rates. At
March 31, 1999, each of the Banks was within established parameters for
interest-rate risk.
Management has determined that the retention of certain real estate mortgage
loans, generally 15- and 30-year fixed rate obligations, is inconsistent with
its goal to maintain profitable leverage or the Banks' interest-rate risk
profiles. Accordingly, the majority of such loans are sold to mitigate exposure
to changes in interest rates. Adjustable-rate and balloon real estate mortgage
loans may often be profitably funded within established risk parameters. The
retention of such loans, together with commercial and agricultural loans, has
been a principal focus of the Banks' balance sheet management strategies. (See
"Non-interest income.")
RESULTS OF OPERATIONS
SUMMARY Net income totaled $2,765,000 during the three months ended March 31,
1999, compared to $2,433,000 during the comparable period of 1998. The
double-digit percentage increase in earnings is principally the result of
increases in net interest income and non-interest income that were partially
offset by increases in non-interest expense.
13
<PAGE> 15
Key performance ratios for the three-month periods ended March 31, 1999 and
1998, are set forth below.
KEY PERFORMANCE RATIOS
<TABLE>
<CAPTION>
Three months
ended March 31,
1999 1998
----------------------------
<S> <C> <C>
Net income to
Average assets 1.05% 1.01%
Average equity 15.66 16.06
Earnings per common share
Basic $.37 $.33
Diluted .37 .33
Cash basis income to(A)
Average tangible assets 1.21% 1.16%
Average tangible equity 23.85 24.93
Cash basis income per share(A)
Basic $.42 $.38
Diluted .42 .37
</TABLE>
(A) Cash basis financial data exclude intangible assets and the related
amortization expense
NET INTEREST INCOME Tax equivalent net interest income totaled $13,336,000
during the three months ended March 31, 1999. The 10% increase from $12,112,000
during the comparable period of 1998 is principally the result of an increase in
average earning assets.
NET INTEREST INCOME AND SELECTED RATIOS
<TABLE>
<CAPTION>
Three months
ended March 31,
1999 1998
----------- -----------
<S> <C> <C>
Average earning assets (in thousands) $980,678 $913,329
Tax equivalent net interest income 13,336 12,112
As a percent of average earning assets
Tax equivalent interest income 9.09 % 9.30 %
Interest expense 3.63 3.98
Tax equivalent net interest income 5.46 5.32
Average earning assets as a
percent of average assets 92.22 % 93.27 %
Free-funds ratio 10.71 % 9.82 %
</TABLE>
Average earning assets totaled $980.7 million and $913.3 million during the
three months ended March 31, 1999 and 1998, respectively. The 7% increase in
average earning assets was principally funded with deposits, excluding Brokered
CDs ("Core Deposits"). Such Core
14
<PAGE> 16
Deposits averaged $768.0 million and $687.7 million during the three months
ended March 31, 1999 and 1998, respectively. (See "Liquidity and capital
resources.")
Tax equivalent net interest income as a percent of average earnings assets ("Net
Yield") was 5.46% during the three-month period in 1999 compared to 5.32% during
the comparable period in 1998. The 14 basis point increase in Net Yield
principally reflects an increase in Core Deposits as a percentage of average
earning assets. Core Deposits were equal to 78.3% and 75.3% of average earning
assets for the three months ended March 31, 1999 and 1998, respectively.
PROVISION FOR LOAN LOSSES The provision for loan losses was $525,000 during the
three months ended March 31, 1999, compared to $633,000 during the three-month
period in 1998. The decrease in the provision reflects Management's assessment
of the allowance for loan losses based upon the composition of the loan
portfolio, an evaluation of specific credits, historical loss experience as well
as the level of non-performing and impaired loans. (See "Asset quality.")
NON-INTEREST INCOME Non-interest income totaled $3,691,000 during the three
months ended March 31, 1999, compared to $2,628,000 during the comparable period
in 1998. The $1,063,000 increase in non-interest income principally reflects
increases in net gains on the sale of real estate mortgage loans and revenues
associated with First Home Financial, Inc. An increase in service charges on
deposit accounts, real estate mortgage service fees and mutual fund and annuity
commissions also contributed to the increase in non-interest income.
NON-INTEREST INCOME
<TABLE>
<CAPTION>
Three months ended
March 31,
1999 1998
--------------- --------------
<S> <C> <C>
Service charges on deposit accounts $1,038,000 $ 823,000
Net gains on asset sales
Real estate mortgage loans 1,248,000 907,000
Securities 14,000 137,000
First Home Financial 426,000
Title insurance fees 185,000 196,000
Real estate mortgage loan servicing 150,000 103,000
Mutual fund and annuity commissions 141,000 22,000
Other 489,000 440,000
---------- ----------
Total non-interest income $3,691,000 $2,628,000
========== ==========
</TABLE>
15
<PAGE> 17
Net gains on the sale of real estate mortgage loans increased to $1,248,000
during the three months ended March 31, 1999, from $907,000 during the
comparable period in 1998. Although such net gains increased as a percent of
loans sold, the $341,000 increase in such net gains principally reflect the
increase in loans sold.
<TABLE>
<CAPTION>
Three months ended
March 31
1999 1998
---------------------------------
<S> <C> <C>
Real estate mortgage loans originated $96,464,000 $118,830,000
Real estate mortgage loan sales 72,938,000 57,514,000
Real estate mortgage loan servicing rights sold 5,014,000 27,373,000
Net gains on the sale of real estate mortgage loans 1,248,000 907,000
Net gains as a percent of real estate mortgage loans sold 1.71% 1.58%
</TABLE>
The Banks capitalized approximately $535,000 and $365,000 of related servicing
rights during the three-month periods ended March 31, 1999 and 1998,
respectively. Amortization of capitalized servicing rights for those periods was
$131,000 and $83,000, respectively. The fair value of capitalized servicing
rights approximated the book value of $2,479,000 at March 31, 1999, and
therefore, no valuation allowance was considered necessary. The capitalized
servicing rights relate to approximately $382 million of loans sold and serviced
at March 31, 1999.
The volume of loans sold is dependent upon the Banks' ability to originate real
estate mortgage loans as well as the demand for fixed-rate obligations and other
loans that the Banks cannot profitably fund within established interest-rate
risk parameters. (See "Asset/liability management.") Net gains on real estate
mortgage loans are also dependent upon economic and competitive factors as well
as the Banks' ability to effectively manage exposure to changes in interest
rates. Given the $10.2 million decline in loans held for sale, together with the
absence of substantial refinance activity, net gains on the sale of real estate
mortgage loans during subsequent periods may not be commensurate with the amount
recorded during the three months ended March 31, 1999.
On April 17, 1998, the Registrant purchased the outstanding capital stock of
First Home Financial, Inc. ("FHF"), an originator of manufactured home loans.
FHF's revenues during the three months ended March 31, 1999, totaled $426,000
and account for 40% of the $1,063,000 increase in other non-interest income.
NON-INTEREST EXPENSE Non-interest expense totaled $12,146,000 during the three
months ended March 31, 1999, compared to $10,331,000 during the comparable
period in 1998. Costs associated with the operation of FHF as well as direct
mail marketing costs related to deposit account promotions account for
approximately 30% of increase in non-interest expense. Costs associated with the
operation of new branch facilities also contributed to the increase in
non-interest expense.
16
<PAGE> 18
NON-INTEREST EXPENSE
<TABLE>
<CAPTION>
Three months ended
March 31,
1999 1998
--------------- --------------
<S> <C> <C>
Salaries $ 4,395,000 $ 3,708,000
Performance-based compensation and benefits 1,269,000 1,304,000
Other benefits 1,146,000 899,000
----------- -----------
Salaries and benefits 6,810,000 5,911,000
Occupancy, net 870,000 699,000
Furniture and fixtures 745,000 579,000
Computer processing 570,000 404,000
Amortization of intangible assets 442,000 379,000
Communications 462,000 383,000
Advertising 551,000 386,000
Supplies 323,000 289,000
Loan and collection 389,000 254,000
Other 984,000 1,047,000
=========== ===========
Total non-interest expense $12,146,000 $10,331,000
=========== ===========
</TABLE>
PROPOSED ACQUISITION
On March 24, 1999, the Registrant announced that it had signed a definitive
agreement to acquire Mutual Savings Bank f.s.b. ("MSB"). As a result of the
transaction, the Registrant will issue 0.80 shares of its common stock for each
share of MSB common stock, subject to certain adjustments.
The transaction is structured as a tax-free exchange of shares and is expected
to qualify as a "pooling-of-interests". The transaction is subject to approval
by the shareholders of both companies as well as regulatory agencies. The
transaction is expected to be consummated in the third quarter of 1999. The
Registrant anticipates approximately $5.0 million of one-time, pretax, merger
related charges.
The merger agreement contains a provision, which allows MSB the right to
terminate the transaction if the average price of the Registrant's common stock
falls below certain pre-determined levels prior to consummation of the
transaction. The merger agreement also provides the Registrant with an option to
purchase 19.9% of the outstanding shares of MSB's common stock under certain
specified circumstances.
At March 31, 1999, MSB had assets of $569 million, deposits of $424 million,
shareholder's equity of $36.7 million and shares outstanding of 4.3 million. It
provides banking services through a total of 22 offices and its common stock
trades on the Nasdaq Stock Market under the symbol MSBK.
YEAR 2000
The Year 2000 issue refers to computer-based operating systems that were
originally designed to recognize calendar years by their last two digits ("Year
2000"). The Registrant began preparing its computer-based operating systems for
2000 during 1997 and formed a committee to address such issues. A significant
portion of the Registrant's Year 2000 issue relates to its core data processing
applications which are provided by a third-party service provider, M&I Data
Services.
17
<PAGE> 19
The Registrant completed its conversion to M&I Data Services Year 2000
compliant application software in 1998. All other material non-compliant
operating systems have been identified and are in the process of being replaced.
It is anticipated that the replacement and testing of non-compliant operating
systems will be completed during the second quarter of 1999.
Costs incurred to date have approximated $1 million, which relate primarily to
the replacement of systems and fully depreciated non-compliant personal computer
equipment. Management estimates that total costs will not exceed $1.6 million
and will not have a material impact on the consolidated financial statements. A
substantial portion of these costs represent an acceleration of expenditures to
replace or upgrade systems that will become obsolete or otherwise inadequate to
meet the Registrant's growing technology needs.
While the Registrant is not aware of any Year 2000 problems for which a solution
is not available, other unanticipated issues could arise. These unanticipated
issues may include the ability to identify and correct all relevant computer
code, the availability and cost of trained personnel, the impact of the Year
2000 on our customers and other uncertainties.
Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
No material changes in the market risk faced by the Registrant has occurred
since December 31, 1998.
18
<PAGE> 20
Item 6. Exhibits & Reports on Form 8-K
(a) Exhibit Number & Description
2. Agreement and Plan of Reorganization between the Registrant and
Mutual Savings Bank, f.s.b. dated March 24, 1999
10. Warrant Purchase agreement between Registrant and Mutual Savings
Bank, f.s.b. dated March 24, 1999
11. Computation of Earnings per share
27. Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended March 31, 1999, there were no reports filed on
Form 8-K.
19
<PAGE> 21
SIGNATURES
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.
Date May 14, 1999 By /s/William R. Kohls
------------------------ ---------------------------------------
William R. Kohls, Principal Financial
Officer
Date May 14, 1999 By /s/James J. Twarozynski
------------------------ ---------------------------------------
James J. Twarozynski, Principal
Accounting Officer
20
<PAGE> 22
EXHIBIT INDEX
-------------
Exhibit No. Description
- ----------- -----------
2. Agreement and Plan of Reorganization between the Registrant and
Mutual Savings Bank, f.s.b. dated March 24, 1999
10. Warrant Purchase agreement between Registrant and Mutual Savings
Bank, f.s.b. dated March 24, 1999
11. Computation of Earnings per share
27. Financial Data Schedule
21
<PAGE> 1
EXHIBIT 2
AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
INDEPENDENT BANK CORPORATION
AND
MUTUAL SAVINGS BANK, F.S.B.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
PAGE
----
<S> <C>
RECITALS .........................................................................................................1
ARTICLE I
CONSOLIDATION............................................................................................1
1.1 Formation of New Bank...........................................................................1
1.2 Execution of Consolidation Agreement............................................................1
1.3 Name of Consolidated Bank.......................................................................2
1.4 Business of Consolidated Bank...................................................................2
1.5 The Closing.....................................................................................2
1.6 Conversion of Shares............................................................................2
1.7 IBC Common Stock................................................................................5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF IBC....................................................................5
2.1 Organization and Good Standing..................................................................5
2.2 Subsidiaries....................................................................................5
2.3 Capitalization..................................................................................5
2.4 Authorizations..................................................................................6
2.5 Financial Statements............................................................................6
2.6 Absence of Undisclosed Liabilities..............................................................7
2.7 Loan Guarantees and Loss Reserves...............................................................7
2.8 Title to Properties.............................................................................7
2.9 Governmental Regulation.........................................................................7
2.10 Absence of Litigation...........................................................................7
2.11 Reports and SEC Documents.......................................................................8
2.12 Tax Matters.....................................................................................9
2.13 Conduct........................................................................................10
2.14 Compliance with Laws...........................................................................10
2.15 Brokerage Fees.................................................................................11
2.16 Contracts......................................................................................11
2.17 Duties as Fiduciary............................................................................12
2.18 Insurance......................................................................................12
2.19 Books and Records..............................................................................12
2.20 Employee Benefit Plans and Other Employee Matters..............................................12
2.21 Environmental Liability........................................................................14
2.22 Community Reinvestment Act Compliance..........................................................15
2.23 Statements True and Correct....................................................................15
2.24 Tax, Regulatory, and Pooling Matters...........................................................15
2.25 Year 2000......................................................................................16
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
2.26 "Material" Defined.............................................................................16
------------------
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MSB...................................................................16
3.1 Organization and Good Standing.................................................................16
3.2 Subsidiaries...................................................................................16
3.3 Capitalization.................................................................................17
3.4 Authorizations.................................................................................17
3.5 Financial Statements...........................................................................17
3.6 Absence of Undisclosed Liabilities.............................................................18
3.7 Loan Guarantees and Loss Reserves..............................................................18
3.8 Title to Properties............................................................................18
3.9 Governmental Regulation........................................................................18
3.10 Absence of Litigation..........................................................................19
3.11 Reports and Securities Documents...............................................................19
3.12 Tax Matters....................................................................................20
3.13 Conduct........................................................................................21
3.14 Compliance with Laws...........................................................................22
3.15 Brokerage Fees.................................................................................22
3.16 Contracts......................................................................................23
3.17 Duties as Fiduciary............................................................................23
3.18 Insurance......................................................................................23
3.19 Books and Records..............................................................................23
3.20 Employee Benefit Plans and Other Employee Matters..............................................24
3.21 Environmental Liability........................................................................26
3.22 Community Reinvestment Act Compliance..........................................................26
3.23 Statements True and Correct....................................................................26
3.24 Tax, Regulatory, and Pooling Matters...........................................................27
3.25 Year 2000......................................................................................27
3.26 "Material" Defined.............................................................................27
3.27 Stock Transactions.............................................................................27
3.28 Disclosure of Deeds, Leases, Agreements, Etc...................................................28
3.29 Takeover Laws..................................................................................28
3.30 Charter Provisions.............................................................................28
3.31 Indemnification................................................................................29
ARTICLE IV
CERTAIN COVENANTS.......................................................................................29
4.1 Material Adverse Changes.......................................................................29
4.2 Reports........................................................................................29
4.3 Registration Statement; Proxy Statement/Prospectus; Shareholder Approvals......................29
4.4 Applications...................................................................................31
4.5 Agreement as to Efforts to Consummate..........................................................31
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
4.6 Investigation and Confidentiality..............................................................31
4.7 Press Releases.................................................................................32
4.8 Tax and Accounting Treatment...................................................................32
4.9 Survival of Representations and Warranties.....................................................32
4.10 Affirmative Covenants Regarding Conduct of MSB's Business
Pending Effective Time.........................................................................32
4.11 Negative Covenants Regarding Conduct of MSB's Business
Pending Effective Time.........................................................................33
4.12 Affiliate Agreements...........................................................................36
4.13 Certain Policies of MSB........................................................................36
4.14 Employee Benefits and Contracts................................................................36
4.15 Indemnification; Directors' and Officers' Insurance............................................42
4.16 Listing of Shares..............................................................................44
ARTICLE V
CONDITIONS PRECEDENT TO THE CONSOLIDATION...............................................................44
5.1 Conditions Precedent to Obligations of Each Party..............................................44
5.2 Conditions Precedent to Obligations of IBC.....................................................45
5.3. Conditions Precedent to Obligations of MSB.....................................................46
ARTICLE VI
ABANDONMENT AND TERMINATION OF CONSOLIDATION............................................................48
6.1 Termination....................................................................................48
ARTICLE VII
EXPENSES................................................................................................50
7.1 IBC Expenses...................................................................................50
7.2 MSB Expenses...................................................................................50
7.3 Termination; Expenses..........................................................................51
7.4 Obligations Upon Breach........................................................................52
ARTICLE VIII
AMENDMENT AND WAIVER....................................................................................52
8.1 Amendment......................................................................................52
8.2 Waiver.........................................................................................52
ARTICLE IX
CERTAIN DEFINITIONS.....................................................................................53
9.1 Certain Definitions............................................................................53
ARTICLE X
GENERAL.................................................................................................55
10.1 Notices........................................................................................55
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
10.2 Governing Law..................................................................................56
10.3 Benefit and Binding Effect.....................................................................56
10.4 Entire Agreement...............................................................................56
10.5 Counterparts...................................................................................56
10.6 Reliance on Headings, Etc......................................................................57
Exhibit A Consolidation Agreement
Exhibit B Warrant Purchase Agreement
Exhibit C Affiliate Agreement
Exhibit D Management Continuity Agreement
</TABLE>
iv
<PAGE> 6
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement") is entered
into by and between INDEPENDENT BANK CORPORATION, a Michigan corporation, with
its principal office at 230 West Main Street, Ionia, Michigan 48846 ("IBC") and
MUTUAL SAVINGS BANK, F.S.B., a federal savings bank, with its principal office
located at 623 Washington Avenue, Bay City, Michigan 48708 ("MSB"). IBC and MSB
are sometimes referred to as the "Parties" or individually as a "Party."
RECITALS
The Board of Directors of MSB and IBC have determined, subject to the
requisite approval of their respective shareholders, that it would be in the
best interest of the respective institutions for MSB to affiliate with IBC,
pursuant to which MSB will be consolidated with a new Michigan banking
corporation to be organized by IBC under the Michigan Banking Code of 1969, as
amended (the "Banking Code").
Concurrently with the execution and delivery of this Agreement, the
Parties are entering into a certain Warrant Purchase Agreement, in the form
attached as Exhibit B (the "Warrant Purchase Agreement"), and a certain Warrant,
in the form attached as Attachment A to the Warrant Purchase Agreement (the
"Warrant"). This Agreement, together with the Consolidation Agreement attached
as Exhibit A, the Warrant Purchase Agreement, and the Warrant are sometimes
collectively referred to as the "Merger Documents."
For purposes of the Merger Documents, certain capitalized terms have
been defined in Article IX of this Agreement.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
CONSOLIDATION
1.1 Formation of New Bank. IBC agrees to use its best efforts to
promptly cause a new Michigan banking corporation ("New Bank") to be organized,
pursuant to Section 130 of the Banking Code, for purposes of effecting the
Consolidation (defined in Section 1.2 below). IBC will acquire and own all the
outstanding capital shares of New Bank as of the date the organization of New
Bank becomes effective.
1.2 Execution of Consolidation Agreement. Promptly after New Bank has
been organized, unless this Agreement has been terminated, MSB and IBC shall,
and IBC shall cause New Bank to, execute and enter into a Consolidation
Agreement substantially in the form of Exhibit A
1
<PAGE> 7
attached to this Agreement (the "Consolidation Agreement"), providing for the
consolidation of MSB with and into New Bank under the charter of New Bank (the
"Consolidation"). The financial institution resulting from the Consolidation
("Consolidated Bank") shall be a wholly owned subsidiary of IBC.
1.3 Name of Consolidated Bank. The name of the Consolidated Bank shall
be "New MSB Bank" or such other name as the Board of Directors and shareholder
of the Consolidated Bank shall determine.
1.4 Business of Consolidated Bank. The business of the Consolidated
Bank shall be that of a Michigan banking corporation. The Consolidated Bank
shall conduct its business at its main office that shall be located at Bay City,
Michigan, and at its legally established branches.
1.5 The Closing. The consummation of the transactions contemplated by
this Agreement and the Consolidation Agreement shall take place at a closing
(the "Closing") to be held upon the satisfaction or waiver of all of the
conditions to the Consolidation set forth herein and in the Consolidation
Agreement, which Closing shall take place at 10:00 a.m., local time, at the
offices of Varnum, Riddering, Schmidt & HowlettLLP (or at such other place upon
which the parties may agree), on a date mutually agreeable to the parties
hereto, but in no event later than the last business day of the month in which
(a) all of the conditions to the Consolidation set forth herein and in the
Consolidation Agreement have been satisfied or waived, or (b) if both of the
conditions in Section 1.6(f)(i) and (ii) have been satisfied, five (5) days
following the expiration of the Determination Period (hereinafter referred to as
the "Closing Date").
1.6 Conversion of Shares. The manner of converting the shares of MSB
and New Bank shall be as follows:
(a) Shares of New Bank. At the Effective Time, as defined in
Article 2 of the Consolidation Agreement, each share of New Bank, par
value $100.00 per share, issued and outstanding shall remain
outstanding as a share of the Consolidated Bank, and the capital of New
Bank shall become capital of the Consolidated Bank.
(b) Conversion of MSB Common Stock. At the Effective Time,
subject to Article 5 of the Consolidation Agreement, by virtue of the
Consolidation and without any action on the part of MSB, or the holder
of any security of MSB, each share of common stock of MSB, par value
$0.01 per share ("MSB Common Stock"), issued and outstanding
immediately prior to the Effective Time, other than shares canceled
pursuant to Section 1.6(e), shall be converted into the right to
receive 0.8 fully paid and nonassessable shares (the "Conversion
Ratio") of IBC common stock, $1.00 par value per share (the "IBC Common
Stock"), subject to adjustment as provided in this Section 1.6. If the
sum of the number of shares of MSB Common Stock outstanding at the
Effective Time plus the number of shares of MSB Common Stock that are
subject to outstanding MSB Stock Options as of the Effective Time
differs from 4,598,780 shares, the Conversion Ratio shall
2
<PAGE> 8
be automatically adjusted by multiplying the original Conversion Ratio
by the quotient obtained by dividing 4,598,780 by the sum of the number
of shares of MSB Common Stock issued and outstanding at the Effective
Time plus the number of shares subject to the outstanding MSB Stock
Options at the Effective Time; provided, however, that, in performing
any such adjustment, the Conversion Ratio shall be rounded to the
nearest hundredth of a share of IBC Common Stock.
(c) No Fractional Shares. No fractional shares of IBC Common
Stock shall be issued. Each holder of MSB Common Stock who would
otherwise be entitled to receive a fractional part of a share of IBC
Common Stock pursuant to Section 1.6(b) shall instead be entitled to
receive cash in an amount equal to the product resulting from
multiplying such fraction (rounded to the nearest tenth when expressed
as an Arabic number) by the average closing sale price of IBC Common
Stock as reported on the Nasdaq Stock Market on the five trading days
immediately preceding the Effective Time.
(d) Recapitalization. In the event that either IBC or MSB
changes (or establishes a record date for changing) the number of
shares of IBC Common Stock or shares of MSB Common Stock issued and
outstanding as a result of a stock dividend, stock split,
recapitalization, reclassification, combination or similar transaction
with respect to the outstanding shares of IBC Common Stock or MSB
Common Stock, and the record date therefor shall be after the date of
this Agreement and prior to the Effective Time, then the Conversion
Ratio shall be appropriately and proportionately adjusted.
(e) Certain Owned Shares of MSB Common Stock. Any and all
shares of MSB Common Stock owned by MSB, IBC or any direct or indirect
majority-owned Subsidiary of either of them, in each case other than in
a fiduciary capacity that are beneficially owned by third parties or as
a result of debts previously contracted, shall be canceled and retired
at the Effective Time and no consideration shall be issued in exchange
therefor.
(f) MSB Termination Right; IBC Adjustment Right. The Board of
Directors of MSB may terminate this Agreement upon written notice to
IBC (the "Termination Notice"), at any time during the Determination
Period (as defined below), if both of the following conditions are
satisfied:
(i) the Average Closing Price shall be less than the
product of 0.85 and the Starting Price; and
(ii) (A) the quotient obtained by dividing the
Average Closing Price by the Starting Price (such number being
referred to herein as the "IBC Ratio") shall be less than (B)
the quotient obtained by dividing the Average Index Price by
the Index Price on the Starting Date and subtracting 0.15 from
the quotient in this clause (ii)(B) (such number being
referred to herein as the "Index Ratio");
3
<PAGE> 9
subject, however, to the following provisions. During the five (5) day
period commencing with IBC's receipt of MSB's Termination Notice, IBC
shall have the option to elect to increase the Conversion Ratio to
equal the lesser of (i) the quotient obtained by dividing (A) the
product of 0.85, the Starting Price and the Conversion Ratio by (B) the
Average Closing Price, or (ii) the quotient obtained by dividing (A)
the product of the Index Ratio and the Conversion Ratio by (B) the IBC
Ratio. If IBC makes such an election within such five (5) day period,
it shall give prompt written notice to MSB of such election and the
revised Conversion Ratio, whereupon no termination shall have occurred
pursuant to this Section 1.6(f) and this Agreement shall remain in
effect in accordance with its terms (except as the Conversion Ratio
shall have been so modified), and any references in this Agreement to
"Conversion Ratio" shall thereafter be deemed to refer to the
Conversion Ratio as adjusted pursuant to this Section 1.6(f).
For purposes of this Section 1.6(f), the following terms shall
have the meanings indicated:
"Average Closing Price" means the average of the daily last
sale prices of IBC Common Stock as reported on the Nasdaq Stock Market
("Nasdaq") (as reported in The Wall Street Journal or, if not reported
therein, in another mutually agreed upon authoritative source) for the
fifteen (15) consecutive full trading days in which such shares are
traded on the Nasdaq ending at the close of trading on the first day of
the Determination Period.
"Average Index Price" means the average of the Index Prices
for the fifteen (15) consecutive full Nasdaq trading days ending at the
close of trading on the first day of the Determination Period.
"Determination Period" means the fifteen (15) day period
commencing two (2) days after the date on which the last Requisite
Regulatory Approval required for consummation of the Consolidation
shall be received.
"Index Group" means the Nasdaq Bank Stock Index.
"Index Price" on a given date means the average of the closing
prices on such date of the companies comprising the Index Group.
"Starting Date" means the last full day on which the Nasdaq
was open for trading prior to the execution of this Agreement.
"Starting Price" shall mean the last sale price per share of
IBC Common Stock on the Starting Date, as reported by the Nasdaq (as
reported in The Wall Street Journal or, if not reported therein, in
another mutually agreed upon authoritative source).
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1.7 IBC Common Stock. All shares of IBC Common Stock that are issued
and outstanding immediately prior to the Effective Time shall continue to be
issued and outstanding shares of IBC Common Stock at and after the Effective
Time.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF IBC
Except as otherwise set forth in the IBC disclosure memorandum ("IBC
Disclosure Memorandum") previously delivered to MSB, IBC represents and warrants
to MSB that:
2.1 Organization and Good Standing. IBC is duly registered as a bank
holding company under the Bank Holding Company Act. Each of the IBC Companies is
duly organized, validly existing and in good standing under the laws of the
State of Michigan (except that IBC Capital Finance is a business trust organized
and in good standing under Delaware law) and has the corporate power to carry on
their respective businesses substantially as it is now being conducted. Each IBC
Company is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions where the failure to be so qualified or licensed is not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
IBC. The IBC Disclosure Memorandum contains true and complete copies of the
Articles of Incorporation and Bylaws of IBC.
2.2 Subsidiaries. Section 2.2 of the IBC Disclosure Memorandum contains
a true and complete list of all of the IBC Subsidiaries as of the date of this
Agreement. Except as disclosed in Section 2.2 of the IBC Disclosure Memorandum,
IBC or one of its Subsidiaries owns all of the issued and outstanding shares of
capital stock of each IBC Subsidiary. No equity securities of any IBC Subsidiary
are or may become required to be issued by reason of any Rights, and there are
no contracts by which any IBC Subsidiary is bound to issue additional shares of
its capital stock or Rights. There are no contracts relating to the rights of
any IBC Company to vote or to dispose of any shares of the capital stock of any
IBC Subsidiary. All of the shares of capital stock of each IBC Subsidiary held
by an IBC Company are fully paid and, except pursuant to Section 201 of the
Michigan Banking Code in the case of the IBC banks, are owned by the IBC Company
free and clear of any lien.
2.3 Capitalization.
(a) IBC has authorized capital of 14,000,000 shares of common
stock, par value $1.00 per share ("IBC Common Stock"), and 200,000
shares of preferred stock, without par value. As of March 23, 1999,
7,426,991shares of IBC Common Stock were issued and outstanding. No
shares of IBC preferred stock are issued or outstanding. All of the
issued and outstanding shares of IBC Common Stock are, and all of the
shares of IBC Common Stock to be issued in exchange for shares of IBC
Common Stock upon consumption of the Consolidation, when issued in
accordance with the terms of this Agreement and the
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Consolidation Agreement, will be, validly issued, fully paid and not
subject to assessment. There are no warrants, options, contracts or
rights outstanding for the purchase of any additional shares of IBC
except as reflected in the notes to IBC's consolidated financial
statements for the year ended December 31, 1998, and as may be issued
or purchased subsequent to December 31, 1998, pursuant to IBC's
Dividend Reinvestment and Stock Purchase Plan and IBC's various
equity-based compensation plans. IBC has not established a record date
for any stock dividend, stock split, recapitalization,
reclassification, combination or similar transaction that has not
become effective prior to the date of this Agreement.
(b) Except as set forth in Section 2.3(a) of this Agreement or
as disclosed in Section 2.3 of the IBC Disclosure Memorandum, there are
no shares of capital stock or other equity securities of IBC
outstanding and no outstanding Rights relating to the capital stock of
IBC and there are no warrants, options, contracts or rights (including
preemptive rights or rights contained in convertible securities or any
other rights) outstanding for the purchase or acquisition of any
additional shares of IBC.
2.4 Authorizations. The execution, delivery and performance of this
Agreement have been duly and validly authorized by IBC and its Board of
Directors, and do not violate or conflict with IBC's Articles of Incorporation,
Bylaws or any court order or decree to which it or any of its Subsidiaries is a
party or subject, or by which IBC or any such Subsidiary is bound, subject to
the approval of this Agreement and the Consolidation Agreement by the
shareholders of IBC. The execution and performance of this Agreement and the
Consolidation Agreement do not and will not result in any default or give rise
to any right of termination, cancellation or acceleration under any material
note, bond, mortgage, indenture or other agreement by which IBC or any of its
Subsidiaries is bound. The Merger Documents, when executed and delivered, will
be a valid, binding and enforceable obligation of IBC (except in all cases as
such enforceability may be limited by applicable bankruptcy, insolvency,
receivership, reorganization, moratorium, or similar laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceeding may be brought).
2.5 Financial Statements. The consolidated statements of financial
condition of IBC as of December 31, 1998 and 1997, and the related consolidated
statements of operations, changes in shareholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1998, as reported
by IBC's independent accountants, KPMG LLP, including all schedules and notes
relating thereto (the "IBC Financial Statements"), fairly present IBC's
financial condition and results of operations, on a consolidated basis, on the
dates and for the periods indicated in conformity with generally accepted
accounting principles applied consistently throughout the periods indicated
(except as otherwise noted in said financial statements). The IBC Financial
Statements referred to in this Section 2.5 do not, as of the date hereof,
include any material assets or omit to state any material liability or other
facts, the inclusion or omission of which renders such IBC Financial
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Statements, in light of the circumstances under which they were made, misleading
in any material respect.
2.6 Absence of Undisclosed Liabilities. Except as and to the extent
reflected or reserved against in the consolidated Statement of Financial
Condition of IBC as of December 31, 1998, and the notes thereto, IBC, on a
consolidated basis, has no material liabilities or obligations (whether accrued,
absolute, contingent or otherwise) of a nature and amount required to be
reflected in such statement, or the notes thereto, in accordance with GAAP.
2.7 Loan Guarantees and Loss Reserves. To the best of its knowledge,
all material guarantees of indebtedness owed to IBC Companies, including, but
not limited to, those of the Federal Housing Administration, the Small Business
Administration, the Farmers Home Administration, and other federal agencies, are
valid and enforceable in accordance with their respective terms. The IBC
Companies' allowance for loan losses reflected in IBC's December 31, 1998,
consolidated financial statements, pursuant to GAAP, was adequate to meet all
loan losses then reasonably anticipated based upon the facts and circumstances
known as of that date.
2.8 Title to Properties. The IBC Companies are the owner of all
material property and assets reflected in their audited Statement of Financial
Condition at December 31, 1998, free of any material liens and encumbrances,
except as noted therein, and except for changes thereafter in the ordinary
course of business, which changes are not in the aggregate material to IBC's
business. The IBC Companies have good and marketable title to all material
properties and assets acquired after December 31, 1998, free of liens and
encumbrances, except assets disposed of or encumbered in the ordinary course of
business. All material leases to which an IBC Company is a party are valid and
enforceable in accordance with their respective terms. Each material lease is
specifically identified in the IBC Disclosure Memorandum. The IBC Companies have
not received notice of any material violation of any applicable zoning
regulation, ordinance or other law, order, regulation or requirement relating to
their operations or properties.
2.9 Governmental Regulation. The IBC Companies hold all material
licenses, certificates, permits, franchises and rights from all appropriate
federal, state or other public authorities necessary for the conduct of their
business. To the best of IBC's knowledge, the IBC Companies have conducted their
business so as to comply in all material respects with all applicable federal,
state and local statutes, regulations, ordinances or rules, particularly, but
not by way of limitation, applicable banking laws, federal and state securities
laws, and laws and regulations concerning truth-in-lending, usury, fair credit
reporting, equal credit opportunity, community reinvestment, redlining, loan
insurance and guarantee programs, privacy, trade practices, consumer protection,
occupational safety, civil rights, age discrimination in employment, employee
benefits, labor relations, fair employment practices and fair labor standards.
2.10 Absence of Litigation. Except as disclosed in Section 2.10 of the
IBC Disclosure Memorandum, there is no Litigation instituted or pending or, to
the knowledge of IBC, threatened (or unasserted but considered probable of
assertion and which, if asserted, would have at least a
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reasonable probability of an unfavorable outcome) against any IBC Company, or
against any asset, interest, or right of any of them, that seeks to enjoin,
delay, or prevent the execution, delivery, or performance of the Merger
Documents or the completion of the transactions contemplated therein or herein,
or that, if a judgment adverse to a IBC Company were to be rendered in such
Litigation, would have, individually or in the aggregate, a Material Adverse
Effect on IBC, nor are there any orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any IBC Company
that would have, individually, or in the aggregate, a Material Adverse Effect on
IBC. Section 2.10 of the IBC Disclosure Memorandum contains a copy of each audit
letter response received by IBC from attorneys for any IBC Company in connection
with the preparation of the financial statements of IBC or otherwise since
December 31, 1997, relating to any Litigation pending as of the date of this
Agreement to which any IBC Company is a party and which names any IBC Company as
a defendant or cross-defendant, and a brief summary report of any such
litigation that is not discussed in such audit letter responses.
2.11 Reports and SEC Documents.
(a) Reports. IBC and each of the IBC Subsidiaries have timely
filed all reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were
required to file since January 1, 1995 with the Regulatory Authorities,
and all other reports and statements required to be filed by them since
January 1, 1995, including, without limitation, any report or statement
required to be filed pursuant to the laws, rules or regulations of the
United States, any state, or any Regulatory Authority, and have paid
all fees and assessments due and payable in connection therewith,
except where the failure to file such report, registration or statement
or to pay such fees and assessments, either individually or in the
aggregate, will not have a Material Adverse Effect on IBC. Except for
normal examinations conducted by Regulatory Authorities in the regular
course of the business of IBC or the IBC Subsidiaries, no Regulatory
Authority has initiated any proceeding or, to the best knowledge of
IBC, investigation into the business or operations of IBC or any of IBC
Subsidiaries since January 1, 1995. There is no unresolved written
violation, written criticism, or written exception by any Regulatory
Authority with respect to any report or statement relating to any
examinations of IBC or any of the IBC Subsidiaries, which is likely,
either individually or in the aggregate, to have a Material Adverse
Effect on IBC.
(b) SEC Documents. IBC has made available to MSB a true and
complete copy of each report, schedule, registration statement and
definitive proxy statement filed by IBC with the SEC (other than
reports filed pursuant to Section 13(d) or 13(g) of the Exchange Act)
since January 1, 1995 (as such documents have since the time of their
filing been amended, the "IBC SEC Documents"), which are all the
documents (other than preliminary material and reports required
pursuant to Section 13(d) or 13(g) of the Exchange Act) that IBC was
required to file with the SEC since such date. As of their respective
dates of filing with the SEC, the IBC SEC Documents complied in all
material respects with the requirements of the Securities Act of 1933,
as amended (the "Securities Act"), or the
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Exchange Act, as the case may be, and the rules and regulations of the
SEC thereunder applicable to such IBC SEC Documents, and 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. The financial statements of IBC included in the
IBC SEC Documents complied as to form, as of their respective dates of
filing with the SEC, in all material respects with applicable
accounting requirements and with the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the notes
thereto or, in the case of the unaudited statements, as permitted by
Form 10-Q of the SEC) and fairly present in all material respects the
consolidated financial position of IBC and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of
operations, changes in shareholders' equity and cash flows of such
companies for the periods then ended. All material agreements,
contracts and other documents required to be filed as exhibits to any
of the IBC SEC Documents have been so filed.
2.12 Tax Matters. Except as may be disclosed in Section 2.12 of
the IBC Disclosure Memorandum:
(a) All tax returns required to be filed by or on behalf of
any of the IBC Companies have been timely filed or requests for
extensions have been timely filed, granted, and have not expired for
periods ended on or before December 31, 1998, and on or before the date
of the most recent fiscal year end immediately preceding the Effective
Time and all returns filed are complete and accurate, except for
failures, if any, which, taken together, would not have a Material
Adverse Effect on IBC. All Taxes shown on filed returns have been paid
or adequate provision therefor has been made in the IBC Financial
Statements. As of the date of this Agreement, there is no audit
examination, deficiency, or refund Litigation with respect to any Taxes
that is reasonably likely to result in a determination that would have,
individually or in the aggregate, a Material Adverse Effect on IBC,
except as reserved against in the IBC Financial Statements delivered
prior to the date of this Agreement or as disclosed in Section 2.12 of
the IBC Disclosure Memorandum. All Taxes and other liabilities due with
respect to completed and settled Tax examinations or concluded Tax
Litigation have been paid or adequate provision therefor has been made
in the IBC financial statements.
(b) None of the IBC Companies has executed an extension or
waiver of any statute of limitations on the assessment or collection of
any Tax due (excluding such statutes that relate to years currently
under examination by the Internal Revenue Service or other applicable
taxing authorities) that is currently in effect.
(c) Adequate provision for any Taxes due or to become due for
any of the IBC Companies for the period or periods through and
including the date of the respective IBC
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financial statements has been made and is reflected on such IBC
financial statements in accordance with GAAP.
(d) Deferred Taxes of the IBC Companies have been provided for
in accordance with GAAP.
(e) Each of the IBC Companies is in material compliance with,
and its records contain all information and documents (including
properly completed IRS Forms W-9) necessary to comply with, all
applicable information reporting and Tax withholding requirements under
federal, state, and local Tax Laws, and such records identify with
specificity all accounts subject to backup withholding under Section
3406 of the Internal Revenue Code.
(f) Except as disclosed in Section 2.12 of the IBC Disclosure
Memorandum, IBC has not received any notification of an audit of its
federal income tax returns for any tax years since 1988.
2.13 Conduct. Since December 31, 1998, neither IBC nor any of its
Subsidiaries has: (a) experienced any material adverse change in financial
condition, assets, liabilities or business; (b) conducted its business or
entered into any material transaction otherwise than in the ordinary course, or
incurred or become subject to any material liabilities or obligations except
current liabilities incurred in the ordinary course of business and except for
any branch or bank acquisition agreements that IBC or its Subsidiaries may enter
into prior to the Effective Time as to which notice of such is provided to MSB
by IBC; (c) to the best of IBC's knowledge, suffered any union organizational
efforts or any labor trouble, or any event or condition of any character
materially and adversely affecting its business or prospects not generally
affecting banks in Michigan in substantially the same manner and to
substantially the same relative extent; (d) paid, other than in the ordinary
course of business, any material obligation or liability other than those shown
on the IBC Financial Statements or incurred after the date thereof in the
ordinary course of business; (e) mortgaged, pledged or subjected to lien, charge
or other encumbrance any of its material assets, or sold or transferred any such
material assets, except in the ordinary course of business; (f) learned of any
basis for the institution of any action, suit, proceeding or governmental
investigation against it with respect to its business, properties, assets or
goodwill, that might have a Material Adverse Effect on IBC or any of its
Subsidiaries; or (g) made or permitted any amendment or termination of any
material contract to which it is a party except for the expiration of contracts
at the end of their term and termination of contracts which are terminable by
the other party without any fault or omission on the part of IBC or a Subsidiary
of IBC.
2.14 Compliance with Laws. Each IBC Company has in effect all permits
necessary for it to own, lease, or operate its material assets and to carry on
its business as now conducted, except for those permits, the absence of which
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on IBC, and there has occurred no default under any such permit,
other than defaults which are not reasonably likely to have, individually or in
the aggregate,
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a Material Adverse Effect on IBC. Except as disclosed in Section 2.14 of the IBC
Disclosure Memorandum, no IBC Company:
(a) Is in default under its governing documents;
(b) Is in violation of any laws, orders, or permits applicable
to its business or employees conducting its business, except for
violations which are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on IBC;
(c) Has received any notification or communication from any
agency or department of federal, state, or local government or any
Regulatory Authority or the staff thereof (i) asserting that any such
entity is not in compliance with any of the laws or orders which such
governmental authority or Regulatory Authority enforces, where such
noncompliance is reasonably likely to have a Material Adverse Effect on
IBC, (ii) threatening to revoke any permits, the revocation of which is
reasonably likely to have a Material Adverse Effect on IBC, or (iii)
requiring any such entity to enter into or consent to the issuance of a
cease and desist order, supervisory letter, formal agreement,
directive, commitment, or memorandum of understanding, or to adopt any
resolution of the Board of Directors of such entity or similar
undertaking, which restricts materially the conduct of its business, or
in any manner relates to its capital adequacy, its credit or reserve
policies, its management, or the payment of dividends, and is subject
to any such agreement under, letter of understanding; or
(d) Directly or indirectly engages in any material activity
prohibited to be conducted by any such entity, or owns any material
assets prohibited to be held by such entity.
2.15 Brokerage Fees. IBC has not employed any broker or finder in
connection with the transactions contemplated by this Agreement and has no
express or implied agreement with any Person or company relative to commissions
or finder's fees as to such transactions.
2.16 Contracts. Except as to contracts and agreements listed or
described in Section 2.16 of the IBC Disclosure Memorandum, as of the date of
this Agreement no IBC Company is a party to (in its own name or as successor in
interest to any predecessor) or bound by any material written or oral: (a)
employment, management or consulting contract or service agreement which by its
terms IBC knows or should know is not terminable by the IBC Company on 30 days'
notice or less without cost or penalty; (b) collective bargaining agreement with
any labor or trade union or association or employee group; (c) bonus, pension,
profit-sharing, retirement, stock option, stock purchase, hospi talization,
insurance or other similar plan providing for benefits for its employees; (d)
lease, installment purchase agreement or other contract with respect to any
property (real, personal or mixed) used or proposed to be used in the IBC
Company's operation; (e) contract or agreement for the purchase or disposition
of material, supplies, equipment or services; (f) instrument evidencing or
relating to indebtedness for money borrowed or money to be borrowed or creating
any lien or
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security interest in any real or personal property excluding such instruments
with customers relating to banking transactions; (g) contract or agreement that
by its terms requires the consent of any party thereto to the consummation of
the transactions contemplated by this Agreement; (h) agreement not to compete in
any line of business or any geographic area; (i) contract or agreement (or
outstanding solicitation for bids) for capital expenditures; (j) any lease,
indenture, note or other contract under which any IBC Company is in material
default; (k) any contract, except ordinary and customary banking relationships
and employment agreements, with any executive officer, director, or holder of
more than 5% of the outstanding stock of IBC; (l) any deferred compensation or
severance pay agreement; or (m) any other material agreement not made in the
ordinary course of the IBC Company's business. True and correct copies of all
contracts and agreements listed or described in IBC Disclosure Memorandum are
attached to the IBC Disclosure Memorandum or are described therein. As of the
date of this Agreement, each IBC Company has in all material respects performed
all material obligations required to be performed by it to date and is not in
default under, and no event has occurred that, with the lapse of time or action
by a third party, could result in a default under any outstanding indenture,
mortgage, contract, lease or other agreement to which any IBC Company is a party
or by which any IBC Company is bound or under any provision of its Articles of
Incorporation or Bylaws.
2.17 Duties as Fiduciary. As of the date of this Agreement, each IBC
Company, in its capacity as trustee, escrow agent, executor, administrator,
custodian, guardian, receiver or other fiduciary, has, to the best of its
knowledge, performed all of its material duties in accordance with all legal
standards applicable to such duties whether imposed by contract, statute or
common law.
2.18 Insurance. As of the date of this Agreement, the IBC Companies
have in effect insurance coverage on their assets, properties, premises,
operations and personnel in such amounts and against such risks and losses as
they reasonably believe to be adequate and customary for the business conducted
by the IBC Companies.
2.19 Books and Records. To the best of IBC's knowledge, IBC's minute
books accurately reflect all actions taken by its shareholders, directors, and
committees of directors, and such books, accounts and records of IBC have been
maintained in a regular manner and in compliance with all applicable laws.
2.20 Employee Benefit Plans and Other Employee Matters.
(a) The IBC Disclosure Memorandum includes a list of (1) all of
the "pension" and "welfare" benefit plans (within the respective
meanings of sections 3(2) and 3(1) of the Employee Retirement Income
Security Act of 1974, as amended ["ERISA"]), and (2) all other bonus,
deferred compensation, pension, retirement, profit sharing, thrift
savings, employee stock ownership, stock bonus, stock purchase,
restricted stock and stock option plans or programs, all employment or
severance contracts, and any applicable "change in control" or similar
provisions in any plan, program, policy, contract or arrangement,
maintained by, or to which IBC or any ERISA Affiliate has made payments
or contributions,
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with respect to its employees (the "IBC Employee Benefit Plans"),
together with a list of any such plans terminated since January 1,
1993, or merged into or consolidated with any of the current IBC
Employee Benefit Plans. The IBC Disclosure Memorandum includes true and
complete copies of all IBC Employee Benefit Plans, and such contracts
or arrangements, including but not limited to, any trust instruments
and/or insurance and investment contracts, if any, forming a part of
any such IBC Employee Benefit Plan, and all amendments thereto,
including but not limited to (i) the actuarial report for each IBC
Employee Benefit Plan, if applicable, and the annual report (Form 5500
series), for each of the last three plan years, (ii) the current
summary plan description (if applicable) for each IBC Employee Benefit
Plan, and (iii) the most recent determination letter from the Internal
Revenue Service (if applicable) for each IBC Employee Benefit Plan. No
reportable event as defined by Section 4043 of ERISA or the regulations
thereunder for which the 30 day reporting requirement has not been
waived has occurred with respect to any IBC Employee Benefit Plan
subject to ERISA. No such IBC Employee Benefit Plan has been terminated
since January 1, 1993. IBC has not sought or obtained from the Internal
Revenue Service any waiver of standard funding requirements under any
IBC Employee Benefit Plan during the past five years. IBC's policies
concerning hours worked by, and payments made to, employees of IBC have
not been in violation of the Fair Labor Standards Act or any other
applicable laws dealing with such matters. All payments due from IBC on
account of each IBC Employee Benefit Plan have been paid or accrued as
a liability on the books of IBC, and all severance payments which are
or were due under the terms of any agreement, oral or written, have
been paid or accrued as a liability on the books of IBC, except as set
forth in Section 2.20 of the IBC Disclosure Memorandum.
(b) Each IBC Employee Benefit Plan has been administered in
substantial compliance with its terms and with all applicable
provisions of ERISA, the Code and all other applicable laws and
regulations. Each IBC Employee Benefit Plan, that is an employee
pension benefit plan within the meaning of Section 3(2) of ERISA, and
which is intended to be qualified under Section 401(a) of the Code, has
received or applied for a favorable determination letter from the IRS,
and IBC is not aware of any circumstances likely to result in the
revocation of any such favorable determination letter.
(c) There is no material pending or threatened litigation or
government investigation relating to any of the IBC Employee Benefit
Plans. Neither IBC or any of its ERISA Affiliates has engaged in a
transaction with respect to any IBC Employee Benefit Plan that could
subject IBC or any of its ERISA Affiliates or any other party to a tax
or penalty imposed by Section 4975 of the Code, or Sections 502(i) or
502(l) of ERISA in an amount that would be material.
(d) No liability under Title IV of ERISA has been, or is
expected to be, incurred by IBC or any of its ERISA Affiliates, with
respect to any ongoing, frozen or terminated "single-employer plan"
within the meaning of Section 4001(a)(15) of ERISA, currently or
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formerly maintained by any of them, or a single-employer plan of any
entity which is considered one employer with IBC or any of its ERISA
Affiliates.
(e) Neither IBC nor any of its ERISA Affiliates has incurred
or expects to incur any withdrawal liability with respect to a
Multiemployer Plan (as defined in Sections 3(37) and 40001(a)(3) of
ERISA) under Subtitle E of Title IV of ERISA. No IBC Employee Benefit
Plan has an accumulated funding deficiency (whether or not waived)
within the meaning of Section 412 of the Code or Section 302 of ERISA.
Neither IBC nor any of its ERISA Affiliates has provided or is required
to provide security to any IBC Employee Benefit Plan pursuant to
Section 401(a)(29) of the Code. Neither IBC nor any of its ERISA
Affiliates presently contributes to, or is currently a party to, any
Multi-Employer Plan or any plan that is or was subject to Title IV of
ERISA.
(f) Except as set forth in the IBC Disclosure Memorandum, or
as required pursuant to Section 4980B of the Code and Sections 601
through 609 of ERISA, neither IBC nor any of its ERISA Affiliates has
any obligations for retiree health and life benefits under any IBC
Employee Benefit Plan.
(g) Except as set forth in the IBC Disclosure Memorandum, the
consummation of the transactions contemplated by this Agreement will
not, either alone or in combination with another event, (i) entitle any
current or former employee, officer or director of IBC or an ERISA
Affiliate to severance pay, unemployment compensation or other payment
except as expressly provided in this Agreement, or (ii) accelerate the
time of payment or vesting, or increase the amount, of compensation due
any such employee, officer or director. No IBC Employee Benefit Plan
provides for payment of any amount which, considered in the aggregate
with amounts payable pursuant to all other IBC Employee Benefit Plans,
would exceed the amount deductible for federal income tax purposes by
virtue of Section 280G of the Code.
(h) For purposes of this Section, the term ERISA Affiliate
includes each entity that is (i) a member of a controlled group of
corporations with IBC, (ii) under common control with IBC, or (iii) a
member of an affiliated service group with IBC, within the meaning of
Sections 414(b), (c), (m) and (o) of the Code.
2.21 Environmental Liability. There are no material actions, suits,
investigations, liabilities, inquiries or other proceedings, rules, orders or
citations involving any IBC Company, or any of its material assets, pending or
threatened as a result of any failure of any IBC Company, or any predecessor
thereof, to comply with any requirement of federal, state, local or foreign law,
civil or common, or regulation relating to air, water, soil, solid waste
management, hazardous or toxic substances, or the protection of health or the
environment, nor is there, to the knowledge of IBC, any factual basis for any of
the foregoing. None of the property owned or leased by any IBC Company, to the
knowledge of IBC, is contaminated with any waste or hazardous substances. To the
knowledge of IBC after reasonable investigation, no IBC Company is or may be
deemed to be an
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"owner or operator" of a "facility" or "vessel" which owns, possesses,
transports, generates, or disposes of a "hazardous substance," as those terms
are defined in Section 9601 of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C.A. ss. 9601 et. seq.
2.22 Community Reinvestment Act Compliance. No IBC Company has received
any notice of non-compliance with the applicable provisions of the CRA and the
regulations promulgated thereunder, and IBC has received a CRA rating of
satisfactory or better from the FDIC. IBC knows of no fact or circumstance or
set of facts or circumstances which would cause any IBC Company to fail to
comply with such provisions or to cause the CRA rating of any IBC Company to
fall below satisfactory.
2.23 Statements True and Correct. None of the information supplied or
to be supplied by any IBC Company or any Affiliate thereof for inclusion in the
Registration Statement to be filed by IBC with the SEC will, when the
Registration Statement becomes effective, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by any IBC Company or any Affiliate thereof for inclusion in the Proxy
Statement/Prospectus to be mailed to IBC's shareholders in connection with the
IBC Shareholders' Meeting or the Proxy Statement/Prospectus to be mailed to
MSB's shareholders in connection with the MSB Shareholder's Meeting, and any
other documents to be filed by IBC or any Affiliate thereof with the SEC or any
other Regulatory Authority in connection with the transactions contemplated by
the Merger Documents, will, at the respective time such documents are filed, and
with respect to the Proxy Statement/Prospectus, when first mailed to the
respective shareholders of MSB and IBC, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or, in the case of the Proxy Statement/Prospectus or any
amendment thereof or supplement thereto, at the time of the IBC or MSB
Shareholders' Meeting, as applicable, be false or misleading with respect to any
material fact, or omit to state any material facts necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the MSB or IBC Shareholders' Meeting. All documents that any IBC
Company or any Affiliate thereof is responsible for filing with any Regulatory
Authority in connection with the transactions contemplated by the Merger
Documents will comply as to form in all material respects with the provisions of
applicable Law. Neither this Agreement nor any schedule, statement, list,
certificate or other written information furnished or to be furnished by IBC in
connection with this Agreement contains, or will contain any untrue statement of
a material fact or omits or will omit, to state a material fact necessary to
make the statements contained herein or therein, in light of the circumstances
in which they are made, not misleading.
2.24 Tax, Regulatory, and Pooling Matters. No IBC Company nor, to the
knowledge of IBC, any Affiliate thereof, has taken any action or has any
knowledge of any fact or circumstance that is reasonably likely to (i) prevent
the transactions contemplated by the Merger Documents, including the
Consolidation, from qualifying as a reorganization within the meaning of Section
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368(a) of the Internal Revenue Code, (ii) impede or materially delay receipt of
any consents of Regulatory Authorities referred to in Section 5.1(b) of this
Agreement, or (iii) prevent IBC from accounting for the Consolidation as a
pooling of interests in accordance with GAAP and applicable SEC regulations.
2.25 Year 2000. Each IBC Company's computers, data processing systems
and other equipment are Year 2000 compliant in all material respects, or are
reasonably expected to be Year 2000 compliant prior to December 31, 1999. The
IBC Companies have implemented Year 2000 compliance procedures appropriate for
the banking industry with respect to their loan customers and vendors.
2.26 "Material" Defined. Except where the context otherwise indicates,
the term "material" as applied to IBC and its Subsidiaries refers to IBC and its
Subsidiaries on a consolidated basis, considering IBC and its Subsidiaries and
their assets and businesses as a whole.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MSB
Except as otherwise set forth in the MSB disclosure memorandum ("MSB
Disclosure Memorandum") previously delivered to IBC, MSB represents and warrants
to IBC that:
3.1 Organization and Good Standing. MSB is a federally chartered stock
savings bank. Each of the MSB Companies is duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation and has the
corporate power to carry on their respective businesses substantially as it is
now being conducted. Each MSB Company is duly qualified or licensed to transact
business as a foreign corporation in good standing in the States of the United
States and foreign jurisdictions where the character of its assets or the nature
or conduct of its business requires it to be so qualified or licensed, except
for such jurisdictions where the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on MSB. The MSB Disclosure Memorandum contains true and complete copies
of the Charter and Bylaws of MSB.
3.2 Subsidiaries. Section 3.2 of the MSB Disclosure Memorandum contains
a true and complete list of all of the MSB Subsidiaries as of the date of this
Agreement. Except as disclosed in Section 3.2 of the MSB Disclosure Memorandum,
MSB or one of its Subsidiaries own all of the issued and outstanding shares of
capital stock of each MSB Subsidiary. No equity securities of any MSB Subsidiary
are or may become required to be issued by reason of any Rights, and there are
no contracts by which any MSB Subsidiary is bound to issue additional shares of
its capital stock or Rights. There are no contracts relating to the rights of
any MSB Company to vote or to dispose of any shares of the capital stock of any
MSB Subsidiary. All of the shares of capital stock of each MSB Subsidiary held
by an MSB Company are fully paid and are owned by the MSB Company free and clear
of any lien.
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3.3 Capitalization.
(a) MSB has authorized capital of 20,000,000 shares of common
stock, par value $0.01 per share ("MSB Common Stock"), and 5,000,000
shares of preferred stock, par value $0.01 per share. As of March 23,
1999, 4,290,414 shares of MSB Common Stock were issued and outstanding.
No shares of MSB Preferred Stock are issued or outstanding. All of the
issued and outstanding shares of MSB Common Stock are validly issued,
fully paid and not subject to assessment. MSB has reserved 333,196
shares of MSB Common Stock for issuance under MSB stock option plans,
pursuant to which options to purchase not more than 308,366 shares of
MSB Common stock are outstanding. MSB has not established a record date
for any stock dividend, stock split, recapitalization,
reclassification, combination or similar transaction that has not
become effective prior to the date of this Agreement.
(b) Except for the Warrant and the Warrant Purchase Agreement,
and except as set forth in Section 3.3(a) of this Agreement or as
disclosed in Section 3.3 of the MSB Disclosure Memorandum, there are no
shares of capital stock or other equity securities of MSB outstanding
and no outstanding Rights relating to the capital stock of MSB and
there are no warrants, options, contracts or rights (including
preemptive rights or rights contained in convertible securities or any
other rights) outstanding for the purchase or acquisition of any
additional shares of MSB.
3.4 Authorizations. The execution, delivery and performance of this
Agreement have been duly and validly authorized by MSB and its Board of
Directors, and does not violate or conflict with MSB's Charter, Bylaws or any
court order or decree to which it or any of its Subsidiaries is a party or
subject, or by which MSB or any such Subsidiary is bound, subject to the
approval of this Agreement and the Consolidation Agreement by the shareholders
of MSB. The execution and performance of this Agreement and the Consolidation
Agreement do not and will not result in any default or give rise to any right of
termination, cancellation or acceleration under any material note, bond,
mortgage, indenture or other agreement by which MSB or any of its Subsidiaries
is bound. The Merger Documents, when executed and delivered, will be a valid,
binding and enforceable obligation of MSB (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency,
receivership, reorganization, moratorium, or similar laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceeding may be brought).
3.5 Financial Statements. The consolidated statements of financial
condition of MSB as of December 31, 1998 and 1997, and the related consolidated
statements of operations, changes in shareholder's equity, and cash flows for
each of the years in the three-year period ended December 31, 1998, as reported
by MSB's independent accountants, KPMG LLP, including all schedules and notes
relating thereto (the "MSB Financial Statements"), fairly present MSB's
financial condition and results of operations, on a consolidated basis, on the
dates and for the periods indicated, in conformity with generally accepted
accounting principles applied consistently throughout the periods
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indicated (except as otherwise noted in said financial statements). The MSB
Financial Statements referred to in this Section 3.5 do not, as of the date
hereof, include any material assets or omit to state any material liability or
other facts, the inclusion or omission of which renders such MSB Financial
Statements, in light of the circumstances under which they were made, misleading
in any material respect. The consolidated reports of condition and income ("Call
Reports") of MSB for each of the five years ended December 31, 1998, and MSB's
statement of condition and statement of income, as of December 31, 1998,
including all schedules and notes relating thereto, are correct and complete in
all material respects, and fairly present MSB's financial condition and results
of operations for the dates and the periods indicated, and the Call Reports have
been prepared in accordance with the Call Report instructions on a consistent
basis.
3.6 Absence of Undisclosed Liabilities. Except, as and to the extent
reflected or reserved against in the consolidated Statement of Financial
Condition of MSB, as of December 31, 1998, and notes thereto, MSB, on a
consolidated basis, has no material liabilities or obligations of any nature,
(whether accrued, absolute, contingent or otherwise) of a nature and amount
required to be reflected in such statement, or the notes thereto, in accordance
with GAAP.
3.7 Loan Guarantees and Loss Reserves. To the best of its knowledge,
all material guarantees of indebtedness owed to the MSB Companies, including,
but not limited to, those of the Federal Housing Administration, the Small
Business Administration, the Farmers Home Administration, and other federal
agencies, are valid and enforceable in accordance with their respective terms.
MSB's allowance for loan losses reflected in MSB's Statement of Financial
Condition, pursuant to GAAP, was adequate to meet all loan losses then
reasonably anticipated, based upon the facts and circumstances known as of that
date.
3.8 Title to Properties. The MSB Companies are the owner of all
material property and assets reflected in their audited Statement of Financial
Condition at December 31, 1998, free of any material liens and encumbrances,
except as noted therein, and except for changes thereafter in the ordinary
course of business, which changes are not in the aggregate material to MSB's
business. The MSB Companies have good and marketable title to all material
properties and assets acquired after December 31, 1998, free of liens and
encumbrances, except assets disposed of or encumbered in the ordinary course of
business. All material leases to which a MSB Company is a party are valid and
enforceable in accordance with their respective terms. Each material lease is
specifically identified in MSB's Disclosure Memorandum. The MSB Companies have
not received notice of any material violation of any applicable zoning
regulation, ordinance or other law, order, regulation or requirement relating to
its operations or properties.
3.9 Governmental Regulation. The MSB Companies hold all material
licenses, certi ficates, permits, franchises and rights from all appropriate
federal, state or other public authorities necessary for the conduct of their
business. To the best of MSB's knowledge, the MSB Companies have conducted their
business so as to comply in all material respects with all applicable federal,
state and local statutes, regulations, ordinances or rules, particularly, but
not by way of limitation, applicable banking laws, federal and state securities
laws, and laws and regulations concerning truth-
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in-lending, usury, fair credit reporting, equal credit opportunity, community
reinvestment, redlining, loan insurance and guarantee programs, privacy, trade
practices, consumer protection, occupational safety, civil rights, age
discrimination in employment, employee benefits, labor relations, fair
employment practices and fair labor standards.
3.10 Absence of Litigation. Except as disclosed in Section 3.10 of the
MSB Disclosure Memorandum, there is no Litigation instituted or pending or, to
the knowledge of MSB, threatened (or unasserted but considered probable of
assertion and which, if asserted, would have at least a reasonable probability
of an unfavorable outcome) against any MSB Company, or against any asset,
interest, or right of any of them, that seeks to enjoin, delay, or prevent the
execution, delivery, or performance of the Merger Documents or the completion of
the transactions contemplated therein or herein, or that, if a judgment adverse
to a MSB Company were to be rendered in such Litigation, would have,
individually or in the aggregate, a Material Adverse Effect on MSB, nor are
there any orders of any Regulatory Authorities, other governmental authorities,
or arbitrators outstanding against any MSB Company that would have,
individually, or in the aggregate, a Material Adverse Effect on MSB. Section
3.10 of the MSB Disclosure Memorandum contains a copy of each audit letter
response received by MSB from attorneys for any MSB Company in connection with
the preparation of the MSB financial statements or otherwise since December 31,
1997, relating to any Litigation pending as of the date of this Agreement to
which any MSB Company is a party and which names any MSB Company as a defendant
or cross-defendant, and a brief summary report of any such litigation that is
not discussed in such audit letter responses.
3.11 Reports and Securities Documents.
(a) Reports. MSB and each of the MSB Subsidiaries have timely
filed all reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were
required to file since January 1, 1995 with the Regulatory Authorities,
and all other reports and statements required to be filed by them since
January 1, 1995, including, without limitation, any report or statement
required to be filed pursuant to the laws, rules or regulations of the
United States, any state, or any Regulatory Authority, and have paid
all fees and assessments due and payable in connection therewith,
except where the failure to file such report, registration or statement
or to pay such fees and assessments, either individually or in the
aggregate, will not have a Material Adverse Effect on MSB. Except for
normal examinations conducted by Regulatory Authorities in the regular
course of the business of MSB or the MSB Subsidiaries, no Regulatory
Authority has initiated any proceeding or, to the best knowledge of
MSB, investigation into the business or operations of MSB or any of MSB
Subsidiaries since January 1, 1995. Except as provided in the MSB
Disclosure Memorandum, there is no unresolved written violation,
written criticism, or written exception by any Regulatory Authority
with respect to any report or statement relating to any examinations of
MSB or any of the MSB Subsidiaries, which is likely, either
individually or in the aggregate, to have a Material Adverse Effect on
MSB.
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(b) Securities Documents. MSB has made available to IBC a true
and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by MSB with the Office of Thrift
Supervision ("OTS") (other than reports filed pursuant to Section 13(d)
or 13(g) of the Exchange Act) since January 1, 1995 (as such documents
have since the time of their filing been amended, the "MSB Securities
Documents"), which are all the documents (other than preliminary
material and reports required pursuant to Section 13(d) or 13(g) of the
Exchange Act) that MSB was required to file with the OTS since such
date under the Exchange Act. As of their respective dates of filing
with the OTS, the MSB Securities Documents complied in all material
respects with the requirements of the Exchange Act, and the rules and
regulations of the SEC thereunder applicable to such MSB Securities
Documents, and 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. The financial statements of
MSB included in the MSB Securities Documents complied as to form, as of
their respective dates of filing with the OTS, in all material respects
with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of the unaudited
statements, as permitted by Form 10-Q of the SEC) and fairly present in
all material respects the consolidated financial position of MSB and
its consolidated Subsidiaries as of the dates thereof and the
consolidated results of operations, changes in shareholders' equity and
cash flows of such companies for the periods then ended. All material
agreements, contracts and other documents required to be filed as
exhibits to any of the MSB Securities Documents have been so filed.
3.12 Tax Matters. Except as may be disclosed in Section 3.12 of
the MSB Disclosure Memorandum:
(a) All tax returns required to be filed by or on behalf of
any of the MSB Companies have been timely filed or requests for
extensions have been timely filed, granted, and have not expired for
periods ended on or before December 31, 1998, and on or before the date
of the most recent fiscal year end immediately preceding the Effective
Time and all returns filed are complete and accurate, except for
failures, if any, which, taken together, would not have a Material
Adverse Effect on MSB. All Taxes shown on filed returns have been paid
or adequate provision therefor has been made in the MSB Financial
Statements. As of the date of this Agreement, there is no audit
examination, deficiency, or refund Litigation with respect to any Taxes
that is reasonably likely to result in a determination that would have,
individually or in the aggregate, a Material Adverse Effect on MSB,
except as reserved against in the MSB Financial Statements delivered
prior to the date of this Agreement or as disclosed in Section 3.12 of
the MSB Disclosure Memorandum. All Taxes and other liabilities due with
respect to completed and settled Tax examinations or concluded
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Tax Litigation have been paid or adequate provision therefor has been
made in the MSB financial statements.
(b) None of the MSB Companies has executed an extension or
waiver of any statute of limitations on the assessment or collection of
any Tax due (excluding such statutes that relate to years currently
under examination by the Internal Revenue Service or other applicable
taxing authorities) that is currently in effect.
(c) Adequate provision for any Taxes due or to become due for
any of the MSB Companies for the period or periods through and
including the date of the respective MSB financial statements has been
made and is reflected on such MSB financial statements in accordance
with GAAP.
(d) Deferred Taxes of the MSB Companies have been provided for
in accordance with GAAP.
(e) Each of the MSB Companies is in material compliance with,
and its records contain all information and documents (including
properly completed IRS Forms W-9) necessary to comply with, all
applicable information reporting and Tax withholding requirements under
federal, state, and local Tax Laws, and such records identify with
specificity all accounts subject to backup withholding under Section
3406 of the Internal Revenue Code.
(f) Except as disclosed in Section 3.12 of the MSB Disclosure
Memorandum, MSB has not received any notification of an audit of its
federal income tax returns for any tax years since 1990.
3.13 Conduct. Since December 31, 1998, neither MSB nor any of its
Subsidiaries has: (a) experienced any material adverse change in financial
condition, assets, liabilities or business; (b) conducted its business or
entered into any material transaction otherwise than in the ordinary course, or
incurred or become subject to any material liabilities or obligations except
current liabilities incurred in the ordinary course of business; (c) to the best
of MSB's knowledge, suffered any union organizational efforts or labor trouble,
or any event or condition of any character materially and adversely affecting
its business or prospects not generally affecting banks or thrifts in Michigan
in substantially the same manner and to substantially the same relative extent;
(d) paid, other than in the ordinary course of business, any material obligation
or liability other than those shown on the MSB Financial Statements or incurred
after the date thereof in the ordinary course of business; (e) mortgaged,
pledged or subjected to lien, charge or other encumbrance any of its material
assets, or sold or transferred any such material assets, except in the ordinary
course of business; (f) made or permitted any amendment or termination of any
material contract to which it is a party except for the expiration of contracts
at the end of their term and termination of contracts which are terminable by
the other party without any fault or omission on the part of MSB or a Subsidiary
of MSB; (g) issued or sold any of its bonds, debentures or other similar
corporate capital debt obligations; (h) declared
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or set aside or paid any dividend or other distribution in respect to its
capital shares or, directly or indirectly, purchased, redeemed or otherwise
acquired any such shares; or (i) except for pay increases which have been
consistent with established past practice, granted any increase in the salary or
bonus payable, or to be payable, to any officer, director or holder of 5% or
more of the outstanding Bank Shares, or any spouse, child, parent or sibling of
any such Person, or to any employee whose annual rate of salary and bonus at
December 31, 1998, exceeded $50,000.
3.14 Compliance with Laws. Each MSB Company has in effect all permits
necessary for it to own, lease, or operate its material assets and to carry on
its business as now conducted, except for those permits, the absence of which
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on MSB, and there has occurred no default under any such permit,
other than defaults which are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on MSB. Except as disclosed in Section
3.17 of the MSB Disclosure Memorandum, no MSB Company:
(a) Is in default under its governing documents;
(b) Is in violation of any laws, orders, or permits applicable to
its business or employees conducting its business, except for
violations which are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on MSB;
(c) Has received any notification or communication from any agency
or department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that any such entity is
not in compliance with any of the laws or orders which such
governmental authority or Regulatory Authority enforces, where such
noncompliance is reasonably likely to have a Material Adverse Effect on
MSB, (ii) threatening to revoke any permits, the revocation of which is
reasonably likely to have a Material Adverse Effect on MSB, or (iii)
requiring any such entity to enter into or consent to the issuance of a
cease and desist order, supervisory letter, formal agreement,
directive, commitment, or memorandum of understanding, or to adopt any
resolution of the Board of Directors of such entity or similar
undertaking, which restricts materially the conduct of its business, or
in any manner relates to its capital adequacy, its credit or reserve
policies, its management, or the payment of dividends, and is subject
to any such agreement under, letter of understanding; or
(d) Directly or indirectly engages in any material activity
prohibited to be conducted by any such entity, or owns any material
assets prohibited to be held by such entity.
3.15 Brokerage Fees. MSB has not employed any broker or finder in
connection with the transactions contemplated by this Agreement and has no
express or implied agreement with any Person or company relative to commissions
or finder's fees as to such transactions, except for fees
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and commissions payable or to be payable to McConnell, Budd & Downes, Inc. as
described in Section 3.20 of the MSB Disclosure Memorandum.
3.16 Contracts. Except as to contracts and agreements listed or
described in Section 3.16 of the MSB Disclosure Memorandum, as of the date of
this Agreement no MSB Company is a party to (in its own name or as successor in
interest to any predecessor) or bound by any material written or oral: (a)
employment, management or consulting contract or service agreement which by its
terms MSB knows or should know is not terminable by the MSB Company on 30 days'
notice or less without cost or penalty; (b) collective bargaining agreement with
any labor or trade union or association or employee group; (c) bonus, pension,
profit-sharing, retirement, stock option, stock purchase, hospitalization,
insurance or other similar plan providing for benefits for its employees; (d)
lease, installment purchase agreement or other contract with respect to any
property (real, personal or mixed) used or proposed to be used in the MSB
Company's operation; (e) contract or agreement for the purchase or disposition
of material, supplies, equipment or services; (f) instrument evidencing or
relating to indebtedness for money borrowed or money to be borrowed or creating
any lien or security interest in any real or personal property excluding such
instruments with customers relating to banking transactions; (g) contract or
agreement that by its terms requires the consent of any party thereto to the
consummation of the transactions contemplated by this Agreement; (h) agreement
not to compete in any line of business or any geographic area; (i) contract or
agreement (or outstanding solicitation for bids) for capital expenditures; (j)
any lease, indenture, note or other contract under which any MSB Company is in
material default; (k) any contract, except ordinary and customary banking
relationships and employment agreements, with any executive officer, director,
or holder of more than 5% of the outstanding stock of MSB; (l) any deferred
compensation or severance pay agreement; or (m) any other material agreement not
made in the ordinary course of the MSB Company's business. True and correct
copies of all contracts and agreements listed or described in MSB Disclosure
Memorandum are attached to the MSB Disclosure Memorandum except to the extent
described therein. As of the date of this Agreement, each MSB Company has in all
material respects performed all material obligations required to be performed by
it to date and is not in default under, and no event has occurred that, with the
lapse of time or action by a third party, could result in a default under any
outstanding indenture, mortgage, contract, lease or other agreement to which any
MSB Company is a party or by which any MSB Company is bound or under any
provision of its Articles of Incorporation or Bylaws.
3.17 Duties as Fiduciary. As of the date of this Agreement, each MSB
Company does not exercise fiduciary powers, except as a document custodian for
FHLMC.
3.18 Insurance. As of the date of this Agreement, the MSB Companies
have in effect insurance coverage on their assets, properties, premises,
operations and personnel in such amounts and against such risks and losses as
they reasonably believe to be adequate and customary for the business conducted
by the MSB Companies.
3.19 Books and Records. To the best of MSB's knowledge, MSB's minute
books accurately reflect all actions taken by its shareholders, directors, and
committees of directors, and
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such books, accounts and records of MSB have been maintained in a regular manner
and in compliance with all applicable laws.
3.20 Employee Benefit Plans and Other Employee Matters.
(a) The MSB Disclosure Memorandum includes a list of (1) all of
the "pension" and "welfare" benefit plans (within the respective
meanings of sections 3(2) and 3(1) of the Employee Retirement Income
Security Act of 1974, as amended ["ERISA"]), and (2) all other bonus,
deferred compensation, pension, retirement, profit sharing, thrift
savings, employee stock ownership, stock bonus, stock purchase,
restricted stock and stock option plans or programs, all employment or
severance contracts, and any applicable "change in control" or similar
provisions in any plan, program, policy, contract or arrangement,
maintained by, or to which any MSB or any ERISA Affiliate has made
payments or contributions, with respect to its employees (the "MSB
Employee Benefit Plans"), together with a list of any such plans
terminated since January 1, 1993, or merged into or consolidated with
any of the current MSB Employee Benefit Plans. The MSB Disclosure
Memorandum includes true and complete copies of all MSB Employee
Benefit Plans, and such contracts or arrangements, including but not
limited to, any trust instruments and/or insurance and investment
contracts, if any, forming a part of any such MSB Employee Benefit
Plan, and all amendments thereto, including but not limited to (i) the
actuarial report for each MSB Employee Benefit Plan, if applicable, and
the annual report (Form 5500 series), for each of the last three plan
years, (ii) the current summary plan description (if applicable) for
each MSB Employee Benefit Plan, and (iii) the most recent determination
letter from the Internal Revenue Service (if applicable) for each MSB
Employee Benefit Plan. No reportable event as defined by Section 4043
of ERISA or the regulations thereunder for which the 30 day reporting
requirement has not been waived has occurred with respect to any MSB
Employee Benefit Plan subject to ERISA. Except as set forth in the MSB
Disclosure Memorandum, no MSB Employee Benefit Plan has been terminated
since January 1, 1993. MSB has not sought or obtained from the Internal
Revenue Service any waiver of standard funding requirements under any
MSB Employee Benefit Plan during the past five years. MSB's policies
concerning hours worked by, and payments made to, employees of MSB have
not been in violation of the Fair Labor Standards Act or any other
applicable laws dealing with such matters. All payments due from MSB on
account of each MSB Employee Benefit Plan have been paid or accrued as
a liability on the books of MSB, and all severance payments which are
or were due under the terms of any agreement, oral or written, have
been paid or accrued as a liability on the books of MSB, except as set
forth in Section 3.20 of the MSB Disclosure Memorandum.
(b) Each MSB Employee Benefit Plan has been administered in
substantial compliance with its terms and with all applicable
provisions of ERISA, the Code and all other applicable laws and
regulations. Each MSB Employee Benefit Plan, that is an employee
pension benefit plan within the meaning of Section 3(2) of ERISA, and
which is intended to be qualified under Section 401(a) of the Code, has
received or applied for a
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favorable determination letter from the IRS, and MSB is not aware of
any circumstances likely to result in the revocation of any such
favorable determination letter. MSB's Employee Stock Ownership Plan
satisfies the requirements for an employee stock ownership plan under
Section 4975(e)(7) of the Code.
(c) There is no material pending or threatened litigation or
government investigation relating to any of the MSB Employee Benefit
Plans. Neither MSB or any of its ERISA Affiliates has engaged in a
transaction with respect to any MSB Employee Benefit Plan that could
subject MSB or any of its ERISA Affiliates or any other party to a tax
or penalty imposed by Section 4975 of the Code, or Sections 502(i) or
502(l) of ERISA in an amount that would be material.
(d) No liability under Title IV of ERISA has been, or is expected
to be, incurred by MSB or any of its ERISA Affiliates, with respect to
any ongoing, frozen or terminated "single-employer plan" within the
meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any of them, or a single-employer plan of any entity
which is considered one employer with MSB or any of its ERISA
Affiliates.
(e) Neither MSB nor any of its ERISA Affiliates has incurred or
expects to incur any withdrawal liability with respect to a
Multiemployer Plan (as defined in Sections 3(37) and 40001(a)(3) of
ERISA) under Subtitle E of Title IV of ERISA. No MSB Employee Benefit
Plan has an accumulated funding deficiency (whether or not waived)
within the meaning of Section 412 of the Code or Section 302 of ERISA.
Except as set forth in the MSB Disclosure Memorandum, neither MSB nor
any of its ERISA Affiliates has provided or is required to provide
security to any MSB Employee Benefit Plan pursuant to Section
401(a)(29) of the Code. Neither MSB nor any of its ERISA Affiliates
presently contributes to, or is currently a party to, any
Multi-Employer Plan or any plan that is or was subject to Title IV of
ERISA.
(f) Except as set forth in the MSB Disclosure Memorandum, or as
required pursuant to Section 4980B of the Code and Sections 601 through
609 of ERISA, neither MSB nor any of its ERISA Affiliates has any
obligations for retiree health and life benefits under any MSB Employee
Benefit Plan.
(g) Except as set forth in the MSB Disclosure Memorandum or as
provided for in this Agreement, the consummation of the transactions
contemplated by this Agreement will not, either alone or in combination
with another event, (i) entitle any current or former employee, officer
or director of MSB or an ERISA Affiliate to severance pay, unemployment
compensation or other payment except as expressly provided in this
Agreement, or (ii) accelerate the time of payment or vesting, or
increase the amount, of compensation due any such employee, officer or
director. No MSB Employee Benefit Plan provides for payment of any
amount which, considered in the aggregate with amounts payable pursuant
to all other
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MSB Employee Benefit Plans, would exceed the amount deductible for
federal income tax purposes by virtue of Section 280G of the Code.
(h) For purposes of this Section, the term ERISA Affiliate
includes each entity that is (i) a member of a controlled group of
corporations with MSB, (ii) under common control with MSB, or (iii) a
member of an affiliated service group with MSB, within the meaning of
Sections 414(b), (c), (m) and (o) of the Code.
3.21 Environmental Liability. There are no material actions, suits,
investigations, liabilities, inquiries or other proceedings, rules, orders or
citations involving any MSB Company, or any of its material assets, pending or
threatened as a result of any failure of any MSB Company, or any predecessor
thereof, to comply with any requirement of federal, state, local or foreign law,
civil or common, or regulation relating to air, water, soil, solid waste
management, hazardous or toxic substances, or the protection of health or the
environment, nor is there, to the knowledge of MSB, any factual basis for any of
the foregoing. None of the property owned or leased by any MSB Company is, to
the knowledge of MSB, contaminated with any waste or hazardous substances except
as disclosed in a baseline environmental assessment, dated December 12, 1997,
pertaining to the Landmark Plaza Building in Bay City, Michigan. To the
knowledge of MSB after reasonable investigation, no MSB Company is or may be
deemed to be an "owner or operator" of a "facility" or "vessel" which owns,
possesses, transports, generates, or disposes of a "hazardous substance," as
those terms are defined in Section 9601 of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C.A. ss. 9601 et. seq.
3.22 Community Reinvestment Act Compliance. No MSB Company has received
any notice of non-compliance with the applicable provisions of the CRA and the
regulations promulgated thereunder, and MSB has received a CRA rating of
satisfactory or better from the OTS. MSB knows of no fact or circumstance or set
of facts or circumstances which would cause any MSB Company to fail to comply
with such provisions or to cause the CRA rating of any MSB Company to fall below
satisfactory.
3.23 Statements True and Correct. None of the information supplied or
to be supplied by any MSB Company or any Affiliate thereof for inclusion in the
Registration Statement to be filed by IBC with the SEC will, when the
Registration Statement becomes effective, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by any MSB Company or any Affiliate thereof for inclusion in the Proxy
Statement/Prospectus to be mailed to MSB's shareholders in connection with the
MSB Shareholders' Meeting or the Proxy Statement/Prospectus to be mailed to
IBC's shareholders in connection with the IBC Shareholder's Meeting, and any
other documents to be filed by MSB or any Affiliate thereof with the SEC, the
OTS or any other Regulatory Authority in connection with the transactions
contemplated by the Merger Documents, will, at the respective time such
documents are filed, and with respect to the Proxy Statement/Prospectus, when
first mailed to the respective shareholders of MSB and IBC, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to make
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the statements therein, in light of the circumstances under which they were
made, not misleading, or, in the case of the Proxy Statement/Prospectus or any
amendment thereof or supplement thereto, at the time of the MSB or IBC
Shareholders' Meeting, as applicable, be false or misleading with respect to any
material fact, or omit to state any material facts necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the MSB or IBC Shareholders' Meeting. All documents that any MSB
Company or any Affiliate thereof is responsible for filing with any Regulatory
Authority in connection with the transactions contemplated by the Merger
Documents will comply as to form in all material respects with the provisions of
applicable law. Neither this Agreement nor any schedule, statement, list,
certificate or other written information furnished or to be furnished by MSB in
connection with this Agreement contains or will contain any untrue statement of
a material fact or omits or will omit to state a mate rial fact necessary to
make the statements contained herein or therein, in light of the circumstances
in which they are made, not misleading.
3.24 Tax, Regulatory, and Pooling Matters. No MSB Company nor, to the
knowledge of MSB, any Affiliate thereof, has taken any action or has any
knowledge of any fact or circumstance that is reasonably likely to (i) prevent
the transactions contemplated by the Merger Documents, including the
Consolidation, from qualifying as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code, (ii) impede or materially delay receipt of
any consents of Regulatory Authorities referred to in Section 5.1(b) of this
Agreement, or (iii) prevent IBC from accounting for the Consolidation as a
pooling of interests in accordance with GAAP and applicable SEC regulations.
3.25 Year 2000. Each MSB Company's computers, data processing systems
and other equipment are Year 2000 compliant in all material respects, or are
reasonably expected to be Year 2000 compliant prior to December 31, 1999. The
MSB Companies have implemented Year 2000 compliance procedures appropriate for
the banking industry with respect to their loan customers and vendors.
3.26 "Material" Defined. Except where the context otherwise indicates,
the term "material" as applied to MSB and its Subsidiaries refers to MSB and its
Subsidiaries on a consolidated basis, considering MSB and its Subsidiaries and
their assets and businesses as a whole.
3.27 Stock Transactions. Except for the transactions described in MSB
Disclosure Memorandum, to the knowledge of MSB after reasonable investigation,
no executive officer or director of MSB, and no Person related to any such
officer or director by blood or marriage and residing in the same household, has
since December 31, 1998, purchased or sold or caused to be purchased or sold any
shares of MSB of which such officer, director or related Person is a record or
beneficial owner as determined under Regulation 13d-3 under the Securities
Exchange Act of 1934, as amended.
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3.28 Disclosure of Deeds, Leases, Agreements, Etc. MSB has furnished to
IBC and specifically identified in Section 3.28 of the MSB Disclosure
Memorandum, true copies of the following documents:
(a) Deeds and Titles. Deeds or other relevant title documents
relating to all real estate actively utilized by any MSB Company in the
conduct of its business and a complete and correct list of all items of
personal property which had a net after depreciation book value in
excess of $20,000 as of December 31, 1998, reflected in the books and
records of MSB as being owned (including those reflected in the balance
sheet of MSB as of December 31, 1998, except as since disposed of in
the ordinary course of business).
(b) Lease Agreements. All leases pursuant to which any MSB Company
as lessee leases real or personal property, excepting leases as to
personal property under which the aggregate lease payments do not
exceed $10,000 for the current term of the lease.
(c) Agreements. (i) All contracts and agreements with respect to
any real property used or proposed to be used in the operations of any
MSB Company which obligate any MSB Company to make aggregate annual
payments in excess of $10,000 or are not terminable at least annually
without penalty; (ii) all material data processing agreements, service
agreements, consulting agreements, or any similar arrangements not
terminable by the MSB Company upon 30 days or less notice without
penalties; (iii) all contracts or agree ments for the purchase or
disposition of material, equipment, supplies, or other personal
property or the purchase of services which obligate any MSB Company to
make aggregate payments in excess of $10,000 or are not terminable at
least annually without penalty.
(d) Insurance Policies. All material policies of insurance
maintained by any MSB Company with respect to assets, properties,
premises, operations and personnel, and copies of the most recent
insurance audit, review or report, if any.
(e) Charter Documents and Bylaws. The Charter of MSB and the
Articles or Certificate of Incorporation of its Subsidiaries, together
with the Bylaws of MSB and its Subsidiaries, including all amendments
to date.
3.29 Takeover Laws. Each MSB Company has taken all necessary steps to
exempt the transactions contemplated by this Agreement and the Consolidation
Agreement from any applicable state or federal takeover law.
3.30 Charter Provisions. MSB has taken all action so that the entering
into of the Merger Documents and the consummation of the Consolidation and the
other transactions contemplated by the Merger Documents do not and will not
result in the grant of any rights to any Person under the governing documents of
any MSB Company or restrict or impair the ability of IBC or any of its
Subsidiaries to vote, or otherwise to exercise the rights of a shareholder with
respect to, shares of MSB that may be directly or indirectly acquired or
controlled by IBC or any of its Subsidiaries.
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3.31 Indemnification. Except as provided in the Charter and in the
Bylaws of MSB and its Subsidiaries, neither MSB nor any of its Subsidiaries is a
party to any indemnification agreement with any of its present or future
directors, officers, employees, agents or other persons who serve or served in
any other capacity with any other enterprise at the request of MSB or a
Subsidiary of MSB (a "Covered Person"), and except for existing indemnification
obligations to certain current and former officers and directors of MSB relating
to the Pending Litigation, to the best knowledge of MSB, there are no claims for
which any Covered Person would be entitled to indemnification under Section 4.16
if such provisions were deemed to be in effect.
ARTICLE IV
CERTAIN COVENANTS
4.1 Material Adverse Changes. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of any change or any condition,
event or circumstance, fact or occurrence (other than general economic or
competitive conditions), other than as provided in this Agreement, that may
reasonably be expected to result in a material adverse change in the business,
properties, financial condition, loan portfolio, operations or prospects
relating to it or any of its Subsidiaries, taken as a whole, or which would
cause or constitute a material breach of any of its representations, warranties,
or covenants contained herein, and to use its reasonable efforts to prevent or
promptly to cure the same.
4.2 Reports. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements are
contained in any such reports filed pursuant to the Securities Exchange Act of
1934 (the "1934 Act") with the SEC (in the case of IBC) or the OTS (in the case
of MSB), such financial statements will fairly present the consolidated
financial position of the entity filing such statements as of the dates
indicated and the consolidated results of operations, changes in shareholders'
equity, and cash flows for the periods then ended in accordance with GAAP
(subject in the case of interim financial statements to normal recurring
year-end and audit adjustments that are not material). As of their respective
dates, such reports filed pursuant to the 1934 Act with the SEC (in the case of
IBC) or the OTS (in the case of MSB) will comply in all material respects with
the applicable securities laws and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Any financial statements contained
in any other reports to another regulatory authority shall be prepared in
accordance with the laws, rules and regulations applicable to such reports.
4.3 Registration Statement; Proxy Statement/Prospectus; Shareholder
Approvals.
(a) As soon as practicable after execution of this Agreement, IBC
shall file a Registration Statement with the SEC on an appropriate form
under the Securities Act of 1933, as amended (the "1933 Act"), and
shall use its reasonable efforts to cause the
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Registration Statement to become effective under the 1933 Act, and
thereafter, until the Effective Time or termination of this Agreement,
to keep same effective and, if necessary, amend and supplement same and
take any action required to be taken under the applicable state Blue
Sky or securities laws in connection with the issuance of the shares of
IBC Common Stock upon consummation of the Consolidation. Such
Registration Statement and any amendments and supplements thereto are
referred to herein as the "Registration Statement." The Registration
Statement shall include a Proxy Statement/Prospectus thereto reasonably
acceptable to IBC and MSB, prepared by IBC and MSB for use in
connection with the meetings of their respective shareholders, all in
accordance with the rules and regulations of the SEC. MSB shall furnish
all information concerning it and the holders of its capital stock as
IBC may reasonably request in connection with such action.
(b) Promptly following filing of the Registration Statement with
the SEC, MSB shall file the Proxy Statement/Prospectus with the OTS and
shall use its reasonable efforts to cause the Proxy
Statement/Prospectus to be cleared by the OTS for mailing to MSB's
shareholders. In advance of filing the Registration Statement, IBC
shall provide MSB and its counsel with a copy of the Registration
Statement and provide an opportunity to comment thereon, and thereafter
shall promptly advise MSB and its counsel of any material communication
received by IBC or its counsel from the SEC with respect to the
Registration Statement. None of the information furnished by IBC or MSB
for inclusion in the Registration Statement, Proxy Statement/Prospectus
or any other document filed with the SEC, the OTS, or any state
securities commission in connection with the transactions contemplated
by this Agreement, at the respective times at which such documents are
filed with the SEC or such state securities commission, or, in the case
of the Registration Statement, when it becomes effective, or in the
case of the Proxy Statement/Prospectus, when mailed or at the time of
the IBC and MSB meetings of shareholders, shall be false or misleading
with respect to any material fact or shall omit to state any material
fact necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading.
(c) MSB and IBC shall each call shareholders' meetings, to be held
as soon as reasonably practicable after the Registration Statement is
declared effective by the SEC and the Proxy Statement/Prospectus is
cleared for mailing by the OTS, for the purpose of voting upon approval
of this Agreement, the Consolidation Agreement, the Consolidation, and
such other related matters as each deems appropriate. In connection
with the shareholders' meetings, (i) MSB and IBC shall mail the Proxy
Statement/Prospectus to their respective shareholders after the SEC
declares the Registration Statement effective and the OTS clears the
Proxy Statement/Prospectus and related proxy materials for mailing,
(ii) the Parties shall furnish to each other all information concerning
them that they may reasonably request in connection with the Proxy
Statement/Prospectus, (iii) the respective Boards of Directors of MSB
and IBC shall recommend (subject to compliance with their fiduciary
duties as advised by counsel) to MSB's shareholders and IBC's
shareholders respectively, the approval of this Agreement, the
Consolidation Agreement, and the Consolidation, and (iv) the respective
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Boards of Directors and officers of MSB and IBC shall (subject to
compliance with their fiduciary duties as advised by counsel) use their
reasonable efforts to obtain such shareholders' approval.
4.4 Applications. IBC shall promptly prepare and file, and MSB shall
cooperate in the preparation and, where appropriate, the filing of, applications
with any Regulatory Authorities having jurisdiction over the transactions
contemplated by this Agreement and the Consolidation Agreement, seeking the
requisite approvals and consents necessary to consummate the transactions
contemplated by this Agreement and the Consolidation Agreement (such approvals
and consents are hereinafter referred to as "Requisite Regulatory Approval").
Notwithstanding the preceding sentence, IBC shall proceed immediately with the
filing of the following regulatory applications necessary to organize New Bank:
IBC shall file or cause to be filed (i) with the Michigan Financial Institutions
Bureau an application to form New Bank pursuant to Section 130 of the Banking
Code, (ii) the appropriate application with the Board of Governors of the
Federal Reserve System for permission for IBC to acquire New Bank, if necessary,
and (iii) the appropriate application with the FDIC, which applications shall be
filed no later than 30 days after the date of this Agreement. In advance of
filing the regulatory applications, IBC shall provide MSB and its counsel with a
copy of the applications and provide an opportunity to comment thereon, and
thereafter shall promptly advise MSB and its counsel of any material
communication received by IBC or its counsel from the Regulatory Authorities
with respect to the applications. IBC shall use its reasonable efforts to obtain
the Requisite Regulatory Approval referred to in this Section 4.4.
4.5 Agreement as to Efforts to Consummate. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its 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 under applicable laws to consummate and make effective, as soon as
practicable after the date of this Agreement, the transactions contemplated by
this Agreement and the Consolidation Agreement, and to cause to be satisfied the
conditions precedent to consummation of the Consolidation; provided, that
nothing herein shall preclude either Party from exercising its rights under this
Agreement. Each Party shall use, and shall cause each of its Subsidiaries to
use, its reasonable efforts to obtain all consents necessary or desirable for
the consummation of the transactions contemplated by this Agreement and the
Consolidation Agreement. The Parties shall deliver to each other, copies of all
filings, correspondence, and orders to and from all Regulatory Authorities in
connection with the transactions contemplated by this Agreement and the
Consolidation Agreement.
4.6 Investigation and Confidentiality.
(a) Prior to the Effective Time, each Party shall keep the other
Party advised of all material developments relevant to its business and
to consummation of the Consolidation and shall permit the other Party
to make or cause to be made such investigation of the business and
properties of it and its Subsidiaries and of their respective financial
and legal conditions as the other Party reasonably requests, provided
that such investigation shall be
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made after reasonable prior notice and during regular business hours,
shall be reasonably related to the transactions contemplated by this
Agreement and the Consolidation Agreement, and shall not interfere
unnecessarily with normal operations. No investigation by a Party shall
affect the representations and warranties of the other Party.
(b) Each Party shall, and shall cause its advisers and agents to,
maintain the confidentiality of all information (other than such
information as shall be in the public domain or otherwise ascertainable
from public or outside sources) furnished to it by or on behalf of the
other Party pursuant to Section 4.6(a) concerning its and its
Subsidiaries' businesses, operations, and financial positions and shall
not use such information for any purpose except in furtherance of the
transactions contemplated by this Agreement and the Consolidation
Agreement. If this Agreement is terminated prior to the Effective Time,
each Party shall promptly return or certify the destruction of all
documents and copies thereof, and all work papers containing
information (other than such information as shall be in the public
domain or otherwise ascertainable from public or outside sources)
received from the other Party.
(c) Each Party agrees to give the other Party notice as soon as
practicable after any determination by it of any fact or occurrence
relating to the other Party which it has discovered through the course
of its investigation and which represents, or is reasonably likely to
represent, either a material breach of any representation, warranty,
covenant or agreement of the other Party or which has had or is
reasonably likely to have a Material Adverse Effect on the other Party.
4.7 Press Releases. Prior to the Effective Time, MSB and IBC shall
consult with each other as to the form and substance of any press release or
other public disclosure related to this Agreement and the Consolidation
Agreement or any transaction contemplated thereby; provided, that nothing in
this Section 4.7 shall be deemed to prohibit any Party from making any
disclosure it believes is required by law.
4.8 Tax and Accounting Treatment. Each of the Parties undertakes and
agrees to use its reasonable efforts to cause the Consolidation, and to take no
action which would cause the Consolidation not to qualify for treatment as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code for federal income tax purposes and to be accounted for as a "pooling of
interests" for financial statement reporting purposes.
4.9 Survival of Representations and Warranties. None of the
representations and warranties of the parties in this Agreement or the
Consolidation Agreement shall survive the Effective Time.
4.10 Affirmative Covenants Regarding Conduct of MSB's Business Pending
Effective Time. From the date hereof until the Effective Time, MSB agrees that,
except as consented to by IBC in writing, MSB shall:
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(a) Use its best efforts to maintain its real and personal
properties in their present state of repair, order and condition,
reasonable wear and tear excepted;
(b) Maintain its books, accounts and records in a manner
consistent with past practice and, where applicable, in accordance with
generally accepted accounting principles or regulatory standards, as
applicable;
(c) Comply with all laws applicable to the conduct of its
business;
(d) Conduct its business only in the usual, regular and ordinary
course consistent with past practice;
(e) Make no change in its Charter or Bylaws;
(f) Use its best efforts to maintain and keep in full force and
effect all fire and other insurance on property and assets, all of the
liability and other casualty insurance, and all bonds on personnel,
presently carried by it; and
(g) Use all reasonable efforts to preserve its business
organization intact, to keep available the services of its present
officers and employees, and to preserve the goodwill of its customers
and others having business relations with it.
4.11 Negative Covenants Regarding Conduct of MSB's Business Pending
Effective Time. From the date hereof until the Effective Time, MSB agrees that,
except as consented to by IBC in writing, MSB shall not:
(a) (i) solicit, encourage or authorize any individual,
corporation or other entity to solicit from any third party any
inquires or proposals relating to or which may be reasonably expected
to lead to an Acquisition Transaction (as hereinafter defined), except
pursuant to a written direction from a Regulatory Authority, or (ii)
negotiate with or entertain any proposals from any other person for any
such Acquisition Transaction, except pursuant to a written direction
from any Regulatory Authority or upon the receipt of an unsolicited
offer from a third party where the Board of Directors of MSB reasonably
believes, upon the written opinion of counsel, that its fiduciary
duties require it to enter into discussions with such party.
Furthermore, except to the extent necessary to comply with the
fiduciary duties of MSB's Board of Directors, as advised by counsel,
neither MSB nor any Affiliate or representative thereof shall furnish
any non-public information that it is not legally obligated to furnish
in connection with, or enter into any contract with respect to, any
Acquisition Transaction, but MSB may communicate and disclose
information about such a proposal to engage in an Acquisition
Transaction to its shareholders if and to the extent that it is
required to do so in order to comply with its legal obligations as
advised by counsel. MSB will immediately cease and cause to be
terminated any existing activities, discussions, or negotiations with
any parties previously conducted with respect to any of the foregoing
and
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agrees to enforce its rights under any confidentiality agreements to
which it or any of its Subsidiaries is a party. MSB shall promptly
notify IBC of all of the relevant details relating to all inquiries and
proposals that it may receive relating to any Acquisition Transaction
and shall keep IBC informed of the status and details of any such
inquiry or proposal, and shall give IBC five days' advance notice of
any agreement to be entered into with, or any information to be
supplied to, any person making such inquiry or proposal. Nothing
contained in this Section 4.11(a) shall prohibit MSB from disclosing to
its shareholders a position contemplated by Rule 14e-2(a) under the
Exchange Act with respect to a tender offer for MSB's Common Stock.
(b) Sell, mortgage, pledge, encumber or otherwise dispose of any
of its material property and assets otherwise than in the ordinary
course of business except as to dispositions that MSB is compelled to
make or over which it has no control, which it will use its best
efforts to prevent;
(c) Repurchase, redeem, or otherwise acquire or exchange (other
than purchases or exchanges in the ordinary course under employee
benefit plans), directly or indirectly, any shares, or securities
convertible into any shares, of the capital stock of MSB;
(d) Declare or pay any dividends, or make any other distribution
in respect of its capital stock, in liquidation or otherwise;
(e) Except for purchases of U.S. Treasury securities or U.S.
Government agency securities, which in either case have maturities of
three years or less, or commercial paper, agreements to repurchase or
federal funds, which in all cases shall have maturities of ninety (90)
days or less, purchase any securities or make any material investment,
either by purchase of stock or securities, contributions to capital,
asset transfers, or purchase of any assets, in any Person other than a
wholly owned MSB Subsidiary, or otherwise acquire direct or indirect
control over any Person, other than in connection with (i) foreclosures
in the ordinary course of business, (ii) acquisitions of control by a
depository institution Subsidiary in its fiduciary capacity, or (iii)
the creation of new wholly owned subsidiaries organized to conduct and
continue activities otherwise permitted by this Agreement;
(f) (i) grant any increase in compensation or benefits to the
employees or officers of any MSB Company, except as made in the
ordinary course of business and not inconsistent with past practices or
as required by law; (ii) pay any severance or termination pay or any
bonus other than pursuant to written policies or written contracts in
effect on the date of this Agreement, except as disclosed in Section
4.11(f) of the MSB Disclosure Memorandum; (iii) enter into or amend any
severance agreements with officers of MSB; (iv) grant any increase in
fees or other increases in compensation or other benefits to the
directors of MSB; (v) voluntarily accelerate the vesting of any
employee benefits, other than pursuant to written policies or written
contracts in effect on the date of this Agreement; (vi) grant any stock
appreciation rights, cash awards, or any rights to acquire MSB
securities under any
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MSB stock option plan; or (vii) enter into or amend any employment
contract between MSB and any Person (unless such amendment is required
by law) that is not terminable on 30 days' notice or less without
penalty or obligation (beyond the notice period of 30 days or less);
(g) Adopt or agree to adopt any pension, profit-sharing or
employee benefit plan, fringe benefit program or other plan or program
of any kind for the benefit of its employees or directors, or make any
material change in or to, any existing MSB Employee Benefit Plan,
except as may be necessary to comply with applicable laws or
regulations, or as permitted by this Agreement, or make any
distributions from or contribution payment to such MSB Employee Benefit
Plan except as required by law or the terms of such plans and
consistent with MSB's past practice or as permitted by this Agreement;
(h) Pay, agree to pay, or incur aggregate liabilities in excess of
$30,000 in any single transaction for the purchase or lease of real
property, fixtures, equipment or other capital assets except normal
replacements, or except as provided in the MSB Disclosure Memorandum;
(i) Enter into or commit to enter into any agreement to purchase
trust, consulting, professional, data processing or other material
non-employee services which is not terminable by MSB without cost or
penalty upon thirty days' notice;
(j) Terminate (excluding failure to exercise a renewal option) or
amend any material lease or other material agreement except for the
expiration of contracts at the end of their term and termination of
contracts which are terminable by the other party without any fault or
omission on the part of MSB;
(k) Except as disclosed in the MSB Disclosure Memorandum, open or
materially enlarge or remodel any of MSB's facilities;
(l) Lease, purchase, or otherwise acquire any real property for
use as a branch bank;
(m) Apply for regulatory approval of any new branch banking
facility;
(n) Make any change in the number of its capital shares issued and
outstanding, except pursuant to the exercise of the MSB Stock Options
or under the terms of the Warrant Purchase Agreement and Warrant;
(o) Do or fail to do anything that would cause a breach of, or a
default under, any contract, commitment, obligation, plan, trust or
other arrangement as to which MSB or any MSB Company is a party, or by
which MSB or any MSB Company is bound;
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(p) Make any borrowings except in the ordinary course of business;
(q) Make any significant change in any tax or accounting methods
or systems of internal accounting controls, except as may be
appropriate to conform to changes in tax laws or regulatory accounting
requirements or GAAP or as provided by this Agreement; or
(r) Commence any Litigation other than in the ordinary course of
business in accordance with past practice, or settle any Litigation
involving any liability of MSB for material money damages or
restrictions upon the operations of MSB or any of its Subsidiaries.
4.12 Affiliate Agreements. MSB shall deliver to IBC not later than 30
days prior to the Effective Time, a written agreement, in a form attached hereto
as Exhibit C, from each director and executive officer of MSB and from those
Persons whom MSB reasonably believes to be an "affiliate" of MSB for purposes of
Rule 145 under the 1933 Act or the comparable OTS regulation or within the
meaning of SEC Staff Accounting Bulletin No. 65 (interpreting certain
requirements for treating a business combination as a pooling of interests).
4.13 Certain Policies of MSB. At the request of IBC, MSB shall use its
best efforts to modify and change its loan, litigation, and real estate
valuation policies and practices (including loan classifications and levels of
reserves) prior to or at the Effective Time so as to be consistent on a mutually
satisfactory basis with those of IBC and GAAP. MSB's representations,
warranties, covenants and agreements provided in this Agreement and the
Consolidation Agreement shall not be deemed untrue or breached in any respect as
a consequence of any modifications or changes undertaken solely on account of
this Section 4.13. Furthermore, MSB shall not be required to take any action
required by this Section 4.13 more than five (5) days prior to the Effective
Time, unless IBC agrees in writing that all conditions to closing set forth in
Article V have been satisfied or waived, or, in any event, before the
shareholders of MSB approve the Consolidation.
4.14 Employee Benefits and Contracts.
(a) ESOP. The following provisions will apply with respect to the
Mutual Savings Bank Employee Stock Ownership Plan and Trust ("MSB
ESOP"):
(i) All cash currently held in the MSB ESOP Suspense Account
and attributable to certain securities litigation settlement
proceeds received by the MSB ESOP (the "Litigation Proceeds"),
shall be allocated to accounts of participants in the MSB ESOP as
of the Effective Time ("MSB ESOP Participants") and former MSB
ESOP Participants. Such allocation shall be made (a) pursuant to
the terms of the MSB ESOP in effect as of the Effective Time, and
(b) as soon as practicable after the receipt of a Private Letter
Ruling requested from the Internal Revenue Service ("IRS") with
respect to the treatment of the Litigation Proceeds pursuant to
Section 415 of the Code.
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(ii) All cash allocated to the accounts of MSB ESOP
Participants and former MSB ESOP Participants as applicable, as
set forth in Section 4.14(a)(i) above, and all remaining cash to
be allocated to the MSB ESOP Participant Accounts and attributable
to the Litigation Proceeds, will be distributed to, or rolled over
by, MSB ESOP Participants and former MSB ESOP Participants as
applicable, at their election, pursuant to the terms of the MSB
ESOP in effect at the Effective Time. Such distributions or
rollovers shall be made as soon as practicable after the later to
occur of the Effective Time or the date of receipt of the
aforementioned IRS Private Letter Ruling.
(iii) From and after the date of this Agreement and
in anticipation of the aforementioned allocations,
distributions and rollovers from the MSB ESOP, IBC, MSB and
their respective representatives prior to the Effective Time,
and IBC and its representatives after the Effective Time,
shall use their best efforts to obtain such Private Letter
Ruling from the IRS. In the event that IBC, MSB and their
respective representatives prior to the Effective Time, and
IBC and its representatives after the Effective Time,
reasonably determine that the MSB ESOP cannot obtain the
Private Letter Ruling, or that amounts attributable to the
Litigation Proceeds cannot be so applied, allocated,
distributed or rolled over without causing the MSB ESOP to
lose its tax-qualified status or to exceed the limitations set
forth in Section 415 of the Code, MSB prior to the Effective
Time and IBC after the Effective Time, and their respective
representatives, shall take such action as they may reasonably
determine with respect to the allocation, distribution and
rollover of the Litigation Proceeds to MSB ESOP Participants
and former MSB ESOP Participants pursuant to the terms of the
MSB ESOP in effect as of the Effective Time, provided that the
Litigation Proceeds shall be held or paid only for the benefit
of MSB ESOP Participants and former MSB ESOP Participants, and
provided further that in no event shall any portion of such
amounts held in the MSB ESOP revert directly or indirectly to
MSB or any Affiliate thereof, or to IBC or any Affiliate
thereof.
(iv) The MSB ESOP shall be merged with and into the
Independent Bank Corporation Employee Stock Ownership Plan and
Trust ("IBC ESOP") as soon as practicable after the later to occur
of (a) the completion of the cash allocations, distributions, and
rollovers described in Sections 4.14(a)(i) through (iii) above, or
(b) the Effective Time.
(v) As of the effective date of the merger of the MSB ESOP and
the IBC ESOP, remaining account balances of MSB ESOP Participants
who are not then employed by IBC or an Affiliate thereof shall be
distributed to, or rolled over by, such MSB ESOP Participants
based upon the vesting schedule set forth in the MSB ESOP as of
the Effective Time.
(vi) Remaining account balances of MSB ESOP Participants who
are employed by IBC or an Affiliate thereof on the effective date
of the merger of the MSB ESOP and the
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IBC ESOP, will be maintained for their benefit in separate
accounts established under the IBC ESOP and will vest in such MSB
ESOP Participants' accounts according to the MSB ESOP vesting
schedule in effect as of the Effective Time.
(vii) Each MSB employee who becomes an employee of IBC or an
Affiliate thereof as of the Effective Time will participate in the
IBC ESOP as of the later to occur of (a) the Effective Time, or
(b) the date such MSB ESOP Participant satisfies the eligibility
requirements of the IBC ESOP. Former MSB employees shall receive
credit for eligibility and vesting purposes under the IBC ESOP for
all services rendered to MSB or an Affiliate thereof prior to the
Effective Time.
(viii) Employees hired by the Consolidated Bank from and after
the Effective Time will become eligible to participate in the IBC
ESOP in the same manner as newly- hired IBC employees.
(ix) IBC shall maintain and operate the MSB ESOP and IBC ESOP
in accordance with their respective terms and the applicable
provisions of ERISA and the Code, and to the extent that there
exist, as of the date of this Agreement, material differences
between the rights of MSB ESOP Participants with respect to the
balances of their MSB ESOP accounts and the rights of IBC ESOP
Participants with respect to the balances of their IBC ESOP
accounts, respectively, and any such differences are adverse to
the MSB ESOP Participants (other than the prevailing differences
in the vesting of account balances, which provisions of the MSB
ESOP shall in no event be modified as it applies to MSB ESOP
account balances at the time of merger of the MSB ESOP with the
IBC ESOP), IBC shall not amend the MSB ESOP or the IBC ESOP in a
way that would adversely affect the rights of MSB ESOP
Participants with respect to the balances of their MSB ESOP
accounts that are transferred to accounts for their benefit under
the IBC ESOP in connection with the merger of the MSB ESOP with
the IBC ESOP, except to the extent required to maintain the IBC
ESOP's tax qualified status under applicable provisions of the
Code.
(x) IBC, MSB and their respective Affiliates shall take all
actions necessary to accomplish the program described above with
respect to the MSB ESOP, including, without limitation, such
amendments to the MSB ESOP and the IBC ESOP as are appropriate or
necessary to complete such program.
(b) 401(k) Plan. IBC and MSB acknowledge and agree that all
participants ("MSB 401(k) Plan Participants") in the MSB 401(k) Profit
Sharing Plan ("MSB 401(k) Plan") shall be fully vested as of the
Effective Time in their accounts under the MSB 401(k) Plan. If IBC
maintains a defined contribution plan subject to a favorable IRS
determination letter as to its tax-qualified status under Sections
401(a) and 401(k) of the Code (the "IBC 401(k) Plan"), on or after the
Effective Time, the MSB 401(k) Plan may be merged with and into the IBC
401(k) Plan. If such merger occurs, or if MSB 401(k) Plan Participants
otherwise become eligible to participate in the IBC 401(k) Plan: (i)
all such MSB 401(k) Plan Participants shall become participants in the
IBC 401(k) Plan; and (ii) each MSB 401(k) Plan Participant's period of
employment with MSB or an Affiliate thereof shall be counted for all
purposes under the IBC 401(k) Plan, including without limitation, for
purposes of eligibility and vesting. In the event of a merger of the
MSB 401(k) Plan with the IBC 401(k) Plan, the compensation of each MSB
401(k) Plan Participant attributable to employment with MSB prior to
the Effective Time shall be counted for all purposes under the IBC
401(k) Plan, including without limitation, for purposes of contribution
allocations. If the MSB 401(k) Plan is not merged with the IBC 401(k)
Plan within 18 months after the Effective Time, the MSB 401(k) Plan
shall be maintained as a separate 401(k) Plan solely for the benefit of
MSB 401(k) Plan Participants.
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(c) MSB Pension Plan. All amounts contributed by MSB to the MSB
Pension Plan prior to the Effective Time, and all earnings thereon,
shall be applied only to provide benefits to MSB employees who
participate in the MSB Pension Plan. As of the Effective Time, MSB's
participation in the MSB Pension Plan shall terminate. From and after
the date of this Agreement, in anticipation of such termination, MSB
and its representatives shall take such action and shall make such
decisions, as they shall deem appropriate with respect to the
termination of MSB's participation in the MSB Pension Plan and to the
application of all amounts contributed by MSB to the MSB Pension Plan
and all earnings thereon only to provide benefits to MSB Pension Plan
participants.
(d) Benefit Plans. At the Effective Time, each employee of MSB
shall become immediately entitled to participate in each of the IBC
Employee Benefit Plans described in Section 2.20, including without
limitation, group hospitalization, medical, life and disability
insurance plans, severance plans, tax-qualified retirement, ESOP,
savings and profit sharing plans, and stock option and management
recognition plans, in which similarly situated employees of IBC and its
Affiliates participate and to the same extent as such employees of IBC
and its Affiliates. The period of employment and compensation of each
employee of MSB and its Affiliates with MSB and its Affiliates prior to
the Effective Time shall be counted for all purposes of the IBC
Employee Benefit Plans (except for purposes of benefit accrual),
including without limitation for purposes of vesting and eligibility.
Any expenses incurred by an employee of MSB or its Affiliates under any
MSB Welfare Plans (as defined in Section 3(1) of ERISA), such as
deductibles or co-payments, shall be counted for all purposes under the
applicable IBC Employee Benefit Plans. IBC and the IBC Employee Benefit
Plans shall waive any pre-existing condition exclusions for conditions
existing at the Effective Time, and actively at work requirements for
periods ending at the Effective Time contained in the IBC Employee
Benefit Plans, as they apply to employees and former employees of MSB
and its Affiliates and their dependents, provided that such waiver of
pre-existing conditions shall not extend to any condition that has
prevented coverage of an MSB employee or former employee or a dependent
thereof under comparable MSB Welfare Plans. Notwithstanding anything to
the contrary in this paragraph, IBC after the Effective Time shall have
sole discretion with respect to the determination whether to terminate,
merge or continue any MSB Employee Benefit Plan, other than the ESOP,
or the MSB Pension Plan provided that IBC shall continue to maintain
MSB Employee Benefit Plans until MSB employees are permitted to
participate in similar IBC Employee Benefit Plans. At the Effective
Time, IBC or an Affiliate thereof shall be substituted for MSB as the
sponsoring employer under those MSB Employee Benefit Plans with respect
to which MSB or an Affiliate is the sponsoring employer immediately
prior to the Effective Time, and which Plan is assumed by IBC pursuant
to the terms of this Agreement, and IBC or an Affiliate thereof shall
assume and be vested with all of the powers, rights, duties,
obligations and liabilities previously vested in MSB or an Affiliate
thereof with respect to each such Plan.
(e) Stock Options. Each unexercised MSB Stock Option that is
outstanding immediately prior to the Effective Time shall become fully
exercisable at the Effective Time
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and shall be converted automatically at the Effective Time into an
option to purchase shares of IBC Common Stock under the IBC Employee
Stock Option Plan ("IBC Stock Option"), with the number of shares of
IBC Common Stock to be subject to a particular IBC Stock Option to
equal the Conversion Ratio multiplied by the number of shares of MSB
Common Stock subject to a particular MSB Stock Option, provided that
any fractional share shall be rounded down to the nearest whole share;
and with the exercise price for each share of IBC Common Stock subject
to a particular IBC Stock Option to be equal to the exercise price of
an MSB Common Share under the MSB Stock Option divided by the
Conversion Ratio. Notwithstanding the preceding sentence, in the case
of any MSB Stock Option to which Section 421 of the Internal Revenue
Code of 1986, as amended ("the "Code") applies by reason of its
qualification under Section 422 of the Code, the terms of the IBC Stock
Option into which such MSB Stock Option is to be converted, including
the exercise price, the number of shares of IBC Common Stock
purchasable pursuant to such Option, and the terms and conditions of
exercise of such Option, shall be determined so as to comply with
Sections 422 and 424(a) of the Code. A cash payment shall be made for
any fractional share of MSB Common Stock that is not represented by the
IBC Stock Option, based upon the average closing sale price of shares
of IBC Common Stock on the five trading days immediately preceding the
Effective Time, as reported on the Nasdaq Stock Market. Upon such
conversion, all rights under each such MSB Stock Option and under the
related stock option plan previously adopted by MSB ("MSB Stock Option
Plan") shall terminate; provided, however, that the terms, benefits,
rights and features of such MSB Stock Option and the agreement
evidencing the grant of such MSB Stock Option, as in existence
immediately prior to the Effective Time shall, to the extent
inconsistent with the terms of the IBC Stock Option Plan or any similar
IBC Plan, and favorable to the interests of the holder of the IBC Stock
Option, continue to apply to such IBC Stock Option from and after the
Effective Time.
As soon as practicable after the Effective Time, IBC shall deliver
to the holder of each IBC Stock Option appropriate notices setting
forth such holder's rights pursuant to the IBC Stock Option Plan, the
agreement evidencing such IBC Stock Option and the original grant of
such converted MSB Stock Option shall continue in effect on the same
terms and conditions (after giving effect to the Consolidation pursuant
to the Agreement and the conversion as set forth above). As of the
Effective Time, IBC shall amend the IBC Stock Option Plan to the extent
necessary to conform to, and implement, the provisions of this Section
4.14(e), including, without limitation, amendments necessary to
preserve those provisions of the converted MSB Stock Options that are
more favorable to the holders of IBC Stock Options than would otherwise
be the case pursuant to the terms of the IBC Stock Option Plan.
(f) Retiree Medical Coverage. From and after the Effective Time,
former and current officers and employees of MSB and its Affiliates and
their dependents who satisfy conditions for coverage under IBC's
program of post retirement medical and health insurance coverage (the
"IBC Program") shall be entitled to participate in the IBC Program,
under the
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terms and conditions of the IBC Program and all at the expense of the
IBC Program participants.
(g) Severance Agreements and Arrangements.
(i) IBC agrees to honor the provisions of the present
Severance Pay Plan, adopted by the MSB Compensation Committee of
the Board of Directors on September 24, 1996, in effect for
certain of MSB officers, as described in the MSB Disclosure
Memorandum, including without limitation, those provisions that
relate to a termination of employment following a change in
control of MSB.
(ii) IBC will provide severance payments to employees of MSB
and its Affiliates (other than those employees whose severance
benefits are provided for in written severance agreements as
described in subparagraph (i) above). Such severance benefits
shall be provided to the following categories of employees:
(A) Employees of MSB and its Affiliates immediately prior
to the Effective Time who are not offered comparable
employment by IBC or an Affiliate thereof immediately
following the Effective Time; and
(B) Employees of MSB or its Affiliates immediately prior
to the Effective Time who are offered and accept comparable
employment with IBC or an Affiliate immediately following the
Effective Time and who are subsequently terminated by IBC or
an Affiliate within 12 months after the Effective Time for any
reason other than cause (as shall be reasonably determined by
IBC or its Affiliate).
The severance payments to be provided pursuant to the subparagraph
(ii) shall be computed as follows:
(i) Non-officer - one week of current base salary for each
full year of service with MSB, IBC and their respective
Affiliates, subject to a maximum of twenty-six weeks and a minimum
of three weeks current base salary; and
(ii) Officer (as defined in the MSB Disclosure Memorandum) -
two weeks of current base salary for each full year of service
with MSB, IBC and their respective Affiliates, subject to a
maximum of twenty-six weeks and a minimum of six weeks current
base salary.
In computing such severance payments for each regular part-time
employee, such employee's per week base salary shall be based on
1/52 of the actual number of hours worked by such employee for MSB
or an Affiliate in the year ended December 31, 1998.
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(h) COBRA. Until the Effective Time, MSB shall be liable for all
obligations for continued health coverage pursuant to Section 4980B of
the Code and Section 601 through 609 of ERISA ("COBRA") with respect to
each qualified beneficiary (as defined in COBRA) of MSB who incurs a
qualifying event (as defined in COBRA) prior to the Effective Time. IBC
shall be liable for (i) all obligations for continued health coverage
under COBRA with respect to each MSB qualified beneficiary (as defined
in COBRA) who incurs a qualifying event (as defined in COBRA) from and
after the Effective Time, and (2) for continued health coverage under
COBRA from and after the Effective Time for each MSB qualified
beneficiary who incurs a qualifying event before the Effective Time.
4.15 Indemnification; Directors' and Officers' Insurance.
(a) For a period of six years after the Effective Time (or the
period of the applicable statute of limitations, if longer), in the
event of any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative, including,
without limitation, any such claim, action, suit, proceeding or
investigation in which any individual who is now, or has been at any
time prior to the date of this Agreement, or who becomes prior to the
Effective Time, a director, officer, or employee of MSB or the MSB
Subsidiaries (the "Indemnified Parties"), is, or is threatened to be,
made a party based in whole or in part on, or arising in whole or in
part out of, or pertaining to (i) the fact that he or she is or was a
director, officer or employee of MSB or the MSB Subsidiaries or any of
their respective predecessors, or (ii) this Agreement or the
Consolidation Agreement or any of the transactions contemplated hereby
or thereby, whether in any case asserted or arising before or after the
Effective Time, IBC agrees to cooperate and use reasonable efforts to
defend against and respond thereto. It is understood and agreed that
for a period of six years after the Effective Time (or the period of
the applicable statute of limitations, if longer), IBC shall (and shall
cause the Consolidated Bank to) defend, indemnify and hold harmless, as
and to the fullest extent permitted by law, each such Indemnified Party
against any losses, claims, damages, liabilities, costs, expenses
(including payment of reasonable attorney's fees and expenses and other
costs in advance of the final disposition of any claim, suit,
proceeding or investigation incurred by each Indemnified Party to the
fullest extent permitted by law upon receipt of any undertaking
required by applicable law), judgments, fines and amounts paid in
settlement in connection with any such threatened or actual claim,
action, suit, proceeding or investigation, and in the event of any such
threatened or actual claim, action, suit, proceeding or investigation
(whether asserted or arising before or after the Effective Time), the
Indemnified Parties may retain counsel reasonably satisfactory to them
after consultation
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with IBC; provided, further, that (A) IBC shall have the right to
assume the defense thereof and upon such assumption IBC shall not be
liable to any Indemnified Party for any legal expenses of other counsel
or any other expenses subsequently incurred by any Indemnified Party in
connection with the defense thereof, except that if IBC elects not to
assume such defense or counsel for the Indemnified Parties reasonably
advises the Indemnified Parties that there are issues that raise
conflicts of interest between IBC and the Indemnified Parties, the
Indemnified Parties may retain counsel reasonably satisfactory to them
after consultation with IBC, and IBC shall pay the reasonable fees and
expenses of such counsel for the Indemnified Parties; provided,
however, that if IBC assumes the defense thereof, IBC shall not settle
any claim, action, suit, proceeding or investigation or consent to any
legal judgment without first obtaining the consent of the Indemnified
Parties, (B) IBC shall be obligated pursuant to this paragraph to pay
for only one firm of counsel for all Indemnified Parties, unless an
Indemnified Party shall have reasonably concluded, based on the advice
of counsel, that there is a material conflict of interest between the
interests of such Indemnified Party and the interests of one or more
other Indemnified Parties and that the interests of such Indemnified
Party will not be adequately represented unless separate counsel is
retained, in which case, IBC shall be obligated to pay such separate
counsel, (C) IBC shall not be liable for any settlement effected
without its prior written consent (which consent shall not be
unreasonably withheld) and (D) IBC shall have no obligation hereunder
to any Indemnified Party when and if a court of competent jurisdiction
shall ultimately determine, and such determination shall have become
final and nonappealable, that indemnification of such Indemnified Party
in the manner contemplated hereby is prohibited by applicable law. Any
Indemnified Party wishing to claim Indemnification under this Section
4.15 upon learning of any such claim, action, suit, proceeding or
investigation, shall notify IBC thereof, provided that the failure to
so notify shall not affect the obligations of IBC under this Section
4.15 except to the extent such failure to notify materially prejudices
IBC.
(b) IBC shall use its reasonable efforts to cause the Consolidated
Bank (i) to obtain, after the Effective Time, directors' and officers'
liability insurance coverage for the officers and directors of the
Consolidated Bank, and (ii) either (A) to cause the individuals serving
as officers and directors of MSB or the MSB Subsidiaries immediately
prior to the Effective Time to be covered for a period of three years
from the Effective Time by the directors' and officers' liability
insurance policies maintained by the Consolidated Bank, or IBC, as the
case may be, or to (B) substitute therefor policies of at least the
same coverage and amounts containing terms and conditions that are not
less advantageous than the policies previously maintained by MSB and
the MSB Subsidiaries, respectively, with respect to acts or omissions
occurring prior to the Effective Time that were committed by such
officers and directors in their capacity as such; provided, however,
that such policies will specifically exclude liabilities with respect
to the Pending Litigation; provided, further, that in no event will IBC
and its Subsidiaries be required to expend more than twice the
aggregate premiums paid by MSB for directors' and officers' liability
insurance for the year ended December 31, 1998, to procure and maintain
such insurance, and provided, further, that such officers and directors
may be required to make application and provide customary
representations and warranties to IBC's insurance carrier for the
purpose of obtaining such insurance.
4.16 Listing of Shares. IBC shall use all reasonable efforts to cause
the shares of IBC Common Stock issuable in the Merger to be approved for listing
on the Nasdaq Stock Market.
ARTICLE V
CONDITIONS PRECEDENT TO THE CONSOLIDATION
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5.1 Conditions Precedent to Obligations of Each Party. The respective
obligations of each Party to perform this Agreement and to consummate the
Consolidation are subject to the satisfaction of each of the following
conditions precedent, unless waived by both Parties:
(a) Shareholder Approval. This Agreement and the Consolidation
Agreement shall have been adopted by the affirmative vote of the
shareholders of MSB, IBC, and New Bank owning (i) at least two thirds
(2/3) of the capital shares outstanding of each of MSB and New Bank,
and (ii) shares representing at least a majority of the votes cast at
the IBC shareholders' meeting to approve the Consolidation.
(b) Governmental Approvals. The parties to this Agreement shall
have received the Requisite Regulatory Approvals and such approvals
shall have become final and shall not be the subject of any formal
administrative review proceeding or appeal, and the Consolidation may
be consummated pursuant to the terms of such approvals.
(c) Challenge in Legal Proceedings. No proceeding shall be pending
or overtly threatened before any court or other governmental agency by
the federal or any state government in which it is or will be sought to
restrain or prohibit the consummation of the Consolidation.
(d) Securities Laws. The Registration Statement shall be effective
under the 1933 Act, no stop orders suspending the effectiveness of the
Registration Statement shall have been issued, no action, suit,
proceeding or investigation by the SEC to suspend the effectiveness
thereof shall have been initiated and be continuing, and all necessary
approvals under state securities laws or the 1933 Act or the 1934 Act,
as amended, relating to the issuance or trading of the shares of IBC
Common Stock issuable pursuant to the Consolidation shall have been
received.
(e) Tax Matters. Each party shall have received a written opinion
of counsel or its independent public accounting firm, in form
reasonably satisfactory to such parties (the "Tax Opinion"), to the
effect that (i) the Consolidation will constitute a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, (ii)
the exchange in the Consolidation of shares of MSB Common Stock for
shares of IBC Common Stock will not give rise to gain or loss to the
shareholders of MSB with respect to such exchange (except to the extent
of any cash received), and (iii) neither MSB nor IBC will recognize
gain or loss as a consequence of the Consolidation. In rendering such
Tax Opinion, such counsel or accounting firm shall be entitled to rely
upon representations of MSB's officers, directors, and shareholders
holding in excess of five percent (5%) of the outstanding shares of MSB
Common Stock and representations of officers of IBC in each case
reasonably satisfactory in form and substance to such counsel or
accounting firm.
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(f) MESC Form 1027. MSB shall have furnished to IBC a complete,
accurate and executed copy of MESC Form 1027, Business Transferor's
Notice of Unemployment Tax Liability and Rate.
5.2 Conditions Precedent to Obligations of IBC. The obligations of IBC
to perform this Agreement and to consummate the Consolidation are subject to the
satisfaction of each of the following conditions, unless waived by IBC:
(a) Compliance with Representations and Warranties. There shall
have been no material breach by MSB of any of the representations or
warranties of MSB pursuant to this Agreement as of the date of this
Agreement or as of the Effective Time.
(b) Opinion of Legal Counsel. MSB shall have delivered to IBC an
opinion of counsel, dated the Effective Time, in form and substance
reasonably satisfactory to IBC and its counsel, to the effect that: (i)
MSB is a validly existing savings association under the laws of the
United States of America; (ii) the authorized capitalization of MSB
consists of 20,000,000 shares of common stock, $.01 par value per
share, and 5,000,000 shares of preferred stock, $.01 par value per
share; (iii) except as set forth in such opinion, to the best of
counsel's knowledge, such party is not a party to or affected by any
material adverse pending litigation, proceeding or investigation before
any court or by or before any federal, state, municipal or other
governmental department, commission, board or agency nor has any such
litigation, proceeding or investigation been expressly threatened
against MSB; and (iv) this Agreement and the Consolidation Agreement
have been duly and validly authorized, executed and delivered by such
party and are binding and enforceable according to their terms. In
rendering such opinions, counsel may rely as to certain factual matters
on certificates of one or more officers of MSB and of public officials.
(c) Officer Certifications. The Chief Executive Officer and
Secretary of MSB shall have given to IBC their respective certificates,
dated as of the Effective Time, that the representations and warranties
of MSB contained in this Agreement and the Consolidation Agreement,
subject to disclosures contained in MSB's Disclosure Memorandum and the
MSB Updated Memorandum, have not, to the best of their knowledge and
belief, been breached, all representations and warranties, subject to
the MSB Disclosure Memorandum and the MSB Updated Memorandum are, to
the best of their knowledge and belief, true as of the Effective Time
and all conditions to the obligations of IBC as set forth in this
Agreement and required to be fulfilled by MSB have been fulfilled on or
before the Closing Date.
(d) Accountant's Letter. IBC shall have received from KPMG LLP an
opinion letter to the effect that the Consolidation will be accounted
for as a pooling of interests if consummated in accordance with this
Agreement and the Consolidation Agreement.
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(e) Fairness Opinion. IBC shall have received from Stifel,
Nicolaus & Company Incorporated, an update to its previously delivered
fairness opinion, not more than five days prior to the date of the
Proxy Statement/Prospectus, as to the fairness of the Consolidation to
the shareholders of IBC from a financial point of view.
(f) No Material Adverse Changes. Between the date of this
Agreement and the Effective Time, there shall not have occurred any
change or any condition, event, circumstance, fact or occurrence (other
than general economic or competitive conditions), other than as
provided in this Agreement, that may reasonably be expected to result
in a material adverse change in the business, properties, financial
condition, loan portfolio, operations or prospects of MSB or its
Subsidiaries, taken as a whole.
(g) Updated Disclosure Memorandum. MSB shall have provided to
IBC any information necessary to make the representations and
warranties set forth in Article III of this Agreement true and correct
as of the Closing Date (the "MSB Updated Memorandum") and such MSB
Updated Memorandum shall not reflect a material adverse change from the
MSB representations and warranties made as of the date of this
Agreement.
(h) Due Diligence. Prior to the Effective Time, MSB shall not have
been required in accordance with GAAP, to record an accrual in excess
of $1,800,000 relating to the Pending Litigation because a loss from
such Pending Litigation has become reasonably probable and such loss
can be reasonably estimated.
5.3. Conditions Precedent to Obligations of MSB. The obligations of MSB
to perform this Agreement and to consummate the Consolidation are subject to the
satisfaction of each of the following conditions, unless waived by MSB:
(a) Compliance with Representations and Warranties. There shall
have been no material breach by IBC of any of the representations and
warranties of IBC pursuant to this Agreement or as of the date of this
Agreement or as of the Effective Time.
(b) Opinion of Legal Counsel. IBC shall deliver to MSB an opinion
of counsel, dated the Effective Time, in form and substance reasonably
satisfactory to MSB and its counsel, to the effect that: (i) IBC and
New Bank are duly organized or incorporated, are validly existing and
in good standing according to the laws under which they were created;
(ii) the number of authorized and issued and outstanding capital shares
of IBC is as represented in, or permitted by, this Agreement and the
Consolidation Agreement; (iii) the shares of IBC Common Stock
deliverable pursuant to this Agreement will be duly authorized and,
upon issuance and delivery in accordance with the terms hereof and
thereof, will be validly issued, fully paid and nonassessable; (iv) the
IBC Common Stock to be issued in the Consolidation shall have been
qualified or exempted under all applicable state securities or blue sky
laws, and shall have been approved for listing on the Nasdaq Stock
Market, subject to official notice thereof; (v) except as set forth in
such opinion, to the best of counsel's knowledge, IBC is not a party to
or affected by any material adverse pending litigation,
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proceeding or investigation before any court or by or before any
federal, state, municipal or other governmental department, commission,
board or agency nor has any such litigation, proceeding or
investigation been expressly threatened against IBC; (vi) this
Agreement and the Consolidation Agreement have been duly and validly
authorized, executed and delivered by such party and are binding and
enforceable according to their terms; and (vii) no consents or
approvals of, or filings or registrations with, any governmental entity
are necessary in connection with the execution and delivery by IBC or
New Bank of this Agreement and the Consolidation Agreement and the
consummation by IBC and New Bank of the transactions contemplated
thereby that have not been received or obtained as of the date hereof,
except where the failure to obtain such consent or approval or to make
such filing or registration will not have or be reasonably likely to
have a Material Adverse Effect on IBC. In rendering such opinions,
counsel may rely as to certain factual matters on certificates of one
or more officers of IBC and of public officials.
(c) Officer Certifications. The President and Secretary of IBC
shall have given to MSB their respective certificates, dated as of the
Effective Time, that the representations and warranties of IBC
contained in this Agreement and the Consolidation Agreement, subject to
disclosure contained in IBC's Disclosure Memorandum and the IBC Updated
Memorandum, have not, to the best of their knowledge and belief, been
breached, all representations and warranties, subject to the IBC
Disclosure Memorandum and the IBC Updated Memorandum are, to the best
of their knowledge and belief, true as of the Effective Time and all
conditions to the obligations of MSB as set forth in this Agreement and
required to be fulfilled by IBC have been fulfilled on or before the
Closing Date.
(d) Accountant's Letter. IBC shall have received from KPMG LLP an
opinion letter to the effect that the Consolidation will qualify for
pooling of interests accounting treatment if consummated in accordance
with this Agreement and the Consolidation Agreement.
(e) Fairness Opinion. MSB shall have received from McConnell, Budd
& Downes, Inc., or such other investment banking firm retained by MSB,
an opinion letter dated not more than five business days prior to the
date of the Proxy Statement/Prospectus to the effect that the
consideration to be received by shareholders of MSB pursuant to this
Agreement is fair from a financial point of view.
(f) No Material Adverse Changes. Between the date of this
Agreement and the Effective Time, there shall not have occurred any
change or any condition, event, circumstance, fact or occurrence (other
than general economic or competitive conditions), other than as
provided in this Agreement, that may reasonably be expected to result
in a material adverse change in the business, properties, financial
condition, loan portfolio, operations or prospects of IBC or its
Subsidiaries, taken as a whole.
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(g) Updated Disclosure Memorandum. IBC shall have provided to
MSB any information necessary to make the representations and
warranties set forth in Article II of this Agreement true and correct
as of the Closing Date (the "IBC Updated Memorandum") and such IBC
Updated Memorandum shall not reflect a material adverse change from the
IBC representations and warranties made as of the date of this
Agreement.
(h) Management Continuity Agreement. Effective as of the
Effective Time, IBC shall have entered into a Management Continuity
Agreement with the Chief Executive Officer of MSB in the form of
attached Exhibit D.
ARTICLE VI
ABANDONMENT AND TERMINATION OF CONSOLIDATION
6.1 Termination. This Agreement may be terminated at any time before
the Effective Time, whether before or after any shareholder action, in
accordance with the following:
(a) Mutual Consent. By mutual written consent of MSB and IBC
if the Boards of Directors of each so determines.
(b) Effective Time. By either IBC or MSB if the terminating
party has used its best reasonable efforts to consummate the
Consolidation and if the Effective Time shall not have occurred on or
before November 30, 1999.
(c) Material Adverse Changes. By either IBC or MSB if there
has occurred any change or any condition, event, circumstance, fact or
occurrence (other than general economic or competitive conditions),
other than as provided in this Agreement, that may reasonably be
expected to result in a material adverse change in the business,
financial condition, loan portfolio, operations or prospects of the
other party, considered as a whole.
(d) Litigation. By either MSB or IBC if any Litigation, other
than the Pending Litigation, shall be pending or overtly threatened (i)
against or affecting the other party or any of its respective assets,
loan portfolio, operation or prospects that would reasonably be
expected to have a Material Adverse Effect on the other party, or (ii)
before any court or other governmental agency by the federal or any
state government in which it is or will be sought to restrain or
prohibit the consummation of the Consolidation.
(e) Misrepresentations. By either MSB or IBC if the other
party breaches any warranty or representation in this Agreement or in
the Consolidation Agreement which breaches individually or in the
aggregate have or, insofar as reasonably can be foreseen, would have, a
Material Adverse Effect on the breaching party and such breaches shall
not have been cured within thirty (30) days after receipt by the
breaching party of notice in writing from the nonbreaching party
specifying the nature of such breaches and requesting that they be
cured.
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(f) Breach of Covenants. By either MSB or IBC if the other
party breaches, in any material respect, any covenant of this Agreement
or the Consolidation Agreement and such breaches shall not have been
cured within thirty (30) days after receipt by the breaching party of
notice in writing from the nonbreaching party specifying the nature of
such breaches and requesting that they be cured.
(g) Regulatory Approvals. By either MSB or IBC if any
Regulatory Authority that must grant a Requisite Regulatory Approval
(A) has denied approval of the Consolidation and such denial has become
final and nonappealable or (B) any Regulatory Authority of competent
jurisdiction shall have issued a final nonappealable order permanently
enjoining or otherwise prohibiting the consummation of the transactions
contemplated by this Agreement.
(h) Shareholder Approvals. By either MSB or IBC if the
approval of shareholders required for the consummation of the
Consolidation shall not have been obtained by reason of the failure to
obtain the required vote at a duly held meeting of shareholders or at
any adjournment or postponement thereof.
(i) Third-Party Business Combination Proposal. By MSB, upon
two (2) days' prior notice to IBC, if, as a result of a Tender Offer by
a party other than IBC or its Affiliates or any written offer or
proposal with respect to an Acquisition Transaction, the Board of
Directors of MSB determines in good faith that its fiduciary
obligations under applicable law require that such Tender Offer or
other written offer or proposal be accepted; provided, however, that
(I) the Board of Directors of MSB shall have been
advised in a written opinion of outside counsel that
notwithstanding a binding commitment to consummate an
agreement of the nature of this Agreement entered into in the
proper exercise of its applicable fiduciary duties, and
notwithstanding all concessions that may be offered by IBC in
negotiations entered into pursuant to clause (II) below, such
fiduciary duties would require the directors to reconsider
such commitment as a result of such Tender Offer or other
written offer or proposal, and
(II) prior to any such termination, MSB shall, and
shall cause its financial and legal advisers to, negotiate
with IBC to make such adjustments in the terms and conditions
of this Agreement as would enable MSB to proceed with the
transactions contemplated herein on such adjusted terms.
By IBC if MSB shall approve or recommend to its shareholders
any Acquisition Transaction involving MSB other than the Consolidation.
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(j) Withdrawal by MSB of Shareholder Recommendation. By IBC,
if the Board of Directors of MSB or any committee thereof (i) shall
withdraw or modify in any manner adverse to IBC its approval or
recommendation of this Agreement or the Consolidation Agreement, (ii)
shall fail to reaffirm such approval or recommendation upon IBC's
request, (iii) shall not include its recommendation of this Agreement,
the Consolidation Agreement or the Consolidation in the Proxy
Statement/Prospectus (as defined in Section 4.3 hereof) or (iv) shall
resolve to take any of the actions specified in clauses (i), (ii) or
(iii) of this subparagraph (j).
(k) IBC Stock Price. By MSB under and subject to the terms and
conditions of Section 1.6(f) of this Agreement.
Termination pursuant to Sections 6.1(b), 6.1(c), 6.1(d), 6.1(e), 6.1(f), 6.1(g),
6.1(h), 6.1(i), or 6.1(j), may be effected at any time prior to the Effective
Time, by written notice by either party to the other, as the case may be,
authorized and approved by a resolution adopted by the Board of Directors of the
party giving such notice. Termination pursuant to Section 6.1(k) shall be
subject to the terms and conditions contained in Section 1.6(f). In the event of
the termination and abandonment of this Agreement and the Consolidation
Agreement pursuant to this Section 6.1, this Agreement and the Consolidation
Agreement shall become null and void and of no effect, without liability on the
part of MSB, New Bank, IBC or their respective shareholders, directors or
officers in any respect hereof, except to the extent provided in Sections 4.6
and 7.3 of this Agreement.
ARTICLE VII
EXPENSES
The costs and expenses (out-of-pocket and otherwise) incurred by the
parties in connection with the transactions contemplated by this Agreement shall
be borne as follows:
7.1 IBC Expenses. IBC shall bear all fees and expenses of its counsel
and accountants, and all other costs and expenses incurred by it in the
preparation of this Agreement and the Consolidation Agreement, its examination
of MSB, the preparation, filing and prosecution of all applications for
regulatory approval, and any appeals therefrom. IBC shall bear and pay all of
the filing fees payable in connection with the Registration Statement and the
Proxy Statement/Prospectus and printing costs incurred in connection with the
printing of the Registration Statement and Proxy Statement/Prospectus.
7.2 MSB Expenses. MSB shall bear all fees and expenses of its counsel
and accountants and all other costs and expenses incurred by it in the
preparation of this Agreement and the Consolidation Agreement, its examination
of IBC, and the calling and holding of a meeting of its shareholders to consider
and act upon the Consolidation, and the furnishing of information or other
cooperation to IBC in connection with the preparation of information and
regulatory applications, and any appeals therefrom.
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7.3 Termination; Expenses.
(a) If any of the following events (a "Triggering Event") occurs:
(i) any material, willful, and intentional breach of
the Merger Documents by MSB that would permit IBC to terminate
the Merger Documents (A) occurring after the receipt by MSB of
a proposal to engage in an Acquisition Transaction, (B)
occurring after the announcement by any other Person of an
intention to engage in an Acquisition Transaction, or (c) in
anticipation and for the purpose of engaging in an Acquisition
Transaction;
(ii) (A) a proposal to engage in an Acquisition
Transaction is submitted to and approved by the shareholders
of MSB at any time prior to December 31, 2000, unless this
Agreement is earlier terminated by MSB, pursuant to its right
to terminate this Agreement, under the conditions of Section
6.1 of this Agreement, or (B) a Tender Offer is commenced and
the transactions contemplated in the Tender Offer are
completed in such a manner that the Person making the Tender
Offer acquired beneficial ownership of more than 20 percent of
the capital stock or any other class of voting securities of
MSB, and the Consolidation is not consummated prior to
December 31, 2000; or
(iii) (A) a proposal to engage in an Acquisition
Transaction is received by MSB or a Tender Offer is made
directly to the shareholders of MSB or the intention of making
an Acquisition Transaction or Tender Offer is announced at any
time prior to the holding of the MSB Shareholders' Meeting;
and (B) the Board of Directors of MSB (1) fails to recommend
to the shareholders of MSB that they vote their shares of MSB
Common Stock in favor of the approval of the Consolidation,
(2) withdraws such recommendation previously made, (3) fails
to solicit proxies of shareholders of MSB to approve the
Consolidation, or (4) fails to hold the MSB Shareholders'
Meeting.
MSB shall pay to IBC an amount in cash equal to the direct
costs and expenses or portion thereof referred to in Section 7.1,
incurred by or on behalf of IBC in connection with the transactions
contemplated by the Merger Documents, but in no event to exceed
$250,000 in the aggregate. The amount shall be an obligation of MSB and
shall be paid by MSB promptly upon notice to MSB by IBC.
(b) Notwithstanding the foregoing, no amount shall be due IBC
pursuant to Section 7.3(a) in the event of the failure to consummate
the Consolidation as a result of any of the following: (i) the failure
of the shareholders of IBC to approve the Consolidation; or (ii) the
failure of any Regulatory Authority to provide any required consent to
the Consolidation, which failure was not the result of the existence of
a proposal to engage in
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an Acquisition Transaction or a breach by MSB of any of its obligations
under any of the Merger Documents.
(c) Nothing contained in this Section 7.3 shall constitute or
shall be deemed to constitute liquidated damages for the willful breach
by a Party of the terms of this Agreement or otherwise limit the rights
of the nonbreaching Party.
7.4 Obligations Upon Breach. Except as otherwise provided in Section
7.3, in the event that this Agreement shall terminate prior to the Effective
Time pursuant to Sections 6.1(e) or 6.1(f), then the breaching party shall
promptly (but in no event later than five (5) business days after receipt of
notice from the non-breaching party) pay the non-breaching party in cash an
amount equal to all out-of-pocket expenses incurred in connection with the
transactions contemplated by this Agreement and the Consolidation Agreement, but
in no event to exceed $250,000 in the aggregate; provided, however, that if this
Agreement is terminated by a Party as a result of a willful breach by the other
Party, the non-breaching Party may pursue any remedies available to it at law or
in equity and shall, in addition to its out-of-pocket expenses (which shall be
paid as specified above and shall not be limited to $250,000), be entitled to
recover such additional amounts as such non-breaching Party may be entitled to
receive at law or in equity.
ARTICLE VIII
AMENDMENT AND WAIVER
8.1 Amendment. MSB and IBC, by mutual consent of a majority of their
respective Boards of Directors, may amend, modify or supplement this Agreement
and, with New Bank's written consent, the Consolidation Agreement, in whole or
in part, and in such manner as may be agreed upon by them in writing, provided
that any such amendment, modification, or supplement subsequent to the adoption
of this Agreement and the Consolidation Agreement by MSB's or IBC's shareholders
may be effected only if the Board of Directors of MSB and IBC determine that
such amendment, modification, or supplement does not and will not have a
Material Adverse Effect on the shareholders of the Party whose shareholders have
previously approved this Agreement and the Consolidation Agreement.
8.2 Waiver. The failure of either party at any time or times to require
performance of any provision hereof shall in no manner affect such party's right
at a later time to enforce the same. No waiver by any party of any condition or
of the breach of any term, covenant, representation or warranty contained in
this Agreement or the Consolidation Agreement, whether by conduct or otherwise,
in any one or more instances shall be deemed to be or construed as a further or
continuing waiver of any such condition or breach or a waiver of any other
condition or of the breach of any other term, covenant, representation or
warranty of this Agreement or the Consolidation Agreement.
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ARTICLE IX
CERTAIN DEFINITIONS
9.1 Certain Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
"Acquisition Transaction" shall mean a transaction between MSB
and any Person other than IBC or any Affiliate of IBC involving (A) the
sale or other disposition of more than 20% of the shares of the capital
stock or any other class of voting securities of MSB, including, but
not limited to, a Tender Offer, (B) the sale or other disposition of
15% or more of the consolidated assets or deposits of MSB, or (c) a
merger or consolidation involving MSB other than a transaction pursuant
to which MSB will be the surviving corporation and the current
shareholders of MSB will be the owners of a majority of the stock of
the surviving corporation following the transaction.
"Affiliate" of a person shall mean (i) any other person
directly, or indirectly through one or more intermediaries,
controlling, controlled by or under common control with such person;
(ii) any officer, director, partner, employer, or direct or indirect
beneficial owner of any 10% or greater equity or voting interest of
such person, or (iii) any other person for which a person described in
clause (ii) acts in any such capacity.
"GAAP" shall mean generally accepted accounting principles.
"IBC Companies" shall mean, collectively, IBC and all IBC
Subsidiaries.
"Litigation" shall mean any action, arbitration, cause of
action, claim, complaint, criminal prosecution, governmental or other
examination or investigation, hearing, inquiry, administrative or other
proceeding, by any Person alleging potential liability, but shall not
include regular, periodic examinations of depository institutions by
Regulatory Authorities.
"Material Adverse Effect" shall mean, with respect to IBC or
MSB, as the case may be, a material adverse effect (i) on the business,
assets, properties, results of operations, financial condition, or
(insofar as they can reasonably be foreseen) prospects of such party
and its Subsidiaries, taken as a whole, or (ii) on the consummation of
the Consolidation.
"MSB Companies" shall mean, collectively, MSB and all MSB
Subsidiaries.
"MSB Stock Options" shall mean all outstanding stock options
granted by MSB to its employees, directors or other Persons.
"Pending Litigation" shall mean that lawsuit filed on behalf
of 14 plaintiffs, in 1995, against MSB and four of its present and
former officers relating to shares of MSB Common Stock allegedly
acquired by plaintiffs in 1992, 1993, and 1994.
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"Person" shall mean a natural person or any legal, commercial
or governmental entity, such as, but not limited to, a corporation,
general partnership, joint venture, limited partnership, limited
liability company, trust, business association, group acting in
concert, or any person acting in a representative capacity.
"Proxy Statement/Prospectus" shall mean the proxy statement
used by MSB or IBC respectively to solicit the approval of its
shareholders of the transactions contemplated by this Agreement and the
Consolidation Agreement which, in the case of MSB, shall include the
prospectus of IBC relating to the issuance of shares of IBC Common
Stock to holders of shares of MSB Common Stock.
"Registration Statement" shall mean the Registration Statement
on Form S-4, or other appropriate form, including any pre-effective or
post-effective amendments or supplements thereto, filed with the SEC by
IBC under the 1933 Act with respect to the shares of IBC Common Stock
to be issued to the shareholders of MSB in the Consolidation.
"Regulatory Authorities" shall mean, collectively, the United
States Department of Justice, the Board of the Governors of the Federal
Reserve System, the FDIC, the Office of Thrift Supervision, and the
Michigan Financial Institutions Bureau.
"Rights" shall mean all arrangements, calls, commitments,
contracts, options, rights to subscribe to, scrip, understandings,
warrants, or other binding obligations of any character whatsoever
relating to, or securities or rights convertible into or exchangeable
for, shares of the capital stock of a Person or by which a Person is or
may be bound to issue additional shares of its capital stock or other
Rights.
"SEC" shall mean the United States Securities and Exchange
Commission.
"Subsidiaries" of a Party shall mean all those corporations,
banks, associations, or other entities of which the Party owns or
controls 50% or more of the outstanding equity securities either
directly or through an unbroken chain of entities as to each of which
50% or more of the outstanding equity securities is owned directly or
indirectly by its parent; provided, there shall not be included any
such entity acquired through foreclosure or any such entity the equity
securities of which are owned or controlled in a fiduciary capacity.
"Tax" or "Taxes" shall mean any federal, state, county, local,
or foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise, occupancy, and other
taxes, assessments, charges, fares, or impositions, including interest,
penalties, and additions imposed thereon or with respect thereto.
"Tender Offer" shall mean a tender or exchange offer made by
any person other than IBC or an Affiliate of IBC to acquire equity
securities of MSB if, upon completion of the transactions proposed in
such offer, such person would own or have the right to acquire
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beneficial ownership of more than 20 percent of the capital stock or
other class of voting securities of MSB.
ARTICLE X
GENERAL
10.1 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered or mailed, registered or certified mail, postage prepaid, to the
persons at the addresses set forth below and shall be deemed to have been
delivered as of the date so delivered:
(a) If to MSB:
Robert N. Shuster
Chief Executive Officer
Mutual Savings Bank, f.s.b.
623 Washington Avenue
Bay City, Michigan 48708
Telephone: (517) 892-0731
Fax: (517) 892-8892
with a copy to:
Christopher J. Zinski, Esq.
Schiff Hardin & Waite
6600 Sears Tower
Chicago, Illinois 60606
Telephone: (312) 258-5548
Fax: (312) 258-5600
(b) If to IBC:
William R. Kohls
Chief Financial Officer
Independent Bank Corporation
230 West Main Street
Ionia, Michigan 48846
Telephone: (616) 527-2400 Ext. 1257
Fax: (616) 527-5834
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with a copy to:
Michael G. Wooldridge, Esquire
Varnum, Riddering, Schmidt & HowlettLLP
Bridgewater Place
P.O. Box 352
Grand Rapids, Michigan 49501-0352
Telephone: (616) 336-6000
Fax: (616) 336-7000
or to such other address as the parties hereto may designate in writing as
aforesaid.
10.2 Governing Law. This Agreement shall be construed and interpreted
according to the laws of Michigan, without regard to any applicable conflict of
laws, except to the extent that the laws, rules and regulations of the United
States govern certain aspects of the Consolidation as it relates to MSB.
10.3 Benefit and Binding Effect. This Agreement, the Consolidation
Agreement, the Warrant Purchase Agreement and the Warrant shall be binding upon
and inure to the benefit of the parties named herein and their respective
successors and assigns, provided that neither this Agreement, the Consolidation
Agreement nor any of the parties' rights, interests or obligations hereunder
shall be assigned by any of the parties without the prior written consent of the
other party hereto.
10.4 Entire Agreement. This Agreement, the Consolidation Agreement and
the Warrant Purchase Agreement to be entered into pursuant to this Agreement,
and the documents described herein or attached or delivered pursuant hereto, set
forth the entire agreement and understanding of the parties in respect of the
transactions contemplated hereby and supersede all prior agreements,
arrangements, and understandings related to the subject matter hereof.
10.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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10.6 Reliance on Headings, Etc. The cover page, table of contents,
article headings and section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement and Plan of Reorganization to be duly executed as of the 24th day of
March, 1999.
MUTUAL SAVINGS BANK, F.S.B.
("MSB")
ATTEST: /s/ Gary W. Wilds By /s/ Robert N. Shuster
-------------------------- ------------------------------------
Robert N. Shuster,
Chief Executive Officer
INDEPENDENT BANK CORPORATION
("IBC")
ATTEST: /s/ Charles E. McCuistion By /s/ Charles C. Van Loan
--------------------------- -------------------------------------
Charles C. Van Loan, President and
Chief Executive Officer
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CONSOLIDATION AGREEMENT
This Consolidation Agreement, dated as of , 1999, is entered into by
and between MUTUAL SAVINGS BANK, F.S.B., a federally chartered stock savings
bank ("MSB") and _______________ BANK, a Michigan banking corporation ("New
Bank"), and is joined in by INDEPENDENT BANK CORPORATION, a Michigan corporation
("IBC").
RECITALS
MSB is a federally chartered stock savings bank with its principal
office in Bay City, Michigan, with authorized capital of 20,000,000 shares of
common stock, par value $0.01 per share, of which [4,290,414] shares are issued
and outstanding as of ______________, 1999. An additional __________ shares of
MSB Common Stock are subject to outstanding stock options previously granted
(collectively, the "MSB Stock Options").
New Bank is a Michigan banking corporation, organized under the
provisions of Section 130 of the Michigan Banking Code of 1969, as amended (the
"Banking Code"), for the sole purpose of effecting the Consolidation, with
authorized capital of $100, consisting of one (1) share of common stock, par
value $100.00 per share, which share is, or will at the time of the
Consolidation be, issued and outstanding and owned beneficially by IBC.
This Consolidation Agreement has been executed and delivered pursuant
to an Agreement and Plan of Reorganization, dated , 1999, between MSB and IBC
(the "Agreement") and fulfills all the requirements of Section 1.2 of the
Agreement.
A majority of the entire Board of Directors of MSB and New Bank have,
respectively, approved, made and executed this Consolidation Agreement and
authorized its execution by MSB and New Bank, and a majority of the entire Board
of Directors of IBC has approved this Consolidation Agreement and the
undertakings of IBC herein set forth, and has authorized IBC, by execution
hereof, to join in and be bound hereby.
At the time the Consolidation becomes effective, and as and when
required by the provisions of this Consolidation Agreement, IBC will issue its
IBC Common Stock as defined in the Agreement, and tender cash payments in lieu
of fractional shares, to the shareholders of MSB in accordance with the terms of
this Consolidation Agreement.
NOW, THEREFORE, the parties agree as follows:
EXHIBIT A
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ARTICLE 1
THE CONSOLIDATION
Subject to the terms and conditions hereof, and the terms contained in
the Agreement, at the "Effective Time" (as such term is defined in Article 2
hereof), MSB and New Bank shall be consolidated into a single bank under the
charter of New Bank, in accordance with Chapter 130 of the Banking Code and
Section 5(d) of the Home Owners' Loan Act and 12 C.F.R. ss. 552.13 and ss.
563.22. The consolidated organization is hereinafter referred to as the
"Consolidated Bank."
ARTICLE 2
EFFECTIVE TIME
The Consolidation shall be effective at 11:59 p.m., local Michigan time
(the "Effective Time") on the date which shall be the latest of (i) the day on
which a Certificate of Consolidation with respect to the Consolidation has been
filed with the Financial Institutions Bureau, in accordance with the
requirements of the laws of the State of Michigan, (ii) the day on which a
Certificate of Consolidation with respect to the Consolidation has been filed
with the Office of Thrift Supervision, in accordance with the laws of the United
States, or (iii) such later date as may be specified in such Certificate of
Consolidation. Unless the parties shall hereafter agree otherwise in writing,
the Effective Time shall be on the Closing Date, as such term is defined in the
Agreement.
ARTICLE 3
EFFECT OF THE CONSOLIDATION
3.1 Name. The name of the Consolidated Bank shall be "New MSB Bank" or
such other name as the Board of Directors and shareholder of the Consolidated
Bank shall determine.
3.2 Charter. The charter of the Consolidated Bank shall be the charter
of New Bank, with such changes and amendments as may be made by this
Consolidation Agreement or as may be required in order to conform such charter
with the provisions of the Agreement or this Consolidation Agreement.
3.3 Bylaws. The Bylaws of the Consolidated Bank shall be the Bylaws of
New Bank in effect immediately prior to the Effective Time.
3.4. Effect of Consolidation. At the Effective Time, the corporate
existence of MSB and New Bank shall be merged into and continue in the
Consolidated Bank, which shall be deemed to be the same corporation as each of
the consolidating banks, possessing all the rights, interests, privileges,
powers and franchises and being subject to all the restrictions, disabilities,
obligations, liabilities and duties of each of the consolidating banks. All
rights, interests, privileges and franchises of each of the consolidating banks
and all property, real, personal and mixed, and all debts and obligations owing
by or due to either of the consolidating banks on whatever account,
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shall be transferred to, become the obligation of and be vested in the
Consolidated Bank without any deed or other transfer and without any order or
other action on the part of any court or otherwise. All property, rights,
privileges, powers, franchises and interests and each and every other interest
shall be thereafter as effectually the property of the Consolidated Bank as they
were of each of the consolidating banks. The title to any real estate, whether
by deed or otherwise, vested in either MSB or New Bank, shall not revert or be
in any way impaired by reason of the Consolidation. The Consolidated Bank, by
virtue of the Consolidation, and without any order or other action on the part
of any court or otherwise, shall hold and enjoy the same and all rights of
property, franchises and interests, including appointments, designations and
nominations and all other rights and interests as trustee, executor,
administrator, registrar of stocks and bonds, guardian of estates, assignee,
receiver, guardian of mentally incompetent persons and in every other fiduciary
capacity, in the same manner and to the same extent as such rights, franchises
and interests were held or enjoyed by each consolidating bank at the Effective
Time.
3.5. Principal Office and Branches. The principal office of the
Consolidated Bank shall be the principal banking office occupied by MSB in Bay
City, Michigan, as of the date of this Consolidation Agreement, and the branches
of the Consolidated Bank shall be all of the branches of MSB in operation at the
Effective Time and such other branches as may be duly authorized and established
from time to time.
3.6 Capital. The authorized capital of the Consolidated Bank shall be
$__________, consisting of ________ shares of common stock, par value $100.00
per share.
3.7 Directors and Officers. The Board of Directors and the officers of
the Consolidated Bank shall be the same persons, holding the same offices, as
the directors and officers of MSB immediately prior to the Effective Time,
provided that the following persons shall be additional directors of the
Consolidated Bank: .
ARTICLE 4
CONVERSION OF SHARES
4.1 Conversion of Shares. The manner of converting the shares of MSB
and New Bank shall be as follows:
(a) Shares of New Bank. At the Effective Time, each share of
New Bank, par value $100.00 per share, issued and outstanding shall
remain outstanding as a share of the Consolidated Bank, and the capital
of New Bank shall become capital of the Consolidated Bank.
(b) Conversion of MSB Common Stock. At the Effective Time,
subject to Article 5 hereof, by virtue of the Consolidation and without
any action on the part of MSB, or the holder of any security of MSB,
each share of common stock of MSB, par value $0.01 per share, issued
and outstanding immediately prior to the Effective Time, other
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than shares canceled pursuant to Section 4.1(e) hereof, shall be
converted into the right to receive 0.8 fully paid and nonassessable
shares (the "Conversion Ratio"), of IBC common stock, $1.00 par value
per share (the "IBC Common Stock"), subject to adjustment as provided
in this Section 4.1. If the sum of the number of shares of MSB Common
Stock outstanding at the Effective Time plus the number of shares of
MSB Common Stock that are subject to outstanding MSB Stock Options as
of the Effective Time differs from 4,598,780 shares, the Conversion
Ratio shall be automatically adjusted by multiplying the original
Conversion Ratio by the quotient obtained by dividing 4,598,780 by the
sum of the number of shares of MSB Common Stock issued and outstanding
at the Effective Time plus the number of shares subject to the
outstanding MSB Stock Options at the Effective Time; provided, however,
that, in performing any such adjustment, the Conversion Ratio shall be
rounded to the nearest hundredth of a share of IBC Common Stock.
(c) No Fractional Shares. No fractional shares of IBC Common
Stock shall be issued. Each holder of MSB Common Stock who would
otherwise be entitled to receive a fractional part of a share of IBC
Common Stock pursuant to Section 4.1(b) shall instead be entitled to
receive cash in an amount equal to the product resulting from
multiplying such fraction by the average closing sale price of IBC
Common Stock as reported on the Nasdaq Stock Market on the five trading
days immediately preceding the Effective Time.
(d) Recapitalization. In the event that either IBC or MSB
changes (or establishes a record date for changing) the number of
shares of IBC Common Stock or shares of MSB Common Stock issued and
outstanding as a result of a stock dividend, stock split,
recapitalization, reclassification, combination, or similar transaction
with respect to the outstanding shares of IBC Common Stock or MSB
Common Stock, and the record date therefor shall be after the date of
this Agreement and prior to the Effective Time, then the Conversion
Ratio shall be appropriately and proportionately adjusted.
(e) Certain Owned Shares of MSB Common Stock. Any and all
shares of MSB Common Stock owned by MSB, IBC, or any direct or indirect
majority-owned Subsidiary of either of them, in each case other than in
a fiduciary capacity that are beneficially owned by third parties or as
a result of debts previously contracted, shall be canceled and retired
at the Effective Time and no consideration shall be issued in exchange
therefor.
(f) MSB Termination Right; IBC Adjustment Right. The Board of
Directors of MSB may terminate this Consolidation Agreement upon
written notice to IBC (the "Termination Notice"), at any time during
the Determination Period (as defined below), if both of the following
conditions are satisfied:
(i) the Average Closing Price shall be less than
the product of 0.85 and the Starting Price; and
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(ii) (A) the quotient obtained by dividing the
Average Closing Price by the Starting Price (such number being
referred to herein as the "IBC Ratio") shall be
less than (B) the quotient obtained by dividing the Average
Index Price by the Index Price on the Starting Date and
subtracting 0.15 from the quotient in this clause (ii)(B)
(such number being referred to herein as the "Index Ratio");
subject, however, to the following provisions. During the five (5) day
period commencing with IBC's receipt of MSB's Termination Notice, IBC
shall have the option to elect to increase the Conversion Ratio to
equal the lesser of (i) the quotient obtained by dividing (A) the
product of 0.85, the Starting Price and the Conversion Ratio by (B) the
Average Closing Price, or (ii) the quotient obtained by dividing (A)
the product of the Index Ratio and the Conversion Ratio by (B) the IBC
Ratio. If IBC makes such an election within such five (5) day period,
it shall give prompt written notice to MSB of such election and the
revised Conversion Ratio, whereupon no termination shall have occurred
pursuant to this Section 4.1(f) and this Consolidation Agreement shall
remain in effect in accordance with its terms (except as the Conversion
Ratio shall have been so modified), and any references in this
Consolidation Agreement to "Conversion Ratio" shall thereafter be
deemed to refer to the Conversion Ratio as adjusted pursuant to this
Section 4.1(f).
For purposes of this Section 4.1(f), the following terms shall
have the meanings indicated:
"Average Closing Price" means the average of the daily last
sale prices of IBC Common Stock as reported on the Nasdaq Stock Market
("Nasdaq") (as reported in The Wall Street Journal or, if not reported
therein, in another mutually agreed upon authoritative source) for the
fifteen (15) consecutive full trading days in which such shares are
traded on the Nasdaq ending at the close of trading on the first day of
the Determination Period.
"Average Index Price" means the average of the Index Prices
for the fifteen (15) consecutive full Nasdaq trading days ending at the
close of trading on the first day of the Determination Period.
"Determination Period" means the fifteen (15) day period
commencing two (2) days after the date on which the last Requisite
Regulatory Approval required for consummation of the Consolidation
shall be received.
"Index Group" means the Nasdaq Bank Stock Index.
"Index Price" on a given date means the average of the closing
prices on such date of the companies comprising the Index Group.
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"Starting Date" means the last full day on which the Nasdaq
was open for trading prior to the execution of this Agreement.
"Starting Price" shall mean the last sale price per share of
IBC Common Stock on the Starting Date, as reported by the Nasdaq (as
reported in The Wall Street Journal or, if not reported therein, in
another mutually agreed upon authoritative source).
4.2 IBC Common Stock. All shares of IBC Common Stock that are issued
and outstanding immediately prior to the Effective Time shall continue to be
issued and outstanding shares of IBC Common Stock at and after the Effective
Time.
ARTICLE 5
EXCHANGE OF STOCK CERTIFICATES
(a) At or prior to the Effective Time, IBC shall deposit, or shall
cause to be deposited, with State Street Bank & Trust (the "Exchange
Agent"), for the benefit of the holders of MSB Common Stock
Certificates, for exchange in accordance with this Article 5, IBC
Common Stock Certificates and cash in lieu of fractional shares of IBC
Common Stock (such cash and IBC Common Stock Certificates, together
with any dividends and distributions with respect thereto paid after
the Effective Time, being hereinafter referred to as the "Conversion
Fund") to be issued pursuant to Section 4.1(b) and (c) and paid
pursuant to Article 5, Subsection (b), in exchange for outstanding
shares of MSB Common Stock.
(b) As promptly as practicable after the Effective Time but not
later than five (5) business days after the Effective Time, IBC shall
cause the Exchange Agent to mail to each holder of record on the
Effective Time of any shares of MSB Common Stock a letter of
transmittal (in a form approved by IBC) containing instructions for the
surrender of all certificates for shares of IBC Common Stock and any
cash in lieu of fractional shares into which the shares of MSB
represented by such MSB Common Stock Certificates shall have been
converted pursuant to this Consolidation Agreement. Upon the proper
surrender by such holder of a certificate or certificates for shares of
MSB Common Stock standing in such holder's name to the Exchange Agent
in accordance with the instructions set forth in the letter of
transmittal, such holder shall be entitled to receive in exchange
therefor a certificate representing the number of whole shares of IBC
Common Stock into which the shares represented by the certificate or
certificates so surrendered shall have been converted and, if
applicable, a check payable to such holder in the amount necessary to
pay for any fractional shares of IBC Common Stock which such holder
would otherwise have been entitled to receive, in accordance with
subsection 4.1(c) hereof, and the MSB Common Stock Certificate so
surrendered shall forthwith be canceled. No interest shall be payable
with respect to either the whole shares of IBC Common Stock or the cash
payable in lieu of fractional shares. Immediately after the third
anniversary of the Effective Time, the Exchange Agent shall deliver to
IBC any unclaimed balance of cash owing with respect to
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fractional shares and such cash shall be retained by, and become the
property of IBC, free and clear of any claims whatsoever.
(c) Neither IBC nor the Exchange Agent shall be obligated to
deliver a certificate for IBC Common Stock or a check for cash in lieu
of fractional shares to a former shareholder of MSB until such former
shareholder surrenders the certificate or certificates representing
shares of MSB Common Stock standing in such former shareholder's name
or, if such former shareholder is unable to locate such certificate or
certificates, an appropriate affidavit of loss and indemnity agreement
and bond as may be required by IBC. Until so surrendered, each
outstanding certificate for shares of MSB Common Stock shall be deemed
for all corporate purposes (except the payment of dividends) to
evidence ownership of the number of whole shares of IBC Common Stock
into which the shares of MSB Common Stock represented thereby shall
have been converted.
(d) After the Effective Time, no dividends or distributions payable
to holders of record of IBC Common Stock shall be paid to any holder of
an outstanding certificate or certificates formerly representing shares
of MSB Common Stock until such certificate(s) are surrendered by such
holder in accordance with the terms of this Consolidation Agreement.
Promptly upon surrender of such outstanding certificate(s), there shall
be paid to such holder of the certificate or certificates for IBC
Common Stock issued in exchange therefor the amount of dividends and
other distributions, if any, which theretofore became payable with
respect to such full shares of IBC Common Stock, but which have not
theretofore been paid on such stock. No interest shall be payable with
respect to the payment of any dividends or other distributions. All
such dividends or other distributions unclaimed at the end of three
years from the Effective Time shall, to the extent such dividends have
been previously paid to the Exchange Agent, be repaid by the Exchange
Agent to IBC, and thereafter the holders of such outstanding
certificates for MSB Common Stock shall look, subject to applicable
escheat, unclaimed funds, and other laws, only to IBC as general
creditors for payment thereof.
(e) The stock transfer books of MSB shall be closed as of the close
of business on the business day immediately preceding the date of the
Effective Time. After such date, there shall be no further registration
on the records of MSB of transfers of outstanding certificates formerly
representing shares of MSB Common Stock.
ARTICLE 6
SHAREHOLDER APPROVAL
This Consolidation Agreement shall be submitted to the shareholders of
each of MSB, New Bank and IBC at separate meetings of such shareholders, each
duly called and held in accordance with the provisions of the Banking Code, the
Michigan Business Corporation Act, the laws of the United States, and other
applicable statutes, as the case may be. In order for the Consolidation to be
effective, this Consolidation Agreement and the Agreement must be adopted by the
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affirmative vote of the holders of not less than two thirds (2/3) of the issued
and outstanding common shares of MSB, not less than two thirds (2/3) of the
issued and outstanding common shares of New Bank, and not less than a majority
of the votes cast at the IBC shareholders' meeting to approve the Consolidation.
ARTICLE 7
MISCELLANEOUS PROVISIONS
7.1 No Dissenters' Rights. Pursuant to 12 CFR ss. 552.14, holders of
MSB Common Stock shall not have dissenters' appraisal rights in the
Consolidation due to the fact that the shares of IBC Common Stock will be quoted
on the Nasdaq Stock Market.
7.2 Defined Terms. All capitalized terms not otherwise defined in this
Consolidation Agreement shall have the meanings ascribed to them in the
Agreement.
7.3 Termination. Notwithstanding anything herein to the contrary, in
the event the Agreement shall have been terminated pursuant to Article VI
thereof, this Consolidation Agreement shall automatically terminate.
7.4 Governing Law. This Consolidation Agreement shall be construed and
interpreted according to the laws of Michigan, without regard to any applicable
conflict of laws, except to the extent that the laws, rules and regulations of
the United States govern certain aspects of the Consolidation as it relates to
MSB.
7.5 Counterparts. This Consolidation Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
7.6 Amendment. MSB and IBC, by mutual consent of a majority of their
respective Boards of Directors, may amend, modify or supplement this
Consolidation Agreement in whole or in part, and in such manner as may be agreed
upon by them in writing, provided that any such amendment, modification, or
supplement subsequent to the adoption of this Consolidation Agreement by MSB's
or IBC's shareholders may be effected only if the Board of Directors of MSB and
IBC determine that such amendment, modification, or supplement does not and will
not have
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a material adverse effect on the shareholders of the Party whose shareholders
have previously approved this Consolidation Agreement.
IN WITNESS WHEREOF, MSB and New Bank have caused this Consolidation
Agreement to be executed by their duly authorized officers and their corporate
seals to be hereunto affixed as of the date first written above, and directors
constituting a majority of the Board of Directors of each such bank have
hereunto subscribed their names.
MUTUAL SAVINGS BANK, F.S.B.
ATTEST: ____________________________ BY:_________________________________
ROBERT N. SHUSTER
CHIEF EXECUTIVE OFFICER
A MAJORITY OF THE DIRECTORS OF
MUTUAL SAVINGS BANK, F.S.B.
____________________________________ _________________________________
____________________________________ _________________________________
____________________________________ _________________________________
NEW MSB BANK
ATTEST: ____________________________ BY:_________________________________
CHARLES C. VAN LOAN, PRESIDENT
A MAJORITY OF DIRECTORS OF
NEW MSB BANK
____________________________________ _________________________________
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____________________________________ _________________________________
____________________________________ _________________________________
____________________________________ _________________________________
INDEPENDENT BANK CORPORATION hereby joins in the foregoing
Consolidation Agreement and undertakes that it will be bound thereby and that it
will do and perform all acts and things therein referred to or provided to be
done by it.
IN WITNESS WHEREOF, Independent Bank Corporation has caused this
undertaking to be executed by its duly authorized officer as of the date first
above written.
INDEPENDENT BANK CORPORATION
ATTEST: BY:____________________________________
CHARLES C. VAN LOAN, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
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WARRANT PURCHASE AGREEMENT
THIS WARRANT PURCHASE AGREEMENT (this "Warrant Purchase Agreement") is
made as of March 24, 1999, between INDEPENDENT BANK CORPORATION, a Michigan
corporation ("IBC"), and MUTUAL SAVINGS BANK, f.s.b., a federally chartered
stock savings bank ("MSB").
RECITALS:
A. Concurrently herewith, IBC and MSB have entered into a certain
Agreement and Plan of Reorganization, dated as of the date hereof (the
"Agreement"), which provides for the consolidation of MSB into a wholly owned
subsidiary of IBC (the "Consolidation") pursuant to a Consolidation Agreement
containing certain additional terms and conditions relating to the Consolidation
(the "Consolidation Agreement"). (The Agreement and the Consolidation Agreement
are sometimes hereinafter collectively referred to as the "Merger Documents.")
All capitalized terms used herein and not otherwise defined herein shall have
the meanings ascribed to them in the Merger Documents.
B. As a condition to IBC's entering into the Agreement, and in
consideration therefor, MSB has agreed to issue to IBC a warrant or warrants
entitling IBC to purchase up to a total of 853,792 shares of MSB Common Stock,
on the terms and conditions set forth herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
SECTION 1. ISSUANCE, DELIVERY, AND EXERCISE OF THE WARRANT.
Concurrently with the execution of the Agreement and this Warrant Purchase
Agreement, MSB shall execute a warrant in favor of IBC in the form attached as
Attachment A hereto (the "Warrant") to purchase up to a total of 853,792 shares
of MSB Common Stock at a purchase price equal to $9.8125 per share (the
"Exercise Price"), subject to adjustments as provided in the Warrant. (The
holder of the Warrant from time to time is hereinafter referred to as the
"Holder.") The Warrant shall be exercisable in accordance with the terms and
conditions set forth therein.
SECTION 2. REGISTRATION RIGHTS. If, at any time after the Warrant
becomes exercisable in accordance with its terms, MSB shall receive a written
request therefor from the Holder, MSB shall prepare and file a registration
statement under the Securities Act of 1933, as amended, or under the applicable
federal laws and Office of Thrift Supervision regulations (the "Applicable
Securities Laws") covering such number of shares of MSB Common Stock as the
Holder shall specify in the request and shall use its best efforts to cause such
registration statement to become effective; provided, however, that the Holder
shall only have the right to request one such registration. Without the written
consent of the Holder, neither MSB nor any other holder of securities of MSB may
include any other securities in such registration.
EXHIBIT B
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SECTION 3. "PIGGYBACK" RIGHTS. If, at any time after the Warrant
becomes exercisable in accordance with its terms, MSB shall determine to proceed
with the preparation and filing of a registration statement under the Applicable
Securities Laws in connection with the proposed offer and sale for money of any
of its securities (other than in connection with a dividend reinvestment,
employee stock purchase, stock option, or similar plan or a registration
statement on Form S-4) by it or any of its security holders, MSB shall give
written notice thereof to the Holder. Upon the written request of the Holder
given within ten days after receipt of any such notice from MSB, MSB shall,
except as herein provided, cause all shares of MSB Common Stock which the Holder
shall request be included in such registration statement to be so included;
provided, however, that nothing herein shall prevent MSB from abandoning or
delaying any registration at any time; and provided, further, that if MSB
decides not to proceed with a registration after the registration statement has
been filed with the United States Securities and Exchange Commission or the
Office of Thrift Supervision, as required by applicable law (the "Securities
Regulator") and MSB's decision not to proceed is primarily based upon the
anticipated public offering price of the securities to be sold by MSB, MSB shall
promptly complete the registration for the benefit of the Holder if the Holder
agrees to bear all additional and incremental expenses incurred by MSB as the
result of such registration after MSB has decided not to proceed. If any
registration pursuant to this Section shall be underwritten in whole or in part,
the Holder may require that any shares of MSB Common Stock requested for
inclusion pursuant to this Section be included in the underwriting on the same
terms and conditions as the securities otherwise being sold through the
underwriters. In the event that the shares of MSB Common Stock requested for
inclusion pursuant to this Section would constitute more than 25 percent of the
total number of shares to be included in a proposed underwritten public
offering, and if in the good faith judgment of the managing underwriter of such
public offering the inclusion of all of such shares would interfere with the
successful marketing of the shares being offered by MSB, the number of shares
otherwise to be included in the underwritten public offering hereunder may be
reduced; provided, however, that after any such required reduction, the shares
of MSB Common Stock to be included in such offering for the account of the
Holder shall constitute at least 25 percent of the total number of shares to be
included in such offering.
SECTION 4. OBLIGATIONS OF MSB IN CONNECTION WITH A REGISTRATION. If
and whenever MSB is required by the provisions of Sections 2 or 3 hereof to
effect the registration of any shares of MSB Common Stock under the Applicable
Securities Laws, MSB shall:
(a) prepare and file with the Securities Regulator a
registration statement with respect to such securities and use its best
efforts to cause such registration statement to become and remain
effective for such period as may be reasonably necessary to effect the
sale of such securities, not to exceed nine months;
(b) prepare and file with the Securities Regulator such
amendments to such registration statement and supplements to the
prospectus contained therein as may be necessary to keep such
registration statement effective for such period as may be reasonably
necessary to effect the sale of such securities, not to exceed nine
months;
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(c) furnish to the Holder and to the underwriters of the
securities being registered such reasonable number of copies of the
registration statement, amendments thereto, preliminary prospectus,
final prospectus, and such other documents as the Holder or such
underwriters may reasonably request in order to facilitate the public
offering of such securities;
(d) use its best efforts to register or qualify the securities
covered by such registration statement under such state securities or
blue sky laws of such jurisdictions as the Holder or such underwriters
may reasonably request; provided that MSB shall not be required by
virtue hereof to submit to the general jurisdiction of any state;
(e) notify the Holder, promptly after MSB shall receive notice
thereof, of the time when such registration statement or any
post-effective amendment thereof has become effective or a supplement
to any prospectus forming a part of such registration statement has
been filed;
(f) notify the Holder promptly of any request by the
Securities Regulator for the amending or supplementing of such
registration statement or prospectus or for additional information;
(g) prepare and file with the Securities Regulator, promptly
upon the request of the Holder, any amendments or supplements to such
registration statement or prospectus which, in the opinion of counsel
for the Holder (and concurred in by counsel for MSB), is required under
the Applicable Securities Laws or the rules and regulations promulgated
thereunder in connection with the distribution of the shares of MSB
Common Stock by the Holder;
(h) prepare and promptly file with the Securities Regulator
such amendment or supplement to such registration statement or
prospectus as may be necessary to correct any statements or omissions
if, at the time when a prospectus is required to be delivered under the
Applicable Securities Laws, any event shall have occurred as the result
of which such prospectus as then in effect would include an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading;
(i) advise the Holder, promptly after it shall receive notice
or obtain knowledge thereof, of the issuance of any stop order by the
Securities Regulator suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for that
purpose and promptly use its best efforts to prevent the issuance of
any stop order or to obtain its withdrawal if such stop order should be
issued; and
(j) at the request of the Holder, furnish on the date or dates
provided for in the underwriting agreement: (i) an opinion or opinions
of the counsel representing MSB for the purposes of such registration,
addressed to the underwriters and to the Holder, covering such
matters as such underwriters and the Holder may reasonably request and
as are customarily
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covered by issuer's counsel at that time; and (ii) a letter or letters
from the independent certified public accountants of MSB, addressed to
the underwriters and to the Holder, covering such matters as such
underwriters or the Holder may reasonably request, in which letters
such accountants shall state (without limiting the generality of the
foregoing) that they are independent certified public accountants
within the meaning of the Applicable Securities Laws and that, in the
opinion of such accountants, the financial statements and other
financial data of MSB included in the registration statement or any
amendment or supplement thereto comply in all material respects with
the applicable accounting requirements of the Applicable Securities
Laws.
SECTION 5. EXPENSES OF REGISTRATION. With respect to a registration
requested pursuant to Section 2 hereof and with respect to each inclusion of
shares of MSB Common Stock in a registration statement pursuant to Section 3
hereof, MSB shall bear the following fees, costs, and expenses: all
registration, stock exchange listing, and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for MSB, fees and disbursements of
counsel for the underwriter or underwriters of such securities (if MSB and/or
the Holder are required to bear such fees and disbursements), and all legal fees
and disbursements and other expenses of complying with state securities or blue
sky laws of any jurisdictions in which the securities to be offered are to be
registered or qualified. Fees and disbursements of counsel and accountants for
the Holder, underwriting discounts and commissions and transfer taxes relating
to the MSB Common Stock being sold for the Holder, and any other expenses
incurred by the Holder not expressly included above shall be borne by the
Holder.
SECTION 6. INDEMNIFICATION.
(a) MSB shall indemnify and hold harmless the Holder, any
underwriter (as defined in the Applicable Securities Laws) for the
Holder, and each person, if any, who controls the Holder or such
underwriter within the meaning of the Applicable Securities Laws, from
and against any and all loss, damage, liability, cost, and expense to
which the Holder or any such underwriter or controlling person may
become subject under the Applicable Securities Laws or otherwise,
insofar as such losses, damages, liabilities, costs, or expenses are
caused by any untrue statement or alleged untrue statement of any
material fact contained in any registration statement filed pursuant to
Section 4 hereof, any prospectus or preliminary prospectus contained
therein, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they are made, not
misleading; provided, however, that MSB will not be liable in any such
case to the extent that any such loss, damage, liability, cost, or
expense arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity
with information furnished by the Holder, such underwriter, or such
controlling persons in writing specifically for use in the preparation
thereof.
(b) Promptly after receipt by an indemnified party pursuant to
the provisions of paragraph (a) of this Section 6 of notice of the
commencement of any action involving the
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subject matter of the foregoing indemnity provisions, such indemnified
party shall, if a claim thereof is to be made against MSB pursuant to
the provision of such paragraph (a), promptly notify MSB of the
commencement thereof; but the omission to so notify MSB will not
relieve it from any liability which it may have to any indemnified
party otherwise hereunder. In case such action is brought against any
indemnified party and such indemnified party notifies MSB of the
commencement thereof, MSB shall have the right to participate in and,
to the extent that it may wish to do so, to assume the defense thereof,
with counsel satisfactory to such indemnified party; provided, however,
if the defendants in any action include both the indemnified party and
MSB and there is a conflict of interest which would prevent counsel for
MSB from also representing the indemnified party, the indemnified party
or parties shall have the right to select one separate counsel to
participate in the defense of such action on behalf of such indemnified
party or parties. After notice from MSB to such indemnified party of
its election so to assume the defense of any such action, the
indemnified party shall have the right to participate in such action
and to retain its own counsel, but MSB shall not be required to
indemnify and hold harmless the indemnified party pursuant to the
provisions of such paragraph (a) for any legal fees or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of investigation, unless
(i) the indemnified party shall have employed separate counsel in
accordance with the provisions of the preceding sentence of this
paragraph (b), (ii) MSB shall not have employed counsel satisfactory to
the indemnified party to represent the indemnified party within a
reasonable time after the notice of the commencement of the action, or
(iii) MSB has authorized the employment of counsel for the indemnified
party at the expense of MSB.
(c) If recovery is not available under the foregoing
indemnification provisions, for any reason other than as specified
therein, the parties entitled to indemnification by the terms thereof
shall be entitled to contribution to liabilities and expenses, except
to the extent that contribution is not permitted under Section 11(f) of
the Securities Act of 1933, as amended. In determining the amount of
contribution to which the respective parties are entitled, there shall
be considered the parties' relative knowledge and access to information
concerning the matter with respect to which the claim was asserted, the
opportunity to correct and prevent any statement or omission, and any
other equitable considerations appropriate under the circumstances.
SECTION 7. REPURCHASE RIGHTS.
(a) Immediately prior to the occurrence of a Repurchase Event
(as defined below), (i) following a request of the Holder, delivered
prior to an Exercise Termination Event, MSB (or any successor thereto)
shall repurchase the Warrant from the Holder at a price (the "Warrant
Repurchase Price") equal to the amount by which (A) the Market/Offer
Price (as defined below) exceeds (B) the Exercise Price, multiplied by
the number of shares for which the Warrant may then be exercised, and
(ii) at the request of the owner of shares of MSB Common Stock
purchased pursuant to an exercise of the Warrant ("Warrant Stock") from
time to time (the "Owner"), delivered within 90 days of such
occurrence, MSB shall repurchase such number of shares of the Warrant
Stock from the Owner as the Owner shall
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designate at a price (the "Warrant Stock Repurchase Price") equal to
the Market/Offer Price multiplied by the number of shares of Warrant
Stock so designated.
(b) For purposes of paragraph (a) of this Section 7, the
"Market/Offer Price" shall mean the highest of (i) the price per share
at which a tender offer or exchange offer for shares of MSB Common
Stock has been made, (ii) the price per share of MSB Common Stock to be
paid by any third party pursuant to an agreement with MSB, and (iii)
the highest closing price for shares of MSB Common Stock within the
4-month period immediately preceding the date the Holder gives notice
of the required repurchase of the Warrant or the Owner gives notice of
the required repurchase of Warrant Stock, as appropriate. In the event
that an exchange offer is made or an agreement is entered into for a
merger or consolidation involving consideration other than cash, the
value of the securities or other property issuable or deliverable in
exchange for MSB Common Stock shall be determined by a nationally
recognized investment banking firm mutually acceptable to the parties
hereto.
(c) The Holder and the Owner may exercise their respective
rights to require MSB to repurchase the Warrant or the Warrant Stock
pursuant to this Section 7 by surrendering for such purpose to MSB, at
its principal office, the Warrant or certificates for shares of Warrant
Stock, as the case may be, free and clear of any liens, claims,
encumbrances, or rights of third parties of any kind, accompanied by a
written notice or notices stating that the Holder or the Owner, as the
case may be, requests MSB to repurchase such Warrant or Warrant Stock
in accordance with the provisions of this Section 7. Subject to the
last proviso of Subsection 7(d) below, as promptly as practicable, and
in any event within five business days after the surrender of the
Warrant or certificates representing shares of Warrant Stock and the
receipt of such notice or notices relating thereto, MSB shall deliver
or cause to be delivered to the Holder or Owner the Warrant Repurchase
Price or the Warrant Stock Repurchase Price therefor, as applicable, or
the portion thereof which MSB is not then prohibited under applicable
law and regulation from so delivering.
(d) To the extent that MSB is prohibited under applicable law
or regulation, or as a result of administrative or judicial action,
from repurchasing the Warrant and/or the Warrant Stock in full at any
time that it may be required to do so hereunder, MSB 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 Warrant Repurchase Price and the
Warrant Stock Repurchase Price, respectively, which it is no longer
prohibited from delivering, within five business days after the date on
which MSB is no longer so prohibited. Upon receipt of such notice from
MSB and for a period of 15 days thereafter, the Holder and/or Owner may
revoke its notice of repurchase of the Warrant and/or Warrant Stock by
written notice to MSB at its principal office stating that the Holder
and/or the Owner elects to revoke its election to exercise its right to
require MSB to repurchase the Warrant and/or Warrant Stock, whereupon
MSB will promptly deliver to the Holder and/or Owner the Warrant and/or
certificates representing shares of Warrant Stock surrendered to MSB
for purposes of such repurchase. Whether or not such election is
revoked, MSB hereby agrees to use its best efforts to obtain all
required legal and regulatory
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approvals necessary to permit MSB to repurchase the Warrant and/or the
Warrant Stock to the full extent and as promptly as practicable.
(e) For purposes of this Section 7, a Repurchase Event shall
be deemed to have occurred upon (i) the consummation of any merger,
consolidation or similar transaction involving MSB or any purchase,
lease or other acquisition of all or a substantial portion of the
assets of MSB, other than any such transaction which would not
constitute an Acquisition Transaction pursuant to the provisions of
Section 1(c) of the Warrant, or (ii) upon the acquisition by any person
of beneficial ownership of 50% or more of the then outstanding shares
of MSB Common Stock.
SECTION 8. ASSUMPTION OF OBLIGATIONS UNDER THIS AGREEMENT.
MSB will not enter into any transaction described in paragraph 5(a) of the
Warrant unless the "Acquiring Corporation" (as that term is defined in the
Warrant) assumes in writing all the obligations of MSB hereunder. Neither of the
parties hereto may assign any of its rights or obligations under this Agreement
or the Warrant created hereunder to any other person, without the express
written consent of the other party, except that in the event a Triggering Event
shall have occurred prior to an Exercise Termination Event, the Holder, subject
to the express provisions hereof, may assign in whole or in part its rights and
obligations hereunder within 90 days following such Triggering Event; provided,
however, that until the date 15 days following the date on which the Office of
Thrift Supervision approves an application by the Holder pursuant to applicable
laws and regulations to acquire the shares of MSB Common Stock subject to the
Warrant, IBC may not assign its rights under the Warrant 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 MSB,
(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 the Holder's
behalf, or (iv) any other manner approved by the Office of Thrift Supervision.
SECTION 9. REMEDIES. Without limiting the foregoing or any remedies
available to the Holder, MSB specifically acknowledges that neither IBC nor any
successor holder of the Warrant would have an adequate remedy at law for any
breach of this Warrant Purchase Agreement and MSB hereby agrees that IBC and any
successor holder of the Warrant shall be entitled to specific performance of the
obligations of MSB hereunder and injunctive relief against actual or threatened
violations of the provisions hereof.
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SECTION 10. TERMINATION. This Warrant Purchase Agreement will
terminate upon a termination of the Warrant in accordance with Section 9
thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant
Purchase Agreement as of the day and year first above written.
INDEPENDENT BANK CORPORATION
By:
---------------------------------------
Charles Van Loan
Its: Chief Executive Officer
MUTUAL SAVINGS BANK, F.S.B.
By:
---------------------------------------
Robert N. Schuster
Its: Chief Executive Officer
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ATTACHMENT A TO WARRANT PURCHASE AGREEMENT
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR
QUALIFIED UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED WITHOUT BEING SO REGISTERED OR QUALIFIED UNLESS AN EXEMPTION OR
EXEMPTIONS FROM SUCH REGISTRATION OR QUALIFICATION REQUIREMENTS ARE AVAILABLE.
WARRANT
TO PURCHASE 853,792 COMMON SHARES
OF
MUTUAL SAVINGS BANK, F.S.B.
This is to certify that, for value received, INDEPENDENT BANK
CORPORATION, a Michigan corporation ("IBC"), is entitled to purchase from MUTUAL
SAVINGS BANK, f.s.b., a federally chartered stock savings bank ("MSB"), at any
time within ninety days after the first occurrence of a Triggering Event and
prior to the occurrence of an Exercise Termination Event, an aggregate of up to
853,792 common shares, $0.01 par value per share, of MSB ("MSB Common Stock"),
at a price of $9.8125 per share (the "Exercise Price"), subject to the terms and
conditions of this Warrant and a certain Warrant Purchase Agreement, of even
date herewith, between IBC and MSB (the "Warrant Purchase Agreement"). The
number of shares of MSB Common Stock which may be received upon the exercise of
this Warrant and the Exercise Price are subject to adjustment from time to time
as hereinafter set forth. The terms and conditions set forth in this Warrant and
the Warrant Purchase Agreement shall be binding upon the respective successors
and assigns of both of the parties hereto. This Warrant is issued in connection
with a certain Agreement and Plan of Reorganization, dated as of the date
hereof, between IBC and MSB (the "Merger Agreement"), which provides for the
consolidation of MSB into a wholly owned subsidiary of IBC (the
"Consolidation"), and a certain Consolidation Agreement among IBC, its
subsidiary and MSB, which provides certain additional terms and conditions
relating to the Merger (the "Consolidation Agreement"). The Merger Agreement and
the Consolidation Agreement are sometimes hereinafter collectively referred to
as the "Merger Documents." All capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Merger Documents.
The term "Holder" shall mean and refer to IBC or any successor holder of this
Warrant.
SECTION 1. EXERCISE OF THE WARRANT.
(a) The Holder will not exercise this Warrant unless it has
obtained all required approvals, if any, of appropriate regulatory
authorities having jurisdiction, including the Office of Thrift
Supervision, pursuant to all applicable laws and regulations. Further,
subject to the terms and conditions set forth in this Warrant and in
the Warrant Purchase Agreement and the provisions of applicable law,
the Holder will not exercise this Warrant without the
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written consent of MSB except within ninety days after the occurrence
of any of the following events (a "Triggering Event") and prior to the
occurrence of an Exercise Termination Event:
(i) any material, willful, and intentional breach
of the Merger Documents by MSB that would permit IBC to
terminate the Merger Documents (A) occurring after the receipt
by MSB of a proposal to engage in an Acquisition Transaction,
(B) occurring after the announcement by any other Person of an
intention to engage in an Acquisition Transaction, or (c) in
anticipation and for the purpose of engaging in an Acquisition
Transaction;
(ii) (A) a proposal to engage in an Acquisition
Transaction is submitted to and approved by the shareholders
of MSB at any time prior to December 31, 2000, or (B) a Tender
Offer is commenced and the transactions contemplated in the
Tender Offer are completed in such a manner that the Person
making the Tender Offer acquires beneficial ownership of more
than 20 percent of the capital stock or any other class of
voting securities of MSB, and the Consolidation is not
consummated prior to December 31, 2000;
(iii) (A) a proposal to engage in an Acquisition
Transaction is received by MSB or a Tender Offer is made
directly to the shareholders of MSB or the intention of making
an Acquisition Transaction or Tender Offer is announced at any
time prior to the holding of the MSB Shareholders' Meeting;
and (B) the Board of Directors of MSB (1) fails to recommend
to the shareholders of MSB that they vote their shares of MSB
Common Stock in favor of the approval of the Consolidation,
(2) withdraws such recommendation previously made, (3) fails
to solicit proxies of shareholders of MSB to approve the
Consolidation, or (4) fails to hold the MSB Shareholders'
Meeting;
(b) Notwithstanding the foregoing, this Warrant shall not be
exercisable after the occurrence of an Exercise Termination Event which
for purposes hereof means (i) the Effective Time (as defined in the
Agreement) of the Consolidation, (ii) the failure of the shareholders
of IBC to approve the Consolidation; (iii) the failure of any
Regulatory Authority to provide any required Consent to the
Consolidation, which failure was not the result of the existence of the
Acquisition Proposal or a breach by MSB of any of its obligations under
any of the Merger Documents; or (iv) the Merger Documents are
terminated pursuant to Section 6.1 of the Merger Agreement, unless the
event giving rise to the right to terminate is a breach by MSB and is
preceded by a Triggering Event or the receipt by MSB of an Acquisition
Transaction proposal, or the announcement by another Person of a
proposal involving an Acquisition Transaction.
(c) An "Acquisition Transaction" shall mean a transaction
between MSB and any Person other than IBC or any Affiliate of IBC
involving (A) the sale or other disposition of more than 20% of the
shares of the capital stock or any other class of voting securities of
MSB, including, but not limited to, a Tender Offer, (B) the sale or
other disposition of 15%
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or more of the consolidated assets or deposits of MSB, or (c) a merger
or consolidation involving MSB other than a transaction pursuant to
which MSB will be the surviving corporation and the current
shareholders of MSB will be the owners of a majority of the stock of
the surviving corporation following the transaction. For purposes of
this Section 1, a Tender Offer which is contingent upon the expiration
of the Warrant is deemed to commence when it is announced.
(d) This Warrant shall be exercised by presentation and
surrender hereof to MSB at its principal office accompanied by (i) a
written notice of exercise for a specified number of shares of MSB
Common Stock, (ii) payment to MSB, for the account of MSB, of the
Exercise Price for the number of shares specified in such notice, and
(iii) a certificate of the Holder indicating the Triggering Event that
has occurred which entitles the Holder to exercise this Warrant. The
Exercise Price for the number of shares of MSB Common Stock specified
in the notice shall be payable in immediately available funds.
(e) Upon such presentation and surrender, MSB shall issue
promptly (and within three business days if requested by the Holder) to
the Holder, or any assignee, transferee, or designee permitted by
subparagraph (g) of this Section 1, the shares to which the Holder is
entitled hereunder and the Holder shall deliver to MSB a copy of this
Warrant and a letter agreeing that the Holder will not offer to sell or
otherwise dispose of such shares in violation of applicable law or the
provisions of this Warrant.
(f) Certificates for shares of MSB Common Stock 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, as amended (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 MSB a copy of a letter from the staff of the SEC, or an
opinion of counsel, in form and substance reasonably satisfactory to
MSB, to the effect that such legend is not required for purposes of the
1933 Act; (ii) the reference to the provisions of this Warrant 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 Warrant 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.
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(g) If this Warrant should be exercised in part only, MSB
shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to
purchase the balance of the shares purchasable hereunder. Upon receipt
by MSB of this Warrant, in proper form for exercise, the Holder shall
be deemed to be the holder of record of the shares of MSB Common Stock
issuable upon such exercise, notwithstanding that the stock transfer
books of MSB shall then be closed or that certificates representing
such shares of MSB Common shall not then be actually delivered to the
Holder. MSB shall pay all expenses, and any and all 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 1 in the name of the Holder or of any assignee, transferee, or
designee permitted by subparagraph (g) of this Section 1.
(h) Neither of the parties hereto may assign any of its rights
or obligations under this Warrant created hereunder to any other
person, without the express written consent of the other party, except
that in the event a Triggering Event shall have occurred prior to an
Exercise Termination Event, the Holder, subject to the express
provisions hereof, may assign in whole or in part its rights and
obligations hereunder within 90 days following such Triggering Event;
provided, however, that until the date 15 days following the date on
which the Office of Thrift Supervision approves an application by the
Holder pursuant to applicable laws and regulations to acquire the
shares of MSB Common Stock subject to this Warrant, IBC may not assign
its rights under this Warrant 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 MSB,
(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 the Holder's behalf, or (iv) any other manner approved
by the Office of Thrift Supervision.
SECTION 2. CERTAIN COVENANTS AND REPRESENTATIONS OF MSB AND IBC.
(a) MSB shall at all times maintain sufficient authorized but
unissued shares of MSB Common Stock so that this Warrant may be
exercised without additional authorization of the holders of MSB Common
Stock, after giving effect to all other outstanding options, warrants,
convertible securities, and other rights to purchase MSB Common Stock.
(b) MSB represents and warrants to the Holder that the shares
of MSB Common Stock issued upon an exercise of this Warrant will be
duly authorized, fully paid, nonassessable, and subject to no
preemptive rights.
(c) MSB agrees (i) 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 MSB; (ii) promptly
to take all action as may from time to time be required, (including,
without limitation (A) complying with all pre-merger notification,
reporting, and waiting period requirements
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specified in 15 U.S.C. Section 18a and regulations promulgated
thereunder, and (B) in the event, under the Bank Holding Company Act of
1956, as amended (the "Bank Holding Company Act"), or the Change in
Bank Control Act of 1978, or other statute, the prior approval of the
Office of Thrift Supervision or other regulatory agency (collectively,
the "Agencies"), is necessary before the Warrant may be exercised or
transferred, cooperate fully with the Holder in preparing such
applications and providing such information to the Agencies as the
Agencies may require) in order to permit the Holder to exercise or
transfer this Warrant and MSB duly and effectively to issue shares
pursuant to the exercise hereof; and (iii) promptly to take all action
provided herein to protect the rights of the Holder against dilution.
(d) IBC represents and warrants to MSB that the Warrant is not
being, and any shares of MSB Common Stock or other securities acquired
by IBC upon exercise of the Warrant will not be, acquired with a view
to the public distribution thereof and will not be transferred or
otherwise disposed of except in a transaction registered or exempt from
registration under the Securities Act of 1933, as amended.
SECTION 3. FRACTIONAL SHARES. MSB shall not be required to issue
fractional shares of MSB Common Stock upon an exercise of this Warrant but shall
pay for such fraction of a share in cash or by certified or official bank check
at the Exercise Price.
SECTION 4. EXCHANGE OR LOSS OF WARRANT. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof at the principal office of MSB for other Warrants of
different denominations entitling the Holder thereof to purchase in the
aggregate the same number of shares of MSB Common Stock purchasable hereunder.
The term "Warrant" as used herein includes any warrants for which this Warrant
may be exchanged. Upon receipt by MSB of evidence reasonably satisfactory to it
of the loss, theft, destruction, or mutilation of this Warrant, and (in the case
of loss, theft, or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Warrant, if mutilated, MSB will execute
and deliver a new Warrant of like tenor and date. Any such new Warrant executed
and delivered shall constitute an additional contractual obligation on the part
of MSB, whether or not the Warrant so lost, stolen, destroyed, or mutilated
shall at any time be enforceable by anyone.
SECTION 5. CERTAIN TRANSACTIONS.
(a) In the event that prior to an Exercise Termination Event,
MSB shall (i) consolidate with or merge into any Person, other than IBC
or one of its Affiliates, and shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) permit any Person,
other than IBC or one of its Affiliates, to merge into MSB, and MSB
shall be the continuing or surviving corporation, but, in connection
with such merger, (x) the shareholders of MSB immediately prior to such
merger own less than a majority of the surviving corporation's
outstanding voting securities, or (y) the then outstanding voting
shares of MSB Common Stock shall be changed into or exchanged for stock
or other securities of any other Person or cash or any other property,
or (iii) sell or otherwise transfer all or substantially all of its
assets to any Person, other than IBC or one of its Affiliates, then,
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<PAGE> 86
and in any such case, the agreement governing such transaction shall
make proper provision so that this Warrant shall, upon the consummation
of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, a warrant, at the option
of the Holder, of either (A) the Acquiring Corporation (as hereinafter
defined), (B) any company which controls the Acquiring Corporation, or
(c) in the case of a merger described in clause (a)(ii) above, MSB, in
which case such warrant shall be a newly issued warrant (in any such
case, the "Substitute Warrant").
(b) For purposes of this Section 5, the following terms have
the meanings indicated:
(i) "Acquiring Corporation" shall mean (A) the
continuing or surviving corporation of a consolidation or
merger with MSB (if other than MSB), (B) the corporation
merging into MSB in a merger in which MSB is the continuing or
surviving person and in connection with which the then
outstanding shares of MSB Common Stock are changed into or
exchanged for stock or other securities of any other Person or
cash or any other property, or (c) the transferee of all or
substantially all of MSB's assets;
(ii) "Substitute Common" shall mean the common stock
issued by the issuer of the Substitute Warrant;
(iii) "Assigned Value" shall mean the Market/Offer
Price as determined pursuant to Subsection 7(b) of the Warrant
Purchase Agreement; provided, however, that in the event of a
sale of all or substantially all of MSB's assets, the Assigned
Value shall be the sum of the price paid in such sale for such
assets and the current market value of the remaining assets of
MSB as determined by a recognized investment banking firm
selected by the Holder, divided by the number of shares of MSB
Common Stock outstanding at the time of such sale;
(iv) "Average Price" shall mean the average closing
price of a share of Substitute Common for the 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 on the day preceding such
consolidation, merger, or sale; provided that if MSB is the
issuer of the Substitute Warrant, the Average Price shall be
computed with respect to a share of the common stock issued by
the Person merging into MSB or by any company which controls
such Person, as the Holder may elect;
(v) A "Person" shall mean any individual, firm,
corporation or other entity and include as well any syndicate
or group deemed to be a "person" by Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended; and
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(vi) "Affiliate" shall have the meaning ascribed to
such term in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended.
(c) The Substitute Warrant shall have the same terms as this
Warrant, provided that, if the terms of the Substitute Warrant cannot,
for legal reasons, be the same as this Warrant, such terms shall be as
similar as possible and in no event less advantageous to the Holder.
The issuer of the Substitute Warrant shall also enter into an agreement
with the then Holder of the Substitute Warrant in substantially the
same form as the Warrant Purchase Agreement, which shall be applicable
to the Substitute Warrant.
(d) The Substitute Warrant shall be exercisable for such
number of shares of Substitute Common as is equal to the Assigned Value
multiplied by the number of shares of MSB Common Stock for which this
Warrant is then exercisable, divided by the Average Price. The exercise
price of the Substitute Warrant per share of Substitute Common shall be
equal to the Exercise Price multiplied by a fraction in which the
numerator is the number of shares of MSB Common Stock for which this
Warrant is then exercisable and the denominator is the number of shares
of Substitute Common for which the Substitute Warrant is exercisable.
SECTION 6. RIGHTS OF THE HOLDER; REMEDIES.
(a) The Holder shall not, by virtue hereof and prior to the
exercise hereof, be entitled to any rights of a holder of MSB Common
Stock.
(b) Without limiting the foregoing or any remedies available
to the Holder, MSB specifically acknowledges that neither IBC nor any
successor Holder of this Warrant would have an adequate remedy at law
for any breach of this Warrant and MSB hereby agrees that IBC and any
successor Holder shall be entitled to specific performance of the
obligations of MSB hereunder and injunctive relief against actual or
threatened violations of the provisions hereof.
SECTION 7. ANTIDILUTION PROVISIONS. The number of shares of MSB
Common Stock purchasable upon the exercise hereof shall be subject to adjustment
from time to time as provided in this Section 7.
(a) In the event that MSB issues any additional shares of MSB
Common Stock at any time after the date hereof (including pursuant to
stock option plans), the number of shares of MSB Common Stock which can
be purchased pursuant to this Warrant shall be increased by an amount
equal to 19.9 percent of the additional shares so issued.
(b) (i) In the event that, after the date hereof, MSB pays or
makes a dividend or other distribution of any class of capital stock of
MSB in MSB Common Stock, the number of shares of MSB Common Stock
purchasable upon exercise hereof shall be increased by multiplying such
number of shares by a fraction of which the denominator shall be the
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number of shares of MSB Common Stock outstanding at the close of
business on the day immediately preceding the date of such distribution
and the numerator shall be the sum of such number of shares and the
total number of shares constituting such dividend or other
distribution, such increase to become effective immediately after the
opening of business on the day following such distribution.
(ii) In the event that, after the date hereof,
outstanding shares of MSB Common Stock are subdivided into a
greater number of shares of MSB Common Stock, the number of
shares of MSB Common Stock purchasable upon exercise hereof at
the opening of business on the day following the day upon
which such subdivision becomes effective shall be
proportionately increased, and, conversely, in the event that,
after the date hereof, outstanding shares of MSB Common Stock
are combined into a smaller number of shares of MSB Common
Stock, the number of shares of MSB Common Stock purchasable
upon exercise hereof at the opening of business on the day
following the day upon which such combination becomes
effective shall be proportionately decreased, such increase or
decrease, as the case may be, to become effective immediately
after the opening of business on the day following the day
upon which such subdivision or combination becomes effective.
(iii) The reclassification (including any
reclassification upon a merger in which MSB is the continuing
corporation) of MSB Common Stock into securities including
other than MSB Common Stock shall be deemed to involve a
subdivision or combination, as the case may be, of the number
of shares of MSB Common Stock outstanding immediately prior to
such reclassification into the number of shares of MSB Common
Stock outstanding immediately thereafter and the effective
date of such reclassification shall be deemed to be the day
upon which such subdivision or combination becomes effective,
as the case may be, within the meaning of clause (ii) above.
(c) Whenever the number of shares of MSB Common Stock
purchasable upon exercise hereof is adjusted pursuant to paragraph (b)
above, the Exercise Price shall be adjusted by multiplying the Exercise
Price by a fraction the numerator of which is equal to the number of
shares of MSB Common Stock purchasable prior to the adjustment and the
denominator of which is equal to the number of shares of MSB Common
Stock purchasable after the adjustment.
(d) For the purpose of this Section 7, the term "MSB Common
Stock" shall include any shares of MSB of any class or series which has
no preference or priority in the payment of dividends or in the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution, or winding up of MSB and which is not subject to
redemption by MSB.
SECTION 8. NOTICE.
8
<PAGE> 89
(a) Whenever the number of shares of MSB Common Stock for
which this Warrant is exercisable is adjusted as provided in Section 7
hereof, MSB shall promptly compute such adjustment and mail to the
Holder a certificate, signed by a principal financial officer of MSB,
setting forth the number of shares of MSB Common Stock for which this
Warrant is exercisable and the adjusted Exercise Price as a result of
such adjustment, a brief statement of the facts requiring such
adjustment, the computation thereof, and when such adjustment will
become effective.
(b) Upon the occurrence of a Triggering Event MSB shall (i)
promptly notify the Holder and/or the "Owner" (as that term is defined
in the Warrant Purchase Agreement) of such event, (ii) promptly compute
the "Warrant Repurchase Price" and the "Warrant Stock Repurchase Price"
(as such terms are defined in the Warrant Purchase Agreement), and
(iii) furnish to the Holder and/or the Owner a certificate, signed by
the chief financial officer of MSB setting forth the Warrant Repurchase
Price and/or the Warrant Stock Repurchase Price and the basis and
computation thereof.
(c) Upon the occurrence of an event which results in this
Warrant becoming convertible into, or exchangeable for, the Substitute
Warrant, as provided in Section 5 hereof, MSB and the Acquiring
Corporation shall promptly notify the Holder of such event; and, upon
receipt from the Holder of its choice as to the issuer of the
Substitute Warrant, the Acquiring Corporation shall promptly compute
the number of shares of Substitute Common for which the Substitute
Warrant is exercisable and furnish to the Holder a certificate, signed
by a principal financial officer of the Acquiring Corporation, setting
forth the number of shares of Substitute Common for which the
Substitute Warrant is exercisable, the Substitute Warrant exercise
price, a computation thereof, and when such adjustment will become
effective.
SECTION 9. TERMINATION. This Warrant and the rights conferred hereby
shall terminate upon the earliest of (i) six months after the occurrence of a
Triggering Event; (ii) the Effective Time of the Merger, (iii) the date of
termination of the Merger Documents unless (a) the event giving rise to the
right to terminate is preceded by a Triggering Event, or (b) the receipt by MSB,
or the announcement by another person, of a proposal involving an Acquisition
Transaction
9
<PAGE> 90
or Tender Offer, unless the Agreement is earlier terminated by MSB, pursuant to
its right to terminate the Agreement, under the conditions of Section 6.1 of the
Agreement; or (iv) December 31, 2000.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of
this , 1999.
ATTEST: MUTUAL SAVINGS BANK, F.S.B.
By: By:
-------------------------------------
Robert N. Schuster
Title: Its: Chief Executive Officer
10
<PAGE> 91
AFFILIATE AGREEMENT
Independent Bank Corporation
230 West Main Street
Ionia, Michigan 48846
Attention: Mr. William R. Kohls, Chief Financial Officer
Ladies and Gentlemen:
The undersigned is a shareholder of Mutual Savings Bank, f.s.b., a
federal savings bank ("MSB"), and may become a shareholder of Independent Bank
Corporation, a Michigan corporation ("IBC") pursuant to the transactions
described in a certain Agreement and Plan of Reorganization, dated as
_____________, 1999 (the "Agreement"), by and between IBC and MSB. Under the
terms of the Agreement, MSB will be consolidated with and into a wholly owned
Michigan bank subsidiary of IBC (the "Consolidation"), and the shares of the
$0.01 par value common stock of MSB ("MSB Common Stock") will be converted into
the right to receive shares of the $1.00 par value common stock of IBC ("IBC
Common Stock"). This Affiliate Agreement represents an agreement between the
undersigned and IBC regarding certain rights and obligations of the undersigned
in connection with any and all shares of IBC Common Stock to be received by the
undersigned as a result of the Consolidation.
In consideration of the Consolidation and the mutual covenants
contained herein, the undersigned and IBC hereby agree as follows:
1. Affiliate Status. The undersigned understands and agrees that as to
MSB the undersigned may be deemed to be an "affiliate" under Rule 145(c) of the
Rules and Regulations of the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933, as amended ("1933 Act"), and the undersigned
anticipates that the undersigned may be deemed to be such an "affiliate" at the
time of the Consolidation.
2. Covenants and Warranties of Undersigned. The undersigned represents,
warrants, and agrees that IBC has informed the undersigned that the issuance of
shares of IBC Common Stock to the undersigned in connection with the
Consolidation will be registered with the SEC under the 1933 Act on a
Registration Statement on Form S-4 and that such registration will not cover any
resale or other disposition of IBC Common Stock and that shares of IBC Common
Stock received pursuant to the Consolidation can only be sold by the undersigned
(a) following such time as financial results covering at least 30 days of
post-consolidation combined operations have been published, and (b)(1) following
registration under the 1933 Act, or (2) in conformity with the requirements of
Rule 145(d) promulgated by the SEC as the same now exist or may hereafter be
EXHIBIT C
<PAGE> 92
amended, or (3) to the extent some other exemption from registration under the
1933 Act might be available.
3. Understanding of Restrictions on Dispositions. The undersigned has
carefully read the Agreement and this Affiliate Agreement and discussed their
requirements and impact upon his ability to sell, transfer, or otherwise dispose
of the shares of IBC Common Stock received by the undersigned as a result of the
Consolidation, to the extent he believes necessary, with the undersigned's
counsel or counsel for MSB.
4. Filing of Reports by IBC. IBC agrees, for a period of two years
after the effective date of the Consolidation, to file on a timely basis all
reports required to be filed by it pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended, so that the public information provisions of
Rule 145(d) promulgated by the SEC as the same are presently in effect will be
available to the undersigned in the event the undersigned desires to transfer
any shares of IBC Common Stock issued to the undersigned pursuant to the
Consolidation.
5. Transfer Restrictions. The undersigned agrees that IBC may refuse to
permit the undersigned to sell, transfer, or dispose of the IBC Common Stock
unless: (a) there is an effective registration statement filed pursuant to the
1933 Act covering such sale, transfer, or other disposition; (b) in the opinion
of counsel for IBC, or in the opinion of counsel satisfactory to counsel for
IBC, such registration is not required; (c) the undersigned furnishes to IBC a
copy of a "no action" or interpretive letter or other definitive ruling from the
staff of the SEC to the effect that the proposed sale, transfer, or other
disposition may be effected without registration; or (d) the undersigned effects
the sale, transfer or disposition within the limits, and in accordance with the
applicable provisions of Rule 145 under the 1933 Act.
6. Rule 145. If the undersigned proposes to sell any of the securities
pursuant to Rule 145, and if such sale would be permitted under the terms of
this letter, then IBC will, upon the undersigned's written request, supply me
with the following: (a) a statement as to whether IBC has complied with the
provisions of Rule 144(c) regarding the filing of reports with the SEC as a
condition to sales made pursuant to that rule; and (b) a confirmation as to the
number of shares of IBC outstanding as shown by the most recent report or
statement published by IBC.
7. No Obligation to Register. Except as set forth in this letter, IBC
is under no obligation to register the sale, transfer, or other disposition of
the securities by the undersigned, or on the undersigned's behalf, or to take
any other action necessary in order to effect compliance with an exemption from
registration available.
8. Legend. IBC may decline to register any transfer of securities,
except consistent with this letter. IBC may place on the certificates for my
shares and any substitute certificates a legend stating in substance:
The shares represented by this certificate are subject to the
provisions of Rule 145 under the Securities Act of 1933 and may not
be sold,
<PAGE> 93
transferred or otherwise disposed of without compliance with said
rule.
9. Removal of Legend. The undersigned understands that the legend, if
any, with respect to the shares of IBC Common Stock received by the undersigned
shall be removed by IBC by delivery of substitute certificates without the
legend, and the related transfer restrictions shall be lifted if: (a) the shares
of IBC Common Stock shall have been registered under the 1933 Act for resale;
(b) there shall have been delivered to IBC a copy of the letter from the staff
of the SEC, or an opinion of counsel satisfactory to IBC, to the effect that an
exemption from registration under the Act is available with respect thereto; or
(c) two years have elapsed since the Effective Date of the Consolidation, as
defined in the Agreement, and the conditions of Rule 145(d)(3) are satisfied.
10. Miscellaneous. This Affiliate Agreement is the complete agreement
between IBC and the undersigned concerning the subject matter hereof. Any notice
required to be sent to any party hereunder shall be sent by registered or
certified mail, return receipt requested, using the address set forth herein or
such other address as shall be furnished in writing by the parties. This
Affiliate Agreement shall be governed by the laws of the State of Michigan.
This Affiliate Agreement is executed by the undersigned as of the
_____ day of _________, 1999.
Very truly yours,
-----------------------------------
Signature
-----------------------------------
Print Name
-----------------------------------
-----------------------------------
-----------------------------------
Address
[Signatures Continued on Next Page]
<PAGE> 94
The foregoing Affiliate Agreement is agreed to and accepted by the
undersigned as of ___________________, 1999.
INDEPENDENT BANK CORPORATION
By
-----------------------------------------
William R. Kohls, Chief Financial Officer
<PAGE> 95
MANAGEMENT CONTINUITY AGREEMENT
THIS IS AN AGREEMENT between INDEPENDENT BANK CORPORATION (the
"Corporation"), whose principal offices are 230 West Main Street, Ionia,
Michigan 48846, and ______________________________________ (the "Executive"),
dated ______________, 1998.
RECITALS
The Executive is a key officer of the Corporation or a Subsidiary whose
continued dedication, availability, advice and counsel to the Corporation and
its Subsidiaries is deemed important to the Board of Directors of the
Corporation ("Board"), the Corporation and its shareholders. The services of the
Executive, his experience and knowledge of the affairs of the Corporation and
his reputation and contacts in the industry are extremely valuable to the
Corporation. The Corporation wishes to attract and retain such well-qualified
executives, and it is in the best interests of the Corporation to secure the
continued services of the Executive notwithstanding any change in control of the
Corporation.
The Corporation considers the establishment and maintenance of a sound
and vital management team to be part of its overall corporate strategy and to be
essential to protecting and enhancing the best interests of this Corporation and
its shareholders. Accordingly, the Board has approved this Agreement with the
Executive and authorized its execution and delivery on behalf of the
Corporation.
AGREEMENT
1. Term of Agreement. This Agreement will begin on the date entered
above (the "Commencement Date") and will continue in effect through the third
anniversary of the Commencement Date (the "Initial Term"). Thereafter, this
Agreement shall be extended automatically for additional three (3) year periods
("Renewal Terms") at the end of the Initial Term and each Renewal Term, unless
not later than twelve (12) months prior to the end of the Initial Term or a
Renewal Term, the Corporation gives written notice to Executive that it has
elected not to renew this Agreement. Notwithstanding the foregoing, if a Change
of Control occurs during the term of this Agreement, this Agreement will
continue in effect for thirty-six (36) months beyond the end of the month in
which any Change of Control occurs.
2. Definitions. The following defined terms shall have the meanings
set forth below, for purposes of this Agreement:
(a) Average Base Salary. Average Base Salary shall mean the
Executive's average annual salary during the three (3) calendar year
period beginning two (2) years immediately prior to the year of Change
of Control and the year in which the Change of Control occurred;
provided that if Executive has been employed for less than three (3)
years,
EXHIBIT D
<PAGE> 96
Average Base Salary shall be determined during that lesser period or if
less than one year, the Executive's prevailing salary shall be
annualized.
(b) Average Bonus. Average Bonus shall mean the average of the
last three (3) bonuses paid to Executive under the Corporation's
Management Incentive Compensation Plan immediately preceding the Change
of Control, and if the Executive is eligible to participate in the
Corporation's Incentive Share Grant Plan, the Executive shall be deemed
to have participated in that plan for each of those three years,
whereby those bonuses shall be based on the aggregate fair market value
of the shares of the Corporation's stock acquired or that would have
been acquired irrespective of the restrictions on transfer or
forfeiture provisions.
(c) Change of Control. A "Change in Control" shall mean a change
in control of the Corporation of such a nature that would be required
to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934 ("Exchange
Act"), or such item thereof which may hereafter pertain to the same
subject; provided that, and notwithstanding the foregoing, a Change in
Control shall be deemed to have occurred if:
(i) Any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation representing
twenty percent (20%) or more of the combined voting power of the
Corporation's then outstanding securities; or
(ii) At any time a majority of the Board of Directors of
the Corporation is comprised of other than Continuing Directors
(for purposes of this paragraph, the term Continuing Director
means a director who was either (A) first elected or appointed as
a Director prior to the date of this Agreement; or (B)
subsequently elected or appointed as a director if such director
was nominated or appointed by at least a majority of the then
Continuing Directors); or
(iii) Any of the following occur:
(A) Any merger or consolidation of the Corporation,
other than a merger or consolidation in which the voting
securities of the Corporation immediately prior to the merger
or consolidation continue to represent (either by remaining
outstanding or being converted into securities of the
surviving entity) fifty-one percent (51%) or more of the
combined voting power of the Corporation or surviving entity
immediately after the merger or consolidation with another
entity;
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<PAGE> 97
(B) Any sale, exchange, lease, mortgage, pledge,
transfer, or other disposition (in a single transaction or a
series of related transactions) of all or substantially all
of the assets of the Corporation which shall include, without
limitation, the sale of assets or earning power aggregating
more than fifty percent (50%) of the assets or earning power
of the Corporation on a consolidated basis;
(C) Any liquidation or dissolution of the Corporation;
(D) Any reorganization, reverse stock split, or
recapitalization of the Corporation which would result in a
Change of Control; or
(E) Any transaction or series of related transactions
having, directly or indirectly, the same effect as any of the
foregoing; or any agreement, contract, or other arrangement
providing for any of the foregoing.
(d) Disability. "Disability" means that, as a result of
Executive's incapacity due to physical or mental illness, the Executive
shall have been found to be eligible for the receipt of benefits under
the Corporation's long term disability plan.
(e) Cause. "Cause" means (i) the willful commission by the
Executive of a criminal or other act that causes or will probably cause
substantial economic damage to the Corporation or a Subsidiary or
substantial injury to the business reputation of the Corporation or a
Subsidiary; (ii) the commission by the Executive of an act of fraud in
the performance of such Executive's duties on behalf of the Corporation
or a Subsidiary; (iii) the continuing willful failure of the Executive
to perform the duties of such Executive to the Corporation or a
Subsidiary (other than any such failure resulting from the Executive's
Disability or occurring after issuance by Executive of a Notice of
Termination for Good Reason) after written notice thereof (specifying
the particulars thereof in reasonable detail) and a reasonable
opportunity to be heard and cure such failure are given to the
Executive by the Board; or (iv) the order of a federal or state bank
regulatory agency or a court of competent jurisdiction requiring the
termination of the Executive's employment. For purposes of this
subparagraph, no act, or failure to act, on the Executive's part shall
be deemed "willful" unless done, or omitted to be done, by the
Executive not in good faith and without reasonable belief that the
action or omission was in the best interest of the Corporation or a
Subsidiary.
(f) Good Reason. For purposes of this Agreement, "Good Reason"
means the occurrence of any one or more of the following without the
Executive's express written consent:
(i) The assignment to Executive of duties which are
materially different from or inconsistent with the duties,
responsibilities and status of Executive's position at any time
during the six (6) month period prior to the Change of Control of
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<PAGE> 98
the Corporation, or which result in a significant reduction in
Executive's authority and responsibility as an executive of the
Corporation or a Subsidiary;
(ii) A reduction by the Corporation in Executive's base
salary or salary grade as of the day prior to the Change of
Control, or the failure to grant salary increases and bonus
payments on a basis comparable to those granted to other
executives of the Corporation, or reduction of Executive's most
recent incentive bonus potential prior to the Change of Control
under the Corporation's Management Incentive Compensation Plan, or
any successor plan;
(iii) Either (a) the Corporation requiring Executive to be
based at a location in excess of ten (10) miles from the location
where Executive is currently based, or (b) in the event of any
relocation of the Executive with the Executive's express written
consent, the failure of the Corporation or a Subsidiary to pay (or
reimburse the Executive for) all reasonable moving expenses by the
Executive relating to a change of principal residence in
connection with such relocation and to pay the Executive the
amount of any loss realized in the sale of the Executive's
principal residence in connection with any such change of
residence. Any gain realized upon the sale shall not offset the
obligation to pay moving expenses, and the amounts payable under
(b) shall be tax effected, all to the effect that the Executive
shall incur no loss on an after tax basis;
(iv) The failure of the Corporation to obtain a satisfactory
agreement from any successor to the Corporation to assume and
agree to perform this Agreement, as contemplated in Paragraph 6
hereof;
(v) Any termination by the Corporation of Executive's
employment that is other than for Cause;
(vi) Any termination of Executive's employment, reduction in
Executive's compensation or benefits, or adverse change in
Executive's location or duties, if such termination, reduction or
adverse change (aa) occurs within six (6) months before a Change
of Control, (bb) is in contemplation of such Change in Control,
and (cc) is taken to avoid the effect of this Agreement should
such action occur after such Change in Control; or
(vii) The failure of the Corporation to provide the Executive
with substantially the same fringe benefits (including, without
limitation, retirement plan, health care, insurance, stock options
and paid vacations) that were provided to him immediately prior to
the Change in Control, or with a package of fringe benefits that,
though one or more of such benefits may vary from those in effect
immediately prior to such Change in Control, is substantially
comparable in all material respects to such fringe benefits taken
as a whole.
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<PAGE> 99
The existence of Good Reason shall not be affected by Executive's
Disability. Executive's continued employment shall not constitute a
waiver of Executive's rights with respect to any circumstance
constituting Good Reason under this Agreement.
(g) Notice of Termination. "Notice of Termination" means a
written notice indicating the specific termination provision in this
Agreement relied upon and setting forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the
employment under the provision so indicated. The Executive shall not be
entitled to give a Notice of Termination that the Executive is
terminating employment for Good Reason more than six (6) months
following the occurrence of the event alleged to constitute Good
Reason, except with respect to an event which occurred before the
Change of Control, in which case the Notice of Termination must be
given within six (6) months following the Change of Control. Any
termination by the Corporation for Cause or due to Executive's
Disability, or by Executive for Good Reason shall be communicated by
Notice of Termination to the other party.
(h) Subsidiary. "Subsidiary" means a corporation with at least
eighty percent (80%) of its outstanding capital stock owned directly or
indirectly by the Corporation.
3. Eligibility for Severance Benefits. Subject to Paragraph 5, the
Executive shall receive the Severance Benefits described in Paragraph 4 if the
Executive's employment is terminated during the term of this Agreement, and
(a) The termination occurs within thirty-six (36) months after a
Change of Control, unless the termination is (i) because of Executive's
death or Disability, (ii) by the Corporation for Cause, or (iii) by the
Executive other than for Good Reason; or
(b) The Corporation terminates the employment of Executive within
six (6) months before a Change of Control, in contemplation of such
Change of Control, and to avoid the effect of this Agreement should
such action occur after such Change of Control.
4. Severance Benefits. Subject to Paragraph 5, the Executive shall
receive the following Severance Benefits (in addition to accrued compensation
and vested benefits) if eligible under Paragraph 3:
(a) A lump sum cash amount (which shall be paid not later than
thirty (30) days after the date of termination of employment) equal to
Executive's Average Base Salary, multiplied by__________ ;
(b) A lump sum cash amount (which shall be paid not later than
thirty (30) days after the date of termination of employment) equal to
the Executive's Average Bonus, multiplied by ___________;
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<PAGE> 100
(c) For a ________ year period after the date the employment is
terminated, the Corporation will arrange to provide to Executive at the
Corporation's expense, with:
(i) Health care coverage equal to that in effect for
Executive prior to the termination (or, if more favorable to
Executive, that furnished generally to salaried employees of the
Corporation), including, but not limited to, hospital, surgical,
medical, dental, prescription and dependent coverages. Upon the
expiration of the health care benefits required to be provided
pursuant to this subparagraph 4(c), the Executive shall be
entitled to the continuation of such benefits under the provisions
of the Consolidated Omnibus Budget Reconciliation Act. Health care
benefits other wise receivable by Executive pursuant to this
subparagraph 4(c) shall be reduced to the extent comparable
benefits are actually received by Executive from a subsequent
employer during the ___________ year period following the date the
employment is terminated and any such benefits actually received
by Executive shall be reported to the Corporation;
(ii) Life and accidental death and dismemberment insurance
coverage (including supplemental coverage purchase opportunity and
double indemnity for accidental death) equal (including policy
terms) to that in effect at the time Notice of Termination is
given (or on the date the employment is terminated if no Notice of
Termination is required) or, if more favorable to Executive, equal
to that in effect at the date the Change of Control occurs; and
(iii) Disability insurance coverage (including policy terms)
equal to that in effect at the time Notice of Termination is given
(or on the date employment is terminated if no Notice of
Termination is required) or, if more favorable to Executive, equal
to that in effect immediately prior to the Change of Control;
provided, however, that no income replacement benefits will be
payable under such disability policy with regard to the __________
year period following a termination of employment provided that
the payments payable under subparagraphs 4(a) and (b) above have
been made.
(d) The Corporation shall pay all fees for outplacement services
for the Executive up to a maximum equal to fifteen percent (15%) of the
Executive's base salary used to calculate his benefit under
subparagraph 4(a) plus provide a travel expense account of up to
$10,000 to reimburse job search travel;
(e) In computing and determining Severance Benefits under
subparagraphs 4(a) through (d) above, a decrease in Executive's salary,
incentive bonus, or insurance benefits shall be disregarded if such
decrease occurs within six (6) months before a Change of Control, is in
contemplation of such Change of Control, and is taken to avoid the
effect of this Agreement should such action be taken after such Change
of Control; in such event, the salary, incentive bonus, and/or
insurance benefits used to determine Average Annual Salary,
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<PAGE> 101
Average Bonus, and therefore Severance Benefits shall be that in effect
immediately before the decrease that is disregarded pursuant to this
subparagraph 4(e);
(f) Executive shall not be required to mitigate the amount of any
payment provided for in this Paragraph 4 by seeking other employment or
otherwise, nor shall the amount of any payment provided for in this
Paragraph 4 be reduced by any compensation earned by Executive as the
result of employment by another employer after the date the employment
is terminated, or otherwise, with the exception of a reduction in
health insurance coverage as provided in subparagraph 4(c)(i).
5. Maximum Payments. Notwithstanding any provision in this Agreement
to the contrary, if part or all of any amount to be paid to Executive by the
Corporation under this Agreement or otherwise constitute a "parachute payment"
(or payments) under Section 280G or any other similar provision of the Internal
Revenue Code of 1986, as amended (the "Code"), the following limitation shall
apply:
If the aggregate present value of such parachute payments (the
"Parachute Amount") exceeds (i) three (3) times Executive's "base
amount" as defined in Section 280G of the Code, and (ii) less One
Dollar ($1.00), then the amounts otherwise payable to or for the
benefit of the Executive subsequent to the termination of his
employment, and taken into account in calculating the Parachute Amount
(the "Termination Payments"), shall be reduced and/or delayed, as
further described below, to the extent necessary so that the Parachute
Amount is equal to three (3) times the Executive's "base amount," less
One Dollar ($1.00).
Any determination or calculation described in this Paragraph 5 shall be
made by the Corporation's independent accountants or the Corporation's tax
counsel, as selected by Executive. Such determination, and any proposed
reduction and/or delay in termination payments shall be furnished in writing
promptly by the accountants to the Executive. The Executive may then elect, in
his sole discretion, which and how much of any particular termination payment
shall be reduced and/or delayed and shall advise the Corporation in writing of
his election, within thirty (30) days of the accountant's determination, of the
reduction or delay in termination payments. If no such election is made by the
Executive within such 30-day period, the Corporation may elect which and how
much of any termination payment shall be reduced and/or delayed and shall notify
the Executive promptly of such election. As promptly as practicable following
such determination and the elections hereunder, the Corporation shall pay to or
distribute to or for the benefit of the Executive such amounts as are then due
to the Executive.
Any disagreement regarding a reduction or delay in termination payments
will be subject to arbitration under Paragraph 15 of this Agreement. Neither the
Executive's designation of specific payments to be reduced or delayed, nor the
Executive's acceptance of reduced or delayed payments, shall waive the
Executive's right to contest such reduction or delay.
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<PAGE> 102
6. Successors; Binding Agreements. This Agreement shall inure to the
benefit of and be enforceable by Executive's personal and legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. Executive's rights and benefits under this Agreement may not be
assigned, except that if Executive dies while any amount would still be payable
to Executive hereunder if Executive had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement, to the beneficiaries designated by the Executive to receive
benefits under this Agreement in a writing on file with the Corporation at the
time of the Executive's death or, if there is no such beneficiary, to
Executive's estate. The Corporation will require any successor (whether direct
or indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of the Corporation (or of any
division or Subsidiary thereof employing Executive) to expressly assume and
agree to perform this Agreement in the same manner and to the same extent that
the Corporation would be required to perform it if no such succession had taken
place. Failure of the Corporation to obtain such assumption and agreement prior
to the effectiveness of any such succession shall be a breach of this Agreement
and shall entitle Executive to compensation from the Corporation in the same
amount and on the same terms to which Executive would be entitled hereunder if
Executive terminated the employment for Good Reason following a Change of
Control.
7. Withholding of Taxes. The Corporation may withhold from any
amounts payable under this Agreement all federal, state, city, or other taxes as
required by law.
8. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
the respective addressees set forth on the first page of this Agreement, or at
such other addresses as the parties may designate in writing.
9. Miscellaneous. No provision of this Agreement may be modified,
waived, or discharged unless such waiver, modification, or discharge is agreed
to in writing and signed by Executive and such officer as may be specifically
designated by the Board of Directors of the Corporation. The validity,
interpretation, construction, and performance of this Agreement shall be
governed by the laws of the State of Michigan.
10. Employment Rights. Except as specifically provided in this
Agreement, this Agreement shall not confer upon Executive any right to continue
in the employ of the Corporation or its Subsidiaries and shall not in any way
affect the right of the Corporation or its Subsidiaries to dismiss or otherwise
terminate Executive's employment at any time with or without cause.
11. No Vested Interest. Neither Executive nor Executive's beneficiary
shall have any right, title, or interest in any benefit under this Agreement
prior to the occurrence of the right to the payment thereof, or in any property
of the Corporation or its subsidiaries or affiliates.
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<PAGE> 103
12. Prior Agreements. This Agreement contains the understanding
between the parties hereto with respect to Severance Benefits in connection with
a Change of Control of the Corporation and supersedes any such prior agreement
between the Corporation (or any predecessor of the Corporation) and Executive.
If there is any discrepancy or conflict between this Agreement and any plan,
policy, or program of the Corporation regarding any term or condition of
Severance Benefits in connection with a Change of Control of the Corporation,
the language of this Agreement shall govern.
13. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
14. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
15. Arbitration. The sole and exclusive method for resolving any
dispute arising out of this Agreement shall be arbitration in accordance with
this paragraph. Except as provided otherwise in this paragraph, arbitration
pursuant to this paragraph shall be governed by the Commercial Arbitration Rules
of the American Arbitration Association. A party wishing to obtain arbitration
of an issue shall deliver written notice to the other party, including a
description of the issue to be arbitrated. Within fifteen (15) days after either
party demands arbitration, the Corporation and the Executive shall each appoint
an arbitrator. Within fifteen (15) additional days, these two arbitrators shall
appoint the third arbitrator by mutual agreement; if they fail to agree within
said fifteen (15) day period, then the third arbitrator shall be selected
promptly pursuant to the rules of the American Arbitration Association for
Commercial Arbitration. The arbitration panel shall hold a hearing in Kent
County, Michigan, within ninety (90) days after the appointment of the third
arbitrator. The fees and expenses of the arbitrator, and any American
Arbitration Association fees, shall be paid by the Corporation. Both the
Corporation and the Executive may be represented by counsel and may present
testimony and other evidence at the hearing. Within ninety (90) days after
commencement of the hearing, the arbitration panel will issue a written
decision; the majority vote of two of the three arbitrators shall control. The
majority decision of the arbitrators shall be final and binding on the parties,
and shall be enforceable in accordance with law. Judgment may be entered on the
arbitrators' award in any court having jurisdiction. The Executive shall be
entitled to seek specific performances of his rights under this Agreement during
the pendency of any dispute or controversy arising under or in connection with
this Agreement. The Corporation will reimburse Executive for all reasonable
attorney fees incurred by Executive as the result of any arbitration with regard
to any issue under this Agreement (or any judicial proceeding to compel or to
enforce such arbitration); (i) which is initiated by Executive if the
Corporation is found in such proceeding to have violated this Agreement
substantially as alleged by Executive; or (ii) which is initiated by the
Corporation, unless Executive is found in such proceeding to have violated this
Agreement substantially as alleged by the Corporation.
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<PAGE> 104
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
day and year written above.
CORPORATION: INDEPENDENT BANK CORPORATION
BY
---------------------------------------
ITS
------------------------------------
EXECUTIVE:
-----------------------------------------
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<PAGE> 1
EXHIBIT 10
WARRANT PURCHASE AGREEMENT
THIS WARRANT PURCHASE AGREEMENT (this "Warrant Purchase Agreement") is
made as of March 24, 1999, between INDEPENDENT BANK CORPORATION, a Michigan
corporation ("IBC"), and MUTUAL SAVINGS BANK, f.s.b., a federally chartered
stock savings bank ("MSB").
RECITALS:
A. Concurrently herewith, IBC and MSB have entered into a certain
Agreement and Plan of Reorganization, dated as of the date hereof (the
"Agreement"), which provides for the consolidation of MSB into a wholly owned
subsidiary of IBC (the "Consolidation") pursuant to a Consolidation Agreement
containing certain additional terms and conditions relating to the Consolidation
(the "Consolidation Agreement"). (The Agreement and the Consolidation Agreement
are sometimes hereinafter collectively referred to as the "Merger Documents.")
All capitalized terms used herein and not otherwise defined herein shall have
the meanings ascribed to them in the Merger Documents.
B. As a condition to IBC's entering into the Agreement, and in
consideration therefor, MSB has agreed to issue to IBC a warrant or warrants
entitling IBC to purchase up to a total of 853,792 shares of MSB Common Stock,
on the terms and conditions set forth herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
SECTION 1. ISSUANCE, DELIVERY, AND EXERCISE OF THE WARRANT.
Concurrently with the execution of the Agreement and this Warrant Purchase
Agreement, MSB shall execute a warrant in favor of IBC in the form attached as
Attachment A hereto (the "Warrant") to purchase up to a total of 853,792 shares
of MSB Common Stock at a purchase price equal to $9.8125 per share (the
"Exercise Price"), subject to adjustments as provided in the Warrant. (The
holder of the Warrant from time to time is hereinafter referred to as the
"Holder.") The Warrant shall be exercisable in accordance with the terms and
conditions set forth therein.
SECTION 2. REGISTRATION RIGHTS. If, at any time after the Warrant
becomes exercisable in accordance with its terms, MSB shall receive a written
request therefor from the Holder, MSB shall prepare and file a registration
statement under the Securities Act of 1933, as amended, or under the applicable
federal laws and Office of Thrift Supervision regulations (the "Applicable
Securities Laws") covering such number of shares of MSB Common Stock as the
Holder shall specify in the request and shall use its best efforts to cause such
registration statement to become effective; provided, however, that the Holder
shall only have the right to request one such registration. Without the written
consent of the Holder, neither MSB nor any other holder of securities of MSB may
include any other securities in such registration.
<PAGE> 2
SECTION 3. "PIGGYBACK" RIGHTS. If, at any time after the Warrant
becomes exercisable in accordance with its terms, MSB shall determine to proceed
with the preparation and filing of a registration statement under the Applicable
Securities Laws in connection with the proposed offer and sale for money of any
of its securities (other than in connection with a dividend reinvestment,
employee stock purchase, stock option, or similar plan or a registration
statement on Form S-4) by it or any of its security holders, MSB shall give
written notice thereof to the Holder. Upon the written request of the Holder
given within ten days after receipt of any such notice from MSB, MSB shall,
except as herein provided, cause all shares of MSB Common Stock which the Holder
shall request be included in such registration statement to be so included;
provided, however, that nothing herein shall prevent MSB from abandoning or
delaying any registration at any time; and provided, further, that if MSB
decides not to proceed with a registration after the registration statement has
been filed with the United States Securities and Exchange Commission or the
Office of Thrift Supervision, as required by applicable law (the "Securities
Regulator") and MSB's decision not to proceed is primarily based upon the
anticipated public offering price of the securities to be sold by MSB, MSB shall
promptly complete the registration for the benefit of the Holder if the Holder
agrees to bear all additional and incremental expenses incurred by MSB as the
result of such registration after MSB has decided not to proceed. If any
registration pursuant to this Section shall be underwritten in whole or in part,
the Holder may require that any shares of MSB Common Stock requested for
inclusion pursuant to this Section be included in the underwriting on the same
terms and conditions as the securities otherwise being sold through the
underwriters. In the event that the shares of MSB Common Stock requested for
inclusion pursuant to this Section would constitute more than 25 percent of the
total number of shares to be included in a proposed underwritten public
offering, and if in the good faith judgment of the managing underwriter of such
public offering the inclusion of all of such shares would interfere with the
successful marketing of the shares being offered by MSB, the number of shares
otherwise to be included in the underwritten public offering hereunder may be
reduced; provided, however, that after any such required reduction, the shares
of MSB Common Stock to be included in such offering for the account of the
Holder shall constitute at least 25 percent of the total number of shares to be
included in such offering.
SECTION 4. OBLIGATIONS OF MSB IN CONNECTION WITH A
REGISTRATION. If and whenever MSB is required by the provisions of Sections 2 or
3 hereof to effect the registration of any shares of MSB Common Stock under the
Applicable Securities Laws, MSB shall:
(a) prepare and file with the Securities Regulator a
registration statement with respect to such securities and use its best
efforts to cause such registration statement to become and remain
effective for such period as may be reasonably necessary to effect the
sale of such securities, not to exceed nine months;
(b) prepare and file with the Securities Regulator such
amendments to such registration statement and supplements to the
prospectus contained therein as may be necessary to keep such
registration statement effective for such period as may be reasonably
necessary to effect the sale of such securities, not to exceed nine
months;
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<PAGE> 3
(c) furnish to the Holder and to the underwriters of the
securities being registered such reasonable number of copies of the
registration statement, amendments thereto, preliminary prospectus,
final prospectus, and such other documents as the Holder or such
underwriters may reasonably request in order to facilitate the public
offering of such securities;
(d) use its best efforts to register or qualify the securities
covered by such registration statement under such state securities or
blue sky laws of such jurisdictions as the Holder or such underwriters
may reasonably request; provided that MSB shall not be required by
virtue hereof to submit to the general jurisdiction of any state;
(e) notify the Holder, promptly after MSB shall receive notice
thereof, of the time when such registration statement or any
post-effective amendment thereof has become effective or a supplement
to any prospectus forming a part of such registration statement has
been filed;
(f) notify the Holder promptly of any request by the
Securities Regulator for the amending or supplementing of such
registration statement or prospectus or for additional information;
(g) prepare and file with the Securities Regulator, promptly
upon the request of the Holder, any amendments or supplements to such
registration statement or prospectus which, in the opinion of counsel
for the Holder (and concurred in by counsel for MSB), is required under
the Applicable Securities Laws or the rules and regulations promulgated
thereunder in connection with the distribution of the shares of MSB
Common Stock by the Holder;
(h) prepare and promptly file with the Securities Regulator
such amendment or supplement to such registration statement or
prospectus as may be necessary to correct any statements or omissions
if, at the time when a prospectus is required to be delivered under the
Applicable Securities Laws, any event shall have occurred as the result
of which such prospectus as then in effect would include an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading;
(i) advise the Holder, promptly after it shall receive notice
or obtain knowledge thereof, of the issuance of any stop order by the
Securities Regulator suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for that
purpose and promptly use its best efforts to prevent the issuance of
any stop order or to obtain its withdrawal if such stop order should be
issued; and
(j) at the request of the Holder, furnish on the date or dates
provided for in the underwriting agreement: (i) an opinion or opinions
of the counsel representing MSB for the purposes of such registration,
addressed to the underwriters and to the Holder, covering such matters
as such underwriters and the Holder may reasonably request and as are
customarily
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<PAGE> 4
covered by issuer's counsel at that time; and (ii) a letter or letters
from the independent certified public accountants of MSB, addressed to
the underwriters and to the Holder, covering such matters as such
underwriters or the Holder may reasonably request, in which letters
such accountants shall state (without limiting the generality of the
foregoing) that they are independent certified public accountants
within the meaning of the Applicable Securities Laws and that, in the
opinion of such accountants, the financial statements and other
financial data of MSB included in the registration statement or any
amendment or supplement thereto comply in all material respects with
the applicable accounting requirements of the Applicable Securities
Laws.
SECTION 5. EXPENSES OF REGISTRATION. With respect to a registration
requested pursuant to Section 2 hereof and with respect to each inclusion of
shares of MSB Common Stock in a registration statement pursuant to Section 3
hereof, MSB shall bear the following fees, costs, and expenses: all
registration, stock exchange listing, and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for MSB, fees and disbursements of
counsel for the underwriter or underwriters of such securities (if MSB and/or
the Holder are required to bear such fees and disbursements), and all legal fees
and disbursements and other expenses of complying with state securities or blue
sky laws of any jurisdictions in which the securities to be offered are to be
registered or qualified. Fees and disbursements of counsel and accountants for
the Holder, underwriting discounts and commissions and transfer taxes relating
to the MSB Common Stock being sold for the Holder, and any other expenses
incurred by the Holder not expressly included above shall be borne by the
Holder.
SECTION 6. INDEMNIFICATION.
(a) MSB shall indemnify and hold harmless the Holder, any
underwriter (as defined in the Applicable Securities Laws) for the
Holder, and each person, if any, who controls the Holder or such
underwriter within the meaning of the Applicable Securities Laws, from
and against any and all loss, damage, liability, cost, and expense to
which the Holder or any such underwriter or controlling person may
become subject under the Applicable Securities Laws or otherwise,
insofar as such losses, damages, liabilities, costs, or expenses are
caused by any untrue statement or alleged untrue statement of any
material fact contained in any registration statement filed pursuant to
Section 4 hereof, any prospectus or preliminary prospectus contained
therein, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they are made, not
misleading; provided, however, that MSB will not be liable in any such
case to the extent that any such loss, damage, liability, cost, or
expense arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity
with information furnished by the Holder, such underwriter, or such
controlling persons in writing specifically for use in the preparation
thereof.
(b) Promptly after receipt by an indemnified party pursuant to
the provisions of paragraph (a) of this Section 6 of notice of the
commencement of any action involving the
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<PAGE> 5
subject matter of the foregoing indemnity provisions, such indemnified
party shall, if a claim thereof is to be made against MSB pursuant to
the provision of such paragraph (a), promptly notify MSB of the
commencement thereof; but the omission to so notify MSB will not
relieve it from any liability which it may have to any indemnified
party otherwise hereunder. In case such action is brought against any
indemnified party and such indemnified party notifies MSB of the
commencement thereof, MSB shall have the right to participate in and,
to the extent that it may wish to do so, to assume the defense
thereof, with counsel satisfactory to such indemnified party;
provided, however, if the defendants in any action include both the
indemnified party and MSB and there is a conflict of interest which
would prevent counsel for MSB from also representing the indemnified
party, the indemnified party or parties shall have the right to select
one separate counsel to participate in the defense of such action on
behalf of such indemnified party or parties. After notice from MSB to
such indemnified party of its election so to assume the defense of any
such action, the indemnified party shall have the right to participate
in such action and to retain its own counsel, but MSB shall not be
required to indemnify and hold harmless the indemnified party pursuant
to the provisions of such paragraph (a) for any legal fees or other
expenses subsequently incurred by such indemnified party in connection
with the defense thereof, other than reasonable costs of
investigation, unless (i) the indemnified party shall have employed
separate counsel in accordance with the provisions of the preceding
sentence of this paragraph (b), (ii) MSB shall not have employed
counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after the notice of the
commencement of the action, or (iii) MSB has authorized the employment
of counsel for the indemnified party at the expense of MSB.
(c) If recovery is not available under the foregoing
indemnification provisions, for any reason other than as specified
therein, the parties entitled to indemnification by the terms thereof
shall be entitled to contribution to liabilities and expenses, except
to the extent that contribution is not permitted under Section 11(f) of
the Securities Act of 1933, as amended. In determining the amount of
contribution to which the respective parties are entitled, there shall
be considered the parties' relative knowledge and access to information
concerning the matter with respect to which the claim was asserted, the
opportunity to correct and prevent any statement or omission, and any
other equitable considerations appropriate under the circumstances.
SECTION 7. REPURCHASE RIGHTS.
(a) Immediately prior to the occurrence of a Repurchase Event
(as defined below), (i) following a request of the Holder, delivered
prior to an Exercise Termination Event, MSB (or any successor thereto)
shall repurchase the Warrant from the Holder at a price (the "Warrant
Repurchase Price") equal to the amount by which (A) the Market/Offer
Price (as defined below) exceeds (B) the Exercise Price, multiplied by
the number of shares for which the Warrant may then be exercised, and
(ii) at the request of the owner of shares of MSB Common Stock
purchased pursuant to an exercise of the Warrant ("Warrant Stock") from
time to time (the "Owner"), delivered within 90 days of such occurrence
, MSB shall repurchase such number of shares of the Warrant Stock from
the Owner as the Owner shall
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<PAGE> 6
designate at a price (the "Warrant Stock Repurchase Price") equal to
the Market/Offer Price multiplied by the number of shares of Warrant
Stock so designated.
(b) For purposes of paragraph (a) of this Section 7, the
"Market/Offer Price" shall mean the highest of (i) the price per share
at which a tender offer or exchange offer for shares of MSB Common
Stock has been made, (ii) the price per share of MSB Common Stock to be
paid by any third party pursuant to an agreement with MSB, and (iii)
the highest closing price for shares of MSB Common Stock within the
4-month period immediately preceding the date the Holder gives notice
of the required repurchase of the Warrant or the Owner gives notice of
the required repurchase of Warrant Stock, as appropriate. In the event
that an exchange offer is made or an agreement is entered into for a
merger or consolidation involving consideration other than cash, the
value of the securities or other property issuable or deliverable in
exchange for MSB Common Stock shall be determined by a nationally
recognized investment banking firm mutually acceptable to the parties
hereto.
(c) The Holder and the Owner may exercise their respective
rights to require MSB to repurchase the Warrant or the Warrant Stock
pursuant to this Section 7 by surrendering for such purpose to MSB, at
its principal office, the Warrant or certificates for shares of Warrant
Stock, as the case may be, free and clear of any liens, claims,
encumbrances, or rights of third parties of any kind, accompanied by a
written notice or notices stating that the Holder or the Owner, as the
case may be, requests MSB to repurchase such Warrant or Warrant Stock
in accordance with the provisions of this Section 7. Subject to the
last proviso of Subsection 7(d) below, as promptly as practicable, and
in any event within five business days after the surrender of the
Warrant or certificates representing shares of Warrant Stock and the
receipt of such notice or notices relating thereto, MSB shall deliver
or cause to be delivered to the Holder or Owner the Warrant Repurchase
Price or the Warrant Stock Repurchase Price therefor, as applicable, or
the portion thereof which MSB is not then prohibited under applicable
law and regulation from so delivering.
(d) To the extent that MSB is prohibited under applicable law
or regulation, or as a result of administrative or judicial action,
from repurchasing the Warrant and/or the Warrant Stock in full at any
time that it may be required to do so hereunder, MSB 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 Warrant Repurchase Price and the
Warrant Stock Repurchase Price, respectively, which it is no longer
prohibited from delivering, within five business days after the date on
which MSB is no longer so prohibited. Upon receipt of such notice from
MSB and for a period of 15 days thereafter, the Holder and/or Owner may
revoke its notice of repurchase of the Warrant and/or Warrant Stock by
written notice to MSB at its principal office stating that the Holder
and/or the Owner elects to revoke its election to exercise its right to
require MSB to repurchase the Warrant and/or Warrant Stock, whereupon
MSB will promptly deliver to the Holder and/or Owner the Warrant and/or
certificates representing shares of Warrant Stock surrendered to MSB
for purposes of such repurchase. Whether or not such election is
revoked, MSB hereby agrees to use its best efforts to obtain all
required legal and regulatory
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<PAGE> 7
approvals necessary to permit MSB to repurchase the Warrant and/or the
Warrant Stock to the full extent and as promptly as practicable.
(e) For purposes of this Section 7, a Repurchase Event shall
be deemed to have occurred upon (i) the consummation of any merger,
consolidation or similar transaction involving MSB or any purchase,
lease or other acquisition of all or a substantial portion of the
assets of MSB, other than any such transaction which would not
constitute an Acquisition Transaction pursuant to the provisions of
Section 1(c) of the Warrant, or (ii) upon the acquisition by any person
of beneficial ownership of 50% or more of the then outstanding shares
of MSB Common Stock.
SECTION 8. ASSUMPTION OF OBLIGATIONS UNDER THIS AGREEMENT.
MSB will not enter into any transaction described in paragraph 5(a) of the
Warrant unless the "Acquiring Corporation" (as that term is defined in the
Warrant) assumes in writing all the obligations of MSB hereunder. Neither of the
parties hereto may assign any of its rights or obligations under this Agreement
or the Warrant created hereunder to any other person, without the express
written consent of the other party, except that in the event a Triggering Event
shall have occurred prior to an Exercise Termination Event, the Holder, subject
to the express provisions hereof, may assign in whole or in part its rights and
obligations hereunder within 90 days following such Triggering Event; provided,
however, that until the date 15 days following the date on which the Office of
Thrift Supervision approves an application by the Holder pursuant to applicable
laws and regulations to acquire the shares of MSB Common Stock subject to the
Warrant, IBC may not assign its rights under the Warrant 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 MSB,
(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 the Holder's
behalf, or (iv) any other manner approved by the Office of Thrift Supervision.
SECTION 9. REMEDIES. Without limiting the foregoing or any remedies
available to the Holder, MSB specifically acknowledges that neither IBC nor any
successor holder of the Warrant would have an adequate remedy at law for any
breach of this Warrant Purchase Agreement and MSB hereby agrees that IBC and any
successor holder of the Warrant shall be entitled to specific performance of the
obligations of MSB hereunder and injunctive relief against actual or threatened
violations of the provisions hereof.
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SECTION 10. TERMINATION. This Warrant Purchase Agreement will
terminate upon a termination of the Warrant in accordance with Section 9
thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant
Purchase Agreement as of the day and year first above written.
INDEPENDENT BANK CORPORATION
By: /s/ Charles Van Loan
----------------------------
Charles Van Loan
Its: Chief Executive Officer
MUTUAL SAVINGS BANK, F.S.B.
By: /s/ Robert N. Schuster
----------------------------
Robert N. Schuster
Its: Chief Executive Officer
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<PAGE> 9
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR
QUALIFIED UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED WITHOUT BEING SO REGISTERED OR QUALIFIED UNLESS AN EXEMPTION OR
EXEMPTIONS FROM SUCH REGISTRATION OR QUALIFICATION REQUIREMENTS ARE AVAILABLE.
WARRANT
TO PURCHASE 853,792 COMMON SHARES
OF
MUTUAL SAVINGS BANK, F.S.B.
This is to certify that, for value received, INDEPENDENT BANK
CORPORATION, a Michigan corporation ("IBC"), is entitled to purchase from MUTUAL
SAVINGS BANK, f.s.b., a federally chartered stock savings bank ("MSB"), at any
time within ninety days after the first occurrence of a Triggering Event and
prior to the occurrence of an Exercise Termination Event, an aggregate of up to
853,792 common shares, $0.01 par value per share, of MSB ("MSB Common Stock"),
at a price of $9.8125 per share (the "Exercise Price"), subject to the terms and
conditions of this Warrant and a certain Warrant Purchase Agreement, of even
date herewith, between IBC and MSB (the "Warrant Purchase Agreement"). The
number of shares of MSB Common Stock which may be received upon the exercise of
this Warrant and the Exercise Price are subject to adjustment from time to time
as hereinafter set forth. The terms and conditions set forth in this Warrant and
the Warrant Purchase Agreement shall be binding upon the respective successors
and assigns of both of the parties hereto. This Warrant is issued in connection
with a certain Agreement and Plan of Reorganization, dated as of the date
hereof, between IBC and MSB (the "Merger Agreement"), which provides for the
consolidation of MSB into a wholly owned subsidiary of IBC (the
"Consolidation"), and a certain Consolidation Agreement among IBC, its
subsidiary and MSB, which provides certain additional terms and conditions
relating to the Merger (the "Consolidation Agreement"). The Merger Agreement and
the Consolidation Agreement are sometimes hereinafter collectively referred to
as the "Merger Documents." All capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Merger Documents.
The term "Holder" shall mean and refer to IBC or any successor holder of this
Warrant.
SECTION 1. EXERCISE OF THE WARRANT.
(a) The Holder will not exercise this Warrant unless it has
obtained all required approvals, if any, of appropriate regulatory
authorities having jurisdiction, including the Office of Thrift
Supervision, pursuant to all applicable laws and regulations. Further,
subject to the terms and conditions set forth in this Warrant and in
the Warrant Purchase Agreement and the provisions of applicable law,
the Holder will not exercise this Warrant without the
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written consent of MSB except within ninety days after the occurrence
of any of the following events (a "Triggering Event") and prior to the
occurrence of an Exercise Termination Event:
(i) any material, willful, and intentional breach of
the Merger Documents by MSB that would permit IBC to terminate
the Merger Documents (A) occurring after the receipt by MSB of
a proposal to engage in an Acquisition Transaction, (B)
occurring after the announcement by any other Person of an
intention to engage in an Acquisition Transaction, or (c) in
anticipation and for the purpose of engaging in an Acquisition
Transaction;
(ii) (A) a proposal to engage in an Acquisition
Transaction is submitted to and approved by the shareholders
of MSB at any time prior to December 31, 2000, or (B) a Tender
Offer is commenced and the transactions contemplated in the
Tender Offer are completed in such a manner that the Person
making the Tender Offer acquires beneficial ownership of more
than 20 percent of the capital stock or any other class of
voting securities of MSB, and the Consolidation is not
consummated prior to December 31, 2000;
(iii) (A) a proposal to engage in an Acquisition
Transaction is received by MSB or a Tender Offer is made
directly to the shareholders of MSB or the intention of making
an Acquisition Transaction or Tender Offer is announced at any
time prior to the holding of the MSB Shareholders' Meeting;
and (B) the Board of Directors of MSB (1) fails to recommend
to the shareholders of MSB that they vote their shares of MSB
Common Stock in favor of the approval of the Consolidation,
(2) withdraws such recommendation previously made, (3) fails
to solicit proxies of shareholders of MSB to approve the
Consolidation, or (4) fails to hold the MSB Shareholders'
Meeting;
(b) Notwithstanding the foregoing, this Warrant shall not be
exercisable after the occurrence of an Exercise Termination Event which
for purposes hereof means (i) the Effective Time (as defined in the
Agreement) of the Consolidation, (ii) the failure of the shareholders
of IBC to approve the Consolidation; (iii) the failure of any
Regulatory Authority to provide any required Consent to the
Consolidation, which failure was not the result of the existence of the
Acquisition Proposal or a breach by MSB of any of its obligations under
any of the Merger Documents; or (iv) the Merger Documents are
terminated pursuant to Section 6.1 of the Merger Agreement, unless the
event giving rise to the right to terminate is a breach by MSB and is
preceded by a Triggering Event or the receipt by MSB of an Acquisition
Transaction proposal, or the announcement by another Person of a
proposal involving an Acquisition Transaction.
(c) An "Acquisition Transaction" shall mean a transaction
between MSB and any Person other than IBC or any Affiliate of IBC
involving (A) the sale or other disposition of more than 20% of the
shares of the capital stock or any other class of voting securities of
MSB, including, but not limited to, a Tender Offer, (B) the sale or
other disposition of 15%
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or more of the consolidated assets or deposits of MSB, or (c) a merger
or consolidation involving MSB other than a transaction pursuant to
which MSB will be the surviving corporation and the current
shareholders of MSB will be the owners of a majority of the stock of
the surviving corporation following the transaction. For purposes of
this Section 1, a Tender Offer which is contingent upon the expiration
of the Warrant is deemed to commence when it is announced.
(d) This Warrant shall be exercised by presentation and
surrender hereof to MSB at its principal office accompanied by (i) a
written notice of exercise for a specified number of shares of MSB
Common Stock, (ii) payment to MSB, for the account of MSB, of the
Exercise Price for the number of shares specified in such notice, and
(iii) a certificate of the Holder indicating the Triggering Event that
has occurred which entitles the Holder to exercise this Warrant. The
Exercise Price for the number of shares of MSB Common Stock specified
in the notice shall be payable in immediately available funds.
(e) Upon such presentation and surrender, MSB shall issue
promptly (and within three business days if requested by the Holder) to
the Holder, or any assignee, transferee, or designee permitted by
subparagraph (g) of this Section 1, the shares to which the Holder is
entitled hereunder and the Holder shall deliver to MSB a copy of this
Warrant and a letter agreeing that the Holder will not offer to sell or
otherwise dispose of such shares in violation of applicable law or the
provisions of this Warrant.
(f) Certificates for shares of MSB Common Stock 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, as amended (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 MSB a copy of a letter from the staff of the SEC, or an
opinion of counsel, in form and substance reasonably satisfactory to
MSB, to the effect that such legend is not required for purposes of the
1933 Act; (ii) the reference to the provisions of this Warrant 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 Warrant 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.
3
<PAGE> 12
(g) If this Warrant should be exercised in part only, MSB
shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to
purchase the balance of the shares purchasable hereunder. Upon receipt
by MSB of this Warrant, in proper form for exercise, the Holder shall
be deemed to be the holder of record of the shares of MSB Common Stock
issuable upon such exercise, notwithstanding that the stock transfer
books of MSB shall then be closed or that certificates representing
such shares of MSB Common shall not then be actually delivered to the
Holder. MSB shall pay all expenses, and any and all 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 1 in the name of the Holder or of any assignee, transferee, or
designee permitted by subparagraph (g) of this Section 1.
(h) Neither of the parties hereto may assign any of its rights
or obligations under this Warrant created hereunder to any other
person, without the express written consent of the other party, except
that in the event a Triggering Event shall have occurred prior to an
Exercise Termination Event, the Holder, subject to the express
provisions hereof, may assign in whole or in part its rights and
obligations hereunder within 90 days following such Triggering Event;
provided, however, that until the date 15 days following the date on
which the Office of Thrift Supervision approves an application by the
Holder pursuant to applicable laws and regulations to acquire the
shares of MSB Common Stock subject to this Warrant, IBC may not assign
its rights under this Warrant 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 MSB,
(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 the Holder's behalf, or (iv) any other manner approved
by the Office of Thrift Supervision.
SECTION 2. CERTAIN COVENANTS AND REPRESENTATIONS OF MSB AND IBC.
(a) MSB shall at all times maintain sufficient authorized but
unissued shares of MSB Common Stock so that this Warrant may be
exercised without additional authorization of the holders of MSB Common
Stock, after giving effect to all other outstanding options, warrants,
convertible securities, and other rights to purchase MSB Common Stock.
(b) MSB represents and warrants to the Holder that the shares
of MSB Common Stock issued upon an exercise of this Warrant will be
duly authorized, fully paid, nonassessable, and subject to no
preemptive rights.
(c) MSB agrees (i) 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 MSB; (ii) promptly
to take all action as may from time to time be required, (including,
without limitation (A) complying with all pre-merger notification,
reporting, and waiting period requirements
4
<PAGE> 13
specified in 15 U.S.C. Section 18a and regulations promulgated
thereunder, and (B) in the event, under the Bank Holding Company Act of
1956, as amended (the "Bank Holding Company Act"), or the Change in
Bank Control Act of 1978, or other statute, the prior approval of the
Office of Thrift Supervision or other regulatory agency (collectively,
the "Agencies"), is necessary before the Warrant may be exercised or
transferred, cooperate fully with the Holder in preparing such
applications and providing such information to the Agencies as the
Agencies may require) in order to permit the Holder to exercise or
transfer this Warrant and MSB duly and effectively to issue shares
pursuant to the exercise hereof; and (iii) promptly to take all action
provided herein to protect the rights of the Holder against dilution.
(d) IBC represents and warrants to MSB that the Warrant is not
being, and any shares of MSB Common Stock or other securities acquired
by IBC upon exercise of the Warrant will not be, acquired with a view
to the public distribution thereof and will not be transferred or
otherwise disposed of except in a transaction registered or exempt from
registration under the Securities Act of 1933, as amended.
SECTION 3. FRACTIONAL SHARES. MSB shall not be required to issue
fractional shares of MSB Common Stock upon an exercise of this Warrant but shall
pay for such fraction of a share in cash or by certified or official bank check
at the Exercise Price.
SECTION 4. EXCHANGE OR LOSS OF WARRANT. This Warrant is exchangeable,
without expense, at the option of the Holder, upon presentation and surrender
hereof at the principal office of MSB for other Warrants of different
denominations entitling the Holder thereof to purchase in the aggregate the same
number of shares of MSB Common Stock purchasable hereunder. The term "Warrant"
as used herein includes any warrants for which this Warrant may be exchanged.
Upon receipt by MSB of evidence reasonably satisfactory to it of the loss,
theft, destruction, or mutilation of this Warrant, and (in the case of loss,
theft, or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Warrant, if mutilated, MSB will execute and
deliver a new Warrant of like tenor and date. Any such new Warrant executed and
delivered shall constitute an additional contractual obligation on the part of
MSB, whether or not the Warrant so lost, stolen, destroyed, or mutilated shall
at any time be enforceable by anyone.
SECTION 5. CERTAIN TRANSACTIONS.
(a) In the event that prior to an Exercise Termination Event,
MSB shall (i) consolidate with or merge into any Person, other than IBC
or one of its Affiliates, and shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) permit any Person,
other than IBC or one of its Affiliates, to merge into MSB, and MSB
shall be the continuing or surviving corporation, but, in connection
with such merger, (x) the shareholders of MSB immediately prior to such
merger own less than a majority of the surviving corporation's
outstanding voting securities, or (y) the then outstanding voting
shares of MSB Common Stock shall be changed into or exchanged for stock
or other securities of any other Person or cash or any other property,
or (iii) sell or otherwise transfer all or substantially all of its
assets to any Person, other than IBC or one of its Affiliates, then,
5
<PAGE> 14
and in any such case, the agreement governing such transaction shall
make proper provision so that this Warrant shall, upon the
consummation of any such transaction and upon the terms and conditions
set forth herein, be converted into, or exchanged for, a warrant, at
the option of the Holder, of either (A) the Acquiring Corporation (as
hereinafter defined), (B) any company which controls the Acquiring
Corporation, or (c) in the case of a merger described in clause
(a)(ii) above, MSB, in which case such warrant shall be a newly issued
warrant (in any such case, the "Substitute Warrant").
(b) For purposes of this Section 5, the following terms
have the meanings indicated:
(i) "Acquiring Corporation" shall mean (A) the
continuing or surviving corporation of a consolidation or
merger with MSB (if other than MSB), (B) the corporation
merging into MSB in a merger in which MSB is the continuing or
surviving person and in connection with which the then
outstanding shares of MSB Common Stock are changed into or
exchanged for stock or other securities of any other Person or
cash or any other property, or (c) the transferee of all or
substantially all of MSB's assets;
(ii) "Substitute Common" shall mean the common stock
issued by the issuer of the Substitute Warrant;
(iii) "Assigned Value" shall mean the Market/Offer
Price as determined pursuant to Subsection 7(b) of the Warrant
Purchase Agreement; provided, however, that in the event of a
sale of all or substantially all of MSB's assets, the Assigned
Value shall be the sum of the price paid in such sale for such
assets and the current market value of the remaining assets of
MSB as determined by a recognized investment banking firm
selected by the Holder, divided by the number of shares of MSB
Common Stock outstanding at the time of such sale;
(iv) "Average Price" shall mean the average closing
price of a share of Substitute Common for the 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 on the day preceding such
consolidation, merger, or sale; provided that if MSB is the
issuer of the Substitute Warrant, the Average Price shall be
computed with respect to a share of the common stock issued by
the Person merging into MSB or by any company which controls
such Person, as the Holder may elect;
(v) A "Person" shall mean any individual, firm,
corporation or other entity and include as well any syndicate
or group deemed to be a "person" by Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended; and
6
<PAGE> 15
(vi) "Affiliate" shall have the meaning ascribed to such
term in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended.
(c) The Substitute Warrant shall have the same terms as this
Warrant, provided that, if the terms of the Substitute Warrant cannot,
for legal reasons, be the same as this Warrant, such terms shall be as
similar as possible and in no event less advantageous to the Holder.
The issuer of the Substitute Warrant shall also enter into an agreement
with the then Holder of the Substitute Warrant in substantially the
same form as the Warrant Purchase Agreement, which shall be applicable
to the Substitute Warrant.
(d) The Substitute Warrant shall be exercisable for such
number of shares of Substitute Common as is equal to the Assigned Value
multiplied by the number of shares of MSB Common Stock for which this
Warrant is then exercisable, divided by the Average Price. The exercise
price of the Substitute Warrant per share of Substitute Common shall be
equal to the Exercise Price multiplied by a fraction in which the
numerator is the number of shares of MSB Common Stock for which this
Warrant is then exercisable and the denominator is the number of shares
of Substitute Common for which the Substitute Warrant is exercisable.
SECTION 6. RIGHTS OF THE HOLDER; REMEDIES.
(a) The Holder shall not, by virtue hereof and prior to the
exercise hereof, be entitled to any rights of a holder of MSB Common
Stock.
(b) Without limiting the foregoing or any remedies available
to the Holder, MSB specifically acknowledges that neither IBC nor any
successor Holder of this Warrant would have an adequate remedy at law
for any breach of this Warrant and MSB hereby agrees that IBC and any
successor Holder shall be entitled to specific performance of the
obligations of MSB hereunder and injunctive relief against actual or
threatened violations of the provisions hereof.
SECTION 7. ANTIDILUTION PROVISIONS. The number of shares of MSB
Common Stock purchasable upon the exercise hereof shall be subject to adjustment
from time to time as provided in this Section 7.
(a) In the event that MSB issues any additional shares of MSB
Common Stock at any time after the date hereof (including pursuant to
stock option plans), the number of shares of MSB Common Stock which can
be purchased pursuant to this Warrant shall be increased by an amount
equal to 19.9 percent of the additional shares so issued.
(b) (i) In the event that, after the date hereof, MSB pays or
makes a dividend or other distribution of any class of capital stock of
MSB in MSB Common Stock, the number of shares of MSB Common Stock
purchasable upon exercise hereof shall be increased by multiplying such
number of shares by a fraction of which the denominator shall be the
number of shares of MSB Common Stock outstanding at the close of
business on the day immediately preceding the date of such distribution
and the numerator shall be the
7
<PAGE> 16
sum of such number of shares and the total number of shares
constituting such dividend or other distribution, such increase to
become effective immediately after the opening of business on the day
following such distribution.
(ii) In the event that, after the date hereof,
outstanding shares of MSB Common Stock are subdivided into a
greater number of shares of MSB Common Stock, the number of
shares of MSB Common Stock purchasable upon exercise hereof at
the opening of business on the day following the day upon
which such subdivision becomes effective shall be
proportionately increased, and, conversely, in the event that,
after the date hereof, outstanding shares of MSB Common Stock
are combined into a smaller number of shares of MSB Common
Stock, the number of shares of MSB Common Stock purchasable
upon exercise hereof at the opening of business on the day
following the day upon which such combination becomes
effective shall be proportionately decreased, such increase or
decrease, as the case may be, to become effective immediately
after the opening of business on the day following the day
upon which such subdivision or combination becomes effective.
(iii) The reclassification (including any
reclassification upon a merger in which MSB is the continuing
corporation) of MSB Common Stock into securities including
other than MSB Common Stock shall be deemed to involve a
subdivision or combination, as the case may be, of the number
of shares of MSB Common Stock outstanding immediately prior to
such reclassification into the number of shares of MSB Common
Stock outstanding immediately thereafter and the effective
date of such reclassification shall be deemed to be the day
upon which such subdivision or combination becomes effective,
as the case may be, within the meaning of clause (ii) above.
(c) Whenever the number of shares of MSB Common Stock
purchasable upon exercise hereof is adjusted pursuant to paragraph (b)
above, the Exercise Price shall be adjusted by multiplying the Exercise
Price by a fraction the numerator of which is equal to the number of
shares of MSB Common Stock purchasable prior to the adjustment and the
denominator of which is equal to the number of shares of MSB Common
Stock purchasable after the adjustment.
(d) For the purpose of this Section 7, the term "MSB
Common Stock" shall include any shares of MSB of any class or series
which has no preference or priority in the payment of dividends or in
the distribution of assets upon any voluntary or involuntary
liquidation, dissolution, or winding up of MSB and which is not subject
to redemption by MSB.
SECTION 8. NOTICE.
8
<PAGE> 17
(a) Whenever the number of shares of MSB Common Stock for
which this Warrant is exercisable is adjusted as provided in Section 7
hereof, MSB shall promptly compute such adjustment and mail to the
Holder a certificate, signed by a principal financial officer of MSB,
setting forth the number of shares of MSB Common Stock for which this
Warrant is exercisable and the adjusted Exercise Price as a result of
such adjustment, a brief statement of the facts requiring such
adjustment, the computation thereof, and when such adjustment will
become effective.
(b) Upon the occurrence of a Triggering Event MSB shall (i)
promptly notify the Holder and/or the "Owner" (as that term is defined
in the Warrant Purchase Agreement) of such event, (ii) promptly compute
the "Warrant Repurchase Price" and the "Warrant Stock Repurchase Price"
(as such terms are defined in the Warrant Purchase Agreement), and
(iii) furnish to the Holder and/or the Owner a certificate, signed by
the chief financial officer of MSB setting forth the Warrant Repurchase
Price and/or the Warrant Stock Repurchase Price and the basis and
computation thereof.
(c) Upon the occurrence of an event which results in this
Warrant becoming convertible into, or exchangeable for, the Substitute
Warrant, as provided in Section 5 hereof, MSB and the Acquiring
Corporation shall promptly notify the Holder of such event; and, upon
receipt from the Holder of its choice as to the issuer of the
Substitute Warrant, the Acquiring Corporation shall promptly compute
the number of shares of Substitute Common for which the Substitute
Warrant is exercisable and furnish to the Holder a certificate, signed
by a principal financial officer of the Acquiring Corporation, setting
forth the number of shares of Substitute Common for which the
Substitute Warrant is exercisable, the Substitute Warrant exercise
price, a computation thereof, and when such adjustment will become
effective.
SECTION 9. TERMINATION. This Warrant and the rights conferred hereby
shall terminate upon the earliest of (i) six months after the occurrence of a
Triggering Event; (ii) the Effective Time of the Merger, (iii) the date of
termination of the Merger Documents unless (a) the event giving rise to the
right to terminate is preceded by a Triggering Event, or (b) the receipt by MSB,
or the announcement by another person, of a proposal involving an Acquisition
Transaction
9
<PAGE> 18
or Tender Offer, unless the Agreement is earlier terminated by MSB, pursuant to
its right to terminate the Agreement, under the conditions of Section 6.1 of the
Agreement; or (iv) December 31, 2000.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of
this 24th day of March, 1999.
ATTEST: MUTUAL SAVINGS BANK, F.S.B.
By: /s/ Gary W. Wilds By: /s/ Robert N. Schuster
-------------------------- ----------------------------
Robert N. Schuster
Title: Secretary Its: Chief Executive Officer
-----------------------
10
<PAGE> 1
EXHIBIT 11
A reconciliation of basic and diluted earnings per share for the
three-month periods ending March 31 follows:
<TABLE>
<CAPTION>
Three months ended
March 31,
1999 1998
------------- -------------
<S> <C> <C>
Net income $ 2,765,000 $ 2,433,000
============ =============
Shares outstanding (Basic) (1) 7,411,000 7,264,000
Effect of dilutive securities - stock options 62,000 94,000
------------ -------------
Shares outstanding (Diluted) 7,473,000 7,358,000
============ =============
Earnings per share
Basic $ .37 $ .33
Diluted .37 .33
</TABLE>
(1) Shares outstanding have been adjusted for a three-for-two stock split
and a 5% stock dividend in 1998.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 33,174
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 88,793
<INVESTMENTS-CARRYING> 16,100
<INVESTMENTS-MARKET> 16,674
<LOANS> 822,743
<ALLOWANCE> 9,989
<TOTAL-ASSETS> 1,054,540
<DEPOSITS> 816,455
<SHORT-TERM> 132,423
<LIABILITIES-OTHER> 14,038
<LONG-TERM> 19,750
0
0
<COMMON> 7,427
<OTHER-SE> 64,447
<TOTAL-LIABILITIES-AND-EQUITY> 1,054,540
<INTEREST-LOAN> 19,508
<INTEREST-INVEST> 1,890
<INTEREST-OTHER> 249
<INTEREST-TOTAL> 21,647
<INTEREST-DEPOSIT> 6,444
<INTEREST-EXPENSE> 8,778
<INTEREST-INCOME-NET> 12,869
<LOAN-LOSSES> 525
<SECURITIES-GAINS> 14
<EXPENSE-OTHER> 12,146
<INCOME-PRETAX> 3,889
<INCOME-PRE-EXTRAORDINARY> 3,889
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,765
<EPS-PRIMARY> 0.37
<EPS-DILUTED> 0.37
<YIELD-ACTUAL> 5.46
<LOANS-NON> 3,276
<LOANS-PAST> 1,814
<LOANS-TROUBLED> 280
<LOANS-PROBLEM> 3,400
<ALLOWANCE-OPEN> 9,714
<CHARGE-OFFS> 412
<RECOVERIES> 162
<ALLOWANCE-CLOSE> 9,989
<ALLOWANCE-DOMESTIC> 5,176
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 4,813
</TABLE>
