<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
Emerald Isle Bancorp, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock
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(2) Aggregate number of securities to which transaction applies:
2,315,177
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
$33.00
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(4) Proposed maximum aggregate value of transaction:
$76,400,841.00
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(5) Total fee paid:
$15,280.17
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/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
December 18, 1997
Dear Fellow Stockholder:
We are pleased to invite you to attend a Special Meeting of Stockholders
(the "Special Meeting") of Emerald Isle Bancorp, Inc., a Massachusetts
corporation ("Emerald"), which will be held on January 22, 1998, at 10:00 A.M.
at the Sheraton Tara Hotel, 37 Forbes Road, Braintree, Massachusetts.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve and adopt an Affiliation Agreement (the "Affiliation
Agreement"), dated as of October 22, 1997, by and between Emerald and Eastern
Bank Corporation ("Eastern"), which provides for the acquisition of Emerald and
its wholly-owned bank subsidiary, The Hibernia Savings Bank ("Hibernia"), by
Eastern (the "Merger"). A copy of the Affiliation Agreement is attached to the
accompanying Proxy Statement as APPENDIX A.
Upon consummation of the Merger, you will be entitled to receive $33.00 in
cash for each outstanding share of common stock of Emerald. CIBC Oppenheimer
Corp., Emerald's financial advisor, has advised the Emerald Board of Directors
that in its opinion the consideration to be received by the Emerald stockholders
in the Merger is fair, from a financial point of view, to the Emerald
stockholders.
THE BOARD OF DIRECTORS OF EMERALD HAS UNANIMOUSLY APPROVED THE AFFILIATION
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, AND
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE IN FAVOR OF THE AFFILIATION
AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE MERGER.
Enclosed are a Notice of Special Meeting of Stockholders and a Proxy
Statement which contain a description of the Merger as well as background to the
transaction and the businesses of the two companies that should help you more
fully understand why the Emerald Board of Directors believes this transaction is
in the best interests of Emerald stockholders. Your Board recognizes that the
Proxy Statement is a long document, but encourages you to study the document
carefully. Should you have questions concerning the upcoming meeting you may
call Gerard F. Linskey of Emerald at (617) 479-5001. The Emerald Board of
Directors has fixed the close of business on December 15, 1997 as the record
date for the Special Meeting. Accordingly, only common stockholders of record on
that date will be entitled to notice of, and to vote at, the Special Meeting.
The affirmative vote of the holders of two-thirds of the shares of Emerald
Common Stock issued and outstanding and entitled to vote is necessary to approve
and adopt the Affiliation Agreement and the transactions contemplated thereby.
YOUR VOTE IS IMPORTANT. Accompanying this letter is a Notice of Special
Meeting of Stockholders, a Proxy Statement and a proxy card with a return
envelope. To ensure that your shares are represented at the meeting, please
sign, date and mail your proxy as promptly as possible in the postage prepaid
envelope provided. If you attend the meeting, you may vote in person even though
you have previously returned the proxy card. If you plan to attend the Special
Meeting, please bring a form of personal identification with you, and if you are
acting as proxy for another, please bring written confirmation from the record
holder for whom you are acting as proxy.
WE URGE YOU TO VOTE FOR APPROVAL OF THE AFFILIATION AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER.
On behalf of your Board of Directors, thank you for your continued support.
Sincerely,
[SIG]
MARK A. OSBORNE
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
<PAGE>
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To the Stockholders of
Emerald Isle Bancorp, Inc.:
Notice is hereby given that a Special Meeting of Stockholders of Emerald
Isle Bancorp, Inc. ("Emerald") will be held at the Sheraton Tara Hotel, 37
Forbes Road, Braintree, Massachusetts, on January 22, 1998 at 10:00 a.m. (the
"Special Meeting"), for the purpose of considering and voting upon the following
matters;
1. A proposal to approve and adopt the Affiliation Agreement, dated as of
October 22, 1997 (the "Affiliation Agreement"), by and between Emerald and
Eastern Bank Corporation ("Eastern"), which provides for the acquisition of
Emerald and its wholly-owned bank subsidiary, The Hibernia Savings Bank, by
Eastern (the "Merger"). Upon consummation of the Merger, Emerald
stockholders will receive $33.00 in cash for each share of Emerald common
stock. A copy of the Affiliation Agreement is attached as Appendix A to the
attached Proxy Statement.
2. Such other business as may properly be brought before the meeting or any
adjournment or postponement thereof.
Stockholder approval of the Affiliation Agreement and the transactions
contemplated thereby requires the affirmative vote of the holders of at least
two-thirds of the shares of Emerald common stock issued and outstanding and
entitled to vote at the Special Meeting.
Only stockholders of record at the close of business on December 15, 1997
are entitled to notice of, and to vote at, the Special Meeting and any and all
adjournments or postponements thereof.
APPRAISAL RIGHTS. If the Affiliation Agreement and the transactions
contemplated thereby are approved by stockholders at the Special Meeting and
consummated by Emerald, any stockholder (a) who, prior to the Special Meeting,
files with Emerald a written objection to the proposed action that states the
stockholder's intention to demand payment for his or her shares if the action is
taken, and (b) whose shares are not voted in favor of such action, has or may
have the right to demand an appraisal of the value of his or her shares and
payment thereof by submitting written notice to Emerald within twenty (20) days
after the date of mailing to the stockholder of notice in writing that the
proposed Merger has become effective. Emerald and any such stockholder shall in
such case have the rights and duties and must follow the procedure set forth in
Sections 85 to 98, inclusive, of Chapter 156B of the Massachusetts General Laws,
a copy of which is attached as Appendix F to the accompanying Proxy Statement.
By Order of the Board of Directors
[SIG]
Douglas C. Purdy
CLERK
------------------------
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. WE URGE YOU TO
SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING IN PERSON. STOCKHOLDERS OF RECORD WHO ATTEND THE
MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON.
<PAGE>
[LOGO]
EMERALD ISLE BANCORP, INC.
PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS
JANUARY 22, 1998
This Proxy Statement of Emerald Isle Bancorp, Inc. ("Emerald") is being
furnished to stockholders of Emerald in connection with the solicitation of
proxies by the Board of Directors of Emerald (the "Emerald Board") for use at
the Special Meeting of Stockholders to be held on January 22, 1998, at 10:00
A.M. at the Sheraton Tara Hotel, 37 Forbes Road, Braintree, Massachusetts (the
"Special Meeting"), including any adjournments or postponements thereof. See
"SPECIAL MEETING OF STOCKHOLDERS."
At the Special Meeting, shareholders of Emerald will consider and vote upon
a proposal to approve the Affiliation Agreement, dated as of October 22, 1997
(the "Affiliation Agreement"), by and between Emerald and Eastern Bank
Corporation ("Eastern"), a copy of which is attached to this Proxy Statement as
APPENDIX A. The Affiliation Agreement provides, among other things, that (i) a
newly-formed subsidiary (the "Merger Subsidiary") of Eastern Bank, Eastern's
wholly-owned subsidiary (the "Eastern Bank"), will be merged with and into
Emerald (the "Merger") and (ii) each share of Emerald common stock outstanding
immediately prior to consummation of the Merger (other than shares held by
Emerald as treasury stock, shares held by shareholders who exercise dissenters'
rights pursuant to the applicable provisions of the Massachusetts Business
Corporation Law and shares held by Eastern or Eastern Bank other than in a
fiduciary capacity) will be converted into and represent the right to receive
$33.00 in cash (the "Merger Consideration"). CIBC Oppenheimer Corp., Emerald's
financial advisor, has advised the Emerald Board of Directors that in its
opinion the consideration to be received by the Emerald stockholders in the
Merger is fair, from a financial point of view, to the Emerald stockholders.
Immediately following the Merger, Eastern Bank and Emerald will enter into a
plan of liquidation pursuant to which Emerald will be liquidated and dissolved,
with Emerald's assets (including all of the outstanding shares of capital stock
of The Hibernia Savings Bank, Emerald's wholly-owned bank subsidiary
("Hibernia")) thereupon vesting in Eastern Bank. Immediately upon the
consummation of such liquidation, Hibernia (which will then be a wholly-owned
subsidiary of Eastern Bank) will merge with and into Eastern Bank, with Eastern
Bank as the surviving entity (the "Bank Merger") pursuant to the terms of an
Agreement and Plan of Merger, dated as of October 22, 1997, by and between
Eastern Bank and Hibernia, a copy of which is attached to this Proxy Statement
as APPENDIX B (the "Bank Merger Agreement"). For a more complete description of
the Affiliation Agreement and the terms of the Merger, see "THE MERGER."
This Proxy Statement and the form of proxy are first being mailed to
stockholders of Emerald on or about December 18, 1997.
THE ABOVE MATTERS ARE DISCUSSED IN DETAIL IN THIS PROXY STATEMENT. THE
PROPOSED MERGER IS A COMPLEX TRANSACTION. STOCKHOLDERS ARE STRONGLY URGED TO
READ AND CONSIDER CAREFULLY THIS PROXY STATEMENT IN ITS ENTIRETY.
------------------------
The date of this Proxy Statement is December 18, 1997.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
AVAILABLE INFORMATION...................................................................................... 4
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.......................................................... 4
SUMMARY.................................................................................................... 5
The Companies.......................................................................................... 5
Eastern.............................................................................................. 5
Emerald.............................................................................................. 5
The Merger............................................................................................. 5
Effective Time......................................................................................... 6
The Special Meeting.................................................................................... 6
Stockholder Vote Required; Voting Agreements........................................................... 6
Background of the Merger; Recommendation of the Emerald Board of Directors; Reasons for the Merger..... 7
Opinion of Financial Advisor to Emerald................................................................ 7
Regulatory Approvals................................................................................... 7
Management and Operations after the Merger............................................................. 8
Interests of Certain Persons in the Merger............................................................. 8
Employee Matters....................................................................................... 8
Treatment of Stock Options............................................................................. 9
Termination of Certain Purchase Plans.................................................................. 9
Stock Option Agreement................................................................................. 9
Accounting Treatment................................................................................... 10
Certain Federal Income Tax Consequences................................................................ 10
Conditions of the Merger............................................................................... 10
Business Pending the Merger............................................................................ 11
Waiver and Amendment................................................................................... 11
Termination............................................................................................ 11
Rights of Dissenting Stockholders...................................................................... 11
Market and Market Prices............................................................................... 12
EASTERN SELECTED FINANCIAL DATA............................................................................ 13
EMERALD SELECTED FINANCIAL DATA............................................................................ 15
PRO FORMA FINANCIAL DATA................................................................................... 16
SPECIAL MEETING OF STOCKHOLDERS............................................................................ 17
Introduction........................................................................................... 17
Purposes............................................................................................... 17
Quorum and Voting...................................................................................... 17
Stockholder Vote Required; Voting Agreements........................................................... 17
Ownership of Emerald Common Stock...................................................................... 18
Solicitation of Proxies................................................................................ 18
Revocation of Proxies.................................................................................. 19
INFORMATION ABOUT EASTERN.................................................................................. 20
General................................................................................................ 20
INFORMATION ABOUT EMERALD.................................................................................. 21
General................................................................................................ 21
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
THE MERGER................................................................................................. 22
General................................................................................................ 22
Background of the Merger............................................................................... 22
Recommendation of the Emerald Board of Directors; Emerald's Reasons for the Merger..................... 23
Opinion of Financial Advisor to Emerald................................................................ 24
Effective Time of the Merger; Closing Date............................................................. 27
Terms of the Merger.................................................................................... 27
Regulatory Approvals................................................................................... 28
Management and Operations after the Merger............................................................. 29
Interests of Certain Persons in the Merger............................................................. 29
Employee Matters....................................................................................... 30
Treatment of Stock Options............................................................................. 31
Termination of Certain Purchase Plans.................................................................. 31
Accounting Treatment................................................................................... 31
Certain Federal Income Tax Consequences................................................................ 31
Conversion of Shares................................................................................... 32
Conversion of Shares of Emerald Common Stock......................................................... 32
Exchange Agent; Procedures for Exchange of Certificates.............................................. 32
Lost Certificates.................................................................................... 33
Conditions to the Merger............................................................................... 33
Conditions to Each Party's Obligations............................................................... 33
Conditions to Eastern's Obligations.................................................................. 33
Conditions to Emerald's Obligations.................................................................. 34
Business Pending the Merger............................................................................ 34
No Solicitation........................................................................................ 37
Waiver and Amendment................................................................................... 37
Waiver............................................................................................... 37
Amendment............................................................................................ 37
Expenses............................................................................................... 37
Termination............................................................................................ 38
Rights of Dissenting Stockholders...................................................................... 38
CERTAIN RELATED TRANSACTIONS............................................................................... 40
Stock Option Agreement................................................................................. 40
General.............................................................................................. 40
Grant of Option...................................................................................... 40
Triggering Events; Exercise of Option................................................................ 40
Repurchase of Option................................................................................. 41
Registration Rights.................................................................................. 42
Assignment of Option................................................................................. 42
Right of First Refusal............................................................................... 42
Additional Provisions................................................................................ 42
Voting Agreements...................................................................................... 42
Bank Merger Agreement.................................................................................. 43
Experts................................................................................................ 43
APPENDIX A--Affiliation Agreement.......................................................................... A-1
APPENDIX B--Agreement and Plan of Merger (for Bank Merger)................................................. B-1
APPENDIX C--Stock Option Agreement......................................................................... C-1
APPENDIX D--Voting Agreements.............................................................................. D-1
APPENDIX E--Opinion of Financial Advisor to Emerald........................................................ E-1
APPENDIX F--Text of Sections 85 to 98 of the Massachusetts Business Corporation Law........................ F-1
</TABLE>
3
<PAGE>
AVAILABLE INFORMATION
Emerald is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements, and other information with the
Commission. Such reports, proxy statements and other information filed by
Emerald can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's regional offices at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and 7 World Trade Center,
Suite 1300, New York, New York 10048. Copies of such material can be obtained by
mail from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549 at prescribed rates. Certain securities
of Emerald are listed on The Nasdaq Stock Market's National Market (the "Nasdaq
National Market"), and such reports, proxy statements and other information
concerning Emerald also may be inspected at the offices of the National
Association of Securities Dealers, Inc. ("NASD"), 1735 K Street, N.W.,
Washington, D.C. 20006. The Commission also maintains an internet site
(http://www.sec.gov) that contains information regarding Emerald's electronic
filings with the Commission.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are hereby incorporated by reference in this Proxy Statement the
following documents and information heretofore filed with the Commission, which
documents are not presented herein or delivered herewith:
Emerald's:
1. Annual Report on Form 10-K filed for its fiscal year ended December 31,
1996 (the "Emerald 1996 10-K");
2. Quarterly Reports on Form 10-Q filed since the Emerald 1996 10-K;
3. Current Reports on Form 8-K filed since the Emerald 1996 10-K;
4. Description of its Common Stock contained in its registration statement
filed under Section 12 of the Exchange Act, including any amendment or
report filed for the purpose of updating such description.
All documents subsequently filed by Emerald pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the date of the Special Meeting
shall be deemed to be incorporated by reference into this Proxy Statement and to
be a part hereof from the date of filing of such documents. Any statement
contained herein or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement to the extent that a statement contained herein, or in an
amendment hereto, or in any other subsequently filed document which also is or
is deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Proxy Statement.
EMERALD WILL PROVIDE UPON REQUEST AND WITHOUT CHARGE, TO EACH PERSON TO WHOM
THIS PROXY STATEMENT IS DELIVERED, A COPY OF ANY OR ALL OF THE FOREGOING
DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER THAN EXHIBITS TO SUCH
DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED THEREIN BY REFERENCE). WRITTEN
REQUESTS FOR DOCUMENTS RELATING TO EMERALD SHOULD BE DIRECTED TO GERARD F.
LINSKEY, TREASURER, EMERALD ISLE BANCORP, INC., 730 HANCOCK STREET, QUINCY,
MASSACHUSETTS 02170. EMERALD'S TELEPHONE NUMBER IS (617) 479-5001. IN ORDER TO
ENSURE TIMELY DELIVERY OF ANY OF THE DOCUMENTS, REQUESTS SHOULD BE MADE BY
JANUARY 1, 1998.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROXY STATEMENT OR INCORPORATED BY
REFERENCE HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY EASTERN OR EMERALD.
4
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS NOT INTENDED TO BE COMPLETE AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO MORE DETAILED INFORMATION CONTAINED ELSEWHERE IN THIS
PROXY STATEMENT OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT, OR IN THE
ACCOMPANYING APPENDICES AND THE DOCUMENTS REFERRED TO HEREIN. STOCKHOLDERS ARE
URGED TO CAREFULLY READ THE PROXY STATEMENT AND ITS APPENDICES IN THEIR
ENTIRETY. CAPITALIZED TERMS WHICH ARE USED AND NOT DEFINED IN THIS PROXY
STATEMENT HAVE THE MEANINGS SET FORTH IN THE AFFILIATION AGREEMENT.
THE COMPANIES
EASTERN. Eastern Bank Corporation is a mutual holding company originally
organized as a mutual savings bank in 1818 under Massachusetts law which,
together with its wholly-owned bank subsidiaries, Eastern Bank and Eastern Bank
& Trust Company, is a full-service banking company with offices in northeastern
Massachusetts and downtown Boston which provides consumer banking, trust and
investment management, mortgage banking, consumer finance, commercial lending,
asset-based lending and equipment leasing services. As of September 30, 1997,
Eastern had total assets of $2.1 billion and total deposits of $1.7 billion. See
"INFORMATION ABOUT EASTERN."
The executive office of Eastern and the head office of Eastern Bank are
located at 112 Market Street, Lynn, Massachusetts 01901-1125 (Telephone (617)
599-2100).
EMERALD. Emerald Isle Bancorp, Inc. is a registered bank holding company
organized in 1996 under Massachusetts law which, through its bank subsidiary,
The Hibernia Savings Bank ("Hibernia"), organized in 1912, is engaged in
providing deposit and lending services to individuals and businesses primarily
concentrated in Boston and southeastern Massachusetts. As of September 30, 1997,
Emerald had total assets of $443.5 million, total deposits of $364.8 million and
total stockholders' equity of $31.0 million. See "INFORMATION ABOUT EMERALD."
The executive office of Emerald and the head office of Hibernia are located
at 730 Hancock Street, Quincy, Massachusetts 02170 (Telephone (617) 479-5001).
THE MERGER
At the Special Meeting, shareholders of Emerald will consider and vote upon
a proposal to approve the Affiliation Agreement, dated as of October 22, 1997
(the "Affiliation Agreement"), by and between Emerald and Eastern, a copy of
which is attached to this Proxy Statement as Appendix A. The Affiliation
Agreement provides, among other things, that (i) the Merger Subsidiary will be
merged with and into Emerald (the "Merger") and (ii) each share of Emerald
common stock par value $1.00 per share ("Emerald Common Stock") outstanding
immediately prior to consummation of the Merger (other than shares held by
Emerald as treasury stock, shares held by shareholders who exercise dissenters'
rights pursuant to the applicable provisions of the Massachusetts Business
Corporation Law (the "MBCL") and shares held by Eastern or Eastern Bank other
than in a fiduciary capacity) will be converted into and represent the right to
receive the Merger Consideration. Immediately following the Merger, Eastern Bank
and Emerald will enter into a plan of liquidation pursuant to which Emerald will
be liquidated and dissolved, with Emerald's assets (including all of the
outstanding shares of capital stock of Hibernia) thereupon vesting in Eastern
Bank. Immediately upon the consummation of such liquidation, Hibernia (which
will then be a wholly-owned subsidiary of Eastern Bank) will merge with and into
Eastern Bank, with Eastern Bank as the surviving entity (the "Bank Merger")
pursuant to the terms of an Agreement and Plan of Merger, dated as of October
22, 1997, by and between Eastern Bank and Hibernia, a copy of which is attached
to this Proxy Statement as Appendix B (the "Bank Merger Agreement").
The Affiliation Agreement as executed contemplates that the Merger
Subsidiary would be formed as a wholly-owned subsidiary of Eastern and that by
virtue of the Merger, Emerald would become a wholly-owned subsidiary of Eastern.
Under the Affiliation Agreement, prior to the Effective Time, Eastern is
5
<PAGE>
entitled to (i) revise the sequence of the Merger and the Bank Merger to provide
that the Bank Merger is to be consummated prior to the Merger, (ii) revise the
structure of the Merger to provide that Emerald is to be merged with and into
the Merger Subsidiary at the Effective Time, (iii) organize the Merger
Subsidiary as a direct wholly-owned subsidiary of Eastern Bank (as contemplated
by this Proxy Statement), and/or (iv) revise the structure of the Merger to
provide that Hibernia is to be merged with and into a special-purpose interim
trust company organized by Eastern prior to the Effective Time, provided that
any change to the structure of the Merger or the Bank Merger will not be adopted
if such change would result in additional adverse tax consequences (beyond gain
recognition on the sale of their shares) to the shareholders of Emerald as a
group, including but not limited to, the Merger becoming subject to taxation to
the Emerald stockholders other than as a capital transaction. As provided by the
Affiliation Agreement, Eastern has notified Emerald of its intention to change
the structure of the transaction as reflected in this Proxy Statement.
EFFECTIVE TIME
The "Effective Time" of the Merger will be the date and time at which the
Articles of Merger of Emerald and the Merger Subsidiary become effective with
The Commonwealth of Massachusetts. The "Closing Date" will occur on the first
business day after the date on which all conditions contained in Article VI of
the Affiliation Agreement are satisfied or waived, or on such other date that
the parties mutually agree. Eastern and Emerald anticipate that the Merger will
be completed in the first quarter of 1998. If the Merger is not consummated on
or before June 30, 1998, the Affiliation Agreement may be terminated by either
Eastern or Emerald.
THE SPECIAL MEETING
The Special Meeting is scheduled to be held on January 22, 1998, at 10:00
A.M. at the Sheraton Tara Hotel, 37 Forbes Road, Braintree, Massachusetts. The
Special Meeting will be held for the purpose of considering and voting upon a
proposal to approve and adopt the Affiliation Agreement and the transactions
contemplated thereby, and to conduct any other business that may properly come
before such meeting, or any adjournments or postponements thereof. See "SPECIAL
MEETING OF STOCKHOLDERS--Introduction" and "--Purposes."
STOCKHOLDER VOTE REQUIRED; VOTING AGREEMENTS
Only stockholders of record at the close of business on December 15, 1997
(the "Record Date") are entitled to notice of and to vote at the Special
Meeting. As of the Record Date, there were issued and outstanding 2,313,927
shares of Emerald Common Stock entitled to vote. The presence, in person or by
proxy, of a majority of the aggregate number of shares of Emerald Common Stock
outstanding on the Record Date is necessary to constitute a quorum at the
Special Meeting. Each stockholder is entitled to one vote, in person or by
proxy, for each share of Emerald Common Stock held of record in the
stockholder's name at the close of business on the Record Date. See "SPECIAL
MEETING OF STOCKHOLDERS--Quorum and Voting."
The approval and adoption of the Affiliation Agreement and the transactions
contemplated thereby requires the affirmative vote of the holders of at least
two-thirds of the issued and outstanding shares of Emerald Common Stock. In
connection with the execution of the Affiliation Agreement, Mark A. Osborne,
Chairman of the Board, President and Chief Executive Officer of Emerald and
Michael T. Putziger, a director of Emerald, owning 507,699 shares in the
aggregate, as of December 1, 1997, representing 21.94% of the shares issued and
outstanding, each agreed by separate letter (the "Voting Agreements") to
Eastern, dated October 22, 1997, to vote or cause to be voted all of the shares
of Emerald Common Stock over which he has beneficial ownership as of the Record
Date in favor of the Affiliation Agreement and the Merger. Execution of the
Voting Agreements was a condition to Eastern entering into the Affiliation
Agreement and no compensation was paid to any person in consideration for
executing the
6
<PAGE>
Voting Agreements. The Form of Voting Agreement is attached hereto as Appendix
D. See "THE SPECIAL MEETING--Record Date; Voting; Solicitation and Reservation
of Proxies" and "CERTAIN RELATED TRANSACTIONS--Voting Agreements."
BACKGROUND OF THE MERGER; RECOMMENDATION OF THE EMERALD BOARD OF DIRECTORS;
REASONS FOR THE MERGER
CIBC Oppenheimer Corp. ("CIBC Oppenheimer") was retained by the Emerald
Board in October, 1997 for the purpose of rendering a fairness opinion in
connection with the Merger. The terms of the Affiliation Agreement, including
the Merger Consideration, were the result of arm's-length negotiations between
Eastern and Emerald.
The Emerald Board believes that the terms of the Affiliation Agreement,
including the Merger Consideration, and each of the transactions contemplated
thereby, are in the best interests of Emerald and are fair to and in the best
interests of its stockholders and unanimously recommends that the stockholders
of Emerald vote for approval and adoption of the Affiliation Agreement and each
of the transactions contemplated thereby. See "THE MERGER-- Recommendation of
the Emerald Board; Emerald's Reasons for the Merger."
In reaching its determination, the Emerald Board consulted with management
and with Emerald's financial and legal advisors, and considered a number of
factors. These factors are described in "THE MERGER--Background of the Merger"
and "--Recommendation of the Emerald Board of Directors; Reasons for the
Merger."
OPINION OF FINANCIAL ADVISOR TO EMERALD
CIBC Oppenheimer has rendered a written opinion to the Emerald Board, dated
as of October 22, 1997 and updated to the date of this Proxy Statement, each to
the effect that, as of such date, the Merger Consideration is fair, from a
financial point of view, to the holders of Emerald Common Stock. The full text
of the opinion of CIBC Oppenheimer is attached as Appendix E to this Proxy
Statement. Emerald stockholders are urged to read the opinion in its entirety
for a description of the procedures followed, assumptions made, matters
considered and qualifications and limitations on the review undertaken by CIBC
Oppenheimer in connection therewith. CIBC Oppenheimer's opinion is directed only
to the Emerald Board about the Merger Consideration and does not constitute a
recommendation to any Emerald stockholder as to how such stockholder should vote
at the Special Meeting. See "THE MERGER--Opinion of Financial Advisor to
Emerald."
REGULATORY APPROVALS
The Affiliation Agreement provides that the obligation of Eastern and
Emerald to consummate the Merger is conditioned upon the receipt of any required
approvals from governmental or regulatory authorities or agencies, including the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
the Federal Deposit Insurance Corporation (the "FDIC"), the Board of Bank
Incorporation of The Commonwealth of Massachusetts (the "Massachusetts Board"),
the Commissioner of Banks of The Commonwealth of Massachusetts (the
"Massachusetts Commissioner") and the United States Department of Justice (the
"DOJ"). The Merger may not be consummated until 30 days after approval by the
FDIC (or such shorter period as the FDIC may prescribe with the concurrence of
the Attorney General, but not less than 15 days), during which time the DOJ may
challenge the Merger on antitrust grounds. The commencement of an antitrust
action by the DOJ would stay the effectiveness of the FDIC approval unless a
court specifically orders otherwise.
The parties have filed or will file all applications and applied for or will
apply for all waivers necessary for consummation of the Merger. The Merger will
not proceed until all regulatory approvals required to consummate the Merger
have been obtained, such approvals are in full force and effect and all
statutory
7
<PAGE>
waiting periods in respect thereof have expired. There can be no assurance that
the Merger will be approved by any of the foregoing regulatory authorities. If
such approvals are received, there can be no assurance as to the date of such
approvals or the absence of any litigation challenging such approvals. Emerald
and Eastern are not aware of any other governmental approvals or actions that
are required prior to the parties' consummation of the Merger. It is currently
contemplated that if any such additional governmental approvals or actions are
required, such approvals or actions will be sought. There can be no assurance,
however, that any such additional approvals or actions will be obtained. See
"THE MERGER-- Regulatory Approvals" and "--Conditions to the Merger."
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Following the Merger, the directors and officers of the Merger Subsidiary
immediately prior to the Effective Time will be the directors and officers of
Emerald as it exists after the Effective Time. See "THE MERGER--Management and
Operations after the Merger."
As set forth in the Bank Merger Agreement, after the Bank Merger, the former
offices of Hibernia will be owned by Eastern Bank and will be operated under the
name, "Eastern Bank".
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Emerald's management and employees and the Emerald Board
may be deemed to have certain interests in the Merger above and beyond their
interests as stockholders. In connection with the Merger, arrangements have been
made to settle the termination rights of the President and Chief Executive
Officer of Emerald and Hibernia under his existing agreements and to provide for
Eastern to enter into an employment agreement with the individual which will
continue for five (5) years after the Closing Date. In addition, certain
officers of Emerald are entitled to receive certain benefits under existing
employment contracts, termination agreements, deferred compensation agreements
and supplemental retirement agreements. Eastern has also agreed to provide
certain severance payments, retention bonuses and health benefits to certain
officers and other employees of Emerald. As set forth in the Affiliation
Agreement, Emerald has accelerated vesting in all outstanding unexercisable
Emerald stock options granted to employees of Emerald and its subsidiaries and
directors of Emerald pursuant to Emerald employee and stock option plans
("Emerald Stock Option Plans"). In addition, as provided in the Affiliation
Agreement, to the extent that any so accelerated stock options are not exercised
by the holders thereof prior to the day immediately before the Closing Date,
such holder will be entitled to receive the excess of the Merger Consideration
over the per share exercise price of such options multiplied by the number of
shares of Common Stock covered by such options, and such options will terminate.
Eastern has also agreed that rights to indemnification existing in favor, and
all limitations on the personal liability, of any director, officer, or other
employee of Emerald and its subsidiaries provided for in the Articles of
Organization of or By-Laws of Emerald and its subsidiaries as in effect on
October 22, 1997, and Emerald's existing director and officer indemnity
insurance coverage, will remain in effect for three (3) years after the
Effective Time.
See "THE MERGER--Management and Operations after the Merger," "--Interests
of Certain Persons in the Merger," and "--Employee Matters."
EMPLOYEE MATTERS
In the Affiliation Agreement, Eastern has agreed that any terminations of
employees of Emerald and its subsidiaries (the "Emerald Employees") to be made
by Eastern in connection with the Merger or the Bank Merger will be made within
six (6) months after the Closing Date. All Emerald Employees who remain employed
by Eastern after the Closing Date will be eligible for the types and levels of
employee benefits maintained by Eastern for similarly situated employees of
Eastern Bank. See "THE MERGER-- Employee Matters."
8
<PAGE>
Under the Affiliation Agreement, Eastern has agreed to cause all Eastern
plans, programs or arrangements to treat the prior service of each such employee
with Emerald or Hibernia, to the extent such prior service is recognized under
the comparable plan, program or arrangement of Emerald, as service rendered to
Eastern or its affiliate, as the case may be, for purposes of eligibility to
participate, vesting, and eligibility for other appropriate benefits under such
plan, program or arrangement of Eastern, but not for benefit accrual generally
under any plan of Eastern or Eastern Bank extended to Emerald Employees.
Eastern has also agreed that, from and after the Effective Time until the
date which is six (6) months thereafter, Eastern will provide to all Emerald
Employees whose employment with Emerald or Hibernia is terminated during such
time with severance pay equal to two (2) weeks pay for every year such Emerald
Employee was employed by Emerald or Hibernia; provided that in no event will any
Emerald Employee receive severance equal to less than four (4) weeks pay or
greater than twenty-six (26) weeks pay.
As set forth in the Affiliation Agreement, Emerald has terminated the
Emerald Non-Qualified Executive Retirement Plan in accordance with its terms. On
or prior to the Closing Date, Emerald has agreed to terminate all other Emerald
Employee pension and benefit plans in accordance with the terms thereof.
TREATMENT OF STOCK OPTIONS
As set forth in the Affiliation Agreement, Emerald has accelerated vesting
in all outstanding unexercisable Emerald stock options granted to employees of
Emerald and its subsidiaries and directors of Emerald pursuant to Emerald Stock
Option Plans. In addition, as provided in the Affiliation Agreement, to the
extent that any so accelerated stock options are not exercised by the holders
thereof prior to the day immediately before the Closing Date, such holder will
be entitled to receive the excess of the Merger Consideration over the per share
exercise price of such options multiplied by the number of shares of Common
Stock covered by such options, and such options will be terminated.
TERMINATION OF CERTAIN PURCHASE PLANS
Pursuant to the Affiliation Agreement, Emerald has terminated the Emerald
Stock Purchase Plan and the Emerald Automatic Dividend Reinvestment Plan each in
accordance with their respective terms.
STOCK OPTION AGREEMENT
As a condition precedent to Eastern's entering into the Affiliation
Agreement and in consideration therefor (without other consideration or monetary
payment), Eastern and Emerald entered into the Stock Option Agreement, dated as
of October 22, 1997 (the "Stock Option Agreement"). The Stock Option Agreement
is intended to increase the likelihood that the Merger will be consummated in
accordance with the terms of the Affiliation Agreement. See "CERTAIN RELATED
TRANSACTIONS--Stock Option Agreement." A copy of the Stock Option Agreement is
attached hereto as Appendix C.
Pursuant to the Stock Option Agreement, Emerald granted Eastern an option
(the "Option") to purchase, under certain circumstances and subject to
adjustment, up to 447,707 fully paid and nonassessable shares of Emerald Common
Stock at a price of $26.00 per share. The Option is exercisable upon the
occurrence of certain events that create the potential for a third party to
acquire control of Emerald. In lieu of exercising the Option, Eastern or any
permitted transferee of Eastern can require Emerald, under certain
circumstances, to repurchase for a formula price the Option or any shares of
Emerald Common Stock acquired upon exercise of the Option. To the best knowledge
of Eastern and Emerald, no such event which would permit exercise of the Option
has occurred as of the date hereof. See "CERTAIN RELATED TRANSACTIONS--Stock
Option Agreement."
9
<PAGE>
ACCOUNTING TREATMENT
The Merger will be accounted for as a purchase and certain adjustments will
be made with respect to those Emerald assets and liabilities acquired or assumed
by Eastern pursuant to the Affiliation Agreement whose carrying values differ
from their estimated fair market values. The actual adjustments will be made on
the basis of appraisals and evaluations as of the dates of consummation of the
Merger and the Bank Merger. See "THE MERGER--Accounting Treatment."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The receipt of cash by a stockholder of Emerald in exchange for shares of
Emerald Common Stock pursuant to the Affiliation Agreement, including cash
received by a Dissenting Holder upon the exercise of appraisal rights, will
constitute a taxable transaction to such stockholder for federal income tax
purposes. In general, a stockholder will recognize gain or loss upon the
surrender of the stockholder's Common Stock equal to the difference, if any,
between (i) the Merger Consideration received by such stockholder from Eastern
in exchange for his or her shares of Common Stock and (ii) the stockholder's tax
basis in such Common Stock. Any gain or loss will be treated as capital gain or
loss if the Common Stock exchanged was held as a capital asset in the hands of
the stockholder.
No ruling has been or will be requested from the IRS as to any of the tax
effects of any of the transactions discussed in this Proxy Statement to
stockholders of Emerald, and no opinion of counsel has been or will be rendered
to Emerald's stockholders with respect to any of the tax effects of the Merger
on Emerald's stockholders.
EMERALD STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO
THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO THEM IN THEIR CIRCUMSTANCES,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS.
CONDITIONS OF THE MERGER
The obligation of each of Eastern and Emerald to consummate the Merger is
subject to satisfaction of a number of conditions, including (a) the affirmative
vote of the holders of at least two-thirds of the issued and outstanding shares
of Emerald Common Stock approving the Affiliation Agreement and the transactions
contemplated thereby, (b) all requisite regulatory approvals, authorizations and
consents required to consummate the Merger and the Bank Merger shall have been
obtained and remain in full force and effect, and all associated waiting periods
shall have expired or terminated, (c) no temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect, (d) the absence of any change in
the business, assets, financial condition or results of operations of Emerald or
any of its subsidiaries or Eastern or any of its subsidiaries which has had,
individually or in the aggregate, a Material Adverse Effect (as defined in the
Affiliation Agreement) on Emerald or any of its subsidiaries or Eastern or any
of its subsidiaries, as the case may be, (e) Emerald and Eastern shall have
performed and complied in all material respects with all obligations of Emerald
and Eastern required to be performed and complied with pursuant to the
Affiliation Agreement and the representations and warranties made by Emerald and
Eastern shall be true and correct in all material respects as of October 22,
1997 and as of the Effective Time (except as otherwise specifically contemplated
by the Affiliation Agreement and except as to any representation or warranty
which specifically relates to an earlier date), and (f) Emerald and Eastern
shall have obtained all permits, consents, waivers, clearances, approvals and
authorizations of third parties which are necessary to consummate the Merger and
the other transactions contemplated by the Affiliation Agreement. See "THE
MERGER--Conditions to the Merger."
10
<PAGE>
BUSINESS PENDING THE MERGER
Pursuant to the Affiliation Agreement, Emerald has agreed to, and will cause
Hibernia to, undertake or refrain from undertaking certain actions pending the
Merger. For a full discussion of the conduct of the business of Emerald pending
the Merger and the other agreements made by the parties with respect to certain
matters, see "THE MERGER--Business Pending the Merger."
WAIVER AND AMENDMENT
Subject to applicable law and as may be authorized by their respective
Boards of Directors, at any time prior to the consummation of the transactions
contemplated by the Affiliation Agreement or the termination of the Affiliation
Agreement, whether before or after approval by the Emerald stockholders of the
Affiliation Agreement and the transactions contemplated thereby, the parties may
(a) amend the Affiliation Agreement by written agreement, (b) extend the time
for the performance of any of the obligations or other acts of any other party
thereunder, (c) waive any inaccuracies in the representations and warranties
contained therein or in any document delivered pursuant thereto, or (d) waive
compliance with any of the agreements or conditions contained in Articles V and
VI (other than those identified in Section 6.01) thereof. Any agreement on the
part of any party to any extension or waiver will be valid only if set forth in
writing signed on behalf of each party, but such waiver or failure to insist on
strict compliance with such obligation, covenant, agreement or condition will
not operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. See "THE MERGER--Waiver and Amendment."
TERMINATION
The Affiliation Agreement may be terminated and the Merger abandoned at any
time prior to the Effective Time, whether before or after the approval of
Emerald's stockholders, under the following circumstances: (a) by mutual written
consent of the respective Boards of Directors of Emerald and Eastern; (b) by
either Emerald or Eastern (i) if the Merger has not occurred on or prior to June
30, 1998, or such later date as agreed to in writing by Emerald and Eastern;
(ii) if any governmental or regulatory authority or agency, or court of
competent jurisdiction, issues a final permanent order or Injunction (as defined
in the Affiliation Agreement) enjoining, denying approval of, or otherwise
prohibiting the consummation of the Merger and the Bank Merger and a time for
appeal or petition for reconsideration of such order or Injunction has expired
without such appeal or petition being granted; (iii) if the stockholders of
Emerald fail to approve the Merger at the Special Meeting, provided in each case
that the terminating party is not then in material breach of the Affiliation
Agreement or the Stock Option Agreement, or (iv) in the event of a material
breach by the other party of the Affiliation Agreement or the Stock Option
Agreement which is not cured within 15 days after written notice thereof. See
"THE MERGER-- Termination" and "CERTAIN RELATED TRANSACTIONS--Stock Option
Agreement."
RIGHTS OF DISSENTING STOCKHOLDERS
A holder of Emerald Common Stock will have appraisal rights provided under
Massachusetts law, if the Merger is consummated and all requirements of
Massachusetts law are satisfied by such stockholder seeking to exercise such
rights. See "THE MERGER--Rights of Dissenting Stockholders" and Sections 86
through 98 of the Massachusetts Business Corporation Law ("MBCL") attached
hereto at Appendix F.
11
<PAGE>
MARKET AND MARKET PRICES
Emerald Common Stock is traded on the Nasdaq National Market. The following
table sets forth, for the periods indicated, the high and low sales prices for
the Emerald Common Stock, as quoted on the Nasdaq National Market.
<TABLE>
<CAPTION>
PRICE PER SHARE
--------------------
<S> <C> <C>
QUARTER HIGH LOW
- ------------------------------------------------------------------------- --------- ---------
1997:
First Quarter.......................................................... $ 20.50 $ 16.50
Second Quarter......................................................... $ 20.00 $ 17.00
Third Quarter.......................................................... $ 26.50 $ 18.625
1996:
First Quarter.......................................................... $ 15.75 $ 15.00
Second Quarter......................................................... $ 15.50 $ 14.00
Third Quarter.......................................................... $ 15.75 $ 14.00
Fourth Quarter......................................................... $ 20.00 $ 15.50
</TABLE>
On October 22, 1997, the business day prior to the public announcement of
the execution of the Affiliation Agreement, the closing sales price of the
Emerald Common Stock as reported on the Nasdaq National Market was $25.50 per
share. On December 15, 1997, a day shortly prior to the mailing of this Proxy
Statement, the closing sales price of the Emerald Common Stock as so reported
was $32.00 per share. Emerald stockholders are advised to obtain current market
quotations for the Emerald Common Stock.
12
<PAGE>
EASTERN
SELECTED FINANCIAL DATA
The following table sets forth certain condensed consolidated historical
financial data of Eastern and is based on the consolidated financial statements
of Eastern, including the respective notes thereto.
EASTERN BANK CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
-------------------------- --------------------------------------------------------------------
(DOLLARS IN THOUSANDS) 1997 1996 1996 1995 1994 1993 1992
- ------------------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income...... $ 70,520 $ 65,155 $ 87,374 $ 85,414 $ 74,386 $ 75,702 $ 68,643
Provision for loan
losses................. 3,753 3,753 5,000 3,600 4,950 16,598 13,962
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net interest income after
provision for loan
losses................. 66,767 61,402 82,374 81,814 69,436 59,104 54,681
Non interest income...... 21,325 16,156 21,505 19,712 18,742 21,549 17,975
Non-interest expense..... 54,898 46,942 64,254 63,090 57,650 72,481 62,952
------------ ------------ ------------ ------------ ------------ ------------ ------------
Income before income
taxes, extraordinary
item, and cumulative
effect of accounting
change................. 33,194 30,616 39,625 38,436 30,528 8,172 9,704
Income tax expense....... 11,127 12,545 16,219 16,229 12,425 1,968 4,236
------------ ------------ ------------ ------------ ------------ ------------ ------------
Income before
extraordinary item, and
cumulative effect of
accounting change...... 22,067 18,071 23,406 22,207 18,103 6,204 5,468
Extraordinary item....... -- -- -- -- -- -- 2,541
Cumulative effect of a
change in accounting
for income taxes....... -- -- -- -- -- 4,000 1,450
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net income:.............. $ 22,067 $ 18,071 $ 23,406 $ 22,207 $ 18,103 $ 10,204 $ 9,459
------------ ------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------ ------------
AVERAGE BALANCE SHEET
DATA:
Loans and lease
financing.............. 1,499,057 1,403,550 1,421,836 1,317,641 1,107,710 1,056,213 1,016,341
Total earning assets..... 1,910,442 2,844,802 1,847,100 1,791,889 1,586,674 1,571,459 1,505,792
Total average assets..... 2,013,005 1,969,669 1,975,933 1,923,994 1,691,126 1,675,233 1,618,078
Deposits................. 1,683,245 1,674,536 1,677,842 1,615,973 1,473,493 1,490,727 1,446,084
Borrowings............... 83,707 76,460 79,557 120,160 52,800 39,391 36,032
Capital.................. 218,451 193,445 196,771 169,557 148,722 136,189 125,835
SELECTED RATIOS:
Net interest margin...... 4.99% 4.75% 4.75% 4.78% 4.69% 4.82% 4.56%
Return on average
assets................. 1.47% 1.23% 1.18% 1.15% 1.07% 0.61% 0.58%
Return on average
equity................. 13.51% 12.48% 11.90% 13.10% 12.17% 7.49% 7.52%
Capital to total
assets................. 11.19% 10.16% 10.21% 8.81% 7.60% 8.56% 7.61%
Average capital to
average total assets... 10.85% 9.82% 9.96% 8.81% 8.79% 8.13% 7.78%
Risk-based capital ratio:
Tier 1................. 14.41% 13.44% 13.30% 12.23% 11.91% 13.77% n/a
Total.................. 15.68% 14.72% 14.57% 14.52% 13.18% 15.04% 13.02%
Leverage ratio........... 10.46% 9.33% 9.56% 8.10% 6.90% 7.80% 6.82%
Net credit losses to
average loans and
leases................. 0.17% 0.54% 0.57% 0.60% 0.26% 1.00% 1.73%
Reserve for credit losses
to loans and leases.... 2.16% 2.23% 2.13% 2.53% 3.05% 3.03% 2.49%
Reserve for credit losses
to noncurrent loans and
losses................. 200% 175% 187% 176% 197% 215% 106%
Nonaccrual loans and OREO
as a percent of related
asset categories....... 1.07% 1.42% 1.30% 1.88% 2.16% 2.61% 5.35%
</TABLE>
- ----------------------------------
(a) The results of operations for the nine months ended 9/30/97 include the
impact of a contribution of securities available for sale, to the Eastern
Chariable Foundation. As a result of this transition, non-interest income
includes gain on the contribution of $4,535,000, non-interest expense
includes a contribution expense of $5,358,000 and income tax expense
includes a benefit of $2,250,000.
(b) On October 8, 1993, the First Colonial Bank for Savings ("FCB") was merged
with and into Eastern Bank ("the Bank"). The merger was accounting for as a
pooling on interests, and accordingly, all amounts except for the Tier 1
risk-limited capital ratio for the year ended December 31, 1992 include the
consolidated results of FCB.
(c) On November 10, 1994, the Bank acquired the net assets of Saugus Bank and
Trust Company ("SBT"). The transaction was accounted for under the purchase
method of accounting, and accordingly, the assets and liabilities of SBT
were recorded at fair value on the date of acquisition.
(d) On April 24, 1992, the Bank acquired from the Federal Deposit Insurance
Corporation ("FDIC") certain assets and assumed certain liabilities of Shore
Bank and Trust Company.
(e) On May 15, 1992, the Bank acquired from the FDIC certain assets and assumed
certain liabilities and assumed the trust operations of the Malden Trust
Company.
n/a The information required to compute the Tier 1 risk-based capital ratio on
the pooling of interests method of accounting with the First Colonial Bank
for Savings is not available.
13
<PAGE>
EASTERN
SELECTED FINANCIAL DATA (CONTINUED)
EASTERN BANK CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) SEPTEMBER 30, 1997 DECEMBER 31, 1996 SEPTEMBER 30, 1996
- ------------------------------------------------------- ------------------ ----------------- ------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks................................ $ 55,352 $ 89,779 $ 70,766
Short-term investments................................. -- 61,022 --
Securities available for sale.......................... 421,497 370,984 409,317
Residential real estate loans.......................... 463,086 461,375 465,937
Commercial and industrial loans........................ 206,111 202,011 199,699
Commercial real estate loans........................... 368,505 357,308 352,757
Consumer loans......................................... 509,096 455,347 441,698
------------------ ----------------- ------------------
Gross loans.......................................... 1,546,798 1,476,041 1,460,091
Unearned discount...................................... (1,667) (2,900) (2,666)
Allowance for loan losses.............................. (33,358) (31,467) (37,735)
------------------ ----------------- ------------------
Net loans.............................................. 1,511,773 1,441,674 1,424,690
Bank premises and equipment............................ 24,437 25,032 24,503
Accrued interest receivable............................ 15,464 12,103 13,446
Goodwill and other intangibles......................... 13,936 15,477 16,163
Other assets........................................... 25,908 28,105 25,850
------------------ ----------------- ------------------
Total assets........................................... $ 2,068,367 $ 2,044,086 $ 1,984,735
------------------ ----------------- ------------------
------------------ ----------------- ------------------
LIABILITIES AND RETAINED EARNINGS
Demand deposits........................................ $ 251,301 $ 242,225 $ 229,068
Interest-bearing checking.............................. 207,787 209,880 205,168
Savings accounts....................................... 308,424 317,958 322,088
Money market deposit accounts.......................... 291,912 301,588 298,668
Certificates of deposit................................ 539,957 516,108 517,084
Certificates of deposit over $100,000.................. 120,535 93,939 103,600
------------------ ----------------- ------------------
Total deposits....................................... 1,719,916 1,681,698 1,675,676
Customer repurchase agreements......................... 82,588 79,131 72,007
Borrowed funds......................................... 6,757 5,930 5,010
Federal Home Loan Bank advances........................ 2,017 42,135 2,181
Tax escrow............................................. 5,422 5,800 5,962
Accrued expenses....................................... 15,824 17,472 18,390
Other liabilities...................................... 4,308 2,472 3,030
------------------ ----------------- ------------------
Total liabilities.................................... 1,836,832 1,834,638 1,782,256
Retained earnings...................................... 226,836 204,769 199,434
Unrealized appreciation (depreciation) on
securities available for sale, net of deferred
taxes................................................ 4,699 4,679 3,045
------------------ ----------------- ------------------
Total retained earnings.............................. 231,535 209,448 202,479
------------------ ----------------- ------------------
Total liabilities and retained earnings................ $ 2,068,367 $ 2,044,086 $ 1,984,735
------------------ ----------------- ------------------
------------------ ----------------- ------------------
</TABLE>
14
<PAGE>
EMERALD
SELECTED FINANCIAL DATA
The following table sets forth certain condensed consolidated historical
financial data of Emerald and is based on the consolidated financial statements
of Emerald, including the respective notes thereto.
<TABLE>
<CAPTION>
Interim unaudited financial data for the nine months ended September 30, 1997 are not
necessarily indicative of results which may be expected for any other interim period
or for the year as a whole.
<S> <C> <C> <C> <C> <C> <C> <C>
NINE MONTHS ENDED
SEPTEMBER 30 YEARS ENDED DECEMBER 31
---------------------- ----------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- ----------
<CAPTION>
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net interest income.................. $10,727.00 $ 8,797.00 $12,046.00 $10,229.00 $ 9,230.00 $ 9,207.00 $ 8,236.00
Provision for loan losses............ 200.00 1,136.00 1,211.00 300.00 135.00 2,080.00 2,270.00
Net interest income after provision
for 1............................ 10,527.00 7,661.00 10,835.00 9,929.00 9,095.00 7,127.00 5,966.00
Noninterest income................... 627.00 479.00 804.00 579.00 549.00 719.00 364.00
Noninterest expense.................. 6,765.00 5,570.00 7,656.00 6,552.00 6,209.00 5,680.00 4,835.00
Income (Loss) before income taxes.... 4,230.00 2,523.00 3,826.00 4,365.00 3,070.00 4,278.00 1,849.00
Provision for (Benefit from) income
taxes.............................. 1,454.00 974.00 1,445.00 1,646.00 1,002.00 1,198.00 265.00
Net income (loss).................... 2,776.00 1,549.00 2,381.00 2,719.00 2,068.00 3,080.00 1,584.00
Per common share
Net income (loss)
Primary............................ 1.21 0.76 1.14 1.41 1.13 1.71 0.97
Fully diluted...................... 1.21 0.76 1.14 1.41 1.13 1.71 0.97
Book value........................... 13.78 12.14 12.64 11.92 10.94 10.34 8.71
Cash dividends declared.............. 0.21 0.21 0.22 0.18 0.00 0.00 0.00 d
Average number of common shares (in
thousands)
Primary............................ 2,297,759 2,036,515 2,091,669 1,931,621 1,835,948 1,796,364 1,633,262
Fully diluted...................... 2,297,759 2,036,515 2,091,669 1,931,621 1,835,948 1,796,364 1,633,262
AVERAGE BALANCE SHEET DATA:
Loans and lease financing............ $278,985.00 $222,458.00 $231,255.00 $188,476.00 $148,814.00 $136,227.00 $140,582.00
Total earning assets................. 402,140.00 353,672.00 362,108.00 301,614.00 256,127.00 226,777.00 205,934.00
Total average assets................. 418,725.00 365,401.00 373,784.00 310,757.00 264,523.00 238,633.00 223,806.00
Deposits............................. 354,405.00 295,635.00 293,740.00 258,054.00 228,786.00 208,384.00 192,912.00
Borrowings........................... 32,599.00 43,780.00 43,253.00 22,395.00 10,168.00 8,836.00 13,578.00
Stockholders' equity................. 29,997.00 24,427.00 25,308.00 21,900.00 18,833.00 16,299.00 13,907.00
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30 YEARS ENDED DECEMBER 31
---------------------- ----------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED RATIOS:
Net interest margin.................. 3.58% 3.28% 3.33% 3.39% 3.60% 4.11% 4.00%
Return on average assets............. 0.86 0.75 0.64 0.88 0.78 1.29 0.71
Return on average common equity...... 11.85 11.46 9.41 12.42 10.98 18.90 12.28
Common equity to total assets........ 6.99 6.83 6.82 6.58 6.91 6.93 6.07
Average total stockholders' equity to
average total assets............... 7.16 6.69 6.77 7.05 7.12 6.83 5.77
Risk-based capital ratios
Tier 1............................. 9.79 10.90 10.90 11.40 12.20 13.40 7.70
Total.............................. 10.75 12.10 11.90 12.70 13.40 14.60 9.20
Leverage ratio....................... 7.40 7.33 7.47 7.35 7.48 7.26 6.24
Net credit losses to average loans
and lease financing................ -- 0.44 0.49 -- 0.25 1.95 1.36
Reserve for credit losses to loans
and lease financing................ 0.97 1.05 1.00 1.22 1.37 1.85 2.30
Reserve for credit losses to
nonactual loans and lease
financing.......................... 2.40 324.00 247.90 507.60 145.10 114.70 88.80
Nonactual loans and OREO as a percent
of related asset categories........ 0.29 .30 .40 .65 1.11 2.08 5.81
</TABLE>
15
<PAGE>
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
EASTERN BANK CORPORATION AND SUBSIDIARIES
EMERALD ISLE BANCORP, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINING BALANCE SHEET
The following Unaudited Pro Forma Condensed Combining Balance Sheet presents
the combined financial position of Eastern and subsidiaries and Emerald and
subsidiaries as of September 30, 1997 and December 31, 1996, assuming that the
Merger had occurred as of September 30, 1997 and January 1, 1996 respectively.
EASTERN BANK CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
9/30/97 12/31/96
PROFORMA PROFORMA
COMBINED COMBINED
------------------- -----------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Net interest income............................................................................ $ 77,647 $ 94,620
Provision for loan losses...................................................................... 3,953 6,211
Net interest income after provision for loan losses............................................ 73,694 88,409
--
Non-interest income............................................................................ 21,952 22,309
Non-interest expense........................................................................... 61,663 71,910
Additional Goodwill Amortization............................................................... 2,471 3,295
Income before income taxes, extraordinary item, and cumulative effect of accounting change..... 31,353 35,356
Income tax expense............................................................................. 11,141 15,744
Income before extraordinary item and cumulative effect of accounting change.................... 20,212 19,612
Extraordinary item............................................................................. -- --
Cumulative effect of a change in accounting for income taxes................................... -- --
Net income..................................................................................... $ 20,212 $ 19,612
AVERAGE BALANCE SHEET DATA:
Loans and lease financing...................................................................... 1,778,042 1,653,091
Total earning assets........................................................................... 2,190,582 2,085,954
Total average assets........................................................................... 2,318,730 2,226,463
Deposits....................................................................................... 2,037,650 1,971,582
Borrowings..................................................................................... 85,707 79,557
Capital........................................................................................ 218,451 196,771
SELECTED RATIOS:
Net interest margin............................................................................ 4.73% 4.54%
Return on average assets....................................................................... 1.16% 0.88%
Return on average equity....................................................................... 12.34% 9.97%
Capital to total assets period-end............................................................. 9.51% 9.51%
Average capital to average total assets........................................................ 9.42% 8.84%
Risk-based capital ratios:
Tier 1....................................................................................... 9.39% 9.17%
Total........................................................................................ 10.62% 10.60%
Leverage ratio................................................................................. 7.19% 6.39%
Net credit losses to average loans and leases.................................................. 0.14% 0.56%
Reserve for credit losses to loans and leases.................................................. 1.96% 2.00%
Reserve for credit losses to nonaccrual loans and leases....................................... 191% 194%
Nonaccrual loans and OREO as a percent of related asset categories............................. 0.92% 1.15%
</TABLE>
The proforma adjustments relate to the reduction in earning assets of
approximately $80 million in purchase price and an additional $33-45 million
reduction in earning assets as a result of proforma reduction in FHLB
borrowings.
Also there is additional goodwill amortization proforma over 15 years, at a
rate of $3.3 million per annum.
Note: no adjustments made for any anticipated reductions in operating
expenses. The pro forma combined condensed financial data are not necessarily
indicative of the results that actually would have occurred had the transaction
been consummated on the dates indicated or that may be obtained in the future.
16
<PAGE>
SPECIAL MEETING OF STOCKHOLDERS
INTRODUCTION
This Proxy Statement is being furnished to holders of Emerald Common Stock
in connection with the solicitation of proxies by the Emerald Board of Directors
(the "Emerald Board") for use at the Special Meeting of Stockholders scheduled
to be held on January 22, 1998, at 10:00 A.M., at the Sheraton Tara Hotel, 37
Forbes Road, Braintree, Massachusetts, and at any adjournments or postponements
thereof.
PURPOSES
The Special Meeting will be held for the purposes of (i) considering and
voting upon a proposal to approve and adopt the Affiliation Agreement and the
transactions contemplated thereby, and (ii) to conduct any other business that
may properly come before such meeting, or any adjournments or postponements
thereof. With the exception of these matters, the management of Emerald knows of
no other matters at this time to be brought before the Special Meeting.
THE EMERALD BOARD UNANIMOUSLY RECOMMENDS THAT EMERALD STOCKHOLDERS VOTE FOR
APPROVAL AND ADOPTION OF THE AFFILIATION AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY.
QUORUM AND VOTING
Only stockholders of record at the close of business on December 15, 1997
(the "Record Date") are entitled to notice of and to vote at the Special
Meeting. As of the Record Date, there were issued and outstanding 2,313,927
shares of Emerald Common Stock entitled to vote. The presence, in person or by
proxy, of a majority of the aggregate number of shares of Emerald Common Stock
outstanding on the Record Date is necessary to constitute a quorum at the
Special Meeting. Each stockholder is entitled to one vote, in person or by
proxy, for each share of Emerald Common Stock held of record in his or her name
at the close of business on the Record Date.
STOCKHOLDER VOTE REQUIRED; VOTING AGREEMENTS
The approval and adoption of the Affiliation Agreement, and the transactions
contemplated thereby, require the affirmative vote of the holders of at least
two-thirds of the issued and outstanding shares of Emerald Common Stock. If the
affirmative vote of the holders of at least two-thirds of the issued and
outstanding shares of Emerald Common Stock is not obtained, each of Emerald and
Eastern will have the right to terminate the Affiliation Agreement, provided
that the terminating party is not in material breach of the Affiliation
Agreement or the Stock Option Agreement. If the Affiliation Agreement is
terminated because of the failure to obtain the requisite stockholder approval,
the Affiliation Agreement will become null and void and there will be no
liability on the part of Emerald or Eastern or their respective officers or
directors to the other, except as specifically provided in the Affiliation
Agreement. See "THE MERGER--Termination."
In connection with the execution of the Affiliation Agreement, Mark A.
Osborne, Chairman of the Board, President and Chief Executive Officer of Emerald
and Michael T. Putziger, a director of Emerald, owning 507,699 shares in the
aggregate, as of December 1, 1997, representing 21.94% of the shares issued and
outstanding, each agreed by separate letter (the "Voting Agreements") to
Eastern, dated October 22, 1997, to vote or cause to be voted all of the shares
of Emerald Common Stock over which he has beneficial ownership as of the Record
Date in favor of the Affiliation Agreement and the Merger. Execution of the
Voting Agreements was a condition to Eastern entering into the Affiliation
Agreement and no compensation was paid to any person in consideration for
executing the Voting Agreements.
17
<PAGE>
OWNERSHIP OF EMERALD COMMON STOCK
The following table sets forth, as of October 22, 1997, certain information
with respect to the beneficial ownership of Emerald Common Stock by: (i) each of
Emerald's directors, (ii) all directors and executive officers of Emerald as a
group, and (iii) each other person (including any "group," as that term is used
in Section 13(d)(3) of the Exchange Act) who is known by Emerald to own
beneficially 5% or more of Emerald Common Stock. Emerald believes that the
beneficial owners of Emerald Common Stock listed below, based on information
furnished by such owners, have sole voting and investment power with respect to
such shares, except as noted below.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) COMMON STOCK(1)
- --------------------------------------------------------------------------- ------------------ -------------------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS:
Mark A. Osborne............................................................ 265,100 11.46%
Gerard F. Linskey.......................................................... 55,161 2.45%
Peter L. Maguire........................................................... 22,968 1.02%
John V. Murphy............................................................. 12,390 .55%
Thomas P. Moore............................................................ 40,350 1.79%
Richard P. Quincy.......................................................... 1,875 .08%
Michael T. Putziger........................................................ 242,599 10.78%
Douglas C. Purdy........................................................... 1,257 .06%
All executive officers and directors as a group (8 persons)................ 641,700 27.73%
</TABLE>
- ------------------------
(1) Beneficial ownership is determined in accordance with the rules of the SEC
and includes voting or investment power with respect to the shares.
SOLICITATION OF PROXIES
The proxy enclosed herewith is being solicited by the Emerald Board. Each
proxy received will be voted as directed; however, if a proxy is received,
signed but with no direction indicated, the proxy will be voted FOR the approval
and adoption of the Affiliation Agreement and the transactions contemplated
thereby, and in such manner as management may decide on such other matters as
may properly come before the Special Meeting. In determining the required vote
necessary for approval, abstentions and broker non-votes (a "broker non-vote"
occurs when a registered broker holding a customer's shares in the name of the
broker has not received voting instructions on a matter from the customer and is
barred from exercising discretionary authority to vote on the matter) will have
the effect of negative votes for purposes of the two-thirds requirement. In
addition, stockholders whose shares of Emerald Common Stock are not registered
in their own name will need additional documentation from the record holder of
such shares to vote personally at the Special Meeting.
In addition to solicitation of proxies by mail, proxies may also be
solicited by telephone or personal interview by employees of Emerald and
Hibernia, who will not receive additional compensation therefor. Emerald has
retained D.F. King to assist in the distribution and solicitation of proxies, at
a fee of approximately $2500 plus reasonable out-of-pocket expenses. Emerald
will also reimburse brokerage firms and others who hold record ownership for
third parties for their expenses in forwarding proxy materials to the beneficial
owners of Emerald Common Stock. Emerald and Eastern will each bear its own
expenses incurred in connection with this Proxy Statement.
18
<PAGE>
REVOCATION OF PROXIES
Any stockholder giving a proxy prior to the Special Meeting has the right to
revoke it prior to its exercise by delivering a written notice to the Clerk of
Emerald, or by returning a duly executed proxy bearing a later date, or by
attending the Special Meeting, revoking prior proxies, and voting in person. A
stockholder of record may revoke a proxy by filing an instrument of revocation
with Douglas C. Purdy, Clerk of Emerald, 730 Hancock Street, Quincy,
Massachusetts 02170, by filing a duly executed proxy bearing a later date, or by
appearing at the Special Meeting in person, notifying the Clerk, and voting by
ballot at the Special Meeting. Any stockholder of record attending the Special
Meeting may vote in person whether or not a proxy has been previously given, but
the mere presence (without notifying the Clerk) of a stockholder at the Special
Meeting will not constitute revocation of a previously given proxy.
19
<PAGE>
INFORMATION ABOUT EASTERN
GENERAL
Eastern Bank Corporation is a mutual holding company originally organized as
a mutual savings bank in 1818 under Massachusetts law which, together with its
wholly-owned subsidiaries, Eastern Bank and Eastern Bank & Trust Company, is a
full-service banking company with offices in northeastern Massachusetts and
downtown Boston providing consumer banking, trust and investment management,
mortgage banking, consumer finance, commercial lending, asset-based lending and
equipment leasing services. As of September 30, 1997, Eastern had total assets
of $2.1 billion and total deposits of $1.7 billion.
20
<PAGE>
INFORMATION ABOUT EMERALD
GENERAL
Emerald is a bank holding company, organized in 1996 under Massachusetts
law. Emerald's principal business, conducted through its subsidiary Hibernia, a
Massachusetts stock savings bank founded in 1912, consists of attracting
deposits from the general public and investing these deposits, together with
funds generated by operations or borrowings from the Federal Home Loan Bank of
Boston, in residential mortgage loans, commercial real estate loans,
construction loans, multi-family residential mortgage loans, commercial and
small business loans and other loans. Emerald's lending markets and deposit
gatherings are primarily concentrated from Boston to southeastern Massachusetts.
For more information about Emerald, reference is made to Emerald's most
recent Annual Report on Form 10-K, which is incorporated herein by reference.
See "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE."
21
<PAGE>
THE MERGER
GENERAL
This section of the Proxy Statement describes certain aspects of the
proposed Merger, including the principal provisions of the Affiliation
Agreement. The following description of the Merger does not purport to be
complete and is qualified in its entirety by reference to the Affiliation
Agreement, the Bank Merger Agreement, the Stock Option Agreement and the Voting
Agreements which are attached as APPENDICES A, B, C AND D, respectively, to this
Proxy Statement and are incorporated herein by reference. All stockholders of
Emerald are urged to read the Affiliation Agreement, the Bank Merger Agreement,
the Stock Option Agreement and the Voting Agreements in their entirety.
BACKGROUND OF MERGER
EXISTING BUSINESS OF EMERALD ISLE BANCORP., INC. Emerald is the holding
company of Hibernia and its subsidiaries and has no operation beyond its
investment in Hibernia. Hibernia is a Massachusetts chartered stock bank which
was founded in 1912 in Boston, Massachusetts and 68 years later opened its
second location at 51 Commercial Street, Braintree, Massachusetts. Thereafter
from July, 1987 through July, 1997, Hibernia opened additional branches in
Quincy (two), Weymouth, Hingham (two), Stoughton and most recently at 470 West
Broadway in South Boston, Massachusetts, thereby establishing a geographic
franchise heading south from Boston. Hibernia currently has a branch under
construction in Marshfield, Massachusetts.
Hibernia began as a mutual savings bank. In 1986 it converted to a
stockholder-owned institution; in 1996 its holding company Emerald was
established.
There are a number of financial institutions which operate within Emerald's
market area, several of which are significantly larger than Hibernia and have
greater financial resources, all of which are competitors of Emerald and
Hibernia. This includes competition from savings banks, co-operative banks,
commercial banks, credit unions, savings and loan associations and other
financial institutions. The identity of competition continues to change as a
result of mergers and acquisitions, and while the continuing consolidation of
the industry and favorable economic and competitive factors have made it
possible for Emerald to expand its franchise and business activities, the
continued ability of Emerald to remain competitive is very dependent upon how
successfully it can respond to the rapidly evolving business environment.
Emerald has always run its business with the view of maximizing shareholder
value. It has had the belief that an independent institution, providing quality
financial services and products in a personalized manner while maintaining a
community orientation would, over time, continue to provide the best possible
returns for shareholders.
On April 9, 1997, Mark Osborne, President and Chief Executive Officer of
Emerald, was introduced to Stanley Lukowski, Chairman of the Board of Eastern,
at which time Mr. Lukowski indicated an interest in acquiring Hibernia. At that
time Mr. Osborne indicated that he did not wish to have any discussion of that
subject until after Emerald's annual meeting on April 28, 1997. It was agreed
that Mr. Osborne and Mr. Lukowski would meet at the Massachusetts Bankers
Association convention in May to discuss the matter further.
On a non-related matter, Mr. Osborne met with Mary Anne Callahan of CIBC
Oppenheimer on April 29, 1997, at which time the results of a valuation of
Emerald prepared by CIBC Oppenheimer were discussed. The valuation indicated
that based upon the then current average sale valuations for similar
institutions and the projected operating results for Emerald, continuing to
operate independently would create more value over time for Emerald's
shareholders.
22
<PAGE>
On May 4, 1997, Mr. Osborne and Mr. Lukowski met in Phoenix, at which time
Mr. Lukowski's interest in acquiring Emerald was discussed in more detail, which
included Eastern's strategic reasons for doing so. A follow up telephone
conversation was held during the week of May 12th during which Mr. Osborne
informed Mr. Lukowski that he believed that more value could be created for
Emerald's shareholders over time by continuing to operate independently.
A meeting of the Board of Directors of Hibernia, which included a majority
of Emerald Directors, was held on May 21, 1997 at which time both Eastern's
interest in acquiring Emerald and the CIBC Oppenheimer valuation were discussed.
It was decided that there was no interest at that time in pursuing the
discussions further.
Mr. Osborne met next with Mary Anne Callahan of CIBC Oppenheimer in
Woodstock, Vermont on August 7, 1997, at which time both the valuation of
Emerald as an independent entity and the sale valuations of similar companies
were updated. The substantial increase in the market value of similar companies
that had occurred during the interim period between meetings as evidenced by the
sales of such companies was discussed. CIBC Oppenheimer was asked to identify
potential cash purchasers for Emerald as a result of that meeting. Institutions
subsequently identified as potential cash purchasers included Eastern Bank. In
September of 1997, again after updating market valuations, CIBC Oppenheimer was
authorized to explore Eastern's interest in acquiring Emerald.
In October of 1997, through discussions with CIBC Oppenheimer it was
determined that Eastern had an interest in the acquisition of Emerald at a price
level which was deemed to be in the best interests of Emerald's shareholders and
on October 7, 1997, Eastern signed a Confidentiality Agreement pursuant to which
it undertook a due diligence investigation of the business operations of
Emerald. On October 15, 1997, during the performance of that due diligence,
discussions took place between the parties, their financial advisers and their
counsel discussing certain aspects of the proposed transaction including the
details of the Affiliation Agreement and related documents. During the period
from then to October 22, 1997, the parties with their counsel and financial
advisers negotiated a variety of issues pertaining to the transaction, including
the various representations, warranties and covenants contained in the
agreements, the terms of the Stock Option Agreement and the other aspects of the
transaction fully set forth in the agreements appended hereto as Appendices A-D.
In the afternoon of October 22, 1997, Emerald, its counsel and CIBC
Oppenheimer met with Emerald's board to consider the proposed terms of the
merger and to consider, with the assistance and advice of CIBC Oppenheimer, the
appropriateness of the transaction in terms of valuation to the shareholders of
Emerald. At that meeting Emerald's board considered various aspects of the
transaction including the current CIBC Oppenheimer valuation, the likelihood of
the transaction in fact proceeding as reflected in the agreements, and the
business prospects of Emerald in light of the increasingly competitive
environment in which it was operating. The Board concluded that the transaction
as proposed represented fair value to the shareholders of Emerald, and therefore
unanimously approved the Affiliation Agreement and related agreements and
authorized Mr. Osborne to execute the same on behalf of Emerald.
RECOMMENDATION OF THE EMERALD BOARD OF DIRECTORS; EMERALD'S REASONS FOR MERGER.
The terms of the Affiliation Agreement, including the Merger Consideration,
were the result of arms' length negotiations between Emerald and Eastern.
Emerald entered into negotiations with Eastern based upon its belief that a
privately-negotiated transaction with Eastern represented the best means of
achieving the strategic interests of Emerald and its stockholders and provided
greater value to Emerald stockholders than other possible alternatives.
Specific factors considered included:
(a) the amount of consideration offered by Eastern in relation to the
estimated future potential value of Emerald Common Stock;
23
<PAGE>
(b) the impact on Hibernia's customers, suppliers, employees, and
communities served; and
(c) CIBC Oppenheimer's opinion that the consideration to be paid to
Emerald's shareholders is fair, from a financial point of view.
EMERALD'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE AFFILIATION
AGREEMENT AND EACH OF THE TRANSACTIONS CONTEMPLATED THEREBY BE APPROVED BY THE
STOCKHOLDERS OF EMERALD.
OPINION OF FINANCIAL ADVISOR TO EMERALD
Emerald has received an opinion that the Merger is fair to Emerald's
stockholders from a financial point of view from CIBC Oppenheimer.
CIBC OPPENHEIMER OPINION. CIBC Oppenheimer was retained by the Emerald
Board on October 22, 1997 for the purpose of rendering financial advice in
connection with the consideration and implementation of a possible transaction
and a fairness opinion in connection with the Merger. Emerald selected CIBC
Oppenheimer for a number of reasons, including its familiarity with Emerald and
its business. Emerald also considered CIBC Oppenheimer's experience and
reputation in the area of valuation and financial advisory work generally, and
in relation to financial institutions specifically. CIBC Oppenheimer is a
nationally recognized investment banking firm and is regularly engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, leveraged buyouts, negotiated underwritings, private placements
and valuations for corporate and other purposes.
CIBC Oppenheimer has rendered its written opinion to the Emerald Board dated
October 22, 1997 and dated the date of this Proxy Statement that, based upon and
subject to the various considerations set forth therein, the proposed merger
consideration is fair to Emerald from a financial point of view. No limitations
were imposed by Emerald upon CIBC Oppenheimer with respect to investigations
made or procedures followed by CIBC Oppenheimer in rendering its opinion.
THE FULL TEXT OF CIBC OPPENHEIMER'S OPINION AS OF THE DATE OF THIS PROXY
STATEMENT, WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON
THE REVIEW UNDERTAKEN BY CIBC OPPENHEIMER, IS ATTACHED HERETO AS APPENDIX E.
EMERALD SHAREHOLDERS ARE URGED TO READ THE OPINION IN ITS ENTIRETY. CIBC
OPPENHEIMER'S OPINION IS DIRECTED ONLY TO THE MERGER CONSIDERATION AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY EMERALD SHAREHOLDER AS TO HOW SUCH
SHAREHOLDER SHOULD VOTE AT THE EMERALD MEETING. THE SUMMARY SET FORTH IN THIS
PROXY STATEMENT OF THE CIBC OPPENHIEMER OPINION IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF THE OPINION ATTACHED AHERETO AS APPENDIX E.
In connection with rendering its opinion, CIBC Oppenheimer reviewed among
other things: (a) the Affiliation Agreement; (b) the Voting Agreements and Stock
Option Agreement (as such term is defined in the Agreement); (c) audited
consolidated financial statements and management's discussion and analysis of
the financial condition and results of operation for Emerald for the three
fiscal years ended December 31, 1996; (d) unaudited consolidated financial
statements for Emerald for the nine months ended September 30, 1997; (e) certain
other publicly available business and financial information relating to Emerald;
(f) the views of senior management of Emerald of the past and current business
operations, results thereof, financial condition and future prospects of
Emerald; (g) a comparison of certain financial information for Emerald, in each
case with similar information for certain other companies considered comparable
to Emerald; (h) the financial terms of certain recent business combinations in
the banking industry;(i) the current market environment generally and the
banking environment in particular; and (j) such other information, financial
studies, analyses and investigations and financial, economic and market criteria
as CIBC Oppenheimer considered appropriate in the circumstances.
24
<PAGE>
CIBC Oppenhiemer assumed and relied upon, without independent verification,
the accuracy and completeness of the information reviewed by it for the purposes
of its opinion. With respect to the financial projections, CIBC Oppenheimer
assumed that they were reasonably prepared and reflected the best currently
available estimates and judgments of the future financial performance of
Emerald. CIBC Oppenheimer did not make any independent valuation or appraisal of
the assets or liabilities of Emerald, nor was it furnished with any such
appraisal. CIBC Oppenheimer's opinion was based on economic, market and other
conditions as in effect on, and the information made available to it as of, the
date of the opinion.
The projections furnished to CIBC Oppenheimer for Emerald were prepared by
management of the company. As a matter of policy, Emerald does not publicly
disclose internal management projections of the type provided to CIBC
Oppenheimer in connection with its analysis of the Merger, and such projections
were not prepared with a view toward public disclosure. These projections were
based on numerous variables and assumptions which are inherently uncertain and
which may not be within the control of management, including, without
limitation, factors relating to general economic and competitive conditions and
prevailing interest rates. Accordingly, actual results could vary significantly
from those set forth in such projections.
The following is a summary of the analyses presented by CIBC Oppenheimer to
the Emerald Board at its meeting on October 22, 1997 in connection with CIBC
Oppenheimer's opinion dated such date:
COMPARABLE TRANSACTIONS ANALYSIS. CIBC Oppenheimer compared the financial
terms of the Merger to the financial terms, to the extent publicly available, of
the seven New England thrift transactions with acquisition values greater than
$25 million announced or completed from January 1, 1997 through October 22, 1997
(the "Recent New England Thrift Acquisitions"). CIBC Oppenheimer believed these
seven transactions to be most comparable for purpose of determining the imputed
values of Emerald. In addition, CIBC Oppenheimer compared the financial terms of
the Merger to the financial terms, to the extent publicly available, of fifteen
recent nationwide thrift transactions with total assets between $300 million and
$1 billion and acquisition values greater than $25 million announced or
completed from January 1, 1997 through October 22, 1997 (the "Recent Nationwide
Thrift Acquisitions").
The Recent New England Thrift Acquisitions included the following: People's
Bank, MHC/Norwich Financial, North Fork Bancorp/Branford Savings Bank, Granite
State Bankshares/Primary Bank, Webster Financial Corp./Peoples Savings
Financial, CFX Corporation/Community Bankshares, CFX Corporation/ Portsmouth
Bank Shares and Eagle Financial Corp/MidConn Bank.
The Recent Nationwide Thrift Acquisitions included the following: First
Commercial Corp/Kemmens Wilson, Regions Financial/Palfed, Inc., People's Bank,
MHC/Norwich Financial, Commercial Federal/Mid Continent Bancshares, Carolina
First Corp/First Southeast Financial Corp, Union Planters Corp/Sho-Me Financial,
Crestar Financial/American National Bancorp, BB&T Corp/Virginia First Financial,
Granite State Bankshares/Primary Bank, Charter One Financial/Haverfield Corp.,
Webster Financial Corp/People's Savings Financial, CFX Corporation/Community
Bankshares, Provident Bankshares/First Citizens Financial, Republic
Bancshares/FFO Financial Group and Eagle Financial Corp/Mid Conn Bank.
For each of these transactions, CIBC Oppenheimer calculated, among other
things, the high, mean, median and low price to book value, price to last twelve
months ("LTM") net income and core deposit premium (defined as the transaction
value minus tangible book value divided by core deposits, excluding certificates
of deposit with balances equal to or greater than $100,000), and compared the
results of these calculations to calculations made by CIBC Oppenheimer for the
proposed Merger as follows.
CIBC Oppenheimer's analysis indicated that the Recent New England Thrift
Acquisitions had a mean price/book multiple of 1.83x, price/LTM earnings
multiple of 17.88x, and a core deposit premium of 14.15%. The Recent Nationwide
Thrift Acquisitions had a mean price/book multiple of 1.95x, price/LTM earnings
multiple of 26.53x and a core deposit premium of 12.87%.
25
<PAGE>
From October 22, 1997 through December 12, 1997 there have been three
additional New England thrift acquisitions announced with transaction values in
excess of $25 million: UST Corp./Somerset Savings Bank, Peoples Heritage
Financial/CFX Corporation and Webster Financial Corp./Eagle Financial Corp. The
Recent New England Thrift Acquisitions, adjusted to include these acquisitions,
had a mean price/ book multiple of 2.04x, price/LTM earnings multiple of 19.84x
and a core deposit premium of 15.52%. From October 22, 1997 through December 12,
1997 there have been five additional Nationwide thrift acquisitions announced
with transaction values in excess of $25 million: UST Corp./Somerset Savings
Bank, Golden State Bancorp/RedFed Bancorp, Magna Group/Charter Financial,
Mercantile Bancorp/ HomeCorp Inc. and HUBCO, Inc./Poughkeepsie Financial. The
Recent Nationwide Thrift Acquisitions, adjusted to include these acquisitions,
had a mean price/book multiple of 1.95x, price/LTM earnings multiple of 26.43X
and a core deposit premium of 13.00%.
The implied values for Emerald Isle derived from these analyses were a mean
of $71.5 million and a median of $68.2 million based on the Recent New England
Thrift Acquisitions, adjusted to include acquisitions announced through December
12, 1997, and a mean of $75.9 million and a median of $67.5 million based on the
Recent Nationwide Thrift Acquisitions, adjusted to include acquisitions
announced through December 12, 1997.
DISCOUNTED CASH FLOW ANALYSIS. Using a discounted cash flow analysis, CIBC
Oppenheimer estimated the present value of the future streams of after-tax cash
flows that Emerald could produce through December 31, 2001. In this analysis,
CIBC Oppenheimer assumed that Emerald's net income was adjusted in each year to
reflect an assumed net charge-off ratio of 0.17% of total loans and a level of
provision for loan losses for each year based on an assumed ration of 1.05x the
amount of net charge offs. CIBC Oppenheimer calculated a range of terminal
values by applying earnings multiples of 18 and 19 (based upon its observation
of price to earnings multiples in the comparable transactions referred to below)
to Emerald's estimated after-tax cash flows for the twelve months ended December
31, 2001. The cash flows were discounted to present values using different rates
ranging from 11% to 12%. CIBC Oppenheimer prepared the discounted cash flow
analysis using 1997, 1998 and 1999 earnings estimate provided by Emerald and
then growing earnings by 8% afterwards. This analysis indicated an implied range
of values for Emerald ranging from $68.5 million to $74.7 million.
In connection with its opinion dated as of the date of this Proxy Statement,
CIBC Oppenheimer confirmed the appropriateness of its reliance on the analyses
used to render its October 22, 1997 opinion by performing procedures to update
certain of such analyses and by reviewing the assumptions on which such analyses
were based and the factors considered in connection therewith.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. CIBC
Oppenheimer believes that its analyses must be considered as a whole and that
selecting portions of its analyses, without considering the analyses taken as a
whole, would create an incomplete view of the process underlying the analyses
set forth in its opinion. In addition, CIBC Oppenheimer considered the results
of all such analyses and did not assign relative weights to any of the analyses,
so that the ranges of valuations resulting from any particular analysis
described above should not be taken to be CIBC Oppenheimer's view of the actual
value of Emerald or the combined entity.
In performing its analyses, CIBC Oppenheimer made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Emerald. The analyses
performed by CIBC Oppenheimer are not necessarily indicative of actual values,
which may be significantly more or less favorable than suggested by such
analyses. Such analyses were prepared solely as a part of CIBC Oppenheimer's
October 22, 1997 opinion: the analyses do not purport to be appraisals or to
reflect the prices at which a company might actually be sold.
The Emerald Board retained CIBC Oppenheimer based upon its experience and
expertise. CIBC Oppenheimer is a nationally recognized investment banking and
advisory firm. CIBC Oppenheimer, as part of its investment banking business, is
continuously engaged in the valuation of business and securities
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in connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. In the
course of its market making and other trading activities, CIBC Oppenheimer may,
from time to time, have a long or short position in, and may buy or sell,
securities of Emerald both for its own account and for the accounts of
customers.
EFFECTIVE TIME OF THE MERGER; CLOSING DATE
As soon as practicable after satisfaction or waiver of all conditions to the
Merger under the Affiliation Agreement, Eastern, the Merger Subsidiary and
Emerald shall cause Articles of Merger complying with the requirements of the
MBCL to be filed with the Secretary of The Commonwealth of Massachusetts. The
date and time set forth in the Articles of Merger as the effective time, will be
the "Effective Time." The "Closing Date" will occur on the first business day
after the date on which all conditions contained in Article VI of the
Affiliation Agreement are satisfied or waived; or at such other date as the
parties may mutually agree. Eastern and Emerald anticipate that the Merger will
be completed in the first quarter of 1998. The consummation of the Merger could
be delayed however, as a result of delays in obtaining the necessary regulatory
and stockholder approvals. There can be no assurances that such approvals will
be obtained or that the Merger will be completed. If the Merger has not been
consummated on or before June 30, 1998, the Affiliation Agreement may be
terminated by either Eastern or Emerald. See "-- Regulatory Approvals,"
"--Conditions to the Consummation of the Merger," and "--Termination of the
Affiliation Agreement."
Immediately after consummation of the Merger, Emerald will cause Hibernia
and Eastern will cause Eastern Bank to be merged. Eastern Bank will be the
surviving Massachusetts stock savings bank of the Bank Merger.
TERMS OF THE MERGER
At the Special Meeting, shareholders of Emerald will consider and vote upon
a proposal to approve the Affiliation Agreement. The Affiliation Agreement
provides, among other things, that (i) the Merger Subsidiary will be merged with
and into Emerald and (ii) each share of Emerald common stock outstanding
immediately prior to consummation of the Merger (other than shares held by
Emerald as treasury stock, shares held by shareholders who exercise dissenters'
rights pursuant to the applicable provisions of the MBCL and shares held by
Eastern or Eastern Bank other than in a fiduciary capacity) will be converted
into and represent the right to receive the Merger Consideration. Immediately
following the Merger, Eastern Bank and Emerald will enter into a plan of
liquidation pursuant to which Emerald will be liquidated and dissolved, with
Emerald's assets (including all of the outstanding shares of capital stock of
Hibernia) thereupon vesting in Eastern Bank. Immediately upon the consummation
of such liquidation, Hibernia (which will then be a wholly-owned subsidiary of
Eastern Bank) will merge with and into Eastern Bank, with Eastern Bank as the
surviving entity, pursuant to the Bank Merger Agreement.
The Affiliation Agreement as executed contemplates that the Merger
Subsidiary would be formed as a wholly-owned subsidiary of Eastern and that by
virtue of the Merger, Emerald would become a wholly-owned subsidiary of Eastern.
Under the Affiliation Agreement, however, prior to the Effective Time, Eastern
is entitled to (i) revise the sequence of the Merger and the Bank Merger to
provide that the Bank Merger is to be consummated prior to the Merger, (ii)
revise the structure of the Merger to provide that Emerald is merged with and
into the Merger Subsidiary at the Effective Time, (iii) organize the Merger
Subsidiary as a direct wholly-owned subsidiary of Eastern Bank (as contemplated
by this Proxy Statement), and/or (iv) revise the structure of the Merger to
provide that Hibernia is merged with and into a special-purpose interim trust
company organized by Eastern prior to the Effective Time, provided that any
change to the structure of the Merger or the Bank Merger will not be adopted if
such change would result in additional adverse tax consequences (beyond gain
recognition on the sale of their shares) to the shareholders of Emerald as a
group, including but not limited to, the Merger becoming subject to taxation to
the
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Emerald stockholders other than as a capital transaction. As provided by the
Affiliation Agreement, Eastern has notified Emerald of its intention to change
the structure of the transaction as reflected in this Proxy Statement.
Shares of Emerald Common Stock that are owned directly or indirectly by
Eastern or Eastern Bank at the Effective Time, other than shares held in a
fiduciary capacity, and any such shares held by Emerald as treasury stock will
be canceled, retired and cease to exist, and no payment will be made with
respect thereto.
Shares of Emerald Common Stock held by a stockholder who has demanded
appraisal rights in compliance with the provisions of the MBCL (see "THE
MERGER--Rights of Dissenting Stockholders") will not be converted into Merger
Consideration at the Effective Time. If, however, the stockholder subsequently
withdraws his or her demand for appraisal or loses his or her right of
appraisal, the stockholder's shares will be deemed to be so converted as of the
Effective Time.
The Articles of Organization and the By-Laws of the Merger Subsidiary, as in
effect immediately prior to the Effective Time, will be the Articles of
Organization and the By-Laws of Emerald after the Effective Time, subject to the
rights of Eastern Bank as its sole stockholder to later amend them. The
directors and officers of the Merger Subsidiary immediately prior to the
Effective Time will be the directors and officers of Emerald after the Effective
Time, subject to the rights of Eastern Bank as sole stockholder to change such
directors and officers thereafter.
The Merger Consideration is the result of arms'-length negotiations between
the respective managements of Emerald and Eastern. In negotiating the Merger
Consideration, the management of Emerald had the benefit of advice from its
financial advisor, the investment banking firm of CIBC Oppenheimer. See "THE
MERGER--Opinion of Financial Advisor to Emerald."
After the Effective Time, holders of certificates of Emerald Common Stock
will have no rights as stockholders of Emerald other than (i) to receive the
Merger Consideration into which such shares of Emerald Common Stock have been
converted, and (ii) the rights afforded to dissenting stockholders under the
laws of the Commonwealth of Massachusetts. See "THE MERGER--Rights of Dissenting
Stockholders."
REGULATORY APPROVALS
The Affiliation Agreement provides that the obligation of Eastern and
Emerald to consummate the Merger is conditioned upon the receipt of any required
approvals from governmental or regulatory authorities or agencies, including the
Federal Reserve Board, the FDIC, the Massachusetts Board, the Massachusetts
Commissioner and the DOJ. The Merger may not be consummated until 30 days after
approval by the FDIC (or such shorter period as the FDIC may prescribe with the
concurrence of the Attorney General, but not less than 15 days), during which
time the DOJ may challenge the Merger on antitrust grounds. The commencement of
an antitrust action by the DOJ would stay the effectiveness of the FDIC approval
unless a court specifically orders otherwise.
The parties have filed or will file all applications and applied for or will
apply for all waivers necessary for consummation of the Merger. The Merger will
not proceed until all regulatory approvals required to consummate the Merger
have been obtained, such approvals are in full force and effect and all
statutory waiting periods in respect thereof have expired. There can be no
assurance that the Merger will be approved by any of the foregoing regulatory
authorities. If such approvals are received, there can be no assurance as to the
date of such approvals or the absence of any litigation challenging such
approvals. Emerald and Eastern are not aware of any other governmental approvals
or actions that are required prior to the parties' consummation of the Merger.
It is currently contemplated that if any such additional governmental approvals
or actions are required, such approvals or actions will be sought. There can be
no assurance, however, that any such additional approvals or actions will be
obtained.
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MANAGEMENT AND OPERATIONS AFTER THE MERGER
The Articles of Organization and the By-Laws of the Merger Subsidiary, as in
effect immediately prior to the Effective Time, will be the Articles of
Organization and the By-Laws of Emerald after the Effective Time, subject to the
rights of Eastern Bank as its sole stockholder to later amend them. The
directors and officers of the Merger Subsidiary immediately prior to the
Effective Time will be the directors and officers of Emerald after the Effective
Time, subject to the rights of Eastern Bank as sole stockholder to change such
directors and officers thereafter.
As set forth in the Bank Merger Agreement, after the Bank Merger, the bank
branches formerly owned and operated by Hibernia and acquired by Eastern Bank
pursuant to the Bank Merger will be operated under the name "Eastern Bank".
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Hibernia and Mark A. Osborne are parties to an Employment Agreement (the
"Employment Agreement") and a Special Termination Agreement (the "Termination
Agreement"), each dated August 1, 1997. Under the Employment Agreement, Mr.
Osborne is entitled to be employed as the President and Chief Executive Officer
of Hibernia until 2002. Mr. Osborne enjoys certain protections under the
Termination Agreement with respect to any "Change in Control" of Emerald or
Hibernia which, as defined in the Termination Agreement, includes consummation
of the Merger and the Bank Merger. Upon such a Change in Control and the
occurrence of a Terminating Event, as defined in below, within three (3) years
of the Effective Time, Mr. Osborne would be entitled to a lump sum severance
payment equal to three (3) times his "base amount" (as defined under Section
280G(b)(3) of the Internal Revenue Code of 1986, as amended (the "Code")), less
one dollar ($1.00). If such a terminating event were to occur in 1998, Mr.
Osborne's base amount for purposes of the Change in Control provisions of the
Termination Agreement would be approximately $676,571.13. Inasmuch as it is not
expected that Mr. Osborne will retain his present responsibilities following the
Effective Time, it is projected that a Terminating Event will occur and that Mr.
Osborne will elect to receive his lump-sum payment at the Effective Time or
shortly thereafter. For the purposes of the Termination Agreement, a
"Terminating Event" means (i) Mr. Osborne is terminated by Hibernia other than
for specific reasons specified therein, or (ii) Mr. Osborne resigns after (x) a
significant change in the nature or scope of his responsibilities prior to the
Effective Time, or (y) a reasonable determination by Mr. Osborne that, as a
result of a Change of Control, he is unable to exercise the responsibilities
exercised by him immediately prior to such Change of Control, or (z) a decrease
in his total annual compensation other than as a result of a decrease in
compensation payable to him and to all other executive officers of Hibernia on
the basis of Hibernia's financial performance.
In connection with the matters set forth in the preceding paragraph,
Eastern, Emerald, Hibernia and Mr. Osborne have confirmed, pursuant to an
employee letter agreement (the "Employee Letter Agreement") that, at the
Effective Time, Hibernia will pay Mr. Osborne an amount (subject to applicable
income tax withholdings) equal to three (3) times Mr. Osborne's "base amount"
(as defined under Section 280G(b)(3) of the Code for a change of control of
Seller occurring in 1998) less one dollar ($1.00). In addition, at or prior to
the Effective Time, Emerald will (i) accelerate the exercisability of all
options previously issued to Mr. Osborne which are not exercisable as of the
Effective Time and pay Mr. Osborne the value of the acceleration of such
options, (ii) transfer to Mr. Osborne the automobile provided him under the
Emerald Employment Agreement (and pay transfer taxes incurred in connection
therewith) and pay Mr. Osborne the value of such automobile when transferred to
him, and (iii) terminate Emerald's Non-Qualified Executive Retirement Plan and
pay out Mr. Osborne's balance thereunder to him (subject to applicable income
tax withholdings). In consideration of the foregoing actions, Mr. Osborne has
agreed to release Emerald, Hibernia, and their successors from all of their
obligations under the Employment Agreement and the Termination Agreement.
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Eastern and Mr. Osborne have also agreed, at or prior to the Effective Time,
to enter into a five (5) year employment agreement (the "Eastern Employment
Agreement") effective at the Effective Time (i) providing Mr. Osborne with (a)
the ordinary employee benefits of an employee of Eastern (e.g., health and
group-life insurance, 401(k) Plan and defined benefit plan eligibility), except
that Mr. Osborne may at his option choose to have Eastern continue for him the
health insurance and life insurance provided by Hibernia, and (b) annual cash
compensation, subject to applicable tax withholdings, of $60,000 per annum and
(ii) containing customary non-competition and confidential information
provisions.
Eastern and Emerald have also agreed, pursuant to the Employee Letter
Agreement, that in the event John Morely's (Treasurer of Hibernia) employment
with Emerald, Hibernia or any successor thereto is terminated by Eastern,
Eastern will pay to Mr. Morely the salary he otherwise would have been entitled
to receive (subject to applicable income tax withholding) from the date of
termination until the date which is one year thereafter.
Eastern and Emerald have also agreed, pursuant to the Employee Letter
Agreement, that Emerald will pay to Vicki Leinas, an employee of Hibernia, on
the Closing Date a lump sum payment equal to two (2) years of Ms. Leinas' salary
as of the Closing Date. In the event that Ms. Leinas' employment with Eastern is
terminated for any reason thereafter, the payment made to Ms. Leinas referred to
in the preceding sentence shall be in lieu of any severance pay to which Ms.
Leinas may otherwise be entitled to as an employee of Eastern.
As set forth in the Affiliation Agreement, Emerald has accelerated vesting
in all outstanding unexercisable Emerald stock options granted to employees of
Emerald and its subsidiaries and directors of Emerald pursuant to Emerald Stock
Option Plans. In addition, as provided in the Affiliation Agreement, to the
extent that any so accelerated stock options are not exercised by the holders
thereof prior to the day immediately before the Closing Date, such holder will
be entitled to receive the excess of the Merger Consideration over the per share
exercise price of such options multiplied by the number of shares of Common
Stock covered by such options, and such options will terminate. The net amount
each executive officer and director is expected to receive in exchange for the
options outstanding as of October 22, 1997 is as follows:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
OF
NAME OUTSTANDING OPTIONS OPTIONS AT EFFECTIVE TIME
- ----------------------------------------------------------------- ------------------- --------------------------
<S> <C> <C>
Mark A. Osborne.................................................. 62,500 $ 1,387,569
Gerard F. Linskey................................................ 8,250 148,500
</TABLE>
The Affiliation Agreement provides that all rights to indemnification
existing in favor, and all limitations on the personal liability, of any
director, officer or other employee of Emerald and its subsidiaries as provided
for in their respective charters or by-laws as in effect on October 22, 1997 and
Emerald's existing director and officer indemnity insurance coverage (or a
substitute comparable policy) will survive the Merger and the Bank Merger and
will continue in force for not less then three (3) years after the Effective
Time. See "--Background of the Merger."
EMPLOYEE MATTERS
In the Affiliation Agreement, Eastern has agreed that any terminations of
Emerald Employees to be made by Eastern in connection with the Merger or the
Bank Merger will be made within six (6) months after the Closing Date. All
Emerald Employees who remain employed by Eastern after the Closing Date will be
eligible for the types and levels of employee benefits maintained by Eastern for
similarly situated employees of Eastern or Eastern Bank. See "THE
MERGER--Background of the Merger."
Under the Affiliation Agreement, Eastern has agreed to cause all Eastern
plans, programs or arrangements to treat the prior service of each such employee
with Emerald or Hibernia, to the extent such prior service is recognized under
the comparable plan, program or arrangement of Emerald, as
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service rendered to Eastern or its affiliate, as the case may be, for purposes
of eligibility to participate, vesting, and eligibility for other appropriate
benefits under such plan, program or arrangement of Eastern, but not for benefit
accrual generally under any plan of Eastern or Eastern Bank extended to Emerald
Employees.
Eastern has also agreed that, from and after the Effective Time until the
date which is six (6) months thereafter, Eastern will provide all Emerald
Employees whose employment with Emerald or Hibernia is terminated during such
time with severance pay equal to two (2) weeks pay for every year such Emerald
Employee was employed by Emerald or Hibernia; provided that in no event will any
Emerald Employee receive severance equal to less than four (4) weeks pay or
greater than twenty-six (26) weeks pay.
Under the Affiliation Agreement, Emerald has terminated the Emerald
Non-Qualified Executive Retirement Plan in accordance with its terms. On or
prior to the Closing Date, Emerald has agreed to terminate all other Emerald
Employee pension and benefit plans in accordance with the terms thereof.
TREATMENT OF STOCK OPTIONS
As set forth in the Affiliation Agreement, Emerald has accelerated vesting
in all outstanding unexercisable Emerald stock options granted to employees of
Emerald and its subsidiaries and directors of Emerald pursuant to Emerald Stock
Option Plans. In addition, as provided in the Affiliation Agreement, to the
extent that any so accelerated stock options are not exercised by the holders
thereof prior to the day immediately before the Closing Date, such holder will
be entitled to receive the excess of the Merger Consideration over the per share
exercise price of such options multiplied by the number of shares of Common
Stock covered by such options, and such options will terminate.
TERMINATION OF CERTAIN PURCHASE PLANS
Pursuant to the Affiliation Agreement, Emerald has taken all steps necessary
to terminate the Emerald Stock Purchase Plan and the Emerald Automatic Dividend
Reinvestment Plan each in accordance with their terms.
ACCOUNTING TREATMENT
The Merger will be accounted for as a purchase and certain adjustments will
be made with respect to those Emerald assets and liabilities acquired or assumed
by Eastern pursuant to the Affiliation Agreement whose carrying values differ
from their estimated fair market values. The actual adjustments will be made on
the basis of appraisals and evaluations as of the dates of consummation of the
Merger and the Bank Merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The receipt of cash by a stockholder of Emerald in exchange for shares of
Emerald Common Stock pursuant to the Affiliation Agreement, including cash
received by a Dissenting Holders upon the exercise of appraisal rights, will
constitute a taxable transaction to such stockholder for federal income tax
purposes. In general, a stockholder will recognize gain or loss upon the
surrender of the stockholder's Common Stock equal to the difference, if any,
between (i) the Merger Consideration received by such stockholder from Eastern
in exchange for his or her shares of Common Stock and (ii) the stockholder's tax
basis in such Common Stock. Any gain or loss will be treated as capital gain or
loss if the Common Stock exchanged was held as a capital asset in the hands of
the stockholder.
No ruling has been or will be requested from the IRS as to any of the tax
effects of any of the transactions discussed in this Proxy Statement to
stockholders of Emerald, and no opinion of counsel has been or will be rendered
to Emerald's stockholders with respect to any of the tax effects of the Merger
or Emerald's stockholders.
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THE DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND
IS NOT A COMPLETE DESCRIPTION OF ALL THE TAX CONSEQUENCES OF THE MERGER. IT DOES
NOT ADDRESS THE STATE, LOCAL OR FOREIGN TAX ASPECTS OF THE MERGER WITH RESPECT
TO ANY STOCKHOLDER OF EMERALD. THE DISCUSSION IS BASED ON CURRENTLY EXISTING
PROVISIONS OF THE CODE, EXISTING AND PROPOSED REGULATIONS OF THE UNITED STATES
DEPARTMENT OF THE TREASURY THEREUNDER AND CURRENT ADMINISTRATIVE RULINGS AND
COURT DECISIONS. ALL OF THE FOREGOING ARE SUBJECT TO CHANGE AND ANY SUCH CHANGE
COULD AFFECT THE CONTINUING VALIDITY OF THIS DISCUSSION. EMERALD STOCKHOLDERS
SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX
CONSEQUENCES OF THE MERGER TO THEM IN THEIR CIRCUMSTANCES, INCLUDING THE
APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS.
CONVERSION OF SHARES
CONVERSION OF SHARES OF EMERALD COMMON STOCK. By virtue of the Merger
automatically and without any action on the part of any holder thereof: (a) each
then-outstanding share of Emerald Common Stock not owned by Eastern directly or
indirectly (except for any such shares of Emerald Common Stock held by Eastern
or Eastern Bank in a fiduciary capacity), and other than those shares of Emerald
Common Stock held by Emerald as treasury stock and shares held by Dissenting
Stockholders who have perfected their rights of appraisal, will be converted
into the right to receive in cash from Eastern an amount equal to the Merger
Consideration (See "The Merger--Terms of the Merger"); (b) each then-outstanding
share of Emerald Common Stock owned by Eastern or its subsidiaries other than in
a fiduciary capacity will be canceled, retired and cease to exist; and (c) each
share of Emerald Common Stock issued and held in Emerald's treasury will be
canceled and retired. No conversion or payment will be made with respect to the
cancellation of shares referred to in clauses (b) and (c) above. For a
discussion of the treatment of shares held by dissenting stockholders, see "THE
MERGER--Rights of Dissenting Stockholders."
EXCHANGE AGENT; PROCEDURES FOR EXCHANGE OF CERTIFICATES. As promptly as
practicable after the Effective Time, and in no event later than five (5) days
thereafter, Eastern, through an exchange agent to be appointed after the date
hereof acting in such capacity, (the "Exchange Agent"), will mail to each holder
of record of Emerald Common Stock outstanding at the Effective Time transmittal
materials, together with instructions, for the exchange of such holder's
certificates representing shares of Emerald Common Stock for the Merger
Consideration into which such holder's shares of Emerald Common Stock have been
converted.
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HOLDERS OF EMERALD COMMON STOCK SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL
THEY RECEIVE THE TRANSMITTAL FORM AND INSTRUCTIONS FROM THE EXCHANGE AGENT.
Upon surrender to the Exchange Agent of the one or more certificates
representing shares of Emerald Common Stock, together with a properly completed
letter of transmittal, there will be issued and mailed to the holder of Emerald
Common Stock surrendering such items a check representing the amount of cash
which such holder is entitled to receive in exchange therefor. The Emerald
certificate or certificates so surrendered will be canceled.
After the Effective Time, there will be no transfers on the stock transfer
books of Emerald of shares of Emerald Common Stock which were issued and
outstanding at the Effective Time and converted pursuant to Article II of the
Affiliation Agreement. If certificates representing shares of Emerald Common
Stock are presented for transfer after the Effective Time, they will be canceled
and exchanged for the Merger Consideration in accordance with the provisions and
procedures set forth in Article II of the Affiliation Agreement.
Neither Eastern nor Emerald nor any other person will be liable to any
former holder of Emerald Common Stock for any shares or any dividends or
distributions with respect thereto which are properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
LOST CERTIFICATES. If a certificate for Emerald Common Stock has been lost,
stolen or destroyed, the Exchange Agent will issue, in exchange for such lost,
stolen or destroyed certificate, the Merger Consideration in respect thereof in
accordance with the Affiliation Agreement upon receipt of (i) appropriate
evidence as to such loss, theft or destruction, (ii) appropriate evidence as to
the ownership of such certificate by the claimant, and (iii) appropriate and
customary indemnification.
CONDITIONS TO THE MERGER
CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligations of each
of Eastern and Emerald to effect the Merger are subject to the fulfillment of
the following conditions, none of which may be waived by the parties:
(a) the Affiliation Agreement and the transactions contemplated thereby must
be approved by the affirmative vote of the holders of at least two-thirds
of the issued and outstanding shares of Emerald Common Stock;
(b) all authorizations, consents, orders or approvals of, or declarations or
filings with, and all expirations of waiting periods imposed by, any
governmental or regulatory authority or agency which are necessary for
the consummation of the Merger and Bank Merger, have been filed, occurred
or been obtained and all such authorizations, orders, declarations,
approvals, filings and consents are in full force and effect; and
(c) no temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger is in
effect.
CONDITIONS TO EASTERN'S OBLIGATIONS. The obligations of Eastern to effect
the Merger also are subject to the satisfaction of additional conditions,
including, but not limited to, the following conditions, any of which may be
waived by Eastern:
(a) there has not been any change in the business, assets, financial
condition or results of operations of Emerald or any of its subsidiaries
which, individually or in the aggregate, has had a Material Adverse
Effect (as defined in the Affiliation Agreement) on Emerald or any of its
subsidiaries;
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<PAGE>
(b) the obligations of Emerald under the Affiliation Agreement have been
duly performed or complied with, and the representations and warranties
of Emerald contained in the Affiliation Agreement are true and correct in
all material respects as of the date of the Affiliation Agreement and as
of the Effective Time; and
(c) all necessary permits, consents, waivers, clearances, approvals and
authorizations of all nongovernmental and nonregulatory third parties
have been received by Emerald, other than those that would neither make
it impossible to consummate the Merger nor result in a Material Adverse
Effect on Eastern.
CONDITIONS TO EMERALD'S OBLIGATIONS. The obligations of Emerald to effect
the Merger also are subject to the satisfaction of certain additional
conditions, including, but not limited to, the following conditions, any of
which may be waived by Emerald:
(a) there has not been any change in the business, assets, financial
condition or results of operations of Eastern or any of its subsidiaries
which, individually or in the aggregate, has had a Material Adverse
Effect on Eastern;
(b) the obligations of Eastern under the Affiliation Agreement have been
duly performed or complied with and the representations and warranties of
Eastern contained in the Affiliation Agreement are true and correct in
all material respects as of the date of the Affiliation Agreement and as
of the Effective Time; and
(c) all necessary permits, consents, waivers, clearances, approvals and
authorizations of all nongovernmental and nonregulatory third parties
have been received by Eastern, other than those that would neither make
it impossible to consummate the Merger nor result in a Material Adverse
Effect on Eastern (on a consolidated basis with Emerald).
BUSINESS PENDING THE MERGER
Pursuant to the Affiliation Agreement, Emerald has agreed that, until the
Effective Time, Emerald:
(a) will, and will cause Hibernia to, except with the prior written consent
of Eastern, conduct its business and engage in transactions only in the
ordinary and usual course of business consistent with past practices
which includes:
(A) maintaining its corporate existence and good standing;
(B) using all commercially reasonable efforts to maintain and keep its
properties in good repair and condition in all material respects,
except for ordinary wear and tear and damage due to casualty;
(C) using all commercially reasonable efforts to maintain in full force
and effect insurance generally comparable in amount and in scope of
coverage to that now maintained by it;
(D) complying with and performing in all material respects its
obligations and duties (y) under contracts, leases and documents
relating to or affecting its assets, properties and business and (z)
imposed upon it by all federal, state and local laws and all rules,
regulations and orders imposed by federal, state or local
governmental authorities, judicial orders, judgments, decrees and
similar determinations; and
(E) using all commercially reasonable efforts to preserve its business
organization intact and the goodwill of those having business
relationships with Emerald or Hibernia, to keep available the
services of its officers and employees as a group and to maintain
satisfactory relationships with borrowers, depositors, other
customers and others having business relationships with it;
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(b) will not, and will not permit any of its subsidiaries, without the prior
written consent of Eastern, to (i) engage or participate in any material
transaction or incur or sustain any material obligation or liability
except in the ordinary, regular and usual course of its businesses
consistent with past practices, (ii) offer an interest rate on any
deposit such that such deposit would be deemed a "brokered deposit,"
(iii) except as set forth in the Disclosure Schedules to the Affiliation
Agreement and except in the ordinary course of business consistent with
past practices and in an immaterial amount sell, lease, transfer, assign,
encumber or otherwise dispose of any, or enter into any contract,
agreement or understanding to lease, transfer, assign, encumber or
dispose of, any of its assets, (iv) file any application or give any
notice to customers or governmental authorities or agencies to open,
close or relocate any branch or open, close, relocate or terminate the
operations of any branch, or (v) waive any material right it has with
respect to any asset except in the ordinary, regular and usual course of
business consistent with past practice;
(c) will cooperate with Eastern with respect to the preparation for the
combination and integration as of the Effective Time of the businesses,
systems and operations of Emerald and Eastern;
(d) will, subject to any restrictions under applicable law or regulation,
promptly notify Eastern of any emergency or other change in the normal
course of its or Hibernia's businesses and of any governmental complaint,
investigations or hearings if such emergency, change, complaint,
investigation or hearing would be material to the business, results of
operations, financial condition or prospects of either Emerald on a
consolidated basis or Hibernia considered independently;
(e) will not make any loan or extend any credit on other than Emerald's
customary terms, conditions and standards other than in connection with
any loan workouts in accordance with applicable law and consistent with
prudent banking practices;
(f) will not pay or declare any dividends on or make other distributions in
respect of the Emerald Common Stock or Emerald Preferred Stock, except
for regular quarterly cash dividends at times ordinarily declared and
paid not exceeding $.07 per share per quarter;
(g) will not adopt or amend in any material respect any pension, benefit or
other plans or enter into any employment, retention, severance or similar
contracts or amend such contracts or plans to increase the amount payable
or benefits provided thereunder, or pay any bonuses to its or its
subsidiaries' employees, provided, however, that Emerald or Hibernia
shall be permitted to pay on or before the Closing Date to Emerald
Employees as a group bonuses in the aggregate amount not to exceed
$450,000;
(h) will not and will not permit any of its subsidiaries, to authorize,
recommend, propose or enter into an agreement with respect to any merger,
consolidation, purchase and assumption transaction or business
combination (other than the Merger or the Bank Merger), any acquisition
of a material amount of assets or securities or assumption of
liabilities, any disposition of a material amount of assets or
securities, or any release or relinquishment of any material contract
rights not in the ordinary course of business and consistent with past
practices;
(i) will not propose or adopt amendments to its or any of its subsidiaries'
Articles of Organization or By-laws;
(j) will not issue, deliver or sell shares of its or any of its
subsidiaries' capital stock or securities convertible into its or such
subsidiary's capital stock, except upon the exercise or fulfillment of
rights or options issued or existing pursuant to Emerald Stock Option
Plans, the Emerald Automatic Dividend Reinvestment Plan and the Emerald
Stock Purchase Plan, to the extent outstanding or existing as of October
22, 1997, and except upon exercise of the Option, or effect any stock
split, reclassification or similar transaction or otherwise change its
capitalization as it existed on September 30, 1997;
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(k) will not grant, confer or award any options or rights to acquire any of
its capital stock;
(l) will not and will not permit Hibernia to purchase, redeem or otherwise
acquire any shares of its capital stock or any securities convertible
into or exercisable for shares of its capital stock, except in a
fiduciary capacity;
(m) will not impose or permit to exist any material lien, charge or
encumbrance on any capital stock held by it or Hibernia;
(n) will not, and will not permit any of its subsidiaries to, incur any debt
obligations or obligations for borrowed money, or to guaranty the same,
other than in the ordinary course of business consistent with past
practices, provided, however, that Hibernia shall be entitled to incur
Federal Home Loan Bank borrowings with a maturity of not more than ninety
(90) days;
(o) will not incur or commit to any capital expenditures or any obligations
or liabilities in connection therewith, other than in connection with the
opening of the Marshfield, Massachusetts branch and with respect to
leases described in the Seller Disclosure Schedules and in the ordinary
and usual course of business consistent with past practices and, in all
cases, will consult with Eastern with respect to capital expenditures
that individually exceed $100,000 or cumulatively exceed $250,000;
(p) will not change its method of accounting in effect at December 31, 1996,
except as may be required by changes in GAAP as concurred in by Emerald's
independent auditors, and Emerald shall not change its fiscal year;
(q) will file all reports, applications and other documents required to be
filed by it with the SEC or any other governmental entity between October
22, 1997 and the Effective Time and shall make available to Eastern
copies of all such reports promptly after the same are filed;
(r) will use all commercially reasonable efforts to improve its business,
results of operations, financial condition and prospects;
(s) will not take any action which would prevent or impede the Bank Merger
from qualifying as a reorganization within the meaning of Section 368 of
the Code;
(t) will not, except as expressly contemplated by the Affiliation Agreement,
enter into any contract with any Affiliate;
(u) will not, except for transactions in the ordinary course of business
consistent with past practices, enter into, terminate, renew or amend any
material contract or alter any material leases or contracts, except as
provided in the Affiliation Agreement;
(v) will not, other than in prior consultation with Eastern, restructure or
materially change its investment securities portfolio or its "gap
position" through purchases, sales or otherwise, or the manner in which
the portfolio is classified or reported; and
(w) will not agree, in writing or otherwise, to take any of the foregoing
actions or any action which would make any of its representations or
warranties made in the Affiliation Agreement untrue or incorrect in any
material respect.
(x) Emerald and Eastern have entered into an agreement according to which
Emerald will cease preparations for the opening of the Marshfield branch
and will cease the process of conversion of Hibernia's data processing
and back-office systems, and Eastern will reimburse Emerald for any costs
or expenses resulting therefrom in the event the Merger does not occur.
Emerald has agreed not to cancel, terminate or take any other action that is
likely to result in any cancellation or termination of any lease with respect to
any of its real or personal properties without prior written notice to Eastern.
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Eastern and Emerald have agreed to cooperate and use all reasonable efforts
to prepare all necessary documentation and file all applications, notices,
petitions and filings, and to obtain and to cooperate in obtaining permits,
consents, approvals and authorizations of all third parties and governmental
entities necessary or advisable to consummate the transactions contemplated by
the Affiliation Agreement and to comply with the terms and conditions of all
such permits, consents, approvals and authorizations.
Emerald has further agreed to advise Eastern promptly of any change or event
having a Material Adverse Effect (as defined in the Affiliation Agreement) on it
or that it believes would or would be reasonably likely to cause or constitute a
material breach of any of its representations, warranties or covenants contained
in the Affiliation Agreement.
NO SOLICITATION
Under the Affiliation Agreement, Emerald has specifically agreed that it
will not and none of its subsidiaries will (and Emerald and Hibernia will use
all commercially reasonable efforts to cause its representatives not to),
directly or indirectly, solicit, encourage, initiate or participate in any
discussion or negotiations with, or (subject to the fiduciary obligations of the
Emerald Board as advised in writing by outside counsel) provide any information
to, any corporation, partnership, person or other entity (other than Eastern and
its affiliates or representatives) concerning any merger, tender offer, sale of
substantial assets, or sales of stock or securities or similar transaction
involving Emerald or Hibernia (an "Other Acquisition Transaction"). Emerald has
agreed to immediately communicate to Eastern the identity of the parties and
terms of any proposal, discussion or inquiry relating to a possible Other
Acquisition Transaction.
WAIVER AND AMENDMENT
WAIVER. Subject to applicable law and as may be authorized by their
respective Boards of Directors, at any time prior to the consummation of the
transactions contemplated by the Affiliation Agreement or its termination,
whether before or after approval by the Emerald stockholders of the Affiliation
Agreement and the transactions contemplated thereby, the parties may extend the
time for the performance of any of the obligations or other acts of any other
party in the Affiliation Agreement, waive any inaccuracies in the
representations and warranties contained therein or in any document delivered
pursuant thereto, or waive compliance with any of the agreements or conditions
contained in Articles V and VI. Notwithstanding the foregoing provisions, under
Article VI of the Affiliation Agreement, the Merger cannot be consummated unless
certain conditions are fulfilled. See "--Conditions to the Merger." Any
agreement on the part of any party to any extension or waiver will be valid only
if set forth in writing signed on behalf of such party, but such waiver or
failure to insist on strict compliance with such obligation, covenant, agreement
or condition will not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
AMENDMENT. Subject to applicable law and as may be authorized by their
respective Boards of Directors, at any time prior to the consummation of the
transactions contemplated by the Affiliation Agreement or its termination,
whether before or after approval by the Emerald stockholders of the Affiliation
Agreement and the transactions contemplated thereby, the parties may amend the
Affiliation Agreement by written agreement.
EXPENSES
The Affiliation Agreement provides that Emerald and Eastern will each pay
its own expenses in connection with the Merger, including fees and expenses of
its own financial consultants, accountants, and attorneys.
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TERMINATION
The Affiliation Agreement may be terminated at any time prior to the
Effective Time, whether before or after the approval by Emerald stockholders of
the Affiliation Agreement, and the transactions contemplated thereby, under the
following circumstances:
(a) by the mutual written consent of the respective Boards of Directors
of Eastern and Emerald;
(b) by Eastern or Emerald if the Effective Time has not occurred on or
prior to June 30, 1998 (the "Termination Date") or such later date as agreed
to in writing by Eastern and Emerald;
(c) by Eastern or Emerald if any governmental or regulatory authority or
agency, or court of competent jurisdiction, issues a final permanent order
or Injunction (as defined in the Affiliation Agreement) enjoining or
otherwise prohibiting the consummation of the transactions contemplated by
the Affiliation Agreement and the time for appeal or petition for
reconsideration of such order or Injunction has expired without such appeal
or petition being granted;
(d) by Eastern or Emerald (provided that the terminating party is not
then in material breach of any representation, warranty or covenant or other
agreement contained in the Affiliation Agreement or in the Stock Option
Agreement), if the approval of Emerald's stockholders of the Affiliation
Agreement and the transactions contemplated thereby has not been obtained by
reason of Emerald's failure to have obtained the requisite stockholder vote
at a duly held meeting of Emerald's stockholders or at any adjournment
thereof; or
(e) by Eastern or Emerald (provided that the terminating party is not
then in material breach of any representation, warranty, covenant or other
agreement contained in the Affiliation Agreement or in the Stock Option
Agreement), in the event of a material breach by the other party of any
representation, warranty, covenant or other agreement contained in the
Affiliation Agreement or in the Stock Option Agreement which breach is not
cured after fifteen (15) days written notice thereof is given to the party
committing such breach.
In the event of termination of the Affiliation Agreement by either Eastern
or Emerald as provided above, the Affiliation Agreement will become null and
void (other than Sections 5.02(b) and 9.01 thereof, which will remain in full
force and effect) and there will be no further liability on the part of any of
the parties or their respective officers or directors to the others, except (a)
any liability of any party under said Sections 5.02(b) and 9.01, (b) that the
Stock Option Agreement will be governed by its own terms as to termination, and
(c) in the event of a willful breach of any representation, warranty, covenant
or agreement contained in the Affiliation Agreement, in which case, the
breaching party will remain liable for any and all damages, costs and expenses,
including all reasonable attorneys' fees, sustained or incurred by the
non-breaching party as a result thereof or in connection therewith or with the
enforcement of its rights thereunder.
RIGHTS OF DISSENTING STOCKHOLDERS
If the Merger becomes effective, a stockholder of Emerald who does not vote
in favor of the Merger and who follows the procedures prescribed under
Massachusetts law may require Emerald (as it exists after the Effective Time) to
pay the fair value of his or her shares as determined in an appraisal proceeding
brought in accordance with Sections 85 through 98 of the MBCL. The text of
Sections 85 through 98 is set forth in full in APPENDIX F annexed hereto. In
order to exercise such statutory appraisal rights, strict adherence to the
statutory provisions is required, and each stockholder who may desire to
exercise such rights should carefully review and adhere to such provisions.
Under Massachusetts statutory law, procedures relating to dissenters' rights
are stated to be the exclusive remedy available to a stockholder objecting to
the Merger except upon the grounds that the Merger will be or is illegal or
fraudulent as to such stockholder. However, under Massachusetts law,
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dissenting stockholders may not be limited to the statutory remedy of judicial
appraisal where violations of fiduciary duty are found.
A dissenting stockholder of Emerald who desires to pursue the appraisal
rights available must adhere to the following procedures: (1) file a written
objection to the Merger with Emerald before the taking of the stockholders' vote
on the Merger, stating the intention of such stockholder to demand payment for
shares owned by such stockholder if the Merger is approved and consummated; (2)
refrain from voting shares owned by such stockholder in favor of the Merger; and
(3) within twenty days of the date of mailing of a notice by Emerald (as its
exists after the Effective Time) to objecting stockholders that the Merger has
become effective, make written demand to Emerald (as it exists after the
Effective Time) for payment for said stockholder's shares. Such written
objection should be delivered to Emerald Isle Bancorp, Inc., 730 Hancock Street,
Quincy, Massachusetts 02170, Attn: Douglas C. Purdy, Clerk, and such written
demand should be delivered to Emerald Isle Bancorp, Inc. (as it exists after the
Effective Time), c/o Eastern Bank Corporation, 112 Market Street, Lynn,
Massachusetts 01901-1125, Attn: Richard E. Holbrook, Treasurer, Clerk and
Secretary. It is recommended that such objection and such demand be sent by
registered or certified mail, return receipt requested.
A dissenting stockholder, who filed the required written objection with
Emerald prior to the stockholder vote, need not vote against the Merger, but a
vote in favor of the Merger will constitute a waiver of such stockholder's
statutory appraisal rights. Stockholders should note that returning a properly
signed proxy card that does not indicate a vote or an abstention on approval of
the Affiliation Agreement will constitute a vote in favor of the Affiliation
Agreement. A vote against the Merger does not, alone, constitute a written
objection. Pursuant to the applicable statutory provisions, notice that the
Merger has become effective will be sent to each objecting stockholder of
Emerald within ten (10) days after the date on which the Merger becomes
effective.
The value of the Emerald Common Stock will be determined initially by
Emerald (as it exists after the Effective Time) and the dissenting stockholder.
If, during the period of thirty (30) days after the expiration of the period
during which the foregoing demand for payment may be made, Emerald (as it exists
after the Effective Time) and the dissenting stockholder fail to agree on an
appraisal value, either of them may file a bill in equity in the Superior Court
of Norfolk County, Massachusetts, asking that the court determine the matter in
issue. The bill in equity must be filed within four (4) months after the date of
expiration of the foregoing thirty (30) day period. After a hearing, the court
shall enter a decree determining the fair value of the Emerald Common Stock and
shall order Emerald (as it exists after the Effective Time) to make payment of
such value, with interest, if any, to the stockholders entitled to said payment,
upon transfer by them to Emerald (as it exists after the Effective Time) of the
certificate or certificates representing the Emerald Common Stock held by said
stockholders.
For appraisal proceeding purposes, value is determined as of the day before
the approval of the Merger by stockholders, excluding any element of value
arising from the expectation or accomplishment of the Merger.
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CERTAIN RELATED TRANSACTIONS
STOCK OPTION AGREEMENT
GENERAL. As a condition to Eastern's entering into the Affiliation
Agreement, and in consideration therefor (without other consideration or
monetary payment), Emerald entered into the Stock Option Agreement, dated
October 22, 1997, pursuant to which Emerald granted to Eastern an option to
purchase shares of Emerald Common Stock (the "Option"). The Stock Option
Agreement is intended to increase the likelihood that the Merger will be
consummated by making it more difficult and more expensive for another party to
obtain control of or acquire Emerald.
GRANT OF OPTION. The Option entitles Eastern to purchase up to 447,707
fully paid and non-assessable shares of Emerald Common Stock (the "Option
Shares"), representing 19.9% of the shares of Emerald Common Stock issued and
outstanding as of October 22, 1997, without giving effect to any shares subject
or issued pursuant to the Option, at a price of $26.00 per share (the "Option
Price"). The aggregate purchase price for the full number of Option Shares at
the Option Price is $11,640,382.
TRIGGERING EVENTS; EXERCISE OF OPTION. The Stock Option Agreement provides
that Eastern may exercise the Option, in whole or in part, if both an Initial
Triggering Event (as defined below) and a Subsequent Triggering Event (as
defined below) occur prior to the occurrence of an Exercise Termination Event
(as defined below); provided that Eastern has sent to Emerald written notice of
such exercise within 30 days following such Subsequent Triggering Event and
prior to the Exercise Termination Event.
For purposes of the Stock Option Agreement:
(a) The term "Initial Triggering Event" means any of the following
events or transactions occurring after October 22, 1997: (i) Emerald, or any
of its subsidiaries, without Eastern's prior written consent, enters into an
agreement to engage in, or the Emerald Board approves or recommends approval
of, an Acquisition Transaction (as defined below) with any person other than
Eastern or any of its subsidiaries; (ii) any person, other than Eastern or
any of its subsidiaries or Emerald acting in a fiduciary capacity, acquires
beneficial ownership, or the right to acquire beneficial ownership, of 10%
or more of the outstanding shares of Emerald Common Stock if such person
beneficially owned less than 10% on October 22, 1997, or acquires beneficial
ownership of an additional 3% if such person beneficially owned 10% or more
on October 22, 1997; (iii) any person other than Eastern or any of its
subsidiaries has made a bona fide proposal to Emerald or its stockholders to
engage in an Acquisition Transaction by public announcement or written
communication that shall become public; (iv) any person, other than Eastern
or any of its subsidiaries, without Eastern's consent, files an application
or notice with any federal or state bank regulatory authority for approval
to engage in an Acquisition Transaction and such application or notice has
been accepted for processing, (v) after any person, other than Eastern or
any of its subsidiaries, has proposed an Acquisition Transaction, Emerald
breaches any covenant or obligation contained in the Affiliation Agreement
and such breach (A) would entitle Eastern to terminate the Affiliation
Agreement and (B) is not remedied prior to the date of Eastern's notice to
Emerald of the exercise of the Option; or (vi) any person, other than
Eastern or any of its subsidiaries, has commenced or filed a registration
statement under the Securities Act of 1933, as amended, with respect to a
tender offer or exchange offer to purchase any shares of Emerald Common
Stock such that, upon consummation of such offer, such person would own or
control 50% or more of the then outstanding shares of Emerald Common Stock.
For purposes of the Stock Option Agreement, the term "Acquisition
Transaction" means (A) a merger or consolidation, or any similar
transaction, with Emerald or any "significant subsidiary" of Emerald as such
term is defined in Regulation S-X of the SEC (a "Significant Subsidiary"),
(B) a purchase, lease or other acquisition of all or substantially all of
the assets of Emerald or any Significant Subsidiary of Emerald, or (C) a
purchase or other acquisition of 10% or more of the voting power of Emerald
or any Significant Subsidiary of Emerald.
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(b) The term "Subsequent Triggering Event" means either of the following
events or transactions occurring after October 22, 1997: (i) the acquisition
by any person of beneficial ownership of 15% or more of the then outstanding
shares of Emerald Common Stock; or (ii) the occurrence of the Initial
Triggering Event described above in clause (a)(i), except that the
percentage referred to in subclause (C) of the definition of "Acquisition
Transaction" set forth above shall be 15%.
The Option will expire upon the earliest of: (i) the Effective Time; (ii)
termination of the Affiliation Agreement if such termination occurs prior to an
Initial Triggering Event; and (iii) twelve (12) months after termination of the
Affiliation Agreement if such termination follows an Initial Triggering Event
(each of (i), (ii) and (iii), an "Exercise Termination Event").
As of the date of this Proxy Statement, to the best knowledge of Eastern and
Emerald, no Initial Triggering Event or Subsequent Triggering Event has
occurred.
In the event of any change in the shares of Emerald Common Stock by reason
of a stock dividend, split-up, merger, recapitalization, combination,
subdivision, conversion, exchange of shares or similar transaction, the type and
number of Option Shares and the Option Price will be adjusted appropriately. The
Emerald Board may make such increases in the number of Option Shares, in
addition to those made in accordance with the events described in the
immediately preceding sentence, in order to avoid taxation of any dividend of
stock or stock rights or any event treated as such for federal income tax
purposes to the recipients.
Whenever the number of Option Shares (or other securities) purchasable upon
exercise of the Option is adjusted as provided in the Stock Option Agreement,
the Option Price will be adjusted by multiplying the Option Price by a fraction,
the numerator of which will be equal to the number of Option Shares prior to the
adjustment and the denominator of which will be equal to the number of Option
Shares (or other securities purchasable) after the adjustment.
REPURCHASE OF OPTION. Upon the occurrence of a Subsequent Triggering Event
that occurs prior to an Exercise Termination Event, at the request of Eastern or
any subsequent holder of the Option delivered within thirty (30) days of such
occurrence, Emerald or any successor (a) shall repurchase the Option from
Eastern or such holder at a price (the "Option Repurchase Price") equal to the
amount by which the market/offer price (as defined below) exceeds the Option
Price, multiplied by the number of shares for which the Option may then be
exercised, and (b) shall repurchase such number of Option Shares from any owner
of Option Shares (the "Owner") as the Owner shall designate at a price (the
"Option Share Repurchase Price") equal to the greater of (i) the market/offer
price and (ii) the average exercise price per share paid by the Owner for the
Option Shares so designated.
The term "market/offer price" means the highest of (i) the price per share
of Emerald Common Stock at which a tender offer or exchange offer therefor has
been made, (ii) the price per share of Emerald Common Stock to be paid by any
third party pursuant to an agreement with Emerald, (iii) the highest sale price
for shares of Emerald Common Stock within the six-month period immediately
preceding the date of the required repurchase of the Options or Option Shares,
as the case may be, or (iv) in the event of a sale of all or a substantial
portion of Emerald's assets, the sum of the price paid in such sale for such
assets and the current market value of the remaining assets of Emerald as
determined by a nationally recognized investment banking firm selected by a
majority in interest of the Holders or the Owners as the case may be, divided by
the number of shares of Emerald Common Stock outstanding at the time of such
sale. In determining the market/offer price, the value of consideration other
than cash will be determined by a nationally recognized investment banking firm
selected by the Holder or the Owner, as the case may be, and reasonably
acceptable to Emerald. However, if Emerald at any time after delivery of a
notice of repurchase as described in this paragraph is prohibited under
applicable law or regulation, from delivering to the Holder and/or the Owner, as
appropriate, the Option Repurchase Price and the Option Share Repurchase Price,
respectively, in full, the Holder or Owner may revoke its notice of repurchase
of the Option or the Option Shares either in whole or to the extent of the
prohibition, whereupon, in the latter
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case, Emerald will promptly (I) deliver to the Holder and/or the Owner, as
appropriate, that portion of the Option Repurchase Price or the Option Share
Repurchase Price that Emerald is not prohibited from delivering and (II)
deliver, as appropriate, (a) to the Holder, a new Stock Option Agreement
evidencing the right of the Holder to purchase that number of shares of Emerald
Common Stock obtained by multiplying the number of shares of Emerald Common
Stock for which the surrendered Stock Option 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.
REGISTRATION RIGHTS. Upon the occurrence of a Subsequent Triggering Event
that occurs prior to an Exercise Termination Event, Emerald shall, at the
request of Eastern delivered within thirty (30) days of such Subsequent
Triggering Event (whether on Emerald's own behalf or on the behalf of any
subsequent holder of the Option (or part thereof) or any of the shares of
Emerald Common Stock issued pursuant thereto), promptly prepare, file and keep
current, with respect to the Option and the Option Shares, a "shelf"
registration statement under Rule 415 of the Securities Act or any successor
provision, and Emerald shall use its best efforts to qualify such shares under
any applicable state securities laws. Emerald 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 sales or other dispositions of Option Shares.
Eastern shall have the right to demand two such registrations.
ASSIGNMENT OF OPTION. Neither Eastern nor Emerald may assign any of its
rights or obligations under the Stock Option Agreement or the Option to any
other person without the express written consent of the other party, except that
(a) Eastern shall, at any time, be permitted to assign its rights under the
Stock Option Agreement or the Option to any Affiliate (as defined in the Stock
Option Agreement) of Eastern and in the event a Subsequent Triggering Event
occurs prior to an Exercise Termination Event and Eastern is not precluded,
pursuant to Section 2(a) of the Stock Option Agreement, from exercising the
Option, Eastern may, subject to the right of first refusal described in the
Stock Option Agreement, assign, in whole or in part, its rights and obligations
under the Stock Option Agreement or the Option within thirty (30) days following
such Subsequent Triggering Event.
RIGHT OF FIRST REFUSAL. If after the occurrence of a Subsequent Triggering
Event Eastern desires to sell, assign, transfer or otherwise dispose of the
Option, in whole or in part, or prior to the expiration of twenty-four (24)
months after the expiration of the Option, all or any of the shares of Emerald
Common Stock or other securities acquired by Eastern pursuant to the Option,
Eastern shall give Emerald written notice of the proposed transaction. Such
notice shall identify the proposed transferee, and be accompanied by a signed
copy of a binding offer to purchase the Option, or such shares or securities.
Emerald will have ten (10) business days from such notice to purchase the
Option, or such shares or securities, on the same terms or conditions and at the
same price at which Eastern proposes to transfer the same.
ADDITIONAL PROVISIONS. Certain rights and obligations of Eastern and
Emerald under the Stock Option Agreement are subject to receipt of required
regulatory approvals. The exercise of the Option by Eastern would require the
approval of the Federal Reserve Board under the BHCA.
VOTING AGREEMENTS
As a condition to Eastern entering into the Affiliation Agreement, Mr.
Osborne, Chairman of the Board, President and Chief Executive Officer of Emerald
and Mr. Putziger, a director of Emerald, owning in the aggregate 507,699 shares,
representing 21.94% of the issued and outstanding shares of Emerald Common
Stock, have agreed pursuant to the Voting Agreements, to vote or cause to be
voted all shares owned by each such person at the Special Meeting for approval
of the Merger, and vote or cause to be voted such shares against approval of any
other agreement for a merger, acquisition, consolidation,
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material asset sale, or other business combination of Emerald or any of its
subsidiaries with any other party other than Eastern or any of its affiliates.
The Voting Agreements remain in force until the earlier of the consummation
of the Merger or the termination of the Affiliation Agreement in accordance with
its terms.
BANK MERGER AGREEMENT
Immediately after the Effective Time, and pursuant to the Bank Merger
Agreement, Hibernia will merge with and into Eastern Bank, and all of the issued
and outstanding shares of capital stock of Hibernia will automatically be
converted and become exchangeable for shares of capital stock of Eastern Bank.
In accordance with the Bank Merger Agreement, the outstanding shares of common
stock of Eastern Bank will remain outstanding immediately following the
Effective Time of the Bank Merger, and the holders thereof will retain all of
their rights thereunder. The outstanding shares of common stock of Hibernia
will, ipso facto, and without any action on the part of the holder thereof, be
converted into and become exchangeable for such number of shares or fraction of
a share of common stock of the combined entity (the "Surviving Bank") based upon
the aggregate fair market value of Hibernia's shares of common stock as compared
to the aggregate fair market value of Eastern Bank's shares of common stock, in
each case as such shares are issued and outstanding immediately prior to the
Effective Time of the Bank Merger. All assets of each of Eastern Bank and
Hibernia as they exist at the Effective Time of the Bank Merger will pass and
vest in the Surviving Bank without any conveyance or other transfer, and the
Surviving Bank will be responsible for all of the liabilities of each of Eastern
Bank and Hibernia existing as of the Effective Time of the Bank Merger. The
Board of Directors and principal officers of Eastern Bank in place and holding
office immediately prior to the Effective Time of the Bank Merger will continue
to serve as the Board of Directors and principal officers of the Surviving Bank.
The Articles of Association and By-Laws of Eastern Bank in effect immediately
prior to the Effective Time of the Bank Merger will constitute the Articles of
Association and By-Laws of the Surviving Bank. The respective obligations of
Eastern Bank and Hibernia to effect the Bank Merger pursuant to the Bank Merger
Agreement are subject to the satisfaction prior to the Effective Time of the
Bank Merger of certain conditions, including: (i) the satisfaction of the
conditions contained in the Affiliation Agreement, (ii) the absence of any
orders, injunction or decree preventing the consummation of the Bank Merger, and
(iii) the receipt of all necessary approvals, all as more fully described in the
Bank Merger Agreement.
EXPERTS
The consolidated financial statements of Emerald appearing in Emerald's
Annual Report on Form 10-K for the year ended December 31, 1996 have been
audited by Arthur Andersen LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements of Eastern as of December 31, 1996 and
December 31, 1995 and for the years then ended, included in the Registration
Statement, have been included in the Registration Statement in reliance upon the
report of KPMG Peat Marwick LLP, independent auditors, and upon the authority of
said firm as experts in accounting and auditing.
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APPENDIX A
AFFILIATION AGREEMENT
AFFILIATION AGREEMENT (the "Agreement"), dated as of October 22, 1997, by
and between EASTERN BANK CORPORATION, a Massachusetts mutual holding company
(the "Buyer") and EMERALD ISLE BANCORP, INC., a Massachusetts corporation and
bank holding company (the "Seller").
WHEREAS, the Board of Trustees of the Buyer and the Board of Directors of
the Seller have determined that it is in the best interests of their respective
organizations and, with respect to the Seller, its stockholders to consummate,
and have approved, the business combination transactions provided for herein, in
which a newly-formed special-purpose subsidiary of the Buyer will, subject to
the terms and conditions set forth herein, merge (the "Merger") with and into
the Seller, with the Seller as the surviving corporation of the Merger; and
WHEREAS, as a condition to, and after the execution of, this Agreement, the
Buyer and the Seller are entering into the Seller Option Agreement (the "Seller
Option Agreement"), attached hereto as Exhibit A, pursuant to which the Seller
has granted the option (the "Seller Option") to the Buyer; and
WHEREAS, as a condition to, and after the execution of, this Agreement, the
Buyer and certain of the officers and directors of the Seller are entering into
the Stockholders Agreements; and
WHEREAS, simultaneously with the execution and delivery of this Agreement,
Buyer Bank, a Massachusetts stock savings bank and wholly-owned subsidiary of
the Buyer (the "Buyer Bank") and Seller Savings Bank, a Massachusetts stock
savings bank and wholly-owned subsidiary of the Seller (the "Seller Bank") are
entering into an Agreement and Plan of Merger (the "Bank Merger Agreement"),
providing for the merger (the "Bank Merger") of the Seller Bank with and into
the Buyer Bank; it being intended that the Bank Merger be consummated
immediately after the Merger; and
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the Merger and to prescribe certain conditions to
the Merger;
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
DEFINITIONS
Except as otherwise provided herein or as otherwise clearly required by the
context, the following terms shall have the respective meanings indicated when
used in this Agreement:
"Acquisition Transaction" shall have the meaning ascribed thereto in Section
5.03 hereof.
"Agreement" shall mean this Affiliation Agreement by and between the Buyer
and the Seller.
"Bank Merger" shall have the meaning ascribed thereto in the recitals
hereto.
"Bank Merger Agreement" shall have the meaning ascribed thereto in the
recitals hereto.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"Buyer" shall have the meaning ascribed thereto in the recitals hereto.
"Buyer Balance Sheet" shall have the meaning ascribed thereto in Section
3.04 hereof.
"Buyer Bank" shall have the meaning ascribed thereto in the recitals hereto.
"Buyer Disclosure Schedule" shall mean the disclosure schedule delivered to
the Seller together herewith.
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"Closing" shall mean the consummation of the Merger.
"Closing Date" shall mean the time and date specified pursuant to Section
7.01 hereof as the time and date on which the parties hereto shall consummate
the Merger.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Companies" shall have the meaning ascribed thereto in Section 4.10(a)
hereof.
"Confidential Information" shall have the meaning ascribed thereto in
Section 5.02(b) hereof.
"Confidentiality Agreement" shall mean that certain Non-Disclosure Agreement
between the Buyer and the Seller dated October 7, 1997.
"Consents" shall have the meaning ascribed thereto in Section 6.01(b)
hereof.
"Disclosure Schedules" shall mean the Buyer Disclosure Schedule and the
Seller Disclosure Schedule, considered together.
"DOJ" shall mean the United States Department of Justice.
"Effective Time" shall mean the date and time at which the Merger has become
effective pursuant to the applicable laws of The Commonwealth of Massachusetts.
"EPA" shall mean the United States Environmental Protection Agency.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Federal Reserve Board" shall mean the Board of Governors of the Federal
Reserve System or the Federal Reserve Bank of Boston, as applicable.
"Filed Tax Returns" shall have the meaning ascribed thereto in Section
4.10(a) hereof.
"GAAP" shall mean generally accepted accounting principles and practices in
effect from time to time within the United States applied consistently
throughout the period involved.
"Injunction" shall have the meaning ascribed thereto in Section 6.01(c)
hereof.
"IRS" shall mean the United States Internal Revenue Service.
"MBCL" shall mean the Massachusetts Business Corporation Law.
"Massachusetts Board" shall have the meaning ascribed thereto in Section
3.03 hereof.
"Massachusetts Commissioner" shall have the meaning ascribed thereto in
Section 3.03 hereof.
"Material Adverse Effect" shall mean, with respect to any Person, a material
adverse effect on the assets, properties, liabilities, business, results of
operations, or financial condition of such Person.
"Merger" shall have the meaning ascribed thereto in the recitals hereto.
"Merger Consideration" shall have the meaning ascribed thereto in Section
2.07(b) hereof.
"Merger Subsidiary" shall mean that certain business corporation, which
shall be organized as a wholly-owned direct subsidiary of the Buyer under the
laws of The Commonwealth of Massachusetts for the purpose of merging with the
Seller pursuant to the terms of this Agreement.
"Merger Subsidiary Common Stock" shall have the meaning ascribed thereto in
Section 5.07 hereof.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ" shall mean the National Association of Securities Dealers Automated
Quotation System.
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"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Person" shall mean any individual, corporation, partnership, joint venture,
association, trust, unincorporated organization or other legal entity, or any
governmental agency or political subdivision thereof.
"Public Announcement" shall mean an oral or written press release, public
announcement or public information disclosure by the Seller or the Buyer or any
of their subsidiaries relating to the Merger or the other transactions
contemplated hereby but shall not include unsolicited press inquiries.
"Records" means all records and original documents in the Seller's
possession which pertain to and are utilized by the Seller or any of its
subsidiaries to administer, reflect, monitor, evidence or record information
respecting its business and operations, including but not limited to all records
and documents relating to (a) corporate, regulatory, supervisory and litigation
matters, (b) tax planning and payment of taxes, (c) personnel and employment
matters, and (d) the business or conduct of the business of the Seller or any of
its subsidiaries.
"Representative(s)" shall have the meaning ascribed thereto in Section
5.02(b) hereof.
"Requisite Regulatory Approvals" shall have the meaning ascribed thereto in
Section 6.01(b) hereof.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Seller" shall have the meaning ascribed thereto in the preamble to this
Agreement and, in addition, shall mean throughout this Agreement, unless the
context contemplates otherwise, the Seller and each of its subsidiaries,
considered separately and on a consolidated basis.
"Seller Balance Sheet" shall have the meaning ascribed thereto in Section
4.05 hereof.
"Seller Bank" shall have the meaning ascribed thereto in the recitals
hereto.
"Seller Benefit Plans" shall have the meaning ascribed thereto in Section
4.11(a) hereof.
"Seller Common Stock" shall have the meaning ascribed thereto in Section
2.07(b) hereof.
"Seller Disclosure Schedule" shall mean the disclosure schedule delivered to
Buyer together herewith.
"Seller Option" shall have the meaning ascribed thereto in the recitals
hereto.
"Seller Option Agreement" shall have the meaning ascribed thereto in the
recitals hereto.
"Seller Other Plans" shall have the meaning ascribed thereto in Section
4.11(a) hereof.
"Seller Pension Plans" shall have the meaning ascribed thereto in Section
4.11(a) hereof.
"Seller Proxy Statement" shall mean the proxy statement relating to the
meeting of the Seller's stockholders to be held in connection with this
Agreement and the transactions contemplated hereby.
"Seller Reports" shall have the meaning ascribed thereto in Section 4.15
hereof.
"Seller Stockholders Meeting" shall have the meaning ascribed thereto in
Section 5.04(a) hereto.
"Seller Stock Option Plans" shall have the meaning ascribed thereto in
Section 2.10 hereof.
"Significant Subsidiary" shall mean, when used with reference to a party,
any "significant subsidiary" of such party as such term is defined in Regulation
S-X of the SEC.
"Stockholders Agreements" shall mean those certain Stockholder Agreements
dated as of the date hereof respectively between the Buyer and members of the
Seller's board of directors and substantially in the form attached hereto as
Exhibit B. "subsidiaries" shall mean, when used with reference to a party, any
corporation or other organization, whether incorporated or unincorporated, of
which such party or any other subsidiary of such party is a general partner
(excluding partnerships the general partnership interests of which held by such
party or any subsidiary of such party do not have a majority of the voting
interests in
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such partnership) or, with respect to such corporation or other organization, at
least a majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the board of directors or others
performing similar functions is directly or indirectly owned or controlled by
such party or by any one or more of its subsidiaries, or by such party and one
or more of its subsidiaries.
"Surviving Corporation" shall have the meaning ascribed thereto in Section
2.01 hereof.
"Surviving Corporation Common Stock" shall have the meaning ascribed thereto
in Section 2.07(a) hereof.
"Tax" shall have the meaning ascribed thereto in Section 4.10(j)(A) hereof.
"Tax Return" shall have the meaning ascribed thereto in Section 4.10(j)(B)
hereof.
"Termination Date" shall have the meaning ascribed thereto in Section
8.01(b) hereof.
"Transaction Documents" shall mean this Agreement, the Confidentiality
Agreement, the Bank Merger Agreement, the Seller Option Agreement, the
Stockholders Agreements, and each other agreement, document or instrument
executed in connection herewith or therewith.
ARTICLE II
THE MERGER
2.01 THE MERGER. Subject to the terms and conditions of this Agreement, in
accordance with the MBCL, at the Effective Time, the Merger Subsidiary shall
merge with and into the Seller, and the separate corporate existence of the
Merger Subsidiary shall cease. The Seller shall be the surviving corporation in
the Merger (hereinafter sometimes referred to as the "Surviving Corporation")
and shall continue its corporate existence under the laws of The Commonwealth of
Massachusetts.
2.02 EFFECT OF THE MERGER.
(a) Upon the Effective Time, all of the estate, property, rights,
privileges, powers and franchises of each of the Seller and the Merger
Subsidiary and all of their property, real, personal and mixed, and all the
debts due on whatever account to any of them, as well as all stock subscriptions
and other choses in action belonging to any of them, shall be transferred to and
vested in the Surviving Corporation, without further act or deed, and all
claims, demands, property and other interest shall be the property of the
Surviving Corporation, and the title to all real estate vested in each of the
Seller or the Merger Subsidiary shall not revert or be in any way impaired by
reason of the Merger, but shall be vested in the Surviving Corporation.
(b) Upon the Effective Time, the rights of creditors of each of the Seller
and the Merger Subsidiary shall not in any manner be impaired, nor shall any
liability or obligation, including taxes due or to become due, or any claim or
demand in any cause existing against such corporation, or any stockholder,
director, or officer thereof, be released or impaired by the Merger, but the
Surviving Corporation shall be deemed to have assumed, and shall be liable for,
all liabilities and obligations of each of the Seller and the Merger Subsidiary
in the same manner and to the same extent as if the Surviving Corporation had
itself incurred such liabilities or obligations. The stockholders, directors,
and officers of each of the Seller and the Merger Subsidiary shall continue to
be subject to all liabilities, claims and demands existing against them as such
at or before the Merger. No action or proceeding then pending before any court
or tribunal of The Commonwealth of Massachusetts or otherwise in which either
the Seller and the Merger Subsidiary is a party, or in which any such
stockholder, director, or officer is a party, shall abate or be discontinued by
reason of the Merger, but any such action or proceeding may be prosecuted to
final judgment as though no merger had taken place, or the Surviving Corporation
may be substituted as a party in place of either the Seller and the Merger
Subsidiary by the court in which such action or proceeding is pending.
2.03 ADDITIONAL ACTIONS. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things
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are necessary or desirable to vest, perfect or confirm of record or otherwise in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, properties or assets of the Seller acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger, the
officers and directors of the Surviving Corporation shall and will be authorized
to execute and deliver, in the name and on behalf of either the Seller or the
Merger Subsidiary or otherwise, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of either the Seller or
the Merger Subsidiary or otherwise, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title and
interest in, to and under such rights, properties or assets in the Surviving
Corporation or to otherwise carry out this Agreement.
2.04 ARTICLES OF ORGANIZATION AND BY-LAWS. At the Effective Time, the
Articles of Organization of the Merger Subsidiary shall be the Articles of
Organization of the Surviving Corporation and the By-Laws of the Merger
Subsidiary shall be the By-Laws of the Surviving Corporation and, subject to the
rights of the Buyer Bank as the sole stockholder, shall thereafter continue to
be its Articles of Organization and By-Laws until amended as provided therein or
by law.
2.05 DIRECTORS AND OFFICERS. At the Effective Time, the Board of Directors
of the Surviving Corporation shall consist of those persons comprising the Board
of Directors of the Merger Subsidiary prior to the Effective Time, each to hold
office in accordance with the Articles of Organization and By-Laws of the
Surviving Corporation. At the Effective Time, the officers of the Surviving
Corporation shall consist of those persons who were officers of the Merger
Subsidiary immediately prior to the Effective Time, subject to the rights of the
Buyer Bank as the sole stockholder, each to hold office in accordance with the
Articles of Organization and By-Laws of the Surviving Corporation.
2.06 EFFECTIVE TIME; CONDITIONS. The Merger shall become effective as set
forth in the articles of merger which shall be submitted for filing to the
Secretary of the Commonwealth pursuant to Section 78(d) of the MBCL (the
"Articles of Merger"). The term "Effective Time" shall be, the date and time
specified in the Articles of Merger.
2.07 EFFECT ON OUTSTANDING SHARES.
(a) MERGER SUBSIDIARY COMMON STOCK. By virtue of the Merger, automatically
and without any action the part of the holder thereof, each share of Merger
Subsidiary Common Stock issued and outstanding immediately prior to the
Effective Time shall become and be converted into 1.00 share of common stock of
the Surviving Corporation, par value $0.01 per share (the "Surviving Corporation
Common Stock"). Each certificate which immediately prior to the Effective Time
represented outstanding shares of Merger Subsidiary Common Stock shall on and
after the Effective Time be deemed for all purposes to represent the number of
shares of Surviving Corporation Common Stock into which the shares of Merger
Subsidiary Common Stock represented by such certificate shall have been
converted pursuant to this Section 2.07(a).
(b) SELLER COMMON STOCK. (i) By virtue of the Merger, automatically and
without any action on the part of the holder thereof, each share of common stock
of the Seller, par value $1.00 per share (the "Seller Common Stock"), issued and
outstanding immediately prior to the Effective Time (other than any such shares
held directly or indirectly by the Buyer or the Buyer Bank, except in a
fiduciary capacity, and any such shares held as treasury stock by the Seller)
shall become and be converted into the right to receive in cash from the Buyer
an amount equal to $33.00 (the "Merger Consideration"); and
(ii) As of the Effective Time, each share of Seller Common Stock held either
directly or indirectly by the Buyer or the Buyer Bank (other than in a fiduciary
capacity) or as treasury stock of the Seller shall be canceled, retired and
cease to exist, and no payment shall be made with respect thereto.
(c) SHARES OF DISSENTING HOLDERS. No conversion under Section 2.07(b) hereof
shall be made with respect to the shares of Seller Common Stock held by a
Dissenting Holder (as such term is defined below); provided, however, that each
share of Seller Common Stock outstanding immediately prior to the Effective Time
and held by a Dissenting Holder who shall, after the Effective Time, withdraw
his demand for appraisal or lose his right of appraisal, in either case pursuant
to the applicable provisions of the MBCL,
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shall be deemed to be converted, as of the Effective Time, into the right to
receive the Merger Consideration as specified in Section 2.07(b) hereof. The
term "Dissenting Holder" shall mean a holder of the Seller Common Stock who has
demanded appraisal rights in compliance with the applicable provisions of the
MBCL concerning the right of such holder to dissent from the Merger and demand
appraisal of such holder's shares of Seller Common Stock.
(d) DISSENTER'S RIGHTS. Any Dissenting Holder (i) who files with the Seller
a written objection to the Merger before the taking of the vote to approve this
Agreement by the shareholders of the Seller and who states in such objection
that he intends to demand payment for his shares if the Merger is concluded and
(ii) whose shares are not voted in favor of the Merger shall be entitled to
demand payment for his shares of Seller Common Stock and an appraisal of the
value thereof, in accordance with the provisions of Sections 86 through 98 of
the MBCL.
2.08 EXCHANGE AGENT. Prior to the Effective Time, the Buyer shall appoint
an exchange agent (the "Exchange Agent"). On the Effective Date, Buyer shall pay
to the Exchange Agent the aggregate cash amount to be paid, pursuant to this
Agreement, in exchange for the outstanding shares of Seller Common Stock in
accordance with the terms of this Article II.
2.09 PROCEDURES.
(a) Certificates which represent shares of Seller Common Stock that are
outstanding immediately prior to the Effective Time (a "Certificate") and are
converted into the Merger Consideration pursuant to this Article II shall, after
the Effective Time, be deemed to represent the right to receive the Merger
Consideration as provided herein and shall be exchangeable by the holders
thereof for cash into which such shares have been converted.
(b) Buyer shall use all reasonable efforts to cause the Exchange Agent to
send to each holder of record of shares of Seller Common Stock outstanding at
the Effective Time as promptly as practicable, and in any event within five (5)
days after the Effective Time, transmittal materials (which shall be reviewed
with and be reasonably acceptable to Seller) for use in exchanging the
certificates for such shares for the Merger Consideration into which such shares
of Seller Common Stock have been converted pursuant to this Article II. As
promptly as practicable after the Effective Time, each holder of an outstanding
Certificate, upon surrender of such Certificate, together with any other
required documents, shall be entitled to receive, in exchange therefor, a check
representing the amount of cash, which such holder has the right to receive in
respect of the Certificate surrendered pursuant to Section 2.07(b)(i) hereof and
such Certificate as surrendered shall forthwith be canceled. After the Effective
Time, there shall be no transfers on the stock transfer books of the Seller of
shares of Seller Common Stock which were issued and outstanding at the Effective
Time and converted pursuant to the provisions of this Article II. If, after the
Effective Time, Certificates are presented for transfer to the Seller, they
shall be canceled and exchanged for the Merger Consideration in accordance with
the provisions and procedures set forth in this Article II.
(c) After the Effective Time, holders of certificates of Seller Common Stock
shall cease to be, and shall have no rights as, stockholders of the Seller,
other than (i) to receive the Merger Consideration into which such shares have
been converted as provided by Section 2.07(b) hereof or (ii) the rights afforded
to any Dissenting Holder (as defined in Section 2.07(c)) under applicable
provisions of the MBCL.
(d) Neither the Buyer nor the Seller nor any other person shall be
liable to any former holder of shares of Seller Common Stock for any shares
or any dividends or distributions with respect thereto properly delivered to
a public official pursuant to applicable abandoned property, escheat or
similar laws.
(e) In the event any Certificate shall have been lost, stolen or
destroyed, upon receipt of appropriate evidence as to such loss, theft or
destruction and to the ownership of such Certificate by the person claiming
such Certificate to be lost, stolen or destroyed, and the receipt by the
Buyer of appropriate and customary indemnification, the Buyer will issue in
exchange for such lost, stolen or destroyed Certificate the Merger
Consideration, as determined in accordance with this Article II.
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2.10 STOCK OPTIONS. After satisfaction of the conditions set forth in
Section 6.01(a) hereof, and at least one day prior to the Effective Time, each
holder of a then outstanding stock option to purchase Seller Common Stock
pursuant to employee or other stock option plans of the Seller (the "Seller
Stock Option Plans") (it being understood that the aggregate number of shares of
Seller Common Stock subject to purchase pursuant to the exercise of such options
is not and shall not be more than 136,513), who has not otherwise exercised such
option prior to such time, shall be entitled to receive in cancellation of such
option a cash payment from the Seller in an amount equal to the excess of the
Merger Consideration over the per share exercise price of such option,
multiplied by the number of shares of Seller Common Stock covered by such
option, subject to any required withholding of taxes. After satisfaction of the
conditions set forth in Section 6.01(a) hereof, and at least one day prior to
the Effective Time, Seller shall obtain the consent of the holders of stock
options to the cancellation, effective prior to the Effective Time, of such
options and the cancellation of any right to acquire equity securities of the
Seller from and after the Effective Time. Seller shall take such actions as are
necessary to ensure that the Seller is not or will not be bound by any options,
warrants, rights or agreements which would entitle any person, other than the
Buyer or the Merger Subsidiary, to own any capital stock of the Surviving
Corporation after the Effective Time.
2.11 SUBSIDIARY BANK MERGER. The Seller shall take such actions as the
Buyer shall reasonably determine to be desirable to effectuate the Bank Merger.
2.12 POSSIBLE ALTERNATIVE STRUCTURE. Notwithstanding any other provision
of this Agreement to the contrary, prior to the Effective Time, the Buyer shall
be entitled to (i) revise the sequence of the Merger and the Bank Merger to
provide that the Bank Merger shall be consummated prior to the Merger, (ii)
revise the structure of the Merger to provide that Seller shall be merged with
and into the Merger Subsidiary at the Effective Time, (iii) organize the Merger
Subsidiary as a direct wholly-owned subsidiary of the Buyer Bank, and/or (iv)
revise the structure of the Merger to provide that the Seller Bank shall be
merged with and into a special-purpose interim trust company organized by the
Buyer prior to the Effective Time; it being understood by the Buyer and the
Seller that any change to the structure of the Merger or the Bank Merger
pursuant to this Section 2.12 shall not be adopted if such change would result
in additional adverse tax consequences (i.e. beyond gain recognition on the sale
of their shares) to the shareholders of the Seller as a group, including but not
limited to, the Merger becoming subject to taxation to shareholders of the
Seller other than as a capital transaction. Notwithstanding the foregoing or any
other provision of this Agreement to the contrary, the Buyer and the Seller may
jointly elect prior to the Effective Time, to substitute an alternative
structure for the accomplishment of the transactions contemplated by this
Agreement and the Bank Merger Agreement. Buyer and Seller agree that this
Agreement and the Bank Merger Agreement shall be appropriately amended in order
to reflect any such contribution or revised sequence or structure.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller as follows:
3.01 CORPORATE ORGANIZATION.
(a) The Buyer is a corporation duly organized, validly existing and in good
standing under the laws of The Commonwealth of Massachusetts. The Buyer has all
requisite corporate power and authority to own, lease or operate all of its
properties and assets and to carry on its business as it is now being conducted.
The Buyer is duly licensed or qualified to do business in each jurisdiction in
which the nature of the business conducted by it or the character or location of
the properties and assets owned, leased or operated by it makes such licensing
or qualification necessary, except where the failure to be so licensed or
qualified would not result in, with respect to the Buyer, a Material Adverse
Effect. The Buyer is a mutual holding company registered with the Federal
Reserve Board under the BHCA.
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(b) Each Significant Subsidiary of the Buyer is duly organized, validly
existing and in corporate good standing under the laws of the jurisdiction of
its incorporation. Each Significant Subsidiary of the Buyer has all requisite
corporate power and authority to own, lease or operate all of its properties and
assets and to carry on its business as it is now being conducted. Each
Significant Subsidiary is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned, leased, or operated by
it makes such licensing or qualification necessary, except where the failure to
be so licensed or qualified would neither individually nor in the aggregate
result in any Material Adverse Effect on the Buyer.
3.02 AUTHORITY; NO VIOLATION.
(a) The Buyer has all requisite corporate power and authority to execute and
deliver this Agreement, the other Transaction Documents and to consummate the
transactions contemplated hereby and thereby. The Merger Subsidiary has or will
have prior to the Closing Date all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement, the other
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby have been duly and validly approved by the Board of Trustees
of the Buyer. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby and thereby have been or will be prior
to the Closing Date duly and validly approved by the Buyer, as sole stockholder
of the Merger Subsidiary, and by the Board of Directors of the Merger
Subsidiary. No other corporate proceedings on the part of the Buyer are
necessary to consummate any of the transactions so contemplated by this
Agreement. This Agreement and the other Transaction Documents have been duly and
validly executed and delivered by the Buyer and (assuming due authorization,
execution and delivery by the Seller) constitute the valid and binding
obligations of the Buyer, enforceable against the Buyer in accordance with their
respective terms, except that enforcement thereof may be limited by the
receivership, conservatorship and supervisory powers of bank regulatory agencies
generally as well as bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting enforcement of creditors' rights generally and except
that enforcement thereof may be subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law) and the availability of equitable remedies.
(b) The Buyer Bank has full corporate power and authority to execute and
deliver the Bank Merger Agreement and to consummate the Bank Merger. The
execution of the Bank Merger Agreement and the consummation of the transactions
contemplated thereby have been duly and validly approved by the Board of
Directors of the Buyer Bank. The Bank Merger Agreement has been duly and validly
executed and delivered by the Buyer Bank, and (assuming due authorization,
execution and delivery by the Seller Bank) constitutes the valid and binding
obligation of the Buyer Bank, enforceable against the Buyer Bank in accordance
with its terms, except that enforcement thereof may be limited by receivership,
conservatorship and supervisory powers of bank regulatory agencies generally as
well as bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting enforcement of creditors' rights generally and except that enforcement
thereof may be subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law) and the
availability of equitable remedies. The Board of Directors of the Buyer Bank has
directed that the Bank Merger Agreement and the transactions contemplated
thereby be adopted by the Buyer as the sole stockholder of the Buyer Bank, and
except for the adoption of the Bank Merger Agreement by the Buyer in its
capacity as the sole stockholder of the Buyer Bank, all as contemplated by
Section 5.15 hereof, no other corporate proceedings on the part of the Buyer
Bank are necessary to consummate the Bank Merger.
(c) Neither the execution and delivery of this Agreement, the Bank Merger
Agreement or the other Transaction Documents by the Buyer and the Buyer Bank,
respectively, nor the consummation by the Buyer or the Buyer Bank, as
applicable, of the transactions contemplated by this Agreement and the Bank
Merger Agreement, nor compliance by the Buyer or the Buyer Bank, as applicable,
with any of the terms or provisions of this Agreement or the Bank Merger
Agreement, will (i) assuming that the consents and
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approvals referred to in Section 3.03 hereof are duly obtained, violate in any
material respect any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to the Buyer or any of its
subsidiaries or any of their respective properties or assets, or (ii) violate,
conflict with, result in a breach of any provisions of, constitute a default (or
an event which, with notice or lapse of time, or both, would constitute a
default) under, result in the termination of, accelerate the performance
required by, or result in a right of termination or acceleration or the creation
of any lien, security interest, charge or other encumbrance upon any of the
respective properties or assets of the Buyer or any of its subsidiaries under,
any of the terms, conditions or provisions of (A) the Articles of Organization
or other charter document of like nature or By-Laws of the Buyer, or such
subsidiary, as the case may be, or (B) any note, bond, mortgage, indenture, deed
of trust, license, lease, agreement or other instrument or obligation to which
the Buyer or any of its subsidiaries is a party as issuer, guarantor or obligor,
or by which they or any of their respective properties or assets may be bound or
affected, except, in the case of clause (ii)(B) above, for such violations,
conflicts, breaches or defaults which either individually or in the aggregate
will not have a Material Adverse Effect on the Buyer.
3.03 CONSENTS AND APPROVALS. Except for consents, waivers or approvals of,
or filings or registrations with, the Federal Reserve Board, the FDIC, the Board
of Bank Incorporation of The Commonwealth of Massachusetts (the "Massachusetts
Board"), the Commissioner of Banks of The Commonwealth of Massachusetts (the
"Massachusetts Commissioner"), the Secretary of State of The Commonwealth of
Massachusetts and the DOJ, no consents, waivers or approvals of or filings or
registrations with any public body or authority are necessary, and no consents
or approvals of any third parties (which term does not include the Board of
Directors of the Buyer, the Merger Subsidiary or the Buyer Bank or the
stockholders of the Merger Subsidiary or the Buyer Bank) are necessary, in
connection with (a) the execution and delivery by the Buyer of this Agreement,
(b) the execution and delivery by the Buyer Bank of the Bank Merger Agreement or
(c) the consummation by the Buyer, the Merger Subsidiary, or the Buyer Bank, as
applicable, of the transactions contemplated by this Agreement and the Bank
Merger Agreement.
3.04 FINANCIAL STATEMENTS. The Buyer has made available to the Seller
copies of (a) the consolidated balance sheets of the Buyer and its subsidiaries
as of December 31 for the fiscal years 1994 through 1996, inclusive, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the fiscal years 1994 through 1996, inclusive, in each case
accompanied by the audit report of KPMG Peat Marwick LLP, independent public
accountants for the Buyer, and (b) the unaudited consolidated balance sheet of
the Buyer and its subsidiaries as of September 30, 1997, and the related
unaudited consolidated statements of income and changes in stockholders' equity
for the nine (9) months ended September 30, 1997 and September 30, 1996. The
December 31, 1996 consolidated balance sheet ("Buyer Balance Sheet") of the
Buyer (including the related notes, where applicable) and the other financial
statements referred to herein (including the related notes, where applicable)
fairly present the consolidated financial position and results of the
consolidated operations and cash flows and changes in stockholders' equity of
the Buyer and its subsidiaries for the respective fiscal periods or as of the
respective dates therein set forth; and each of such statements (including the
related notes, where applicable) has been prepared in accordance with GAAP
consistently applied during the periods involved, except as otherwise set forth
in the notes thereto (subject, in the case of unaudited interim statements, to
normal year-end adjustments). The books and records of the Buyer and its
subsidiaries have been, and are being, maintained in accordance with GAAP and
applicable legal and regulatory requirements.
3.05 BUYER INFORMATION. The information relating to the Buyer and the
Buyer Bank to be contained in the Seller Proxy Statement, as described in
Section 5.04 hereof, and any other documents filed with the SEC or any
regulatory agency in connection herewith, to the extent such information is
provided in writing by the Buyer, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make such
information not misleading.
3.06 DISCLOSURE. No representation or warranty contained in this
Agreement, and no statement contained in any certificate, list or other writing
furnished to the Seller pursuant to the provisions hereof,
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to the best knowledge of the Buyer, contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Buyer as follows:
4.01 CORPORATE ORGANIZATION.
(a) The Seller is a corporation duly organized, validly existing and in good
standing under the laws of The Commonwealth of Massachusetts. The Seller is a
bank holding company registered with the Federal Reserve Board under the BHCA.
The Seller Bank is a stock savings bank organized under the laws of The
Commonwealth of Massachusetts. Each of the Seller and the Seller Bank has all
requisite corporate power and authority to own, lease or operate all of its
properties and assets and to carry on its business as it is now being conducted.
The Seller is duly licensed or qualified to do business in each jurisdiction in
which the nature of the business conducted by it or the character or location of
the properties and assets owned, leased or operated by it makes such licensing
or qualification necessary, except where the failure to be so licensed or
qualified would not result in, with respect to the Seller, any Material Adverse
Effect.
(b) Except for the Seller Bank and as set forth in Section 4.01(b) of the
Seller Disclosure Schedule, the Seller has no subsidiaries. Each subsidiary of
the Seller is duly organized, validly existing and in corporate good standing
under the laws of the jurisdiction of its incorporation. Each subsidiary of the
Seller has all requisite corporate power and authority to own, lease or operate
all of its properties and assets and to carry on its business as it is now being
conducted. Each subsidiary is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned, leased, or operated by
it makes such licensing or qualification necessary, except where the failure to
be so licensed or qualified would neither individually nor in the aggregate
result in, with respect to the Seller or such subsidiary, any Material Adverse
Effect.
(c) The minute books of the Seller and each of its subsidiaries contain
complete and accurate records of all meetings and other corporate actions
authorized at such meetings held or taken since January 1, 1992 to date of its
stockholders and Board of Directors.
4.02 CAPITALIZATION.
(a) The authorized capital stock of the Seller consists of (i) 10,000,000
shares of Seller Common Stock, of which, as of September 30, 1997, 2,249,786
shares were issued and outstanding and (ii) 5,000,000 shares of serial preferred
stock, par value, $1.00 per share (the "Seller Preferred Stock"), of which as of
September 30, 1997, no shares were issued and outstanding. As of the date
hereof, 136,513 shares of Seller Common Stock are reserved for issuance under
outstanding options under the Seller Stock Option Plans, 375,000 shares were
reserved for issuance under the Seller Stock Purchase Plan and 359,694 shares
were reserved for issuance under the Seller Automatic Dividend Reinvestment
Plan. All issued and outstanding shares of Seller Common Stock have been duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights. Except as referred to in this Section 4.02, and except for
the Stock Option Agreement, the Seller does not have and is not bound by any
outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character calling for the Seller to issue, deliver or sell, or cause to
be issued, delivered or sold any shares of Seller Common Stock, Seller Preferred
Stock, or any other equity security of the Seller or any subsidiary of the
Seller or any securities convertible into, exchangeable for or representing the
right to subscribe for, purchase or otherwise receive any shares of Seller
Common Stock, Seller Preferred Stock or any other equity security of the Seller
or any subsidiary of the Seller or obligating the Seller to grant, extend or
enter into any such subscriptions, options, warrants, calls, commitments or
agreements. As of the date hereof, there are no outstanding contractual
obligations
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of the Seller to repurchase, redeem or otherwise acquire any shares of capital
stock of the Seller or any subsidiary of the Seller.
(b) The Seller Bank is an "insured depository institution" as defined in the
FDIA and applicable regulations thereunder, and the deposits of the Seller Bank
are insured by the Bank Insurance Fund of the FDIC in accordance with the FDIA
and by the Deposit Insurance Fund of the Mutual Savings Central Fund, Inc. of
Massachusetts in excess of the FDIC's insurance limits. The Seller Bank has paid
all assessments and filed all reports required by the FDIA and the Deposit
Insurance Fund. As of the date hereof no proceedings for the revocation or
termination of such deposit insurance are pending or to the knowledge of the
Seller, threatened. None of the subsidiaries of the Seller is bound by any
outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character calling for such subsidiary to issue, deliver or sell, or cause
to be issued, delivered or sold, any equity security of the Seller or any of its
subsidiaries or any securities convertible into, exchangeable for or
representing the right to subscribe for, purchase or otherwise receive any such
equity security or obligating a subsidiary of the Seller to grant, extend or
enter into any such subscriptions, options, warrants, calls, commitments or
agreements. As of the date hereof, there are no outstanding contractual
obligations of any of the subsidiaries of the Seller to repurchase, redeem or
otherwise acquire any shares of capital stock of the Seller or any of its
subsidiaries. All of the issued and outstanding shares of capital stock of the
Seller's subsidiaries are owned by the Seller. All of the shares of capital
stock of the subsidiaries of the Seller held by the Seller are fully paid and
nonassessable and, except for directors' qualifying shares, are owned by the
Seller free and clear of any claim, lien, encumbrance or agreement with respect
thereto.
4.03 AUTHORITY; NO VIOLATION.
(a) The Seller has full corporate power and authority to execute and deliver
this Agreement, the other Transaction Documents and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement, the other Transaction Documents and the consummation of the
transactions contemplated hereby and thereby have been duly and validly approved
by the Board of Directors of the Seller. The Board of Directors of the Seller
has directed that this Agreement, the other Transaction Documents and the
transactions contemplated hereby and thereby be submitted to the stockholders of
the Seller for approval at a meeting of such stockholders and, except for the
adoption of this Agreement by its stockholders, no other corporate proceedings
on the part of the Seller are necessary to consummate any of the transactions so
contemplated by this Agreement. This Agreement and the other Transaction
Documents have been duly and validly executed and delivered by the Seller and
(assuming due authorization, execution and delivery by the Buyer) constitute the
valid and binding obligations of the Seller, enforceable against the Seller in
accordance with their respective terms, except that enforcement thereof may be
limited by the receivership, conservatorship and supervisory powers of bank
regulatory agencies generally as well as bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting enforcement of creditors' rights
generally and except that enforcement thereof may be subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law) and the availability of equitable remedies.
(b) The Seller Bank has full corporate power and authority to execute and
deliver the Bank Merger Agreement and to consummate the Bank Merger. The
execution of the Bank Merger Agreement and the consummation of the transactions
contemplated thereby have been duly and validly approved by the Board of
Directors of the Seller Bank. The Bank Merger Agreement has been duly and
validly executed and delivered by the Seller Bank and (assuming the
authorization, execution and delivery by the Buyer Bank), constitutes the valid
and binding obligation of the Seller Bank, enforceable against the Seller Bank
in accordance with its terms, except that enforcement thereof may be limited by
receivership, conservatorship and supervisory powers of bank regulatory agencies
generally as well as bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting enforcement of creditors' rights generally and except
that enforcement thereof may be subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law) and the availability of equitable remedies. The Board of
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Directors of the Seller Bank has directed that the Bank Merger Agreement and the
transactions thereby be adopted by the Seller as the sole stockholder of the
Seller Bank, and except for the adoption of the Bank Merger Agreement by the
Seller as the sole stockholder of the Seller Bank, no other corporate
proceedings on the part of the Seller Bank are necessary to consummate the Bank
Merger.
(c) Neither the execution and delivery of this Agreement, the Bank Merger
Agreement, or the other Transaction Documents by the Seller and the Seller Bank,
respectively, nor the consummation by the Seller or the Seller Bank, as
applicable, of the transactions contemplated by this Agreement, the Bank Merger
Agreement, or the other Transaction Documents, nor compliance by the Seller or
the Seller Bank, as applicable, with any of the terms or provisions thereof,
will (i) assuming that the consents and approvals referred to in Section 4.04
are duly obtained, violate in any material respect any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction applicable to the
Seller or any of its subsidiaries or any of their respective properties or
assets, or (ii) violate, conflict with, result in a breach of any provisions of,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of, accelerate the
performance required by, or result in a right of termination or acceleration or
the creation of any lien, security interest, charge or other encumbrance upon
any of the respective properties or assets of the Seller or the Seller Bank
under, any of the terms, conditions or provisions of (A) the Articles of
Organization or other charter document of like nature or By-Laws of the Seller
or the Seller Bank, as the case may be, or (B) any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which the Seller or the Seller Bank is a party as issuer,
guarantor or obligor, or by which they or any of their respective properties or
assets may be bound or affected, except, in the case of clause (ii)(B) above,
for such violations, conflicts, breaches or defaults which either individually
or in the aggregate will not have a Material Adverse Effect on the Seller or the
Seller Bank.
4.04 CONSENTS AND APPROVALS. Except for consents, waivers or approvals of,
or filings or registrations with, the Federal Reserve Board, the FDIC, the
Massachusetts Board, the Massachusetts Commissioner, the Secretary of State of
The Commonwealth of Massachusetts, the SEC, NASDAQ, the DOJ or the stockholders
of the Seller, no consents, waivers or approvals of or filings or registrations
with any public body or authority are necessary, and except as set forth on
Section 4.04 of the Seller Disclosure Schedule, no consents or approvals of any
third parties (which term does not include the Board of Directors and
stockholders of the Seller and the Seller Bank) are necessary, in connection
with (a) the execution and delivery by the Seller of this Agreement, (b) the
execution and delivery by the Seller Bank of the Bank Merger Agreement or (c)
the consummation by the Seller or the Seller Bank, as applicable, of the
transactions contemplated by this Agreement or the Bank Merger Agreement. The
affirmative vote of holders of two-thirds of the outstanding shares of Seller
Common Stock is the only vote of the holders of any class or series of capital
stock or other securities of the Seller necessary to approve of this Agreement
and the transactions contemplated hereby.
4.05 FINANCIAL STATEMENTS. The Seller has made available to the Buyer copies
of (a) the consolidated balance sheets of the Seller and its subsidiaries as of
December 31 for the fiscal years 1994 through 1996, inclusive, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for the fiscal years 1994 through 1996, inclusive, as reported in the
Seller's Annual Report on Form 10-K for the fiscal year ended December 31, 1996,
which was filed with the SEC under the Exchange Act, accompanied by the audit
report of Arthur Andersen LLP, independent accountants for the Seller, and (b)
the unaudited consolidated balance sheets of the Seller and its subsidiaries as
of September 30, 1997 and September 30, 1996, the related unaudited consolidated
statements of income and changes in stockholders' equity for the nine (9) months
ended September 30, 1997 and September 30, 1996 and the related unaudited
consolidated statements of cash flows for the nine (9) months ended September
30, 1997 and September 30, 1996. The December 31, 1996 consolidated balance
sheet (the "Seller Balance Sheet") of the Seller (including the related notes,
where applicable) and the other financial statements referred to herein
(including the related notes, where applicable) fairly present, and the
financial statements to be
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included in any reports or statements (including reports on Forms 10-Q and 10-K)
to be filed with the SEC after the date hereof will fairly present, the
consolidated financial position and results of the consolidated operations and
cash flows and changes in shareholders' equity of the Seller and its
subsidiaries for the respective fiscal periods or as of the respective dates
therein set forth; and each of such statements (including the related notes,
where applicable) has been prepared in accordance with GAAP consistently applied
during the periods involved, except as otherwise set forth in the notes thereto
(subject, in the case of unaudited interim statements, to normal year-end
adjustments). The books and records of the Seller and its subsidiaries have
been, and are being, maintained in accordance with GAAP and applicable legal and
regulatory requirements.
4.06 ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Seller nor any of its
subsidiaries has any obligation or liability (contingent or otherwise) that is
material on a consolidated basis to the Seller, except as disclosed or reflected
in the Seller Balance Sheet or any of the other financial statements described
in Section 4.05 above or Section 4.06 of the Seller Disclosure Schedule.
4.07 BROKER'S FEES. Except as set forth in Section 4.07 of the Seller
Disclosure Schedule, neither the Seller nor any of its officers, directors,
employees or agents has employed any broker, finder or financial advisor or
incurred any liability for any fees or commissions in connection with any of the
transactions contemplated by this Agreement.
4.08 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in Section
4.08 of the Seller Disclosure Schedule, or as disclosed in the Seller's
Quarterly Report on Form 10-Q for the six (6) months ended June 30, 1997, or in
any Current Report of the Seller on Form 8-K filed prior to the date of this
Agreement, since December 31, 1996, neither the Seller nor any of its
subsidiaries has incurred any material liability, except in the ordinary course
of their business consistent with their past practices, nor has there been any
change in the business, assets, financial condition or results of operations of
the Seller or such subsidiary.
4.09 LEGAL PROCEEDINGS. Except as set forth in Section 4.09 of the Seller
Disclosure Schedule, there is no suit, action or proceeding pending or, to the
best knowledge of the Seller, threatened, against the Seller or any of its
subsidiaries or challenging the validity or propriety of the transactions
contemplated by this Agreement or the Bank Merger Agreement, as to which there
is a reasonable possibility of an adverse determination and which, if adversely
determined, would, individually or in the aggregate, have a Material Adverse
Effect on the Seller or any of its subsidiaries or otherwise materially
adversely affect the Seller's or the Seller Bank's, as applicable, ability to
perform its obligations under this Agreement or the Bank Merger Agreement, nor
is there any judgment, decree, injunction, rule or order of any legal or
administrative body or arbitrator outstanding against the Seller or any of its
subsidiaries having, or which insofar as reasonably can be foreseen, in the
future could have, any such effect.
4.10 TAXES AND TAX RETURNS.
(a) The Seller and each of its subsidiaries (referred to for purposes of
this Section 4.10, collectively, as the "Companies") have timely filed in
correct form all Tax Returns that were required to be filed by any of them
on or prior to the date hereof (the "Filed Tax Returns"), each Filed Tax
Return has been prepared in compliance with all applicable laws and
regulations, and all Filed Tax Returns are true and accurate in all
respects. The Companies have made available to the Buyer correct and
complete copies of all federal income Tax Returns filed with respect to the
Companies for taxable periods ended on or after December 31, 1991, and all
examination reports, and statements of deficiencies assessed against or
agreed to by any of the Companies with respect to such taxable periods.
(b) The Companies have paid all Taxes required to be paid.
(c) No assessment that has not been settled or otherwise resolved has
been made with respect to Taxes not shown on the Filed Tax Returns. No
deficiency in Taxes or other proposed adjustment that
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has not been settled or otherwise resolved has been asserted in writing by
any taxing authority against any of the Companies. No Tax Return of any of
the Companies is now under examination by any applicable taxing authority
nor have any of the Companies consented to any extension of the period for
assessment or collection with respect to any Tax. There are no liens for
Taxes (other than current Taxes not yet due and payable) on any of the
assets of any Company. None of the Companies has requested or been granted
an extension of the time for filing any Tax Return to a date later than the
Effective Time. No claim has ever been made by a taxing authority in a
jurisdiction where any of the Companies does not pay Tax or file Tax Returns
that such of the Companies is or may be subject to Taxes assessed by that
jurisdiction.
(d) Adequate provision has been made on the Seller Balance Sheet for all
Taxes of the Companies in respect of all periods through the date hereof.
(e) None of the Companies is a party to or bound by any Tax
indemnification, Tax allocation or Tax sharing agreement with any person or
entity or has any current or potential contractual obligation to indemnify
any other person or entity with respect to Taxes.
(f) None of the Companies has filed or been included in a combined,
consolidated or unitary income Tax Return (including any consolidated
federal income Tax Return) other than one of which one of the Companies or
the Seller was the parent.
(g) None of the Companies has made any payments, is obligated to make
any payments, or is a party to any agreement that could obligate it to make
any payments that will not be deductible under Code Section 280G.
(h) None of the Companies has made or is affected by any elections under
Code Sections 108(b)(5), 338(g), or 565, or Treasury Regulation Sections
1.1502-20(g) or 1.1502-32(f)(2).
(i) The Companies have withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
creditor, independent contractor or other third party.
(j) For purposes of this Section 4.10:
(A) "Tax" means any federal, state, local or foreign income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum,
sales, use, transfer, registration, value added, excise, natural
resources, severance, stamp, occupation, premium, windfall profit,
environmental, customs, duties, real property, personal property, capital
stock, intangibles, social security, unemployment, disability, payroll,
license, employee or other tax or levy, of any kind whatsoever, including
any interest, penalties or additions to tax in respect of the foregoing.
(B) "Tax Return" means any return, declaration, report, claim for
refund, information return or other document (including any related or
supporting estimates, elections, schedules,
statements or information) filed or required to be filed in connection
with the determination, assessment or collection of any Tax or the
administration of any laws, regulations or administrative requirements
relating to any Tax.
4.11 EMPLOYEES.
(a) Except as set forth in Section 4.11(a) of the Seller Disclosure
Schedule, neither the Seller nor any of its subsidiaries maintains or
contributes to any "employee pension benefit plan" (the "Seller Pension
Plans"), as such term is defined in Section 3 of ERISA, "employee welfare
benefit plan" (the "Seller Benefit Plans"), as such term is defined in
Section 3 of ERISA, stock option plan, stock purchase plan, deferred
compensation plan, other employee benefit plan for employees of the Seller
or any of its subsidiaries, or any other plan, program or arrangement of the
same or similar nature
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that provides benefits to non-employee directors of the Seller or any of its
subsidiaries (collectively, the "Seller Other Plans").
(b) The Seller shall have delivered to the Buyer contemporaneous with
the delivery of the Seller Disclosure Schedule a complete and accurate copy
of each of the following with respect to each of the Seller Pension Plans,
the Seller Benefit Plans and the Seller Other Plans: (i) plan document; (ii)
trust agreement or insurance contract, if any; (iii) most recent IRS
determination letter, if any; (iv) most recent actuarial report, if any; and
(v) most recent annual report on Form 5500.
(c) The current value of the assets of each of the Seller Pension Plans
subject to Title IV of ERISA exceeds that plan's "Benefit Liabilities" as
that term is defined in Section 4001(a)(16) of ERISA, when determined under
actuarial factors that would apply if that plan terminated in accordance
with all applicable legal requirements.
(d) Each of the Seller Pension Plans and each of the Seller Benefit
Plans has been administered in compliance with its terms in all material
respects and is in compliance in all material respects with the applicable
provisions of ERISA (including, but not limited to, the funding and
prohibited transactions provisions thereof), the Code and other applicable
laws.
(e) There has been no reportable event within the meaning of Section
4043(b) of ERISA or any waived funding deficiency within the meaning of
Section 412(d)(3) (or any predecessor section) of the Code with respect to
any the Seller Pension Plan.
(f) The Seller has made or provided for all contributions to the Seller
Pension Plans required thereunder.
(g) Neither the Seller nor any of its subsidiaries contributes or has
contributed to any "Multiemployer Plan," as such term is defined in Section
3(37) of ERISA.
(h) Each of the Seller Pension Plans which is intended to be a qualified
plan within the meaning of Section 401(a) of the Code is so qualified, and
the Seller is not aware of any fact or circumstance which would adversely
affect the qualified status of any such plan.
(i) Except as set forth in Section 4.11(i) of the Seller Disclosure
Schedule, neither the Seller nor the Seller Bank is party to or maintains
any contract or other arrangement with any employee or group of employees,
providing severance payments, stock or stock-equivalent payments or post-
employment benefits of any kind or providing that any otherwise disclosed
plan, program or arrangement will irrevocably continue, with respect to any
or all of its participants, for any period of time.
4.12 AGREEMENTS WITH BANKING AUTHORITIES. Neither the Seller nor any of its
subsidiaries is currently a party to any commitment, letter (other than letters
addressed to regulated depository institutions generally), written agreement,
memorandum of understanding or order to cease and desist with any federal or
state governmental entity charged with the supervision or regulation of banks or
bank holding companies or engaged in the insurance of bank deposits which
restricts materially the conduct of its business, or in any manner relates to
its capital adequacy, credit policies, management or overall safety and
soundness or such entity's ability to perform its obligations hereunder, and
neither the Seller nor any of its subsidiaries has received written notification
from any such federal or state governmental entity that any such Person may be
requested to enter into, or otherwise be subject to, any such commitment,
letter, written agreement, memorandum of understanding or cease and desist
order.
4.13 MATERIAL AGREEMENTS. Except as set forth in any of the Seller
Disclosure Schedules or the index of exhibits in the Seller's Annual Report on
Form 10-K for the year ended December 31, 1996, as of the date of this
Agreement, except for this Agreement and the other Transaction Documents,
neither the Seller nor any of its subsidiaries is a party to or is bound by (a)
any agreement, arrangement, or commitment that is material to the financial
condition, results of operations or business of the Seller, except those entered
into
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in the ordinary course of business; (b) any written (or oral, if material)
agreement, arrangement, or commitment relating to the employment of any person
or the election or retention in office or severance of any present or former
director or officer of the Seller or any of its subsidiaries; (c) any contract,
agreement, or understanding with any labor union; (d) any agreement by and among
the Seller, any subsidiary of the Seller and/or any Affiliate thereof; or (e)
any contract or agreement or amendment thereto that would be required to be
filed as an Exhibit to a Form 10-K filed by the Seller as of the date hereof
that has not been filed as an Exhibit to the Form 10-K filed by it for 1996.
4.14 OWNERSHIP OF PROPERTY. Section 4.14 of the Seller Disclosure Schedule
sets forth a true and complete list of all real property owned, leased or
operated by the Seller or any of its subsidiaries (including all of the branches
of the Seller Bank and all of the Seller's properties acquired by foreclosure
proceedings in the ordinary course of business) as of the date hereof. The
Seller directly or indirectly through any of its subsidiaries has good and
marketable title to all assets and properties, whether real or personal,
tangible or intangible, including, without limitation, the capital stock of its
subsidiaries and all other assets and properties reflected in its consolidated
balance sheet as of September 30, 1997, or acquired subsequent thereto subject
to no encumbrances, liens, mortgages, security interests or pledges, except (a)
those items that secure liabilities that are reflected in said balance sheet or
the notes thereto or incurred in the ordinary course of business after the date
of such balance sheet and not otherwise prohibited by the terms hereof, (b)
dispositions for adequate consideration in the ordinary course of business or as
expressly permitted by the terms hereof, (c) statutory liens for amounts not yet
delinquent or which are being contested in good faith, (d) those items that
secure public or statutory obligations or any discount with, borrowing from, or
other obligations to, any Federal Reserve Bank or Federal Home Loan Bank,
inter-bank credit facilities, or any transaction by a subsidiary acting in a
fiduciary capacity, and (e) such encumbrances, liens, mortgages, security
interests, and pledges that are not material in character, amount or extent.
Neither the Seller nor any of its subsidiaries has received any notice of
violation of any applicable zoning or environmental regulation, ordinance or
other law, order, regulation, or requirement relating to its properties. The
Seller and its subsidiaries as lessees have the right under valid and existing
leases to occupy, use, possess and control all property leased by the Seller and
its subsidiaries as presently occupied, used, possessed and controlled by the
Seller and its subsidiaries. Neither the Seller nor any of its subsidiaries is
in default, and there has not occurred any event that with the lapse of time or
giving of notice or both would constitute a default, under any leases pursuant
to which the Seller or such subsidiary leases any real property. All such leases
constitute legal, valid and binding obligations of the Seller or such subsidiary
and, to the knowledge of the Seller, the other party thereto, enforceable by the
Seller or such subsidiary in accordance with their respective terms, except that
enforcement thereof may be limited by the receivership, conservatorship and
supervisory powers of bank regulatory agencies generally as well as bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
enforcement of creditors' rights generally and except that enforcement thereof
may be subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law) and the
availability of equitable remedies. Section 4.14 of the Seller Disclosure
Schedule sets forth the expiration date and renewal terms of each such lease.
Neither the Seller nor any of its subsidiaries has received notice of, or made a
claim with respect to, any breach or default under any leases pursuant to which
the Seller or such subsidiary lease any real property.
4.15 REPORTS. Since January 1, 1994, the Seller and the Seller Bank have
filed, and subsequent to the date hereof will file, all reports, together with
any amendments required to be made with respect thereto, that were and are
required to be filed with (a) the SEC, including but not limited to, Forms 10-K,
10-Q and 8-K and proxy statements (and all such reports, registrations and
statements have been or will be delivered by the Seller to the Buyer), and (b)
the Federal Reserve Board, (c) the FDIC, and (d) any applicable state securities
or banking authorities (all such reports and statements are collectively
referred to herein as the " Seller Reports"). As of their respective dates, the
Seller Reports complied and, with respect to filings made after the date of this
Agreement, will at the date of filing comply, in all material respects with all
of the statutes, rules and regulations enforced or promulgated by the regulatory
authority with which they were
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filed and did not contain and, with respect to filings made after the date of
this Agreement, will not at the date of filing contain, any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.16 COMPLIANCE WITH APPLICABLE LAW. Each of the Seller and its subsidiaries
holds all licenses, franchises, permits and authorizations necessary for the
lawful conduct of its business, and each of the Seller and its subsidiaries has
complied with and is not in default in any material respect under any,
applicable law, statute, order, rule, regulation or policy of, or agreement
with, any federal, state or local governmental agency or authority relating to
the Seller or any of its subsidiaries, which would result in a Material Adverse
Effect on the Seller or any of its subsidiaries and neither the Seller nor any
of its subsidiaries has received any notice of any violation of, or commencement
of any proceeding in connection with any such violation (including but not
limited to any hearing or investigation relating to the imposition or
contemplated imposition of fines or penalties), and does not know of any
violation of, any such law, statute, order, rule, regulation, policy or
agreement which would have such a result.
4.17 ENVIRONMENTAL MATTERS. The Seller and its subsidiaries are in material
compliance and have always been in material compliance with all environmental
laws, rules, regulations and standards promulgated, adopted or enforced by the
United States Environmental Protection Agency (the "EPA") and of similar
agencies in states in which they conduct their respective business. There is no
suit, claim, action or proceeding now pending before any court, governmental
agency or board or other forum, or, to the knowledge of the Seller, threatened
by any person, as to which there is a reasonable probability of an adverse
determination (i) for alleged noncompliance with any environmental law, rule or
regulation or (ii) relating to the discharge or release into the environment of
any hazardous material or waste at or on a site presently or formerly owned,
leased or operated by the Seller or any of its subsidiaries or in which the
Seller or any of its subsidiaries has a lien or other security interest.
4.18 INSURANCE. The Seller and its subsidiaries are presently insured, and
since January 1, 1992 have been insured, for reasonable amounts against such
risks as companies engaged in a similar business in a similar location would, in
accordance with good business practice, customarily be insured. The Seller has
made available to the Buyer a list of policies relating to insurance maintained
by the Seller or its subsidiaries with respect to their properties and the
conduct of their respective businesses.
4.19 LABOR. No work stoppage involving the Seller or its subsidiaries is
pending or, to the best knowledge of the Seller's management, threatened.
Neither the Seller nor its subsidiaries is involved in, or, to the best
knowledge of the Seller's management, threatened with or affected by, any
dispute, arbitration, lawsuit or administrative proceeding relating to labor or
employment matters. No employees of the Seller or its subsidiaries are
represented by any labor union, and, to the best knowledge of the Seller's
management, no labor union is attempting to organize employees of the Seller or
its subsidiaries.
4.20 MATERIAL INTERESTS OF CERTAIN PERSONS. Except as disclosed in Section
4.20 of the Seller Disclosure Schedule, no officer or director of the Seller, or
any "associate" (as such term is defined in Rule 14a-1 under the Exchange Act)
of any such officer or director, has any material interest in any material
contract or property (real or personal), tangible or intangible, used in or
pertaining to the business of the Seller or its subsidiaries.
4.21 ABSENCE OF REGISTRATION OBLIGATIONS. Neither the Seller nor any of its
subsidiaries is under any obligation, contingent or otherwise, by reason of any
agreement to register any of its securities under the Securities Act which will
survive the Merger.
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4.22 LOANS. (a) All currently outstanding loans of, or current extensions
of credit by, the Seller (individually, a "Loan," and collectively, the "Loans")
were solicited, originated and currently exist in material compliance with all
applicable requirements of federal and state law and regulations promulgated
thereunder and applicable loan policies of the Seller, except for such changes
to the circumstances of the obligor thereunder or the collateral occurring
subsequent to the origination thereof and over which the Seller had no control.
The Loans are adequately documented and each note evidencing a Loan or loan or
credit agreement or security instrument related to the Loans constitutes a
valid, legal and binding obligation of the obligor thereunder, enforceable in
accordance with the terms thereof. There are no oral modifications or amendments
or additional agreements related to the Loans that are not reflected in the
records of the Seller, and no claims of defense as to the enforcement of any
Loan has been asserted and the Seller is aware of no acts or omissions which
would give rise to any claim or right of rescission, set-off, counterclaim or
defense. The Seller currently maintains, and shall continue to maintain, an
allowance for loan losses allocable to the Loans which is adequate to provide
for all known and estimable losses, net of any recoveries relating to such
extensions of credit previously charged off, on the Loans, such allowance for
loan losses complying in all material respects with all applicable loan loss
reserve requirements established in accordance with GAAP and by any governmental
authorities having jurisdiction with respect to the Seller.
(b) Except as set forth in Section 4.22(b) of the Seller Disclosure
Schedule, as of the date hereof, the Seller was not a party to any written
or oral (a) loan agreement, note or borrowing arrangement (including,
without limitation, leases and credit enhancements) the unpaid principal
balance of which exceeds $50,000 and as to which the obligor is, as of the
date of this Agreement, over 90 days delinquent in payment of principal or
interest, or (b) Loan with any director, executive officer or, to the
knowledge of the Seller, five percent stockholder of the Seller. Section
4.22(b) of the Seller Disclosure Schedule sets forth as of September 30,
1997, (i) all of the Loans in original principal amount in excess of $25,000
of the Seller that as of the date of this Agreement are classified by the
Seller as "Other Loans Specially Mentioned", "Special Mentions",
"Substandard", "Doubtful", "Loss", "Classified", "Restructured", "Watch
list" or words of similar import, together with the principal amount of and
accrued and unpaid interest on each such Loan and the identity of the
obligor thereunder, and (ii) by category of Loan (i.e., commercial,
consumer, etc.), all of the other Loans of the Seller that as of September
30, 1997 are classified as such, together with the aggregate principal
amount of such Loans by category. No additional Loans are required to be
included in Section 4.22(b) of the Seller Disclosure Schedule as of the date
hereof. The Seller shall promptly inform Buyer in writing of any Loan the
original principal balance of which exceeds $100,000 that becomes classified
in the manner described in this Section 4.22(b), or any Loan the
classification of which is materially and adversely changed at any time
after the date of this Agreement.
4.23 CAPITALIZATION. As of the date hereof, without giving effect to the
transactions contemplated hereby, the Seller Bank will (a) remain "well
capitalized", as defined in the FDIA, and (b) meet all capital requirements,
standards and ratios required by each state or federal bank regulator with
jurisdiction over such Persons, including without limitation, any such higher
requirement, standard or ratio as shall apply to institutions engaging in the
acquisition of insured institution deposits, assets or branches, and no such
regulator has indicated that it will condition any of the regulatory approvals
upon an increase in such Persons' capital or compliance with any special capital
requirement, standard or ratio.
4.24 CRA RATING. The Seller Bank was rated "Satisfactory" following its
most recent Community Reinvestment Act examination by the FDIC. Neither the
Seller nor the Seller Bank has received any notice of and none of such Persons
has any knowledge of any planned or threatened objection by any community group
to the transactions contemplated hereby.
4.25 TRANSACTIONS ONLY IN ORDINARY COURSE. Except as disclosed in Section
4.25 of the Seller Disclosure Schedule or described in the Seller Balance Sheet,
the Seller has engaged in transactions only in the ordinary course of business
for entities engaged in its respective business.
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4.26 SELLER INFORMATION. The information relating to the Seller and its
subsidiaries to be contained in the Seller Proxy Statement as described in
Section 5.04 hereof, and any other documents filed with the SEC or any
regulatory agency in connection herewith, to the extent such information is
provided in writing by the Seller, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make such
information not misleading.
4.27 DISCLOSURE. No representation or warranty contained in this
Agreement, and no statement contained in any certificate, list or other writing,
including but not necessarily limited to the Seller Disclosure Schedule,
furnished to the Buyer pursuant to the provisions hereof, to the best knowledge
of the Seller, contains or will contain any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
herein or therein not misleading.
4.28 FAIRNESS OPINION. The Seller has received an opinion, dated as of the
date hereof, and will receive as of the date of the Seller Proxy Statement, from
Oppenheimer & Co. to the effect that the Merger Consideration is fair to the
stockholders of the Seller from a financial point of view.
ARTICLE V
COVENANTS OF THE PARTIES
5.01 CONDUCT OF THE BUSINESS OF THE SELLER. During the period from the
date of this Agreement to the Effective Time, the Seller:
(a) shall, and shall cause the Seller Bank to, except with the prior
written consent of the Buyer, conduct its business and engage in
transactions only in the ordinary and usual course of business consistent
with past practices, which shall mean (i) conducting its banking and other
business in the ordinary and usual course, (ii) refraining from any of the
activities described in Section 5.01(b) below, (iii) not entering into any
material transactions except in the ordinary and usual course of business
consistent with past practices and (iv) complying with the following
covenants:
(A) maintaining its corporate existence and good standing;
(B) using all commercially reasonable efforts to maintain and keep its
properties in as good repair and condition in all material respects as they
presently exist, except for ordinary wear and tear and damage due to casualty;
(C) using all commercially reasonable efforts to maintain in full force and
effect insurance generally comparable in amount and in scope of coverage to that
now maintained by it;
(D) complying with and performing in all material respects its obligations
and duties (y) under contracts, leases and documents relating to or affecting
its assets, properties and business and (z) imposed upon it by all federal,
state and local laws and all rules, regulations and orders imposed by federal,
state or local governmental authorities, judicial orders, judgments, decrees and
similar determinations; and
(E) using all commercially reasonable efforts to preserve its business
organization intact and the goodwill of those having business relationships with
the Seller or the Seller Bank, to keep available the services of its officers
and employees as a group and to maintain satisfactory relationships with
borrowers, depositors, other customers and others having business relationships
with it;
(b) shall not and shall not permit any of its subsidiaries to, without
the prior written consent of the Buyer:
(i) engage or participate in any material transaction or incur or
sustain any material obligation or liability except in the ordinary,
regular and usual course of its businesses consistent with past
practices;
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(ii) offer an interest rate with respect to any deposit that would
constitute such deposit a "brokered deposit" under 12 C.F.R.
Section337.6(a)(l)(ii);
(iii) except as set forth in Section 5.01(b)(iii) of the Seller
Disclosure Schedule and except in the ordinary, regular and usual course
of business consistent with past practices and in an immaterial aggregate
amount, sell, lease, transfer, assign, encumber or otherwise dispose of
or enter into any contract, agreement or understanding to lease,
transfer, assign, encumber or dispose of any of its assets;
(iv) except in connection with opening the Marshfield, Massachusetts
branch of the Seller Bank, file any application to open, close or
relocate any branch office;
(v) except in connection with opening the Marshfield, Massachusetts
branch of the Seller Bank, open, close, relocate, or give any notice
(written or verbal) to customers or governmental authorities or agencies
to open, close or relocate the operations of any branch office; or
(vi) waive any material right, whether in equity or at law, that it
has with respect to any asset except in the ordinary, regular and usual
course of business consistent with past practice;
(c) except with respect to the conversion of the Seller Bank's data
processing and back-office systems currently being undertaken by the Seller
Bank, shall, at the Buyer's request and expense, use all commercially
reasonable efforts to cooperate with the Buyer with respect to preparation
for the combination and integration of the businesses, systems and
operations of the Buyer and the Seller, and shall confer on a regular and
frequent basis with one or more representatives of the Buyer to report on
operational and related matters;
(d) shall, subject to any restrictions under applicable law or
regulation, promptly notify the Buyer of any emergency or other change in
the normal course of its or the Seller Bank's businesses or in the operation
of its or the Seller Bank's properties and of any governmental complaints,
investigations or hearings (or communications indicating that the same may
be contemplated) if such emergency, change, complaint, investigation or
hearing would be material to the business, results of operations, financial
condition or prospects of either the Seller on a consolidated basis or the
Seller Bank considered independently;
(e) shall not make any loan or extend any credit on other than the
Seller's customary terms, conditions and standards other than in connection
with any loan workouts in accordance with applicable law and consistent with
prudent banking practices;
(f) shall not declare or pay any dividends on or make any other
distributions in respect of Seller Common Stock or Seller Preferred Stock,
except for regular quarterly cash dividends at times ordinarily declared and
paid not exceeding $.07 per share per quarter;
(g) except as set forth in Section 5.08 hereof, shall not adopt or amend
(other than amendments required by applicable law or amendments that reduce
amounts payable by it or the Seller Bank) in any material respect any Seller
Pension Plan, any Seller Benefit Plan or any Seller Other Plan or enter (or
permit any of its subsidiaries to enter) into any employment, severance or
similar contract with any person (including, without limitation, contracts
with management which might require that payments be made upon the
consummation of the transactions contemplated hereby) or amend any such
existing agreements, plans or contracts to increase any amounts payable
thereunder or benefits provided thereunder, or grant or permit any increase
in compensation to its or the Seller Bank's employees as a class or pay any
bonus; PROVIDED, HOWEVER, that the Seller or the Seller Bank shall be
permitted to pay on or before the Closing Date to Seller Employees as a
group bonuses in the aggregate amount not to exceed $450,000;
(h) shall not, with respect to itself or any of its subsidiaries,
authorize, recommend, propose or announce an intention to authorize,
recommend or propose, or enter into an agreement with respect
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to, any merger, consolidation, purchase and assumption transaction or
business combination (other than the Merger or the Bank Merger), any
acquisition of a material amount of assets or securities or assumption of
liabilities (including deposit liabilities), any disposition of a material
amount of assets or securities, or any release or relinquishment of any
material contract rights not in the ordinary course of business and
consistent with past practices;
(i) shall not propose or adopt amendments to its or any of its
subsidiaries articles of organization or By-Laws;
(j) shall not issue, deliver or sell any shares (whether original
issuance or from treasury shares) of its capital stock or securities
convertible into or exercisable for shares of its capital stock (or permit
any of its subsidiaries to issue, deliver or sell any shares of such
subsidiaries' capital stock or securities convertible into or exercisable
for shares of such subsidiaries' capital stock), except upon the exercise or
fulfillment of rights or options issued or existing pursuant to Seller Stock
Option Plans, the Seller Automatic Dividend Reinvestment Plan and the Seller
Stock Purchase Plan, to the extent outstanding or in existence on the date
hereof, and except upon exercise of the Seller Option, as applicable, or
effect any stock split, reverse stock split, recapitalization,
reclassification or similar transaction or otherwise change its equity
capitalization as it existed on September 30, 1997;
(k) shall not grant, confer or award any options, warrants, conversion
rights or other rights to acquire any shares of its capital stock;
(l) shall not purchase, redeem or otherwise acquire, or permit the
Seller Bank to purchase, redeem or otherwise acquire, any shares of its
capital stock or any securities convertible into or exercisable for any
shares of its capital stock, except in a fiduciary capacity;
(m) shall not impose, or suffer the imposition, on any share of capital
stock held by it or the Seller Bank of any material lien, charge, or
encumbrance, or permit any such lien, charge, or encumbrance to exist;
(n) shall not incur, or permit any of its subsidiaries to incur, any
additional debt obligation or other obligation for borrowed money, or to
guaranty any additional debt obligation or other obligation for borrowed
money, except in the ordinary course of business consistent with past
practices, which shall include but not necessarily be limited to creation of
deposit liabilities, purchases of federal funds, sales of certificates of
deposit and entry into repurchase agreements or other similar arrangements
commonly employed by banks; PROVIDED, HOWEVER, that for purposes of this
Section 5.01(n), the Seller Bank shall be entitled to incur Federal Home
Loan Bank borrowings with a maturity of not more than ninety (90) days;
(o) shall not incur or commit to any capital expenditures or any
obligations or liabilities in connection therewith, other than capital
expenditures and such related obligations or liabilities incurred or
committed to in connection with the opening of the Marshfield, Massachusetts
branch and with respect to the lease referred to in Section 5.01(b)(iii) of
the Seller Disclosure Schedule or in the ordinary and usual course of
business consistent with past practices, and, in all cases, the Seller
agrees to consult with the Buyer with respect to capital expenditures that
individually exceed $100,000 or cumulatively exceed $250,000;
(p) shall not change its methods of accounting in effect at December 31,
1996, except as may be required by changes in GAAP as concurred in by the
Seller's independent auditors, and the Seller shall not change its fiscal
year;
(q) shall file all reports, applications and other documents required to
be filed by it with the SEC or any other governmental entity between the
date of this Agreement and the Effective Time and shall make available to
the Buyer copies of all such reports promptly after the same are filed;
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(r) shall use its commercially reasonable efforts to improve its
business, results of operations, financial condition and prospects;
(s) shall not take any action which would prevent or impede the Bank
Merger from qualifying as a reorganization within the meaning of Section 368
of the Code;
(t) shall not, except as expressly contemplated hereby, enter into any
contract with any Affiliate;
(u) shall not, except for transactions in the ordinary course of
business consistent with past practice, enter into or terminate any material
contract or agreement, or make any changes in any of its material leases or
contracts, other than renewals of contracts and, subject to the provisions
of Section 5.11 hereof, leases without material adverse change of terms;
(v) shall not, other than in prior consultation with the other party to
this Agreement, restructure or materially change its investment securities
portfolio or its gap position through purchases, sales or otherwise, or the
manner in which the portfolio is classified or reported;
(w) shall not agree, in writing or otherwise, to take any of the
foregoing actions or any action which would make any of its representations
or warranties contained herein untrue or incorrect in any material respect.
5.02 ACCESS TO PROPERTIES AND RECORDS; CONFIDENTIALITY.
(a) The Seller shall permit the Buyer reasonable access to its
properties and those of the Seller Bank, and shall disclose and make
available to the Buyer all Records, including all books, papers and records
relating to the assets, stock ownership, properties, operations, obligations
and liabilities of the Seller and the Seller Bank, including, but not
limited to, all books of account (including the general ledger), tax
records, minute books of directors and stockholders meetings, organizational
documents, By-Laws, material contracts and agreements, filings with any
regulatory authority, accountants' work papers, litigation files, plans
affecting employees, and any other business activities or prospects in which
the Buyer may reasonably have an interest in light of the transactions
contemplated hereby. The Seller shall make arrangements with each third
party provider of services to the Seller to permit the Buyer reasonable
access to all of the Seller's Records held by each such third party. The
Buyer shall permit the Seller reasonable access to such properties and
records of the Buyer and/or its subsidiaries in which the Seller may
reasonably have an interest in light of the transactions contemplated
hereby. Neither the Buyer nor the Seller nor any of their respective
subsidiaries shall be required to provide access to or to disclose
information where such access or disclosure would violate or prejudice the
rights of any customer, would jeopardize the attorney-client privilege of
the institution in possession or control of such information, or would
contravene any law, rule, regulation, order, judgment, decree or binding
agreement. The parties will use all reasonable efforts to make appropriate
substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply.
(b) All Confidential Information furnished by each party hereto to the
other, or to any of its affiliates, directors, officers, employees,
representatives or agents (such persons being collectively referred to
herein as "Representatives"), shall be treated as the sole property of the
party furnishing the information until consummation of the transactions
contemplated hereby, and, if such transactions shall not occur, the party
receiving the information, or any of its affiliates or Representatives, as
the case may be, shall return to the party which furnished such information
all documents or other materials containing, reflecting or referring to such
information, shall keep confidential all such information for the period
hereinafter referred to, and shall not directly or indirectly at any time
use such information for any competitive or other commercial purpose;
provided, however, that the Buyer and its affiliates shall be permitted to
retain and share with their regulators, examiners and auditors (who need to
know such information and are informed of the confidential nature thereof
and directed
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to treat such information confidentially) such materials, files and
information relating to or constituting the Buyer's or any of its
affiliate's or Representatives' work product, presentations or evaluation
materials as the Buyer deems reasonably necessary or advisable in connection
with auditing or examination purposes. The obligation to keep such
information confidential shall continue for two (2) years from the date this
Agreement is terminated. In the event that either party or its affiliates or
Representatives are requested or required in the context of a litigation,
governmental, judicial or regulatory investigation or other similar
proceeding (by oral questions, interrogatories, requests for information or
documents, subpoenas, civil investigative demands or similar process) to
disclose any Confidential Information, the party or its affiliate or its
Representative so requested or required will directly or through the party
of such affiliate or Representative, if practicable and legally permitted,
prior to providing such information, and as promptly as practicable after
receiving such request, provide the other party with notice of each such
request or requirement so that the other party may seek an appropriate
protective order or other remedy or, if appropriate, waive compliance with
the provisions of this Agreement. If, in the absence of a protective order
or the receipt of a waiver hereunder, the party or affiliate or
Representative so requested or required is, in the written opinion of its
counsel, legally required to disclose Confidential Information to any
tribunal, governmental or regulatory authority, or similar body, the party
or affiliate or Representative so required may disclose that portion of the
Confidential Information which it is advised in writing by such counsel it
is legally required to so disclose to such tribunal or authority or similar
body without liability to the other party hereto for such disclosure. The
parties and their affiliates and Representatives will exercise reasonable
efforts to obtain assurance that confidential treatment will be accorded the
information so disclosed.
As used in this Section 5.02(b), "Confidential Information" means all data,
reports, interpretations, forecasts and records (whether in written form,
electronically stored or otherwise) containing or otherwise reflecting
information concerning the disclosing party or its affiliates which is not
available to the general public and which the disclosing party or any affiliate
or any of their respective Representatives provides or has previously provided
to the receiving party or to the receiving party's affiliates or Representatives
at any time in connection with the transactions contemplated by this Agreement,
including but not limited to any information obtained by meeting with
Representatives of the disclosing party or its affiliates, together with
summaries, analyses, extracts, compilations, studies, personal notes or other
documents or records, whether prepared by the receiving party or others, which
contain or otherwise reflect such information. Notwithstanding the foregoing,
the following information will not constitute "Confidential Information": (i)
information that is or becomes generally available to the public other than as a
result of a disclosure by the receiving party or any affiliate or Representative
of the receiving party, (ii) information that was previously known to the
receiving party or its affiliates or Representatives on a nonconfidential basis
prior to its disclosure by the disclosing party, its affiliates or
Representatives, (iii) information that became or becomes available to the
receiving party or any affiliate or Representative thereof on a nonconfidential
basis from a source other than the disclosing party or any affiliate or
Representatives of the disclosing party, provided that such source is not known
by the disclosing party or its affiliates or Representatives to be subject to
any confidentiality agreement or other legal restriction on disclosing such
information and (iv) information that has been independently acquired or
developed by the receiving party or its affiliates or Representatives without
violating the obligations of this Section 5.02(b).
5.03 NO SOLICITATION. Unless and until this Agreement shall have been
properly terminated by either party pursuant to Section 8.01 hereof, neither the
Seller nor any of its subsidiaries shall (and the Seller and the Seller Bank
shall use all commercially reasonable efforts to cause its Representatives,
including, but not limited to, investment bankers, attorneys and accountants,
not to), directly or indirectly, encourage, solicit, initiate or participate in
any discussions or negotiations with, or, subject to the fiduciary obligations
of the Seller's Board of Directors (as advised in writing by outside counsel),
provide any information to, any corporation, partnership, person or other entity
or group (other than the Buyer and its affiliates or Representatives) concerning
any merger, tender offer, sale of substantial assets, sale of shares of capital
stock or debt securities or similar transaction involving the Seller or the
Seller Bank (an
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<PAGE>
"Acquisition Transaction"). Notwithstanding the foregoing, nothing contained in
this Section 5.03 shall prohibit the Seller or its Board of Directors from
taking and disclosing to the Seller's stockholders a position with respect to a
tender offer by a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated
under the Exchange Act or from making such disclosure to the Seller's
stockholders which, in the judgment of the Board of Directors with the written
advice of outside counsel, may be required under applicable law. The Seller will
immediately communicate to the Buyer the terms of any proposal, discussion,
negotiation or inquiry relating to an Acquisition Transaction and the identity
of the party making such proposal or inquiry which it may receive in respect of
any such transaction (which shall mean that any such communication shall be
delivered no less promptly than by telephone within 24 hours of the Seller's
receipt of any such proposal or inquiry) or its receipt of any request for
information from the Federal Reserve Board, the DOJ, or any other governmental
agency or authority with respect to a proposed Acquisition Transaction.
5.04 APPROVAL OF STOCKHOLDERS; REGULATORY MATTERS; CONSENTS.
(a) The Seller will (i) as promptly as practicable, take all steps
necessary to duly call, give notice of, convene and hold a meeting of its
stockholders (the "Seller Stockholders Meeting") for the purpose of
approving this Agreement and the Merger, and for such other purposes as may
be, in Seller's reasonable judgment, necessary or desirable, (ii) subject to
the fiduciary responsibility of the Board of Directors of the Seller as
advised by counsel in writing, recommend to its stockholders the approval of
the aforementioned matters to be submitted by it to its stockholders, and
(iii) cooperate and consult with the Buyer with respect to each of the
foregoing matters.
(b) As soon as practicable after the date hereof, the Seller shall file
the Seller Proxy Statement with the SEC under the Exchange Act and shall use
all reasonable efforts to have the Seller Proxy Statement cleared by the
SEC. The Buyer and the Seller shall cooperate with each other in the
preparation of the Seller Proxy Statement and the Seller shall notify the
Buyer promptly of the receipt of any comments of the SEC with respect to the
Seller Proxy Statement and of any requests by the SEC for any amendment or
supplement thereto or for additional information and shall provide to the
Buyer promptly copies of all correspondence between the Seller or any
representative of the Seller and the SEC. The Seller shall give the Buyer
and its counsel the opportunity to review the Seller Proxy Statement prior
to its being filed with the SEC and shall give Buyer and its counsel the
opportunity to review all amendments and supplements to the Seller Proxy
Statement and all responses to requests for additional information and
replies to comments prior to their being filed with, or sent to, the SEC.
Each of the Buyer and the Seller agrees to use all reasonable efforts, after
consultation with the other party hereto, to respond promptly to all such
comments of and requests by the SEC and to cause the Seller Proxy Statement
and all required amendments and supplements thereto to be mailed to the
holders of Seller Common Stock entitled to vote at the Seller Stockholders
Meeting referred to in Section 5.04(a) hereof at the earliest practicable
time.
(c) The Seller and the Buyer shall have the right to review in advance,
and to the extent practicable each will consult the other on, in each case
subject to applicable laws relating to the exchange of information, all the
information relating to the Seller or the Buyer, as the case may be, and any
of their respective subsidiaries, which appears in the Seller Proxy
Statement, any filing made with, or written materials submitted to, any
third party or any government regulatory body, department, agency or
authority in connection with the transactions contemplated by this
Agreement. In exercising the foregoing right, each of the parties hereto
shall act reasonably and as promptly as practicable. The parties hereto
agree that they will consult with each other with respect to the obtaining
of all permits, consents, approvals and authorizations of all third parties
and government regulatory bodies, departments, agencies or authorities
necessary or advisable to consummate the transactions contemplated by this
Agreement, and each party will keep the other apprised of the status of
matters relating to completion of the transactions contemplated herein and
therein.
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<PAGE>
(d) The Buyer and the Seller shall, upon request, furnish each other
with all information concerning themselves, their subsidiaries, directors,
officers and stockholders and such other matters as may be reasonably
necessary or advisable in connection with the Seller Proxy Statement or any
other statement, filing, notice or application made by or on behalf of the
Buyer, the Seller or any of their respective subsidiaries to any
governmental regulatory body, department, agency or authority in connection
with the Merger and the other transactions contemplated by this Agreement.
(e) Each of the Seller and the Buyer will cooperate with the other and
use all reasonable efforts to prepare all necessary documentation, to obtain
all necessary permits, consents, approvals and authorizations of all third
parties and governmental bodies necessary to consummate the transactions
contemplated by this Agreement.
5.05 FURTHER ASSURANCES. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable efforts to, as
promptly as practicable, take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, the Bank Merger Agreement or to vest the Buyer
with full title to all properties, assets, rights, approvals, immunities and
franchises of the Seller. In case at any time after the Effective Time any
further action is reasonably necessary or desirable to carry out the purposes of
this Agreement, the Bank Merger Agreement or to vest the Buyer with full title
to all properties, assets, rights, approvals, immunities and franchises of the
Seller, the proper officers and directors of each party to this Agreement shall
take all such necessary action.
5.06 PUBLIC ANNOUNCEMENTS. From the date of this Agreement to the Closing
Date, neither of the parties hereto shall make or send a Public Announcement
unless the other party shall have first been afforded reasonable opportunity to
review and comment on the text of such Public Announcement prior to the delivery
of the same; PROVIDED, HOWEVER, that nothing in this Section shall prohibit any
party hereto from making any Public Announcement which its legal counsel deems
necessary under law, if it makes a good faith effort to obtain the other party's
comment to the text of the Public Announcement before making it public.
5.07 THE MERGER SUBSIDIARY. At or prior to the Effective Time, the Buyer
will organize the Merger Subsidiary under the laws of The Commonwealth of
Massachusetts. The authorized capital stock of the Merger Subsidiary shall
consist of one hundred (100) shares of common stock, $0.01 par value per share
("Merger Subsidiary Common Stock"), all of which shares will be directly owned
by the Buyer. The Buyer will cause all outstanding shares of capital stock of
the Merger Subsidiary to be voted in favor of this Agreement and the Merger and
not to be voted to modify or rescind, or otherwise permit the modification or
rescission of, such vote prior to a termination of this Agreement in accordance
with Section 8.01 hereof.
5.08 EMPLOYMENT AND BENEFIT MATTERS.
(a) BENEFITS AFTER THE CLOSING DATE. The Buyer agrees that any
terminations of Seller Employees (as defined below) from employment of the
Seller, the Seller Bank or any successor thereto to be made by the Buyer in
connection with the Merger or the Bank Merger shall be made within six (6)
months after the Closing Date. The Buyer agrees to provide the employees of
the Seller and its subsidiaries who remain employed after the Closing Date
(collectively, the "Seller Employees") with the types and levels of employee
benefits maintained by the Buyer for similarly situated employees of the
Buyer or the Buyer Bank. The Buyer will treat the service of Seller
Employees with Seller and/or the Seller Bank as service rendered to Buyer or
Buyer Bank for purposes of eligibility to participate, vesting and for other
appropriate benefits, but not for the benefit accrual (including minimum
pension amount) or benefit payment, early retirement subsidies, minimum
pension benefits or post-retirement welfare benefits, under any pension
benefit plan or welfare plan of Buyer or Buyer Bank extended to Seller
Employees. Notwithstanding the foregoing, from and after the Effective Time
until the date which is six (6) months thereafter, the Buyer shall provide
to all Seller Employees whose employment with Seller, Seller Bank or any
successor thereto is terminated during such time, with severance pay
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<PAGE>
equal to two weeks pay for every year such Seller Employee was employed by
the Seller or the Seller Bank; PROVIDED, that in no event shall a Seller
Employee receive severance pay equal to less than four (4) weeks pay or
greater than twenty-six (26) weeks pay. The Buyer and the Seller agree that
the rights and obligations of the Buyer, the Seller and the Seller Bank
under the Special Termination Agreement, dated as of August 1, 1997, by and
between the Seller Bank and Mark A. Osborne shall be covered by that certain
Letter Agreement, dated as of the date hereof, by and between the Buyer, the
Seller, the Seller Bank and Mark A. Osborne. On the Closing Date, the Buyer,
the Buyer Bank and Mark A. Osborne shall enter into an Employment Agreement
in substantially the form attached hereto as Exhibit E.
(b) BENEFITS BEFORE THE CLOSING DATE. Promptly after the date hereof,
the Seller will accelerate vesting in all outstanding Seller stock options
granted to Seller Employees or directors of the Seller or the Seller Bank.
Promptly after the date hereof, the Seller shall take all steps necessary to
terminate the Seller Non-Qualified Executive Retirement Plan in accordance
with the terms thereof. Except as otherwise provided in this Section
5.08(b), on or prior to the Closing Date, the Seller shall terminate all
Seller Pension Plans, Seller Benefit Plans or Seller Other Plans and the
Buyer shall have no obligation to any Seller Employee or any other Person
thereunder.
5.09 TERMINATION OF CERTAIN PLANS. On the date hereof, the Seller shall take
all steps necessary to terminate the Seller Stock Purchase Plan and the Seller
Automatic Dividend Reinvestment Plan each in accordance with the terms thereof.
5.10 ADDITIONAL UNDERTAKINGS. Within three (3) business days of the date
hereof, the Seller will cause to be filed on its behalf an election with the
Massachusetts Department of Revenue to be treated as a Massachusetts securities
corporation.
5.11 ACCOUNTANTS' LETTERS. The Seller shall use all reasonable efforts to
cause to be delivered to the Buyer letters from its independent public
accountants, dated the date on which the Seller Proxy Statement is mailed to
stockholders of the Seller pursuant to Section 5.04 hereof and dated the date of
the Closing, relating to the financial condition of the Seller and the
transactions contemplated by this Agreement, and addressed to the Buyer, in form
and substance which is reasonably satisfactory to the Buyer and customary in
transactions of the nature contemplated hereby.
5.12 MAINTENANCE OF RECORDS. Through the Effective Time, the Seller will
maintain the Records in the same manner and with the same care that the Records
have been maintained prior to the execution of this Agreement. The Buyer may, at
its own expense, make such copies of and excerpts from the Records as it may
deem desirable. All Records, whether held by the Buyer or the Seller, shall be
maintained for such periods as are required by law, unless the parties shall,
applicable law permitting, agree in writing to a different period.
5.13 LEASES. The Seller shall consult with the Buyer before renewing or
extending any material lease of the Seller or the Seller Bank of real property
or lease relating to furniture, fixtures or equipment that is currently in
effect but that would otherwise expire on or prior to the Effective Time. The
Seller shall not cancel, terminate or take other action that is likely to result
in any cancellation or termination of any such lease without prior written
notice to the Buyer.
5.14 ADVICE OF CHANGES. The Seller shall promptly advise the Buyer of any
change or event having a Material Adverse Effect on it or which it believes
would or would be reasonably likely to cause or constitute a material breach of
any of its representations, warranties or covenants contained herein. Upon the
request of the Buyer, which shall be no more often than at reasonable intervals,
from time to time prior to the Effective Time, and in any event on the date
which is five (5) days prior to the Effective Time, the Seller will promptly
supplement or amend the Seller Disclosure Schedules delivered in connection with
the execution of this Agreement to reflect any matter which, if existing,
occurring or known at the date of this Agreement, would have been required to be
set forth or described in such Disclosure Schedules or which is
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<PAGE>
necessary to correct any information in such Disclosure Schedules which has been
rendered inaccurate thereby. No supplement or amendment to such Disclosure
Schedules shall have any effect for the purpose of determining satisfaction of
the conditions set forth in Section 6.02(a) hereof or the compliance by the
Seller with the covenants set forth in Sections 5.01.
5.15 SIMULTANEOUS EXECUTION OF BANK MERGER AGREEMENT. Simultaneously
herewith, the Buyer Bank and the Seller Bank are executing the Bank Merger
Agreement. The Buyer, with respect to the Buyer Bank, and the Seller, with
respect to the Seller Bank, shall each cause the Bank Merger Agreement to be
approved as the sole stockholder of the Buyer Bank and the Seller Bank,
respectively.
5.16 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. (a) After the
Effective Time, the Buyer shall honor the indemnification provisions for
officers and directors currently set forth in the Articles of Organization (or
charter or other organizational documents) and By-Laws of the Seller and its
subsidiaries with respect to acts and omissions taken prior to the Effective
Time by such officers and directors, including but not limited to any acts and
omissions taken in connection with this Agreement or the transactions
contemplated thereby, but only to the extent permitted by federal and
Massachusetts law and regulations.
(b) The Buyer shall maintain the Seller's (including its subsidiaries')
existing directors' and officers' liability insurance (the "D&O Insurance")
covering persons who are currently covered by the Seller's D&O Insurance for a
period of three (3) years after the Effective Time on terms no less favorable
than those in effect on the date hereof; PROVIDED, HOWEVER, that the Buyer may
substitute therefor policies providing at least comparable coverage and
containing terms and conditions no less favorable than those in effect on the
date hereof; and provided, further, that for any year of coverage provided for
hereunder, the Buyer shall not be required to expend in excess of 200% of the
current annual premium paid by the Seller to secure coverage.
ARTICLE VI
CLOSING CONDITIONS
6.01 CONDITIONS TO EACH PARTY'S OBLIGATIONS UNDER THIS AGREEMENT. The
respective obligations of each party under this Agreement shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions,
none of which may be waived:
(a) STOCKHOLDER'S APPROVAL. This Agreement and the transactions
contemplated hereby shall have been approved by the affirmative vote of the
holders of at least two-thirds of the outstanding shares of Seller Common
Stock or such greater number as may be required pursuant to the Articles of
Organization of the Seller in accordance with applicable law.
(b) GOVERNMENTAL CONSENTS. All authorizations, consents, orders or
approvals of, or declarations or filings with, and all expirations of
waiting periods imposed by, any governmental or regulatory authority or
agency (all of the foregoing being referred to as "Consents") which are
necessary for the consummation of the Merger and the Bank Merger, if the
Buyer has determined to proceed with the Bank Merger, shall have been filed,
occurred or been obtained (all such authorizations, orders, declarations,
approvals, filings and consents and the lapse of all such waiting periods
being referred to as the "Requisite Regulatory Approvals") and all such
Requisite Regulatory Approvals shall be in full force and effect.
(c) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the Merger shall be in effect.
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<PAGE>
6.02 CONDITIONS TO THE OBLIGATIONS OF THE BUYER UNDER THIS AGREEMENT. The
obligations of the Buyer under this Agreement shall be further subject to the
satisfaction of or waiver by the Buyer, at or prior to the Effective Time, of
the following conditions:
(a) ABSENCE OF MATERIAL ADVERSE CHANGES. There shall not have occurred
any change in the business, assets, financial condition or results of
operations of the Seller or any of its subsidiaries which has had, or is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on the Seller or any of its subsidiaries.
(b) REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
obligations of the Seller required to be performed by it at or prior to the
Closing pursuant to the terms of this Agreement shall have been duly
performed and complied with in all material respects and the representations
and warranties of the Seller contained in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of
the Effective Time as though made at and as of the Effective Time (except as
otherwise specifically contemplated by this Agreement and except as to any
representation or warranty which specifically relates to an earlier date)
and the Buyer shall have received a certificate to that effect signed by the
chairman or president and other executive officer of the Seller acceptable
to the Buyer.
(c) THIRD-PARTY APPROVALS. Any and all permits, consents, waivers,
clearances, approvals and authorizations of all non-governmental and
non-regulatory third parties which are necessary in connection with the
consummation of the transactions contemplated by this Agreement and are
required to be received or obtained by the Seller, shall have been obtained
by the Seller, other than permits, consents, waivers, clearances, approvals
and authorizations the failure of which to obtain would neither make it
impossible to consummate the Merger nor result in any Material Adverse
Effect with respect to the Seller.
6.03 CONDITIONS TO THE OBLIGATIONS OF THE SELLER UNDER THIS AGREEMENT. The
obligations of the Seller under this Agreement shall be further subject to the
satisfaction of or waiver by the Seller, at or prior to the Effective Time, of
the following conditions:
(a) ABSENCE OF MATERIAL ADVERSE CHANGES. There shall not have occurred
any change in the business, assets, financial condition or results of
operations of the Buyer or any of its subsidiaries which has had, or is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on the Buyer.
(b) REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
obligations of the Buyer required to be performed by it at or prior to the
Closing pursuant to the terms of this Agreement shall have been duly
performed and complied with in all material respects and the representations
and warranties of the Buyer contained in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of
the Effective Time as though made at and as of the Effective Time (except as
otherwise specifically contemplated by this Agreement and except as to any
representation or warranty which specifically relates to an earlier date)
and the Seller shall have received a certificate to that effect signed by
the chairman or president and the chief financial officer or chief
accounting officer of the Buyer.
(c) THIRD-PARTY APPROVALS. Any and all permits, consents, waivers,
clearances, approvals and authorizations of all non-governmental and
non-regulatory third parties which are necessary in connection with the
consummation of the transactions contemplated by this Agreement and the Bank
Merger Agreement and are required to be received or obtained by the Buyer,
shall have been obtained by the Buyer, other than permits, consents,
waivers, clearances, approvals and authorizations the failure of which to
obtain would neither make it impossible to consummate the Merger or the Bank
Merger nor result in a Material Adverse Effect on the Buyer (on a
consolidated basis with the Seller) after the Merger.
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<PAGE>
ARTICLE VII
CLOSING
7.01 TIME AND PLACE. Subject to the provisions of Articles VI and VIII
hereof, the Closing of the transactions contemplated hereby shall take place at
the Boston, Massachusetts offices of Bingham Dana LLP at 10:00 A.M., local time,
on the first business day after the date on which all of the conditions
contained in Article VI are satisfied or waived; or at such other place, at such
other time, or on such other date as the Seller and the Buyer may mutually agree
upon for the Closing to take place.
7.02 DELIVERIES AT THE CLOSING. Subject to the provisions of Articles VI
and VIII hereof, at the Closing there shall be delivered to the Seller and the
Buyer, the opinions, certificates, and other documents and instruments required
to be delivered under Article VI hereof.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of this Agreement and the
transactions contemplated hereby by the Seller's stockholders:
(a) by mutual written consent of the Seller and the Buyer authorized by
their respective Boards of Directors;
(b) by the Seller or the Buyer if the Effective Time shall not have
occurred on or prior to June 30, 1998 (the "Termination Date") or such later
date as shall have been agreed to in writing by the Buyer and the Seller;
(c) by the Buyer or the Seller if any governmental or regulatory
authority or agency, or court of competent jurisdiction, shall have issued a
final permanent order or Injunction enjoining, denying approval of, or
otherwise prohibiting the consummation of the Merger or the Bank Merger and
the time for appeal or petition for reconsideration of such order or
Injunction shall have expired without such appeal or petition being granted;
(d) by the Buyer or the Seller (provided that the terminating party is
not then in material breach of any representation, warranty or covenant or
other agreement contained herein or in the Seller Option Agreement) if the
approval of the Seller's stockholders specified in Section 5.04 shall not
have been obtained by reason of the failure to obtain the required vote at a
duly held meeting of the Seller's stockholders or at any adjournment
thereof; or
(e) by the Board of Directors of the Buyer or the Board of Directors of
the Seller (provided that the terminating party is not then in material
breach of any representation, warranty, covenant or other agreement
contained herein or in the Seller Option Agreement), in the event of a
material breach by the other party of any representation, warranty, covenant
or other agreement contained herein or in the Seller Option Agreement which
breach is not cured after fifteen (15) days written notice thereof is given
to the party committing such breach.
8.02 EFFECT OF TERMINATION. In the event of termination of this Agreement
by either the Seller or the Buyer as provided above, this Agreement shall
forthwith become null and void (other than Sections 5.02(b) and 9.01 hereof,
which shall remain in full force and effect) and there shall be no further
liability on the part of the Seller or the Buyer or their respective officers or
directors to the other, except (i) any liability of the Seller and the Buyer
under said Sections 5.02(b) and 9.01, (ii) that the Seller Option
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Agreement shall be governed by its own terms as to termination, and (iii) in the
event of a willful breach of any representation, warranty, covenant or agreement
contained in this Agreement, in which case, the breaching party shall remain
liable for any and all damages, costs and expenses, including all reasonable
attorneys' fees, sustained or incurred by the non-breaching party as a result
thereof or in connection therewith or with the enforcement of its rights
hereunder.
8.03 AMENDMENT, EXTENSION AND WAIVER. Subject to applicable law and as may
be authorized by their respective Boards of Directors, at any time prior to the
consummation of the transactions contemplated by this Agreement or termination
of this Agreement in accordance with the provisions of Section 8.01 hereof,
whether before or after approval thereof by the stockholders of the Seller, the
Buyer and the Seller may, (a) amend this Agreement, (b) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(c) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto, or (d) waive compliance
with any of the agreements or conditions contained in Articles V and VI (other
than Section 6.01) hereof; PROVIDED, HOWEVER, that after any approval of the
transactions contemplated by this Agreement by the Seller's stockholders, there
may not be, without further approval of such stockholders, any amendment,
extension or waiver of this Agreement which reduces the amount or changes the
form of the consideration to be delivered to the stockholders of the Seller
hereunder other than as contemplated by this Agreement. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto. Any agreement on the part of a party hereto to any extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party, but such waiver or failure to insist on strict compliance
with such obligation, covenant, agreement or condition shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure.
ARTICLE IX
MISCELLANEOUS
9.01 EXPENSES. Except as may otherwise be agreed to hereunder or in other
writing by the parties, all legal and other 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.
9.02 SURVIVAL. None of the representations, warranties, covenants and
agreements of the Seller or the Buyer shall survive after the Effective Time,
except for the agreements and covenants contained or referred to in Article II,
Section 5.02(b), the last sentence of Section 5.05, and Section 5.08 which
agreements and covenants shall survive the Effective Time.
9.03 NOTICES. All notices or other communications hereunder shall be in
writing and shall be deemed given if delivered personally or mailed by prepaid
registered or certified mail (return receipt requested) or by telecopy, cable,
telegram or telex addressed as follows:
(a) If to the Seller, to:
<TABLE>
<S> <C>
Emerald Isle Bancorp, Inc.
730 Hancock Street
Quincy, Massachusetts 02170
Attention: Mark A. Osborne, Chairman, President and CEO
Tel: 617-479-5001
</TABLE>
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<PAGE>
with a required copy to:
<TABLE>
<S> <C>
Roche, Carens & DeGiacomo, P.C.
99 High Street
Boston, Massachusetts 02110
Attention: Michael T. Putziger, Esq.
Tel: 617-457-4000
Fax: 617-482-3868
</TABLE>
(b) If to the Buyer, to:
<TABLE>
<S> <C>
Eastern Bank Corporation
112 Market Street
Lynn, Massachusetts 01901-1125
Attention: Stanley J. Lukowski, Chairman, President and CEO
Tel: 617-599-2100
Fax: 617-598-7999
</TABLE>
with required copies to:
<TABLE>
<S> <C>
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
Attention: Neal J. Curtin, Esq.
and
Stephen H. Faberman, Esq.
Tel: 617-951-8000
Fax: 617-951-8736
</TABLE>
or such other address as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given as of the date
so mailed.
9.04 PARTIES IN INTEREST. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; PROVIDED, HOWEVER, that neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party hereto without
the prior written consent of the other parties, and that nothing in this
Agreement is intended to confer, expressly or by implication, upon any other
person any rights or remedies under or by reason of this Agreement.
9.05 COMPLETE AGREEMENT. This Agreement, including the documents and other
writings referred to herein or delivered pursuant hereto contains the entire
agreement and understanding of the parties with respect to its subject matter.
Except as set forth in this Agreement or in the Disclosure Schedules, there are
no restrictions, agreements, promises, warranties, covenants or undertakings
between the parties other than those expressly set forth herein or therein. This
Agreement supersedes all prior agreements, including without limitation, the
Confidentiality Agreement, and understandings between the parties, both written
and oral, with respect to its subject matter.
9.06 COUNTERPARTS. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and each of which shall be
deemed to be an original and shall become effective when a counterpart has been
signed by each of the parties and delivered to each of the other parties.
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9.07 GOVERNING LAW. This Agreement shall be governed by the laws of The
Commonwealth of Massachusetts, without giving effect to the principles of
conflicts of laws thereof.
9.08 CAPTIONS. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
9.09 EFFECT OF INVESTIGATIONS. No investigation by the parties hereto made
heretofore or hereafter, whether pursuant to this Agreement or otherwise shall
affect the representations and warranties of the parties which are contained
herein and each such representation and warranty shall survive such
investigation, subject, however, to Section 9.02 hereof.
9.10 SEVERABILITY. In the event that any one or more provisions of this
Agreement shall for any reason be held invalid, illegal or unenforceable in any
respect, by any court of competent jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement and the
parties shall use their best efforts to substitute a valid, legal and
enforceable provision which, insofar as practicable, implements the purposes and
intents of this Agreement.
9.11 SPECIFIC ENFORCEABILITY. The parties recognize and hereby acknowledge
that it is impossible to measure in money the damages that would result to a
party by reason of the failure of either of the parties to perform any of the
obligations imposed on it by this Agreement. Accordingly, if any party should
institute an action or proceeding seeking specific enforcement of the provisions
hereof, each party against which such action or proceeding is brought hereby
waives the claim or defense that the party instituting such action or proceeding
has an adequate remedy at law and hereby agrees not to assert in any such action
or proceeding the claim or defense that such a remedy at law exists.
IN WITNESS WHEREOF, the Seller and the Buyer have caused this Agreement to
be executed as a sealed instrument by their duly authorized officers as of the
day and year first above written.
EASTERN BANK CORPORATION
By: /s/Stanley J. Lukowski____________
Title: President and Chief Executive
Officer EMERALD ISLE BANCORP, INC.
By: /s/Mark A. Osborne________________
Title: President and Chief Executive
Officer
A-32
<PAGE>
APPENDIX B
AGREEMENT OF MERGER
by and between
EASTERN BANK
and
THE HIBERNIA SAVINGS BANK
under the charter of
EASTERN BANK
This AGREEMENT OF MERGER (this "Agreement"), dated as of October 22, 1997 by
and between (i) EASTERN BANK ("Buyer Bank"), a Massachusetts stock savings bank
and wholly-owned subsidiary of Eastern Bank Corporation (the "Buyer"), being
located at 112 Market Street, in the City of Lynn, County of Essex, in The
Commonwealth of Massachusetts, with a capital of $600,000, divided into 600,000
shares of common stock, each of $1.00 par value, surplus of $102,740,395, and
undivided profits, including capital reserves, of $85,290,393, as of September
30, 1997, and (ii) THE HIBERNIA SAVINGS BANK ("Seller Bank"), a Massachusetts
stock savings bank and wholly-owned subsidiary of Emerald Isle Bancorp, Inc.
(the "Seller"), being located at 730 Hancock Street, in the City of Quincy,
County of Norfolk, in The Commonwealth of Massachusetts, with a capital of
$30,991,035, divided into 2,249,786 shares of common stock, of $1.00 par value,
surplus of $12,111,505, and undivided profits, including capital reserves, of
$16,629,744 , as of September 30, 1997:
WHEREAS, the Board of Trustees of the Buyer and the Board of Directors of
the Seller have approved, and deem it advisable and in the best interests of
their respective organizations and, with respect to the Seller, to its
stockholders to consummate, the business combination transaction set forth in
the Affiliation Agreement (the "Parent Acquisition Agreement"), dated as of
October 22, 1997, by and between the Buyer and the Seller, and in accordance
with the terms and conditions of the Parent Acquisition Agreement, a
wholly-owned subsidiary of the Seller Bank shall be merged with and into the
Seller, with the Seller as the surviving corporation of the merger (the "Parent
Merger");
WHEREAS, not less than a majority of each of the Boards of Directors of
Buyer Bank and Seller Bank have approved, and deem it advisable to consummate,
the Bank Merger provided for herein, in accordance with the provisions of
Massachusetts General Laws ("M.G.L.") Chapter 168, Section 34D;
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, guaranties and agreements set forth herein and in
the Parent Acquisition Agreement, and intending to be legally bound hereby, the
parties hereto agree as follows:
SECTION 1.
At the Effective Time of the Bank Merger (as defined below) and subject to
the terms and conditions of this Agreement, the Seller Bank shall merge (the
"Bank Merger") with and into the Buyer Bank, under the charter of Buyer Bank
(Buyer Bank is sometimes referred to herein as the "Surviving Bank"), and upon
the effectiveness of the Bank Merger all of the issued and outstanding shares of
capital stock of the Seller Bank shall automatically be converted and
exchangeable for shares of capital stock of the Surviving Bank in accordance
with Section 7 hereof.
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<PAGE>
SECTION 2.
Subject to the terms and conditions of, and upon satisfaction of all of the
legal requirements specified in this Agreement, including without limitation,
the receipt of the approvals of the Commissioner of Banks of The Commonwealth of
Massachusetts (the "Commissioner") required by Section 34D of Chapter 168 of the
M.G.L. and the Federal Deposit Insurance Corporation ("FDIC") required by Title
12 of the United States Code, the Bank Merger shall become effective upon the
date specified in the approval to be issued by the Commissioner under the seal
of his office approving the Bank Merger. The specific time on such date at which
the Bank Merger shall become effective shall be the time at which Buyer Bank and
Seller Bank file articles of merger (the "Articles of Merger") with the
Secretary of State of The Commonwealth of Massachusetts or such other time
specified in the Articles of Merger. As used in this Agreement, the term
"Effective Time of the Bank Merger" shall mean the date and time when the Bank
Merger becomes effective.
SECTION 3
The closing of the Bank Merger will take place immediately prior to the
Parent Merger on the date and at the time specified in the Parent Acquisition
Agreement with respect to the Parent Merger or at such other time, and date as
may be agreed to by the parties hereto (the "Closing Date").
SECTION 4.
Upon the Effective Time of the Bank Merger, the corporate existence of the
Seller Bank, as provided by the foregoing section and as provided by Section 34D
of Chapter 168 of the M.G.L. shall be merged into and continued in the Surviving
Bank, which shall be deemed to be the same corporation as the Seller Bank and
the Buyer Bank. The business of the Surviving Bank shall be that of a
Massachusetts stock savings bank. This business shall be conducted by the
Surviving Bank at its main office which shall be 112 Market Street, Lynn,
Massachusetts, and at its legally established branches. Upon the Effective Time
of the Bank Merger, the main office and each of the branch offices of the Buyer
Bank and the Seller Bank established and authorized immediately prior to the
Effective Time of the Bank Merger shall become established and authorized branch
offices of the Surviving Bank.
SECTION 5.
Immediately following the Effective Time of the Bank Merger, the Surviving
Bank shall have capital stock and surplus which shall be equal to the capital
stock and surplus of the Buyer Bank as stated in the preamble to this Agreement,
adjusted, however, to reflect the completion of the Bank Merger and the
attendant conversion of the outstanding shares of the Seller Bank's capital
stock into shares of the Buyer Bank's capital stock in accordance with Section 7
hereof. Immediately following the Effective Time of the Bank Merger, the
Surviving Bank shall have undivided profits, including capital reserves, which
when combined with capital and surplus will be equal to the combined capital
structures of the Buyer Bank and the Seller Bank as stated in the preamble to
this Agreement, adjusted, however, for normal earnings and expenses.
SECTION 6.
Upon the Effective Time of the Bank Merger, all rights, franchises and
interests of the Seller Bank in and to every type of property (real, personal
and mixed) and choses in action shall be transferred to and vested in the
Surviving Bank by virtue of the Bank Merger without any deed or other transfer.
The Surviving Bank, without any order or other action on the part of any court
or otherwise, shall hold and enjoy all rights of property, franchises, and
interests, including appointments, designations, and nominations, and all other
rights and interests as trustee, executor, administrator, registrar of stocks
and bonds, guardian of estates, assignee, receiver and committee of estates of
lunatics, and in every other fiduciary
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<PAGE>
capacity, in the same manner and to the same extent as such rights, franchises
and interests were held or enjoyed by Buyer Bank and Seller Bank immediately
prior to the Effective Time of the Merger.
Upon the Effective Time of the Bank Merger, the Surviving Bank shall be
liable for all liabilities of the Seller Bank, including all deposits, debts,
obligations and contracts of the Seller Bank, matured or unmatured, whether
accrued, absolute, contingent or otherwise, and whether or not reflected or
reserved against on balance sheets, books of account or records of the Seller
Bank and all rights of creditors or obligees and all liens on property of the
Seller Bank shall be preserved unimpaired.
SECTION 7.
With respect to the capital stock of the Buyer Bank, the presently
outstanding 600,000 shares of common stock of the Buyer Bank, each of $1.00 par
value, shall remain outstanding shares of capital stock of the Surviving Bank
immediately following the Effective Time of the Bank Merger and the holders of
such shares shall retain all of their present rights thereunder. With respect to
the capital stock of the Seller Bank, each of the presently outstanding
2,249,786 shares of common stock of the Seller Bank, each of $1.00 par value,
shall, IPSO FACTO and without any action on the part of the holder thereof, be
converted into and become exchangeable for such number of shares or fraction of
a share of common stock of the Surviving Bank, par value $1.00 per share, based
upon the aggregate fair market value of the Seller Bank's shares of common stock
as compared to the aggregate fair market value of the Buyer Bank's shares of
common stock, in each case as such shares are issued and outstanding immediately
prior to the Effective Time of the Bank Merger.
SECTION 8.
The board of directors and principal officers of the Buyer Bank in place and
holding office immediately prior to the Effective Time of the Bank Merger shall
continue to serve as the board of directors and principal officers of the
Surviving Bank, each to hold office in accordance with the articles of
organization and by-laws of the Surviving Bank until such time as their
respective successors are duly elected or appointed and qualified.
SECTION 9.
The articles of organization and by-laws of the Buyer Bank in effect
immediately prior to the Effective Time of the Bank Merger shall constitute the
articles of organization and by-laws of the Surviving Bank.
SECTION 10
During the period from the date of this Agreement to the Effective Time of
the Bank Merger, the Seller Bank agrees to observe and perform all applicable
agreements and covenants thereof contained in the Parent Acquisition Agreement.
SECTION 11.
The respective obligations of the Buyer Bank and the Seller Bank to effect
the Bank Merger shall be subject to the satisfaction prior to the Effective Time
of the Bank Merger of the following conditions:
(a) Each condition contained in the Parent Acquisition Agreement to the
consummation of the Parent Merger (as such term is defined in the Parent
Acquisition Agreement) shall have been satisfied (or waived as provided in
the Parent Acquisition Agreement).
(b) No order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Bank Merger contemplated hereunder shall be in
effect. No statute, rule, regulation, order, injunction or decree shall have
been
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<PAGE>
enacted, entered, promulgated or enforced by any governmental agency or
authority which prohibits, restricts or makes illegal the consummation of
the Bank Merger.
(c) This Agreement and the transactions contemplated hereby shall have
been duly approved, ratified and confirmed in accordance with the respective
articles of association or articles of organization, as applicable, and
by-laws of the Buyer Bank and the Seller Bank by the affirmative vote of the
holders of not less than two-thirds of the outstanding shares of each of the
Buyer Bank and the Seller Bank entitled to vote thereon, each such vote to
be adopted at a duly called and held meeting of such stockholder(s) or, if
permissible under applicable law or otherwise, by the unanimous written
consent of such stockholder(s) in lieu thereof.
(d) All necessary approvals or consents of, notices to, or other filings
with, all requisite governmental agencies or authorities relating to the
Bank Merger, including without limitation the necessary approval of the FDIC
under 12 U.S.C. Section 1828(c) and the Commissioner under ch. 168 M.G.L.
Section 34D, shall have been obtained, filed or submitted or shall have
otherwise occurred and shall continue to be in full force and effect. In
addition, all consents, approvals or permits of, and notices to, any
nongovernmental third parties that are necessary to consummate the Bank
Merger shall have been obtained or delivered or shall have otherwise
occurred and shall continue to be in full force and effect.
SECTION 12.
This Agreement shall be terminated immediately and without any action on the
part of either the Buyer Bank or the Seller Bank upon any termination of the
Parent Acquisition Agreement in accordance with the terms thereof. This
Agreement may be terminated at any time prior to the Effective Time of the Bank
Merger by mutual consent of the Buyer Bank and the Seller Bank evidenced by a
written instrument, if the Board of Directors of each so determines by a vote of
not less than a majority of its members. In the event of the termination of this
Agreement as provided herein, this Agreement shall forthwith become null and
void and of no further force or effect and there shall be no liability or
obligation under this Agreement on the part of the parties hereto or any of
their respective offices, directors or affiliates.
SECTION 13.
This Agreement may be adopted, certified and executed in separate
counterparts, each of which shall be considered one and the same Agreement and
shall become effective when all counterparts have been signed by each of the
parties and delivered to each of the other parties, it being understood that all
parties need not sign the same counterpart.
SECTION 14.
Except as otherwise set forth in this Agreement (including any documents or
instruments referred to herein), this Agreement constitutes the entire
agreement, and supersedes all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter hereof.
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<PAGE>
IN WITNESS WHEREOF, Buyer Bank and Seller Bank have caused this Agreement to
be executed in counterparts by their duly authorized officers and their
corporate seals to be hereunto affixed as of the date first-above written.
<TABLE>
<S> <C>
EASTERN BANK
By: /s/ Stanley J. Lukowski
------------------------------
President and Chief Executive Officer
By: /s/ Richard E. Holbrook
------------------------------
Treasurer
THE HIBERNIA SAVINGS BANK
By: /s/ Mark A. Osborne
------------------------------
President and Chief Executive Officer
By: /s/ Gerard F. Linskey
------------------------------
Treasurer
</TABLE>
B-5
<PAGE>
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<PAGE>
APPENDIX C
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of October 22, 1997, between EMERALD ISLE
BANCORP, INC., a Massachusetts corporation (the "Issuer") and EASTERN BANK
CORPORATION, a Massachusetts corporation (the "Grantee").
WHEREAS, the Grantee and the Issuer have entered into an Affiliation
Agreement of even date herewith (as amended and in effect from time to time, the
"Acquisition Agreement"), which agreement is being executed by the parties
thereto prior to the execution of this Agreement; and
WHEREAS, as a condition to the Grantee's entry into the Acquisition
Agreement and in consideration for such entry, the Issuer has agreed to grant
the 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 Acquisition Agreement, the parties
hereto agree as follows:
1. (a) The Issuer hereby grants to the Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 447,707
fully paid and nonassessable shares (the "Option Shares") of common stock, par
value $1.00 per share, of the Issuer ("Common Stock") at a price of Twenty-Six
Dollars ($26) per share (the "Option Price"). 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 provided that in no event shall
the number of shares for which this Option is exercisable exceed 19.9% of the
Issuer's issued and outstanding shares of Common Stock (without giving effect to
any shares of Common Stock issued pursuant to the Option) less the number of
shares previously issued pursuant to exercise of the Option.
(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 exercise of the Option pursuant to this Agreement or as contemplated
by Section 5(a) of this Agreement), including, without limitation, pursuant to
stock option or other employee plans or as a result of the exercise of
conversion rights, 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 the
Issuer or the Grantee to breach any provision of the Acquisition Agreement.
2. (a) The Holder (as such term is defined in paragraph (c) below) may
exercise the Option, in whole or in part, if, but only if, both an Initial
Triggering Event (as defined in paragraph (e) below) and a Subsequent Triggering
Event (as defined in paragraph (f) below) shall have occurred prior to the
occurrence of an Exercise Termination Event (as defined in paragraph (b) below),
PROVIDED that the Holder shall have sent the written notice of such exercise (as
provided in paragraph (h) of this Section 2) within thirty (30) days following
such Subsequent Triggering Event and prior to the Exercise Termination Event.
(b) The term "Exercise Termination Event" shall mean the earliest of (i) the
Effective Time, (ii) any termination of the Acquisition Agreement in accordance
with the provisions thereof if such termination occurs prior to the occurrence
of an Initial Triggering Event, and (iii) in the event of any termination of the
Acquisition Agreement in accordance with the provisions thereof after the
occurrence of an Initial Triggering Event, the passage of twelve (12) months
after such termination. Notwithstanding the termination of the Option, the
Grantee shall be entitled to purchase those Option Shares with respect to which
it has exercised the Option in whole or in part prior to the termination of the
Option.
(c) The term "Holder" shall mean the holder or holders of the Option.
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<PAGE>
(d) The term "Schedule 13G Investor" shall mean any person holding voting
securities of the Issuer eligible to report the beneficial ownership of such
securities on Schedule 13G pursuant to the provisions of Rule 13d-1 under the
Exchange Act.
(e) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) The Issuer or any subsidiary of the Issuer, without having received
the Grantee's prior written consent, shall have entered into an agreement to
engage in an Acquisition Transaction 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 Exchange Act and the rules and regulations
thereunder), other than the Grantee or any subsidiary of the Grantee, or,
without the consent of the Grantee, the Board of Directors of the Issuer
shall have approved an Acquisition Transaction or recommended that the
shareholders of the Issuer approve or accept any Acquisition Transaction
other than as contemplated by the Acquisition Agreement. For purposes of
this Agreement, the term "Acquisition Transaction" shall mean (A) a merger
or consolidation, or any similar transaction, with the Issuer or any
Significant Subsidiary of the Issuer, or any subsidiary of the Issuer which,
after such transaction, would be a Significant Subsidiary of the Issuer, (B)
a purchase, lease or other acquisition of all or substantially all of the
assets of the Issuer or any Significant Subsidiary of the Issuer or (C) a
purchase or other acquisition (including by way of merger, consolidation,
share exchange or otherwise) of securities representing ten percent (10%) or
more of the voting power of the Issuer or any Significant Subsidiary of the
Issuer;
(ii) Any Person, other than the Grantee or any subsidiary of the Grantee
or the Issuer in a fiduciary capacity, and other than a Schedule 13G
Investor, shall have acquired beneficial ownership (as hereinafter defined)
or the right to acquire beneficial ownership of ten percent (10%) or more of
the outstanding shares of Common Stock if such Person owned beneficially
less than ten percent (10%) of the outstanding shares of Common Stock on the
date of this Agreement, or any Person shall have acquired beneficial
ownership of an additional three percent (3%) of the outstanding shares of
Common Stock if such Person owned beneficially ten percent (10%) or more of
the outstanding shares of Common Stock on the date of this Agreement (the
term "beneficial ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the Exchange Act, and in the
rules and regulations thereunder);
(iii) Any Person, other than the Grantee or any subsidiary of the
Grantee, shall have made a bona-fide proposal to the Issuer or its
shareholders to engage in an Acquisition Transaction by public announcement
or written communication that shall be or become the subject of public
disclosure; or
(iv) Any Person other than the Grantee or any subsidiary of the Grantee,
other than in connection with a transaction to which the Grantee has given
its prior written consent, shall have filed an application or notice with
the Federal Reserve Board or other federal or state bank regulatory
authority, which application or notice has been accepted for processing, for
approval to engage in an Acquisition Transaction;
(v) After any Person other than the Grantee or any subsidiary of the
Grantee has made a proposal to the Issuer or its shareholders to engage in
an Acquisition Transaction, the Issuer shall have breached any covenant or
obligation contained in the Acquisition Agreement and such breach (A) would
entitle the Grantee to terminate the Acquisition Agreement and (B) shall not
have been remedied prior to the Notice Date (as defined in paragraph (h)
below); or
(vi) Any person (other than Grantee or any subsidiary of Grantee) shall
have commenced (as such term is defined in Rule 14d-2 under the Exchange
Act) or shall have filed a registration statement under the Securities Act
of 1933, as amended (the "Securities Act"), with respect to, a tender offer
or exchange offer to purchase any shares of Issuer Common Stock such that,
upon
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<PAGE>
consummation of such offer, such person would own or control 50% or more of
the then outstanding shares of Issuer Common Stock (such an offer being
referred to herein as a "Tender Offer" or an "Exchange Offer,"
respectively).
(f) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any Person (other than a Schedule 13G Investor)
of beneficial ownership of fifteen percent (15%) or more of the then
outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
subparagraph (i) of paragraph (e) of this Section 2, except that the
percentage referenced in clause (C) thereof shall be fifteen percent (15%)
in lieu of ten percent (10%).
(g) The Issuer shall notify the 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 the Issuer shall not be a condition to the right of the Holder to
exercise the Option.
(h) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to the Issuer a written notice (the date of which being
herein referred to as the "Notice Date") specifying (i) the total number of
shares of Common Stock it will purchase pursuant to such exercise, and (ii) a
place and date not earlier than three (3) business days nor later than sixty
(60) business days from the Notice Date for the closing of such purchase (the
"Closing"); PROVIDED that if prior notification to or approval of the Federal
Reserve Board or any other regulatory agency is required in connection with such
purchase, the Holder shall promptly file the required notice or application for
approval 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. The term "business day" for purposes of this Agreement means any
day, excluding Saturdays, Sundays and any other day that is a legal holiday in
The Commonwealth of Massachusetts or a day on which banking institutions in The
Commonwealth of Massachusetts are authorized by law or executive order to close.
(i) At the Closing, the Holder shall pay to the Issuer the aggregate
purchase price for the shares of Common Stock purchased pursuant to the exercise
of the Option in immediately available funds by a wire transfer to a bank
account designated by the Issuer, PROVIDED that failure or refusal of the Issuer
to designate such a bank account shall not preclude the Holder from exercising
the Option.
(j) At such Closing, simultaneously with the delivery of immediately
available funds as provided in paragraph (i) above, the 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, and the Holder shall deliver to
the Issuer a copy of this Agreement and a letter agreeing that the Holder will
not offer to sell or otherwise dispose of such shares in violation of applicable
law or the provisions of this Agreement.
(k) Certificates for the Common Stock delivered at a Closing hereunder may
(in the sole discretion of the Issuer) be endorsed with a restrictive legend
that shall read substantially as follows:
"THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTION PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF
OCTOBER 22, 1997, A COPY OF WHICH AGREEMENT WILL BE PROVIDED TO THE HOLDER
HEREOF WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST
THEREFOR."
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if the shares have been sold or
transferred in compliance with the provisions of this
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<PAGE>
Agreement and under circumstances that do not require the retention of such
legend. In addition, such certificates shall bear any other legend as may be
required by law.
(l) Upon the giving by the Holder to the Issuer of the written notice of
exercise of the Option provided for under paragraph (h) above, the tender of the
applicable purchase price in immediately available funds and the tender of a
copy of this Agreement to the Issuer, such 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 the Issuer shall then be closed
or that certificates representing such shares of Common Stock shall not then be
actually delivered to the Holder. The Issuer shall pay all expenses, and any and
all United States federal, state and local taxes and other charges that may be
payable in connection with the preparation, issue and delivery of stock
certificates under this Section 2 in the name of the Holder or its assignee,
transferee or designee.
3. The Issuer agrees (a) 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 requiring the Issuer's
stockholders to approve an increase in the number of authorized shares of Common
Stock after giving effect to all other options, warrants, convertible securities
and other rights to purchase Common Stock, (b) 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 the Issuer, (c) promptly to take all action
as may from time to time be required (including without limitation cooperating
fully with any Holders in preparing any applications or notices required under
the Bank Holding Company Act of 1956, as amended, or the Change in Bank Control
Act of 1978, as amended, or any state banking law), in order to permit such
Holders to exercise the Option and the Issuer duly and effectively to issue
shares of Common Stock pursuant hereto, and (d) promptly to take all action
provided herein to protect the rights of any Holders against dilution.
4. This Agreement (and the Option granted hereby) is exchangeable, without
expense, at the option of each 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 Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by the 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, the Issuer will execute and deliver a new Agreement of
like tenor and date. Any such new Agreement executed and delivered shall
constitute for all purposes and under all circumstances an additional
contractual obligation on the part of the Issuer, whether or not this Agreement
so lost, stolen, destroyed or mutilated shall at any time be enforceable by
anyone.
5. In addition to the adjustment in the number of Option Shares pursuant to
Section 1 of this Agreement, the number of Option Shares shall be subject to
adjustment from time to time as provided in this Section 5.
(a) (i) In the event of any change in the shares of Common Stock by
reason of stock dividend, split up, merger, recapitalization, subdivision,
conversion, combination, exchange of shares or similar transaction, the type
and number of Option Shares, and the Option Price therefor, shall be
adjusted appropriately, and proper provision shall be made in the agreements
governing such transaction, so that the Grantee shall receive upon exercise
of the Option the number and class of shares or other securities or property
that the Grantee would have held immediately after such event if the Option
had been exercised immediately prior to such event, or the record date
therefor, as applicable.
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<PAGE>
(ii) The Issuer may make such increases in the number of Option Shares,
in addition to those required under subparagraph (a)(i) above, as shall be
determined by its Board of Directors to be advisable in order to avoid
taxation, so far as practicable, of any dividend of stock or stock rights or
any event treated as such for federal income tax purposes to the recipients.
(b) Whenever the number of Option Shares (or other securities) 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 is equal to the number of Option Shares prior to the adjustment and the
denominator of which is equal to the number of Option Shares (or other
securities) 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 thirty (30) days of such Subsequent Triggering Event (whether on the
Grantor's own behalf or on the 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, with respect to the Option and the
Option Shares, a "shelf" registration statement under Rule 415 of the Securities
Act or any successor provision, and Issuer shall use its best efforts to qualify
such shares under any applicable state securities laws. 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 sales or other dispositions of Option Shares.
Grantee shall have the right to demand two such registrations. Any registration
statement prepared and filed under this Section 6, and any sales covered
thereby, shall be at Issuer's expense, except for underwriting discounts or
commissions, broker's fees and expenses and the fees and disbursements of
Grantee's counsel related thereto. The foregoing notwithstanding, if, at the
time of any request by Grantee for registration of the Option or Option Shares
as provided above, (i) Issuer is in registration with respect to an underwritten
public offering of shares of Common Stock, and (ii) 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 or
Option Shares would interfere with the successful marketing of the shares
represented by the Option, the number of Option Shares otherwise to be covered
in the registration statement contemplated hereby may be reduced; PROVIDED,
HOWEVER, that if such reduction occurs, the Issuer shall file a registration
statement for the balance as promptly as practical and no reduction shall
thereafter occur. 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 the Issuer.
7. (a) Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, (i) at the request of any Holder,
delivered within thirty (30) days following such occurrence (or such later
period as provided in Section 10), the Issuer shall repurchase the Option from
the Holder at a price (the "Option Repurchase Price") equal to 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, and (ii) at the request of any owner of Option Shares from time to
time (the "Owner"), delivered within thirty (30) days following such occurrence
(or such later period as provided in Section 10), the Issuer shall repurchase
such number of the Option Shares from such Owner as the Owner shall designate at
a price per share ("Option Share Repurchase Price") equal to the greater of (A)
the market/offer price and (B) the average exercise price per share paid by the
Owner for the Option Shares so designated. The term "market/offer price" shall
mean the highest of (w) the price per share of the Common Stock at which a
tender offer or exchange offer therefor has been made, (x) the price per share
of the Common Stock to be paid by any Person, other than the Grantee or a
subsidiary of the Grantee, pursuant to an agreement with the Issuer, (y) the
highest sale price for shares of Common Stock within the
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six (6) month period immediately preceding the required repurchase of Options or
Option Shares, as the case may be, or (z) in the event of a sale of all or
substantially all of the Issuer's assets, the sum of the price paid in such sale
for such assets and the current market value of the remaining assets of the
Issuer as determined by a nationally recognized investment banking firm selected
by a majority in the interest of the Holders or the Owners, as the case may be,
and reasonably acceptable to the Issuer, divided by the number of shares of
Common Stock of the 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 a
majority in interest of the Holders or the Owners, as the case may be, and
reasonably acceptable to the Issuer.
(b) Each Holder and Owner, as the case may be, may exercise its right to
require the Issuer to repurchase the Option and any Option Shares pursuant to
this Section 7 by surrendering for such purpose to the 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 such Holder
or Owner elects to require the Issuer to repurchase this Option and/or Option
Shares in accordance with the provisions of this Section 7. As promptly as
practicable, and in any event within ten (10) business days (the "Payment Date")
after the surrender of the Option and/or certificates representing Option Shares
and the receipt of such notice or notices relating thereto (the "Surrender
Date"), the Issuer shall deliver or cause to be delivered to each Holder the
Option Repurchase Price and/or to each Owner the Option Share Repurchase Price
therefor or the portion thereof that the Issuer is not then prohibited under
applicable law and regulation from so delivering.
(c) To the extent that the Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, or as a result of a
written agreement or other binding obligation with a governmental or regulatory
body or agency, from repurchasing the Option and/or the Option Shares in full,
the Issuer shall immediately so notify each Holder and/or each Owner and
thereafter deliver or cause to be delivered, from time to time, to such Holder
and/or 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 ten (10) business days after the date on which the
Issuer is no longer so prohibited; PROVIDED, HOWEVER, that if the 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 any Holder and/or Owner, as
appropriate, the Option Repurchase Price and the Option Share Repurchase Price,
respectively, in part or in full (and the Issuer hereby undertakes to use its
best efforts to receive all required regulatory and legal approvals and to file
any required notices as promptly as practicable in order to accomplish such
repurchase), such Holder or Owner may revoke its notice of repurchase of the
Option or the Option Shares either in whole or to the extent of the prohibition,
whereupon the Issuer shall promptly (i) deliver to such Holder and/or Owner, as
appropriate, that portion of the Option Purchase Price or the Option Share
Repurchase Price that the Issuer is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to such Holder, a new Stock Option Agreement
evidencing the right of such Holder to purchase that number of shares of Common
Stock obtained by multiplying the number of shares of Common Stock for which the
surrendered Stock Option 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 such
Owner, a certificate for the Option Shares it is then so prohibited from
repurchasing.
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8. (a) In the event that prior to an Exercise Termination Event, the Issuer
shall enter into an agreement (i) to consolidate with or merge into any Person,
other than the Grantee or one of the Grantee's subsidiaries, and the Issuer
shall not be the continuing or surviving corporation of such consolidation or
merger, (ii) to permit any Person, other than the Grantee or one of its
subsidiaries, to merge into the Issuer and the 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
fifty percent (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 assets to any Person, other than the Grantee or one of the Grantee's
subsidiaries, 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 (A) the Acquiring Corporation
(as defined in paragraph (b) below) or (B) any Person that controls the
Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) The term "ACQUIRING CORPORATION" shall mean (A) the continuing or
surviving corporation of a consolidation or merger with the Issuer (if
other than the Issuer), (B) the Issuer in a merger in which the Issuer is
the continuing or surviving Person, and (C) the transferee of all or
substantially all of the Issuer's assets.
(ii) The term "SUBSTITUTE COMMON STOCK" shall mean the common stock
issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(iii) The term "ASSIGNED VALUE" shall mean the "market/offer price",
as defined in paragraph (a) of Section 7 hereof.
(iv) The term "AVERAGE PRICE" shall mean the average closing price of
a share of the Substitute Common Stock for the one (1) year period
immediately preceding the consolidation, merger or sale in question, but
in no event higher than the closing price of the shares of the Substitute
Common Stock on the day preceding such consolidation, merger or sale,
PROVIDED that if the 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 the Issuer or by any company which
controls 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, to the extent legally
permissible, be as similar as possible to, and in no event less advantageous
to the Holder than, the terms of the Option. 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,
which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares
of the Substitute Common Stock as is equal to (i) the product of (A) the
Assigned Value and (B) the number of shares of Common Stock for which the
Option is then exercisable, divided by (ii) the Average Price. The exercise
price of the Substitute Option per share of the Substitute Common Stock
shall then be equal to the Option Price multiplied by a fraction in which
the numerator is the number of Option Shares and the denominator is the
number of shares of the Substitute Common Stock for which the Substitute
Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of the Substitute Common Stock outstanding prior to exercise of the
Substitute Option (without giving effect to any shares of Substitute
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Common Stock issued pursuant to the Substitute Option) less the number of
shares previously issued pursuant to 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
paragraph (e), the issuer of the Substitute Option (the "SUBSTITUTE OPTION
ISSUER") shall make a cash payment to the Holder equal to the excess of (i)
the value of the Substitute Option without giving effect to the limitation
in this paragraph (e) over (ii) the value of the Substitute Option after
giving effect to the limitation in this paragraph (e). The difference in
value shall be determined by a nationally recognized investment banking firm
selected by a majority in interest of the Holders or the Owners, as the case
may be.
(f) The Issuer shall not enter into any transaction described in
paragraph (a) of this Section 8 unless the Acquiring Corporation and any
Person that controls the Acquiring Corporation shall have assumed in writing
all the obligations of the Issuer hereunder.
9. (a) At the written 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 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 the Substitute Common Stock for which the Substitute
Option may then be exercised, and at the request of each owner (the "SUBSTITUTE
SHARE OWNER") of shares of the Substitute Common Stock (the "SUBSTITUTE
SHARES"), the Substitute Option Issuer shall repurchase the Substitute Shares at
a price per share (the "SUBSTITUTE SHARE REPURCHASE PRICE") equal to the greater
of (A) the Highest Closing Price and (B) the average exercise price per share
paid by the Substitute Share Owner for the Substitute Shares so designated. The
term "HIGHEST CLOSING PRICE" shall mean the highest closing price for shares of
the Substitute Common Stock within the six (6) 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) Each 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 such
Substitute Option Holder or Substitute Share Owner 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 (5) business days after
the surrender of the Substitute Option and/or the 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(s) 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, or
as a result of a written agreement or other binding obligation with a
governmental or regulatory body or agency, from repurchasing the Substitute
Option and/or the Substitute Shares in full, the Substitute Option Issuer shall
immediately so notify each 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 Substitute Share Owner, as appropriate, that
portion of the Substitute Option Repurchase Price and the Substitute Share
Repurchase Price, respectively, which it is no longer prohibited from
delivering, within five (5) 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
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time after delivery of a notice of repurchase pursuant to paragraph (b) of this
Section 9 prohibited under applicable law or regulation, or as a consequence of
administrative policy, or as a result of a written agreement or other binding
obligation with a governmental or regulatory body or agency, 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 part or 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 the prohibition, whereupon 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.
10. The thirty (30) day period for exercise of certain rights under Sections
2, 6, 7 and 12 hereof shall be extended in each such case: (i) to the extent
necessary to obtain all regulatory approvals for the exercise of such rights and
for the expiration of all statutory waiting periods; and (ii) to the extent
necessary to avoid liability under Section 16(b) of the Exchange Act by reason
of such exercise, PROVIDED that notice of intent to exercise such rights shall
be given to the Issuer within the requisite thirty (30) day period and the
Grantee and the Holders shall use their best efforts to promptly obtain all
requisite approvals and cause the expiration of all requisite waiting periods.
11. The Issuer hereby represents and warrants to the Grantee as follows:
(a) The Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Issuer and no other corporate proceedings on the part
of the 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 the Issuer. This Agreement is the valid and legally binding
obligation of the Issuer, enforceable against the Issuer in accordance with its
respective terms, except that enforcement thereof may be limited by the
receivership, conservatorship and supervisory powers of bank regulatory agencies
generally as well as bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting enforcement of creditors rights generally and except that
enforcement thereof may be subject to general principles of equity (regardless
of whether enforcement is considered in a proceeding in equity or at law) and
the availability of equitable remedies.
(b) The 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 hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrances 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 Option Agreement or the Option created hereunder to any
other Person, whether by operation of law or
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otherwise, without the express written consent of the other party, except that
(a) the Grantee shall, at any time, be permitted to assign its rights under this
Option Agreement or the Option created hereunder to any Affiliate (as defined in
the Acquisition Agreement) of the Grantee and (b) in the event a Subsequent
Triggering Event shall have occurred prior to an Exercise Termination Event, the
Grantee may, subject to the right of first refusal set forth in Section 13,
assign, transfer or sell in whole or in part its rights and obligations
hereunder within thirty (30) days following such Subsequent Triggering Event (or
such later period as provided in Section 10); PROVIDED, HOWEVER, that in the
event the Grantee sells, assigns or transfers all or a portion of the Option to
other Holders as permitted by this Agreement, the Grantee may exercise its
rights hereunder on behalf of itself and such Holders.
13. If at any time after the occurrence of a Subsequent Triggering Event
and, with respect to shares of Common Stock or other securities acquired by the
Grantee pursuant to an exercise of the Option, prior to the expiration of
twenty-four (24) months after the expiration of the Option pursuant to Section
2(b), the Grantee shall desire to sell, assign, transfer or otherwise dispose of
the Option, in whole or in part, or all or any of the shares of Common Stock or
other securities acquired by the Grantee pursuant to the Option, the Grantee
shall give the Issuer written notice of the proposed transaction (an "OFFEROR'S
NOTICE"), identifying the proposed transferee, accompanied by a copy of a
binding offer to purchase the Option or such shares or other securities signed
by such transferee and setting forth the terms of the proposed transaction. An
Offeror's Notice shall be deemed an offer by the Grantee to the Issuer, which
may be accepted within ten (10) business days of the receipt of such Offeror's
Notice, on the same terms and conditions and at the same price at which the
Grantee is proposing to transfer the Option or such shares or other securities
to such transferee. The purchase of the Option or such shares or other
securities by the Issuer shall be settled within five (5) business days of the
date of the acceptance of the offer and the purchase price shall be paid to the
Grantee in immediately available funds, PROVIDED that, if prior notification to
or approval, consent or waiver of the Federal Reserve Board or any other
regulatory authority is required in connection with such purchase, the Issuer
shall promptly file the required notice or application for approval, consent or
waiver and shall expeditiously process the same (and the Grantee shall cooperate
with the Issuer in the filing of any such notice or application and the
obtaining of any such approval) and the period of time that otherwise would run
pursuant to this sentence shall run instead from the date on which, as the case
may be, (a) the required notification period has expired or been terminated or
(b) such approval has been obtained and, in either event, any requisite waiting
period shall have passed. In the event of the failure or refusal of the Issuer
to purchase the Option or the shares or other securities, as the case may be,
covered by an Offeror's Notice or if the Federal Reserve Board or any other
regulatory authority disapproves the Issuer's proposed purchase of the Option or
such shares or other securities, the Grantee may, within sixty (60) days
following the date of the Offeror's Notice (subject to any necessary extension
for regulatory notification, approval, or waiting periods), sell all, but not
less than all, of the portion of the Option (which may be one hundred percent
(100%)) or such shares or other securities, as the case may be, proposed to be
transferred to the proposed transferee identified in the Offeror's Notice at no
less than the price specified and on terms no more favorable to the proposed
transferee than those set forth in the Offeror's Notice. The requirements of
this Section 13 shall not apply to (i) any disposition of the Option or any
shares of Common Stock or other securities by a Person to whom the Grantee has
assigned its rights under the Option with the prior written consent of the
Issuer, (ii) any sale by means of a public offering in which steps are taken to
reasonably ensure that no purchaser will acquire securities representing more
than five percent (5%) of the outstanding shares of Common Stock of the Issuer
or (iii) any transfer to a direct or indirect wholly-owned subsidiary of the
Grantee which agrees in writing to be bound by the terms hereof.
14. Each of the Grantee and the Issuer will use all reasonable 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 of 1956, as amended,
for approval to acquire the shares issuable hereunder.
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15. Notwithstanding anything to the contrary herein, in the event that the
Holder or the Owner or any Related Person thereof (as hereinafter defined) is a
Person making an offer or proposal to engage in an Acquisition Transaction
(other than the transaction contemplated by the Acquisition Agreement), then (a)
in the case of a Holder or any Related Person thereof, the Option held by it
shall immediately terminate and be of no further force or effect, and (b) in the
case of an Owner or any Related Person thereof, the Option Shares held by it
shall be immediately repurchasable by the Issuer at the Option Price. For
purposes of this Agreement, a "RELATED PERSON" of a Holder or Owner means any
Affiliate (as defined in Rule 12b-2 of the rules and regulations under the
Exchange Act) of the Holder or the Owner and any Person that is required to file
a Schedule 13D with the Holder or the Owner with respect to shares of Common
Stock or options to acquire the Common Stock.
16. 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.
17. 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 the 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 Sections 1(b) or 5(a)
hereof), it is the express intention of the Issuer to allow the Holder to
acquire or to require the Issuer to repurchase such lesser number of shares as
may be permissible, without any amendment or modification hereof.
18. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in Person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Acquisition Agreement.
19. This Agreement shall be governed by and construed in accordance with the
laws of The Commonwealth of Massachusetts, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
20. 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.
21. 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.
22. Except as otherwise expressly provided herein, this Agreement contains
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 assigns. Nothing in this
Agreement, express or implied, is intended to confer upon any party, other than
the parties hereto, and their respective successors and permitted assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
23. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Acquisition Agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Stock Option
Agreement to be executed as a sealed instrument on its behalf by its officers
thereunder duly authorized, all as of the day and year first above written.
<TABLE>
<S> <C>
EMERALD ISLE BANCORP, INC.
By: /s/ Mark A. Osborne
--------------------------------------------
Title: President and Chief Executive Officer
EASTERN BANK CORPORATION
By: /s/ Stanley J. Lukowski
--------------------------------------------
Title: President and Chief Executive Officer
</TABLE>
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APPENDIX D
[Form of Voting Agreement]
October 22, 1997
Eastern Bank Corporation
112 Market Street
Lynn, Massachusetts 01901-1125
Attention: Stanley J. Lukowski, Chairman, President and CEO
Ladies and Gentlemen:
The undersigned (the "Stockholder") beneficially owns and has sole voting
power with respect to the number of shares of the common stock, par value $1.00
per share (the "Shares"), of EMERALD ISLE BANCORP, INC., a Massachusetts
corporation (the "Seller"), indicated opposite the Stockholder's name on
Schedule 1 attached hereto.
Immediately prior to the execution of this letter agreement, EASTERN BANK
CORPORATION (the "Buyer") and the Seller are entering into an Affiliation
Agreement (as amended and in effect from time to time, the "Acquisition
Agreement") providing, among other things, for the direct or indirect
acquisition of the Seller by the Buyer (the "Acquisition"). The undersigned
understands that Buyer has undertaken and will continue to undertake substantial
expenses in connection with the negotiation and execution of the Acquisition
Agreement and the subsequent actions necessary to consummate the transactions
contemplated by the Acquisition Agreement.
In consideration of, and as a condition to, the Buyer's entering into the
Acquisition Agreement, and in consideration of the expenses incurred and to be
incurred by the Buyer in connection therewith, the Stockholder and the Buyer
agree as follows:
1. The Stockholder, while this letter agreement is in effect, shall vote or
cause to be voted all of the Shares, as well as any other shares of common stock
of the Seller of which the Stockholder acquires beneficial ownership and sole
voting power, whether pursuant to the exercise of stock options or otherwise, as
long as such shares are owned by the Stockholder as of the record date for the
special meeting of the Seller's stockholders to be called and held following the
date hereof, for the approval of the Acquisition Agreement and the Acquisition
and shall vote or cause to be voted all such shares, at such special meeting or
any other meeting of the Seller's stockholders following the date hereof,
against the approval of any other agreement providing for a merger, acquisition
consolidation, sale of a material amount of assets or other business combination
of the Seller or any of its subsidiaries with any person or entity other than
the Buyer, or any subsidiary of the Buyer.
2. The Stockholder will not sell, assign, transfer or otherwise dispose of
(including, without limitation, by the creation of a Lien (as defined in
paragraph 5 below)), or permit to be sold, assigned, transferred or otherwise
disposed of, any Shares owned by the Stockholder, whether such Shares are held
by the Stockholder on the date of this letter agreement or are subsequently
acquired, whether pursuant to the exercise of stock options or otherwise, except
(a) transfers by will or by operation of law (in which case this letter
agreement shall bind the transferee), (b) transfers pursuant to any pledge
agreement,
D-1
<PAGE>
(c) transfers in connection with estate planning purposes, including transfers
to relatives, trusts and charitable organizations, subject to the transferee
agreeing in writing to be bound by the terms of this letter agreement and (d) as
the Buyer may otherwise agree in its sole discretion. In the event that the
Stockholder proposes to transfer any Shares permitted by this Section 2, other
than pursuant to clause (c) hereof, the Buyer shall have the option to elect to
have any existing certificates representing Shares subject to this letter
agreement canceled and reissued bearing the following legend:
"THIS CERTIFICATE, AND THE SHARES REPRESENTED HEREBY, ARE SUBJECT
TO CERTAIN VOTING AND TRANSFER RESTRICTIONS CONTAINED IN A VOTING
AGREEMENT BY AND BETWEEN BUYER AND THE BENEFICIAL OWNER OF THESE
SHARES AND MAY BE TRANSFERRED ONLY IN COMPLIANCE THEREWITH. COPIES
OF THE ABOVE-REFERENCED AGREEMENT ARE ON FILE AT THE OFFICES OF
THE SELLER."
3. The agreements contained herein are intended to relate to restrictions
on transferability and to continue only for such time as may reasonably be
necessary to obtain all necessary approvals, including shareholder approval and
all necessary governmental approvals, of the Acquisition and all other
transactions contemplated by the Acquisition Agreement.
4. The Stockholder represents that the Stockholder has the complete and
unrestricted power and the unqualified right to enter into and perform the terms
of this letter agreement. The Stockholder further represents that this letter
agreement (assuming this letter agreement constitutes a valid and binding
agreement of the Buyer) constitutes a valid and binding agreement with respect
to the Stockholder, enforceable against the Stockholder in accordance with its
terms, except as enforcement may be limited by general principles of equity
whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally.
Except as may be set forth in Schedule 1, the Stockholder represents that the
Stockholder beneficially owns the number of Shares indicated opposite such
Stockholder's name on said Schedule 1, free and clear of any liens, claims,
charges or other encumbrances or restrictions of any kind whatsoever ("Liens"),
and has sole and otherwise unrestricted, voting power with respect to such
Shares.
5. Notwithstanding anything herein to the contrary, the agreements
contained herein shall remain in full force and effect until the earlier of (a)
the consummation of the Acquisition or (b) the termination of the Acquisition
Agreement in accordance with Article VIII thereof.
6. The Stockholder has signed this letter agreement intending to be bound
thereby. The Stockholder expressly agrees that this letter agreement shall be
specifically enforceable in any court of competent jurisdiction in accordance
with its terms against the Stockholder. All of the covenants and agreements
contained in this letter agreement shall be binding upon, and inure to the
benefit of, the respective parties and their permitted successors, assigns,
heirs, executors, administrators and other legal representatives, as the case
may be.
7. This letter agreement may be executed in one or more counterparts, each
of which will be deemed an original but all of which together shall constitute
one and the same instrument.
8. No waivers of any breach of this letter agreement extended by the Buyer
to the Stockholder shall be construed as a waiver of any rights or remedies of
the Buyer with respect to any subsequent breach of the Stockholder hereunder.
9. This letter agreement is deemed to be signed as a sealed instrument and
is to be governed by the laws of The Commonwealth of Massachusetts, without
giving effect to the principles of conflicts of laws thereof. If any provision
hereof is deemed unenforceable, the enforceability of the other provisions
hereof shall not be affected.
D-2
<PAGE>
If the foregoing accurately reflects your understanding of the subject
matter intended to be contained herein, please confirm our agreement by signing
this letter where indicated below.
Very truly yours,
------------------------------------------------------------------------------
AGREED TO AND ACCEPTED BY AS
OF THE DATE FIRST ABOVE WRITTEN
EASTERN BANK CORPORATION
By:____________________________________
Title: President and Chief Executive Officer
D-3
<PAGE>
SCHEDULE 1
<TABLE>
<CAPTION>
NAME OF NUMBER OF SHARES SHARES
STOCKHOLDER BENEFICIALLY OWNED SUBJECT TO PLEDGE
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
</TABLE>
D-4
<PAGE>
APPENDIX E
CIBC Oppenheimer Tower
World Financial Center
New York, NY 10281
(212) 667-7000
CIBC OPPENHEIMER CORP.
Investment Banking Group
December 18, 1997
Board of Directors
Emerald Isle Bancorp, Inc.
730 Hancock Street
Quincy, Massachusetts 2170-2722
Directors:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the outstanding shares of common stock of Emerald Isle
Bancorp, Inc. (the "Company") of the consideration to be received by such
shareholders from Eastern Bank ("Eastern") pursuant to the Affiliation Agreement
to be dated as of October 22, 1997 by and between Eastern and the Company (the
"Agreement"). Pursuant to the Agreement, the Company will merge with a
subsidiary of Eastern Bank (the "Merger") and each outstanding share of the
Company's stock will be converted into the right to receive $33.00 in cash (the
"Consideration").
In connection with this opinion we have reviewed, among other things: (a)
the Agreement; (b) the Stockholders Agreements and Seller Option Agreement (as
such terms are defined in the Agreement); (c) audited consolidated financial
statements and management's discussion and analysis of the financial condition
and results of operation for the Company for the three fiscal years ended
December 31, 1996; (d) unaudited consolidated financial statements for the
Company for the nine months ended September 30, 1997; (e) certain other publicly
available business and financial information relating to the Company; (f) the
views of senior management of the Company of the past and current business
operations, results thereof, financial condition and future prospects of the
Company; (g) a comparison of certain financial information for the Company, with
similar information for certain other companies we considered comparable to the
Company; (h) the financial terms of certain recent business combinations in the
banking industry; (i) the current market environment generally and the banking
environment in particular; and (j) such other information, financial studies,
analyses and investigations and financial, economic and market criteria as we
considered appropriate in the circumstances.
We have relied, without independent verification or investigation, on all of
the financial information, analyses and other information furnished to us for
purposes of this opinion, including information relating to assets and
liabilities, contingent or otherwise, as being complete and accurate. We have
also relied upon the management of the Company as to the reasonableness and
achievability of the financial and operating forecasts and projections provided
to us. In that regard, we have assumed, with your consent, that such forecasts,
projections and estimates have been reasonably prepared and reflect the best
currently available estimates and judgements of the management of the Company as
to the future financial performance of the Company. We have not made an
independent evaluation or appraisal of the assets and liabilities of the
E-1
<PAGE>
Company or any of its subsidiaries and we have not been furnished with any such
evaluation or appraisal. Furthermore, this opinion shall not constitute any such
evaluation or appraisal. We were not asked to, and did not, solicit indications
of interest from any other person regarding a business combination involving the
Company.
We have acted as financial advisor to the Company in connection with the
Merger and will receive a fee for our services, a portion of which is contingent
on the consummation of the Merger. In the ordinary course of our business, we
may actively trade the equity securities of the Company for our own account and
for the accounts of customers, and accordingly may at any time hold a long or
short position in such securities.
It is understood that this opinion is for the information of the Board of
Directors in connection with its consideration of the Merger and may not be
quoted or referred to, in whole or in part, in any registration statement,
prospectus, or proxy statement, or in any other document used in connection with
the offering or sale of securities, nor shall this letter be used for any other
purposes, without our prior written consent.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that, as of the date hereof, the
Consideration to be received by the common shareholders of the Company in the
Merger is fair, from a financial point of view, to such shareholders.
Very truly yours,
CIBC Oppenheimer Corp.
E-2
<PAGE>
APPENDIX F
MASSACHUSETTS GENERAL LAWS
CHAPTER 156B
SECTION 85. RIGHTS OF MINORITY STOCKHOLDER, ETC.
A stockholder in any corporation organized under the laws of Massachusetts which
shall have duly voted to consolidate or merge with another corporation or
corporations under the provisions of sections seventy-eight or seventy-nine who
objects to such consolidation or merger may demand payment for his stock from
the resulting or surviving corporation and an appraisal in accordance with the
provisions of sections eighty-six to ninety-eight, inclusive, and such
stockholder and the resulting or surviving corporation shall have the rights and
duties and follow the procedure set forth in those sections. This section shall
not apply to the holders of any shares of stock of a constituent corporation
surviving a merger if, as permitted by subsection (c) of section seventy-eight,
the merger did not require for its approval a vote of the stockholders of the
surviving corporation.
SECTION 86. APPLICABILITY OF SECTIONSECTION 87 TO 98; PREREQUISITES OF OBJECTING
STOCKHOLDER'S RIGHT TO DEMAND PAYMENT FOR SHARES AND APPRAISAL THEREOF.
If a corporation proposes to take a corporate action as to which any section of
this chapter provides that a stockholder who objects to such action shall have
the right to demand payment for his shares and an appraisal thereof, sections
eighty-seven to ninety-eight, inclusive, shall apply except as otherwise
specifically provided in any section of this chapter. Except as provided in
sections eighty-two and eighty-three, three, no stockholder shall have such
right unless (1) he files with the corporation before the taking of the vote of
the shareholders on such corporate action, written objection to the proposed
action stating that he intends to demand payment for his shares if the action is
taken and (2) his shares are not voted in favor of the proposed action.
SECTION 87. NOTICE OF CERTAIN STOCKHOLDERS' MEETINGS TO CONTAIN STATEMENT OF
RIGHTS OF OBJECTING
STOCKHOLDERS; EFFECT OF GIVING NOTICE; FORM.
The notice of the meeting of stockholders at which the approval of such proposed
action is to be considered shall contain a statement of the rights of objecting
stockholders. The giving of such notice shall not be deemed to create any rights
in any stockholder receiving the same to demand payment for his stock, and the
directors may authorize the inclusion in any such notice of a statement of
opinion by the management as to the existence or non-existence of the right of
the stockholders to demand payment for their stock on account of the proposed
corporate action. The notice may be in such form as the directors or officers
calling the meeting deem advisable, but the following form of notice shall be
sufficient to comply with this section:
"If the action proposed is approved by the stockholders at the meeting and
effected by the corporation, any stockholder (1) who files with the corporation
before the taking of the vote on the approval of such action, written objection
to the proposed action stating that he intends to demand payment for his shares
if the action is taken and (2) whose shares are not voted in favor of such
action has or may have the right to demand in writing from the corporation (OR,
IN THE CASE OF A CONSOLIDATION OR MERGER, THE NAME OF THE RESULTING OR SURVIVING
CORPORATION SHALL BE INSERTED), within twenty days after the date of mailing to
him of notice in writing that the corporate action has become effective, payment
for his shares and an appraisal of the value thereof. Such corporation and any
such stockholder shall in such cases have the rights and duties and shall follow
the procedure set forth in sections 88 to 98, inclusive, of chapter 156B of the
General Laws of Massachusetts."
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<PAGE>
SECTION 88. CORPORATION TAKING ACTION, ETC., TO NOTIFY CERTAIN OBJECTING
STOCKHOLDERS THAT CERTAIN APPROVED ACTION HAS BECOME EFFECTIVE, ETC.
The corporation taking such action, or in the case of a merger or consolidation
the surviving or resulting corporation, shall, within ten days after the date on
which such corporate action became effective, notify each stockholder who filed
a written objection meeting the requirements of section eighty-six and whose
shares were not voted in favor of the approval of such action, that the action
approved at the meeting of the corporation of which he is a stockholder has
become effective. The giving of such notice shall not be deemed to create any
rights in any stockholder receiving the same to demand payment for his stock.
The notice shall be sent by registered or certified mail, addressed to the
stockholder at his last known address as it appears in the records of the
corporation.
SECTION 89. CORPORATION TO PAY TO CERTAIN OBJECTING STOCKHOLDERS FAIR VALUE OF
THEIR SHARES ON DEMAND, ETC.
If within twenty days after the date of mailing of a notice under subsection (e)
or section eighty-two, subsection (f) of section eighty three, or section
eighty-eight, any stockholder to whom the corporation was required to give such
notice shall demand in writing from the corporation taking such action, or in
the case of a consolidation or merger from the resulting or surviving
corporation, payment for his stock, the corporation upon which such demand is
made shall pay to him the fair value of his stock within thirty days after the
expiration of the period during which such demand may be made.
SECTION 90. BILL IN EQUITY TO DETERMINE VALUE OF STOCK OF OBJECTING STOCKHOLDERS
ON FAILURE TO AGREE ON VALUE THEREOF, ETC.
If during the period of thirty days provided for in section eighty-nine the
corporation upon which such demand is made and any such objecting stockholder
fail to agree as to the value of such stock, such corporation or any such
stockholder may within four months after the expiration of such thirty-day
period demand a determination of the value of the stock of all such objecting
stockholders by a bill in equity filed in the superior court in the county where
the corporation in which such objecting stockholder held stock had or has its
principal office in the commonwealth.
SECTION 91. BILL IN EQUITY TO DETERMINE VALUE OF STOCK OF OBJECTING
STOCKHOLDERS; PARTIES; SERVICE; NOTICE.
If the bill is filed by the corporation, it shall name as parties respondent all
stockholders who have demanded payment for their shares and with whom the
corporation has not reached agreement as to the value thereof. If the bill is
filed by a stockholder, he shall bring the bill in his own behalf and in behalf
of all other stockholders who have demanded payment for their shares and with
whom the corporation has not reached agreement as to the value thereof and
service of the bill shall be made upon the corporation by subpoena with a copy
of the bill annexed. The corporation shall file with its answer a duly verified
list of all such other stockholders, and such stockholders shall thereupon be
deemed to have been added as parties to the bill. The corporation shall give
notice in such form and returnable on such date as the court shall order to each
stockholder party to the bill by registered or certified mail, addressed to the
last known address of such stockholder as shown in the records of the
corporation, and the court may order such additional notice by publication or
otherwise as it deems advisable. Each stockholder who makes demand as provided
in section eighty-nine shall be deemed to have consented to the provisions of
this section relating to notice, and the giving of notice by the corporation to
any such stockholder in compliance with the order of the court shall be a
sufficient service of process on him. Failure to give notice to any stockholder
making demand shall not invalidate the proceedings as to other stockholders to
whom notice was properly given, and the court may at any time before the entry
of a final decree make supplementary orders of notice.
F-2
<PAGE>
SECTION 92. DECREE DETERMINING VALUE OF STOCK OF OBJECTING STOCKHOLDERS; DATE AS
OF WHICH STOCK VALUE IS DETERMINED.
After hearing the court shall enter a decree determining the fair value of the
stock of those stockholders who have become entitled to the valuation of and
payment for their shares, and shall order the corporation to make payment of
such value, together with interest, if any, as hereinafter provided, to the
stockholders entitled thereto upon the transfer by them to the corporation of
the certificates representing such stock if certificated or, if uncertificated,
upon receipt of an instruction transferring such stock to the corporation. For
this purpose, the value of the shares shall be determined as of the day
preceding the date of the vote approving the proposed corporate action and shall
be exclusive of any element of value arising from the expectation or
accomplishment of the proposed corporate action.
SECTION 93. FINDINGS BY SPECIAL MASTER IN DETERMINATION OF STOCK VALUE OF
OBJECTING STOCKHOLDERS.
The court in its discretion may refer the bill or any question arising
thereunder to a special master to hear the parties, make findings and report the
same to the court, all in accordance with the usual practice in suits in equity
in the superior court.
SECTION 94. NOTATION OF PENDANCY OF BILL TO DETERMINE VALUE OF STOCK ON STOCK
CERTIFICATES AND CORPORATE RECORDS.
On motion the court may order stockholder parties to the bill to submit their
certificates of stock to the corporation for the notation thereon of the
pendancy of the bill and may order the corporation to note such pendancy in its
records with respect to any uncertificated shares held by such stockholder
parties, and may on motion dismiss the bill as to any stockholder who fails to
comply with such order.
SECTION 95. EQUITABLE TAXATION OF COSTS OF BILL TO DETERMINE VALUE OF STOCK OF
OBJECTING STOCKHOLDERS; INTEREST ON AWARD.
The costs of the bill, including the reasonable compensation and expenses of any
master appointed by the court, but exclusive of fees of counsel or of experts
retained by any party, shall be determined by the court and taxed upon the
parties to the bill, or any of them, in such manner as appears to be equitable,
except that all costs of giving notice to stockholders as provided in this
chapter shall be paid by the corporation. Interest shall be paid upon any award
from the date of the vote approving the proposed corporate action, and the court
may on application of any interested party determine the amount of interest to
be paid in the case of any stockholder.
SECTION 96. STOCKHOLDER DEMANDING PAYMENT FOR STOCK NOT ENTITLED TO NOTICE OF
STOCKHOLDERS' MEETINGS OR TO VOTE STOCK OR TO RECEIVE DIVIDENDS, ETC.;
EXCEPTIONS.
Any stockholder who has demanded payment for his stock as provided in this
chapter shall not thereafter be entitled to notice of any meeting of
stockholders or to vote such stock for any purpose and shall not be entitled to
the payment of dividends or other distribution on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the date of the vote approving the proposed corporate action) unless:
(1) A bill shall not be filed within the time provided in section ninety;
(2) A bill, if filed, shall be dismissed as to such stockholder; or
F-3
<PAGE>
(3) Such stockholder shall with the written approval of the corporation, or in
the case of a consolidation or merger, the resulting or surviving corporation,
deliver to it a written withdrawal of his objections to and an acceptance of
such corporate action.
Notwithstanding the provisions of clauses (1) to (3), inclusive, said
stockholder shall have only the rights of a stockholder who did not 90 demand
payment for his stock as provided in this chapter.
SECTION 97. CERTAIN SHARES PAID FOR BY CORPORATION TO HAVE STATUS OF TREASURY
STOCK.
The shares of the corporation paid for by the corporation pursuant to the
provisions of this chapter shall have the status of treasury stock, or in the
case of a consolidation or merger the shares or the securities of the resulting
or surviving corporation into which the shares of such objecting stockholder
would have been converted had he not objected to such consolidation or merger
shall have the status of treasury stock or securities.
SECTION 98. ENFORCEMENT BY STOCKHOLDER OF RIGHT TO RECEIVE PAYMENT FOR SHARES TO
BE EXCLUSIVE REMEDY; EXCEPTION.
The enforcement by a stockholder of his right to receive payment for his shares
in the manner provided in this chapter shall be an exclusive remedy except that
this chapter shall not exclude the right of such stockholder to bring or
maintain an appropriate proceeding to obtain relief on the ground that such
corporate action will be or is illegal or fraudulent as to him.
F-4
<PAGE>
PROXY FOR SPECIAL MEETING OF EMERALD ISLE BANCORP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF EMERALD ISLE BANCORP, INC.
The undersigned holder(s) of the Common Stock of Emerald Isle Bancorp,
Inc. do hereby nominate, constitute and appoint Mark A. Osborne and
Gerard F. Linskey, jointly and severally, proxies with full power of
substitution, for us and in our name, place and stead to vote all the Common
Stock in said Company, standing in our name on its books on December 15, 1997
at the Special Meeting of its shareholders to be held at the Sheraton Tara
Hotel, 37 Forbes Road, Braintree, Massachusetts on January 22, 1998 at
10:00 a.m. or at any adjournment thereof with all the powers the undersigned
would possess if personally present, as specified on the reverse side.
- -------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
<PAGE>
<TABLE>
<S> <C>
_______________________________________________________________________________________________________________________
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1. Please mark
your votes as
indicated in / X /
this example
1. A proposal to approve and adopt the Affiliation Agreement,
dated as of October 22, 1997 (the "Affiliation Agreement"), by
and between Emerald and Eastern Bank Corporation ("Eastern"),
which provides for the acquisition of Emerald and its wholly-owned
bank subsidiary, The Hibernia Savings Bank, by Eastern (the
"Merger"). Upon consummation of the Merger, Emerald stockholders
will receive $33.00 in cash for each share of Emerald common stock.
FOR AGAINST ABSTAIN In their discretion the proxies are authorized
to vote upon such matters as may properly come
/ / / / / / before the meeting or any adjournment thereof.
THIS PROXY WILL BE VOTED, IN ACCORDANCE WITH
THE SPECIFICATION INDICATED. IF NO SPECIFICATION
IS INDICATED, THIS PROXY WILL BE VOTED "FOR"
PROPOSAL (1).
All joint owners must sign. When signing as
attorney, executor, administrator, trustee or
guardian, please give full title. If more than
one trustee all must sign.
THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO
THE MEETING BY WRITTEN NOTICE TO THE COMPANY
OR MAY BE WITHDRAWN AND YOU MAY VOTE IN PERSON
SHOULD YOU ATTEND THE SPECIAL MEETING.
____
| ------------------------------------------------
| (Signature)
------------------------------------------------
(Please print your name here)
Date -------------------------------------------
------------------------------------------------
(Signature)
------------------------------------------------
(Please print your name here)
Date -------------------------------------------
</TABLE>
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- FOLD AND DETACH HERE -
