SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
February 4, 1995
Date of Report (Date of earliest event reported)
MICHIGAN NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Michigan 0-7186 38-0111135
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
27777 Inkster Rd., 48334
Farmington Hills, Michigan
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (810) 473-3000<PAGE>
Item 5. Other Events
On February 4, 1995, Michigan National Corporation, a
Michigan Corporation (the "Company"), entered into an Agreement
and Plan of Merger (the "Merger Agreement") with National
Australia Bank Limited A.C.N. 004044937, a commercial bank
organized under Australian law ("NAB"), pursuant to which a
wholly owned subsidiary of NAB will merge with the Company (the
"Merger"). As a result of the Merger, the outstanding shares
of the Company's common stock, par value $10 per share
("Company Common Stock"), will be converted into the right to
receive from the surviving corporation U.S. $110 per share, in
cash. The Merger is conditioned upon, among other things,
approval by holders of a majority of the Company Common Stock
and upon receipt of certain regulatory and governmental
approvals. The Merger Agreement is attached as Exhibit 1
hereto and its terms are incorporated herein by reference.
Simultaneously with their execution and delivery of
the Merger Agreement, the Company and NAB entered into a Stock
Option Agreement pursuant to which the Company granted NAB the
right, upon the terms and subject to the conditions set forth
therein, to purchase up to 2,633,502 shares of Company Common
Stock at a price of $89 per share. The Stock Option Agreement
is attached as Exhibit 2 hereto and its terms are incorporated
herein by reference.
A copy of the Press Release, dated February 6, 1995,
issued by the Company and NAB relating to the Merger Agreement
and the Stock Option Agreement is attached as Exhibit 3 hereto
and is incorporated herein by reference.
On February 4, 1995, the Company amended its Rights
Agreement, dated as of April 25, 1988, by and between the
Company and Mellon Bank, N.A. (the "Rights Agreement"), with
the effect of exempting the Merger, the Merger Agreement, the
Stock Option Agreement, and the events and the transactions
contemplated thereby from the Rights Agreement. The amendments
to the Rights Agreement are attached hereto as Exhibit 4 and
are incorporated herein by reference.
Item 7. Financial Statements and Exhibits
1. Agreement and Plan of Merger dated as of
February 4, 1995, by and among National
Australia Bank Limited A.C.N. 004044937, MNC
Acquisition Co., and Michigan National
Corporation.
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2. Stock Option Agreement dated as of February 4,
1995, by and among National Australia Bank
Limited A.C.N. 004044937, MNC Acquisition Co.,
and Michigan National Corporation.
3. Press Release, dated February 5, 1995, relating
to transactions with National Australia Bank
Limited.
4. Amendments, dated as of February 4, 1995, to
Rights Agreement, dated as of April 25, 1988, by
and between Mellon Bank, N.A. and Michigan
National Corporation.
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SIGNATURES
Pursuant to the requirements of the Securities Ex-
change Act of 1934, the Company has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
MICHIGAN NATIONAL CORPORATION
By:/s/ Lawrence L. Gladchun
Name: Lawrence L. Gladchun
Title: Senior Vice President
Date: February 14, 1995
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EXHIBIT INDEX
Exhibit Sequential
No. Description Page Number
1. Agreement and Plan of Merger dated
as of February 4, 1995, by and among
National Australia Bank Limited
A.C.N. 004044937, MNC Acquisition Co.,
and Michigan National Corporation........
2. Stock Option Agreement, dated as of
February 4, 1995, by and among National
Australia Bank Limited A.C.N. 004044937,
MNC Acquisition Co., and Michigan National
Corporation..............................
3. Press Release, dated February 5,
1995, relating to transactions with
National Australia Bank Limited..........
4. Amendments, dated as of February 4, 1995,
to Rights Agreement, dated April 25, 1988,
by and between and Mellon Bank, N.A and
Michigan National Corporation............
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AGREEMENT AND PLAN OF MERGER
Dated as of February 4, 1995
among
NATIONAL AUSTRALIA BANK LIMITED A.C.N. 004044937,
MNC ACQUISITION CO.
and
MICHIGAN NATIONAL CORPORATION
<PAGE>
TABLE OF CONTENTS
Page
Parties and Recitals..................................... 1
ARTICLE I
The Merger
SECTION 1.01. The Merger................................ 2
SECTION 1.02. Closing................................... 2
SECTION 1.03. Effective Time............................ 2
SECTION 1.04. Effects of the Merger..................... 3
SECTION 1.05. Articles of Incorporation and By-laws..... 3
SECTION 1.06. Directors................................. 3
SECTION 1.07. Officers.................................. 3
SECTION 1.08. Principal Place of Business............... 3
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.01. Effect on Capital Stock................... 3
(a) Capital Stock of Sub...................... 4
(b) Cancellation of Company and Parent
Owned Stock............................. 4
(c) Conversion of Company Common Stock........ 4
SECTION 2.02. Exchange of Certificates.................. 4
(a) Paying Agent.............................. 4
(b) Parent To Provide Funds................... 4
(c) Exchange Procedures....................... 5
(d) No Further Ownership Rights in
Company Common Stock.................... 5
(e) No Liability.............................. 6
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties
of the Company.......................... 6
(a) Organization and Authority................ 6
(b) Capital Structure......................... 7
(c) Authorization............................. 8
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Page
(d) SEC Documents; Financial Statements;
Reports................................. 10
(e) Information Supplied...................... 11
(f) Compliance with Applicable Laws........... 12
(g) Litigation................................ 14
(h) Taxes..................................... 14
(i) Certain Agreements........................ 16
(j) Absence of Changes in Benefit Plans....... 17
(k) ERISA Compliance.......................... 17
(l) Subsidiaries.............................. 19
(m) Absence of Certain Changes or Events...... 20
(n) Article SEVENTH of the Charter;
State Takeover Statutes................. 20
(o) Vote Required............................. 20
(p) Rights Agreement.......................... 20
(q) Properties................................ 21
(r) Insurance................................. 21
(s) Labor Matters............................. 22
(t) Material Interests of Certain Persons..... 22
(u) Brokers and Finders; Schedule of
Fees and Expenses....................... 22
(v) Opinion of Financial Advisor.............. 22
(w) Allowance for Loan Losses................. 23
SECTION 3.02. Representations and Warranties
of Parent and Sub....................... 23
(a) Organization and Authority................ 23
(b) Authorization............................. 23
(c) Information Supplied...................... 25
(d) Ownership of Company Common Stock......... 25
(e) Brokers and Finders....................... 25
(f) Financing................................. 25
(g) Litigation................................ 26
ARTICLE IV
Covenants Relating to Conduct of the Company's Business
SECTION 4.01. Covenants of the Company.................. 26
(a) Ordinary Course........................... 26
(b) Dividends; Changes in Stock............... 27
(c) Issuance of Securities.................... 27
(d) Governing Documents....................... 28
(e) No Acquisitions........................... 28
(f) No Dispositions........................... 28
(g) Indebtedness.............................. 28
(h) Other Actions............................. 29
(i) Advice of Changes; Government Filings..... 29
(j) Accounting Methods........................ 30
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Page
(k) Compensation; Benefits Plans.............. 30
(l) Tax Matters............................... 30
(m) Settlements, etc.......................... 31
(n) Material Contracts........................ 31
(o) General................................... 32
SECTION 4.02. No Solicitation........................... 32
ARTICLE V
Additional Agreements
SECTION 5.01. Preparation of the Proxy Statement........ 34
SECTION 5.02. Access to Information..................... 35
SECTION 5.03. Company Stockholders Meeting.............. 35
SECTION 5.04. Legal Conditions to Merger................ 36
SECTION 5.05. Employee Benefit Plans.................... 37
SECTION 5.06. Stock Options and the ESOP ............... 38
SECTION 5.07. Fees and Expenses......................... 39
SECTION 5.08. Indemnification, Exculpation
and Insurance........................... 40
SECTION 5.09. Company Accruals and Reserves............. 41
SECTION 5.10. Rights Agreement.......................... 42
SECTION 5.11. Company Debentures........................ 42
SECTION 5.12. Additional Agreements..................... 42
SECTION 5.13. Parent Covenants.......................... 42
(a) Other Actions............................. 42
(b) Advice of Changes; Government Filings..... 43
ARTICLE VI
Conditions Precedent
SECTION 6.01. Conditions to Each Party's Obligation
To Effect the Merger.................... 43
(a) Company Stockholder Approval.............. 43
(b) Other Approvals........................... 43
(c) No Injunctions or Restraints;
Illegality.............................. 44
SECTION 6.02. Conditions to Obligations of Parent....... 44
(a) Representations and Warranties............ 44
(b) Performance of Obligations of the
Company................................. 45
(c) Burdensome Condition...................... 45
(d) Company Debentures and Equity Contracts... 45
(e) Company Stock Options and Company
Stock Plans............................. 45
(f) Rights Agreement.......................... 45
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Page
SECTION 6.03. Conditions to Obligations of the
Company................................. 46
(a) Representations and Warranties............ 46
(b) Performance of Obligations of Parent
and Sub................................. 46
ARTICLE VII
Termination and Amendment
SECTION 7.01. Termination............................... 46
SECTION 7.02. Effect of Termination..................... 48
SECTION 7.03. Amendment................................. 48
SECTION 7.04. Extension; Waiver......................... 48
SECTION 7.05 Procedure for Termination, Amendment,
Extension or Waiver..................... 49
ARTICLE VIII
General Provisions
SECTION 8.01. Nonsurvival of Representations and
Warranties.............................. 49
SECTION 8.02. Notices................................... 49
SECTION 8.03. Definitions; Interpretation............... 50
SECTION 8.04. Counterparts.............................. 51
SECTION 8.05. Entire Agreement; No Third-Party
Beneficiaries; Rights of Ownership...... 51
SECTION 8.06. Governing Law............................. 52
SECTION 8.07. Limitations on Remedies................... 52
SECTION 8.08. Publicity................................. 52
SECTION 8.09. Assignment................................ 52
SECTION 8.10. Enforcement............................... 53
Signatures............................................... 54
EXHIBIT A Form of Stock Option Agreement
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AGREEMENT AND PLAN OF MERGER dated as of Feb-
ruary 4, 1995, among NATIONAL AUSTRALIA BANK LIMITED
A.C.N. 004044937, an Australian corporation ("Par-
ent"), MNC ACQUISITION CO., a Michigan corporation
and a wholly owned subsidiary of Parent ("Sub"), and
MICHIGAN NATIONAL CORPORATION, a Michigan corporation
(the "Company").
WHEREAS the Company is a registered bank holding
company under the Bank Holding Company Act of 1956, as amended
(the "BHC Act");
WHEREAS Parent is a commercial bank under Australian
law and is a foreign bank within the meaning of the Interna-
tional Banking Act of 1978, as amended (the "IBA");
WHEREAS the respective Boards of Directors of Parent,
Sub and the Company have approved the merger of Sub into the
Company, or the Company into Sub, at the election of Parent as
set forth below (the "Merger"), upon the terms and subject to
the conditions set forth in this Agreement, whereby each issued
and outstanding share of common stock, par value U.S. $10 per
share, of the Company ("Company Common Stock"), not owned
directly or indirectly by Parent or the Company, will be con-
verted into the right to receive U.S. $110.00 in cash;
WHEREAS, as a condition and inducement to Parent's
and Sub's willingness to enter into this Agreement, Parent, Sub
and the Company are entering into a Stock Option Agreement
dated as of the date hereof in the form of Exhibit A attached
hereto (the "Stock Option Agreement") pursuant to which the
Company has granted to Parent an option to purchase shares of
Company Common Stock;
WHEREAS the Merger requires the approval by an
affirmative vote of the holders of a majority of the out-
standing shares of Company Common Stock entitled to vote
thereon ("Company Stockholder Approval"); and
WHEREAS Parent, Sub and the Company desire to make
certain representations, warranties, covenants and agreements
in connection with the Merger and also to prescribe various
conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and
the respective representations, warranties, covenants and
agreements set forth herein and in the Stock Option Agreement,
the parties hereto agree as follows:<PAGE>
ARTICLE I
The Merger
SECTION 1.01. The Merger. Upon the terms and sub-
ject to the conditions set forth in this Agreement, and in
accordance with the Michigan Business Corporation Act (the
"MBCA"), Sub shall be merged with and into the Company at the
Effective Time (as defined in Section 1.03). Following the
Merger, the separate corporate existence of Sub shall cease and
the Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all
the rights and obligations of Sub in accordance with the MBCA.
Notwithstanding the foregoing, Parent may elect at any time
prior to the mailing of the Proxy Statement (as defined here-
in), instead of merging Sub into the Company as provided above,
to merge the Company with and into Sub; provided, however, that
the Company shall not be deemed to have breached any of its
representations, warranties, covenants or agreements set forth
in this Agreement solely by reason of such election; provided,
further, that no such election may be made if it would alter or
change the amount or kind of Merger Consideration (as defined
in Section 2.01(c)) to be received by holders of Company Common
Stock pursuant to Article II, or be reasonably likely to
materially delay or impede consummation of the transactions
contemplated hereby. In such event, the parties agree to
execute an appropriate amendment to this Agreement in order to
reflect the foregoing and, where appropriate, to provide that
Sub shall be the Surviving Corporation and shall continue under
the name "Michigan National Corporation".
SECTION 1.02. Closing. The closing of the Merger
(the "Closing") will take place at 10:00 a.m. on a date to be
specified by the parties, which shall be no later than the
later of (i) the third business day or (ii) the first business
day of the month, in either case following the satisfaction (or
waiver) of all the conditions set forth in Article VI (the
"Closing Date"), at the offices of Cravath, Swaine & Moore,
Worldwide Plaza, 825 Eighth Avenue, New York, NY 10019, unless
another time, date or place is agreed to in writing by the
parties hereto.
SECTION 1.03. Effective Time. Subject to the pro-
visions of this Agreement, as soon as practicable on the
Closing Date, a certificate of merger or other appropriate
documents (in any such case, the "Certificate of Merger") shall
be duly prepared, executed, acknowledged and filed by the
parties in accordance with the relevant provisions of the MBCA
with the Department of Commerce of the State of Michigan. The
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Merger shall become effective upon the filing of the Certifi-
cate of Merger with the Department of Commerce of the State of
Michigan or at such time thereafter as is provided in the
Certificate of Merger (the time the Merger becomes effective
being hereinafter referred to as the "Effective Time").
SECTION 1.04. Effects of the Merger. The Merger
shall have the effects set forth in Section 724 of the MBCA.
SECTION 1.05. Articles of Incorporation and By-laws.
(a) The articles of incorporation of the Company as in effect
immediately prior to the Effective Time shall be the articles
of incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
(B) The by-laws of the Company as in effect imme-
diately prior to the Effective Time shall be the by-laws of the
Surviving Corporation, until thereafter changed or amended as
provided therein or by applicable law.
SECTION 1.06. Directors. The directors of Sub at
the Effective Time and the persons listed on Schedule 1.06
shall be the directors of the Surviving Corporation, until the
earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the
case may be.
SECTION 1.07. Officers. The officers of the Company
immediately prior to the Effective Time shall be the officers
of the Surviving Corporation, until the earlier of their res-
ignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
SECTION 1.08. Principal Place of Business. Parent
currently intends to maintain the Surviving Corporation's
headquarters and its principal place of business at the Com-
pany's existing headquarters.
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.01. Effect on Capital Stock. As of the
Effective Time, by virtue of the Merger and without any action
on the part of the holder of any shares of Company Common Stock
or any shares of capital stock of Sub:
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(a) Capital Stock of Sub. Each issued and out-
standing share of capital stock of Sub shall be converted
into and become one fully paid and nonassessable share of
Common Stock, par value U.S. $.01 per share, of the
Surviving Corporation.
(b) Cancellation of Company and Parent Owned Stock.
Each share of Company Common Stock that is owned by the
Company or by any subsidiary of the Company (which shall
not include any shares owned by the Company's Employee
Stock Ownership Plan and Trust (the "ESOP")) and each
share of Company Common Stock that is owned by Parent, Sub
or any other subsidiary of Parent (other than, in each
case, shares in trust accounts, managed accounts, custo-
dial accounts and the like that are beneficially owned by
third parties (any such shares, "Trust Account Shares"))
shall be automatically cancelled and retired and shall
cease to exist, and no consideration shall be delivered in
exchange therefor.
(c) Conversion of Company Common Stock. Each issued
and outstanding share of Company Common Stock (other than
shares to be cancelled in accordance with Section 2.01(b))
shall be converted into the right to receive from the
Surviving Corporation in cash, without interest, U.S.
$110.00 (the "Merger Consideration"). As of the Effective
Time, all such shares of Company Common Stock shall no
longer be outstanding and shall automatically be cancelled
and retired and shall cease to exist, and each holder of a
certificate previously representing any such shares shall
cease to have any rights with respect thereto, except the
right to receive the Merger Consideration, without
interest.
SECTION 2.02. Exchange of Certificates. (a) Paying
Agent. Prior to the Effective Time, Parent shall designate
Michigan National Bank, a national banking association and a
wholly owned subsidiary of the Company ("MNB"), or such other
bank or trust company reasonably acceptable to the Company, to
act as paying agent (the "Paying Agent") for the payment of the
Merger Consideration upon surrender of certificates repre-
senting Company Common Stock.
(b) Parent To Provide Funds. Parent shall take all
steps necessary to enable and cause Sub, or the Surviving
Corporation, to provide to the Paying Agent on a timely basis,
as and when needed on and after the Effective Time, funds
necessary to pay for the shares of Company Common Stock as part
of the Merger pursuant to Section 2.01.
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(c) Exchange Procedures. As soon as reasonably
practicable (and in any event no later than 10 days) after the
Effective Time, Parent shall cause the Paying Agent to mail to
each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding
shares of Company Common Stock (the "Certificates") whose
shares were converted into the right to receive the Merger
Consideration pursuant to Section 2.01 (i) a letter of trans-
mittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to the Paying Agent and shall
be in such form and have such other customary provisions as
Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the
Merger Consideration. Upon surrender of a Certificate for
cancellation to the Paying Agent or to such other agent or
agents as may be appointed by Parent, together with such letter
of transmittal, duly executed, and such other customary docu-
ments as may be reasonably required by the Paying Agent, the
holder of such Certificate shall be entitled to receive in
exchange therefor the amount of cash into which the shares of
Company Common Stock theretofore represented by such Certifi-
cate shall have been converted pursuant to Section 2.01, and
the Certificate so surrendered shall forthwith be cancelled.
In the event of a transfer of ownership of Company Common Stock
which is not registered in the transfer records of the Company,
payment may be made to a person other than the person in whose
name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the person requesting such payment
shall pay any transfer or other taxes required by reason of the
payment to a person other than the registered holder of such
Certificate or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable.
Until surrendered as contemplated by this Section 2.02, each
Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender
the amount of cash, without interest, into which the shares of
Company Common Stock theretofore represented by such Certifi-
cate shall have been converted pursuant to Section 2.01. No
interest will be paid or will accrue on the cash payable upon
the surrender of any Certificate.
(d) No Further Ownership Rights in Company Common
Stock. All cash paid upon the surrender of Certificates in
accordance with the terms hereof shall be deemed to have been
paid in full satisfaction of all rights pertaining to the
shares of Company Common Stock theretofore represented by such
Certificates, subject, however, to the Surviving Corporation's
obligation to pay any dividends or make any other distributions
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with a record date prior to the Effective Time which may have
been declared or made by the Company on such shares of Company
Common Stock in accordance with the terms of this Agreement on
or prior to the Effective Time and which remain unpaid at the
Effective Time, and there shall be no further registration of
transfers on the stock transfer books of the Surviving Corpo-
ration of the shares of Company Common Stock which were out-
standing immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be cancelled and
exchanged as provided in this Article II.
(e) No Liability. None of Parent, Sub, the Company
or the Paying Agent shall be liable to any person in respect of
any cash delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any
Certificates shall not have been surrendered prior to seven
years after the Effective Time (or immediately prior to such
earlier date on which any payment pursuant to this Article II
would otherwise escheat to or become the property of any Gov-
ernmental Entity (as defined in Section 3.01(c))), the cash
payment in respect of such Certificate shall, to the extent
permitted by applicable law, become the property of the Sur-
viving Corporation, free and clear of all claims or interests
of any person previously entitled thereto.
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of the
Company. Except as set forth on the Disclosure Schedule
delivered by the Company to Parent prior to the execution of
this Agreement (the "Company Disclosure Schedule"), the Company
represents and warrants to Parent and Sub as follows:
(a) Organization and Authority. The Company is a
bank holding company duly registered under the BHC Act. MNB is
a directly held wholly owned (other than any directors' qual-
ifying shares) subsidiary of the Company. Each of the Company
and its subsidiaries is a bank or corporation duly organized,
validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has all requi-
site corporate power and authority to own, lease and operate
its properties and to carry on its business as now being con-
ducted and is duly qualified and in good standing to do busi-
ness in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such
qualification necessary except where the failure so to qualify
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would not have a Material Adverse Effect (as defined in Section
8.03(a)) on the Company.
(b) Capital Structure. (i) The authorized capital
stock of the Company consists of 50,000,000 shares of Company
Common Stock and 6,000,000 shares of preferred stock, par value
U.S. $10 per share, of the Company ("Company Preferred Stock").
At the close of business on February 3, 1995, (A) (1)
13,233,678 shares of Company Common Stock were outstanding, (2)
2,633,502 shares of Company Common Stock were reserved for
issuance under the Stock Option Agreement, (3) 441,942 shares
of Company Common Stock were reserved for issuance with respect
to outstanding options issued under the Company's stock option,
stock bonus and incentive plans, including the ESOP (the
"Company Stock Plans"), a list of which is set forth on the
Company Disclosure Schedule and (4) 665,419 shares of Company
Common Stock were reserved for issuance in connection with the
Company's Cancelable Mandatory Stock Purchase Contracts issued
and outstanding as of the date hereof (the "Equity Contracts")
in connection with the Company's 8% Redeemable Subordinated
Debentures due November 10, 1998 issued and outstanding as of
the date hereof (the "Company Debentures"), (B) no shares of
Company Preferred Stock were outstanding and (C) 500,000 shares
of Series B Junior Participating Preferred Stock (the "Company
Series B Preferred") were reserved for issuance upon exercise
of the rights (the "Rights") distributed to the holders of
Company Common Stock pursuant to the Rights Agreement dated as
of April 25, 1988, between the Company and Mellon Bank, N.A.,
as Rights Agent (the "Rights Agreement"). Except as set forth
above, at the close of business on February 3, 1995, no shares
of capital stock or other voting securities of the Company were
issued, reserved for issuance or outstanding.
(ii) As of the date hereof, other than the Company
Debentures and the related Equity Contracts referred to in
paragraph (i) above, no bonds, debentures, notes or other
indebtedness having the right to vote (or convertible into or
exchangeable for securities having the right to vote) on any
matters on which stockholders may vote ("Voting Debt") of the
Company were issued or outstanding. All outstanding shares of
the Company capital stock are, and any shares of Company Common
Stock which may be issued pursuant to the Stock Option Agree-
ment or upon exercise of Company Stock Options (as defined in
Section 5.06) will be, validly issued, fully paid and non-
assessable and will be delivered free and clear of all claims,
liens, encumbrances, charges, pledges or security interests of
any kind or nature whatsoever (collectively, "Liens") and not
subject to preemptive rights.
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(iii) As of the date of this Agreement, except for
this Agreement, the Company Stock Plans, the Company Stock
Options, the Rights Agreement, the Equity Contracts and the
Stock Option Agreement, there are no outstanding securities,
options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company
or any subsidiary of the Company is a party or by which it is
bound obligating the Company or any subsidiary of the Company
to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or any Voting Debt of
the Company or of any subsidiary of the Company or obligating
the Company or any subsidiary of the Company to issue, grant,
extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking. As
of the date hereof, there are no outstanding contractual
obligations (A) of the Company or any of its subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital
stock of the Company or any of its subsidiaries, other than the
Stock Option Agreement, or (B) of the Company to vote or to
dispose of any shares of the capital stock of any of its sub-
sidiaries.
(c) Authorization. (i) The Company has all req-
uisite corporate power and authority to enter into this
Agreement and the Stock Option Agreement and, subject in the
case of this Agreement to the Company Stockholder Approval, to
consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the Stock
Option Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of the Company,
subject in the case of this Agreement to the Company Stock-
holder Approval. Without limiting the foregoing, the Company
has taken all necessary corporate action to authorize and
reserve for issuance that number of shares of Company Common
Stock equal to the maximum number of shares of Company Common
Stock issuable upon exercise of the option granted pursuant to
the Stock Option Agreement. This Agreement and the Stock
Option Agreement have been duly executed and delivered by the
Company and each constitutes a valid and binding obligation of
the Company, enforceable against the Company in accordance with
its terms.
(ii) The execution and delivery of this Agreement and
the Stock Option Agreement do not, and the consummation of the
transactions contemplated hereby and thereby will not, and
compliance by the Company with any of the provisions hereof or
thereof will not, (A) conflict with, or result in any breach or
violation of, or default (with or without notice or lapse of
time or both) under, or result in the termination of, or
-8-<PAGE>
accelerate the performance required by, or give rise to a right
of termination, cancellation or acceleration of any obligation
or the loss of a material benefit under, or the creation of a
Lien (any such conflict, breach, violation, default, termina-
tion, acceleration, right of termination, cancellation or
acceleration, loss or creation, a "Violation") pursuant to, any
provision of the articles of incorporation or by-laws of the
Company, MNB or any other subsidiary of the Company or (B)
subject to obtaining or making the consents, approvals, orders,
authorizations, registrations, declarations and filings
referred to in paragraph (iii) below, result in any Violation
of any loan or credit agreement, note, mortgage, indenture,
lease, Company Benefit Plan (as defined in Section 3.01(k)) or
other agreement, obligation, instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company, MNB or
any other subsidiary of the Company or their respective prop-
erties or assets, which Violation under this clause (B) could
reasonably be expected to have, individually or in the aggre-
gate with other such Violations, a Material Adverse Effect on
the Company.
(iii) No consent, approval, order or authorization of,
or registration, declaration or filing with, any court,
administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (a "Govern-
mental Entity"), is required by or with respect to the Company,
MNB or any other subsidiary of the Company in connection with
the execution and delivery of this Agreement and the Stock
Option Agreement by the Company, or the consummation by the
Company of the transactions contemplated hereby and thereby,
the failure to obtain which could, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect on the Company, except for (A) the filing of applica-
tions with the Board of Governors of the Federal Reserve System
(the "Federal Reserve") under the BHC Act and with the Office
of Thrift Supervision (the "OTS") and approval of the same, (B)
the filing with the SEC of (1) a proxy statement in definitive
form (as amended or supplemented from time to time, the "Proxy
Statement") relating to the meeting of the Company's stock-
holders at which a vote is held on the Merger (the "Company
Stockholders Meeting") and (2) such reports under Sections
13(a), 13(d), 13(g) and 16(a) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as may be required in
connection with this Agreement, the Stock Option Agreement and
the transactions contemplated hereby and thereby and the
obtaining from the SEC of such orders as may be required in
connection therewith, (C) the filing of the Certificate of
Merger with the Department of Commerce of the State of Michigan
and appropriate documents with the relevant authorities of
-9-<PAGE>
other states in which the Company is qualified to do business,
(D) the filing of such applications, filings, authorizations,
orders and approvals as may be required under state banking
laws, and with and of state banking authorities and approval of
same (collectively, the "State Banking Approvals"), (E) con-
sents, authorizations, approvals, filings or exemptions in
connection with compliance with the applicable provisions of
Federal and state securities laws relating to the regulation of
broker-dealers or investment advisers, and Federal commodities
laws relating to the regulation of futures commission merchants
and the rules and regulations thereunder and of any applicable
industry self-regulatory organization, and the rules of the
Nasdaq over-the-counter market, or which are required under
consumer finance, mortgage banking and other similar laws, (F)
notices, if any, under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (G) such
filings, authorizations, orders and approvals as may be
required under foreign laws and (H) filings, notifications and
approvals under state insurance laws and regulations.
(d) SEC Documents; Financial Statements; Reports.
(i) The Company has made available to Parent a true and com-
plete copy of each report, schedule, registration statement and
definitive proxy statement filed by the Company with the SEC
(other than reports filed pursuant to Section 13(d) or 13(g) of
the Exchange Act) since January 1, 1994 (the "Company SEC
Documents"), which are all the documents (other than prelimi-
nary material and reports required pursuant to Section 13(d) or
13(g) of the Exchange Act) that the Company was required to
file with the SEC since such date. As of their respective
dates, the Company SEC Documents complied in all material
respects with the requirements of the Securities Act of 1933,
as amended (the "Securities Act"), or the Exchange Act, as the
case may be, and the rules and regulations of the SEC there-
under applicable to such Company SEC Documents. All material
agreements, contracts and other documents required to be filed
as exhibits to any of the Company SEC Documents have been so
filed. Except to the extent that information contained in any
Company SEC Document has been revised or superseded by a later
Company Filed SEC Document (as defined in Section 3.01(f)),
none of the Company SEC Documents contains any untrue statement
of a material fact or omits 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.
(ii) The financial statements of the Company included
in the Company SEC Documents comply as to form in all material
respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect
-10-<PAGE>
thereto, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis
("GAAP") during the periods involved (except as may be indi-
cated in the notes thereto or, in the case of the unaudited
statements, as permitted by Form 10-Q of the SEC) and fairly
present the consolidated financial position of the Company and
its consolidated subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for the
periods then ended.
(iii) Since January 1, 1994, each of the Company and
its subsidiaries, including MNB, has filed all material
reports, registrations and statements, together with any
required material amendments thereto ("Company Regulatory
Reports"), and has paid all fees and assessments due and pay-
able therewith, that it was required to file with the Federal
Reserve, the Federal Deposit Insurance Corporation (the
"FDIC"), the U.S. Comptroller of the Currency (the "OCC"), the
OTS, all applicable state banking and other regulatory au-
thorities and other relevant Governmental Entities charged with
the supervision or regulation of the Company or any of its
subsidiaries (collectively, "Regulatory Authorities"). As of
their respective dates, each such Company Regulatory Report
complied in all material respects with all the rules and reg-
ulations promulgated by the applicable Regulatory Authority
(including regulatory accounting practices) and, except as
revised or superseded by a later filed Company Regulatory
Report, does 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. The Company has made available to Parent true and
complete copies of MNB's most recent annual and quarterly
Consolidated Reports of Condition and Income ("Call Reports")
filed with the OCC.
(e) Information Supplied. None of the information
supplied or to be supplied by the Company for inclusion or
incorporation by reference in the Proxy Statement will, at the
date of mailing to stockholders and at the time of the Company
Stockholders Meeting, contain any untrue statement of a mate-
rial fact or omit to state any 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. The Proxy Statement will comply as to
form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder, except
that no representation or warranty is made by the Company with
respect to statements made or incorporated by reference therein
-11-<PAGE>
based on information supplied by Parent or Sub specifically for
inclusion or incorporation by reference therein.
(f) Compliance with Applicable Laws. (i) The
Company and its subsidiaries hold all permits, licenses,
variances, exemptions, authorizations, orders and approvals of
all Governmental Entities (the "Company Permits") that are
required for them to own, lease or operate their properties and
assets and to carry on their businesses as presently conducted,
and there has occurred no default under any such Company Per-
mit, except for the lack of Company Permits and for defaults
under Company Permits which lack or default individually or in
the aggregate would not have a Material Adverse Effect on the
Company. Except as disclosed in the Company SEC Documents
filed and publicly available prior to the date of this Agree-
ment (the "Company Filed SEC Documents"), the Company and its
subsidiaries are in compliance in all material respects with
all applicable statutes, laws, ordinances, rules, orders and
regulations of any Governmental Entity, and with their internal
policies and procedures.
(ii) Neither the Company nor any of its subsidiaries
has received any notification or communication which has not
been fully and finally resolved from any Regulatory Authorities
(A) asserting that any of the Company or any of its subsid-
iaries is not in substantial compliance with any of the stat-
utes, regulations, ordinances or guidelines which such Regu-
latory Authority enforces or administers, or the internal
policies and procedures of such company, (B) threatening to
revoke any material Company Permit, including such company's
status as an insured depositary institution under the Federal
Deposit Insurance Act ("FDIA"), (C) requiring or threatening to
require the Company or any of its subsidiaries, or indicating
that the Company or any of its subsidiaries may be required, to
enter into a cease and desist order, agreement or memorandum of
understanding or any other agreement, to be subject to any
directive or supervisory letter, or to adopt resolutions of its
board of directors, in each case restricting or limiting or
purporting to restrict or limit in any manner the operations of
the Company or any of its subsidiaries, including any re-
striction on the payment of dividends, or relating to its
capital adequacy, its credit policies or its management, or (D)
directing, restricting or limiting, or purporting to direct,
restrict or limit, in any manner the operations of the Company
or any of its subsidiaries, including any restriction on the
payment of dividends, or relating to its capital adequacy, its
credit policies or its management (any such notification,
communication, order, agreement, memorandum of understanding,
directive, supervisory letter or required board resolutions
being referred to herein as a "Regulatory Agreement"). Neither
-12-<PAGE>
the Company nor any of its subsidiaries has received, consented
to or entered into, or is subject to, any Regulatory Agreement,
nor has the Company or any of its subsidiaries been advised by
any Regulatory Authority that such Regulatory Authority is
contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such Regulatory
Agreement. True and complete copies of all Regulatory Agree-
ments have been delivered by the Company to Parent.
(iii) Except as may be required by virtue of the
Merger, neither the Company nor any of its subsidiaries is
required by Section 32 of the FDIA to give prior notice to a
Regulatory Authority of the proposed addition of an individual
to its board of directors or the employment of an individual as
a senior executive officer.
(iv) To the knowledge of the Company, each of the
Company and its subsidiaries is, and has been, and each of the
Company's former subsidiaries, while subsidiaries of the Com-
pany, was in compliance with all applicable Environmental Laws
(as defined below), except for possible noncompliance which
individually or in the aggregate would not have a Material
Adverse Effect on the Company. The term "Environmental Laws"
means any Federal, state, local or foreign statute, ordinance,
rule, regulation, policy, permit, consent, approval, license,
judgment, order, decree, injunction or other authorization
relating to: (A) Releases (as defined in 42 U.S.C.
Section 9601(22)) or threatened Releases of Hazardous Material
(as defined below) into the environment; or (B) the generation,
treatment, storage, disposal, use, handling, manufacturing,
transportation or shipment of any Hazardous Material. The term
"Hazardous Material" means (1) hazardous substances (as defined
in 42 U.S.C. Section 9601(14)), (2) petroleum, including crude
oil and any fractions thereof, (3) natural gas, synthetic gas
and any mixtures thereof, (4) asbestos and/or asbestos-
containing material and (5) polychlorinated biphenyls ("PCBs"),
or materials containing PCBs in excess of 50 ppm.
(v) During the period of ownership or operation by
the Company and its subsidiaries of any of their respective
current or previously owned or leased properties (including for
purposes of this paragraph any such properties acquired in
foreclosures or otherwise in connection with extensions of
credit), to the knowledge of the Company, there have been no
Releases of Hazardous Material in, on, under or affecting such
properties or any surrounding site, and none of the Company or
its subsidiaries have disposed of any Hazardous Material or any
other substance in a manner that has led, or could reasonably
be anticipated to lead, to a Release, except in each case for
those which individually or in the aggregate would not have a
-13-<PAGE>
Material Adverse Effect on the Company. Prior to the period of
ownership or operation by the Company and its subsidiaries of
any of their respective current or previously owned or leased
properties, to the knowledge of the Company, no Hazardous
Material was generated, treated, stored, disposed of, used,
handled or manufactured at, or transported, shipped or disposed
of from, such current or previously owned properties, and there
were no Releases of Hazardous Material in, on, under or
affecting any such property or any surrounding site, except in
each case for those which individually or in the aggregate
would not have a Material Adverse Effect on the Company.
(vi) The Company and its subsidiaries are not subject
to any judgment, decree or order relating to compliance with
any Environmental Law or to investigation or cleanup under any
Environmental Law (collectively, "Environmental Enforcement
Actions"), except with respect to Environmental Enforcement
Actions which, individually or in the aggregate, would not have
a Material Adverse Effect on the Company. Neither the Company
nor any of its subsidiaries has any contingent liabilities in
connection with any Hazardous Materials, including claims of
liability for cleanup of Hazardous Materials related to any of
the Company, its subsidiaries or any of the Company's former
subsidiaries that, individually or in the aggregate, would have
a Material Adverse Effect on the Company.
(g) Litigation. Except as disclosed in the Company
Filed SEC Documents, there is no suit, action or proceeding
pending or, to the knowledge of the Company or any subsidiary
of the Company, threatened, against or affecting the Company or
any subsidiary of the Company (including any such suit, action
or proceeding under the Securities Act, the Exchange Act, the
Community Reinvestment Act of 1977, as amended, or fair lending
laws or by any stockholder or former stockholder of the Company
or any subsidiary of the Company) that could reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company or that could reasonably be
expected to threaten, impede or delay the consummation of the
Merger, nor is there any judgment, decree, injunction, rule or
order of any Governmental Entity or arbitrator outstanding
against the Company or any subsidiary of the Company having, or
which could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company or that
could reasonably be expected to threaten, impede or delay the
consummation of the Merger.
(h) Taxes. (i) (A) The Company and its subsid-
iaries have filed, been included in or sent all returns, dec-
larations and reports and information returns and statements
-14-<PAGE>
required to be filed or sent (including in each case exten-
sions) by or relating to any of them relating to any taxes with
respect to any income, properties or operations of the Company
or any such subsidiary prior to the Effective Time (collec-
tively, "Company Returns"), (B) as of the time of filing, the
Company Returns correctly reflected in all material respects
the facts regarding the income, business, assets, operations,
activities and status of the Company and its subsidiaries and
any other information required to be shown therein, (C) the
Company and its subsidiaries have timely paid or made provision
for all taxes that have been shown as due and payable on the
Company Returns that have been filed, (D) the Company and its
subsidiaries have made or will make provision for all taxes
payable for any periods that end before the Effective Time for
which no Company Returns have yet been filed and for any
periods that begin before the Effective Time and end after the
Effective Time to the extent such taxes are attributable to the
portion of any such period ending at the Effective Time, (E)
the charges, accruals and reserves for taxes reflected on the
books of the Company and its subsidiaries are adequate to cover
the tax liabilities accruing or payable by the Company and its
subsidiaries in respect of periods prior to the date hereof,
(F) neither the Company nor any subsidiary is delinquent in the
payment of any taxes or has requested any extension of time
within which to file or send any Company Return, which Company
Return has not since been filed or sent, (G) no deficiency for
any taxes has been proposed, asserted or assessed in writing
against the Company or any of its subsidiaries other than those
taxes being contested in good faith, (H) the Federal income tax
returns of the Company or any consolidated group to which it
belongs have been examined by and settled with the United
States Internal Revenue Service (the "IRS") for all years
through December 31, 1987, (I) neither the Company nor any
subsidiary has granted any extension of the limitation period
applicable to any tax claims (which period has not since
lapsed), other than those taxes being contested in good faith,
and (J) neither the Company nor any subsidiary has any con-
tractual obligations under any tax sharing agreement with any
corporation which, as of the Effective Time, is not a member of
a consolidated group of which all of and only the Company and
its subsidiaries are members.
(ii) Any amount that could be received (whether in
cash or property or the vesting of property) as a result of any
of the transactions contemplated by this Agreement by any
employee, officer or director of the Company or any of its
affiliates who is a "disqualified individual" (as such term is
defined in proposed Treasury Regulation Section 1.280G-1) under
any employment, severance or termination agreement, other
compensation arrangement or Company Benefit Plan currently in
-15-<PAGE>
effect would not be characterized as an "excess parachute
payment" (as such term is defined in Section 280G(b)(1) of the
Code).
(iii) The disallowance of a deduction under Section
162(m) of the Code for employee remuneration will not apply to
any amount paid or payable by the Company or any subsidiary of
the Company under any contract, plan, program, arrangement or
understanding.
(iv) For the purpose of this Agreement, the term
"tax" (including, with correlative meaning, the terms "taxes"
and "taxable") shall include, except where the context other-
wise requires, all Federal, state, local and foreign income,
profits, franchise, gross receipts, payroll, sales, employment,
use, property, withholding, excise, occupancy and other taxes,
duties or assessments of any nature whatsoever (including the
Michigan single business tax), together with all interest,
penalties and additions imposed with respect to such amounts.
(i) Certain Agreements. (A) Except as disclosed in
the Company Filed SEC Documents, as of the date of this
Agreement, neither the Company nor any of its subsidiaries is a
party or subject to, or has amended or waived any rights under,
any of the following (whether written or oral, express or
implied):
(i) any agreement, arrangement or commitment not
made in the ordinary course of business consistent with
past practice that is material to the Company on a con-
solidated basis, or any contract, agreement or under-
standing relating to the sale or disposition by the Com-
pany or any of its subsidiaries of any significant assets
or businesses of the Company or any of its subsidiaries;
(ii) any material agreement, indenture, credit
agreement or other instrument relating to the borrowing of
money by the Company or any of its subsidiaries (other
than certificates of deposit and customary bank funding
instruments) or the guarantee by the Company or any such
subsidiary of any such obligation;
(iii) any contract containing covenants which limit
the ability of the Company or any of its subsidiaries to
compete in any line of business or with any person or
which involve any restriction of the geographical area in
which, or method by which, the Company and its subsid-
iaries may carry on their respective businesses (other
than as may be required by law or applicable Regulatory
Authorities); or
-16-<PAGE>
(iv) any other contract or agreement that would be
required to be disclosed as an exhibit to the Company's
annual report on Form 10-K and which has not been so
disclosed.
(B) Neither the Company nor any of its sub-
sidiaries is in default under any material agreement, commit-
ment, arrangement, lease, insurance policy or other instrument,
whether entered into in the ordinary course of business or
otherwise and whether written or oral, and there has not
occurred any event that, with the giving of notice or the lapse
of time or both, would constitute such a default, except in all
cases where such default would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
(j) Absence of Changes in Benefit Plans. Except as
disclosed in the Company Filed SEC Documents, since the date of
the most recent audited financial statements included in the
Company Filed SEC Documents, there has not been any adoption or
amendment in any material respect by the Company or any of its
subsidiaries of any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, retirement, vacation,
severance, disability, death benefit, hospitalization, medical
or other plan, arrangement or understanding (whether or not
legally binding) providing benefits to any current or former
employee, officer or director of the Company or any of its
subsidiaries. Except as disclosed in the Company Filed SEC
Documents, there exist no employment, consulting, severance,
termination or indemnification agreements, arrangements or
understandings between the Company or any of its subsidiaries
and any current or former employee, officer or director of the
Company or any of its subsidiaries.
(k) ERISA Compliance. (i) The Company Disclosure
Schedule contains a list and brief description of each
"employee pension benefit plan" (as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (sometimes referred to herein as a "Pension Plan"),
each "employee welfare benefit plan" (as defined in Section
3(1) of ERISA) and each stock option, stock purchase, deferred
compensation plan or arrangement and each other employee fringe
benefit plan or arrangement maintained, contributed to or
required to be maintained or contributed to by the Company, any
of its subsidiaries or any other person or entity that,
together with the Company, is treated as a single employer
under Section 414(b), (c), (m) or (o) of the Internal Revenue
Code of 1986, as amended (the "Code"), (each, a "Commonly
Controlled Entity"), for the benefit of any current or former
-17-<PAGE>
employees, officers, agents, directors or independent con-
tractors of the Company or any of its subsidiaries (collec-
tively, "Company Benefit Plans"). The Company has delivered or
made available to Parent true, complete and correct copies of
(A) each Company Benefit Plan (or, in the case of any unwritten
Company Benefit Plans, descriptions thereof), (B) the most
recent annual report on Form 5500 filed with the IRS with
respect to each Company Benefit Plan (if any such report was
required) and (C) the most recent summary plan description (or
similar document) for each Company Benefit Plan for which such
summary plan description is required or was provided to plan
participants or beneficiaries.
(ii) Each Company Benefit Plan has been administered
in all material respects in accordance with its terms. The
Company, its subsidiaries and all the Company Benefit Plans are
all in compliance in all material respects with the applicable
provisions of ERISA and the Code. To the best knowledge of the
Company, there are no investigations, proceedings or other
claims involving any Company Benefit Plan that could give rise
to any material liability.
(iii) All Pension Plans intended to be qualified under
Section 401(a) of the Code have been the subject of determi-
nation letters from the IRS to the effect that such Pension
Plans are qualified and exempt from Federal income taxes under
Sections 401(a) and 501(a), respectively, of the Code, and, to
the knowledge of the Company, all such letters are valid and
effective as of the date hereof.
(iv) No Pension Plan, other than any Pension Plan
that is a "multiemployer plan" (as such term is defined in
Section 4001(a)(3) of ERISA; collectively, the "Multiemployer
Pension Plans"), had, as of the respective last annual valua-
tion date for each such Pension Plan, an "unfunded benefit
liability" (as such term is defined in Section 4001(a)(18) of
ERISA), based on actuarial assumptions which have been fur-
nished to Parent and neither the Company nor any of its sub-
sidiaries is aware of any facts or circumstances that would
materially change the funded status of any such Company Benefit
Plans. None of the Pension Plans has an "accumulated funding
deficiency" (as such term is defined in Section 302 of ERISA or
Section 412 of the Code), and there has been no application for
a waiver of the minimum funding standards imposed by Section
412 of the Code with respect to any Company Benefit Plan that
is a Pension Plan. No Commonly Controlled Entity has incurred
any material liability to a Pension Plan (other than for con-
tributions not yet due) or to the Pension Benefit Guaranty
Corporation (other than for premiums not yet due).
-18-<PAGE>
(v) There have been no non-exempt "prohibited
transactions" (as such term is defined in Section 406 of ERISA
or Section 4975 of the Code) or any other breach of fiduciary
responsibility with respect to the Company Benefit Plans that
could subject the Company, any of its subsidiaries or any
officer of the Company or any of its subsidiaries to tax or
penalty under ERISA, the Code or other applicable law. Neither
any of such Company Benefit Plans nor any of such trusts has
been terminated, nor has there been any "reportable event" (as
that term is defined in Section 4043 of ERISA) with respect
thereto, during the last five years.
(vi) Neither the Company nor any Commonly Controlled
Entity (A) maintains or contributes to a "multiemployer plan"
(as defined in Section 4001(a)(3) of ERISA) or has maintained,
contributed to or had an obligation to maintain or contribute
to such a plan within the five full plan years of any such plan
immediately prior to the date hereof, or (B) has incurred any
liability to the PBGC or a Company Benefit Plan upon the ter-
mination of or withdrawal from a Company Benefit Plan, which
liability remains unpaid as of the date hereof.
(vii) With respect to any Company Benefit Plan that is
an employee welfare benefit plan, (A) no such Company Benefit
Plan is funded through a "welfare benefit fund", as such term
is defined in Section 419(e) of the Code, (B) each such Company
Benefit Plan that is a "group health plan", as such term is
defined in Section 5000(b)(1) of the Code, complies in all
material respects with the applicable requirements of Section
4980B(f) of the Code and (C) each such Company Benefit Plan
(including any such Plan covering retirees or other former
employees) may be amended or terminated without material
liability to the Company or any of its subsidiaries on or at
any time after the consummation of the Merger.
(viii) No employee of the Company or any subsidiary of
the Company will be entitled to any additional benefits or any
acceleration of the time of payment or vesting of any benefits
under any Company Benefit Plan as a result of the transactions
contemplated by this Agreement or by the Stock Option Agree-
ment.
(l) Subsidiaries. The Company Disclosure Schedule
sets forth all the subsidiaries of the Company as of the date
of this Agreement and indicates for each such subsidiary as of
such date the jurisdiction of incorporation. Each of the
Company's subsidiaries that is a bank (as defined in the BHC
Act) is an "insured bank" as defined in the FDIA and applicable
regulations thereunder. Except as provided in Section 55 of
the National Bank Act in the case of subsidiaries that are
-19-<PAGE>
national banks, all the shares of capital stock of each of the
subsidiaries of the Company are fully paid and nonassessable
and (except for directors' qualifying shares, if any) are owned
by the Company or another subsidiary of the Company free and
clear of all Liens. Except for the capital stock of its sub-
sidiaries, the Company does not own, directly or indirectly,
any capital stock or other ownership interest in any corpora-
tion, bank, partnership, joint venture or other entity.
(m) Absence of Certain Changes or Events. Except as
disclosed in the Company Filed SEC Documents, since December
31, 1993, the Company and its subsidiaries have conducted their
businesses only in the ordinary course of business consistent
with past practice and have not incurred any material liabil-
ity, except in the ordinary course of their business consistent
with their past practices, nor has there been any change, or
any event involving a prospective change, in the business,
assets, financial condition or results of operations of the
Company or any of its subsidiaries, which in any such case has
had, or is reasonably likely to have, a Material Adverse Effect
on the Company.
(n) Article SEVENTH of the Charter; State Takeover
Statutes. The Board of Directors of the Company has approved
the Merger, this Agreement and the Stock Option Agreement and/
or has taken such other action, and such approval and/or action
is sufficient, to render inapplicable to the Merger, this
Agreement, the Stock Option Agreement and the transactions
contemplated by this Agreement and the Stock Option Agreement
the provisions of Article SEVENTH of the Company's articles of
incorporation and the provisions of Chapters 7A and 7B of the
MBCA. To the best of the Company's knowledge, no other state
takeover statute or similar statute or regulation applies or
purports to apply to the Merger, this Agreement, the Stock
Option Agreement and the transactions contemplated by this
Agreement and the Stock Option Agreement.
(o) Vote Required. The Company Stockholder Approval
is the only vote of the holders of any class or series of the
Company capital stock necessary to approve this Agreement and
the transactions contemplated hereby (assuming for purposes of
this representation the accuracy of the representations con-
tained in Section 3.02(d)).
(p) Rights Agreement. The Company and the Board of
Directors of the Company have taken all necessary action to (i)
render the Rights Agreement inapplicable with respect to the
Merger and the other transactions contemplated by this Agree-
ment and the Stock Option Agreement and (ii) ensure that (1)
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neither Parent nor Sub nor any of their affiliates is consid-
ered to be an "Acquiring Person" or an "Adverse Person" (as
such terms are defined in the Rights Agreement) and (2) no
"Stock Acquisition Date" or "Distribution Date" (as such terms
are defined in the Rights Agreement) occurs by reason of
announcement, approval, execution or delivery of this Agreement
or the Stock Option Agreement or the consummation of the
transactions contemplated hereby and thereby.
(q) Properties. Except as disclosed in the Company
Filed SEC Documents, the Company and its subsidiaries (i) have
good, clear and marketable title to all the properties and
assets which are material to the Company's business on a con-
solidated basis and are reflected in the latest audited
statement of condition included in the Company Filed SEC
Documents as being owned by the Company and its subsidiaries or
acquired after the date thereof (except properties sold or
otherwise disposed of since the date thereof), free and clear
of all Liens except (A) statutory Liens securing payments not
yet due, (B) Liens on assets of subsidiaries of the Company
incurred in the ordinary course of their business and (C) such
imperfections or irregularities of title or Liens as do not
affect the use of the properties or assets subject thereto or
affected thereby or otherwise materially impair business
operations at such properties, in either case in such a manner
as to have a Material Adverse Effect on the Company, and (ii)
are collectively the lessee of all leasehold estates which are
material to the Company's business on a consolidated basis and
are reflected in the latest audited financial statements
included in the Company Filed SEC Documents or acquired after
the date thereof (except for leases that have expired by their
terms or as to which the Company has agreed to terminate or
convey since the date thereof) and is in possession of the
properties purported to be leased thereunder, and each such
lease is valid without default thereunder by the lessee or, to
the Company's knowledge, the lessor, other than defaults that
would not have a Material Adverse Effect on the Company. Each
of the Company and each of its subsidiaries enjoys peaceful and
undisturbed possession under all such leases. Substantially
all the Company's and its subsidiaries' owned buildings,
structures and equipment have been well maintained and are in
good and serviceable condition, normal wear and tear excepted.
(r) Insurance. The Company and its subsidiaries are
presently insured, and during each of the last five years have
been insured, for reasonable amounts against such risks as
companies engaged in similar businesses would, in accordance
with good business practice, customarily be insured. The
Company Disclosure Schedule sets forth a true and complete list
and brief description of all insurance policies maintained by
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or for the benefit of the Company, its subsidiaries or their
directors, officers, employees or agents.
(s) Labor Matters. No work stoppage involving the
Company or any of its subsidiaries is pending or, to the best
knowledge of the Company or its subsidiaries, threatened.
Neither the Company nor any of its subsidiaries is involved in,
or to the best knowledge of the Company or its subsidiaries,
threatened with or affected by any labor dispute, arbitration,
lawsuit or administrative proceeding which could reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company. Employees of the Company or of
any of its subsidiaries are not represented by any labor union
or any collective bargaining organization and, to the best
knowledge of the Company or its subsidiaries, no labor union is
attempting to organize employees of the Company or any of its
subsidiaries.
(t) Material Interests of Certain Persons. Except
as disclosed in the Company's Proxy Statement for its 1994
Annual Meeting of Stockholders, no executive officer or
director of the Company or any "associate" (as such term is
defined in Rule 14a-1 under the Exchange Act) of any such
executive officer or director has any material interest in any
material contract or property, real or personal, tangible or
intangible, that is used in or pertains to the business of the
Company or any of its subsidiaries.
(u) Brokers and Finders; Schedule of Fees and
Expenses. No broker, investment banker, financial advisor or
other person, other than Keefe, Bruyette & Woods, Inc., the
fees and expenses of which will be paid by the Company, is
entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the trans-
actions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company. The estimated fees and
expenses incurred and to be incurred by the Company in con-
nection with this Agreement and the Stock Option Agreement and
the transactions contemplated by this Agreement and the Stock
Option Agreement (including the fees of the Company's legal
counsel) are set forth in the Company Disclosure Schedule.
(v) Opinion of Financial Advisor. The Company has
received the opinion of Keefe, Bruyette & Woods, Inc., dated
the date of this Agreement, to the effect that, as of such
date, the Merger Consideration to be received by the Company's
stockholders is fair to the Company's stockholders from a
financial point of view, and a signed copy of such opinion has
been delivered to Parent.
-22-<PAGE>
(w) Allowance for Loan Losses. The allowance for
loan losses shown on the consolidated statement of condition of
the Company and its subsidiaries reflected in the Company's
latest audited financial statements included in the Company
Filed SEC Documents was, and the allowance for loan losses
shown on the consolidated statements of condition of the Com-
pany and its subsidiaries reflected in the Company's audited
financial statements as of dates subsequent to the date hereof
will be, in each case as of the dates thereof, adequate to
provide for losses relating to or inherent in the loan and
lease portfolios (including accrued interest receivables) of
the Company and its subsidiaries and other extensions of credit
(including letters of credit and commitments to make loans or
extend credit) by the Company and its subsidiaries.
SECTION 3.02. Representations and Warranties of
Parent and Sub. Parent and Sub represent and warrant to the
Company as follows:
(a) Organization and Authority. Each of Parent and
Sub is a bank or corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction in
which it is incorporated or organized and has the requisite
power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. Each of
Parent and Sub and each of Parent's other subsidiaries is duly
qualified and in good standing to do business in each juris-
diction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary
except where the failure so to qualify would not have a Mate-
rial Adverse Effect on Parent. Sub is a direct or indirect
wholly owned (other than any directors' qualifying shares)
subsidiary of Parent.
(a) Authorization. (i) Parent and Sub have all
requisite corporate power and authority to enter into this
Agreement and the Stock Option Agreement and to consummate the
transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the Stock Option Agreement
and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corpo-
rate action on the part of Parent and Sub. This Agreement and
the Stock Option Agreement have been duly executed and deliv-
ered by Parent and Sub and each constitutes a valid and binding
obligation of Parent and Sub, enforceable against Parent and
Sub in accordance with its terms.
(ii) The execution and delivery of this Agreement and
the Stock Option Agreement do not, and the consummation of the
transactions contemplated hereby and thereby will not, and
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compliance by Parent and Sub with any of the provisions hereof
or thereof will not, (A) result in any Violation pursuant to
any provision of the articles of incorporation (or similar
constitutive document) or by-laws of Parent, Sub or any other
subsidiary of Parent or (B) subject to obtaining or making the
consents, approvals, orders, authorizations, registrations,
declarations and filings referred to in paragraph (iii) below,
result in any Violation of any loan or credit agreement, note,
mortgage, indenture, lease, benefit plan or other agreement,
obligation, instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parent, Sub or any other subsidiary of
Parent or their respective properties or assets which Violation
under this clause (B) could reasonably be expected to have,
individually or in the aggregate with other such Violations, a
Material Adverse Effect on Parent.
(iii) No consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Parent, Sub or any
other subsidiary of Parent in connection with the execution and
delivery of this Agreement and the Stock Option Agreement by
Parent and Sub, or the consummation by Parent and Sub of the
transactions contemplated hereby and thereby, the failure to
obtain which could, individually or in the aggregate, reason-
ably be expected to have a Material Adverse Effect on Parent,
except for (A) the filing of applications with the Federal
Reserve under the BHC Act and with the OTS and approval of the
same, (B) the filing with the SEC of the Proxy Statement and
such reports under Sections 13(a), 13(d), 13(g) and 16(a) of
the Exchange Act, as may be required in connection with this
Agreement, the Stock Option Agreement and the transactions
contemplated hereby and thereby and the obtaining from the SEC
of such orders as may be required in connection therewith, (C)
such filings and approvals as are required to be made or
obtained under the securities or blue sky laws of various
states in connection with the transactions contemplated by this
Agreement, (D) the filing of the Certificate of Merger with the
Department of Commerce of the State of Michigan and appropriate
documents with the relevant authorities of other states in
which Parent is qualified to do business, (E) the State Banking
Approvals, (F) consents, authorizations, approvals, filings or
exemptions in connection with compliance with the applicable
provisions of Federal and state securities laws relating to the
regulation of broker-dealers or investment advisers and Federal
commodities laws relating to the regulation of futures com-
mission merchants and the rules and regulations thereunder and
of any applicable industry self-regulatory organization, and
the rules of the New York Stock Exchange ("NYSE"), or which are
required under consumer finance, mortgage banking and other
-24-<PAGE>
similar laws, (G) notices under the HSR Act, (H) notifications
to the Australian Stock Exchange and advice to the Reserve Bank
of Australia and, if applicable, to the Bank of England and (I)
filings, notifications and approvals under state insurance laws
and regulations.
(c) Information Supplied. None of the information
supplied or to be supplied by Parent or Sub for inclusion or
incorporation by reference in the Proxy Statement will, at the
date of mailing to stockholders and at the time of the Company
Stockholders Meeting, contain any untrue statement of a mate-
rial fact or omit to state any 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. The Proxy Statement will comply as to
form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder, except
that no representation or warranty is made by Parent or Sub
with respect to statements made or incorporated by reference
therein based on information supplied by the Company specifi-
cally for inclusion or incorporation by reference therein.
(d) Ownership of Company Common Stock. Other than
pursuant to the Stock Option Agreement, as of the date hereof,
neither Parent nor any of its affiliates (as such term is
defined under the Exchange Act), (i) beneficially owns,
directly or indirectly, or (ii) is party to any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of, in each case, shares of
capital stock of the Company, which in the aggregate represent
10% or more of the outstanding shares of Company Common Stock
entitled to vote generally in the election of directors (other
than Trust Account Shares).
(e) Brokers and Finders. No broker, investment
banker, financial advisor or other person, other than CS First
Boston Corporation and Morgan Stanley & Co. Incorporated, the
fees and expenses of each of which will be paid by Parent, is
entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the trans-
actions contemplated by this Agreement and the Stock Option
Agreement based upon arrangements made by or on behalf of
Parent or Sub.
(f) Financing. Parent has available funds suffi-
cient to consummate the Merger on the terms contemplated by
this Agreement, and at the Effective Time, Parent will have
available all the funds necessary to perform its obligations
under this Agreement, including consummating the Merger on the
terms contemplated hereby.
-25-<PAGE>
(g) Litigation. There is no suit, action or pro-
ceeding pending or, to the knowledge of Parent, threatened
against or affecting Parent or any of its subsidiaries that
individually or in the aggregate could reasonably be expected
to (i) impair the ability of Parent to perform its obligations
under this Agreement or (ii) threaten, impede or delay the
consummation of the Merger, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbi-
trator outstanding against Parent or any of its subsidiaries
having, or which is reasonably likely to have, individually or
in the aggregate, any effect referred to in clause (i) or (ii)
above.
ARTICLE IV
Covenants Relating to Conduct of the Company's Business
SECTION 4.01. Covenants of the Company. During the
period from the date of this Agreement until the Effective
Time, the Company agrees as to itself and its subsidiaries that
(except as expressly contemplated or permitted by this Agree-
ment or the Stock Option Agreement or as set forth in the
Company Disclosure Schedule):
(a) Ordinary Course. The Company and its subsid-
iaries shall carry on their respective businesses in the
usual, regular and ordinary course consistent with sound
banking practices and use their best efforts to preserve
intact their present business organizations, maintain
their rights and franchises, keep available the services
of their current officers and employees and preserve their
relationships with customers, suppliers and others having
business dealings with them to the end that their goodwill
and ongoing businesses shall not be impaired in any
material respect at the Effective Time. The Company shall
not, nor shall it permit any of its subsidiaries to, (i)
enter into any new material line of business; (ii) except
as required by law, regulation, GAAP or regulatory poli-
cies or guidelines, change its or its subsidiaries'
lending, credit, investment, liability management and
other material banking policies in any respect which is
material to the Company; or (iii) except as required by
any applicable regulatory authorities, incur or commit to
any capital expenditures, or any obligations or liabili-
ties in connection therewith, other than capital expen-
ditures and obligations or liabilities incurred or
committed to that are approved in accordance with the
Company's capital expenditure approval policies (as
adopted by the Company's board of directors pursuant to
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resolutions adopted on January 20, 1993, February 23,
1994, and May 18, 1994) and that are not (A) individually
in excess of U.S. $250,000 and (B) in the aggregate in
excess of the amount identified as capital expenditures in
the Company's 1995 operating budget as in effect on the
date hereof, which budget shall not be amended without the
prior written consent of Parent and which amount shall in
no event exceed U.S. $10,000,000.
(b) Dividends; Changes in Stock. The Company shall
not, nor shall it permit any of its subsidiaries to, nor
shall it propose to, (i) declare, set aside or pay any
dividends on or make other distributions in respect of,
directly or indirectly, any of its capital stock, except
(A) the Company may continue the declaration and payment
of regular quarterly cash dividends not in excess of U.S.
$.55 per share of Company Common Stock, with usual record
and payment dates for such dividends in accordance with
the Company's past dividend practice, and (B) for divi-
dends by a direct or indirect wholly owned (other than
directors' qualifying shares) subsidiary of the Company,
(ii) adjust, split, combine or reclassify any of its
capital stock or issue or authorize or propose the issu-
ance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock or (iii)
repurchase, redeem or otherwise acquire, or permit any
subsidiary to purchase or otherwise acquire (except for
the acquisition of Trust Account Shares and the acquisi-
tion of shares to be used to satisfy obligations under
Company Stock Plans), any shares of its capital stock or
any securities convertible into or exchangeable for any
shares of its capital stock, except that the Company shall
redeem the Company Debentures and cancel the Equity Con-
tracts in accordance with Section 5.11.
(c) Issuance of Securities. The Company shall not,
nor shall it permit any of its subsidiaries to, issue,
deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its or any of its
subsidiaries' capital stock of any class, any Voting Debt
or any securities convertible into or exchangeable for, or
any rights, warrants or options to acquire, any such
shares or Voting Debt, or enter into any agreement with
respect to any of the foregoing, other than (i) the
issuance of Company Common Stock pursuant to the terms of
the Equity Contracts and the Company Debentures or upon
the exercise of Company Stock Options referred to in this
Agreement that are outstanding on the date of this
Agreement in accordance with their present terms or pur-
suant to the Stock Option Agreement, (ii) issuances by a
-27-<PAGE>
direct or indirect wholly owned (other than directors'
qualifying shares) subsidiary of its capital stock to its
parent and (iii) issuance of Company Series B Preferred
upon exercise of the Rights in accordance with their
present terms and reservation for issuance of shares of
Company Series B Preferred in addition to those presently
reserved for issuance.
(d) Governing Documents. The Company shall not
amend or propose to amend, nor shall it permit any of its
subsidiaries to amend, the articles of incorporation (or
similar constitutive documents) or by-laws of the Company
or any of its subsidiaries nor shall the Company amend the
Rights Agreement other than in accordance with Sections
3.01(p) and 5.10.
(e) No Acquisitions. The Company shall not, nor
shall it permit any of its subsidiaries to, acquire or
agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or a sub-
stantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association
or other business organization or division thereof or
otherwise acquire or agree to acquire any assets, in each
case which are material, individually or in the aggregate,
to the Company and its subsidiaries taken as a whole.
Without limiting the generality of the foregoing, the
Company shall not, nor shall it permit any of its sub-
sidiaries to, make any investment either by purchase or
stock or securities, contributions to capital, property
transfers or purchase of any property or assets of any
other individual, corporation or other entity other than a
wholly owned subsidiary thereof, except for transactions
in the ordinary course of business consistent with sound
banking practice.
(f) No Dispositions. Other than (i) activities in
the ordinary course of business consistent with sound
banking practice or (ii) as set forth on the Company
Disclosure Schedule, the Company shall not, nor shall it
permit any of its subsidiaries to, sell, lease, mortgage,
encumber or otherwise dispose of, any of its assets
(including capital stock of subsidiaries), which are
material, individually or in the aggregate, to the Company
and its subsidiaries taken as a whole.
(g) Indebtedness. The Company shall not, nor shall
it permit any of its subsidiaries to, incur any indebt-
edness for borrowed money or guarantee any such indebt-
edness or issue or sell any debt securities or warrants or
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rights to acquire any debt securities of the Company or
any of its subsidiaries or guarantee any debt securities
of others, other than (i) short-term indebtedness incurred
to refinance existing short-term indebtedness, (ii)
indebtedness of any subsidiary of the Company to the
Company or another subsidiary of the Company or (iii) in
the case of bank subsidiaries, indebtedness incurred in
the ordinary course of business consistent with sound
banking practice.
(h) Other Actions. The Company shall not, nor shall
it permit any of its subsidiaries to, take any action that
would, or reasonably could be expected to, result in any
of its representations and warranties set forth in this
Agreement that are qualified as to materiality being or
becoming untrue, any of such representations and warran-
ties that are not so qualified being or becoming untrue in
any material respect, any of the conditions to the Merger
set forth in Article VI not being satisfied or a material
Violation of any provision of the Stock Option Agreement,
or (unless such action is required by applicable law or
sound banking practice) which could reasonably be expected
to adversely affect or delay the ability of any of Parent,
Sub or the Company or their subsidiaries to obtain any of
the Requisite Regulatory Approvals (as defined in Section
6.01(b)) without imposition of a condition or restriction
of the type referred to in Section 6.02(c).
(i) Advice of Changes; Government Filings. The
Company shall confer on a regular and frequent basis with
Parent, report on operational matters and promptly advise
Parent orally and in writing of any change or event hav-
ing, or which, insofar as can reasonably be foreseen,
could have, individually or in the aggregate a Material
Adverse Effect on the Company or which would cause or
constitute a material breach of any of the representa-
tions, warranties or covenants of the Company contained
herein. The Company shall file all reports required to be
filed by it with the SEC or Nasdaq between the date of
this Agreement and the Effective Time and shall deliver to
Parent copies of all such reports promptly after the same
are filed. The Company and each subsidiary of the Company
that is a bank shall file all Call Reports with the
appropriate Regulatory Authorities and all other reports,
applications and other documents required to be filed with
the Federal Reserve and the other Regulatory Authorities
between the date hereof and the Effective Time and shall
make available to Parent copies of all such reports
promptly after the same are filed. Except where prohib-
ited by applicable statutes and regulations, the Company
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shall promptly provide Parent (or its counsel) with copies
of all other filings made by the Company with any state or
Federal Governmental Entity in connection with this
Agreement, the Stock Option Agreement or the transactions
contemplated hereby or thereby.
(j) Accounting Methods. Except as contemplated by
Section 5.09, the Company shall not change its fiscal year
or its methods of accounting in effect at January 1, 1994,
except as required by changes in GAAP or regulatory
accounting practices as concurred in by the Company's
independent auditors.
(k) Compensation; Benefit Plans. Neither the Com-
pany nor any of its subsidiaries will (i) enter into,
adopt, amend or terminate any Company Benefit Plan or any
other employee benefit plan or any agreement, arrangement,
plan or policy between such party and one or more of its
directors or officers, in each case so as to increase
benefits thereunder, (ii) increase in any manner the
compensation or fringe benefits of any of its directors,
officers or employees or provide any other benefit not
required by any plan and arrangement as in effect as of
the date hereof (including the granting of stock options,
stock appreciation rights, restricted stock, restricted
stock units or performance units or shares), except for
normal salary compensation increases, benefit changes or
cash bonus payments in the ordinary course of business
consistent with past practice, and, in the case of those
executive officers referred to in Section 4.01(k) of the
Company Disclosure Schedule, as set forth therein, (iii)
create or amend any Company Stock Plan or grant any equity
based award pursuant to any Company Stock Plan or other-
wise or (iv) enter into or renew any contract, agreement,
commitment or arrangement providing for the payment to any
director, officer or employee of such party of compensa-
tion or benefits contingent, or the terms of which are
materially altered, upon the occurrence of any of the
transactions contemplated by this Agreement or the Stock
Option Agreement; provided, however, that the Company
shall, at the request of Parent, use its reasonable
efforts to enter into employment agreements, in form and
substance satisfactory to Parent, with those executive
officers of the Company designated by Parent, which
employment agreements shall be effective on and after (and
subject to the occurrence of) the Effective Time and shall
be assumed by the Surviving Corporation.
(l) Tax Matters. From the date hereof until the
Effective Time, (i) the Company and its subsidiaries will
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file all Company Returns required to be filed with any
taxing authority in accordance with all applicable laws,
(ii) the Company and its subsidiaries will timely pay all
taxes shown as due and payable on the respective Company
Returns that are so filed and as of the time of filing,
the Company Returns will correctly reflect the facts
regarding the income, business, assets, operations,
activities and the status of the Company and its subsid-
iaries in all material respects, and (iii) the Company and
its subsidiaries will promptly notify Parent of any
action, suit, proceeding, investigation, audit or claim
pending against or with respect to the Company or any
subsidiary in respect of any tax where there is a rea-
sonable possibility of a determination or decision which
would reasonably be expected to have a significant adverse
effect on the Company's tax liabilities or other tax
attributes. The Company shall not, nor shall it permit
any of its subsidiaries to, make any tax election or
settle or compromise any income tax liability.
(m) Settlements, etc. The Company shall not, nor
shall it permit any of its subsidiaries to, pay, dis-
charge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, dis-
charge, settlement or satisfaction, in the ordinary course
of business consistent with sound banking practice or in
accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, the most recent
consolidated financial statements (or the notes thereto)
of the Company included in the Company Filed SEC Documents
or incurred since the date of such financial statements in
the ordinary course of business consistent with sound
banking practice.
(n) Material Contracts. Except in the ordinary
course of business consistent with sound banking practice,
the Company shall not, nor shall it permit any of its
subsidiaries to, modify, amend or terminate any material
contract, lease or agreement to which the Company or any
subsidiary is a party or waive, release or assign any
material rights or claims thereunder. Without limiting the
generality of the foregoing, without the prior written
consent of Parent, the Company shall not waive any
standstill provision contained in any confidentiality
agreement in existence as of the date hereof between the
Company and any other person. Without the prior written
consent of Parent (which shall not be unreasonably with-
held), the Company shall not, nor shall it permit any of
its subsidiaries to, enter into any contract, agreement or
-31-<PAGE>
arrangement which, if entered into prior to the date
hereof, would have been covered by clause (i), (ii), (iii)
or (iv) of Section 3.01(i)(A).
(o) General. The Company shall not, nor shall it
permit any of its subsidiaries to, authorize any of, or
commit or agree to take any of, the foregoing actions
described in this Section 4.01.
SECTION 4.02. No Solicitation. (a) The Company
shall not, nor shall it permit any of its subsidiaries to, nor
shall it authorize or permit any officer, director or employee
of or any investment banker, attorney or other advisor or
representative of, the Company or any of its subsidiaries to,
(i) solicit, initiate or encourage the submission of any
takeover proposal or (ii) participate in any discussions or
negotiations regarding, or furnish to any person any informa-
tion with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes,
or may reasonably be expected to lead to, any takeover pro-
posal; provided, however, that prior to receipt of the Company
Stockholder Approval, to the extent required by the fiduciary
obligations of the Board of Directors of the Company, as
determined in good faith by the Board of Directors based on the
advice of independent counsel, the Company may, (A) in response
to an unsolicited takeover proposal and subject to compliance
with Section 4.02(c), furnish information with respect to the
Company and its subsidiaries to any person pursuant to a cus-
tomary confidentiality agreement (as determined by the Com-
pany's independent counsel) and discuss such information (but
not the terms of any possible takeover proposal) with such
person and (B) upon receipt by the Company of an unsolicited
takeover proposal and subject to compliance with Section
4.02(c), participate in negotiations regarding such takeover
proposal. Without limiting the foregoing, it is understood
that any violation of the restrictions set forth in the pre-
ceding sentence by any executive officer of the Company or any
of its subsidiaries or any investment banker, attorney or other
advisor or representative of the Company or any of its sub-
sidiaries, whether or not such person is purporting to act on
behalf of the Company or any of its subsidiaries or otherwise,
shall be deemed to be a breach of this Section 4.02(a) by the
Company. For purposes of this Agreement, "takeover proposal"
means any inquiry, proposal or offer from any person relating
to any direct or indirect acquisition or purchase of a sub-
stantial amount of the assets of the Company or any of its
subsidiaries, other than the transactions contemplated by this
Agreement and the Stock Option Agreement, or of 20% or more of
any class of equity securities of the Company or any of its
subsidiaries or any tender offer or exchange offer that if
-32-<PAGE>
consummated would result in any person beneficially owning 20%
or more of any class of equity securities of the Company or any
of its subsidiaries, or any merger, consolidation, business
combination, sale of substantially all assets, recapitaliza-
tion, liquidation, dissolution or similar transaction involving
the Company or any of its subsidiaries other than the trans-
actions contemplated by this Agreement and the Stock Option
Agreement.
(b) Except as set forth herein, neither the Board of
Directors of the Company nor any committee thereof shall (i)
withdraw or modify, or propose to withdraw or modify, in a
manner adverse to Parent or Sub, the approval or recommendation
by such Board of Directors or any such committee of this
Agreement or the Merger, (ii) approve or recommend, or propose
to approve or recommend, any takeover proposal or (iii) enter
into any agreement with respect to any takeover proposal.
Notwithstanding the foregoing, prior to the receipt of the
Company Stockholder Approval, the Board of Directors of the
Company, to the extent required by its fiduciary obligations,
as determined in good faith by the Board of Directors based on
the advice of independent counsel, may (subject to the fol-
lowing sentences) withdraw or modify its approval or recom-
mendation of this Agreement or the Merger, approve or recommend
any superior proposal (as defined below), enter into an
agreement with respect to such superior proposal or terminate
this Agreement, in each case at any time after the second
business day following Parent's receipt of written notice
advising Parent that the Board of Directors has received a
superior proposal, specifying the material terms and conditions
of such superior proposal and identifying the person making
such superior proposal (it being understood that any amendment
to a superior proposal shall necessitate an additional two
business day period). In addition, if the Company proposes to
enter into an agreement with respect to any takeover proposal,
it shall concurrently with entering into such agreement pay, or
cause to be paid, to Parent the Expenses and the Termination
Fee (each as defined in Section 5.07(b)) in accordance with the
provisions of Section 5.07(b). For purposes of this Agreement,
"superior proposal" means any bona fide takeover proposal made
by a third party to acquire, directly or indirectly, for con-
sideration consisting of cash and/or securities, more than 50%
of the shares of Company Common Stock then outstanding or all
or substantially all the assets of the Company and otherwise on
terms which the Board of Directors of the Company determines in
its good faith judgment (based on the advice of a financial
advisor of nationally recognized reputation) to be more
favorable to the Company's stockholders than the Merger and for
which financing, to the extent required, is then committed or
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which, in the good faith judgment of such Board of Directors,
is reasonably capable of being financed by such third party.
(c) In addition to the obligations of the Company
set forth in paragraph (b) above, the Company promptly shall
advise Parent orally and in writing of any request for infor-
mation or of any takeover proposal, or any inquiry with respect
to or which could lead to any takeover proposal, the material
terms and conditions of such request, takeover proposal or
inquiry and the identity of the person making any such request,
takeover proposal or inquiry. The Company will keep Parent
fully informed of the status and details (including amendments
or proposed amendments) of any such request, takeover proposal
or inquiry.
(d) Nothing contained in this Section 4.02 shall
prohibit the Company from taking and disclosing to its stock-
holders a position contemplated by Rule 14e-2(a) promulgated
under the Exchange Act or from making any disclosure to the
Company's stockholders if, in the good faith judgment of the
Board of Directors of the Company based on the recommendation
of independent counsel, failure to do so would be inconsistent
with applicable laws; provided that the Company does not,
except as permitted by Section 4.02(b), withdraw or modify, or
propose to withdraw or modify, its position with respect to the
Merger or approve or recommend, or propose to approve or rec-
ommend, a takeover proposal.
ARTICLE V
Additional Agreements
SECTION 5.01. Preparation of the Proxy Statement.
The Company will, as soon as practicable following the date of
this Agreement, prepare and file a preliminary Proxy Statement
with the SEC and will use all reasonable efforts to respond to
any comments of the SEC or its staff and to cause the Proxy
Statement to be mailed to the Company's stockholders as
promptly as practicable after responding to all such comments
to the satisfaction of the SEC or its staff. The Company will
notify Parent promptly of the receipt of any comments from the
SEC or its staff and of any request by the SEC or its staff for
amendments or supplements to the Proxy Statement or for addi-
tional information and will supply Parent with copies of all
correspondence between the Company or any of its representa-
tives, on the one hand, and the SEC or its staff, on the other
hand, with respect to the Proxy Statement or the Merger. If at
any time prior to the Company Stockholders Meeting there shall
occur any event that should be set forth in an amendment or
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supplement to the Proxy Statement, the Company will promptly
prepare and mail to its stockholders such an amendment or
supplement. The Company will not mail any Proxy Statement, or
any amendment or supplement thereto, to which Parent reasonably
objects.
SECTION 5.02. Access to Information. The Company
shall, and shall cause each of its subsidiaries to, afford to
Parent and to the officers, employees, accountants, counsel and
other representatives of Parent, reasonable access, during
normal business hours during the period prior to the Effective
Time, to all their respective properties, books, contracts,
commitments, personnel and records and, during such period, the
Company shall, and shall cause each of its subsidiaries to,
furnish promptly to Parent (a) a copy of each report, schedule,
registration statement and other document filed or received by
it during such period pursuant to the requirements of Federal
or state securities laws or Federal or state banking laws
(other than reports or documents which the Company or subsid-
iary is not permitted to disclose under applicable law) and (b)
all other information concerning its business, properties and
personnel as Parent may reasonably request. Parent will, and
will cause its advisors and representatives to, hold any such
information which is nonpublic in confidence to the extent
required by, and in accordance with, the terms of the Confi-
dentiality Agreement dated as of January 11, 1995, between the
Company and Parent (the "Confidentiality Agreement"). No
investigation by either Parent or Sub shall affect the repre-
sentations and warranties of the Company, and each such rep-
resentation and warranty shall survive such investigation.
During the period from the date of this Agreement to the
Effective Time, the Company shall promptly furnish to Parent
copies of all monthly and quarterly interim financial state-
ments (including any budgets and variances from budgets) as the
same become available and shall cause one or more of its des-
ignated representatives to confer on a regular and frequent
basis with Parent. The Company shall promptly notify Parent of
any material change in its business or operations and of any
complaints, investigations or hearings (or communications
indicating that the same may be contemplated) by any Govern-
mental Entity, or the institution of the threat of material
litigation involving the Company or its subsidiaries, and shall
keep Parent fully informed of all such events.
SECTION 5.03. Company Stockholders Meeting. The
Company shall duly call, give notice of, convene and hold the
Company Stockholders Meeting for the purpose of obtaining the
Company Stockholder Approval as soon as practicable after the
date on which the definitive Proxy Statement has been mailed to
the Company's stockholders. Subject to Section 4.02, the
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Company will, through its Board of Directors, recommend to its
stockholders that they grant the Company Stockholder Approval.
Without limiting the generality of the foregoing, the Company
agrees that, subject to its right to terminate this Agreement
pursuant to Section 7.01(d), its obligations pursuant to the
first sentence of this Section 5.03 shall not be affected by
(a) the commencement, public proposal, public disclosure or
communication to the Company of any takeover proposal or (b)
the withdrawal or modification by the Board of Directors of the
Company of its approval or recommendation of this Agreement or
the Merger in accordance with Section 4.02(b).
SECTION 5.04. Legal Conditions to Merger. Subject
to the terms and conditions of this Agreement, each of the
Company and Parent shall, and shall cause its subsidiaries to,
use all reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things neces-
sary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Merger and the
other transactions contemplated by this Agreement, including
(a) the obtaining of any necessary consent, authorization,
order or approval of, or any exemption by, any Governmental
Entity and/or any other public or private third party which is
required to be obtained by such party or any of its subsid-
iaries in connection with the Merger and the other transactions
contemplated by this Agreement and the Stock Option Agreement
(including the redemption of the Company Debentures and the
cancellation of the Equity Contracts in accordance with Section
5.11), and the making or obtaining of all necessary filings and
registrations with respect thereto, (b) the defending of any
lawsuits or other legal proceedings, whether judicial, admin-
istrative or regulatory, challenging this Agreement or the
Stock Option Agreement, including seeking to have any stay or
temporary restraining order entered by any court or other
Governmental Entity vacated or reversed, and (c) the execution
and delivery of any additional instruments necessary to con-
summate the transactions contemplated by, and to fully carry
out the purposes of, this Agreement and the Stock Option
Agreement; provided, however, that a party shall not be obli-
gated to take any action pursuant to the foregoing if the
taking of such action or such compliance or the obtaining of
such consent, authorization, order, approval or exemption
would, in such party's reasonable opinion, (A) be materially
burdensome to such party and its subsidiaries taken as a whole
in the context of the transactions contemplated by this
Agreement or impact in such a materially adverse manner the
economic or business benefits of the transactions contemplated
by this Agreement as to render inadvisable the consummation of
the Merger or (B) result in the imposition of a condition or
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restriction on such party or on the Surviving Corporation of
the type referred to in Section 6.02(c). Each of the Company
and Parent will promptly cooperate with and furnish information
to the other in connection with any such burden suffered by, or
requirement imposed upon, any of them or any of their subsid-
iaries in connection with the foregoing. In connection with
and without limiting the foregoing, the Company and its Board
of Directors shall (x) take all action necessary to ensure that
neither Article SEVENTH of the Company's articles of incorpo-
ration nor any state takeover statute or similar statute or
regulation (including Chapters 7A and 7B of the MBCA) is or
becomes applicable to the Merger, this Agreement, the Stock
Option Agreement or any of the other transactions contemplated
by this Agreement or the Stock Option Agreement and (y) if
Article SEVENTH or any state takeover statute or similar
statute or regulation becomes applicable to the Merger, this
Agreement, the Stock Option Agreement or any of the other
transactions contemplated by this Agreement or the Stock Option
Agreement, take all action necessary to ensure that the Merger
and the other transactions contemplated by this Agreement and
the Stock Option Agreement may be consummated as promptly as
practicable on the terms contemplated by this Agreement and
otherwise to minimize the effect of such Article, statute or
regulation on the Merger, this Agreement, the Stock Option
Agreement or any of the other transactions contemplated by this
Agreement or the Stock Option Agreement. Notwithstanding the
foregoing, the Board of Directors of the Company shall not be
prohibited from taking any action permitted by the terms of
this Agreement.
SECTION 5.05. Employee Benefit Plans. (a) Except
as provided in Section 5.06, Parent shall cause the Surviving
Corporation and its subsidiaries to maintain for a period of at
least one year after the Effective Time the Company Benefit
Plans in effect on the date of this Agreement or to provide,
pursuant to benefit plans of the Surviving Corporation or of
Parent, benefits to employees of the Surviving Company and its
subsidiaries that are at least generally comparable in the
aggregate to those benefits provided under the Company Benefit
Plans in effect on the date of this Agreement.
(b) Parent shall cause the Surviving Corporation to
honor in accordance with their terms the employment, severance
and supplemental pension contracts to which employees of the
Company are a party that are set forth on the Company Disclo-
sure Schedule, and honor all provisions for vested benefits and
other vested amounts earned or accrued through the Effective
Time under the Company Benefit Plans.
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SECTION 5.06. Stock Options and the ESOP. (a) As
soon as practicable following the date of this Agreement, the
Board of Directors of the Company (or, if appropriate, any
committee administering the Company Stock Plans) shall adopt
such resolutions or take such other actions as are required to
provide for the cancellation of all outstanding employee stock
options to purchase shares of Company Common Stock ("Company
Stock Options") heretofore granted under the Company Stock
Plans to provide that each Company Stock Option, whether vested
or not, outstanding immediately prior to the Effective Time, in
exchange for a cash payment by the Company of an amount equal
to (i) the excess, if any, of (x) the Merger Consideration per
share over (y) the exercise price per share of Company Common
Stock subject to such Company Stock Option, multiplied by (ii)
the number of shares of Company Common Stock subject to such
Company Stock Options for which such Company Stock Option shall
not theretofore have been exercised. The Company shall use its
best efforts to obtain all consents of the holders of the
Company Stock Options as shall be necessary to effectuate the
foregoing. Notwithstanding anything to the contrary contained
in this Agreement, payment shall, at Parent's request, be
withheld in respect of any Company Stock Option until all
necessary consents with respect to such Company Stock Options
are obtained.
(b) All amounts payable pursuant to this Section
5.06 shall be subject to any required withholding of taxes and
shall be paid without interest.
(c) The Board of Directors of the Company (or, if
appropriate, any committee administering the Company Stock
Plans) shall adopt such resolutions or take such actions as are
required to terminate the Company Stock Plans other than the
ESOP as of the Effective Time, to delete as of the Effective
Time the provision in any other Company Benefit Plan providing
for the issuance, transfer or grant of any capital stock of the
Company or any interest in respect of any capital stock of the
Company and to ensure that following the Effective Time no
holder of a Company Stock Option or any participant in any
Company Stock Plan or other Company Benefit Plan shall have any
right thereunder to acquire any capital stock of the Company or
the Surviving Corporation.
(d) If Parent so requests, the Board of Directors of
the Company (or, if appropriate, any committee administering
the ESOP) shall give due consideration to any request by Parent
to cause the ESOP to continue following the Effective Time, and
shall give due consideration to any request by Parent to take,
in accordance with the terms of the ESOP and pursuant to the
Michigan National Corporation Employee Stock Ownership Trust
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Agreement (the "Trust Agreement"), such actions as are neces-
sary (including amendment of the ESOP and the Trust Agreement)
to cause the trustee thereunder to reinvest the Merger Con-
sideration in common stock of the Parent (or any equivalent
equity security) designated by Parent that constitutes, if any,
a "qualifying employer security" (as defined in Section
4975(e)(8) and Section 409(l) of the Code).
SECTION 5.07. Fees and Expenses. (a) Whether or
not the Merger is consummated, all costs and expenses incurred
in connection with this Agreement, the Stock Option Agreement
and the transactions contemplated hereby and thereby shall be
paid by the party incurring such expense, except (i) as
otherwise provided below in this Section 5.07 and (ii) that
filing fees and expenses incurred in connection with the fil-
ing, printing and mailing of the Proxy Statement shall be
shared equally by Parent and the Company.
(b) If this Agreement is terminated pursuant to its
terms, other than by Parent or the Company pursuant to Section
7.01(b)(i) or (iii) or by the Company pursuant to Section
7.01(b)(ii), and an Acquisition Event shall occur after the
date hereof and prior to the date that is 18 months after the
date of such termination, the Company shall upon demand by
Parent, pay or cause to be paid, in same day funds to Parent
the sum of (i) all of Parent's Expenses (as defined below) in
an amount up to but not exceeding U.S. $10,000,000 and (ii)
U.S. $50,000,000 (the "Termination Fee"). "Acquisition Event"
shall mean any of the following: (i) any person or group (as
defined in Section 13(d)(3) of the Exchange Act), other than
Parent or any of its subsidiaries, shall have acquired, pur-
suant to a tender offer, exchange offer or otherwise, benefi-
cial ownership (including pursuant to the acquisition of
options) of 20% or more of any class of equity securities of
the Company or any of its subsidiaries; (ii) any such person or
group shall have received approval from the Federal Reserve to
acquire ownership of 20% or more of any class of equity secu-
rities of the Company or MNB; or (iii) the Company or MNB shall
have authorized, recommended, proposed or publicly announced an
intention to authorize, recommend or propose, shall have
amended the Rights Agreement to facilitate, or shall have
entered into, an agreement with any person (other than Parent
or a subsidiary thereof) to (w) effect a merger, consolidation,
business combination, sale of substantially all assets, or
similar transaction involving the Company or MNB, (x) sell,
lease or otherwise dispose of assets of the Company or its
subsidiaries representing 15% or more of the consolidated
assets of the Company and its subsidiaries, (y) issue, sell or
otherwise dispose of (including by way of merger, consolida-
tion, share exchange, or any similar transaction) securities
-39-<PAGE>
representing 20% or more of any class of equity securities of
the Company or any of its subsidiaries or (z) have such person
effect a tender offer or exchange offer that if consummated
would result in any person beneficially owning 20% or more of
any class of equity securities of the Company or any of its
subsidiaries. "Expenses" shall mean all out-of-pocket fees and
expenses incurred or paid by or on behalf of Parent or any of
its affiliates in connection with the Merger or the consumma-
tion of any of the other transactions contemplated by this
Agreement or the Stock Option Agreement, including all fees and
expenses of counsel, commercial banks, investment banking
firms, accountants, experts and consultants to Parent or any of
its affiliates. The amount of Expenses so payable shall be the
amount set forth in an estimate delivered by Parent, subject to
upward or downward adjustment upon delivery of reasonable
documentation therefor.
(c) Notwithstanding anything to the contrary con-
tained herein, the aggregate amount of gain realized by Grantee
pursuant to the Stock Option Agreement from the Company (or the
Substitute Option Issuer (as defined in the Stock Option
Agreement)), when added to the Termination Fee, if any,
received by Parent pursuant to Section 5.07(b), shall not in
the aggregate exceed U.S. $75,000,000, and, in the event Parent
realizes gain in excess of such amount under the Stock Option
Agreement from the Company (or the Substitute Option Issuer) or
under the Termination Fee, Parent hereby undertakes promptly to
pay back to the Company, by wire transfer of immediately
available funds, the amount of such excess.
SECTION 5.08. Indemnification, Exculpation and
Insurance. (a) Parent and Sub agree that, for a period of six
years (or the period of the applicable statute of limitations,
if longer) from the Effective Time, all rights to indemnifi-
cation and exculpation from liability for acts or omissions
occurring prior to the Effective Time now existing in favor of
the current or former directors or officers of the Company and
its subsidiaries (such persons, "Indemnified Persons") as
provided in their respective articles of incorporation (or
similar constitutive documents) or by-laws shall survive the
Merger and shall not be amended, repealed or otherwise modified
in any manner that would adversely affect the rights thereunder
of any such Indemnified Persons. Parent will cause to be
maintained for a period of six years from the Effective Time
the Company's current directors' and officers' insurance and
indemnification policy (a copy of which has heretofore been
delivered to Parent) to the extent that it provides coverage
for events occurring prior to the Effective Time (the "D&O
Insurance") for all persons who are directors and officers of
the Company on the date of this Agreement, so long as the
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annual premium therefor would not be in excess of (i) until the
third anniversary of the Effective Time, 200%, and (ii) there-
after, 100%, of the last annual premium paid prior to the date
of this Agreement (in the case of either clause (i) or (ii)
above, the "Maximum Premium"); provided, however, that Parent
may, in lieu of maintaining such existing D&O Insurance as
provided above, cause comparable coverage to be provided under
any policy maintained for the benefit of Parent or any of its
subsidiaries, so long as the material terms thereof are no less
advantageous than the existing D&O Insurance. If the existing
D&O Insurance expires, is terminated or cancelled during such
three-year period, Parent will use all reasonable efforts to
cause to be obtained as much D&O Insurance as can be obtained
for the remainder of such period for an annualized premium not
in excess of the Maximum Premium, on terms and conditions no
less advantageous than the existing D&O Insurance. The Company
represents to Parent that the Maximum Premium is U.S.
$1,230,000 for the first three years and U.S. $615,000 there-
after.
(b) The provisions of this Section 5.08 are intended
to be for the benefit of, and shall be enforceable by, each
Indemnified Party and each Indemnified Party's heirs and rep-
resentatives.
SECTION 5.09. Company Accruals and Reserves. Prior
to the Closing Date, at the request of Parent, the Company
shall review and, to the extent mutually determined to be
necessary or advisable, consistent with GAAP and the accounting
rules, regulations and interpretations of the SEC and its
staff, modify and change its loan, accrual and reserve policies
and practices (including loan classifications and levels of
reserves and accruals to (a) reflect the Surviving Corpora-
tion's plans with respect to the conduct of the Company's
business following the Merger and (b) make adequate provision
for the costs and expenses relating thereto) so as to be
applied consistently on a basis that is mutually satisfactory
to each of the Company and Parent. Notwithstanding the fore-
going, the Company shall not be obligated to take in any
respect any such action pursuant to this Section 5.09 unless
and until Parent acknowledges that all conditions to its
obligation to consummate the Merger have been satisfied.
SECTION 5.10. Rights Agreement. The Board of
Directors of the Company shall take all further action (in
addition to that referred to in Section 3.01(p)) requested in
writing by Parent in order to render the Rights inapplicable to
the Merger, the Stock Option Agreement and the other trans-
actions contemplated by this Agreement and the Stock Option
Agreement. Except as requested in writing by Parent, during
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the term of this Agreement, the Board of Directors of the
Company shall not (i) amend the Rights Agreement or (ii) take
any action with respect to, or make any determination under,
the Rights Agreement, including a redemption of the Rights or
any action to facilitate a takeover proposal; provided that any
of such actions may be taken simultaneously with entering into
an agreement in respect of such takeover proposal pursuant to
Section 4.02(b).
SECTION 5.11. Company Debentures. The Company shall
deliver, as promptly as practicable following receipt of Fed-
eral Reserve approval for such redemption and cancellation, a
notice to holders of the Company Debentures and the Equity
Contracts of the Company's irrevocable intention to redeem, on
a specified date not earlier than 60 days nor later than 90
days following the date of such notice, all the outstanding
Company Debentures in accordance with their terms and to cause
the cancellation of all the outstanding Equity Contracts in
accordance with their terms. On such specified date, the
Company shall duly effect such redemptions and such cancella-
tions, in each case in accordance with the respective provi-
sions of the Company Debentures and the Equity Contracts.
SECTION 5.12. Additional Agreements. In case at any
time after the Effective Time any further action is necessary
or desirable to carry out the purposes of this Agreement or to
vest the Surviving Corporation with full title to all proper-
ties, assets, rights, approvals, immunities and franchises of
either of the Company or Parent, the proper officers and
directors of each party to this Agreement shall take all such
necessary action.
SECTION 5.13. Parent Covenants. (a) Other Actions.
Parent shall not, nor shall it permit any of its subsidiaries
to, take any action that would, or reasonably could be expected
to, result in any of its representations and warranties set
forth in this Agreement that are qualified as to materiality
being or becoming untrue, any of such representations and
warranties that are not so qualified being or becoming untrue
in any material respect, any of the conditions to the Merger
set forth in Article VI not being satisfied or a material
Violation of any provision of the Stock Option Agreement, or
(unless such action is required by applicable law or sound
banking practice) which could reasonably be expected to
adversely affect or delay the ability of any of Parent, Sub or
the Company or their subsidiaries to obtain any of the Requi-
site Regulatory Approvals without imposition of a condition or
restriction of the type referred to in Section 6.02(c).
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(b) Advice of Changes; Government Filings. Parent
shall file all reports required to be filed by it with the SEC
or the applicable self-regulatory organization between the date
of this Agreement and the Effective Time and shall deliver to
the Company copies of all such reports promptly after the same
are filed. Parent and each subsidiary of Parent that is a bank
shall file all Call Reports with the appropriate Regulatory
Authorities and all other reports, applications and other
documents required to be filed with the Federal Reserve and the
other Regulatory Authorities between the date hereof and the
Effective Time and shall make available to the Company copies
of all such reports promptly after the same are filed. Except
where prohibited by applicable statutes and regulations, Parent
shall promptly provide the Company (or its counsel) with copies
of all other filings made by Parent with any state or Federal
Governmental Entity in connection with this Agreement, the
Stock Option Agreement or the transactions contemplated hereby
or thereby.
ARTICLE VI
Conditions Precedent
SECTION 6.01. Conditions to Each Party's Obligation
To Effect the Merger. The respective obligations of each party
to effect the Merger and the other transactions contemplated
hereby shall be subject to the satisfaction or waiver at or
prior to the Effective Time of the following conditions:
(a) Company Stockholder Approval. The Company
Stockholder Approval shall have been obtained.
(b) Other Approvals. Other than the filing provided
for by Section 1.03, all authorizations, consents, orders
or approvals of, or declarations or filings with, and all
expirations of waiting periods imposed by, any Govern-
mental Entity (all the foregoing, "Consents") which are
necessary for the consummation of the Merger, other than
Consents the failure to obtain which would not, indi-
vidually or in the aggregate, have a Material Adverse
Effect on the Surviving Corporation or which would not,
individually or in the aggregate, materially adversely
affect the consummation of the transactions contemplated
hereby, shall have been filed, occurred or been obtained
(all such Consents and the lapse of all such waiting
periods being referred to as the "Requisite Regulatory
Approvals"), and all such Requisite Regulatory Approvals
shall be in full force and effect.
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(c) No Injunctions or Restraints; Illegality. No
temporary restraining order, preliminary or permanent
injunction or other order or decree issued by any court of
competent jurisdiction or other legal restraint or pro-
hibition preventing the consummation of the Merger shall
be in effect; provided, however, that each of the parties
shall have used reasonable efforts to prevent the entry of
any such injunction or other order or restraint and to
appeal as promptly as possible any injunction or other
order or restraint that may be entered. There shall not
be any action taken, or any statute, rule, regulation or
order enacted, entered, enforced or deemed applicable to
the Merger, which makes the consummation of the Merger
illegal.
SECTION 6.02. Conditions to Obligations of Parent.
The obligations of Parent and Sub to effect the Merger are
subject to the satisfaction of the following conditions unless
waived by Parent and Sub:
(a) Representations and Warranties. The represen-
tations and warranties of the Company (i) set forth in
this Agreement (other than those described in clause (ii)
hereof) that are qualified as to materiality shall be true
and correct, and any such representations and warranties
that are not so qualified shall be true and correct in all
material respects and (ii) set forth in the last sentence
of Section 3.01(f)(i), Section 3.01(f)(ii)(A) and the last
two sentences of Section 3.01(q) except to the extent that
any inaccuracies, either individually or in the aggregate,
could not reasonably be expected to result in or consti-
tute a Material Adverse Effect on the Company; in the case
of all such representations and warranties referred to in
clause (i) and (ii) hereof both as of the date of this
Agreement and (except to the extent such representations
and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date,
except as otherwise contemplated by this Agreement, and
Parent shall have received a certificate signed on behalf
of the Company by its Chairman or Chief Executive Officer
and its Chief Financial Officer or other executive officer
performing duties equivalent to those of a "chief finan-
cial officer" to such effect.
(b) Performance of Obligations of the Company. The
Company shall have performed in all material respects all
obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and Parent
shall have received a certificate signed on behalf of the
Company by its Chairman or Chief Executive Officer and its
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Chief Financial Officer or other executive officer per-
forming duties equivalent to these of a "chief financial
officer" to such effect.
(c) Burdensome Condition. There shall not be any
action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the
Merger, by any Governmental Entity which, in connection
with the grant of a Requisite Regulatory Approval, imposes
any requirement upon Parent, the Company or the Surviving
Corporation or their respective subsidiaries to (i) dis-
pose of any asset which is material to Parent, the Company
or the Surviving Corporation, (ii) materially restrict or
curtail the current business operations or activities of
Parent, or (iii) raise an amount of capital, the issuance
and sale of which, in the absence of the Merger and the
other transactions contemplated by this Agreement, would
in the good faith judgment of Parent be materially bur-
densome in light of such person's capital raising poli-
cies.
(d) Company Debentures and Equity Contracts. The
Company shall have duly effected the redemption of all the
outstanding Company Debentures and the cancellation of all
the outstanding Equity Contracts.
(e) Company Stock Options and Company Stock Plans.
The Company shall have duly effected, as of the Effective
Time, the cancellation of all outstanding Company Stock
Options, whether vested or not (the holders of which shall
then be entitled to receive from Parent the amounts
determined in accordance with Section 5.06(a)), the ter-
mination of the Company Stock Plans (other than, subject
to Section 5.06(d), the ESOP) and the deletion of any
provision in any other Company Benefit Plan providing for
the issuance, transfer or grant of any capital stock of
the Company or any subsidiary of the Company or any
interest in respect of any capital stock of the Company or
any subsidiary of the Company.
(f) Rights Agreement. The Rights Agreement shall be
inapplicable to the Merger and the other transactions
contemplated by this Agreement.
SECTION 6.03. Conditions to Obligations of the
Company. The obligations of the Company to effect the Merger
are subject to the satisfaction of the following conditions
unless waived by the Company:
-45-<PAGE>
(a) Representations and Warranties. The represen-
tations and warranties of Parent and Sub set forth in this
Agreement that are qualified as to materiality shall be
true and correct, and any such representations and war-
ranties that are not so qualified shall be true and cor-
rect in all material respects, in either case as of the
date of this Agreement and (except to the extent such
representations speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date,
except as otherwise contemplated by this Agreement, and
the Company shall have received a certificate signed on
behalf of Parent and Sub by their respective Chairman or
Chief Executive Officers and their respective Chief
Financial Officers or other executive officers performing
duties equivalent to these of a "chief financial officer"
to such effect.
(b) Performance of Obligations of Parent and Sub.
Parent and Sub shall have performed in all material
respects all obligations required to be performed by them
under this Agreement and the Stock Option Agreement at or
prior to the Closing Date, and the Company shall have
received a certificate signed on behalf of Parent and Sub
by their respective Chairman or Chief Executive Officers
and their respective Chief Financial Officers or other
executive officers performing duties equivalent to these
of a "chief financial officer" to such effect.
ARTICLE VII
Termination and Amendment
SECTION 7.01. Termination. This Agreement may be
terminated at any time prior to the Effective Time, whether
before or after the Company Stockholder Approval is received:
(a) by mutual written consent of Parent and the
Company;
(b) by either Parent or the Company upon written
notice to the other party:
(i) if (1) the Federal Reserve or any other
Governmental Entity the approval of which is required
to permit consummation of the Merger or the other
transactions contemplated hereby shall have issued an
order denying approval of the Merger or such other
-46-<PAGE>
transactions or (2) any Governmental Entity of com-
petent jurisdiction shall have issued a final per-
manent order enjoining or otherwise prohibiting the
consummation of the Merger or the other transactions
contemplated hereby and in any such case under either
clause (1) or (2) the time for appeal or petition for
reconsideration of such order shall have expired
without such appeal or petition being granted;
(ii) if the Company, on the one hand, or Parent
or Sub, on the other hand, materially breaches any of
its covenants and obligations hereunder or under the
Stock Option Agreement and such breach is not cured
after 30 days' written notice thereof is given to the
party committing such breach by the other party;
(iii) if the Merger shall not have been consum-
mated on or before February 5, 1996, unless the
failure to consummate the Merger is the result of a
willful and material breach of this Agreement by the
party seeking to terminate this Agreement; or
(iv) if, upon a vote at a duly held Company
Stockholders Meeting, the Company Stockholder
Approval shall not have been obtained;
(c) by either Parent or Sub upon written notice to
the Company:
(i) if, prior to the Company Stockholders
Meeting, a takeover proposal is commenced, publicly
proposed, publicly disclosed or communicated to the
Company (or the willingness of any person to make a
takeover proposal is publicly disclosed or commu-
nicated to the Company) and (A) the Company Stock-
holder Approval is not obtained at the Company
Stockholders Meeting, (B) the Company Stockholders
Meeting does not occur prior to 120 days after the
date of this Agreement or (C) the Board of Directors
of the Company or any committee thereof shall have
withdrawn or modified its approval or recommendation
of the Merger or this Agreement, or approved or
recommended any takeover proposal; or
(ii) if the Company shall have entered into any
agreement with respect to any superior proposal in
accordance with Section 4.02(b); or
(d) by the Company in connection with entering into
a definitive agreement in accordance with Section 4.02(b),
-47-<PAGE>
provided it has complied with all provisions thereof,
including the notice provisions therein, and that it makes
simultaneous payment of the Expenses and the Termination
Fee in accordance with Section 5.07(b).
SECTION 7.02. Effect of Termination. In the event
of termination of this Agreement by either the Company or
Parent as provided in Section 7.01, this Agreement shall
forthwith become void and have no effect, and there shall be no
liability or obligation on the part of Parent, Sub, the Company
or their respective officers or directors, except (a) with
respect to Section 3.01(u), Section 3.02(e), the second sen-
tence of Section 5.02, Section 5.07, this Section 7.02 and
Article VIII, (b) with respect to the representations and
warranties contained in Sections 3.01 and 3.02 insofar as such
representations and warranties relate to the Stock Option
Agreement (but only until the termination of the Stock Option
Agreement) and (c) to the extent that such termination results
from the willful and material breach by the other party of any
of its representations, warranties, covenants or agreements set
forth in this Agreement.
SECTION 7.03. Amendment. This Agreement may be
amended by the parties hereto at any time before or after the
Company Stockholder Approval is received, but, after receipt of
the Company Stockholder Approval, no amendment shall be made
which by law requires further approval by such stockholders
without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of
each of the parties hereto; provided, however, that, notwith-
standing anything to the contrary contained in this Section
7.03, Parent may from time to time without the consent of the
Company increase the amount (but not change the nature) of the
Merger Consideration, and any provisions inconsistent with such
right herein or in any agreement referred to herein are hereby
deemed superseded to the extent of such inconsistency.
SECTION 7.04. Extension; Waiver. At any time prior
to the Effective Time, the parties hereto may, to the extent
legally allowed, (a) extend the time for the performance of any
of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warran-
ties contained herein or in any document delivered pursuant
hereto and (c) subject to the proviso of Section 7.03, waive
compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party. The failure
of any party to this Agreement to assert any of its rights
-48-<PAGE>
under this Agreement or otherwise shall not constitute a waiver
of those rights.
SECTION 7.05. Procedure for Termination, Amendment,
Extension or Waiver. A termination of this Agreement pursuant
to Section 7.01, an amendment of this Agreement pursuant to
Section 7.03 or an extension or waiver pursuant to Section 7.04
shall, in order to be effective, require, in the case of Par-
ent, Sub or the Company, action by its Board of Directors or
the duly authorized designee of its Board of Directors.
ARTICLE VIII
General Provisions
SECTION 8.01. Nonsurvival of Representations and
Warranties. None of the representations and warranties in this
Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Effective Time. This Section 8.01
shall not limit any covenant or agreement of the parties which
by its terms contemplates performance after the Effective Time.
SECTION 8.02. Notices. All notices and other com-
munications hereunder shall be in writing and shall be deemed
given if delivered personally, telecopied (with confirmation)
or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at
such other address for a party as shall be specified by like
notice):
(a) if to Parent or Sub, to:
National Australia Bank Limited
Level 35
500 Bourke Street
Melbourne, Australia
Attention: Chief Financial Officer
Facsimile: 011-613-641-4902
with copies to:
National Australia Bank Limited
Level 24
500 Bourke Street
Melbourne, Australia
Attention: Group Legal
Facsimile: 011-613-641-4902
-49-<PAGE>
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: B. Robbins Kiessling, Esq.
Facsimile: (212) 474-3700; and
(b) if to the Company, to:
Michigan National Corporation
27777 Inkster Road
Farmington Hills, MI 48334
Attention: Robert J. Mylod
Facsimile: (810) 473-3086
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Edward D. Herlihy, Esq.
Facsimile: (212) 403-2000.
SECTION 8.03. Definitions; Interpretation. (a) As
used in this Agreement, (i) any reference to any event, change
or effect being "material" with respect to any entity means an
event, change or effect which is material in relation to the
businesses, assets, properties, liabilities, results of
operations, financial condition or prospects of such entity and
its subsidiaries taken as a whole, (ii) the term "Material
Adverse Effect" means, with respect to the Company, Parent or
Sub, a material adverse effect on the business, assets, prop-
erties, liabilities, results of operations, financial condition
or prospects of such party and its subsidiaries taken as a
whole or on the ability of such party to perform its obliga-
tions hereunder or, except for purposes of determining satis-
faction of the conditions set forth in Section 6.02, under the
other agreements contemplated hereby and (iii) the term "per-
son" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or
other entity.
(b) When a reference is made in this Agreement to
Articles, Sections, Exhibits or Schedules, such reference shall
be to an Article, Section of or Exhibit or Schedule to this
Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference
-50-<PAGE>
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "in-
clude", "includes" or "including" are used in this Agreement,
they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provi-
sion of this Agreement. All terms defined in this Agreement
shall have the defined meanings when used in any certificate or
other document made or delivered pursuant hereto unless
otherwise defined herein. The definitions contained in this
Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement,
instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such
agreement, instrument or statute as from time to time amended,
modified or supplemented, including (in the case of agreements
or instruments) by waiver or consent and (in the case of
statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incor-
porated therein. References to a person are also to its per-
mitted successors and assigns.
SECTION 8.04. Counterparts. This Agreement may be
executed in one or more counterparts, all of which shall be
considered one and the same agreement and shall become effec-
tive when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 8.05. Entire Agreement; No Third-Party
Beneficiaries; Rights of Ownership. This Agreement (including
the documents and the instruments referred to herein, including
the Stock Option Agreement, the Confidentiality Agreement, and
any other agreement among the parties entered into contempo-
raneously herewith (a) constitutes the entire agreement and
supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject
matter hereof and of the Confidentiality Agreement, provided
that the Confidentiality Agreement shall survive the execution
and delivery of this Agreement, and (b) other than Sections
5.05, 5.06 and 5.08, is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
The parties hereby acknowledge that, except as otherwise spe-
cifically provided in the Stock Option Agreement or as here-
inafter agreed to in writing, neither Parent nor Sub shall have
the right to acquire or shall be deemed to have acquired shares
of Company Common Stock pursuant to the Merger until consum-
mation thereof.
-51-<PAGE>
SECTION 8.06. Governing Law. This Agreement shall
be governed and construed in accordance with the laws of the
State of Michigan, without regard to any applicable principles
of conflicts of law.
SECTION 8.07. Limitations on Remedies. Each party
agrees that, should any court or other competent authority hold
any provision of this Agreement or the Stock Option Agreement
or part hereof or thereof to be null, void or unenforceable, or
order any party to take any action inconsistent herewith or not
to take any action required herein, the other party shall not
be entitled to specific performance of such provision or part
hereof or thereof or to any other remedy, including money
damages, for breach hereof or thereof or of any other provision
of this Agreement or the Stock Option Agreement or part hereof
or thereof as a result of such holding or order. This provi-
sion is not intended to render null or unenforceable any
obligation hereunder that would be valid and enforceable if
this provision were not in this Agreement.
SECTION 8.08. Publicity. Except as otherwise
required by law or the rules of the NYSE or Nasdaq, so long as
this Agreement is in effect, neither the Company nor Parent
shall, or shall permit any of its subsidiaries to, issue or
cause the publication of any press release or other public
announcement with respect to the transactions contemplated by
this Agreement or the Stock Option Agreement without the con-
sent of the other party, which consent shall not be unreason-
ably withheld. The parties agree that the initial press
release to be issued with respect to the transactions contem-
plated by this Agreement shall be in the form heretofore agreed
to by the parties.
SECTION 8.09. Assignment. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall
be assigned, in whole or in part, by any of the parties hereto
(whether by operation of law or otherwise) without the prior
written consent of the other parties, and any such assignment
that is not so consented to shall be null and void. Subject to
the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
SECTION 8.10. Enforcement. Subject to Section 8.07,
the parties agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that, subject to
Section 8.07, the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to
-52-<PAGE>
enforce specifically the terms and provisions of this Agreement
in any Federal court located in the State of New York or in any
New York state court, this being in addition to any other
remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit
itself to the personal jurisdiction of any Federal court
located in the State of New York or any New York state court in
the event any dispute arises out of this Agreement or any of
the transactions contemplated by this Agreement and (b) agrees
that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such
court.
-53-<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Company have
caused this Agreement to be signed by their respective officers
thereunto duly authorized, all as of the date first above
written.
NATIONAL AUSTRALIA BANK
LIMITED A.C.N. 004044937,
by
/s/ Bruce S. McComish
Name: Bruce S. McComish
Title: Chief Financial
Officer
MNC ACQUISITION CO.,
by
/s/ Bruce S. McComish
Name: Bruce S. McComish
Title: Chairman, President
and Chief Execu-
tive Officer
MICHIGAN NATIONAL CORPORATION,
by
/s/ Robert J. Mylod
Name: Robert J. Mylod
Title: Chairman and Chief
Executive Officer
-54-
STOCK OPTION AGREEMENT dated as of February
4, 1995, among NATIONAL AUSTRALIA BANK LIMITED
A.C.N. 004044937, an Australian corporation
("Grantee"), MNC ACQUISITION CO., a Michigan
corporation and a wholly owned subsidiary of
Grantee ("Sub"), and MICHIGAN NATIONAL CORPO-
RATION, a Michigan corporation ("Issuer").
WHEREAS Issuer is a registered bank holding company
under the Bank Holding Company Act of 1956, as amended (the
"BHC Act");
WHEREAS Grantee is a commercial bank under Australian
law and is a foreign bank within the meaning of the Interna-
tional Banking Act of 1978, as amended;
WHEREAS Grantee, Sub and Issuer propose to enter into
an Agreement and Plan of Merger dated as of the date hereof
(the "Merger Agreement");
WHEREAS, as a condition and inducement to Grantee's
and Sub's willingness to enter into the Merger Agreement,
Grantee and Sub have required that Issuer grant to Grantee the
Option (as defined in Section 2); and
WHEREAS the Board of Directors of Issuer, believing
it to be in the best interests of Issuer, has approved this
Agreement and the grant by Issuer of the Option.
NOW THEREFORE, in consideration of the foregoing and
the respective representations, warranties, covenants and
agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. Definitions; Interpretation. Capitalized terms
used but not defined herein shall have the meanings set forth
in the Merger Agreement, which also contains in Section 8.03(b)
thereof certain rules of construction and interpretation that
shall be applicable hereto as if set forth herein.
2. Grant of Option. Issuer hereby grants to Grantee
an unconditional, irrevocable option (the "Option") to pur-
chase, subject to the terms hereof, up to 2,633,502 fully paid
and nonassessable shares (such amount, as may be adjusted from
time to time as set forth herein, the "Option Shares") of
Common Stock, par value $10 per share ("Issuer Common Stock"),
of the Issuer at a purchase price of U.S. $89.00 per Option
Share (such price, as may be adjusted from time to time as set
forth herein, the "Option Price"). The number of Option Shares<PAGE>
that may be received upon the exercise of the Option and the
Option Price are subject to adjustment as set forth in Section
6.
2. Exercise of Option. (a) Grantee may exercise
the Option, in whole or part, at any time and from time to time
on or after the date hereof if a Triggering Event (as defined
below) shall have occurred; provided, however, that, to the
extent the Option shall not have been exercised, it shall
terminate and be of no further force and effect upon the ear-
liest of (i) the Effective Time of the Merger, (ii) termination
of the Merger Agreement pursuant to Section 7.01 thereof (other
than for any of the reasons described in clause (iii) below) or
(iii) 18 months after termination of the Merger Agreement (x)
by either party under Section 7.01(c) or (d) thereof, (y) by
Grantee under Section 7.01(b)(ii) thereof or (z) by Issuer
under Section 7.01(b)(iv) under circumstances where Grantee
could effect termination pursuant to Section 7.01(c); provided
further that, any such exercise and purchase of Option Shares
shall be subject to compliance with applicable laws, including
the BHC Act. The rights set forth in Sections 8, 9 and 10
shall not terminate when the right to exercise the option
terminates as set forth herein, but shall extend to such time
as is provided in such Sections 8, 9 and 10. Notwithstanding
the termination of the Option, Grantee shall be entitled to
purchase those Option Shares with respect to which it has ex-
ercised the Option in accordance with the terms hereof prior to
the termination of the Option.
(b) A "Triggering Event" means the occurrence of an
Acquisition Event, as defined in Section 5.07(b) of the Merger
Agreement (without regard to whether the Merger Agreement is
terminated).
(c) Issuer shall notify Grantee promptly in writing
of the occurrence of any Triggering Event; provided that it is
understood that the giving of such notice by Issuer shall not
be a condition to the right of Grantee to exercise the Option.
(d) In the event Grantee is entitled to and wishes
to exercise the Option, it shall send to Issuer a written no-
tice (the date of which being referred to herein as the "Notice
Date") specifying (i) the total number of Option Shares it will
purchase pursuant to such exercise and (ii) a place and date
not earlier than three business days nor later than 60 business
days from the Notice Date for the closing of such purchase (a
"Closing Date"); provided that if prior notification to or
approval of the Federal Reserve Board (the "Federal Reserve")
or any other Governmental Entity is required in connection with
such purchase, Grantee shall promptly file the required notice
-2-<PAGE>
or application for approval and shall expeditiously process the
same and the period of time that otherwise would run pursuant
to this sentence shall run instead from the date on which, as
the case may be, (A) any required notification periods have
expired or been terminated or (B) such approvals have been
obtained and any requisite waiting period or periods shall have
passed.
(e) Notwithstanding Section 3(d), in no event shall
any Closing Date be more than 18 months after the related No-
tice Date, and if the Closing Date shall not have occurred
within 18 months after the related Notice Date due to the
failure to obtain any such required approval, the exercise of
the Option effected on the Notice Date shall be deemed to have
expired. In the event (i) Grantee receives official notice
that an approval of the Federal Reserve or any other Govern-
mental Entity required for the purchase of the Option Shares
would not be issued or granted or (ii) a Closing Date shall not
have occurred within 18 months after the related Notice Date
due to the failure to obtain any such required approval,
Grantee shall nevertheless be entitled to exercise its right as
set forth in Section 8 or to exercise the Option in connection
with the resale of Issuer Common Stock or other securities
pursuant to a registration statement as provided in Section 10.
The provisions of this Section 3 and Section 4 shall apply with
appropriate adjustments to any such exercise.
4. Payment and Delivery of Certificates. (a) On
each Closing Date referred to in Section 3(d), Grantee shall
pay to Issuer in immediately available funds by a wire transfer
to a bank account designated by Issuer an amount equal to the
Option Price multiplied by the number of Option Shares to be
purchased on such Closing Date.
(b) On each Closing Date, simultaneously with the
delivery of immediately available funds as provided in Section
4(a), Issuer shall deliver to Grantee a certificate or cer-
tificates representing the Option Shares to be purchased on
such Closing Date. If the Option should be exercised in part
only, a new Option evidencing the rights of Grantee to purchase
the balance of the Option Shares purchasable hereunder shall be
issued to Grantee, and Grantee shall deliver to Issuer a copy
of this Agreement and a letter agreeing that Grantee will not
offer to sell or otherwise dispose of such Option Shares in
violation of applicable law or the provisions of this Agree-
ment.
(c) Certificates for Issuer Common Stock delivered
on a Closing Date hereunder shall be endorsed with a restric-
tive legend that shall read substantially as follows:
-3-<PAGE>
THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE
IS SUBJECT TO CERTAIN RESALE RESTRICTIONS ARISING UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND PURSUANT TO
THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF FEBRUARY
4, 1995, A COPY OF WHICH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICE OF ISSUER. A COPY OF SUCH AGREEMENT WILL
BE MAILED 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 "Securities Act"), in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if
Grantee shall have delivered to Issuer a copy of a letter from
the staff of the Securities and Exchange Commission, or an
opinion of counsel, in form and substance satisfactory to Is-
suer, to the effect that such legend is not required for pur-
poses of the Securities Act; (ii) the reference to the provi-
sions of this Agreement in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if
the Option Shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances
that do not require the retention of such reference; and (iii)
the legend shall be removed in its entirety if the conditions
in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may
be required by law.
(d) Upon the giving by Grantee to Issuer of the
written notice of exercise of the Option provided for under
Section 3(d), the tender of the applicable purchase price in
immediately available funds and the tender of a copy of this
Agreement to Issuer, Grantee shall be deemed to be the holder
of record of the Option Shares issuable upon such exercise,
notwithstanding that the stock transfer books of Issuer shall
then be closed or that certificates representing such Option
Shares shall not then be actually delivered to Grantee. Issuer
shall pay all expenses and any and all United States Federal,
state and local taxes and other charges that may be payable in
connection with the preparation, issue and delivery of stock
certificates under this Section 4 in the name of Grantee or its
assignee, transferee or designee.
(e) If, at the time of issuance of any Option Shares
pursuant to an exercise of all or a portion of the Option here-
under, Issuer shall not have redeemed the Rights or shall have
issued any similar securities, then each Option Share issued
pursuant to such exercise shall also represent Rights or new
rights with terms substantially identical to and at least
-4-<PAGE>
as favorable to Grantee as are provided under the Rights
Agreement or any similar agreement then in effect.
5. Authorizations, etc. Issuer agrees (i) that it
shall at all times maintain, free from preemptive rights or
Liens, sufficient authorized but unissued shares of Issuer
Common Stock so that the Option may be exercised without ad-
ditional authorization of Issuer Common Stock after giving
effect to all other options, warrants, convertible securities
and other rights to purchase Issuer Common Stock, (ii) that it
will not, by charter amendment or through reorganization, re-
capitalization, reclassification, consolidation, merger, dis-
solution or sale of assets, or by any other voluntary act,
avoid or seek to avoid the observance or performance of any of
the covenants, stipulations or conditions to be observed or
performed hereunder by Issuer and (iii) promptly to take all
action as may from time to time be required (including, in the
event, under the BHC Act or the Change in Bank Control Act of
1978, as amended, or a state banking law, prior approval of or
notice to the Federal Reserve or to any state regulatory au-
thority is necessary before the Option may be exercised, co-
operating fully with Grantee in preparing such applications or
notices and providing such information to the Federal Reserve
or such state regulatory authority as they may require) in
order to permit Grantee to exercise the Option and so that the
Option Shares, when issued, shall be duly authorized, validly
issued, fully paid and nonassessable and free and clear of all
Liens and not subject to any preemptive rights.
6. Adjustments. (a) In the event that any addi-
tional shares of Issuer Common Stock are issued or otherwise
become outstanding after the date of this Agreement (other than
pursuant to an exercise of the Option or an event described in
Section 6(b)), including pursuant to stock option plans and in
connection with acquisitions and other transactions permitted
by the Merger Agreement, the number of Option Shares shall be
increased so that, after such issuance, it equals 19.9% of the
number of shares of Issuer Common Stock then issued and out-
standing (without giving pro forma effect to the issuance of
the Option Shares). Nothing contained in this Section 6(a) or
elsewhere in this Agreement shall be deemed to authorize Issuer
to issue shares of Issuer Common Stock in breach of, or oth-
erwise breach any of, the provisions of the Merger Agreement.
(b) In the event of any change in Issuer Common
Stock by reason of a stock dividend, split-up, recapitaliza-
tion, combination, subdivision, conversion, exchange of shares
or similar transaction, the type and number of Option Shares
shall be appropriately adjusted and proper provision shall be
made in the agreements governing any such transaction, so that
-5-<PAGE>
Grantee shall receive upon exercise of the Option the number
and class of shares, other securities, property or cash that
Grantee would have received in respect of Issuer Common Stock
if the Option had been exercised in full and the Option Shares
had been issued to Grantee immediately prior to such event or
the record date therefor, as applicable. Whenever the number
of Option Shares is adjusted as provided in this Section 6(b),
the Option Price shall be adjusted by multiplying the Option
Price by a fraction, the numerator of which is equal to the
number of Option Shares purchasable prior to the adjustment and
the denominator of which is equal to the number of Option
Shares purchasable after the adjustment.
7. Replacement Options. (a) In the event that
Issuer shall enter into an agreement (i) to consolidate with or
merge into any person, other than Grantee or one of its sub-
sidiaries, and shall not be the continuing or surviving cor-
poration of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its subsidiaries, to merge
into Issuer and Issuer shall be the continuing or surviving
corporation, but, in connection with such merger, the then
outstanding shares of Issuer Common Stock shall be changed into
or exchanged for stock or other securities of Issuer or any
other person or cash or any other property or the then out-
standing shares of Issuer Common Stock shall after such merger
represent less than 50% of the outstanding shares and share
equivalents of the merged company or (iii) to sell or otherwise
transfer all or substantially all its assets to any person,
other than Grantee or one of its subsidiaries, then, and in
each such case, the agreement governing such transaction shall
make proper provision so that the Option shall, upon the con-
summation of any such transaction and upon the terms and con-
ditions set forth herein, be converted into, or exchanged for,
an option (the "Substitute Option"), at the election of
Grantee, of either (A) the Acquiring Corporation (as defined
below) or (B) any person that controls the Acquiring Corpora-
tion.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (A) the con-
tinuing or surviving corporation of a consolidation or
merger with Issuer (if other than Issuer), (B) Issuer in a
merger in which Issuer is the continuing or surviving
person or (C) the transferee of all or substantially all
of Issuer's assets.
(ii) "Substitute Common Stock" shall mean the common
stock issued by the issuer of the Substitute Option upon
exercise of the Substitute Option.
-6-<PAGE>
(iii) "Average Price" shall mean the average closing
price of a share of the Substitute Common Stock 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 the Substitute Common Stock
on the day preceding such consolidation, merger or sale;
provided that, if Issuer is the issuer of the Substitute
Option, the Average Price shall be computed with respect
to a share of common stock issued by the person merging
into Issuer or by any company which controls or is con-
trolled by such person, as Grantee may elect.
(c) The Substitute Option shall have the same terms
as the Option, provided that, if the terms of the Substitute
Option cannot, for legal reasons, be the same as the Option,
such terms shall be as similar as possible and in no event less
advantageous to Grantee. The issuer of the Substitute Option
(the "Substitute Option Issuer") shall also enter into an
agreement with Grantee in substantially the same form as this
Agreement, which shall be applicable to the Substitute Option.
Without limiting the generality of the foregoing, the provi-
sions of Sections 8, 9, 10, 11 and 12 shall apply with respect
to the Substitute Option and any securities for which the
Substitute Option becomes exercisable with the same effect as
if all references to "Issuer" in such Sections were references
to "Substitute Option Issuer", all references to "Issuer Common
Stock" were references to "Substitute Common Stock", all ref-
erences to the "Option" were references to the "Substitute
Option" and all references to "Option Shares" were references
to "Substitute Option Shares".
(d) The Substitute Option shall be exercisable for
such number of shares of Substitute Common Stock as is equal to
the then-current Applicable Price (as defined in Section 8(c))
multiplied by the number of shares of Issuer Common Stock for
which the Option is then exercisable, divided by the then-
current Average Price. The exercise price of the Substitute
Option per share of Substitute Common Stock shall then be equal
to the Option Price multiplied by a fraction in which the nu-
merator is the number of shares of Issuer Common Stock for
which the Option is then exercisable and the denominator is the
number of shares of the Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more
than 19.9% of the shares of Substitute Common Stock outstanding
prior to the exercise of the Substitute Option. In the event
that the Substitute Option would be exercisable for more than
19.9% of the shares of Substitute Common Stock outstanding
-7-<PAGE>
prior to such exercise but for the limitation in this paragraph
(e), the Substitute Option Issuer shall make a cash payment to
Grantee equal to the excess of (i) the value of the Substitute
Option without giving effect to the limitation in this para-
graph (e) over (ii) the value of the Substitute Option after
giving effect to the limitation in this paragraph (e). This
difference in value shall be determined by a nationally rec-
ognized investment banking firm selected by Grantee.
(f) Issuer shall not enter into any transaction de-
scribed in Section 7(a) unless the Acquiring Corporation and
any person that controls the Acquiring Corporation assume in
writing all the obligations of Issuer hereunder.
8. Repurchase at the Option of Grantee. (a) At the
request of Grantee at any time during (i) the period during
which the Option is exercisable pursuant to Section 3 or (ii)
the period of 30 business days immediately following the oc-
currence of either of the events set forth in clauses (i) and
(ii) of the second sentence of Section 3(e) (but solely as to
the shares of Issuer Common Stock with respect to which the
required approval was not received) (either such period being
referred to herein as the "Repurchase Period"), Issuer (or any
successor entity thereof) shall repurchase from Grantee (A) the
Option (or, in the circumstances set forth in clause (ii)
above, that portion thereof relating to shares of Issuer Common
Stock with respect to which required approvals were not re-
ceived) unless the Option has expired or been terminated in
accordance with the terms hereof and (B) all Option Shares
purchased by Grantee pursuant hereto with respect to which
Grantee then has beneficial ownership. The date on which
Grantee exercises its rights under this Section 8 is referred
to as the "Request Date". Such repurchase shall be at an ag-
gregate price (the "Section 8 Repurchase Consideration") equal
to the sum of:
(1) the aggregate exercise price paid by Grantee for
any Option Shares acquired with respect to which Grantee
then has beneficial ownership;
(2) the excess, if any, of (x) the Applicable Price
for shares of Issuer Common Stock over (y) the Option
Price, with such excess multiplied by the number of Option
Shares with respect to which the Option has not been ex-
ercised; and
(3) the excess, if any, of (x) the Applicable Price
over (y) the Option Price paid (or, in the case of Option
Shares with respect to which the Option has been exercised
but the Closing Date has not occurred, payable) by Grantee
-8-<PAGE>
for each Option Share with respect to which the Option has
been exercised, with such excess multiplied by the number
of such Option Shares.
(b) If Grantee exercises its rights under this Sec-
tion 8, Issuer shall, within 10 business days after the Request
Date, pay the Section 8 Repurchase Consideration to Grantee in
immediately available funds, and Grantee shall surrender to
Issuer the Option and the certificates evidencing the shares of
Issuer Common Stock purchased thereunder with respect to which
Grantee then has beneficial ownership, and Grantee shall war-
rant that it has sole record and beneficial ownership of such
shares and that the same are then free and clear of all Liens.
Notwithstanding the foregoing, to the extent that prior noti-
fication to or approval of the Federal Reserve or other Gov-
ernmental Entity is required in connection with the payment of
all or any portion of the Section 8 Repurchase Consideration,
Issuer shall deliver from time to time that portion of the
Section 8 Repurchase Consideration that it is not then so
prohibited from paying and shall promptly file the required
notice or application for approval and shall expeditiously
process the same (and Grantee shall cooperate with Issuer in
the filing of any such notice or application and the obtaining
of any such approval), and the period of time that otherwise
would run pursuant to the preceding sentence for the payment of
the portion of the Section 8 Repurchase Consideration requiring
such notification or approval shall run instead from the date
on which, as the case may be, (i) any required notification
period has expired or been terminated or (ii) such approval has
been obtained and, in either event, any requisite waiting pe-
riod shall have passed. If the Federal Reserve or any other
Governmental Entity disapproves of any part of Issuer's pro-
posed repurchase pursuant to this Section 8, Issuer shall
promptly give notice of such fact to Grantee and redeliver to
Grantee the Option Shares it is then prohibited from repur-
chasing, and Grantee shall have the right to exercise the Op-
tion as to the number of Option Shares for which the Option was
exercisable at the Request Date less the number of shares as to
which payment has been made pursuant to Section 8(a)(2); pro-
vided that if the Option shall have terminated prior to the
date of such notice or shall be scheduled to terminate prior to
the date of such notice or shall be scheduled to terminate at
any time before the expiration of a period ending on the 30th
business day after such date, Grantee shall nonetheless have
the right so to exercise the Option or exercise its rights
under Section 10 until the expiration of such period of 30
business days. Notwithstanding anything herein to the con-
trary, Grantee shall be entitled to exercise its right under
this Section 8 on only one occasion.
-9-<PAGE>
(c) For purposes of this Agreement, the "Applicable
Price" means the highest of (i) the highest price per share at
which a tender offer or exchange offer has been made for shares
of Issuer Common Stock after the date hereof and on or prior to
the Request Date (or any other applicable determination date),
(ii) the price per share to be paid by any third party for
shares of Issuer Common Stock or the consideration per share to
be received by holders of Issuer Common Stock, in each case
pursuant to an agreement with Issuer for a merger or other
business combination entered into on or prior to the Request
Date (or any other applicable determination date), (iii) the
highest price per share paid by any third party to acquire from
a stockholder of Issuer, in one transaction or in a series of
related transactions, an aggregate amount of Issuer Common
Stock of 5% or more of the outstanding Issuer Common Stock or
(iv) the highest bid price per share of Issuer Common Stock as
quoted on the Nasdaq over-the-counter quotations system or, if
not so quoted, on the principal trading market on which such
shares are traded as reported by a recognized source during the
60 business days preceding the Request Date (or any other ap-
plicable determination date). If the consideration to be of-
fered, paid or received pursuant to a transaction described in
either clause (i) or (ii) above shall be other than cash, the
value of such consideration shall be determined in good faith
by an independent nationally recognized investment banking firm
selected by Grantee and reasonably acceptable to Issuer, which
determination shall be conclusive for all purposes of this
Agreement.
9. Repurchase at the Option of Issuer. (a) Except
to the extent that Grantee shall have previously exercised its
rights under Section 8, at the request of Issuer during the
six-month period commencing 15 months following the first oc-
currence of a Triggering Event, Issuer may repurchase from
Grantee, and Grantee shall sell to Issuer, all (but not less
than all) the shares of Issuer Common Stock acquired by Grantee
pursuant hereto and with respect to which Grantee has benefi-
cial ownership at the time of such repurchase at a price equal
to the greater of (i) 110% of the Current Market Price (as
defined below) or (ii) the sum of (A) the Option Price in re-
spect of the shares so acquired and (B) Grantee's pre-tax per
share carrying cost (as defined below), multiplied in the case
of either clause (i) or (ii) above by the number of shares so
acquired (the "Section 9 Repurchase Consideration"); provided
that Grantee, within 30 days following Issuer's notice of its
intention to purchase shares pursuant to this Section 9, may
deliver an Offeror's Notice (as defined in Section 11) pursuant
to Section 11, in which case the provisions of Section 11 and
not those of this Section 9 shall control; and provided further
that Issuer's rights under this Section 9 shall be suspended
-10-<PAGE>
(with any such rights being extended accordingly) during any
period when the exercise of such rights would subject Grantee
to liability pursuant to Section 16(b) of the Exchange Act by
reason of Grantee's purchase of shares of Issuer Common Stock
pursuant to this Agreement.
(b) If Issuer exercises its rights under this Sec-
tion 9 and Grantee does not deliver an Offeror's Notice or
Grantee does not sell the shares to a third party pursuant
thereto, Issuer shall, within 10 business days after the ex-
piration of the 30-day period referred to in paragraph (a)
above or, if applicable, upon abandonment of the transaction
covered by the Offeror's Notice, pay the Section 9 Repurchase
Consideration in immediately available funds, and Grantee shall
surrender to Issuer the certificates evidencing the shares of
Issuer Common Stock purchased hereunder with respect to which
Grantee then has beneficial ownership, and Grantee shall war-
rant that it has sole record and beneficial ownership of such
shares and that the same are then free and clear of all Liens.
(c) As used herein, (i) "Current Market Price" means
the average closing bid price per share of Issuer Common Stock
as quoted on the Nasdaq over-the-counter quotations system or,
if not so quoted, on the principal trading market on which such
shares are traded as reported by a recognized source for the 10
business days preceding the date of the Issuer's request for
repurchase pursuant to this Section 9 and (ii) "Grantee's pre-
tax per share carrying cost" shall be the amount equal to the
interest on the aggregate Option Price paid for the shares of
Issuer Common Stock purchased from the date of purchase to the
date of repurchase at the rate of interest announced by
Parent's New York branch as its prime or base lending or ref-
erence rate during such period, less any dividends received on
the shares so purchased, divided by the number of shares so
purchased.
10. Registration Rights; Listing. (a) Issuer shall,
if requested by Grantee at any time and from time to time (i)
within three years of the first exercise of the Option or (ii)
for 30 business days following the occurrence of either of the
events set forth in clauses (i) and (ii) of the second sentence
of Section 3(e) or receipt by Grantee of official notice that
an approval of the Federal Reserve or any other Governmental
Entity required for a repurchase as contemplated by Section
8(b) would not be issued or granted (but solely as to the
shares of Issuer Common Stock or portion of the Option with
respect to which the required approval was not received), as
expeditiously as practicable prepare and file up to two
registration statements under the Securities Act if necessary
in order to permit the sale or other disposition of the shares
-11-<PAGE>
of Issuer Common Stock or other securities that have been ac-
quired by or are issuable to Grantee upon exercise of the Op-
tion in accordance with the intended method of sale or other
disposition stated by Grantee, including a "shelf" registration
statement under Rule 415 under the Securities Act or any suc-
cessor provision. Issuer shall use its best efforts to cause
each such registration statement to become effective and to
remain effective for such period not in excess of 180 days from
the day such registration statement first becomes effective as
may be reasonably necessary to effect such sale or other dis-
position. Issuer shall also use its best efforts to qualify
such shares or other securities under any applicable state
securities laws. Grantee agrees to use all reasonable efforts
to cause, and to cause any underwriters or agents of any sale
or other disposition to cause, any sale or other disposition
pursuant to such registration statement to be effected on a
widely distributed basis so that upon consummation thereof no
purchaser or transferee shall own beneficially more than 2% of
the then outstanding voting power of Issuer. In the event that
Grantee requests Issuer to file a registration statement fol-
lowing the failure to obtain a required approval for an exer-
cise of the Option as described in Section 3(e), the closing of
the sale or other disposition of Issuer Common Stock or other
securities pursuant to such registration statement shall occur
substantially simultaneously with the exercise of the Option,
and Grantee shall be entitled to cause the Option Shares to be
issued directly to the underwriters or agents named in such
registration statement. The obligations of Issuer hereunder to
file a registration statement and to maintain its effectiveness
may be suspended for one or more periods of time that do not
exceed 60 days in the aggregate for all such periods if the
Board of Directors of Issuer shall have determined that the
filing of such registration statement or the maintenance of its
effectiveness would require disclosure of nonpublic information
that would materially and adversely affect Issuer. Any regis-
tration effected under this Section 10 shall be at Issuer's ex-
pense, except for underwriting discounts or commissions,
brokers' fees and the fees and disbursements of Grantee's
counsel related thereto. Grantee shall provide all information
reasonably requested by Issuer for inclusion in any registra-
tion statement to be filed hereunder. If requested by Grantee
in connection with any such registration, Issuer shall become a
party to any underwriting agreement relating to the sale of
such shares or other securities, but only to the extent of
obligating itself in respect of representations, warranties,
covenants, indemnities, contribution and other agreements
customarily included in such underwriting agreements for the
issuer. If, during the time periods referred to in the first
sentence of this Section 10, Issuer effects a registration
under the Securities Act of Issuer Common Stock for its own
-12-<PAGE>
account or for any other stockholders of Issuer (other than on
Form S-4 or S-8, or any successor form), it shall allow Grantee
the right to participate in such registration, and such par-
ticipation shall not affect the obligation of Issuer to effect
two registration statements for Grantee under this Section 10;
provided that, if the managing underwriters of such offering
advise Issuer in writing that in their opinion the number of
shares of Issuer Common Stock requested to be included in such
registration exceeds the number which can be sold in such of-
fering, Issuer shall include the shares requested to be in-
cluded therein by Grantee pro rata with the shares intended to
be included therein by Issuer or other stockholders, taken as a
single group.
(b) If Issuer Common Stock or any other securities
to be acquired upon exercise of the Option are then listed on a
national or regional securities exchange or quoted on a na-
tional or regional quotation system, Issuer, upon request of
Grantee, shall use its best efforts to make any filings and
obtain any approvals necessary in order to cause the Option
Shares or other securities acquired upon exercise of the Option
to be so listed or quoted.
11. First Refusal. At any time after the first oc-
currence of a Triggering Event and prior to the later of (a)
expiration of 24 months immediately following the first pur-
chase of shares of Issuer Common Stock pursuant to the Option
and (b) the termination of the Option pursuant to Section 3(a),
if Grantee shall desire to sell, assign, transfer or otherwise
dispose of all or any of the shares of Issuer Common Stock or
other securities acquired by it pursuant to the Option, it
shall give Issuer written notice of the proposed transaction
(an "Offeror's Notice"), identifying the proposed transferee,
accompanied by a copy of a binding offer to purchase such
shares or other securities from such transferee and setting
forth the terms of the proposed transaction. An Offeror's
Notice shall be deemed an offer by Grantee to Issuer, which may
be accepted within 10 business days of the receipt of such
Offeror's Notice, on the same terms and conditions and at the
same price at which Grantee is proposing to transfer such
shares or other securities to such transferee. The purchase of
any such shares or other securities by Issuer shall be settled
within 10 business days of the date of the acceptance of the
offer and the purchase price shall be paid to Grantee in im-
mediately available funds; provided that, if prior notification
to or approval of the Federal Reserve or any other Governmental
Entity is required in connection with such purchase, Issuer
shall promptly file the required notice or application for
approval and shall expeditiously process the same (and Grantee
shall cooperate with Issuer in the filing of any such notice or
-13-<PAGE>
application and the obtaining of any such approval) and the
period of time that otherwise would run pursuant to this sen-
tence shall run instead from the date on which, as the case may
be, (i) any required notification period has expired or been
terminated or (ii) such approval has been obtained and, in
either event, any requisite waiting period shall have passed.
In the event of the failure or refusal of Issuer to purchase
all the shares or other securities covered by an Offeror's
Notice or if the Federal Reserve or any other Governmental
Entity disapproves Issuer's proposed purchase of such shares or
other securities, Grantee may, within 60 days from the date of
the Offeror's notice (subject to any necessary extension for
regulatory notification, approval or waiting periods), sell
all, but not less than all, of such shares or other securities
to the proposed transferee at no less than the price specified,
and on terms no more favorable than those specified, in the
Offeror's Notice. The requirements of this Section 11 shall
not apply to (A) any disposition as a result of which the
proposed transferee would own beneficially not more than 2% of
the outstanding voting power of Issuer, (B) any disposition of
Issuer Common Stock or other securities by a person to whom
Grantee has assigned its rights under the Option with the
consent of Issuer, (C) any sale by means of a public offering
registered under the Securities Act in which steps are taken to
reasonably assure that no purchaser will acquire securities
representing more than 2% of the outstanding voting power of
Issuer or (D) any transfer to Sub or to any other wholly owned
subsidiary of Parent that agrees in writing to be bound by the
terms hereof.
12. Division of Option. This Agreement (and the
Option granted hereby) are exchangeable, without expense, at
the option of Grantee, upon presentation and surrender of this
Agreement at the principal office of Issuer, for other Agree-
ments providing for Options of different denominations enti-
tling the holder thereof to purchase in the aggregate the same
number of shares of Issuer Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any
Stock Option Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged.
Upon receipt by Issuer of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft, or destruction) of
reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, Issuer will ex-
ecute and deliver a new Agreement of like tenor and date. Any
such new Agreement executed and delivered shall constitute an
additional contractual obligation on the part of Issuer,
whether or not the Agreement so lost, stolen, destroyed, or
mutilated shall at any time be enforceable by anyone.
-14-<PAGE>
13. Assignment. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement or
the Option shall be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Grantee may
assign in whole or in part its rights and obligations hereunder
to Sub or to any other direct or indirect wholly owned sub-
sidiary of Grantee without the consent of Issuer. Subject to
the preceding sentence, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted
assigns.
14. Further Assurances. Each party hereto will use
its best efforts to make all filings with, and to obtain con-
sent of, all third parties and governmental authorities nec-
essary or advisable to the consummation of the transactions
contemplated by this Agreement, including applying to the
Federal Reserve under the BHC Act for approval to acquire the
shares issuable hereunder. In the event of any exercise of the
Option by Grantee, Issuer, Grantee and Sub shall execute and
deliver all other documents and instruments and take all other
action that may be reasonably necessary or advisable in order
to consummate the transactions provided for by such exercise.
15. Specific Performance. The parties hereto ac-
knowledge that damages would be an inadequate remedy for a
breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by ei-
ther party hereto through specific performance, injunctive
relief or other equitable relief. This provision is without
prejudice to any other rights that the parties hereto may have
for any failure to perform this Agreement.
16. Severability. If any term, provision, covenant
or restriction contained in this Agreement is held by a court
or a Federal or state regulatory agency of competent juris-
diction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions contained in
this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. If for any
reason such court or regulatory agency determines that Grantee
is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 8, the full number of Option
Shares provided in Section 1(a) hereof (as adjusted pursuant to
Section 6), it is the express intention of Issuer to allow
Grantee to acquire or to require Issuer to repurchase such
lesser number of Option Shares as may be permissible without
any amendment or modification hereof.
-15-<PAGE>
17. Notices. All notices, requests, claims, demands
and other communications hereunder shall be deemed to have been
duly given when delivered in the manner and to the addresses
specified in accordance with Section 8.02 of the Merger
Agreement.
18. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
Michigan without regard to any applicable principles of con-
flicts of laws.
19. Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one
and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and
delivered to the other parties.
20. Expenses. Except as otherwise expressly pro-
vided herein, each of the parties hereto shall bear and pay all
costs and expenses incurred by it or on its behalf in connec-
tion with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
21. Limitation on Maximum Gain. Notwithstanding
anything to the contrary contained herein or in the Merger
Agreement, the aggregate amount of gain realized by Grantee
pursuant to this Stock Option Agreement from Issuer (or the
Substitute Option Issuer), when added to the Termination Fee
(as defined in Section 5.07(b) of the Merger Agreement), if
any, received by Grantee pursuant to such Section 5.07(b),
shall not in the aggregate exceed U.S. $75,000,000, and, in the
event Grantee realizes gain in excess of such amount hereunder
from Issuer (or the Substitute Option Issuer) or under the
Termination Fee, Grantee hereby undertakes promptly to pay back
to Issuer, by wire transfer of immediately available funds, the
amount of such excess.
22. Waiver and Amendment. Any provision of this
Agreement may be waived at any time by the party that is en-
titled to the benefits of such provision. This Agreement may
not be modified, amended, altered or supplemented except upon
the execution and delivery of a written agreement executed by
the parties hereto.
23. Entire Agreement; No Third-Party Beneficiaries.
Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement (and the Merger Agreement and the
other documents and instruments referred to herein and therein)
contains the entire agreement between the parties with respect
-16-<PAGE>
to the transactions contemplated hereunder and supersedes all
prior arrangements or understandings with respect thereof,
written or oral. Nothing in this Agreement, expressed or im-
plied, is intended to confer upon any party, other than the
parties hereto, and their respective successors and permitted
assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement, except as expressly provided
herein.
IN WITNESS WHEREOF, each of the parties has caused
this Agreement to be executed on its behalf by its officers
thereunto duly authorized, all as of the day and year first
above written.
NATIONAL AUSTRALIA BANK
LIMITED A.C.N. 004044937,
by
/s/ Bruce S. McComish
Name: Bruce S. McComish
Title: Chief Financial
Officer
MNC ACQUISITION CO.
by
/s/ Bruce S. McComish
Name: Bruce S. McComish
Title: Chairman, President
and Chief Executive
Officer
MICHIGAN NATIONAL CORPORATION
by
/s/ Robert J. Mylod
Name: Robert J. Mylod
Title: Chairman and Chief
Executive Officer
-17-
[LETTERHEAD OF MICHIGAN NATIONAL CORPORATION]
NATIONAL AUSTRALIA BANK TO ACQUIRE
MICHIGAN NATIONAL FOR $1.5 BILLION
Melbourne, Australia and Farmington Hills, Michigan, February
5, 1995- - National Australia Bank Limited ("the National"), a
transnational banking organization, headquartered in Melbourne,
Australia, with assets of US$93 billion, equity of US$7.3
billion and net income in the last fiscal year of US$1.3 bil-
lion, and Michigan National Corporation (Nasdaq: MNCO)
("Michigan National") today jointly announced the execution of
a definitive agreement for the cash acquisition of Michigan
National by the National. Under the agreement, the holders of
Michigan National common stock will receive $110.00 per share.
The aggregate purchase price is approximately $1.5 billion.
Robert J. Mylod, Michigan National's chief executive
officer, said, "Michigan National's Board of Directors and all
of us in senior management are extremely pleased with the
agreement. We believe our partnership with a quality company
like the National is in the best interests of our shareholders,
our customers, our employees and the communities we serve.
National Australia Bank is a superbly managed financial in-
stitution with broad based banking operations in Australia,
Great Britain, Ireland and New Zealand. The entire Michigan
National team is very enthusiastic about joining a partner with
the balance sheet depth and strength of the National to help
Michigan National's growth strategies."
Don Argus, the National's managing director and chief
executive officer, stated, "The acquisition of Michigan
National Corporation with its broad franchise in Michigan is
the result of several years of reviewing the United States
market for the right partner. This combination represents an
extraordinary opportunity for the National as Michigan National
will be the flagship in the United States for the years ahead.
National Australia Bank intends to retain the Michigan National
Corporation name and to have a locally managed financial in-
stitution sensitive to customer needs and services. We
heartily welcome the entire Michigan National Corporation
family and are enthusiastic about its great franchise and the
opportunities ahead."
Douglas E. Ebert, Michigan National's president and
chief operating officer commented further, "This combination
will allow Michigan National to play an even more effective
role in serving Michigan markets." He indicated that "the man-
agements of the two organizations are very compatible, both<PAGE>
personally and philosophically, and the organization is well
suited to participate in the rapidly changing financial ser-
vices industry. We look forward to the opportunity of working
closely with this highly respected financial institution. With
the success of Michigan National's restructuring initiatives as
well as Project Streamline's implementation, the corporation is
experiencing strong momentum and has the resources necessary
for future growth. Planning for a smooth transition will begin
immediately so as to assure a seamless merger."
The transaction, which is expected to be completed
sometime after mid year, is subject to Michigan National Corpo-
ration shareholder approval and various customary regulatory
approvals.
National Australia Bank Limited is the largest bank
in Australia and the second largest public company in Austra-
lia. In its fiscal year ended September 30, 1994 it earned
US$1,337 million representing a return on shareholders equity
of 17.5%. The National Group operates 2373 branches and other
business outlets and operates banking subsidiaries through
National Australia Bank Limited, Yorkshire Bank PLC, Clydesdale
Bank PLC, Northern Bank Limited, National Irish Bank Limited
and Bank of New Zealand. The Group's long term debt is rated
AA by S&P and AA3 by Moodys.
Michigan National is a diversified financial services
corporation headquartered in Farmington Hills, Michigan. It
has 191 branches in Michigan and total assets of $8.7 billion.
Keefe Bruyette & Woods is serving as financial
advisor to Michigan National Corporation in the merger and has
rendered a fairness opinion to Michigan National Corporation's
Board of Directors with respect to the transaction. CS First
Boston is serving as financial advisor to National Australia
Bank on this transaction and Morgan Stanley has provided
strategic advice and a fairness opinion to National Australia
Bank's Board of Directors with respect to this transaction.
Executives of the two companies will be available to
the media at a news conference on Monday, February 6 at 9:00
a.m. at Michigan National's headquarters.
# # # # #
-2-
AMENDMENT TO RIGHTS AGREEMENT
AMENDMENT, dated as of February 4, 1995, to the
Rights Agreement, dated as of April 25, 1988 (the "Rights
Agreement"), between Michigan National Corporation, a
Michigan corporation (the "Company"), and Mellon Bank,
National Association, a national banking association, as
Rights Agent (the "Rights Agent").
WHEREAS, the Company and the Rights Agent have here-
tofore executed and entered into the Rights Agreement; and
WHEREAS, pursuant to Section 26 of the Rights Agree-
ment, the Company may from time to time supplement or amend
the Rights Agreement in accordance with the provisions of
Section 26 thereof; and
WHEREAS, it is proposed that the Company enter into
an Agreement and Plan of Merger (as it may be amended or sup-
plemented from time to time, the "Merger Agreement"), sub-
stantially in the form set forth in Exhibit A to this Amend-
ment, between the Company and Buyer, as the same may be
amended from time to time (all capitalized terms used in this
Amendment and not otherwise defined herein shall have the
meaning ascribed thereto in the Merger Agreement); and<PAGE>
WHEREAS, it is proposed that immediately after the
execution of the Merger Agreement the Company enter into the
Stock Option Agreement attached as an exhibit to the Merger
Agreement (the "Stock Option Agreement"); and
WHEREAS, the Board of Directors has determined that
the Merger and the other transactions contemplated by the
Merger Agreement are fair to and in the best interests of the
Company and its stockholders; and
WHEREAS, the Board of Directors has determined that
it is in the best interest of the Company and its stockhold-
ers to amend the Rights Agreement to exempt the Merger Agree-
ment and the Stock Option Agreement and the transactions con-
templated thereby from the application of the Rights Agree-
ment.
NOW, THEREFORE, the Company hereby amends the Rights
Agreement as follows:
Section 1(a) of the Rights Agreement is hereby
modified and amended by adding the following sentence at the
end thereof:
"Neither National Australia Bank Limited, a
commercial bank organized under Australian law
("Buyer") nor any other Person, shall be deemed to
be an Acquiring Person by virtue of the Agreement
and Plan of Merger (as it may be amended or
supplemented from time to time, the "Merger
Agreement") or the Stock Option Agreement, each to
be entered into as of February 4, 1995, between the
Company and Buyer or<PAGE>
by virtue of any of the transactions contemplated
thereby."
Section 3(a) or the Rights Agreement is hereby modified
and amended to add the following parenthetical clause defining the
term "Distribution Date":
"(provided, however, that no Distribution Date shall be
deemed to have occurred as a result of Buyer having
taken any action required, permitted, or contemplated by
the Merger Agreement or the Stock Option Agreement,
within the time limits, if any, prescribed therein)"
Section 29 of the Rights Agreement is hereby modified
and amended to add the following sentence at the end thereof:
"Nothing in this Agreement shall be construed to
give any holder of Rights or any other Person any
legal or equitable rights, remedy or claim under
this Agreement in connection with any transactions
contemplated by the Merger Agreement or the Stock
Option Agreement."<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly exe-
cuted by the Company and the Rights Agent as of the day and year
first written above.
Michigan National Corporation
/s/Robert J. Mylod
By: Robert J. Mylod
Title: Chief Executive Officer
Mellon Bank, N.A.
/s/James Aramanda
By: James Aramanda
Title: Senior Vice President
