Item
1.01 Entry into a
Material Definitive Agreement
On
January 8, 2008, MFB Corp. (the "Registrant") and MutualFirst Financial, Inc.
(“MutualFirst”) jointly announced the signing of a definitive agreement (the
"Agreement") pursuant to which the Registrant will be merged with and into
MutualFirst Acquisition Corp., a wholly-owned subsidiary of MutualFirst (the
“Merger”), and Registrant’s savings bank subsidiary, MFB Financial, will be
merged into MutualFirst’s subsidiary, Mutual Federal Savings
Bank. The Agreement provides that upon the effective date of the
Merger (the "Effective Time"), pursuant to election procedures described in
the
Agreement, each share of common stock of Registrant will be converted into
either an amount of cash equal to $41.00 per share (the “Cash Consideration”),
or 2.59 shares of common stock, $.01 par value per share, of MutualFirst (the
“Exchange Ratio”).
Notwithstanding
the foregoing, 80% of the total number of outstanding shares of common stock
of
the Registrant must be converted into MutualFirst common stock. There
may be allocations of cash or stock made to Registrant’s shareholders to ensure
that this requirement is satisfied.
The
Registrant will have the right to terminate the Agreement if the average closing
price of MutualFirst common stock during a period of five business days
following receipt of all required regulatory and shareholder approvals is less
than $12.664 and MutualFirst common stock underperforms an index of financial
institutions by fifteen percent, unless MutualFirst were to elect to make a
compensating adjustment to the exchange ratio.
At
the
effective time of the Merger, each option to purchase Registrant common stock,
vested or unvested, will be converted into the right to receive options for
a
number of shares of MutualFirst common stock equal to 2.59 times the number
of
shares of Registrant common stock, subject to such options, for the same
aggregate option price as shall be in effect for the Registrant stock options
immediately prior to the effective date of the Merger.
A
copy of
the Agreement is attached hereto as Exhibit 10.1 and incorporated by reference
herein.
Based
on
the closing price of Registrant common stock on January 7, 2008 ($13.35), the
transaction has an aggregate value of approximately $52.7 million.
In
connection with the consummation of the Merger, Charles J. Viater, Donald R.
Kyle and Terry L. Clark, executive officers of the Registrant, will each
terminate their existing employment agreements with the Registrant’s savings
bank subsidiary in exchange for change of control payments under those
agreements, although it its expected that those individuals will be employed
with a change in status by Mutual Federal Savings Bank following the closing
of
the Merger. Charles J. Viater has entered into a three-year
employment agreement with Mutual Federal Savings Bank which shall become
effective at the closing of the Merger. He will serve as Senior Vice
President of MutualFirst and Regional President of MutualFirst Savings Bank
following the closing. A copy of Mr. Viater's employment agreement is
attached hereto as Exhibit 10.2 and is incorporated by reference herein.
Four directors of Registrant -- Charles J. Viater, Michael J. Marien, Jonathan
E. Kintner, and Edward C. Levy -- are to be added to the Boards of Directors
of
MutualFirst and MutualFirst Savings Bank at the closing of the
Merger.
Concurrently
with the execution of the Agreement, each of Registrant’s directors entered into
voting agreements with and in favor of MutualFirst under which the directors
have agreed to vote their shares of Registrant common stock in favor of the
Agreement and the Merger at the special meeting of Registrant’s shareholders at
which these matters are to be considered. Under the voting
agreements, the directors have agreed not to sell or otherwise dispose of any
shares of Registrant’s Common Stock they currently hold other than a number of
shares equal to no more than the number of shares which the directors acquired
or will acquire upon the exercise of stock options for shares of Registrant
Common Stock between December 15, 2007, and the earlier of the conclusion of
the
special shareholders’ meeting or the termination of the voting
agreements. A copy of the form of voting agreement is attached hereto
as Exhibit 10.3 and incorporated by reference herein.
Upon
termination of the Agreement because the Registrant enters into an agreement
for
an alternative transaction pursuant to a Superior Proposal (as defined in the
Agreement) or a termination in connection with a change in the Registrant’s
Board’s recommendation of the Agreement to Registrant’s shareholders followed by
a failure of those shareholders to approve the Agreement, the Registrant has
agreed to pay MutualFirst a termination fee of $1.7 million. Such a
fee is also payable if, within twelve months following termination of the
Agreement by MutualFirst as a result of a breach of the Agreement by Registrant,
Registrant engages in another transaction constituting a change in control
of
Registrant.
The
Merger will be accounted for as a purchase and is expected to close in the
second quarter of 2008. The Agreement has been approved by the boards
of directors of Registrant and MutualFirst. However, the closing of
the Merger is subject to certain other conditions, including the approval of
the
Merger by the shareholders of Registrant and approval of the issuance of shares
by shareholders of MutualFirst and the approval of regulatory
authorities.
Cautionary
Statement
The
representations, warranties and covenants contained in the Agreement were made
only for purposes of such Agreement and as of specific dates, were solely for
the benefit of the parties to the Agreement, and are subject to limitations
agreed upon by the contracting parties, including being qualified by
confidential disclosures exchanged between the parties in connection with the
execution of the Agreement. The representations and warranties may
have been made for the purposes of allocating contractual risk between the
parties to the Agreement instead of establishing these matters as facts, and
may
be subject to standards of materiality applicable to the contracting parties
that differ from those applicable to investors. Investors are not
third-party beneficiaries under the Agreement and should not rely on the
representations, warranties and covenants or any descriptions thereof as
characterizations of the actual state of facts or condition of Registrant,
or
any of its subsidiaries or affiliates. Moreover, information
concerning the subject matter of the representations and warranties may change
after the date of the Agreement, which subsequent information may or may not
be
fully reflected in Registrant’s or MutualFirst’s respective public
disclosures.
Pursuant
to General Instruction F to Form 8-K, a press release issued jointly by
Registrant and MutualFirst is attached hereto as Exhibit 99.1.