<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
__________________
Date of Report (Date of earliest event reported): July 21, 1994
___________________
METROPOLITAN FINANCIAL CORPORATION
__________________________________
(Exact name of registrant as specified in its charter)
Delaware 1-9018 45-0388518
________ ______ __________
(State of Incorporation) (Commission (I.R.S. Employer
File Number) Identification No.)
1000 Metropolitan Centre,
333 South Seventh Street, Minneapolis, Minnesota 55402
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (612) 399-6000
<PAGE>
Item 5. Other Events.
On July 21, 1994, Metropolitan Financial Corporation ("MFC")
and First Bank System, Inc. ("FBS") entered into an Agreement
of Merger and Consolidation (the "Merger Agreement"), pursuant
to which MFC will be merged into FBS. In connection with the
merger, each outstanding share of Common Stock of MFC will be
converted into .6803 shares of Common Stock of FBS. In
addition, each outstanding share of Series B Preferred Stock
of MFC will be converted into the right to receive $27.00
(plus accumulated and unpaid dividends) in cash and the
outstanding warrants to purchase 249,100 shares of MFC Common
Stock will be converted to warrants to purchase 169,462 shares
of FBS Common Stock at $6.96 per share. The conversion ratio
for the MFC Common Stock will be proportionately adjusted if
the average closing price of FBS Common Stock during the 20
trading days ending three business days before the
stockholders' meetings scheduled to consider the merger is
less than $33.00 or more than $40.50. Either party may
terminate the merger if the average closing price of FBS
Common Stock during the 20 trading days ending three business
days before the stockholders' meetings scheduled to consider
the merger is less than $29.50. The merger is intended to be
tax free for federal income tax purposes to the holders of MFC
Common Stock receiving shares of FBS Common Stock and to be
accounted for as a "pooling of interests."
In connection with the Merger Agreement, MFC and FBS entered
into a Stock Option Agreement pursuant to which FBS has the
right to purchase up to 19.9% of MFC's outstanding Common
Stock at a price of $24.66 per share if, under certain
circumstances, MFC enters into (or the MFC Board of Directors
recommends that the MFC stockholders approve or accept) an
agreement to be merged with or acquired by a third party
(including the acquisition of 20% or more of MFC's outstanding
Common Stock) or a third party acquires 20% or more of the
outstanding MFC Common Stock.
The merger is subject to various conditions, including the
approval of the stockholders of MFC and FBS and required
regulatory approvals.
The Merger Agreement and the Stock Option Agreement are
attached hereto as Exhibits 2.1 and 2.2 and are incorporated
herein by reference.
<PAGE>
Item 7. Financial Statements and Exhibits.
a. Financial Statements of Businesses Acquired.
Not applicable.
b. Pro Forma Financial Information.
Not applicable.
c. Exhibits. Attached hereto.
2.1 Agreement of Merger and Consolidation, dated July
21, 1994, by and between First Bank System, Inc.
and Metropolitan Financial Corporation. Omitted
from this Exhibit, as filed, are the exhibits
referenced in such agreement. MFC will furnish
supplementally a copy of any such exhibits to the
Commission upon request.
2.2 Stock Option Agreement, dated July 21, 1994, by
and between First Bank System, Inc. and
Metropolitan Financial Corporation.
99.1 Press Release, dated July 21, 1994.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
METROPOLITAN FINANCIAL CORPORATION
(Registrant)
Dated: July 25, 1994 By
Steven B. Dewald
Executive Vice President and
Chief Financial Officer
<PAGE>
INDEX TO EXHIBITS
Exhibit Item Page
2.1 Agreement of Merger and
Consolidation, dated July 21,
1994, by and between First Bank
System, Inc. and Metropolitan
Financial Corporation. Omitted
from this Exhibit, as filed, are
the exhibits referenced in such
agreement. MFC will furnish
supplementally a copy of any such
exhibits to the Commission upon
request............................
2.2 Stock Option Agreement, dated
July 21, 1994, by and between
First Bank System, Inc. and
Metropolitan Financial
Corporation........................
99.1 Press Release, dated July 21, 1994
AGREEMENT OF MERGER AND CONSOLIDATION
BY AND BETWEEN
FIRST BANK SYSTEM, INC.
AND
METROPOLITAN FINANCIAL CORPORATION
Dated: July 21, 1994
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
MERGER.......................................................2
1.1. Effect of Merger........................................2
1.2. Effect on Outstanding Shares of MFC
Capital Stock...........................................2
1.3. FBS Common Stock Adjustments............................3
1.4. Rights of Holders of MFC Capital Stock;
Capital Stock of FBS....................................4
1.5. No Fractional Shares....................................4
1.6. Procedure for Exchange of Stock.........................5
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF FBS........................7
2.1. Organization and Qualification..........................7
2.2. Authority Relative to this Agreement;
Non-Contravention......................................7
2.3. Validity of FBS Common Stock............................8
2.4. Capital Stock...........................................8
2.5. 1934 Act Reports........................................9
2.6. No Material Adverse Changes.............................9
2.7. Prospectus/Proxy Statement.............................10
2.8. Litigation.............................................10
2.9. Reports and Filings....................................10
2.10.Compliance with Laws...................................10
2.11.Regulatory Approvals...................................10
2.12.Disclosure.............................................11
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF MFC.......................11
3.1. Organization and Qualification.........................11
3.2. Authority Relative to this Agreement;
Non-Contravention......................................11
3.3. Capitalization.........................................12
3.4. 1934 Act Reports.......................................12
3.5. Financial Statements...................................13
3.6. Loans..................................................14
3.7. Reports and Filings....................................14
3.8. Subsidiaries...........................................15
3.9. Absence of Undisclosed Liabilities.....................15
3.10.No Material Adverse Changes............................15
3.11.Absence of Certain Developments........................15
3.12.Properties.............................................17
3.13.Tax Matters............................................19
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3.14.Contracts and Commitments..............................20
3.15.Litigation.............................................21
3.16.No Brokers or Finders..................................21
3.17.Employees..............................................21
3.18.Employee Benefit Plans.................................22
3.19.Insurance..............................................25
3.20.Affiliate Transactions.................................25
3.21.Compliance with Laws; Permits..........................25
3.22.Administration of Fiduciary Accounts...................26
3.23.Disclosure.............................................26
3.24.Prospectus/Proxy Statement.............................26
3.25.Pooling of Interests...................................27
3.26.Regulatory Approvals...................................27
3.27.Interest Rate Risk Management Instruments..............27
ARTICLE 4
CONDUCT OF BUSINESS PENDING THE MERGER......................27
4.1. Conduct of Business....................................27
ARTICLE 5
ADDITIONAL COVENANTS AND AGREEMENT..........................30
5.1. Filings and Approvals..................................30
5.2. Certain Loans and Related Matters......................31
5.3. Monthly Financial Statements...........................31
5.4. Expenses...............................................31
5.5. No Negotiations, etc...................................31
5.6. Notification of Certain Matters........................32
5.7. Access to Information; Confidentiality.................32
5.8. Filing of Tax Returns and Adjustments..................33
5.9. Registration Statement.................................34
5.10.Affiliate Letters......................................35
5.11.Establishment of Accruals..............................36
5.12.Employee Matters.......................................36
5.13.Pooling of Interests; Tax Treatment....................38
5.14.Stock Options and Warrants.............................39
5.15.Indemnification and Insurance..........................40
5.16.Edina Realty Litigation Matters........................41
5.17.FBS SEC Reports........................................42
5.18.SEC Reports............................................42
5.19.Stock Exchange Listing.................................42
5.20.Shareholder Approvals..................................42
5.21.FBS Board of Directors; Consulting Agreement...........42
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ARTICLE 6
CONDITIONS..................................................43
6.1. Conditions to Obligations of Each Party................43
6.2. Additional Conditions to Obligation of MFC.............45
6.3. Additional Conditions to Obligation of FBS.............46
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER...........................50
7.1. Termination............................................50
7.2. Effect of Termination..................................51
7.3. Amendment..............................................52
7.4. Waiver.................................................52
ARTICLE 8
GENERAL PROVISIONS..........................................52
8.1. Public Statements......................................52
8.2. Notices................................................52
8.3. Interpretation.........................................53
8.4. Severability...........................................54
8.5. Miscellaneous..........................................54
8.6. Survival of Representations, Warranties
and Covenants..........................................54
8.7. Schedules..............................................54
SIGNATURES..................................................55
<PAGE>
AGREEMENT OF MERGER AND CONSOLIDATION
AGREEMENT OF MERGER AND CONSOLIDATION dated July 21,
1994, by and between FIRST BANK SYSTEM, INC., a Delaware
corporation ("FBS"), and METROPOLITAN FINANCIAL
CORPORATION, a Delaware corporation ("MFC").
WHEREAS, the Boards of Directors of FBS and MFC have
determined that it is in the best interests of FBS and MFC
and their respective shareholders to consummate the merger
of MFC with and into FBS as described in Article 1 (the
"Merger");
WHEREAS, as a result of the Merger, all of the
outstanding common stock, $0.01 par value, of MFC ("MFC
Common Stock") will be converted into common stock, $1.25
par value, of FBS ("FBS Common Stock") and all of the
outstanding preferred stock, $0.01 par value, of MFC ("MFC
Preferred Stock") will be converted into the right to
receive cash, all on the terms and subject to the conditions
set forth in this Agreement;
WHEREAS, (a) MFC (i) owns all of the issued and
outstanding capital stock of Metropolitan Federal Bank, fsb
(the "Bank") and (ii) owns all of the issued and
outstanding capital stock of LMN Management Corp. and Edina
Realty, Inc. (collectively, the "Direct Nonbanking
Subsidiaries"); (b) the Bank owns, directly or indirectly,
all of the issued and outstanding capital stock of the
entities listed on Schedule A hereto (collectively, the
"Indirect Nonbanking Subsidiaries"); and (c) Edina Realty,
Inc. owns all of the issued and outstanding capital stock of
the entities listed on Schedule B hereto (collectively, the
"Edina Realty Subsidiaries" and together with the Bank,
the Direct Nonbanking Subsidiaries and the Indirect
Nonbanking Subsidiaries, the "Subsidiaries");
WHEREAS, as a condition and inducement to FBS's
willingness to enter into this Agreement, FBS and MFC are
entering into immediately after the execution and delivery
hereof a Stock Option Agreement dated as of the date hereof
(the "Stock Option Agreement") pursuant to which MFC shall
grant to FBS an option to purchase shares of MFC Common
Stock; and
WHEREAS, FBS and MFC desire that the Merger be made on
the terms and subject to the conditions set forth in this
Agreement and qualify as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
NOW, THEREFORE, in consideration of the representations,
warranties and covenants contained herein, the parties hereto
agree as follows:
<PAGE>
ARTICLE 1
MERGER
Subject to the satisfaction or waiver of the conditions
set forth in Article 6, on a date mutually satisfactory to
the parties as soon as practicable following receipt of all
necessary regulatory approvals of the Board of Governors of
the Federal Reserve System ("FRB") and the Office of
Thrift Supervision (the "OTS"), MFC will merge with and
into FBS. FBS, in its capacity as the corporation surviving
the Merger, is sometimes referred to herein as the
"Surviving Corporation." The Merger will be effected
pursuant to the provisions of, and with the effect provided
in, Section 251 of the Delaware General Corporation Law (the
"DGCL").
1.1. Effect of Merger.
(a) On the Effective Date (as defined in
Section 1.1(d)), MFC shall be merged with and into FBS, and
the separate existence of MFC shall cease. The Charter (as
defined Section 2.2) and Bylaws of FBS, as in effect
immediately prior to the Effective Date, shall be the
Charter and the Bylaws of the Surviving Corporation until
further amended as provided therein and in accordance with
law. The directors of FBS immediately prior to the
Effective Date will be the directors of the Surviving
Corporation until their successors are elected and qualify.
(b) The Surviving Corporation shall thereupon and
thereafter be responsible and liable for all the
liabilities, debts, obligations and penalties of each of FBS
and MFC.
(c) The Surviving Corporation shall thereupon and
thereafter possess all the rights, privileges, immunities
and franchises, of a public as well as of a private nature,
of each of FBS and MFC; all property, real, personal and
mixed, and all debts due on whatever account, and all and
every other interest, of or belonging to or due to each of
FBS and MFC, shall be taken and deemed to be transferred to
and vested in the Surviving Corporation without further act
or deed; and the title to any real estate or any interest
therein, vested in FBS and MFC, shall not revert or be in
any way impaired by reason of the Merger.
(d) To effect the Merger, the parties hereto will
cause a certificate of merger relating to the Merger to be
filed with the Secretary of State of Delaware. The Merger
shall be effective upon the filing of such certificate of
merger. As used herein, the term "Effective Date" shall
mean the date on which the certificate of merger is filed
with the Secretary of State of Delaware.
1.2. Effect on Outstanding Shares of MFC Capital
Stock.
To effectuate the Merger and subject to the terms and
conditions of this Agreement:
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(a) each issued and outstanding share of MFC Common
Stock (other than shares held as treasury stock of MFC or
shares held directly or indirectly by FBS, other than shares
held in a fiduciary capacity or in satisfaction of a debt
previously contracted) shall be converted into .6803 shares
of FBS Common Stock, and FBS shall issue to holders of MFC
Common Stock .6803 shares of FBS Common Stock (the
"Exchange Ratio"), subject to adjustment as provided in
Section 1.3, in exchange for each such share of MFC Common
Stock;
(b) all outstanding options and warrants to purchase
shares of MFC Common Stock shall be exchanged for options
and warrants to purchase FBS Common Stock, or shares of FBS
Common Stock, as provided in Section 5.14;
(c) each issued and outstanding share of MFC Preferred
Stock (other than shares as to which the holders thereof
have asserted and not effectively withdrawn or otherwise
lost their appraisal rights pursuant to Section 262 of the
DGCL ("Dissenters' Shares")) shall be converted into the
right to receive $27.00 in cash, plus any accumulated and
unpaid dividends on such shares of MFC Preferred Stock to,
but excluding, the Effective Date calculated as set forth in
the terms of such MFC Preferred Stock, without interest,
from FBS (the "Preferred Consideration"), and FBS shall
pay to holders of such MFC Preferred Stock the Preferred
Consideration in exchange for each such share of MFC
Preferred Stock;
(d) Dissenters' Shares shall be purchased and paid for
in accordance with Section 262 of the DGCL; and
(e) each share of MFC Common Stock held as treasury
stock of MFC or held directly or indirectly by FBS, other
than shares held in a fiduciary capacity or in satisfaction
of a debt previously contracted, shall be canceled, retired
and cease to exist, and no exchange or payment shall be made
with respect thereof.
1.3. FBS Common Stock Adjustments.
(a) If the average of the closing prices of FBS Common
Stock as quoted on the New York Stock Exchange (the
"NYSE") for the 20 trading days ending three business days
prior to the last date of the meetings of shareholders
scheduled to obtain the shareholder approvals referred to in
Section 5.20 (the "Average Price") is less than $33.00,
then, subject to Section 7.1(e), the Exchange Ratio will be
adjusted by multiplying the Exchange Ratio by the quotient
of (i) $33.00 divided by (ii) the Average Price.
(b) If the Average Price is greater than $40.50, then
the Exchange Ratio will be adjusted by multiplying the
Exchange Ratio by the quotient of (i) $40.50 divided by (ii)
the Average Price.
(c) If, between the date hereof and the Effective
Date, shares of FBS Common Stock shall be changed into a
different number of shares or a different class of shares by
reason of any reclassification, recapitalization, split-up,
<PAGE>
combination, exchange of shares or readjustment, or if a
stock dividend thereon shall be declared with a record date
within such period, then the number of shares of FBS Common
Stock issued to holders of MFC Common Stock pursuant to this
Agreement will be appropriately and proportionately adjusted
so that the number of such shares of FBS Common Stock (or
such class of shares into which shares of FBS Common Stock
have been changed) that will be issued to holders of MFC
Common Stock will equal the number of such shares that
holders of MFC Common Stock would have received pursuant to
such classification, recapitalization, split-up,
combination, exchange of shares or readjustment had the
record date therefor been immediately following the
Effective Date.
1.4. Rights of Holders of MFC Capital Stock; Capital
Stock of FBS.
(a) On and after the Effective Date and until
surrendered for exchange, each outstanding stock certificate
which immediately prior to the Effective Date represented
shares of MFC Common Stock shall be deemed for all purposes,
except as provided in Section 1.6(c), to evidence ownership
of and to represent the number of whole shares of FBS Common
Stock into which such shares of MFC Common Stock shall have
been converted, and the record holder of such outstanding
certificate shall, after the Effective Date, be entitled to
vote the shares of FBS Common Stock into which such shares
of MFC Common Stock shall have been converted on any matters
on which the holders of record of FBS Common Stock, as of
any date subsequent to the Effective Date, shall be entitled
to vote. In any matters relating to such certificates, FBS
may rely conclusively upon the record of shareholders
maintained by MFC containing the names and addresses of the
holders of record of MFC Common Stock on the Effective Date.
(b) On and after the Effective Date and until
surrendered for exchange, each outstanding stock certificate
which immediately prior to the Effective Date represented
shares of MFC Preferred Stock (other than Dissenters'
Shares) shall be deemed for all purposes to represent the
right to receive the Preferred Consideration from FBS. In
any matters relating to such certificates, FBS may rely
conclusively upon the record of shareholders maintained by
MFC containing the names and address of the holders of
record of MFC Preferred Stock on the Effective Date.
(c) On and after the Effective Date, each share of FBS
Common Stock issued and outstanding immediately prior to the
Effective Date shall remain an issued and existing share of
common stock of the Surviving Corporation and shall not be
affected by the Merger.
(d) On and after the Effective Date, FBS shall reserve
a sufficient number of authorized but unissued shares of FBS
Common Stock for issuance in connection with the conversion
of MFC Common Stock into FBS Common Stock as provided
herein.
1.5. No Fractional Shares. No fractional shares of FBS
Common Stock, and no certificates representing such
<PAGE>
fractional shares, shall be issued upon the surrender for
exchange of certificates representing MFC Common Stock. In
lieu of any fractional share, FBS shall pay to each holder
of MFC Common Stock who otherwise would be entitled to
receive a fractional share of FBS Common Stock an amount of
cash (without interest) determined by multiplying (a) the
closing price per share of FBS Common Stock on the Effective
Date times (b) the fractional share interest to which such
holder would otherwise be entitled.
1.6. Procedure for Exchange of Stock.
(a) After the Effective Date, holders of certificates
theretofore evidencing outstanding shares of MFC Common
Stock or MFC Preferred Stock, upon surrender of such
certificates to an exchange agent appointed by FBS (the
"Exchange Agent"), shall be entitled to receive, (i) in
the case of MFC Common Stock, (A) certificates representing
the number of whole shares of FBS Common Stock into which
shares of MFC Common Stock theretofore represented by the
certificates so surrendered shall have been converted as
provided in Section 1.2(a) and (B) cash payments in lieu of
fractional shares, if any, as provided in Section 1.5, and
(ii) in the case of MFC Preferred Stock, the Preferred
Consideration. As soon as practicable after the Effective
Date, FBS shall cause the Exchange Agent to mail appropriate
and customary transmittal materials (which shall specify
that delivery shall be effected, and risk of loss and title
to the certificates theretofore representing shares of MFC
Common Stock or MFC Preferred Stock shall pass, only upon
proper delivery of such certificates to the Exchange Agent)
to each holder of MFC Common Stock and MFC Preferred Stock
of record as of the Effective Date advising such holder of
the effectiveness of the Merger and the procedure for
surrendering to the Exchange Agent outstanding certificates
formerly evidencing MFC Common Stock in exchange for new
certificates for FBS Common Stock and outstanding
certificates formerly evidencing MFC Preferred Stock in
exchange for the Preferred Consideration. FBS shall not be
obligated to deliver the consideration to which any former
holder of shares of MFC Common Stock or MFC Preferred Stock
is entitled as a result of the Merger until such holder
surrenders the certificate or certificates representing such
shares for exchange as provided in such transmittal
materials and this Section 1.6(a). In addition,
certificates surrendered for exchange by any person deemed
an "affiliate" of MFC (as defined in Section 5.10), shall
not be exchanged for such consideration until FBS has
received a written agreement from such person as provided in
Section 5.10. Upon surrender, each certificate evidencing
MFC Common Stock or MFC Preferred Stock shall be canceled.
(b) On the Effective Date, FBS shall deposit, or shall
cause to be deposited, with the Exchange Agent, for exchange
in accordance with this Section 1.6, certificates
representing the shares of FBS Common Stock and the cash in
lieu of fractional shares and cash for payment of the
Preferred Consideration (such certificates and cash,
hereinafter referred to as the "Exchange Fund") to be
issued or paid by FBS pursuant to this Article 1 in
connection with the Merger.
(c) Until outstanding certificates formerly
representing MFC Common Stock are surrendered as provided in
<PAGE>
Section 1.6(a), no dividend or distribution payable to
holders of record of FBS Common Stock shall be paid to any
holder of such outstanding certificates, but upon surrender
of such outstanding certificates by such holder there shall
be paid to such holder the amount of any dividends or
distributions (without interest) theretofore paid with
respect to such whole shares of FBS Common Stock, but not
paid to such holder, and which dividends or distributions
had a record date occurring on or subsequent to the
Effective Date.
(d) After the Effective Date, there shall be no
further registration of transfers on the records of MFC of
outstanding certificates formerly representing shares of MFC
Common Stock or MFC Preferred Stock and, if a certificate
formerly representing such shares is presented to MFC or
FBS, it shall be forwarded to the Exchange Agent for
cancellation and exchange for certificates representing
shares of FBS Common Stock or the Preferred Consideration,
as applicable, as herein provided.
(e) All shares of FBS Common Stock and cash for any
fractional shares issued and paid upon the surrender for
exchange of MFC Common Stock and all Preferred Consideration
paid upon the surrender for exchange of MFC Preferred Stock
in accordance with the above terms and conditions shall be
deemed to have been issued and paid in full satisfaction of
all rights pertaining to such shares of MFC Common Stock and
MFC Preferred Stock, respectively.
(f) Any portion of the Exchange Fund (including the
proceeds of any investments thereof and any FBS Common Stock
or any dividends or distributions thereon) that remains
unclaimed by the holders of MFC Common Stock or MFC
Preferred Stock for six months after the Effective Date
shall be repaid to FBS. Any holders of MFC Common Stock or
MFC Preferred Stock who have not theretofore complied with
this Section 1.6 shall thereafter look only to FBS for
payment of their shares of FBS Common Stock, cash in lieu of
fractional shares and any unpaid dividends and distributions
on the FBS Common Stock deliverable in respect of each share
of MFC Common Stock or cash in an amount equal to the
Preferred Consideration payable in respect of each share of
MFC Preferred Stock, as the case may be, that such holder
holds as determined pursuant to this Agreement, in each
case, without any interest thereon. If outstanding
certificates for shares of MFC Common Stock or MFC Preferred
Stock are not surrendered or the payment for them not
claimed prior to the date on which such payments would
otherwise escheat to or become the property of any
governmental unit or agency, the unclaimed items shall, to
the extent permitted by abandoned property and any other
applicable law, become the property of FBS (and to the
extent not in its possession shall be paid over to it), free
and clear of all claims or interest of any person previously
entitled to such claims. Notwithstanding the foregoing,
none of FBS, the Exchange Agent or any other person shall be
liable to any former holder of MFC Common Stock or MFC
Preferred Stock for any amount delivered to a public
official pursuant to applicable abandoned property, escheat
or similar laws.
(g) In the event any certificate for MFC Common Stock
or MFC Preferred Stock shall have been lost, stolen or
<PAGE>
destroyed, the Exchange Agent shall issue and pay in
exchange for such lost, stolen or destroyed certificate,
upon the making of an affidavit of that fact by the holder
thereof, (i) in the case of MFC Common Stock, such shares of
FBS Common Stock and cash for fractional shares, if any, and
(ii) in the case of MFC Preferred Stock, such Preferred
Consideration, each as may be required pursuant to this
Agreement; provided, however, that FBS may, in its
discretion and as a condition precedent to the issuance and
payment thereof, require the owner of such lost, stolen or
destroyed certificate to deliver a bond in such sum as it
may direct as indemnity against any claim that may be made
against FBS, MFC, the Exchange Agent or any other party with
respect to the certificate alleged to have been lost, stolen
or destroyed.
(h) Any Dissenters' Shares shall not be converted into
the Preferred Consideration or the right to receive the
Preferred Consideration unless and until the holder of such
Dissenters' Shares shall have effectively withdrawn or
otherwise lost the right to appraisal of and payment for
such shares under the DGCL, at which time such shares shall
be converted into the Preferred Consideration, and the right
to receive the Preferred Consideration, as provided in
Section 1.2(c). MFC shall give prompt notice to FBS of any
demands received from holders of MFC Preferred Stock for
appraisal of and payment for their shares. MFC shall not,
except with the prior written consent of FBS, voluntarily
make any payment with respect to, or settle or offer to
settle, any such demands for appraisal.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF FBS
FBS hereby represents and warrants to MFC as follows:
2.1. Organization and Qualification. FBS is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has
the requisite corporate power to carry on its business as
now conducted. FBS is registered as a bank holding company
under Section 1841 et seq. of Title 12, United States Code
(the "Bank Holding Company Act"). FBS is licensed or
qualified to do business in every jurisdiction in which the
nature of its business or its ownership of property requires
it to be licensed or qualified, except where the failure to
be so licensed or qualified would not have or would not
reasonably be expected to have a material adverse effect on
the business, operations or financial condition of FBS and
its subsidiaries, taken as a whole.
2.2. Authority Relative to this Agreement; Non-
Contravention. FBS has the requisite corporate power and
authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this
Agreement by FBS and the consummation by FBS of the
transactions contemplated hereby have been duly authorized
by the Board of Directors of FBS, and, except for approval
of this Agreement and the Merger by the shareholders of FBS,
no other corporate proceedings on the part of FBS are
<PAGE>
necessary to authorize this Agreement and such transactions.
This Agreement has been duly executed and delivered by FBS
and constitutes a valid and binding obligation of FBS,
enforceable in accordance with its terms. FBS is not
subject to, or obligated under, any provision of (a) its
Charter (as hereinafter defined) or Bylaws, (b) any
agreement, arrangement or understanding, (c) any license,
franchise or permit or (d) subject to obtaining the
approvals referred to in the next sentence, any law,
regulation, order, judgment or decree, which would be
breached or violated, or in respect of which a right of
termination or acceleration or any encumbrance on any of its
or any of its subsidiaries' assets would be created, by its
execution, delivery and performance of this Agreement and
the consummation by it of the transactions contemplated
hereby, other than any such breaches or violations which
will not, individually or in the aggregate, have a material
adverse effect on the business, operations or financial
condition of FBS and its subsidiaries, taken as a whole, or
the consummation of the transactions contemplated hereby.
Other than in connection with obtaining any approvals
required by the Bank Holding Company Act, Section 1730a of
Title 12, United States Code (the "Savings and Loan Holding
Company Act"), the Home Owners Loan Act (the "HOLA"), the
Federal Deposit Insurance Act (the "FDIA"), the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), the Securities Act of 1933, as amended,
and the rules and regulations thereunder (the "1933 Act"),
the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder (the "1934 Act"), rules
of the NYSE, state securities or blue sky laws, and the
rules and regulations thereunder ("Blue Sky Laws"), rules
and regulations of any applicable state insurance regulatory
authority ("Applicable Insurance Regulations") and the
filing of a certificate of merger with the Secretary of
State of Delaware, no authorization, consent or approval of,
or filing with, any public body, court or authority is
necessary on the part of FBS for the consummation by it of
the transactions contemplated by this Agreement, except for
such authorizations, consents, approvals and filings as to
which the failure to obtain or make would not, individually
or in the aggregate, have a material adverse effect on the
business, operations or financial condition of FBS and its
subsidiaries, taken as a whole, or the consummation of the
transactions contemplated hereby. As used in this
Agreement, the term "Charter" with respect to any
corporation or banking association shall mean those
instruments that at that time constitute its charter as
filed or recorded under the general corporation or other
applicable law of the jurisdiction of incorporation or
association, including the articles or certificate of
incorporation or association, any amendments thereto and any
articles or certificate of merger or consolidation.
2.3. Validity of FBS Common Stock. The shares of FBS
Common Stock to be issued pursuant to this Agreement will
be, when issued, duly authorized, validly issued, fully paid
and nonassessable.
2.4. Capital Stock. The authorized capital stock of
FBS consists of 200,000,000 shares of FBS Common Stock and
10,000,000 shares of preferred stock, par value $1.00 per
share (the "FBS Preferred Stock"). As of June 30, 1994,
(a) 116,300,311 shares of FBS Common Stock were issued and
outstanding (including 2,144,277 shares of FBS Common Stock,
par value $1.25 per share, held in treasury), 10,982,385
<PAGE>
shares of FBS Common Stock were reserved for issuance
pursuant to FBS's 1987 Stock Option Plan, 1991 Stock
Incentive Plan, 1994 Stock Incentive Plan, Restated Employee
Stock Purchase Plan and Dividend Reinvestment Plan, the
Western Capital Investment Corp. 1984 Stock Option and
Incentive Plan and the 1988 Equity Participation Plan and
3,655,684 shares of FBS Common Stock were reserved for
issuance upon conversion of FBS's $3.5625 Cumulative
Preferred Stock, Series 1991A (the "Series 1991A
Preferred"); (b) 2,118,500 shares of Series 1991A Preferred
were outstanding; (c) 12,750 shares of Adjustable Rate
Cumulative Preferred Stock, Series 1990A were reserved for
issuance pursuant to certain periodic stock purchase rights
and risk event warrants issued by FBS; and (d) 1,400,000
shares of Series A Junior Participating Preferred Stock were
reserved for issuance upon exercise of rights to purchase
shares of Junior Participating Preferred Stock of FBS
pursuant to the Rights Agreement dated as of December 21,
1988, between FBS and First Chicago Trust Company of New
York, as Rights Agent.
2.5. 1934 Act Reports.
(a) Prior to the execution of this Agreement, FBS has
delivered to MFC complete and accurate copies of (a) FBS's
Annual Reports on Form 10-K for the years ended December 31,
1991, 1992 and 1993, as amended (the "FBS 10-K Reports"),
as filed under the 1934 Act with the Securities and Exchange
Commission (the "SEC"), (b) all FBS proxy statements and
annual reports to shareholders used in connection with
meetings of FBS shareholders held since January 1, 1992, and
(c) FBS's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1994 (the "FBS 10-Q Report"), as filed
under the 1934 Act with the SEC. As of their respective
dates, such documents (i) did not contain any untrue
statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under
which they were made, not misleading and (ii) complied as to
form in all material respects with the applicable laws and
rules and regulations of the SEC. Since January 1, 1991,
FBS has filed in a timely manner all reports that it was
required to file with the SEC pursuant to the 1934 Act.
(b) The FBS financial statements (including any
footnotes thereto) contained in the FBS 10-K Reports and the
FBS 10-Q Report were prepared in accordance with generally
accepted accounting principles applied on a consistent basis
during the periods involved and fairly present the
consolidated financial position of FBS and its subsidiaries
as of the dates thereof and the consolidated results of
operations, changes in shareholders' equity and cash flows
for the periods then ended.
2.6. No Material Adverse Changes. Since March 31,
1994, there has been no material adverse change in, and no
event, occurrence or development in the business of FBS or
its subsidiaries that, taken together with other events,
occurrences and developments with respect to such business,
has had or would reasonably be expected to have a material
adverse effect on, the business operations or financial
condition of FBS and its subsidiaries, taken as a whole, or
the ability of FBS to consummate the transactions
contemplated hereby.
<PAGE>
2.7. Prospectus/Proxy Statement. At the time the
Registration Statement (as defined in Section 5.9(a))
becomes effective and at the time the Prospectus/Proxy
Statement (as defined in Section 5.9(a)) is mailed to the
shareholders of FBS and MFC for purposes of obtaining the
approvals referred to in Section 5.9(a) and at all times
subsequent to such mailing up to and including the times of
such approvals, the Registration Statement and the
Prospectus/Proxy Statement (including any amendments or
supplements thereto), with respect to all information set
forth therein relating to FBS, the FBS Common Stock, this
Agreement, the Merger and all other transactions
contemplated hereby, will (a) comply in all material
respects with applicable provisions of the 1933 Act and the
1934 Act and (b) not contain any untrue statement of a
material fact or omit to state a material fact required to
be stated therein or necessary to make the statements
contained therein, in light of the circumstances under which
they were made, not misleading.
2.8. Litigation. There are no actions, suits,
proceedings, orders or investigations pending or, to the
best knowledge of FBS threatened, against FBS or any of its
subsidiaries which if determined adversely to FBS or its
subsidiaries could reasonably be expected to have a material
adverse effect on the financial condition, business or
operations of FBS and its subsidiaries, taken as a whole, or
would have a material adverse effect on the ability of FBS
to consummate the transactions contemplated hereby.
2.9. Reports and Filings. Since January 1, 1991, each
of FBS and its subsidiaries has filed each report or other
filing it was required to file with any federal or state
banking or bank holding company or other regulatory
authority having jurisdiction over it (together with all
exhibits thereto, the "FBS Regulatory Reports"), except
for such reports and filings which the failure to so file
would not have a material adverse effect on the business,
operations or financial condition of FBS and its
subsidiaries, taken as a whole, or the ability of FBS to
consummate the transactions contemplated hereby. As of
their respective dates or as subsequently amended prior to
the date hereof, each of the FBS Regulatory Reports was true
and correct in all material respects and complied in all
material respects with applicable laws, rules and
regulations.
2.10. Compliance with Laws. Each of FBS and its
subsidiaries has complied in all material respects with
applicable laws and regulations of foreign, federal, state
and local governments and all agencies thereof which affect
the business or any owned or leased properties of FBS or any
of its subsidiaries and to which FBS or any of its
subsidiaries may be subject, except where the failure to so
comply would not, individually or in the aggregate, have a
material adverse effect on the business, operations or
financial condition of FBS and its subsidiaries, taken as a
whole, or the ability of FBS to consummate the transactions
contemplated hereby.
2.11. Regulatory Approvals. As of the date hereof,
FBS is not aware of any reason that the regulatory approvals
specified in Section 5.1 and required to be obtained by FBS
would not be obtained.
<PAGE>
2.12. Disclosure. The representations and warranties
contained in this Agreement are true and correct in all
material respects, and such representations and warranties
do not omit any material fact necessary to make the
statements contained therein, in light of the circumstances
under which they were made, not misleading. There is no fact
known to FBS which has not been disclosed to MFC pursuant to
this Agreement, the FBS 10-K Reports and the FBS 10-Q
Report, all taken together as a whole, which would have or
would reasonably be expected to have a material adverse
effect on the business, operations or financial condition of
FBS and its subsidiaries, taken as a whole, or the ability
of FBS to consummate the transactions contemplated hereby.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF MFC
MFC hereby represents and warrants to FBS as follows:
3.1. Organization and Qualification. MFC is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. MFC is
registered as a savings and loan holding company under the
Savings and Loan Holding Company Act. The Bank is a
federally chartered savings bank duly organized, validly
existing and in good standing under the laws of the United
States and has the requisite corporate power to carry on its
business as now conducted. Each of the Subsidiaries (other
than the Bank) is a corporation duly organized, validly
existing and in good standing under the laws of the state of
its incorporation. The copies of the Charter and Bylaws of
each of MFC and the Subsidiaries which have been made
available to FBS prior to the date of this Agreement are
correct and complete and reflect all amendments made thereto
through such date. Each of MFC and the Subsidiaries is
licensed or qualified to do business in every jurisdiction
in which the nature of its respective business or its
ownership of property requires it to be licensed or
qualified, except where the failure to be so licensed or
qualified would not have or would not reasonably be expected
to have a material adverse effect on the business,
operations or financial condition of MFC and the
Subsidiaries, taken as a whole.
3.2. Authority Relative to this Agreement; Non-
Contravention. MFC has the requisite corporate power and
authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this
Agreement by MFC and the consummation by MFC of the
transactions contemplated hereby have been duly authorized
by the Board of Directors of MFC and, except for approval of
this Agreement and the Merger by the affirmative vote of the
holders of a majority of the outstanding MFC Common Stock,
no other corporate proceedings on the part of MFC are
necessary to authorize this Agreement and such transactions.
This Agreement has been duly executed and delivered by MFC
and constitutes a valid and binding obligation of MFC,
enforceable in accordance with its terms. None of MFC or
<PAGE>
the Subsidiaries is subject to, or obligated under, any
provision of (a) its Charter or Bylaws, (b) any agreement,
arrangement or understanding, (c) any license, franchise or
permit or (d) subject to obtaining the approvals referred to
in the next sentence, any law, regulation, order, judgment
or decree, which would be breached or violated, or in
respect of which a right of termination or acceleration or
any encumbrance on any of its assets would be created, by
the execution, delivery or performance of this Agreement,
the Stock Option Agreement or the consummation of the
transactions contemplated hereby or thereby, other than any
such breaches or violations which will not, individually or
in the aggregate, have a material adverse effect on the
business, operations or financial condition of MFC and the
Subsidiaries, taken as a whole, or the consummation of the
transactions contemplated hereby or thereby. Other than in
connection with obtaining any approvals required by the Bank
Holding Company Act, the Savings and Loan Holding Company
Act, the HOLA, the FDIA, the HSR Act, the 1933 Act, the 1934
Act, the rules of the NYSE, Blue Sky Laws, Applicable
Insurance Regulations and the filing of a certificate of
merger with the Secretary of State of Delaware, no
authorization, consent or approval of, or filing with, any
public body, court or authority is necessary on the part of
MFC or any of the Subsidiaries for the consummation by MFC
of the transactions contemplated by this Agreement, except
for such authorizations, consents, approvals and filings as
to which the failure to obtain or make would not,
individually or in the aggregate, have a material adverse
effect on the business, operations or financial condition of
MFC and the Subsidiaries, taken as a whole, or the
consummation of the transactions contemplated hereby.
3.3. Capitalization. The authorized and issued and
outstanding capital stock of each of MFC and the
Subsidiaries as of the date hereof is correctly set forth on
Schedule 3.3. The issued and outstanding shares of capital
stock of each of MFC and the Subsidiaries are duly
authorized, validly issued, fully paid and nonassessable and
have not been issued in violation of any preemptive rights.
Except as disclosed on Schedule 3.3 and as permitted in
Section 4.1, there are no options, warrants, conversion
privileges or other rights, agreements, arrangements or
commitments obligating MFC or any Subsidiary to issue, sell,
purchase or redeem any shares of its capital stock or
securities or obligations of any kind convertible into or
exchangeable for any shares of its capital stock or of any
of its subsidiaries or affiliates, nor are there any stock
appreciation, phantom or similar rights outstanding based
upon the book value or any other attribute of any of the
capital stock of MFC or any of the Subsidiaries, or the
earnings or other attributes of MFC or any of the
Subsidiaries. MFC has heretofore delivered to FBS true and
correct copies of all such agreements, arrangements
(including all stock option plans) or commitments identified
on Schedule 3.3.
3.4. 1934 Act Reports. Prior to the execution of this
Agreement, MFC has delivered or made available to FBS
complete and accurate copies of (a) MFC's Annual Reports on
Form 10-K for the years ended December 31, 1991, 1992 and
1993 (the "MFC 10-K Reports") as filed under the 1934 Act
with the SEC, (b) all MFC proxy statements and annual
reports to shareholders used in connection with meetings of
<PAGE>
MFC shareholders held since January 1, 1992 and (c) MFC's
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1994 (the "MFC 10-Q Report") as filed under the
1934 Act with the SEC. As of their respective dates, such
documents (i) did not contain any untrue statement of a
material fact or omit to state a material fact required to
be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading and (ii) complied as to form in all
material respects with the applicable laws and rules and
regulations of the SEC. Since January 1, 1991, MFC has
filed in a timely manner all reports that it was required to
file with the SEC pursuant to the 1934 Act.
3.5. Financial Statements.
(a) The MFC financial statements (including any
footnotes thereto) contained in the MFC 10-K Reports and the
MFC 10-Q Report have been prepared in accordance with
generally accepted accounting principles applied on a
consistent basis during the periods involved and fairly
present the consolidated financial position of MFC and the
Subsidiaries as of the dates thereof and the results of
operations, changes in shareholders' equity and cash flows
for the periods then ended. MFC has furnished FBS with
copies of the consolidated balance sheet of MFC as of June
30, 1994 (the "Latest MFC Balance Sheet") and the related
statements of income and changes in shareholders' equity for
the six months ended June 30, 1994 (the "Related MFC
Statements"). The Latest MFC Balance Sheet and the Related
MFC Statements have been prepared in accordance with
generally accepted accounting principles and fairly present
the consolidated financial position of MFC and the
Subsidiaries, subject to normal recurring year-end
adjustments, as of the date thereof and the results of
operations and changes in shareholders' equity for the six-
month period then ended.
(b) MFC has furnished FBS with copies of the balance
sheets of the Bank as of December 31, 1991, 1992 and 1993
and as of June 30, 1993 and 1994 and the related statements
of income, changes in shareholder's equity and cash flows
for the years and six-month periods then ended (except that
no statement of cash flows for the six months ended June 30,
1994 have been so furnished), respectively (collectively,
together with any footnotes thereto, the "Bank Financial
Statements"). The balance sheet of the Bank as of June 30,
1994 are referred to herein as the "Latest Bank Balance
Sheet," and the related statements of income and changes in
shareholder's equity for the six-month period then ended are
referred to herein as the "Related Bank Financial
Statements." The Bank Financial Statements have been
prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods
involved and fairly present the financial position of the
Bank, subject in the case of the Latest Bank Balance Sheet
and the Related Bank Financial Statements to normal
recurring year-end adjustments, as of the dates thereof and
the results of operations, changes in shareholder's equity
and cash flows for the periods then ended.
(c) MFC has furnished FBS with copies of the balance
sheets of each of Edina Realty, Inc., MFC Insurance
<PAGE>
Corporation and Equity Title Services, Inc. (collectively,
the "Principal Nonbanking Subsidiaries") as of December
31, 1991, 1992 and 1993 and as of June 30, 1993 and 1994 and
the related statements of income for the years and six-month
periods then ended (except that no statement of cash flows
for the six months ended June 30, 1994 have been so
furnished), respectively (collectively, together with any
footnotes thereto, the "Principal Nonbanking Subsidiaries
Financial Statements"). The balance sheets of each of the
Principal Nonbanking Subsidiaries as of June 30, 1994 are
herein referred to as the "Latest Principal Nonbanking
Subsidiaries Balance Sheets," and the related statement of
income and changes in shareholder's equity for the six-month
period then ended are herein referred to as the "Related
Principal Nonbanking Subsidiaries Financial Statements."
The Principal Nonbanking Subsidiaries Financial Statements
have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during
the periods involved and fairly present the financial
position of each of the Principal Nonbanking Subsidiaries
covered thereby, subject in the case of the Latest Principal
Nonbanking Subsidiaries Balance Sheet and the Related
Principal Nonbanking Subsidiaries Financial Statements to
normal recurring year-end adjustments, as of the dates
thereof and the results of operations, changes in
shareholder's equity and cash flows for the periods then
ended. The Latest MFC Balance Sheet, the Latest Bank
Balance Sheet and the Latest Principal Nonbanking
Subsidiaries Balance Sheets are collectively referred to
herein as the "Latest Balance Sheets," and the Related MFC
Financial Statements, the Related Bank Financial Statements
and the Related Principal Nonbanking Subsidiaries Financial
Statements are collectively referred to herein as the
"Related Statements."
3.6. Loans.
(a) The documentation relating to each loan made by
the Bank and relating to all security interests, mortgages
and other liens with respect to all collateral for each such
loan, taken as a whole, are adequate for the enforcement of
the material terms of each such loan and of the related
security interests, mortgages and other liens. The terms of
each such loan and of the related security interests,
mortgages and other liens comply in all material respects
with all applicable laws, rules and regulations (including,
without limitation, laws, rules and regulations relating to
the extension of credit).
(b) Except as set forth in Schedule 3.6, (i) as of
June 30, 1994, there are no loans, leases, other extensions
of credit or commitments to extend credit of the Bank that
have been or, to MFC's knowledge, should have been
classified by the Bank as non-accrual, as restructured, as
90 days past due, as still accruing and doubtful of
collection or any comparable classification, (ii) MFC has
provided to FBS true, correct and complete in all material
respects written information concerning the loan portfolios
of the Bank, and (iii) no material information with respect
to the loan portfolios of the Bank has been withheld from
FBS.
3.7. Reports and Filings. Since January 1, 1991, each
of MFC and the Subsidiaries has filed each report or other
<PAGE>
filing that it was required to file with any federal or
state savings and loan, banking, savings and loan holding
company, bank holding company or other applicable regulatory
authorities having jurisdiction over it (together with all
exhibits thereto, the "MFC Regulatory Reports"). As of
their respective dates or as subsequently amended prior to
the date hereof, each of the MFC Regulatory Reports was true
and correct in all material respects and complied in all
material respects with applicable laws, rules and
regulations.
3.8. Subsidiaries. Schedule 3.8 correctly sets forth
the jurisdiction of incorporation of each Subsidiary. All
of the issued and outstanding shares of capital stock of
each Subsidiary are owned by MFC free and clear of any lien,
pledge, security interest, encumbrance or charge of any
kind, other than encumbrances arising as a result of
requisite regulatory approvals for transfer. Except for the
stock of the Subsidiaries owned by MFC and as otherwise
disclosed on Schedule 3.8, neither MFC nor any of the
Subsidiaries owns any stock, partnership interest, joint
venture interest or any other security issued by any other
corporation, organization or entity, except securities owned
by the Bank in the ordinary course of its business.
3.9. Absence of Undisclosed Liabilities. All of the
obligations or liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise, whether due or to
become due, and regardless of when asserted) arising out of
transactions or events heretofore entered into, or any
action or inaction, including Taxes (as defined in
Section 3.13) with respect to or based upon transactions or
events heretofore occurring ("Liabilities"), required to
be reflected on the Latest Balance Sheets in accordance with
generally accepted accounting principles have been so
reflected. MFC and the Subsidiaries have no Liabilities
except (a) as reflected on the Latest Balance Sheets,
(b) Liabilities which have arisen after the date of the
Latest Balance Sheets in the ordinary course of business and
(c) as otherwise disclosed on Schedule 3.9. As of June 30,
1994, there are no agreements or commitments binding the
Bank to extend credit, in the amount per "one borrower"
(as defined in 12 C.F.R. 563.93), of $1,000,000 or more,
except as set forth on Schedule 3.9.
3.10. No Material Adverse Changes. Since the date of
the Latest Balance Sheets, there has been no material
adverse change in, and no event, occurrence or development
in the business of MFC or the Subsidiaries that, taken
together with other events, occurrences and developments
with respect to such business, has had or would reasonably
be expected to have a material adverse effect on the
business, operations or financial condition of MFC and the
Subsidiaries, taken as a whole, or the ability of MFC to
consummate the transactions contemplated hereby.
3.11. Absence of Certain Developments. Except as set
forth in the Latest Balance Sheets and the Related
Statements or on Schedule 3.11, unless otherwise expressly
contemplated or permitted by this Agreement, since May 31,
1994, neither MFC nor any of the Subsidiaries has:
(a) issued or sold any of its equity securities,
securities convertible into or exchangeable for its equity
securities, warrants, options or other rights to acquire its
equity securities, or any bonds or other securities, except
(i) deposit and other bank obligations in the ordinary
course of business and (ii) pursuant to the exercise of
<PAGE>
stock options and warrants issued under, or otherwise
pursuant to, the agreements, arrangements or commitments
identified on Schedule 3.3;
(b) redeemed, purchased, acquired or offered to
acquire, directly or indirectly, any shares of capital stock
of MFC or any of the Subsidiaries or other securities of MFC
or any of the Subsidiaries, except pursuant to the exercise
of stock options and warrants issued under, or otherwise
pursuant to, the agreements, arrangements or commitments
identified on Schedule 3.3;
(c) split, combined or reclassified any outstanding
shares of capital stock of MFC or any of the Subsidiaries,
or declared, set aside or paid any dividends or other
distribution payable in cash, property or otherwise with
respect to any shares of capital stock of MFC or any of the
Subsidiaries or other securities, except (i) dividends paid
in cash by the Subsidiaries which are wholly owned by MFC to
MFC, or to another wholly owned Subsidiary of MFC, (ii) the
regular quarterly cash dividends paid on the MFC Common
Stock in an amount not to exceed $.20 per share and
(iii) the regular dividends paid in accordance with the
terms of the MFC Preferred Stock;
(d) borrowed any amount or incurred or become subject
to any material liability, except liabilities incurred in
the ordinary course of business, but in no event has MFC or
any of the Subsidiaries entered into any long-term
borrowings with terms of greater than one year, other than
(i) as set forth in Schedule 3.27 and (ii) borrowings for
the purpose of interest rate risk management with maturities
of less than three years in an aggregate amount not
exceeding $150,000,000 and any related derivative
transactions, without prior consultation with FBS;
(e) discharged or satisfied any material lien or
encumbrance on the properties or assets of MFC or any of the
Subsidiaries or paid any material liability other than in
the ordinary course of business, other than reverse
repurchase agreements or Federal Home Loan Bank borrowings;
(f) sold, assigned, transferred, mortgaged, pledged or
subjected to any lien or other encumbrance any of its assets
with an aggregate market value in excess of $50,000 except
(A) in the ordinary course of business, including real
estate acquired through foreclosure or deed in lieu of
foreclosure ("REO"), (B) liens and encumbrances for
current property taxes not yet due and payable and (C) liens
and encumbrances which do not materially affect the value
of, or interfere with the past or future use or ability to
convey, the property subject thereto or affected thereby;
(g) canceled any material debts or claims or waived
any rights of material value, except in the ordinary course
of business or upon payment in full;
(h) suffered any theft, damage, destruction or loss of
or to any property or properties owned or used by it,
whether or not covered by insurance, which would,
individually or in the aggregate, have a material adverse
effect on the business, operations or financial condition of
MFC and the Subsidiaries, taken as a whole;
<PAGE>
(i) made or granted any bonus or any wage, salary or
compensation increase or severance or termination payment
to, or promoted, any director, officer, employee, group of
employees or consultant, entered into any employment
contract or hired any employee with an employee
classification above grade "G" (as such classifications
have been described by MFC to FBS) other than (A) bonuses,
compensation increases, promotions or new hires in the
ordinary course and in a manner consistent with past
practices as previously disclosed to FBS and (B) bonuses
payable on the Effective Date as a result of the Merger
under the Change in Control Plans (as defined in
Section 5.12(d));
(j) made or granted any increase in the benefits
payable under any employee benefit plan or arrangement,
amended or terminated any existing employee benefit plan or
arrangement or adopted any new employee benefit plan or
arrangement (except as required by law and, with respect to
any such action taken prior to the date hereof, disclosed on
Schedule 3.11);
(k) made any single or group of related capital
expenditures or commitment therefor in excess of $50,000 or
entered into any lease or group of related leases with the
same party which involves aggregate lease payments payable
of more than $100,000 for any individual lease or involves
more than $100,000 for any group of related leases in the
aggregate;
(l) acquired (by merger, exchange, consolidation,
acquisition of stock or assets or otherwise) any
corporation, partnership, joint venture or other business
organization or division or material assets thereof, or
assets or deposits that are material to MFC, except in
exchange for debt previously contracted, including REO;
(m) taken any other action or entered into any other
transaction other than in the ordinary course of business;
or
(n) agreed to do any of the foregoing.
3.12. Properties.
(a) Each of MFC and the Subsidiaries owns good and
marketable title to all of the real property and all of the
personal property, fixtures, furniture and equipment
reflected on the Latest Balance Sheets or acquired since the
date thereof (other than real property reflected on the
Latest Balance Sheets as REO), free and clear of all liens
and encumbrances, except for (i) mortgages on real property
set forth on Schedule 3.12(a), (ii) encumbrances which do
not materially affect the value of, or interfere with the
past or future use or ability to convey, the property
subject thereto or affected thereby, (iii) liens for current
taxes and special assessments not yet due and payable,
(iv) leasehold estates with respect to multi-tenant
buildings owned by MFC or any of the Subsidiaries, which
leases are identified on Schedule 3.12(a), and (v) property
disposed of since the date of the Latest Balance Sheets in
the ordinary course of business.
<PAGE>
(b) Schedule 3.12(b) correctly sets forth a brief
description, including the term, of each lease for real or
personal property to which MFC or any of the Subsidiaries is
a party as lessee with respect to (i) each individual lease
which involves a remaining aggregate balance of lease
payments payable of more than $100,000 or any group of
related leases which involves a remaining aggregate balance
of lease payments payable of more than $100,000, (ii) each
lease which is a "material contract" within the meaning of
Item 601(b)(10) of Regulation S-K promulgated by the SEC or
(iii) each lease which was not entered into in the ordinary
course of business. MFC has delivered or made available to
FBS complete and accurate copies of each of the leases
described on Schedules 3.12(a) and 3.12(b), and none of such
leases has been modified in any material respect, except to
the extent that such modifications are disclosed by the
copies delivered to FBS. The leases described on
Schedules 3.12(a) and 3.12(b) are in full force and effect.
MFC or one of the Subsidiaries (if lessee under such lease)
has a valid and existing leasehold interest under each lease
described on Schedule 3.12(b) for the term set forth
therein. With respect to the leases described on
Schedule 3.12(b), neither MFC nor any of the Subsidiaries is
in default, nor, to the best knowledge of MFC and the
Subsidiaries, are any of the other parties to any of such
leases in default, and, to the best knowledge of MFC and the
Subsidiaries, no circumstances (not in the control of MFC
and the Subsidiaries) exist which could result in such a
default under any of such leases. To the best knowledge of
MFC and the Subsidiaries, there has been no cancellation,
breach or anticipated breach by any other party to any lease
described on Schedule 3.12(a) or 3.12(b). The rent rolls
set forth on Schedules 3.12(a) and 3.12(b) are true and
complete in all material respects and describe all
occupancies and the material terms of each occupancy.
(c) Except as set forth in Schedule 3.12(c), all of
the buildings, fixtures, furniture and equipment necessary
for the conduct of the business of MFC and each of the
Subsidiaries are in good condition and repair, ordinary wear
and tear excepted, and are usable in the ordinary course of
business. Each of MFC and the Subsidiaries owns, or leases
under valid leases, all buildings, fixtures, furniture,
personal property, land improvements and equipment necessary
for the conduct of its business as it is presently being
conducted.
(d) Except as set forth in Schedules 3.12(d) and
3.12(e), neither MFC nor any of the Subsidiaries nor any of
the buildings owned or leased by MFC or any of the
Subsidiaries is in violation of any applicable zoning
ordinance or other law, regulation or requirement relating
to the operation of any properties used in the operation of
its business, including, without limitation, applicable
environmental protection laws and regulations, which
violations would, individually or in the aggregate, have a
material adverse effect on the business, operations or
financial condition of MFC and the Subsidiaries taken as a
whole; and neither MFC nor any of the Subsidiaries has
received any notice of any such violation, or of the
existence of any condemnation proceeding with respect to any
properties owned or leased by MFC or any of the
Subsidiaries. Except as set forth in Schedule 3.12(d), no
hazardous substances, hazardous wastes, pollutants or
<PAGE>
contaminants have been deposited or disposed of in, on or
under MFC's or any of the Subsidiaries' owned or leased
properties (including properties owned, managed or
controlled by the Bank in connection with its lending or
fiduciary operations) during the period in which MFC or any
of the Subsidiaries has owned, occupied, managed, controlled
or operated such properties, except to the extent not
material to the business, operations or financial conditions
of MFC and the Subsidiaries, taken as a whole. To the best
knowledge of MFC and the Subsidiaries, no prior owners,
occupants or operators of all or any part of MFC's or any of
the Subsidiaries' owned or leased properties (including
properties owned, managed or controlled by the Bank in
connection with its lending or fiduciary operations) ever
used such properties as a dump or gasoline service station,
or deposited, disposed of or allowed to be deposited or
disposed of in, on or under such properties any hazardous
substances, hazardous wastes, pollutants or contaminants,
except to the extent not material to the business,
operations or financial conditions of MFC and the
Subsidiaries, taken as a whole. No asbestos or any material
amount of ureaformaldehyde materials exists in or on any of
MFC's or the Subsidiaries' owned or leased properties
(including properties owned, managed or controlled by the
Bank in connection with its lending or fiduciary
operations), and no electrical transformers or capacitors,
other than those owned by public utility companies, on such
properties contain any PCBs. The representations contained
in this Section 3.12(d) are not applicable to properties
securing loans made by the Bank where the loans were made in
the ordinary course of business and are fully performing in
accordance with their terms.
(e) Except as set forth in Schedule 3.12(e), there are
no aboveground or underground tanks (excluding hot water
storage or propane tanks) located under, in or about, nor,
to the best knowledge of MFC and the Subsidiaries, have
there ever been any such tanks located under, in or about,
any of MFC's or any of the Subsidiaries' owned or leased
properties (including properties owned, managed or
controlled by the Bank in connection with its lending or
fiduciary operations).
3.13. Tax Matters. Each of MFC, the Subsidiaries and
all members of any consolidated, affiliated, combined or
unitary group of which MFC or any of the Subsidiaries is a
member have filed or will file all Tax (as hereinafter
defined) and Tax information returns or reports required to
be filed (taking into account permissible extensions) by
them on or prior to the Effective Date, and have paid (or
have accrued or will accrue, prior to the Effective Date,
amounts for the payment of) all Taxes relating to the time
periods covered by such returns and reports. The accrued
taxes payable accounts for Taxes and provision for deferred
income taxes, specifically identified as such, on the Latest
Balance Sheets are sufficient for the payment of all unpaid
Taxes of MFC and the Subsidiaries accrued for or applicable
to all periods ended on or prior to the date of the Latest
Balance Sheet or which may subsequently be determined to be
owing with respect to any such period. Except as disclosed
on Schedule 3.13, neither MFC nor any of the Subsidiaries
has waived any statute of limitations with respect to Taxes
or agreed to any extension of time with respect to an
assessment or deficiency for Taxes. Each of MFC and the
Subsidiaries has paid or will pay in a timely manner and as
<PAGE>
required by law all Taxes due and payable by it or which it
is obligated to withhold from amounts owing to any employee
or third party. All Taxes which will be due and payable,
whether now or hereafter, for any period ending on, prior to
or including the Effective Date shall have been paid by or
on behalf of MFC and the Subsidiaries or shall be reflected
on the books of MFC and the Subsidiaries as an accrued Tax
liability determined in a manner which is consistent with
past practices and the Latest Balance Sheets. No Tax
returns of MFC or the Subsidiaries have been audited by any
governmental authority other than as disclosed on
Schedule 3.13; and, except as set forth on Schedule 3.13,
there are no unresolved questions, claims or disputes
asserted by any relevant taxing authority concerning the
liability for Taxes of MFC or any of the Subsidiaries.
Neither MFC nor any of the Subsidiaries has made an election
under Section 341(f) of the Code for any taxable years not
yet closed for statute of limitations purposes. No demand
or claim has been made against MFC or any of the
Subsidiaries with respect to any Taxes arising out of
membership or participation in any consolidated, affiliated,
combined or unitary group of which MFC or any of its
Subsidiaries was at any time a member. For purposes of this
Agreement, the term "Tax" shall mean any federal, state,
local or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium,
property or windfall profits tax, environmental tax, customs
duty, capital stock, franchise, employees' income
withholding, foreign or domestic withholding, social
security, unemployment, disability, workers' compensation,
employment-related insurance, real property, personal
property, sales, use, transfer, value added, alternative or
add-on minimum or other tax, fee, assessment or charge of
any kind whatsoever, including any interest, penalties or
additions to, or additional amounts in respect of the
foregoing, for each of MFC, the Subsidiaries and all members
of any consolidated, affiliated, combined or unitary group
of which MFC or any of the Subsidiaries is a member.
3.14. Contracts and Commitments.
(a) Except as set forth on Schedule 3.14, neither MFC
nor any of the Subsidiaries (i) is a party to any collective
bargaining agreement or contract with any labor union,
(ii) is a party to any written or oral contract for the
employment of any officer, individual employee or other
person on a full-time or consulting basis, or relating to
severance pay for any such person, (iii) is a party to any
written or oral agreement or understanding to repurchase
assets previously sold (or to indemnify or otherwise
compensate the purchaser in respect of such assets), except
for securities sold under a repurchase agreement providing
for a repurchase date 30 days or less after the purchase
date, (iv) is a party to any (A) contract or group of
related contracts with the same party for the purchase or
sale of products or services, under which the undelivered
balance of such products and services has a purchase price
in excess of $100,000 for any individual contract or
$100,000 for any group of related contracts in the
aggregate, (B) other contract which is a "material
contract" within the meaning of Item 601(b)(10) of
Regulation S-K promulgated by the SEC, or (C) other
agreement which is not entered into in the ordinary course
of business and which is not disclosed on Schedules 3.12(a)
or 3.12(b), or (v) has any commitments for capital
expenditures in excess of $50,000.
<PAGE>
(b) Except as disclosed on Schedule 3.14, (i) to the
best knowledge of MFC and the Subsidiaries, since the date
of the Latest Balance Sheets, no customer has indicated that
it will stop or decrease the rate of business done with MFC
or any of the Subsidiaries (except for changes in the
ordinary course of such business) that would, individually
or in the aggregate, have a material adverse effect on the
business, operations or financial condition of MFC and the
Subsidiaries, taken as a whole; (ii) each of MFC and the
Subsidiaries have performed all obligations required to be
performed by it prior to the date hereof in connection with
the contracts or commitments set forth on Schedule 3.14, and
none of MFC or any of the Subsidiaries is in receipt of any
claim of default under any contract or commitment set forth
on Schedule 3.14, except for any failures to perform,
breaches or defaults which would not, individually or in the
aggregate, have a material adverse effect on the business,
operations or financial condition of MFC and the
Subsidiaries taken as a whole; (iii) none of MFC or any of
the Subsidiaries has any present expectation or intention of
not fully performing any material obligation pursuant to any
contract or commitment set forth on Schedule 3.14; and
(iv) to the best knowledge of MFC and the Subsidiaries,
there has been no cancellation, breach or anticipated breach
by any other party to any contract or commitment set forth
on Schedule 3.14, except for any cancellation, breach or
anticipated breach which would not, individually or in the
aggregate, have a material adverse effect on the business,
operations or financial condition of MFC and the
Subsidiaries, taken as a whole.
3.15. Litigation. Except as set forth on
Schedule 3.15, there are no actions, suits, proceedings,
orders or investigations pending or, to the best knowledge
of MFC and the Subsidiaries, threatened against MFC or any
of the Subsidiaries, at law or in equity, or before or by
any federal, state or other governmental department,
commission, board, bureau, agency or instrumentality,
domestic or foreign, except for such actions, suits,
proceedings, orders or investigations which are not
reasonably likely to result in losses or expenses in excess
of $50,000. Except as set forth on Schedule 3.15, none of
the matters set forth on such Schedule, individually or in
the aggregate, will have or could reasonably be expected to
have a material adverse effect on the business, operations
or financial condition of MFC and the Subsidiaries, taken as
a whole.
3.16. No Brokers or Finders. Except as disclosed on
Schedule 3.16, there are no claims for brokerage
commissions, finders' fees, investment advisory fees or
similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement,
understanding, commitment or agreement made by or on behalf
of MFC or any of the Subsidiaries.
3.17. Employees. Except as set forth on Schedule
3.17, none of MFC's Chairman, Chief Administrative Officer,
Chief Financial Officer or Senior Vice President, Human
Resources, has any knowledge (without inquiry) of the
announced or anticipated resignation of (i) any officer of
MFC or any of the Subsidiaries or (ii) other employees at a
rate substantially higher than the historical resignation
rate for such employees of MFC or the Subsidiaries. Except
as set forth on Schedule 3.17, MFC and each of the
Subsidiaries has complied with all laws relating to the
<PAGE>
employment of labor, including provisions thereof relating
to wages, hours, equal opportunity, collective bargaining,
non-discrimination and the payment of social security and
other taxes, except where failure to so comply would not,
individually or in the aggregate, have a material adverse
effect on the business, operations or financial condition of
MFC and the Subsidiaries, taken as a whole.
3.18. Employee Benefit Plans.
(a) Definitions. For the purposes of this
Section 3.18, unless the context clearly requires otherwise,
the term "Plan" or "Plans" includes all employee benefit
plans as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and all
other benefit arrangements (including, without limitation,
any employment agreement or any program, agreement, policy
or commitment providing for insurance coverage of employees,
workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement
benefits, life, health, disability or accidental benefits)
applicable to the employees of MFC or any of the
Subsidiaries, to which MFC or any of the Subsidiaries
contribute, or which MFC or any of the Subsidiaries have
committed to implement for their employees prior to the date
of this Agreement. Unless the context clearly requires
otherwise, "Plan" or "Plans" shall also include any
similar program or arrangement maintained by any
organization affiliated by ownership with MFC or any of the
Subsidiaries for which MFC or any of the Subsidiaries are or
could be completely or partially liable for the funding or
the administration either as a matter of law or by agreement
but excluding customers of the trust departments of
affiliates of MFC where there is no ownership affiliation
between such customers and MFC.
(b) Except as disclosed on Schedule 3.18:
(i) Full Disclosure of All Plans. With respect
to all employees and former employees of MFC and the
Subsidiaries (and all dependents and beneficiaries of such
employees and former employees):
(A) Neither MFC nor any of the Subsidiaries
maintain or contribute to any nonqualified
deferred compensation or retirement plans,
contracts or arrangements;
(B) Neither MFC nor any of the Subsidiaries
maintain or contribute to any qualified defined
contribution plans (as defined in Section 3(34) of
ERISA or Section 414(i) of the Code);
(C) Neither MFC nor any of the Subsidiaries
maintain or contribute to any qualified defined
benefit plans (as defined in Section 3(35) of
ERISA or Section 414(j) of the Code) ("Defined
Benefit Plans"); and
<PAGE>
(D) Neither MFC nor any of the Subsidiaries
maintain or contribute to any employee welfare
benefit plans (as defined in Section 3(1) of
ERISA).
(ii) Funding. With respect to the Plans, (A) all
required contributions which are due have either been made
or properly accrued and (B) neither MFC nor any of the
Subsidiaries is liable for any "accumulated funding
deficiency" as that term is defined in Section 412 of the
Code or any penalty or excise tax in connection therewith.
(iii) Plan Documents. With respect to all Plans
sponsored or administered by MFC or any Subsidiary and with
respect to any other Plan if available to MFC or any
Subsidiary, MFC has furnished FBS with true and complete
copies of (A) the most recent determination letter, if any,
received by MFC or any of the Subsidiaries from the Internal
Revenue Service regarding each qualified Plan, (B) the
Form 5500 and all Schedules and accompanying financial
statements, if any, for each Plan for which such form is
required to be filed for the three most recent fiscal Plan
years, (C) the most recently prepared actuarial valuation
report, if any, for each Plan, and (D) copies of the current
Plan documents, trust agreements, insurance contracts and
all related contracts and documents (including any material
employee communications) with respect to each Plan.
(iv) Defined Benefit Plans. Neither MFC nor any of
the Subsidiaries nor any affiliate of MFC or any of the
Subsidiaries maintains or has maintained any Defined Benefit
Plans for which MFC, any of the Subsidiaries or FBS have or
will have any liability or, which if terminated, could
result in any liability to MFC, the Subsidiaries or FBS
under Title IV of ERISA. There are no unfunded vested
liabilities (determined using the assumptions used by the
Plan for funding and without regard to future salary
increases) with respect to Defined Benefit Plans sponsored
by MFC or any Subsidiary. There have been no reportable
events under Section 4043 of ERISA (with respect to which
the 30-day notice requirement has not been waived by
regulation) with respect to any Defined Benefit Plan
maintained by MFC or any of the Subsidiaries. No Defined
Benefit Plan has been terminated that will result in a
material liability by MFC or any of the Subsidiaries to the
Pension Benefit Guaranty Corporation.
(v) Multiemployer Plans. Neither MFC nor any of the
Subsidiaries has any actual or potential liabilities under
Sections 4201 or 4205 of ERISA for any complete or partial
withdrawal from any multiemployer plan.
(vi) Fiduciary Breach; Claims. Neither MFC nor any of
the Subsidiaries nor any of its directors, officers,
employees or other "fiduciaries" (as such term is defined
in Section 3(21) of ERISA) has committed any breach of
fiduciary duty imposed by ERISA or any other applicable law
with respect to the Plans which would subject MFC or any of
the Subsidiaries, directly or indirectly, to any liability
<PAGE>
under ERISA or any applicable law. There are no actions,
suits or claims pending against MFC or any Subsidiary
relating to benefits other than routine, uncontested claims
for benefits.
(vii) Prohibited Transaction. Neither MFC nor any of
the Subsidiaries nor any officer, director, employee, agent
or fiduciary of any Plan has incurred any liability for any
civil penalty imposed by Section 4975 of the Code or
Section 502(i) of ERISA.
(viii) Material Compliance With Law. All Plans have
been consistently administered in accordance with their
terms in all material respects. To the extent required
either as a matter of law or to obtain the intended tax
treatment and tax benefits, all Plans comply in all material
respects with the requirements of ERISA and the Code. All
Tax information returns or reports and all other required
filings, disclosures and contributions have been made with
respect to all Plans. No condition exists that limits the
right of MFC or any of the Subsidiaries to amend or
terminate any such Plan (except as provided in such Plans or
limited under ERISA or the Code).
(ix) VEBA Funding. No Plan is funded in whole or in
part through a voluntary employees' beneficiary association
exempt from tax under Section 501(c)(9) of the Code. The
limitations under Sections 419 and 419A of the Code have
been computed, all unrelated business income tax returns
have been filed and appropriate adjustments have been made
on all other Tax returns.
(x) Retirement and COBRA Benefits. Neither MFC nor
any of the Subsidiaries have actual or potential liability
under current law for benefits after separation from
employment other than (i) benefits under Plans described in
clauses (A), (B) or (C) of Section 3.18(b)(i), and
(ii) health care continuation benefits described in
Section 4980B of the Code or Part G of Subtitle B of Title I
of ERISA or any comparable provisions under the laws of any
state.
(xi) Collective Bargaining. No Plan is maintained in
whole or in part pursuant to collective bargaining.
(xii) Employee Status. No employee of MFC or any of
the Subsidiaries is absent due to (A) a disability that
currently entitles the employee to benefits under any long-
term disability plan sponsored by MFC or any of the
Subsidiaries or (B) military service leave of absence. All
employees of MFC or any of the Subsidiaries are "at will"
employees.
(xiii) Parachute Payments. No Plan requires or would
result, separately or in the aggregate, in the payment of
any "excess parachute payments" within the meaning of
Section 280G of the Code, and the consummation of the
transactions contemplated by this Agreement will not be a
<PAGE>
factor in causing payments to be made by FBS, MFC or any of
the Subsidiaries that are not deductible (in whole or in
part) under Section 280G of the Code.
3.19. Insurance. Schedule 3.19 hereto lists each
insurance policy maintained by MFC or any of the
Subsidiaries with respect to its properties and assets.
Prior to the date hereof, MFC has delivered to FBS complete
and accurate copies of each of the insurance policies
described on Schedule 3.19. All such insurance policies are
in full force and effect, and neither MFC nor any of the
Subsidiaries is in default with respect to its obligations
under any of such insurance policies.
3.20. Affiliate Transactions. Except as set forth on
Schedule 3.20, neither MFC nor any of the Subsidiaries, nor
any executive officer or director of MFC or any of the
Subsidiaries, nor any member of the immediate family of any
such officer or director (which for the purposes hereof
shall mean a spouse, minor child or adult child living at
the home of any such officer or director), nor any entity
which any of such persons "controls" (within the meaning
of Regulation O of the FRB), has any loan agreement, note or
borrowing arrangement or any other agreement with MFC or any
of the Subsidiaries (other than normal employment
arrangements) or any interest in any property, real,
personal or mixed, tangible or intangible, used in or
pertaining to the business of MFC or any of the
Subsidiaries.
3.21. Compliance with Laws; Permits. Each of MFC and
the Subsidiaries has complied in all respects with all
applicable laws and regulations of foreign, federal, state
and local governments and all agencies thereof which affect
the business or any owned or leased properties of MFC or any
of the Subsidiaries and to which MFC or any of the
Subsidiaries may be subject (including, without limitation,
the Occupational Safety and Health Act of 1970, the HOLA,
the FDIA, the Real Estate Settlement Procedures Act, the
Home Mortgage Disclosure Act of 1975, the Fair Housing Act,
the Equal Credit Opportunity Act and the Federal Reserve
Act, each as amended, and any other state or federal acts
(including rules and regulations thereunder) regulating or
otherwise affecting employee health and safety or the
environment), except where failure to so comply would not,
individually or in the aggregate, have a material adverse
effect on the business, operations or financial condition of
MFC and the Subsidiaries, taken as a whole, or MFC's ability
to consummate the transactions contemplated hereby; and no
claims have been filed by any such governments or agencies
against MFC or any of the Subsidiaries alleging such a
violation of any such law or regulation which have not been
resolved to the satisfaction of such governments or
agencies. Each of MFC and the Subsidiaries holds all of the
permits, licenses, certificates and other authorizations of
foreign, federal, state and local governmental agencies
required for the conduct of its business, except where
failure to obtain such authorizations would not,
individually or in the aggregate, have a material adverse
effect on the business, operations or financial condition of
MFC and the Subsidiaries, taken as whole, or the ability of
MFC to consummate the transactions contemplated hereby.
Except as disclosed in Schedule 3.21, neither MFC nor any of
<PAGE>
the Subsidiaries is subject to any cease and desist order,
written agreement or memorandum of understanding with, or is
a party to any commitment letter or similar undertaking to,
or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory agreement letter
from, or has adopted any board resolutions at the request
of, federal or state governmental authorities charged with
the supervision or regulation of savings banks, banks,
savings and loan holding companies or bank holding companies
or engaged in the insurance of bank deposits (collectively,
the "Bank Regulators"), nor have any of MFC or any of the
Subsidiaries been advised by any Bank Regulator that it is
contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order,
directive, written agreement, memorandum of understanding,
extraordinary supervisory letter, commitment letter, board
resolutions or similar undertaking. Neither MFC nor any
Subsidiary is subject to Section 32 of the Federal Deposit
Insurance Act.
3.22. Administration of Fiduciary Accounts. Each
Subsidiary has properly administered, in all respects
material and which could reasonably be expected to be
material to the business, operations or financial condition
of MFC and the Subsidiaries, taken as a whole, all accounts
for which it acts as a fiduciary, including but not limited
to accounts for which it serves as a trustee, agent,
custodian, personal representative, guardian, conservator or
investment advisor, in accordance with the terms of the
governing documents and applicable state and federal law and
regulation and common law. Neither MFC, any Subsidiary, nor
any director, officer or employee of MFC or any Subsidiary
has committed any breach of trust with respect to any such
fiduciary account which is material to or could reasonably
be expected to be material to the business, operations or
financial condition of MFC and the Subsidiaries, taken as a
whole, and the accountings for each such fiduciary account
are true and correct in all material respects and accurately
reflect the assets of such fiduciary account in all material
respects.
3.23. Disclosure. The representations and warranties
of MFC contained in this Agreement are true and correct in
all material respects, and such representations and
warranties do not omit any material fact necessary to make
the statements contained therein, in light of the
circumstances under which they were made, not misleading.
There is no fact known to MFC and the Subsidiaries which has
not been disclosed to FBS pursuant to this Agreement, the
Schedules hereto and the MFC 10-K Reports and the MFC 10-Q
Report, all taken together as a whole, which would have or
would reasonably be expected to have a material adverse
effect on the business, operations or financial condition of
MFC and the Subsidiaries, taken as a whole, or the ability
of MFC to consummate the transactions contemplated hereby.
3.24. Prospectus/Proxy Statement. At the time the
Prospectus/Proxy Statement is mailed to the shareholders of
FBS and MFC in order to obtain approvals referred to in
Section 5.9(a) and at all times subsequent to such mailing
up to and including the times of such approvals, such
Prospectus/Proxy Statement (including any supplements
thereto), with respect to all information set forth therein
relating to MFC (including the Subsidiaries) and its
shareholders, MFC Common Stock, this Agreement, the Merger
<PAGE>
and all other transactions contemplated hereby, will
(a) comply in all material respects with applicable
provisions of the 1933 Act and the 1934 Act, and (b) not
contain any untrue statement of material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements contained therein, in light
of the circumstances under which they are made, not
misleading.
3.25. Pooling of Interests. Neither MFC nor any of
the Subsidiaries has taken or agreed to take any action
which would disqualify the Merger as a "pooling of
interests" for accounting purposes.
3.26. Regulatory Approvals. As of the date hereof,
MFC is not aware of any reason that the regulatory approvals
specified in Section 5.1 would not be obtained.
3.27. Interest Rate Risk Management Instruments.
(a) Schedule 3.27 sets forth a true, correct and
complete list of all interest rate swaps, caps, floors and
option agreements and other interest rate risk management
arrangements to which MFC or any of the Subsidiaries is a
party or by which any of their properties or assets may be
bound. MFC has delivered or made available to FBS true,
correct and complete copies of all such interest rate risk
management agreements and arrangements.
(b) All interest rate swaps, caps, floors and option
agreements and other interest rate risk management
arrangements to which MFC or any of the Subsidiaries is a
party or by which any of their properties or assets may be
bound were entered into in the ordinary course of business
and, to MFC's knowledge, in accordance with prudent banking
practice and applicable rules, regulations and policies of
the Bank Regulators and with counterparties believed to be
financially responsible at the time and are legal, valid and
binding obligations enforceable in accordance with their
terms (except as may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the
rights of creditors generally and the availability of
equitable remedies), and are in full force and effect. MFC
and each of the Subsidiaries has duly performed in all
material respects all of its obligations thereunder to the
extent that such obligations to perform have accrued; and to
MFC's knowledge, there are no breaches, violations or
defaults or allegations or assertions of such by any party
thereunder.
ARTICLE 4
CONDUCT OF BUSINESS PENDING THE MERGER
4.1. Conduct of Business. From the date of this
Agreement to the Effective Date, unless FBS shall otherwise
agree in writing or as otherwise expressly contemplated or
permitted by other provisions of this Agreement, including
this Section 4.1:
<PAGE>
(a) the business of MFC and each of the Subsidiaries
shall be conducted only in, and neither MFC nor any of the
Subsidiaries shall take any action except in, the ordinary
course, on an arms-length basis and in accordance, in all
material respects, with all applicable laws, rules and
regulations and past practices;
(b) neither MFC nor any of the Subsidiaries shall,
directly or indirectly, (i) amend or propose to amend its
Charter or Bylaws; (ii) issue or sell any of its equity
securities, securities convertible into or exchangeable for
its equity securities, warrants, options or other rights to
acquire its equity securities, or any bonds or other
securities, except (A) deposit and other bank obligations in
the ordinary course of business and (B) pursuant to the
exercise of the options, warrants, conversion privileges and
other rights set forth on Schedule 3.3 on the date of this
Agreement; (iii) redeem, purchase, acquire or offer to
acquire, directly or indirectly, any shares of capital stock
of MFC or any of the Subsidiaries or other securities of MFC
or of any of the Subsidiaries, except pursuant to the
agreements, arrangements or commitments identified on
Schedule 3.3; (iv) split, combine or reclassify any
outstanding shares of capital stock of MFC or any of the
Subsidiaries, or declare, set aside or pay any dividend or
other distribution payable in cash, property or otherwise
with respect to shares of capital stock of MFC or any of the
Subsidiaries except (A) dividends paid in cash by the
Subsidiaries which are wholly owned by MFC to MFC, or
another wholly owned Subsidiary of MFC, (B) the regular
quarterly cash dividends paid on the MFC Common Stock in an
amount not to exceed $.20 per share, and (C) the regular
dividends paid in accordance with the terms of the MFC
Preferred Stock; (v) borrow any amount or incur or become
subject to any material liability, except liabilities
incurred in the ordinary course of business, but in no event
will MFC or any of the Subsidiaries enter into any long-term
borrowings with a term of greater than one year, other than
(i) as set forth on Schedule 3.27 and (ii) borrowings for
the purpose of interest rate risk management with maturities
of less than three years in an aggregate amount not
exceeding $150,000,000 and any related derivative
transactions, without prior consultation with FBS;
(vi) discharge or satisfy any material lien or encumbrance
on the properties or assets of MFC or any of the
Subsidiaries or pay any material liability, except in the
ordinary course of business, other than reverse repurchase
agreements or Federal Home Loan Bank borrowings; (vii) sell,
assign, transfer, mortgage, pledge or subject to any lien or
other encumberance any of its assets with an aggregate
market value in excess of $50,000, except (x) in the
ordinary course of business, including REO, (y) liens and
encumbrances for current property taxes not yet due and
payable and (z) liens and encumbrances which do not
materially affect the value of, or interfere with the past
or future use or ability to convey, the property subject
thereto or affected thereby; (viii) cancel any material debt
or claims or waive any rights of material value, except in
the ordinary course of business; (ix) acquire (by merger,
exchange, consolidation, acquisition of stock or assets or
otherwise) any corporation, partnership, joint venture or
other business organization or division or material assets
thereof, or assets or deposits that are material to MFC,
except in exchange for debt previously contracted, including
REO; (x) other than as set forth on Schedule 3.11 on the
date of this Agreement, make any single or group of related
capital expenditures or commitments therefor in excess of
$50,000 or enter into any lease or group of related leases
<PAGE>
with the same party which involves aggregate lease payments
payable of more than $100,000 for any individual lease or
involves more than $100,000 for any group of related leases
in the aggregate; or (xi) enter into or propose to enter
into, or modify or propose to modify, any agreement,
arrangement or understanding with respect to any of the
matters set forth in this Section 4.l(b);
(c) neither MFC nor any of the Subsidiaries shall,
directly or indirectly, enter into or modify any employment,
severance or similar agreements or arrangements with, or
grant any bonuses, wage, salary or compensation increases,
or severance or termination pay to, or promote, any
director, officer, employee, group of employees or
consultant or hire any employee with an employee
classification above grade "G" (as such classifications
have been described by MFC to FBS), other than (i) bonuses,
increases, promotions or new hires in the ordinary course
and in a manner consistent with past practices as previously
disclosed to FBS, (ii) bonuses payable on the Effective Date
as a result of the Merger under the Change in Control Plans
and (iii) retention bonuses in an aggregate amount not to
exceed $300,000 and as to which the identity of the
recipient and amount of each such bonus will be previously
agreed upon by FBS and MFC;
(d) neither MFC nor any of the Subsidiaries shall
adopt or amend any bonus, profit sharing, stock option,
pension, retirement, deferred compensation, or other
employee benefit plan, trust, fund, contract or arrangement
for the benefit or welfare of any employees, except as
required by law;
(e) each of MFC and the Subsidiaries shall use
reasonable efforts to cause its current insurance policies
not to be canceled or terminated or any of the coverage
thereunder to lapse, unless simultaneously with such
termination, cancellation or lapse, replacement policies
providing coverage substantially equal to the coverage under
the canceled, terminated or lapsed policies are in full
force and effect;
(f) neither MFC nor any of the Subsidiaries shall
enter into any settlement or similar agreement with respect
to, or take any other significant action with respect to the
conduct of, any action, suit, proceeding, order or
investigation which is set forth on Schedule 3.15 or to
which MFC or any of the Subsidiaries becomes a party after
the date of this Agreement, without prior consultation with
FBS, provided that neither MFC nor any of the Subsidiaries
shall take any such action with respect to the litigation
matters identified as "Edina Realty Litigation Matters" on
Schedule 3.15 (the "Edina Realty Litigation Matters"),
without the prior written consent of FBS;
(g) each of MFC and the Subsidiaries shall use
commercially reasonable efforts to preserve intact in all
material respects the business organization and the goodwill
of each of MFC and the Subsidiaries and to keep available
the services of its officers and employees as a group and
preserve intact material agreements, and MFC shall confer on
a regular and frequent basis with representatives of FBS, as
reasonably requested by FBS, to report on operational
matters and the general status of ongoing operations;
<PAGE>
(h) neither MFC nor any of the Subsidiaries shall take
any action with respect to investment securities held or
controlled by any of them inconsistent with past practices,
alter its investment portfolio duration policy as heretofore
in effect or, without prior consultation with FBS, take any
action that would have or could reasonably be expected to
have a material effect on the Bank's asset/liability
position;
(I) the Bank shall not make any agreements or
commitments binding it to extend credit in the amount per
"one borrower" (as previously defined) in excess of
$1,000,000 nor will it purchase any portfolio of loans with
an aggregate principal balance in excess of $100,000,000
without prior consultation with FBS;
(j) with respect to properties leased by MFC or any of
the Subsidiaries, neither MFC nor any of the Subsidiaries
shall renew, exercise an option to extend, cancel or
surrender any lease of real property nor allow any such
lease to lapse, without prior consultation with FBS (other
than leases with remaining terms of six months or less); and
(k) neither MFC nor any of the Subsidiaries shall
agree to do any of the foregoing;
provided, however, that in the event MFC and the
Subsidiaries would be prohibited from taking any action by
reason of this Section 4.1 without the prior written consent
of FBS, such action may nevertheless be taken if MFC or any
of the Subsidiaries is expressly required to do so by law or
by the OTS and MFC informs FBS of such prohibition or
restriction. For purposes of this Agreement, the words
"prior consultation" with respect to any action means
advance notice of such proposed action and a reasonable
opportunity to discuss such action in good faith prior
to taking such action.
ARTICLE 5
ADDITIONAL COVENANTS AND AGREEMENTS
5.1. Filings and Approvals. Each party will use all
reasonable efforts and will cooperate with the other party
in the preparation and filing, as soon as practicable, of
all applications or other documents required to obtain
regulatory approvals and consents from the FRB and the OTS,
filings under the HSR Act and any other applicable
regulatory authorities (including any applications with the
OTS or the Office of the Comptroller of the Currency deemed
by FBS to be necessary to allow it to consolidate the
operations of the Bank with the operations of FBS) and
provide copies of such applications, filings and related
correspondence to the other party. Prior to filing each
application, registration statement or other document with
the applicable regulatory authority, each party will provide
the other party with an opportunity to review and comment on
the nonconfidential portions of each such application,
registration statement or other document. Each party will
<PAGE>
use all reasonable efforts and will cooperate with the other
parties in taking any other actions necessary to obtain such
regulatory or other approvals and consents, including
participating in any required hearings or proceedings.
Subject to the terms and conditions herein provided, each
party will use all reasonable efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions
contemplated by this Agreement.
5.2. Certain Loans and Related Matters. MFC will
furnish to FBS a complete and accurate list as of the end of
each calendar month after May 1994, within 15 business days
after the end of each such calendar month, of (a) all of the
Bank's periodic internal credit quality reports prepared
during such calendar month (which reports will be prepared
in a manner consistent with past practices), (b) all loans
of the Bank classified as non-accrual, as restructured, as
90 days past due, as still accruing and doubtful of
collection or any comparable classification, (c) all REO,
including in-substance foreclosures and real estate in
judgment, (d) any current repurchase obligations of the Bank
with respect to any loans, loan participations or state or
municipal obligations or revenue bonds and (e) any standby
letters of credit issued by the Bank.
5.3. Monthly Financial Statements. MFC shall furnish
FBS with MFC's and each of the Subsidiaries' balance sheets
as of the end of each calendar month after June 1994 and the
related statements of income, within 15 business days after
the end of each such calendar month. Such financial
statements shall be prepared on a basis consistent with the
Latest Balance Sheets and the Related Statements and on a
consistent basis during the periods involved and shall
fairly present the financial positions of MFC and each of
the Subsidiaries as of the dates thereof and the results of
operations of MFC and each of the Subsidiaries for the
periods then ended.
5.4. Expenses. All costs and expenses incurred in
connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring
such costs and expenses.
5.5. No Negotiations, etc. MFC will not, and will
cause the Subsidiaries and MFC's and the Subsidiaries'
respective officers, directors, employees, agents and
affiliates, not to, directly or indirectly, solicit,
authorize, initiate or encourage submission of, any
proposal, offer, tender offer or exchange offer from any
person or entity (including any of its or their officers or
employees) relating to any liquidation, dissolution,
recapitalization, merger, consolidation or acquisition or
purchase of all or a material portion of the assets or
deposits of, or any equity interest in, MFC or any of the
Subsidiaries or other similar transaction or business
combination involving MFC or any of the Subsidiaries, or,
unless MFC shall have determined, after receipt of a written
opinion of counsel to MFC (a copy of which opinion shall be
delivered to FBS), that the Board of Directors of MFC has a
fiduciary duty to do so, (a) participate in any negotiations
in connection with or in furtherance of any of the foregoing
or (b) permit any person other than FBS and its
<PAGE>
representatives to have any access to the facilities of, or
furnish to any person other than FBS and its representatives
any non-public information with respect to, MFC or any of
the Subsidiaries in connection with or in furtherance of any
of the foregoing. MFC shall promptly notify FBS if any such
proposal or offer, or any inquiry from or contact with any
person with respect thereto, is made, and shall promptly
provide FBS with such information regarding such proposal,
offer, inquiry or contact as FBS may request.
5.6. Notification of Certain Matters. Each party
shall give prompt notice to the other party of (a) the
occurrence or failure to occur of any event or the discovery
of any information, which occurrence, failure or discovery
would be likely to cause any representation or warranty on
its part contained in this Agreement to be materially untrue
or inaccurate when made at the Effective Date or at any time
prior to the Effective Date and (b) any material failure of
such party to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it
hereunder.
5.7. Access to Information; Confidentiality.
(a) MFC shall permit and shall cause each of the
Subsidiaries to permit FBS full access on reasonable notice
and at reasonable hours to its properties and shall disclose
and make available (together with the right to copy) to FBS
and to the internal auditors, loan review officers,
employees, attorneys, accountants and other representatives
of FBS all books, papers and records relating to the assets,
stock, properties, operations, obligations and liabilities
of MFC and the Subsidiaries, including, without limitation,
all books of account (including, without limitation, the
general ledger), tax records, minute books of directors' and
shareholders' meetings, organizational documents, bylaws,
contracts and agreements, filings with any regulatory
authority, accountants' work papers, litigation files
(including, without limitation, legal research memoranda),
documents relating to assets and title thereto (including,
without limitation, abstracts, title insurance policies,
surveys, environmental reports, opinions of title and other
information relating to the real and personal property),
plans affecting employees, securities transfer records and
shareholder lists, and any books, papers and records
relating to other assets, business activities or prospects
in which FBS may have a reasonable interest, including,
without limitation, its interest in planning for integration
and transition with respect to the business of MFC and the
Subsidiaries; provided, however, that the foregoing rights
granted to FBS shall, whether or not and regardless of the
extent to which the same are exercised, in no way affect the
nature or scope of the representations, warranties and
covenants of MFC set forth herein. In addition, MFC shall
cause each of the Subsidiaries to instruct its officers,
employees, counsel and accountants to be available for, and
respond to any questions of, such FBS representatives at
reasonable hours and with reasonable notice by FBS to such
individuals, and to cooperate fully with FBS in planning for
the integration of the business of MFC and the Subsidiaries
with the business of FBS and its subsidiaries.
(b) FBS shall permit reasonable access to its
properties and shall disclose and make available (together
<PAGE>
with the right to copy) to MFC and to its representatives
FBS's financial books and records, minute books of
directors' and shareholders' meetings, organizational
documents, bylaws, and filings with any regulatory
authority; provided, however, that the foregoing rights
granted to MFC shall, whether or not and regardless of the
extent to which the same are exercised, in no way affect the
nature or scope of the representations, warranties and
covenants of FBS set forth herein. In addition, FBS shall
instruct its officers, employees, counsel and accountants to
be available for, and respond to reasonable questions of,
representatives of MFC at reasonable hours and with
reasonable notice by MFC to such individuals.
(c) All information furnished by MFC or FBS pursuant
hereto shall be treated as the sole property of the party
furnishing the information until the Effective Date, and, if
the Effective Date shall not occur, the receiving party
shall return to the party which furnished such information,
or destroy, all documents or other materials (including
copies thereof) containing, reflecting or referring to such
information. In addition, the receiving party shall keep
confidential all such information and shall not directly or
indirectly use such information for any competitive or other
commercial purpose. In the event that this Agreement shall
terminate, neither party shall disclose, except as required
by law or pursuant to the request of an administrative
agency or other regulatory body, the basis or reason for
such termination, without the consent of the other party.
The obligation to keep such information confidential shall
not apply to (i) any information which (A) was already in
the receiving party's possession prior to the disclosure
thereof to the receiving party by the party furnishing the
information, (B) was then generally known to the public,
(C) became known to the public through no fault of the
receiving party or its representatives or (D) was disclosed
to the receiving party by a third party not bound by an
obligation of confidentiality or (ii) disclosures required
by law, governmental or regulatory authority.
5.8. Filing of Tax Returns and Adjustments.
(a) MFC, on behalf of MFC and each of the
Subsidiaries, shall file (or cause to be filed) at their own
expense, on or prior to the due date, all Tax returns,
including all Plan returns and reports, for all Tax periods
ending on or before the Effective Date where the due date
for such returns or reports (taking into account valid
extensions of the respective due dates) falls on or before
the Effective Date; provided, however, that neither MFC nor
any of the Subsidiaries shall file any such Tax returns, or
other returns, elections or information statements with
respect to any liabilities for Taxes (other than federal,
state or local sales, use, withholding or employment tax
returns or statements), or consent to any adjustment or
otherwise compromise or settle any matters with respect to
Taxes, without prior consultation with FBS; provided,
further, that neither MFC nor any of the Subsidiaries shall
make any election or take any other discretionary position
with respect to Taxes, in a manner inconsistent with past
practices, without the prior written approval of FBS, which
approval shall not be unreasonably withheld. In the event
the granting or withholding of such approval by FBS results
in additional Taxes owing for any Tax period ending on or
<PAGE>
before the Effective Date, liability for such additional
Taxes shall not cause any representation of MFC relating to
Taxes to be untrue. MFC shall provide FBS with a copy of
appropriate workpapers, schedules, drafts and final copies
of each federal and state income Tax return or election of
MFC and each of the Subsidiaries (including returns of all
Plans) at least seven days before filing such return or
election and shall reasonably cooperate with any request by
FBS in connection therewith.
(b) FBS, in its sole and absolute discretion, will
file (or cause to be filed) all Tax returns of MFC and each
of the Subsidiaries due after the Effective Date. After the
Effective Date, FBS, in its sole and absolute discretion and
to the extent permitted by law, shall have the right to
amend, modify or otherwise change all Tax returns of MFC and
each of the Subsidiaries for all Tax periods.
5.9. Registration Statement.
(a) For the purposes (i) of holding meetings of the
shareholders of FBS and MFC to approve this Agreement and
the Merger and (ii) of registering the FBS Common Stock to
be issued to holders of MFC Common Stock and of options
under the MFC Stock Option Plans (as defined in Section
5.14(a)) in connection with the Merger with the SEC and with
applicable state securities authorities, the parties hereto
shall cooperate in the preparation of an appropriate
registration statement (such registration statement,
together with all and any amendments and supplements
thereto, being herein referred to as the "Registration
Statement"), which shall include a prospectus/joint proxy
statement satisfying all applicable requirements of the 1933
Act, the 1934 Act, applicable state securities laws and the
rules and regulations thereunder (such prospectus/joint
proxy statement, together with any and all amendments or
supplements thereto, being herein referred to as the
"Prospectus/Proxy Statement").
(b) FBS shall furnish such information concerning FBS
as is necessary in order to cause the Prospectus/Proxy
Statement, insofar as it relates to FBS, to be prepared in
accordance with Section 5.9(a). FBS agrees promptly to
advise MFC if at any time prior to the FBS or MFC
shareholders' meetings any information provided by FBS in
the Prospectus/Proxy Statement becomes incorrect or
incomplete in any material respect, and to provide the
information needed to correct such inaccuracy or omission.
(c) MFC shall furnish FBS with such information
concerning MFC and the Subsidiaries as is necessary in order
to cause the Prospectus/Proxy Statement, insofar as it
relates to MFC and the Subsidiaries, to be prepared in
accordance with Section 5.9(a). MFC agrees promptly to
advise FBS if at any time prior to the FBS or MFC
shareholders' meetings any information provided by MFC in
the Prospectus/Proxy Statement becomes incorrect or
incomplete in any material respect, and to provide FBS with
the information needed to correct such inaccuracy or
omission.
<PAGE>
(d) FBS shall promptly file the Registration Statement
with the SEC and applicable state securities agencies. FBS
shall use reasonable efforts to cause the Registration
Statement to become effective under the 1933 Act and
applicable state securities laws at the earliest practicable
date. MFC authorizes FBS to utilize in the Registration
Statement the information concerning MFC and the
Subsidiaries provided to FBS for the purpose of inclusion in
the Prospectus/Proxy Statement. MFC shall have the right to
review and comment on the form of proxy statement included
in the Registration Statement. FBS shall advise MFC
promptly when the Registration Statement has become
effective and of any supplements or amendments thereto, and
FBS shall furnish MFC with copies of all such documents.
Prior to the Effective Date or the termination of this
Agreement, each party shall consult with the other with
respect to any material (other than the Prospectus/Proxy
Statement) that might constitute a "prospectus" relating
to the Merger within the meaning of the 1933 Act.
(e) FBS shall use reasonable efforts to cause to be
delivered to MFC a letter relating to the Registration
Statement from Ernst & Young, FBS's independent auditors,
dated a date within two business days before the date on
which the Registration Statement shall become effective and
addressed to MFC, in form and substance reasonably
satisfactory to MFC and customary in scope and substance for
letters delivered by independent public accountants in
connection with registration statements similar to the
Registration Statement.
(f) MFC shall use reasonable efforts to cause to be
delivered to FBS a letter relating to the Registration
Statement from Ernst & Young, MFC's independent auditors,
dated a date within two business days before the date on
which the Registration Statement shall become effective and
addressed to FBS, in form and substance reasonably
satisfactory to FBS and customary in scope and substance for
letters delivered by independent public accountants in
connection with registration statements similar to the
Registration Statement.
(g) FBS shall bear (i) the costs of all SEC filing
fees with respect to the Registration Statement and the
costs of qualifying the shares of FBS Common Stock under
state blue sky laws to the extent necessary and (ii) all
printing and mailing costs in connection with the
preparation and mailing of the Prospectus/Proxy Statement to
FBS shareholders. MFC shall bear all printing and mailing
costs in connection with the preparation and mailing of the
Prospectus/Proxy Statement to MFC shareholders. FBS and
MFC shall each bear their own legal and accounting expenses
in connection with the Registration Statement.
5.10. Affiliate Letters. MFC shall use its best
efforts to obtain and deliver to FBS at least 31 days prior
to the Effective Date a signed representation letter
substantially in the form of Exhibit A hereto from each
shareholder of MFC who may reasonably be deemed an
"affiliate" of MFC within the meaning of such term as used
in Rule 145 under the 1933 Act and for purposes of
qualifying for pooling of interests accounting treatment for
the Merger. FBS may place appropriate legends on the stock
certificates of affiliates of MFC.
<PAGE>
5.11. Establishment of Accruals. If requested by FBS
prior to March 1, 1995, prior to the public release of
financial results for MFC's 1994 fiscal year (or, if
earlier, the business day immediately prior to the Effective
Date), MFC shall, consistent with generally accepted
accounting principles, establish for such fiscal year such
additional accruals and reserves as may be necessary to
conform MFC's accounting and credit loss reserve practices
and methods to those of FBS (as such practices and methods
are to be applied to MFC from and after the Effective Date)
and reflect FBS's plans with respect to the conduct of MFC's
business following the Merger and to provide for the costs
and expenses relating to the consummation by MFC of the
transactions contemplated by this Agreement; provided,
however, that MFC shall not be required to take such action
unless (A) FBS certifies in writing that it has no reason to
believe that all conditions to FBS's obligation to
consummate the transactions contemplated by this Agreement
set forth in Article 6 hereof will not be satisfied or
waived; and (B) MFC shall have no reasonable basis for
believing that all the conditions to MFC's obligation to
consummate the transactions contemplated by this Agreement
will not be satisfied. In the event that MFC shall not be
obligated to establish the additional accruals and reserves
referred to in the preceding sentence prior to March 1,
1995, and thereafter FBS shall request that MFC establish
such accruals and reserves and the conditions set forth in
clauses (A) and (B) of the preceding sentence are satisfied,
MFC shall establish such accruals and reserves for a period
subsequent to the 1994 fiscal year. Notwithstanding
anything to the contrary contained in this Agreement, no
accrual or reserve made by MFC or the Bank pursuant to this
Section 5.11, or any litigation or regulatory proceeding
arising out of any such accrual or reserve, or any other
effect on MFC or the Bank resulting from MFC's compliance
with this Section 5.11, shall constitute or be deemed to be
a breach, violation of or failure to satisfy any
representation, warranty, covenant, condition or other
provisions of this Agreement or otherwise be considered in
determining whether any such breach, violation or failure to
satisfy shall have occurred.
5.12. Employee Matters.
(a) General. Subject to the following agreements, FBS
shall have the right to continue, amend or terminate any of
the Plans (as defined in Section 3.18) in accordance with
the terms thereof and subject to any limitation arising
under applicable law. Until FBS shall take such action,
however, such Plans shall continue in force for the benefit
of present and former employees of MFC or the Subsidiaries
who have any present or future entitlement to benefits under
any of the Plans ("MFC Employees").
(b) MFC Plans.
(I) MFC 401(k) Plan. After the Effective Date,
FBS will terminate the accrual of benefits under the MFC
401(k) plans listed on Schedule 3.18(b)(i)(B) and sponsored
by MFC or any Subsidiary not more than two years after the
Effective Date and will take such actions as may be
<PAGE>
necessary to cause the assets and liabilities of the MFC
401(k) plans to be merged with and into the FBS 401(k) plan.
As of the Effective Date, FBS shall take such action as may
be necessary to amend the MFC 401(k) plans to provide that
with respect to MFC Employees who are participants in the
MFC 401(k) plans and who are employees of MFC as of the
Effective Date, their accounts under such plans as of the
Effective Date shall be fully vested as of the Effective
Date. Benefits accruing between the Effective Date and the
date on which the accrual of benefits is terminated shall be
fully and immediately vested as of that time. Distributions
shall not be permitted from the MFC 401(k) plans merely
because of the discontinuance of accruals or the transfer of
assets and liabilities.
(ii) MFC Directors' Retirement Plan. MFC shall
calculate and pay in cash on the Effective Date all amounts
reasonably estimated to be owing to any MFC director
pursuant to the MFC Directors' Retirement Plan, including
any estimated "gross up" payment payable as provided
therein. To the extent that any such gross up payment
remains payable after the Effective Date, FBS hereby
acknowledges that it will promptly pay such amounts in full
in accordance with the terms of such plan.
(iii) Change in Control Plans. Prior to the
Effective Date, MFC shall amend the Change in Control Plans
as set forth in Exhibit B hereto, and FBS hereby agrees to
such amendments. FBS acknowledges that any employment
agreement with an executive officer previously disclosed to
it does not constitute a "severance plan" for purposes of
such plans.
(iv) MFC Bonus Plans. On or prior to December
31, 1994, MFC shall pay all bonuses accrued in 1994 by MFC
Employees under the MFC bonus plans disclosed to FBS.
(v) MFC Defined Benefit Plan. Not more than two
(2) years after the Effective Date, FBS will terminate the
accrual of benefits under the MFC qualified defined benefit
pension plan and will take such actions as may be necessary
to cause the assets and liabilities of the MFC qualified
defined benefit pension plan to be merged with and into the
FBS Personal Retirement Account. As of the Effective Date,
FBS shall take such action as may be necessary to amend the
MFC qualified defined benefit pension plan to provide that
with respect to MFC Employees who are participants in the
MFC qualified defined benefit pension plan and who are
employees of MFC as of the Effective Date, their accrued
benefits under such plan as of the Effective Date shall be
fully vested as of the Effective Date.
(c) FBS Plans.
(i) FBS CAP (401(k)) Plan. After the Effective
Date, FBS shall take such actions as may be necessary to
cause eligible MFC Employees to become qualified to
participate in the FBS Capital Accumulation Plan ("CAP")
<PAGE>
concurrent with the date that FBS causes accruals to cease
under the MFC 401(k) plan. All service with MFC and any of
the Subsidiaries (whether before or after the Effective
Date) shall be recognized under the CAP for eligibility and
vesting purposes but shall not be recognized for
contribution and allocation purposes. FBS shall take such
actions as may be necessary to cause the CAP to accept
transfers of assets and liabilities from the MFC 401(k)
plan.
(ii) FBS Defined Benefit Plan. Upon the
cessation of accruals under any MFC Defined Benefit Plan,
FBS shall take such actions as may be necessary to cause
eligible MFC Employees to be qualified to participate in any
qualified defined benefit plan generally available at the
time to similarly situated employees of FBS or an affiliate
of FBS. All service with MFC or any of the Subsidiaries and
their predecessors, to such extent taken into account for
purposes of the MFC Defined Benefit Plan (whether before or
after the Effective Date) shall be recognized under the FBS
plan for eligibility and vesting purposes but shall not be
required to be recognized for any other purpose.
(iii) Welfare and Other Benefits. FBS shall use
its best efforts to cause any transition by MFC Employees
from the welfare and other generally applicable benefit
plans and practices of MFC or its affiliates not otherwise
expressly dealt with in this Section 5.12 to FBS plans and
practices to be effected in a manner that does not result in
a significant financial detriment to the MFC Employees other
than any such financial detriment as a result of higher
premium costs in the FBS plan which are generally applicable
to other similarly situated employees of FBS and its
affiliates or to the absence of any FBS counterpart for a
particular MFC plan or practice.
(d) Successor Status; Further Assurances. FBS hereby
expressly assumes and agrees to perform or cause to be
performed all of the obligations of "successors" under the
terms of the MFC Broad-Based Change in Control Severance Pay
Plan, as amended, the MFC Senior Management Change in
Control Severance Pay Plan, as amended, and the MFC
Executive Management Change in Control Severance Pay Plan,
as amended (the "Change in Control Plans"), and the MFC
Directors' Retirement Plan.
(e) Limitation on Enforcement. This Section 5.12 is an
agreement solely between MFC and the Subsidiaries and FBS.
Nothing in this Section 5.12, whether express or implied,
confers upon any employee of MFC, any of the Subsidiaries or
FBS or any other person, any rights or remedies, including,
but not limited to: (i) any right to employment or recall,
(ii) any right to continued employment for any specified
period, or (iii) any right to claim any particular
compensation, benefit or aggregate of benefits, of any kind
or nature whatsoever, as a result of this Section 5.12.
5.13. Pooling of Interests; Tax Treatment. Neither
MFC nor any of the Subsidiaries nor FBS shall take any
<PAGE>
action which would disqualify the Merger as a "pooling of
interests" for accounting purposes or as a
"reorganization" that would be tax free to the
shareholders of MFC pursuant to Section 368(a) of the Code.
5.14. Stock Options and Warrants.
(a) Stock Option Plans. In the event that each option
outstanding or to be outstanding on the Effective Date under
the MFC 1982 Stock Option and Incentive Plan, the MFC 1990
Stock Option Plan, the MFC 1993 Non-Employee Director Stock
Option Plan and the MFC 1993 Stock Incentive Plan
(collectively, the "MFC Stock Option Plans") is converted
into a right to receive in lieu of all other rights under
such option (and each such option thereafter is terminated
and canceled), shares of FBS Common Stock with a value as of
the Effective Date equal to the "fair value" of such
option as determined by an independent third party expert to
be mutually selected by FBS and MFC, FBS will, as of the
Effective Date, issue in respect of such option shares of
FBS Common Stock having an Average Price equal to such
"fair value." In the event that each such option is not
so converted, then, at the Effective Date, such option shall
be assumed by FBS and shall thereafter be deemed to
constitute an option to acquire, on the same terms and
conditions as were applicable under such option, the same
number of shares of FBS Common Stock as the holder of such
option would have been entitled to receive pursuant to the
Merger had such holder exercised such option in full
immediately prior to the Effective Date, at a price per
share equal to (x) the aggregate exercise price for the
shares of MFC Common Stock otherwise purchasable pursuant to
such option divided by (y) the number of full shares of FBS
Common Stock deemed purchasable pursuant to such option;
provided, however, that in the case of any option to which
Section 421 of the Code applies by reason of its
qualification under Section 422 of the Code ("incentive
stock options"), the option price, the number of shares
purchasable pursuant to such option and the terms and
conditions of exercise of such options shall be determined
in order to comply with Section 424(a) of the Code. In
addition, MFC will use its best efforts to cause all of the
options outstanding and vested under the MFC Stock Option
Plans as of December 31, 1994 to be exercised in full on or
prior to such date.
(b) Employee Stock Purchase Plans. At the Effective
Date, each outstanding option issued pursuant to the MFC
Employee Stock Purchase Plan or the Edina Realty Sales
Associate Stock Purchase Plan shall be deemed to constitute
an option to acquire FBS Common Stock on the same terms and
conditions as theretofore applicable, except that the
exercise price per share and the number of shares of stock
for which such option is exercisable shall be adjusted as
appropriate in light of the Merger and the Exchange Ratio in
order to prevent any diminution of the value of such options
or the rights of the participants.
(c) MFC Warrants. On the Effective Date, FBS shall
execute a supplemental warrant agreement to the Warrant
Agreement dated as of November 20, 1990 (the "MFC Warrant
Agreement") between MFC and American Stock Transfer and
Trust Company, as Warrant Agent, as provided in
Section 10(I) of the Warrant Agreement, and all outstanding
warrants of MFC (the "MFC Warrants") issued pursuant to
such Warrant Agreement shall be assumed by FBS. Each MFC
<PAGE>
Warrant shall be deemed to constitute an option to acquire,
on the same terms and conditions as were applicable under
such MFC Warrant, the same number of shares of FBS Common
Stock as the holder of such MFC Warrant would have been
entitled to receive pursuant to the Merger had such holder
exercised such option in full immediately prior to the
Effective Date, at a price per share equal to (x) the
aggregate exercise price for the shares of MFC Common Stock
otherwise purchasable pursuant to such MFC Warrant divided
by (y) the number of full shares of FBS Common Stock deemed
purchasable pursuant to such MFC Warrant. FBS shall take all
corporate action necessary to reserve for issuance a
sufficient number of shares of FBS Common Stock for delivery
upon exercise of MFC Warrants assumed by it in accordance
with this Section 5.14. FBS shall use its best efforts to
register the MFC Warrants and the underlying FBS Common Stock
under the 1933 Act as of the Effective Date and to maintain
the effectiveness of such registration statement or registration
statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such MFC Warrants
remain outstanding.
5.15. Indemnification and Insurance.
(a) From and after the Effective Date, FBS shall
indemnify, defend and hold harmless each person who is now,
or has been at any time prior to the date hereof or who
becomes prior to the Effective Date, an officer, director or
employee of MFC or any of the Subsidiaries (the
"Indemnified Parties") against all losses, claims,
damages, costs, expenses (including attorney's fees),
liabilities or judgments or amounts that are paid in
settlement (which settlement shall require the prior written
consent of FBS, which consent shall not be unreasonably
withheld) of or in connection with any claim, action, suit,
proceeding or investigation (a "Claim") in which an
Indemnified Party is, or is threatened to be made, a party
or a witness based in whole or in part on or arising in
whole or in part out of the fact that such person is or was
a director, officer or employee of MFC or any of the
Subsidiaries if such Claim pertains to any matter or fact
arising, existing or occurring prior to the Effective Date
(including, without limitation, the Merger and other
transactions contemplated by this Agreement), regardless of
whether such Claim is asserted or claimed prior to, at or
after the Effective Date (the "Indemnified Liabilities")
to the full extent permitted under applicable Delaware or
federal law as of the date hereof or as amended prior to the
Effective Date and under MFC's Charter and Bylaws as in
effect on the date hereof (and FBS shall pay expenses in
advance of the final disposition of any such action or
proceeding to each Indemnified Party to the full extent
permitted by law and under such Charter or Bylaws, upon
receipt of any undertaking required by such Charter, Bylaws
or applicable law). Any Indemnified Party wishing to claim
indemnification under this Section 5.15(a), upon learning of
any Claim, shall notify FBS (but the failure so to notify
FBS shall not relieve it from any liability which FBS may
have under this Section 5.15(a) except to the extent such
failure prejudices FBS) and shall deliver to FBS any
undertaking required by such Charter, Bylaws or applicable
law. FBS shall use its best efforts to assure, to the
extent permitted under applicable law, that all limitations
of liability existing in favor of the Indemnified Parties as
provided in the MFC Charter and Bylaws, as in effect as of
<PAGE>
the date hereof, with respect to claims or liabilities
arising from facts or events existing or occurring prior to
the Effective Date (including, without limitation, the
transactions contemplated by this Agreement), shall survive
the Merger. The obligations of FBS described in this
Section 5.15(a) shall continue in full force and effect,
without any amendment thereto, for a period of not less than
five years from the Effective Date; provided, however, that
all rights to indemnification in respect of any Claim
asserted or made within such period shall continue until the
final disposition of such Claim; and provided further that
nothing in this Section 5.15(a) shall be deemed to modify
applicable Delaware law regarding indemnification of former
officers and directors. Nothing in this Section 5.15(a)
shall affect the obligations to be assumed in the Merger by
FBS to indemnify former directors and officers of MFC or the
Bank pursuant to the terms of the indemnification agreements
in effect as of the date hereof and as disclosed to FBS in
Schedule 3.14.
(b) From and after the Effective Date, the directors,
officers and employees of MFC and the Subsidiaries who
become directors, officers or employees of FBS or any of its
subsidiaries, except for the indemnification rights set
forth in Section 5.15(a), shall have indemnification rights
with prospective application only. The prospective
indemnification rights shall consist of such rights to which
directors, officers and employees of FBS are entitled under
the provisions of the Charter or similar governing documents
of FBS and its subsidiaries, as in effect from time to time
after the Effective Date, as applicable, and provisions of
applicable law as in effect from time to time after the
Effective Date.
(c) The obligations of FBS provided under
Sections 5.15(a) and 5.15(b) are intended to benefit, and be
enforceable against FBS directly by, the Indemnified
Parties, and shall be binding on all respective successors
of FBS.
(d) For a period of three years after the Effective
Date, FBS shall use its best efforts to provide that portion
of directors' and officers' liability insurance that serves
to reimburse officers and directors of MFC or any of the
Subsidiaries (as opposed to FBS or MFC) with respect to
claims against such officers and directors arising from
facts or events which occurred before the Effective Date of
at least the same coverage and amounts, and containing terms
and conditions no less advantageous, as that coverage
currently provided by MFC; provided, however, that the
annual premiums for such coverage will not exceed 200% of
the annual premiums currently paid by MFC for such coverage;
provided, further, that officers and directors of MFC or any
Subsidiary may be required to make application and provide
customary representations and warranties to FBS's insurance
carrier for the purpose of obtaining such insurance; and
provided, further, that such coverage will have a single
aggregate for such three-year period in an amount not less
than the annual aggregate of such coverage currently
provided by MFC.
5.16. Edina Realty Litigation Matters. MFC shall
provide FBS regular updates on the status of the Edina
Realty Litigation Matters, shall notify FBS of any
<PAGE>
developments with respect to such matters, and shall allow
FBS to attend all settlement negotiations or other meetings
relating to the settlement or other disposition of such
matters.
5.17. FBS SEC Reports. FBS shall continue to file all
reports with the SEC necessary to permit the shareholders of
MFC who are "affiliates" of MFC (within the meaning of
such term as used in Rule 145 under the 1933 Act) to sell
the FBS Common Stock received by them in connection with the
Merger pursuant to Rules 144 and 145(d) under the 1933 Act
if they would otherwise be so permitted. After the
Effective Date, FBS will file with the SEC reports and other
materials required by the federal securities laws on a
timely basis.
5.18. SEC Reports. Each of FBS and MFC agree to
provide to the other party copies of all reports and other
documents filed with the SEC by it between the date hereof
and the Effective Date within five days after the date such
reports or other documents are filed with the SEC.
5.19. Stock Exchange Listing. FBS shall use its best
efforts to list on the New York Stock Exchange, subject to
official notice of issuance, the shares of FBS Common Stock
to be issued to the holders of MFC Common Stock in the
Merger.
5.20. Shareholder Approvals. Each of FBS and MFC
shall call a meeting of its shareholders for the purpose of
voting upon this Agreement and the Merger, and shall
schedule such meeting based on consultation with the other
party. The Board of Directors of each of FBS and MFC shall
recommend approval of this Agreement and the Merger, and use
its best efforts (including, without limitation, soliciting
proxies for such approvals) to obtain such shareholder
approvals, unless the Board of Directors of either party
determines, after receipt of a written opinion of counsel to
such party (a copy of which shall be delivered to the other
party), that recommending such approvals or using its best
efforts to obtain such shareholder approvals would be a
breach of its fiduciary duties.
5.21. FBS Board of Directors; Consulting Agreement.
(a) Following the Effective Date, FBS shall use its
best efforts to (i) secure the election of Norman M. Jones
to the FBS Board of Directors for a term of at least three
years and (ii) appoint Mr. Jones as Chairman of the Board of
Directors of the Bank, or its successor following the
Merger, for at least three years, subject to any applicable
regulatory requirements.
(b) Prior to the Effective Date, FBS shall enter into
a consulting agreement with Mr. Jones, containing customary
terms and conditions, engaging Mr. Jones for a three-year
period following the Effective Date as an independent
consultant to assist FBS in identifying and contacting, on
behalf of FBS, potential financial institution acquisition
candidates as requested from time to time by FBS.
(c) FBS shall pay Mr. Jones, for all of the services
rendered by Mr. Jones pursuant to this Section 5.21, total
compensation equal to $200,000 annually.
<PAGE>
(d) FBS acknowledges that, on the Effective Date,
there shall exist a "termination" of Mr. Jones employment
with MFC under the terms of the MFC Executive Management
Change in Control Severance Pay Plan and FBS shall pay all
benefits payable to Mr. Jones pursuant to the terms of such
plan upon such termination.
ARTICLE 6
CONDITIONS
6.1. Conditions to Obligations of Each Party. The
respective obligations of each party to effect the
transactions contemplated hereby shall be subject to the
fulfillment at or prior to the Effective Date of the
following conditions:
(a) Regulatory Approval. Regulatory approval for the
consummation of the transactions contemplated hereby shall
have been obtained from the FRB, the OTS and any other
governmental authority from whom approval is required, the
applicable waiting periods, if any, under the HSR Act shall
have expired or been terminated, and all other statutory or
regulatory waiting periods shall have lapsed. None of such
approvals shall contain any conditions or restrictions that
FBS reasonably believes will materially restrict or limit
the business or activities of FBS, MFC or the Subsidiaries
or have a material adverse effect on, or would be reasonably
likely to have a material adverse effect on, the business,
operations or financial condition of FBS and its
subsidiaries, taken as a whole, on the one hand, or MFC and
the Subsidiaries, taken as a whole, on the other hand. FBS
acknowledges that a requirement to divest control of Edina
Realty, Inc. following the Merger would not, in and of
itself, constitute a failure of the condition in this
Section 6.1(a).
(b) No Injunction. No injunction or other order
entered by a state or federal court of competent
jurisdiction shall have been issued and remain in effect
which would impair the consummation of the transactions
contemplated hereby.
(c) No Prohibitive Change of Law. There shall have
been no law, statute, rule or regulation, domestic or
foreign, enacted or promulgated which would materially
impair the consummation of the transactions contemplated
hereby.
(d) No Termination. No party hereto shall have
terminated this Agreement as permitted herein.
(e) Registration Statement. The Registration
Statement shall have been declared effective and shall not
be subject to a stop order of the SEC, and, if the offer and
<PAGE>
sale of FBS Common Stock in the Merger pursuant to this
Agreement is required to be registered under the securities
laws of any state, the Registration Statement shall not be
subject to a stop order of securities commission in such
state.
(f) Federal Tax Opinion. An opinion of Oppenheimer
Wolff & Donnelly shall have been obtained with respect to
the Merger, based on customary reliance and subject to
customary qualifications, to the effect that for federal
income tax purposes:
(i) The Merger will qualify as a
"reorganization" under Section 368(a) of the Code;
(ii) No gain or loss will be recognized by any
MFC shareholder (except in connection with the receipt
of cash) upon the exchange of MFC Common Stock for FBS
Common Stock in the Merger;
(iii) The basis of the FBS Common Stock received
by a MFC shareholder who exchanges MFC Common Stock for
FBS Common Stock will be the same as the basis of the
MFC Common Stock surrendered in exchange therefore
(subject to any adjustments required as the result of
receipt of cash in lieu of a fractional share of FBS
Common Stock);
(iv) The holding period of the FBS Common Stock
received by a MFC shareholder receiving FBS Common
Stock will include the period during which the MFC
Common Stock surrendered in exchange therefor was held
(provided that the MFC Common Stock of such MFC
shareholder was held as a capital asset at the
Effective Date); and
(v) Cash received by a MFC shareholder in lieu of
a fractional share interest of FBS Common Stock will be
treated as having been received as a distribution in
full payment in exchange for the fractional share
interest of FBS Common Stock which he would otherwise
be entitled to receive, and will qualify as capital
gain or loss (assuming the MFC Common Stock was a
capital asset in his hands at the Effective Date).
Such opinion shall be delivered on and dated as of the
Effective Date and on and as of such earlier date as may be
required by the SEC in connection with the Registration
Statement.
(g) The FBS Common Stock to be issued to holders of
MFC Common Stock in the Merger shall have been approved for
listing on the NYSE on official notice of issuance.
<PAGE>
6.2. Additional Conditions to Obligation of MFC. The
obligation of MFC to consummate the transactions
contemplated hereby in accordance with the terms of this
Agreement is also subject to the following conditions:
(a) Representations and Compliance. The
representations and warranties of FBS set forth in
Article 2 shall have been true and correct as of the
date hereof, and shall be true and correct as of the
Effective Date as if made at and as of the Effective
Date, except where the failure to be true and correct
would not have, or would not reasonably be expected to
have, a material adverse effect on the business,
operations or financial condition of FBS and its
subsidiaries, taken as a whole; and FBS shall in all
material respects have performed each obligation and
agreement and complied with each covenant to be
performed and complied with by it hereunder at or prior
to the Effective Date.
(b) Officer's Certificate. FBS shall have
furnished to MFC a certificate of the Vice Chairman and
Chief Financial Officer of FBS, dated as of the
Effective Date, in which such officer shall certify
that he has no reason to believe that the conditions
set forth in Section 6.2(a) have not been fulfilled.
(c) FBS Secretary's Certificate. FBS shall have
furnished to MFC (i) copies of the text of the
resolutions by which the corporate action on the part
of FBS necessary to approve this Agreement and the
transactions contemplated hereby were taken, (ii) a
certificate dated as of the Effective Date executed on
behalf of FBS by its corporate secretary or one of its
assistant corporate secretaries certifying to MFC that
such copies are true, correct and complete copies of
such resolutions and that such resolutions were duly
adopted and have not been amended or rescinded and
(iii) an incumbency certificate dated as of the
Effective Date executed on behalf of FBS by its
corporate secretary or one of its assistant corporate
secretaries certifying the signature and office of each
officer of FBS executing this Agreement or any other
agreement, certificate or other instrument executed
pursuant hereto.
(d) Opinion of Counsel to FBS. MFC shall have
received an opinion letter dated as of the Effective
Date addressed to MFC from Michael J. O'Rourke, Esq.,
Executive Vice President and General Counsel of FBS,
based on customary reliance and subject to customary
qualifications, to the effect that:
(i) FBS is a corporation duly incorporated,
validly existing and in good standing under the
laws of the State of Delaware. FBS is registered
as a bank holding company under the Bank Holding
Company Act.
(ii) FBS has the corporate power to
consummate the transactions on its part
contemplated by this Agreement. FBS has taken all
requisite corporate action to authorize this
Agreement, and this Agreement has been duly
<PAGE>
executed and delivered by FBS and constitutes the
valid and binding obligation of FBS enforceable in
accordance with its terms, subject as to the
enforcement of remedies to applicable bankruptcy,
insolvency, moratorium and other laws affecting
the rights of creditors generally and to judicial
limitations on the enforcement of the remedy of
specific performance.
(iii) The execution and delivery of this
Agreement by FBS and the consummation of the
transactions contemplated hereby will not
constitute a breach, default or violation
under its Charter or Bylaws or, to his knowledge,
(A) any agreement, arrangement or understanding to
which FBS is a party, (B) any license, franchise
or permit or (C) any law, regulation, order,
judgment or decree.
(iv) No authorization, consent or approval
of, or filing with, any public body, court or
authority is necessary for the consummation by FBS
of the transactions contemplated hereby which has
not been obtained or made.
(v) The shares of FBS Common Stock to be
issued pursuant to this Agreement will be, when
issued, duly authorized, validly issued, fully
paid and nonassessable.
(e) Shareholder Approval. This Agreement and the
Merger shall have been approved by the affirmative vote of
the holders of the percentage of MFC capital stock required
for such approval under the provisions of MFC's Charter and
Bylaws, the DGCL and the rules of the NYSE.
(f) Material Adverse Change. Since the date of
this Agreement, there has been no material adverse change
in, and no event, occurrence or development in the business
of FBS or its subsidiaries that, taken together with other
events, occurrences and developments with respect to such
business, would have or would reasonably be expected to have
a material adverse effect on, the business, operations or
financial condition of FBS and its subsidiaries, taken as a
whole.
(g) Fairness Opinion. Prior to mailing the
Prospectus/Proxy Statement and immediately prior to the
Effective Date, MFC shall have received a written opinion in
a form reasonably acceptable to MFC from Dain Bosworth
Incorporated (or another investment banking firm reasonably
acceptable to MFC) to the effect that the consideration to
be delivered in the Merger is fair from a financial point of
view to the holders of MFC Common Stock.
6.3. Additional Conditions to Obligation of FBS. The
obligation of FBS to consummate the transactions
contemplated hereby in accordance with the terms of this
Agreement is also subject to the following conditions:
<PAGE>
(a) Representations and Compliance. The
representations and warranties of MFC in this Agreement
shall have been true and correct as of the date hereof, and
such representations and warranties shall be true and
correct as of the Effective Date as if made at and as of the
Effective Date, except where the failure to be true and
correct would not have, or would not reasonably be expected
to have, a material adverse effect on the business,
operations or financial condition of MFC and the
Subsidiaries taken as a whole; and MFC shall in all material
respects have performed each obligation and agreement and
complied with each covenant to be performed and complied
with by it hereunder at or prior to the Effective Date.
(b) Officers' Certificate of MFC. MFC shall have
furnished to FBS a certificate of the Chief Executive
Officer and Chief Financial Officer of MFC, dated as of the
Effective Date, in which such officers shall certify that
they have no reason to believe that the conditions set forth
in Section 6.3(a) have not been fulfilled.
(c) Secretary's Certificates. MFC shall have
furnished to FBS (i) copies of the text of the resolutions
by which the corporate action on the part of MFC necessary
to approve this Agreement and the transactions contemplated
hereby were taken, (ii) certificates dated as of the
Effective Date executed on behalf of MFC by its corporate
secretary or one of its assistant corporate secretaries
certifying to FBS that such copies are true, correct and
complete copies of such resolutions and that such
resolutions were duly adopted and have not been amended or
rescinded and (iii) an incumbency certificate dated as of
the Effective Date executed on behalf of MFC by its
corporate secretary or one of its assistant corporate
secretaries certifying the signature and office of each
officer executing this Agreement or any other agreement,
certificate or other instrument executed pursuant hereto.
(d) Opinion of Counsel to MFC. FBS shall have
received an opinion letter dated as of the Effective Date
addressed to FBS from Oppenheimer Wolff & Donnelly, counsel
to MFC (provided that the opinions contained in
subparagraphs (iv), (vi) and (viii) of this Section 6.3(d)
may be provided by J. Michael Nilles, Esq., Executive Vice
President and General Counsel of MFC), based on customary
reliance and subject to customary qualifications, to the
effect that:
(i) MFC is a corporation duly incorporated,
validly existing and in good standing under the laws of
the State of Delaware. MFC is registered as a savings
and loan holding company under the Savings and Loan
Holding Company Act.
(ii) The Bank is a federally chartered savings
bank duly organized, validly existing and in good
standing under the laws of the United States.
<PAGE>
(iii) Each of the Principal Nonbanking
Subsidiaries (other than the Bank) is a corporation
duly organized, validly existing and in good standing
under the laws of its state of incorporation.
(iv) Each of MFC, the Bank and the Principal
Nonbanking Subsidiaries has the requisite corporate and
other power and authority (including all licenses,
permits and authorizations) to own and operate its
properties and to carry on its business as now
conducted. Each of MFC, the Bank and the Principal
Nonbanking Subsidiaries is licensed or qualified to do
business in every jurisdiction in which the nature of
its business or its ownership of property requires it
to be licensed or qualified, except where the failure
to be so licensed or qualified would not have or would
not be reasonably expected to have a material adverse
effect on the business, operations, financial condition
or operating results of MFC, the Bank or any of the
Principal Nonbanking Subsidiaries.
(v) The execution and delivery of this Agreement
by MFC and the consummation of the transactions
contemplated hereby and thereby will not constitute a
breach, default or violation under the respective
Charter or Bylaws of MFC, the Bank or any of the
Principal Nonbanking Subsidiaries or, to such counsel's
knowledge, (A) any material agreement, arrangement or
understanding to which MFC, the Bank or any of the
Principal Nonbanking Subsidiaries is a party, (B) any
material license, franchise or permit or (C) any
material law, regulation, order, judgment or decree.
(vi) The authorized capital of MFC consists of
60,000,000 shares of MFC Common Stock and 10,000,000
shares of preferred stock; all of the issued and
outstanding shares of the capital stock of MFC are duly
authorized, validly issued, fully paid and
nonassessable. No holder of the capital stock of MFC
is entitled to any preemptive or other similar rights
with respect to the capital stock of MFC.
(vii) All of the issued and outstanding shares of
each of the Bank and the Principal Nonbanking
Subsidiaries are duly authorized, validly issued, fully
paid and nonassessable.
(viii) Except as set forth in Schedule 3.15, to
the knowledge of such counsel, there are no actions,
suits, proceedings, orders or investigations pending or
threatened against MFC, the Bank or any of the
Principal Nonbanking Subsidiaries, at law or in equity,
or before or by any federal, state or other
governmental department, commission, board, bureau,
agency or instrumentality.
<PAGE>
(ix) MFC has the corporate power to consummate
the transactions on its part contemplated by this
Agreement. MFC has duly taken all requisite corporate
action to authorize this Agreement and this Agreement
has been duly executed and delivered by MFC and
constitutes the valid and binding obligation of MFC
enforceable in accordance with its terms, subject as to
the enforcement of remedies to applicable bankruptcy,
insolvency, moratorium and other laws affecting the
rights of creditors generally and to judicial
limitations on the enforcement of the remedy of
specific performance.
(x) No authorization, consent or approval of, or
filing with any public body, court or public authority,
is necessary for the consummation by MFC of the
transactions contemplated hereby which has not been
obtained or made.
(e) Shareholder Approval. This Agreement and the
Merger shall have been approved by the affirmative vote of
holders of the percentage of FBS capital stock required for
such approval under the Charter and Bylaws of FBS, the DGCL
and the rules of the NYSE.
(f) Affiliate Letters. MFC shall have delivered to
FBS the letters required to be delivered pursuant to
Section 5.10.
(g) Pooling of Interests Accounting. No event shall
have occurred which, in the reasonable opinion of FBS and
concurred in by Ernst & Young, would prevent the Merger from
being accounted for as a pooling of interests, and FBS shall
have received from Ernst & Young an opinion that the Merger
shall qualify as a pooling of interests for accounting
purposes.
(h) Adverse Proceedings. There shall not be
threatened, instituted or pending any action or proceeding
before any court or governmental authority or agency,
domestic or foreign, (i) challenging or seeking to make
illegal, or to delay or otherwise directly or indirectly to
restrain or prohibit, the consummation of the transactions
contemplated hereby or seeking to obtain material damages in
connection with the transactions contemplated hereby,
(ii) seeking to prohibit direct or indirect ownership or
operation by FBS of all or a material portion of the
business or assets of MFC or any of the Subsidiaries or of
FBS or any of its subsidiaries, or to compel FBS or any of
its subsidiaries or MFC or any of the Subsidiaries to
dispose of or to hold separately all or a material portion
of the business or assets of FBS or any of its subsidiaries
or of MFC or any of the Subsidiaries, as a result of the
transactions contemplated hereby, or (iii) seeking to
require direct or indirect divestiture by FBS of any
material portion of its business or assets or of MFC's or
the Subsidiaries' business or assets. FBS acknowledges that
an action or proceeding seeking to divest control of Edina
Realty, Inc. following the Merger would not, in and of
itself, constitute a failure of the condition in this
Section 6.3(h).
<PAGE>
(i) Governmental Action. There shall not be any
action taken, or any statute, rule, regulation, judgment,
order or injunction proposed, enacted, entered, enforced,
promulgated, issued or deemed applicable to the transactions
contemplated hereby by any federal, state or other court,
government or governmental authority or agency, which would
reasonably be expected to result, directly or indirectly, in
any of the consequences referred to in Section 6.3(h).
(j) Failure to Disclose. FBS shall not have
discovered any fact or circumstance existing as of the date
of this Agreement which has not been disclosed to FBS, as of
the date of this Agreement, in this Agreement, any Schedule
hereto, or any document specifically required to be
furnished to FBS hereunder, regarding MFC or any of the
Subsidiaries which would, individually or in the aggregate
with other such facts and circumstances, (i) materially
impair the consummation of the transactions contemplated by
this Agreement, or (ii) have a material adverse effect on
the business, operations or financial condition of MFC and
the Subsidiaries, taken as a whole.
(k) Material Adverse Change. Since the date of this
Agreement, there has been no material adverse change in, and
no event, occurrence or development in the business of MFC
or the Subsidiaries that, taken together with other events,
occurrences and developments with respect to such business,
would have or would reasonably be expected to have a
material adverse effect on, the business, operations or
financial condition of MFC and the Subsidiaries, taken as a
whole.
(l) Stock Option Agreement. Immediately following the
execution and delivery of this Agreement, FBS and MFC shall
have executed and delivered the Stock Option Agreement.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
7.1. Termination. This Agreement may be terminated
prior to the Effective Date:
(a) by mutual consent of FBS and MFC;
(b) by either FBS or MFC, if any of the conditions to
such party's obligation to consummate the transactions
contemplated in this Agreement shall have become impossible
to satisfy;
<PAGE>
(c) by either FBS or MFC, if this Agreement and the
Merger are not duly approved by the shareholders of each of
MFC and FBS, in each case at a meeting of shareholders (or
any adjournment thereof) duly called and held for such
purpose;
(d) by FBS or MFC if the Effective Date is not on or
before September 30, 1995 (unless the failure to consummate
the Merger by such date shall be due to the action or
failure to act of the party seeking to terminate this
Agreement in breach of such party's obligations under this
Agreement);
(e) by FBS or MFC if the Average Price is less than
$29.50;
(f) by MFC if (1) any corporation, partnership,
person, other entity or group, as defined in the 1934 Act
(other than FBS or any affiliate of FBS) (a "Person"),
shall have commenced (as such term is used in Rule 14d-2(b)
under the 1934 Act) a bona fide tender offer for all
outstanding shares of MFC Common Stock or any Person shall
have made a bona fide written offer involving a merger or
consolidation of MFC or the acquisition of all or
substantially all of its assets, and (2) MFC's Board of
Directors shall determine, based on advice of MFC's
independent financial advisors that such offer is a material
economic improvement to the Company's shareholders when
compared to the Merger, and (3) MFC's Board of Directors
determines upon the advice of its legal counsel that if they
failed to recommend such offer or accept such proposal then
such failure would be likely to result in a breach of the
directors' fiduciary duties; provided, however, that MFC may
not terminate the Agreement pursuant to this Section 7.1(f)
until the expiration of five business days after written
notice of any such offer or proposal referenced in this
Section 7.1(f) has been delivered to FBS, together with a
summary of the terms of any such offer or proposal;
(g) by FBS if, after the date hereof, any Person shall
have commenced (as such term is used in Rule 14d-2(b) under
the 1934 Act) a bona fide tender offer or exchange offer to
acquire at least 20% of the then outstanding shares of MFC
Common Stock, or if the Board of Directors of MFC shall have
withdrawn, modified or changed its recommendation of this
Agreement or the Merger; or
(h) by FBS if after the date hereof, there shall have
occurred a "Subsequent Triggering Event" as defined in the
Stock Option Agreement.
Any party desiring to terminate this Agreement shall
give written notice of such termination and the reasons
therefor to the other party.
7.2. Effect of Termination. If this Agreement is
terminated as permitted by Section 7.1, such termination
shall be without liability or obligation of any party (or
any shareholder, officer, employee, agent, consultant or
representative of such party) to any other party to this
Agreement, except (a) that if such termination is (i) by MFC
pursuant to (A) Section 7.1(b) as a result of a failure of
<PAGE>
the condition contained in Section 6.2(g), or (B)
Section 7.1(f) or (ii) by FBS pursuant to (A)
Section 7.1(g), (B) Section 7.1(h), or (C) Section 7.1(b) as
a result of the failure of the condition contained in
Section 6.3(a) because of the willful and material breach by
MFC of any obligation, agreement or covenant referred to
therein (a "willful and material" breach for the purposes
of this Section 7.2 shall be deemed to have occurred if MFC
has intentionally and knowingly taken, or intentionally and
knowingly failed to take, any action which causes such
breach), then MFC shall pay to FBS within three business
days of such termination, a termination fee of $35,000,000
by wire transfer in immediately available funds to an
account designated by FBS, (b) as may be otherwise provided
in law or in equity, and (c) except as provided in
Section 8.6.
7.3. Amendment. This Agreement may not be amended
except by an instrument in writing approved by the parties
to this Agreement and signed on behalf of each of the
parties hereto.
7.4. Waiver. At any time prior to the Effective Date,
any party hereto may (a) extend the time for the performance
of any of the obligations or other acts of any other party
hereto or (b) waive compliance with any of the agreements of
any other party or with any conditions to its own
obligations, in each case only to the extent such
obligations, agreements and conditions are intended for its
benefit.
ARTICLE 8
GENERAL PROVISIONS
8.1. Public Statements. Neither MFC nor FBS shall
make any public announcement or statement with respect to
the Merger, this Agreement or any related transactions
without the approval of the other party; provided, however,
that either FBS or MFC may, upon reasonable notice to the
other party, make any public announcement or statement that
it believes is required by federal securities law. To the
extent practicable, each of FBS and MFC will consult with
the other with respect to any such public announcement or
statement.
8.2. Notices. All notices and other communications
hereunder shall be in writing and shall be sufficiently
given if made by hand delivery, by fax, by telecopier, by
overnight delivery service, or by registered or certified
mail (postage prepaid and return receipt requested) to the
parties at the following addresses (or at such other address
for a party as shall be specified by it by like notice):
if to FBS:
First Bank System, Inc.
First Bank Place
601 Second Avenue South
Minneapolis, Minnesota 55402-4302
Attention: Richard A. Zona, Vice Chairman
and Chief Financial Officer
Fax: (612) 973-0410
<PAGE>
with a copy to:
Dorsey & Whitney
220 South Sixth Street
Minneapolis, Minnesota 55402
Attention: Lee R. Mitau, Esq.
Fax: (612) 340-8738
if to MFC:
Metropolitan Financial Corporation
1000 South Seventh Street
Minneapolis, Minnesota 55402
Attention: Norman M. Jones, Chairman
Fax: (612) 339-6011
with a copy to:
Oppenheimer Wolff & Donnelly
3400 Plaza VII Building
45 South Seventh Street
Minneapolis, Minnesota 55402
Attention: Bruce A. Machmeier, Esq.
Fax: (612) 344-9376
All such notices and other communications shall be
deemed to have been duly given as follows: when delivered by
hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if delivered
by mail; when receipt acknowledged, if faxed or telecopied;
and the next day after being delivered to an overnight
delivery service.
8.3. Interpretation. When a reference is made in this
Agreement to subsidiaries of FBS, the word "subsidiary"
means any "majority-owned subsidiary" (as defined in Rule
12b-2 under the 1934 Act) of FBS, as the context requires;
provided, however, that neither MFC nor any of the
Subsidiaries shall at any time be considered a subsidiary of
FBS for purposes of this Agreement. The headings contained
in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this
Agreement. References to Sections and Articles refer to
Sections and Articles of this Agreement unless otherwise
stated. Words such as "herein," "hereinafter,"
"hereof," "hereto," "hereby" and "hereunder," and
words of like import, unless the context requires otherwise,
refer to this Agreement (including the Exhibits and
Schedules hereto). As used in this Agreement, the
masculine, feminine and neuter genders shall be deemed to
include the others if the context requires.
<PAGE>
8.4. Severability. If any term, provision, covenant
or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force
and effect and shall in no way be affected, impaired or
invalidated, and the parties shall negotiate in good faith
to modify this Agreement and to preserve each party's
anticipated benefits under this Agreement.
8.5. Miscellaneous. This Agreement (together with all
other documents and instruments referred to herein):
(a) constitutes the entire agreement, and supersedes all
other prior agreements and undertakings, both written and
oral, among the parties, with respect to the subject matter
hereof; (b) is not intended to confer upon any person other
than each party hereto any rights or remedies hereunder,
except as provided in Section 5.15; (c) shall be governed in
all respects, including validity, interpretation and effect,
by the internal laws of the State of Minnesota, without
giving effect to the principles of conflict of laws thereof;
(d) shall not be assigned by operation of law or otherwise.
This Agreement may be executed in two or more counterparts
which together shall constitute a single agreement.
8.6. Survival of Representations, Warranties and
Covenants. The representations and warranties of the
parties set forth herein shall not survive the consummation
of the Merger, but covenants that specifically relate to
periods, activities or obligations subsequent to the Merger
shall survive the Merger. In addition, if this Agreement is
terminated pursuant to Section 7.1, the covenants contained
in Sections 5.4, 5.7(c) and 7.2 shall survive such
termination.
8.7. Schedules. The Schedules referred to in this
Agreement shall be delivered as of the date hereof under
cover of a letter from the Chief Executive Officer of MFC.
<PAGE>
IN WITNESS WHEREOF, FBS and MFC have caused this
Agreement to be executed on the date first written above by
their respective officers.
FIRST BANK SYSTEM, INC.
By John F. Grundhofer
Its Chairman, President and
Chief Executive
METROPOLITAN FINANCIAL
CORPORATION
By Norman M. Jones
Its Chairman of the Board and
Chief Executive Officer
<PAGE>
[Not a part of agreement]
EXHIBITS AND SCHEDULES TO
AGREEMENT OF MERGER AND CONSOLIDATION
DATED JULY 21, 1994, BY AND BETWEEN
FIRST BANK SYSTEM, INC. AND
METROPOLITAN FINANCIAL CORPORATION
Exhibit or Reference in
Schedule Subject Agreement
- ---------- ------- ------------
Exhibit A Affiliate Letter Section 5.10
Exhibit B Amendments to Change Section
in Control Severance 5.12(b)(iii)
Pay Plan
Schedules A & B Subsidiaries Recitals
Schedules 3.1, Disclosure Schedules Article 3
3.2, 3.3, 3.4,
3.5, 3.6, 3.8,
3.9, 3.11, 3.12,
3.13, 3.14, 3.15,
3.16, 3.17, 3.18,
3.19, 3.20, 3.21
and 3.27
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated July 21, 1994
between FIRST BANK SYSTEM, INC., a Delaware corporation
("Grantee"), and METROPOLITAN FINANCIAL CORPORATION, a
Delaware corporation ("Issuer").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an
Agreement of Merger and Consolidation of even date herewith
(the "Merger Agreement"), which agreement has been executed
by the parties hereto immediately prior to this Agreement;
and
WHEREAS, as a condition and inducement to
Grantee's entering into the Merger Agreement and in
consideration therefor, Issuer has agreed to grant Grantee
the Option (as hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing
and the mutual covenants and agreements set forth herein
and in the Merger Agreement, the parties hereto agree as
follows:
1. (a) Issuer hereby grants to Grantee an
unconditional, irrevocable option (the "Option") to
purchase, subject to the terms hereof, up to 6,209,304
fully paid and nonassessable shares of the common stock,
$.01 par value, of Issuer ("Common Stock") at a price of
$24.66 per share; provided, however, that in the event
Issuer issues or agrees to issue any shares of Common Stock
at a price less than $24.66 per share (as adjusted pursuant
to subsection (b) of Section 5) other than in connection
with the options, rights or plans disclosed on Schedule 3.3
to the Merger Agreement, such price shall be equal to such
lesser price (such price, as adjusted if applicable, the
"Option Price"); provided further that in no event shall
the number of shares for which this Option is exercisable
exceed 19.9% of the issued and outstanding shares of Common
Stock. The number of shares of Common Stock that may be
received upon the exercise of the Option and the Option
Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares
of Common Stock are issued or otherwise become outstanding
after the date of this Agreement (other than pursuant to
this Agreement), the number of shares of Common Stock
subject to the Option shall be increased so that, after
such issuance, it equals 19.9% of the number of shares of
Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the
Option. Nothing contained in this Section 1(b) or
elsewhere in this Agreement shall be deemed to authorize
Issuer or Grantee to breach any provision of the Merger
Agreement.
2. (a) The Holder (as hereinafter defined)
may exercise the Option, in whole or part, if, but only if,
both an Initial Triggering Event (as hereinafter defined)
and a Subsequent Triggering Event (as hereinafter defined)
shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined), provided that
the Holder shall have sent the written notice of such
exercise (as provided in subsection (e) of this Section 2)
within 12 months following such Subsequent Triggering Event
(or such later period as provided in Section 10). Each of
the following shall be an Exercise Termination Event: (i)
the Effective Date of the Merger; (ii) termination of the
Merger Agreement in accordance with the provisions thereof
if such termination occurs prior to the occurrence of an
Initial Triggering Event; (iii) termination of the Merger
Agreement either (a) pursuant to Section 7.1(e) thereof, or
(b) by Grantee solely as a result of failure of one or more
of the conditions set forth in Sections 6.1(a), 6.1(b),
6.1(c), 6.1(g), 6.3(e), 6.3(h), 6.3(i) or 6.3(k) or
pursuant to Section 7.1(c) (as a result of failure of
Grantee's shareholders to approve the Merger) or Section
7.1(d) (as a result of failure to consummate the Merger on
or before the date specified therein) if neither Issuer nor
any of its affiliates, officers, directors, employees or
agents shall have taken any actions that have contributed
in any way, either directly or indirectly, to any such
failure; or (iv) the passage of 12 months (or such longer
period as provided in Section 10) after termination of the
Merger Agreement (other than any termination of the Merger
Agreement covered by the immediately preceding clause
(iii)) if such termination follows the occurrence of an
Initial Triggering Event (provided that if an Initial
Triggering Event continues or occurs beyond such
termination, the Exercise Termination Event shall be 12
months (or such longer period as provided in Section 10)
from the expiration of the Last Triggering Event but in no
event more than 18 months (or such longer period as
provided in Section 10) after such termination). The
"Last Triggering Event" shall mean the last Initial
Triggering Event to occur. The term "Holder" shall mean the
holder or holders of the Option.
(b) The term "Initial Triggering Event"
shall mean any of the following events or transactions
occurring after the date hereof:
(i) Issuer or any of its
Subsidiaries (as hereinafter defined) (each an
"Issuer Subsidiary"), without having received
Grantee's prior written consent, shall have
entered into an agreement to engage in an
Acquisition Transaction (as hereinafter defined)
with any person (the term "person" for purposes
of this Agreement having the meaning assigned
thereto in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934 (the "1934 Act"),
and the rules and regulations thereunder) other
than Grantee or any of its Subsidiaries (each a
"Grantee Subsidiary") or the Board of Directors
of Issuer shall have recommended that the
shareholders of Issuer approve or accept any
Acquisition Transaction other than as
contemplated by the Merger Agreement or this
Agreement. For purposes of this Agreement,
(a) "Acquisition Transaction" shall mean (x) a
<PAGE>
merger or consolidation, or any similar
transaction, involving Issuer or any Significant
Subsidiary (as defined in Rule 1-02 of Regulation
S-X promulgated by the Securities and Exchange
Commission (the "SEC")) of Issuer, (y) a
purchase, lease or other acquisition of all or
substantially all of the assets or deposits of
Issuer or any Significant Subsidiary of Issuer,
or (z) a purchase or other acquisition (including
by way of merger, consolidation, share exchange
or otherwise) of securities representing 10% or
more of the voting power of Issuer or any
Significant Subsidiary of Issuer, and (b)
"Subsidiary" shall have the meaning set forth
in Rule 12b-2 under the 1934 Act;
(ii) Any person other than Grantee or any
Grantee Subsidiary shall have acquired beneficial
ownership or the right to acquire beneficial
ownership of 10% or more of the outstanding
shares of Common Stock (the term "beneficial
ownership" for purposes of this Agreement having
the meaning assigned thereto in Section 13(d) of
the 1934 Act, and the rules and regulations
thereunder);
(iii) The shareholders of the Issuer shall
not have approved the transactions contemplated
by the Merger Agreement at the meeting held for
that purpose or any adjournment thereof, or such
meeting shall not have been held or shall have
been cancelled prior to termination of the Merger
Agreement, or Issuer's Board of Directors shall
have withdrawn or modified (or publicly announced
its intention to withdraw or modify or interest
in withdrawing or modifying) its recommendation
that the shareholders of Issuer approve the
transactions contemplated by the Merger
Agreement, or Issuer or any Issuer Subsidiary,
without having received Grantee's prior written
consent, shall have authorized, recommended,
proposed (or publicly announced its intention to
authorize, recommend or propose or interest in
authorizing, recommending or proposing) an
agreement to engage in an Acquisition Transaction
with any person other than Grantee or a Grantee
Subsidiary;
(iv) Any person other than Grantee or any
Grantee Subsidiary shall have made a bona fide
proposal to Issuer or its shareholders by public
announcement or written communication that is or
becomes the subject of public disclosure to
engage in an Acquisition Transaction;
(v) Issuer shall have breached any
covenant or obligation contained in the Merger
Agreement and such breach would entitle Grantee
to terminate the Merger Agreement;
<PAGE>
(vi) Any person other than Grantee or any
Grantee Subsidiary, other than in connection with
a transaction to which Grantee has given its
prior written consent, shall have filed an
application or notice with the Federal Reserve
Board, the Office of Thrift Supervision ("OTS")
or other federal or state bank regulatory
authority, which application or notice has been
accepted for processing, for approval to engage
in an Acquisition Transaction; or
(vii) Issuer shall have terminated the
Merger Agreement pursuant to Section 7.1(b) by
reason of the failure of Issuer's condition set
forth in Section 6.2(g) or pursuant to Section
7.1(f).
(c) The term "Subsequent Triggering Event" shall
mean any of the following events or transactions occurring
after the date hereof:
(i) The acquisition by any person of
beneficial ownership of 20% or more of the then
outstanding Common Stock; or
(ii) The occurrence of the Initial
Triggering Event described in clause (i) of subsection (b)
of this Section 2, except that the percentage referred to
in clause (z) shall be 20%.
(d) Issuer shall notify Grantee promptly in
writing of the occurrence of any Initial Triggering Event
or Subsequent Triggering Event (together, a "Triggering
Event"), it being understood that the giving of such notice
by Issuer shall not be a condition to the right of the
Holder to exercise the Option.
(e) In the event the Holder is entitled to and
wishes to exercise the Option, it shall send to Issuer a
written notice (the date of which being herein referred to
as the "Notice Date") specifying (i) the total number of
shares it will purchase pursuant to such exercise and (ii)
a place and date not earlier than three business days nor
later than 60 business days from the Notice Date for the
closing of such purchase (the "Closing Date"); provided
that if prior notification to or approval of the Federal
Reserve Board, the OTS or any other regulatory agency is
required in connection with such purchase, the Holder shall
promptly file the required notice or application for
approval, shall promptly notify the Issuer of such filing,
and shall expeditiously process the same and the period of
time that otherwise would run pursuant to this sentence
shall run instead from the date on which any required
notification periods have expired or been terminated or
such approvals have been obtained and any requisite waiting
period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating
thereto.
<PAGE>
(f) At the closing referred to in subsection (e)
of this Section 2, the Holder shall pay to Issuer the
aggregate purchase price for the shares of Common Stock
purchased pursuant to the exercise of the Option in
immediately available funds by wire transfer to a bank
account designated by Issuer, provided that failure or
refusal of Issuer to designate such a bank account shall
not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the
delivery of immediately available funds as provided in
subsection (f) of this Section 2, Issuer shall deliver to
the Holder a certificate or certificates representing the
number of shares of Common Stock purchased by the Holder
and, if the Option should be exercised in part only, a new
Option evidencing the rights of the Holder thereof to
purchase the balance of the shares purchasable hereunder.
(h) Certificates for Common Stock delivered at a
closing hereunder may be endorsed with a restrictive legend
that shall read substantially as follows:
"The transfer of the shares represented by this
certificate is subject to certain provisions of an
agreement between the registered holder hereof and
Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such
agreement is on file at the principal office of Issuer
and will be provided to the holder hereof without
charge upon receipt by Issuer of a written request
therefor."
It is understood and agreed that: (i) the reference to the
resale restrictions of the Securities Act of 1933 (the
"1933 Act") in the above legend shall be removed by
delivery of substitute certificate(s) without such
reference if the Holder shall have delivered to Issuer a
copy of a letter from the staff of the SEC, or an opinion
of counsel, in form and substance satisfactory to Issuer,
to the effect that such legend is not required for purposes
of the 1933 Act; (ii) the reference to the provisions of
this Agreement in the above legend shall be removed by
delivery of substitute certificate(s) without such
reference if the shares have been sold or transferred in
compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its
entirety if the conditions in the preceding clauses (i) and
(ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of
the written notice of exercise of the Option provided for
under subsection (e) of this Section 2 and the tender of
the applicable purchase price in immediately available
funds, the Holder shall be deemed to be the holder of
record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then be
actually delivered to the Holder. Issuer shall pay all
<PAGE>
expenses, and any and all United States federal, state and
local taxes and other charges that may be payable in
connection with the preparation, issue and delivery of
stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all
times maintain, free from preemptive rights, sufficient
authorized but unissued or treasury shares of Common Stock
so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all
other options, warrants, convertible securities and other
rights to purchase Common Stock; (ii) that it will not, by
charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other
voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or
conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time
be required (including (x) complying with all premerger
notification, reporting and waiting period requirements
specified in 15 U.S.C. 18a and regulations promulgated
thereunder and (y) in the event, under the Bank Holding
Company Act of 1956, as amended, or the Home Owners Loan
Act, as amended, or any state or other federal banking law,
prior approval of or notice to the Federal Reserve Board,
the OTS or to any state or other federal regulatory
authority is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such
applications or notices and providing such information to
the Federal Reserve Board, the OTS or such state or other
federal regulatory authority as they may require) in order
to permit the Holder to exercise the Option and Issuer duly
and effectively to issue shares of Common Stock pursuant
hereto; and (iv) promptly to take all action provided
herein to protect the rights of the Holder against
dilution.
4. This Agreement (and the Option granted
hereby) are exchangeable, without expense, at the option of
the Holder, upon presentation and surrender of this
Agreement at the principal office of the Issuer, for other
Agreements providing for Options of different denominations
entitling the holder thereof to purchase, on the same terms
and subject to the same conditions as are set forth herein,
in the aggregate the same number of shares of Common Stock
purchasable hereunder. The terms "Agreement" and "Option"
as used herein include any Agreements and related Options
for which this Agreement (and the Option granted hereby)
may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the
case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date.
Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part
of Issuer, whether or not the Agreement so lost, stolen,
destroyed or mutilated shall at any time be enforceable by
anyone.
<PAGE>
5. In addition to the adjustment in the number
of shares of Common Stock that are purchasable upon
exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable
upon the exercise of the Option shall be subject to
adjustment from time to time as provided in this Section 5.
(a) In the event of any change in Common
Stock by reason of stock dividends, split-ups,
mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares or the
like, the type and number of shares of Common Stock
purchasable upon exercise hereof shall be
appropriately adjusted and proper provision shall be
made so that, in the event that any additional shares
of Common Stock are to be issued or otherwise become
outstanding as a result of any such change (other than
pursuant to an exercise of the Option), the number of
shares of Common Stock that remain subject to the
Option shall be increased so that, after such issuance
and together with shares of Common Stock previously
issued pursuant to the exercise of the Option (as
adjusted on account of any of the foregoing changes in
the Common Stock), it equals 19.9% of the number of
shares of Common Stock then issued and outstanding.
(b) Whenever the number of shares of Common
Stock purchasable upon exercise hereof is adjusted as
provided in this Section 5, the Option Price shall be
adjusted by multiplying the Option Price by a
fraction, the numerator of which shall be equal to the
number of shares of Common Stock purchasable prior to
the adjustment and the denominator of which shall be
equal to the number of shares of Common Stock
purchasable after the adjustment.
6. Upon the occurrence of a Subsequent
Triggering Event that occurs prior to an Exercise
Termination Event, Issuer shall, at the request of Grantee
delivered within 12 months (or such later period as
provided in Section 10) of such Subsequent Triggering Event
(whether on its own behalf or on behalf of any subsequent
holder of this Option (or part thereof) or any of the
shares of Common Stock issued pursuant hereto), promptly
prepare, file and keep current a registration statement
under the 1933 Act covering any shares issued and issuable
pursuant to this Option and shall use its best efforts to
cause such registration statement to become effective and
remain current in order to permit the sale or other
disposition of any shares of Common Stock issued upon total
or partial exercise of this Option ("Option Shares") in
accordance with any plan of disposition requested by
Grantee. Issuer will use its best efforts to cause such
registration statement first to become effective and then
to remain effective for such period not in excess of 180
days from the day such registration statement first becomes
effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions.
Grantee shall have the right to demand two such
registrations. The Issuer shall bear the costs of such
registrations (including, but not limited to, attorneys'
fees, printing costs and filing fees). The foregoing
notwithstanding, if, at the time of any request by Grantee
<PAGE>
for registration of Option Shares as provided above, Issuer
is in registration with respect to an underwritten public
offering of shares of Common Stock, and if in the good
faith judgment of the managing underwriter or managing
underwriters, or, if none, the sole underwriter or
underwriters, of such offering the inclusion of the Option
Shares would interfere with the successful marketing of the
shares of Common Stock offered by Issuer, the number of
Option Shares otherwise to be covered in the registration
statement contemplated hereby may be reduced; provided,
however, that after any such required reduction the number
of Option Shares to be included in such offering for the
account of the Holder shall constitute at least 25% of the
total number of shares to be sold by the Holder and Issuer
in the aggregate; and provided further, however, that if
such reduction occurs, then the Issuer shall file a
registration statement for the balance as promptly as
practicable thereafter as to which no reduction pursuant to
this Section 6 shall be permitted or occur and the Holder
shall thereafter be entitled to one additional
registration. Each such Holder shall provide all
information reasonably requested by Issuer for inclusion in
any registration statement to be filed hereunder. If
requested by any such Holder in connection with such
registration, Issuer shall become a party to any
underwriting agreement relating to the sale of such shares,
but only to the extent of obligating itself in respect of
representations, warranties, indemnities and other
agreements customarily included in such underwriting
agreements for Issuer. Upon receiving any request under
this Section 6 from any Holder, Issuer agrees to send a
copy thereof to any other person known to Issuer to be
entitled to registration rights under this Section 6, in
each case by promptly mailing the same, postage prepaid, to
the address of record of the persons entitled to receive
such copies.
7. (a) Upon the occurrence of a Subsequent
Triggering Event that occurs prior to an Exercise
Termination Event, (i) at the request of the Holder,
delivered within 12 months of such occurrence (or such
later period as provided in Section 10), Issuer shall
repurchase the Option from the Holder at a price (the
"Option Repurchase Price") equal to (x) the amount by which
(A) the market/offer price (as defined below) exceeds (B)
the Option Price, multiplied by the number of shares for
which this Option may then be exercised plus (y) Grantee's
Out-of-Pocket Expenses (as defined below) (to the extent
not previously reimbursed), and (ii) at the request of the
owner of Option Shares from time to time (the "Owner"),
delivered within 12 months of such occurrence (or such
later period as provided in Section 10), Issuer shall
repurchase such number of the Option Shares from the Owner
as the Owner shall designate at a price (the "Option Share
Repurchase Price") equal to (x) the market/offer price
multiplied by the number of Option Shares so designated
plus (y) Grantee's Out-of-Pocket Expenses (to the extent
not previously reimbursed). The term "Out-of-Pocket
Expenses" shall mean Grantee's reasonable out-of-pocket
expenses incurred in connection with the transactions
contemplated by the Merger Agreement, including without
limitation legal, accounting and consulting fees. The term
"market/offer price" shall mean the highest of (i) the
price per share of Common Stock at which a tender or
exchange offer therefor has been made, (ii) the price per
share of Common Stock to be paid by any third party
pursuant to an agreement with Issuer, (iii) the highest
<PAGE>
closing price for shares of Common Stock within the six-
month period immediately preceding the date the Holder
gives notice of the required repurchase of this Option or
the Owner gives notice of the required repurchase of Option
Shares, as the case may be, or (iv) in the event of a sale
of all or substantially all of Issuer's assets or deposits,
the sum of the price paid in such sale for such assets or
deposits and the current market value of the remaining
assets of Issuer as determined by a nationally recognized
investment banking firm selected by the Holder or the
Owner, as the case may be, divided by the number of shares
of Common Stock of Issuer outstanding at the time of such
sale. In determining the market/offer price, the value of
consideration other than cash shall be determined by a
nationally recognized investment banking firm selected by
the Holder or Owner, as the case may be.
(b) its right to require Issuer to
repurchase the Option and any Option Shares pursuant to
this Section 7 by surrendering for such purpose to Issuer,
at its principal office, a copy of this Agreement or
certificates for Option Shares, as applicable, accompanied
by a written notice or notices stating that the Holder or
the Owner, as the case may be, elects to require Issuer to
repurchase this Option and/or the Option Shares in
accordance with the provisions of this Section 7. As
promptly as practicable, and in any event within five
business days after the surrender of the Option and/or
certificates representing Option Shares and the receipt of
such notice or notices relating thereto, Issuer shall
deliver or cause to be delivered to the Holder the Option
Repurchase Price and/or to the Owner the Option Share
Repurchase Price therefor or the portion thereof that
Issuer is not then prohibited under applicable law and
regulation from so delivering.
(c) To the extent that Issuer is prohibited
under applicable law or regulation, or as a consequence of
administrative policy, from repurchasing the Option and/or
the Option Shares in full, Issuer shall immediately so
notify the Holder and/or the Owner and thereafter deliver
or cause to be delivered, from time to time, to the Holder
and/or the Owner, as appropriate, the portion of the Option
Repurchase Price and the Option Share Repurchase Price,
respectively, that it is no longer prohibited from
delivering, within five business days after the date on
which Issuer is no longer so prohibited; provided, however,
that if Issuer at any time after delivery of a notice of
repurchase pursuant to paragraph (b) of this Section 7 is
prohibited under applicable law or regulation, or as a
consequence of administrative policy, from delivering to
the Holder and/or the Owner, as appropriate, the Option
Repurchase Price and the Option Share Repurchase Price,
respectively, in full (and Issuer hereby undertakes to use
its best efforts to obtain all required regulatory and
legal approvals and to file any required notices as
promptly as practicable in order to accomplish such
repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option or the Option Shares whether in
whole or to the extent of the prohibition, whereupon, in
the latter case, Issuer shall promptly (i) deliver to the
Holder and/or the Owner, as appropriate, that portion of
the Option Purchase Price or the Option Share Repurchase
Price that Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Holder, a
<PAGE>
new Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by
multiplying the number of shares of Common Stock for which
the surrendered Agreement was exercisable at the time of
delivery of the notice of repurchase by a fraction, the
numerator of which is the Option Repurchase Price less the
portion thereof theretofore delivered to the Holder and the
denominator of which is the Option Repurchase Price, or (B)
to the Owner, a certificate for the Option Shares it is
then so prohibited from repurchasing. If an Exercise
Termination Event shall have occurred prior to the date of
the notice by Issuer described in the first sentence of
this subsection (c), or shall be scheduled to occur at any
time before the expiration of a period ending on the
thirtieth day after such date, the Holder shall nonetheless
have the right to exercise the Option until the expiration
of such 30-day period.
8. (a) In the event that prior to an
Exercise Termination Event, Issuer shall enter into an
agreement (i) to consolidate with or merge into any person,
other than Grantee or a Grantee Subsidiary, and shall not
be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other
than Grantee or a Grantee Subsidiary, to merge into Issuer
and Issuer shall be the continuing or surviving
corporation, but, in connection with such merger, the then
outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other person
or cash or any other property or the then outstanding
shares of Common Stock shall after such merger represent
less than 50% of the outstanding shares and share
equivalents of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its or any
Significant Subsidiary's assets or deposits to any person,
other than Grantee or a Grantee Subsidiary, then, and in
each such case, the agreement governing such transaction
shall make proper provision so that the Option shall, upon
the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or
exchanged for, an option (the "Substitute Option"), at
the election of the Holder, of either (x) the Acquiring
Corporation (as hereinafter defined) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings
indicated:
(i) "Acquiring Corporation" shall
mean (i) the continuing or surviving corporation
of a consolidation or merger with Issuer (if
other than Issuer), (ii) Issuer in a merger in
which Issuer is the continuing or surviving
person, and (iii) the transferee of all or
substantially all of Issuer's assets or deposits
(or the assets or deposits of a Significant
Subsidiary of Issuer).
(ii) "Substitute Common Stock" shall
mean the common stock issued by the issuer of the
Substitute Option upon exercise of the Substitute
Option.
<PAGE>
(iii) "Assigned Value" shall mean
the market/offer price, as defined in Section 7.
(iv) "Average Price" shall mean the
average closing price of a share of the
Substitute Common Stock for one year immediately
preceding the consolidation, merger or sale in
question, but in no event higher than the closing
price of the shares of Substitute Common Stock on
the day preceding such consolidation, merger or
sale; provided that if Issuer is the issuer of
the Substitute Option, the Average Price shall be
computed with respect to a share of common stock
issued by the person merging into Issuer or by
any company which controls or is controlled by
such person, as the Holder may elect.
(c) The Substitute Option shall have the
same terms as the Option, provided, that if the terms of
the Substitute Option cannot, for legal reasons, be the
same as the Option, such terms shall be as similar as
possible and in no event less advantageous to the Holder.
The issuer of the Substitute Option shall also enter into
an agreement with the then Holder or Holders of the
Substitute Option in substantially the same form as this
Agreement (after giving effect for such purpose to the
provisions of Section 9), which agreement shall be
applicable to the Substitute Option.
(d) The Substitute Option shall be
exercisable for such number of shares of Substitute Common
Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option is
then exercisable, divided by the Average Price. The
exercise price of the Substitute Option per share of
Substitute Common Stock shall then be equal to the Option
Price multiplied by a fraction, the numerator of which
shall be the number of shares of Common Stock for which the
Option is then exercisable and the denominator of which
shall be the number of shares of Substitute Common Stock
for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the
foregoing paragraphs, shall the Substitute Option be
exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option
would be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise but
for this clause (e), the issuer of the Substitute Option
(the "Substitute Option Issuer") shall make a cash
payment to Holder equal to the excess of (i) the value of
the Substitute Option without giving effect to the
limitation in this clause (e) over (ii) the value of the
Substitute Option after giving effect to the limitation in
this clause (e). This difference in value shall be
determined by a nationally recognized investment banking
firm selected by the Holder.
(f) Issuer shall not enter into any
transaction described in subsection (a) of this Section 8
unless the Acquiring Corporation and any person that
<PAGE>
controls the Acquiring Corporation assume in writing all
the obligations of Issuer hereunder.
9. (a) At the request of the holder of the
Substitute Option (the "Substitute Option Holder"), the
issuer of the Substitute Option (the "Substitute Option
Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute
Option Repurchase Price") equal to (x) the amount by which
(i) the Highest Closing Price (as hereinafter defined)
exceeds (ii) the exercise price of the Substitute Option,
multiplied by the number of shares of Substitute Common
Stock for which the Substitute Option may then be exercised
plus (y) Grantee's Out-of-Pocket Expenses (to the extent
not previously reimbursed), and at the request of the owner
(the "Substitute Share Owner") of shares of Substitute
Common Stock (the "Substitute Shares"), the Substitute
Option Issuer shall repurchase the Substitute Shares at a
price (the "Substitute Share Repurchase Price") equal to
(x) the Highest Closing Price multiplied by the number of
Substitute Shares so designated plus (y) Grantee's Out-of-
Pocket Expenses (to the extent not previously reimbursed).
The term "Highest Closing Price" shall mean the highest
closing price for shares of Substitute Common Stock within
the six-month period immediately preceding the date the
Substitute Option Holder gives notice of the required
repurchase of the Substitute Option or the Substitute Share
Owner gives notice of the required repurchase of the
Substitute Shares, as applicable.
(b) The Substitute Option Holder and the
Substitute Share Owner, as the case may be, may exercise
its respective right to require the Substitute Option
Issuer to repurchase the Substitute Option and the
Substitute Shares pursuant to this Section 9 by
surrendering for such purpose to the Substitute Option
Issuer, at its principal office, the agreement for such
Substitute Option (or, in the absence of such an agreement,
a copy of this Agreement) and certificates for Substitute
Shares accompanied by a written notice or notices stating
that the Substitute Option Holder or the Substitute Share
Owner, as the case may be, elects to require the Substitute
Option Issuer to repurchase the Substitute Option and/or
the Substitute Shares in accordance with the provisions of
this Section 9. As promptly as practicable and in any event
within five business days after the surrender of the
Substitute Option and/or certificates representing
Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Issuer shall
deliver or cause to be delivered to the Substitute Option
Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase
Price therefor or the portion thereof which the Substitute
Option Issuer is not then prohibited under applicable law
and regulation from so delivering.
(c) To the extent that the Substitute
Option Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy,
from repurchasing the Substitute Option and/or the
Substitute Shares in part or in full, the Substitute Option
Issuer shall immediately so notify the Substitute Option
Holder and/or the Substitute Share Owner and thereafter
deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner,
<PAGE>
as appropriate, the portion of the Substitute Share
Repurchase Price, respectively, which it is no longer
prohibited from delivering, within five business days after
the date on which the Substitute Option Issuer is no longer
so prohibited; provided, however, that if the Substitute
Option Issuer is at any time after delivery of a notice of
repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or regulation, or as a
consequence of administrative policy, from delivering to
the Substitute Option Holder and/or the Substitute Share
Owner, as appropriate, the Substitute Option Repurchase
Price and the Substitute Share Repurchase Price,
respectively, in full (and the Substitute Option Issuer
shall use its best efforts to receive all required
regulatory and legal approvals as promptly as practicable
in order to accomplish such repurchase), the Substitute
Option Holder or Substitute Share Owner may revoke its
notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of
prohibition, whereupon, in the latter case, the Substitute
Option Issuer shall promptly (i) deliver to the Substitute
Option Holder or Substitute Share Owner, as appropriate,
that portion of the Substitute Option Repurchase Price or
the Substitute Share Repurchase Price that the Substitute
Option Issuer is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to the Substitute
Option Holder, a new Substitute Option evidencing the right
of the Substitute Option Holder to purchase that number of
shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common
Stock for which the surrendered Substitute Option was
exercisable at the time of delivery of the notice of
repurchase by a fraction, the numerator of which is the
Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and
the denominator of which is the Substitute Option
Repurchase Price, or (B) to the Substitute Share Owner, a
certificate for the Substitute Option Shares it is then so
prohibited from repurchasing. If an Exercise Termination
Event shall have occurred prior to the date of the notice
by the Substitute Option Issuer described in the first
sentence of this subsection (c), or shall be scheduled to
occur at any time before the expiration of a period ending
on the thirtieth day after such date, the Substitute Option
Holder shall nevertheless have the right to exercise the
Substitute Option until the expiration of such 30-day
period.
10. The 30-day, 12-month or 18-month periods for
exercise of certain rights under Sections 2, 6, 7, 9 and 12
shall be extended: (i) to the extent necessary to obtain
all regulatory approvals for the exercise of such rights
(for so long as the Holder is using commercially reasonable
efforts to obtain such regulatory approvals), and for the
expiration of all statutory waiting periods; and (ii) to
the extent necessary to avoid liability under Section 16(b)
of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to
Grantee as follows:
(a) Issuer has full corporate power and
authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the
<PAGE>
consummation of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors
of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered
by Issuer. This Agreement is the valid and legally binding
obligation of Issuer.
(b) Issuer has taken all necessary
corporate action to authorize and reserve and to permit it
to issue, and at all times from the date hereof through the
termination of this Agreement in accordance with its terms
will have reserved for issuance upon the exercise of the
Option, that number of shares of Common Stock equal to the
maximum number of shares of Common Stock at any time and
from time to time issuable hereunder, and all such shares,
upon issuance pursuant thereto, will be duly authorized,
validly issued, fully paid, nonassessable, and will be
delivered free and clear of all claims, liens, encumbrance
and security interests and not subject to any preemptive
rights.
12. Neither of the parties hereto may assign any
of its rights or obligations under this Agreement or the
Option created hereunder to any other person, without the
express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred
prior to an Exercise Termination Event, Grantee, subject to
the express provisions hereof, may assign in whole or in
part its rights and obligations hereunder within 12 months
following such Subsequent Triggering Event (or such later
period as provided in Section 10); provided, however, that
until the date 30 days following the date on which the
Federal Reserve Board and OTS have approved applications by
Grantee to acquire the shares of Common Stock subject to
the Option, Grantee may not assign its rights under the
Option except in (i) a widely dispersed public
distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2% of the
voting shares of Issuer, (iii) an assignment to a single
party (e.g., a broker or investment banker) for the purpose
of conducting a widely dispersed public distribution on
Grantee's behalf, or (iv) any other manner approved by the
Federal Reserve Board and OTS.
13. If the Grantee has been paid the termination
fee provided for in the Merger Agreement (the "Termination
Fee") and at any time receives any Net Realized Cash (as
defined below) under this Agreement, then Grantee shall be
obligated, as provided in this Section 13, to reimburse
such Termination Fee, but only up to the amount of Net
Realized Cash received by the Grantee. The term "Net
Realized Cash" shall mean: (i) any cash proceeds received
on sale or other disposition of Option Shares (or on sale
or other disposition of other consideration received in
exchange for such Option Shares), net of all related
commissions, fees, underwriting discounts, costs and
expenses; (ii) any Option Repurchase Price paid pursuant to
Section 7 hereof; and (iii) any cash proceeds received in
exchange for sale or other disposition of the Option (or
upon sale or other disposition of other consideration
received in exchange for such Option), net of all related
commissions, fees, underwriting discounts, costs and
expenses. If the Grantee becomes obligated to reimburse
<PAGE>
all or any part of the Termination Fee under this Section
13, Grantee shall do so as soon as practicable upon receipt
of the Net Realized Cash, by wire transfer of immediately
available funds to a bank account designated by Issuer. In
no event shall the aggregate amount payable by Grantee
under this Section 13 exceed the lesser of (x) the amount
of Termination Fee previously received by Grantee and (y)
the amount of Net Realized Cash received by Grantee under
this Agreement.
14. Each of Grantee and Issuer will use its best
efforts to make all filings with, and to obtain consents
of, all third parties and governmental authorities
necessary to the consummation of the transactions
contemplated by this Agreement, including without
limitation applying to the Federal Reserve Board under the
Bank Holding Company Act and the OTS under the Home Owners
Loan Act for approval to acquire the shares issuable
hereunder, but Grantee shall not be obligated to apply to
state banking authorities for approval to acquire the
shares of Common Stock issuable hereunder until such time,
if ever, as it deems appropriate to do so.
15. The parties hereto acknowledge that damages
would be an inadequate remedy for a breach of this
Agreement by either party hereto and that the obligations
of the parties hereto shall be enforceable by either party
hereto through injunctive or other equitable relief.
16. If any term, provision, covenant or
restriction contained in this Agreement is held by a court
or a federal or state regulatory agency of competent
jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions and covenants and
restrictions contained in this Agreement shall remain in
full force and effect, and shall in no way be affected,
impaired or invalidated. If for any reason such court or
regulatory agency determines that the Holder is not
permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares
of Common Stock provided in Section 1(a) hereof (as
adjusted pursuant to Section 1(b) or 5 hereof), it is the
express intention of Issuer to allow the Holder to acquire
or to require Issuer to repurchase such lesser number of
shares as may be permissible, without any amendment or
modification hereof.
17. All notices, requests, claims, demands and
other communications hereunder shall be deemed to have been
duly given when delivered in person, by fax, telecopy, or
by registered or certified mail (postage prepaid, return
receipt requested ) at the respective addresses of the
parties set forth in the Merger Agreement.
18. This Agreement shall be governed by and
construed in accordance with the laws of the State of
Minnesota, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws
thereof.
<PAGE>
19. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the
same agreement.
20. Except as otherwise expressly provided
herein, each of the parties hereto shall bear and pay all
costs and expenses incurred by it or on its behalf in
connection with the transactions contemplated hereunder,
including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel.
21. Except as otherwise expressly provided
herein or in the Merger Agreement, this Agreement contain
the entire agreement between the parties with respect to
the transactions contemplated hereunder and supersedes all
prior arrangements or understandings with respect thereof,
written or oral. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and
permitted assignees. Nothing in this Agreement, expressed
or implied, is intended to confer upon any party, other
than the parties hereto, and their respective successors
except as assignees, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as
expressly provided herein.
22. Capitalized terms used in this Agreement and
not defined herein shall have the meanings assigned thereto
in the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has
caused this Agreement to be executed on its behalf by its
officers thereunto duly authorized, all of the date first
above written.
METROPOLITAN FINANCIAL
CORPORATION
By Norman M. Jones
Its Chairman of the
Board and Chief
Executive Officer
FIRST BANK SYSTEM, INC.
By John F. Grundhofer
Its Chairman, President
and Chief Executive
Officer
FIRST BANK SYSTEM AND METROPOLITAN FINANCIAL
SIGN PURCHASE AGREEMENT
MINNEAPOLIS, July 21, 1994--First Bank System, Inc. (NYSE: FBS) today
announced that it had signed a definitive purchase agreement to acquire
Minneapolis-based Metropolitan Financial Corporation (NYSE: MFC). The
companies previously announced on July 1 that they had signed a letter
of intent. The acquisition is subject to shareholder and regulatory
approvals. The transaction is expected to close in the first quarter
of 1995.
FBS will exchange .6803 shares of First Bank System common stock
for each common share of Metropolitan resulting in a per share price
of $24.66 based upon FBS closing stock price of $36.25 on July 20,
1994. The exchange ratio is subject to change based upon changes in
FBS stock price under certain circumstances. The aggregate purchase
price is approximately $800 million. In its July 1 announcement, FBS
said that upon completion of the due diligence process, it would
establish a definitive exchange ratio that would be between .6803 and
.7347 shares of FBS common stock for each common share of Metropolitan.
The exchange ratio would be adjusted if the average of the closing
prices of FBS common stock is less than $33.00 for the 20 trading days
ending three business days prior to the last date of both companies'
meetings of shareholders. In that event, the exchange ratio would be
multiplied by the quotient of $33.00 divided by the average price. In
addition, if the average
<PAGE>
price is greater than $40.50, the exchange ratio would be adjusted by
multiplying the ratio by the quotient of $40.50 divided by the average
price. Either company can terminate the agreement if the average price
of FBS common stock is less than $29.50. In addition, Metropolitan will
issue to FBS a warrant granting FBS the option to purchase up to 19.9%
of the outstanding shares of Metropolitan common stock under certain
circumstances.
John F. Grundhofer, chairman, president and chief executive officer
of First Bank System said, "FBS has become a high performing company over
the past five years by taking actions that make strategic and financial
sense. This acquisition delivers positive returns to shareholders as
well as a broader line of products and services to Metropolitan
customers." The acquisition adds the states of Nebraska, Iowa, Kansas,
and Wyoming to First Bank System's service area and expands its existing
presence in Minnesota, North Dakota, South Dakota and Wisconsin. The
company expects the acquisition to be accretive to earnings by
approximately 10 cents per share in the first year of operation.
Norman M. Jones, chairman and chief executive officer of Metropolitan
Financial Corporation, will become a member of the FBS Board of Directors
and will serve as chairman of Metropolitan Federal Bank fsb, which will
be renamed First Bank fsb. First Bank fsb will operate under a thrift
charter in selected locations. "This acquisition is in keeping with our
tradition of providing strong shareholder returns," said Jones. "It will
result in more than a 30 percent annualized total rate of return to
shareholders who purchased shares when Metropolitan became a public
company in 1983. Additionally our customers will now have access to a
wider variety of products and services. I am also pleased to join the
First Bank board of directors to be the chairman of their thrift
subsidiary and to continue my involvement in the financial services
industry."
Metropolitan Financial said that it expects to take an estimated
one time, after tax restructuring charge of $45 million prior to the close
as a result of the acquisition
<PAGE>
First Bank System is a regional bank holding company headquarterd in
Minneapolis with assets of $25.9 billion. The company provides complete
financial services to individuals and institutions through nine banks and
other financial services companies with 220 offices primarily in
Minnesota, Colorado, Illinois, Montana, North Dakota, South Dakota, and
Wisconsin.
Metropolitan Financial Corporation is a regional financial services
holding company headquartered in Minneapolis with $8.0 billion in assets
and $5.6 billion in deposits at June 30, 1994. Metropolitan Federal Bank,
fsb, the company's full service consumer savings bank, operates more than
211 offices primarily in North Dakota, Minnesota, Iowa, Nebraska, Kansas,
Wyoming, South Dakota, and Wisconsin. MFC provides real estate brokerage
services in Minnesota and Wisconsin through its Edina Realty, Inc.
subsidiary with 59 locations. The company's Equity Title Services
subsidiary offers title closing services with eight offices in
Minnesota and Wisconsin.
