<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 16, 1995.
REGISTRATION NO. 33-57617
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
------------------------
BAYBANKS, INC.
(Exact Name of Registrant as Specified in Its Charter)
------------------------
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MASSACHUSETTS 6712 04-2008039
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code) Identification No.)
Organization)
</TABLE>
175 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
(617) 482-1040
(Address, Including ZIP Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
MICHAEL W. VASILY, EXECUTIVE VICE PRESIDENT
BAYBANKS, INC.
175 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
(617) 482-1040
(Name, Address, Including ZIP Code, and Telephone Number,
Including Area Code, of Agent for Service)
------------------------
with copies to:
JERRY V. KLIMA, ESQ.
PALMER & DODGE
ONE BEACON STREET
BOSTON, MASSACHUSETTS 02108
(617) 573-0100
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and all other
conditions to the merger of BayBank New Hampshire, Inc., a wholly-owned
subsidiary of BayBanks, Inc., with and into NFS Financial Corp. pursuant to an
Acquisition Agreement dated December 22, 1994 described in the enclosed
Prospectus and Proxy Statement have been satisfied or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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BAYBANKS, INC.
Cross-reference Sheet Pursuant to Rule 404(a) of Regulation C and Item
501(b) of Regulation S-K Showing the Location in the Prospectus/Proxy Statement
of the Information Required by Part I of Form S-4.
<TABLE>
<CAPTION>
LOCATION OR HEADING IN
ITEM OF S-4 PROSPECTUS/PROXY STATEMENT
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A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus................. Forepart of Registration Statement; Outside
Front Cover Page of Prospectus/Proxy
Statement
2. Inside Front and Outside Back Cover Pages of
Prospectus..................................... Inside Front Cover Page of Prospectus/Proxy
Statement; Available Information;
Incorporation of Certain Documents by
Reference; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information.......................... Summary; Selected Financial Data; Background
and NFS's Reasons for the Merger; Terms of
the Merger
4. Terms of the Transaction......................... Summary; Background and NFS's Reasons for the
Merger; Terms of the Merger; Comparison of
Rights of Holders of BayBanks and NFS
Common Stock
5. Pro Forma Financial Information.................. *
6. Material Contacts with the Company Being
Acquired....................................... Summary; Terms of the Merger
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be
Underwriters................................... *
8. Interests of Named Experts and Counsel........... *
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................... *
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants...... Incorporation of Certain Documents by
Reference; Summary; BayBanks, Inc.
11. Incorporation of Certain Information by
Reference...................................... Incorporation of Certain Documents by
Reference
12. Information with Respect to S-2 or S-3
Registrants.................................... *
13. Incorporation of Certain Information by
Reference...................................... *
14. Information with Respect to Registrants Other
Than S-3 or S-2 Registrants.................... *
C. INFORMATION ABOUT THE COMPANY BEING
ACQUIRED
15. Information with Respect to S-3 Companies........ Incorporation of Certain Documents by
Reference; Summary
16. Information with Respect to S-2 or S-3
Companies...................................... *
17. Information with Respect to Companies Other Than
S-3 or S-2 Companies........................... *
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited............. Outside Front Cover Page of Prospectus;
Incorporation of Certain Documents by
Reference; Summary; NFS Annual Meeting;
BayBanks, Inc.; Terms of the Merger
19. Information if Proxies, Consents or
Authorizations are not to be Solicited, or in
an Exchange Offer.............................. *
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* Not applicable or the answer is negative
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NFS FINANCIAL CORP.
157 MAIN STREET
NASHUA, NEW HAMPSHIRE 03060
(603) 880-2011
March 21, 1995
Dear Shareholder:
You are cordially invited to attend the annual meeting of shareholders of
NFS Financial Corp. ("NFS") to be held at 11:00 a.m. on Tuesday, April 25, 1995
at the Sheraton Tara, Tara Boulevard, Nashua, New Hampshire.
The principal purpose of the meeting will be to vote on approving the
proposed acquisition of NFS by BayBanks, Inc. ("BayBanks"). Under the terms of
an Acquisition Agreement dated December 22, 1994 between NFS and BayBanks, a
subsidiary of BayBanks is to merge with NFS. Upon consummation of the merger,
NFS will become a wholly-owned subsidiary of BayBanks and NFS shareholders will
receive $20.15 in cash and .2038 shares of BayBanks common stock in exchange for
each of their shares of NFS common stock. This consideration is subject to
adjustment in certain circumstances, as described in the accompanying
Prospectus/Proxy Statement.
BayBanks is one of the leading bank holding companies in New England. Your
Board of Directors believes that the merger is in the best interests of the
shareholders of NFS and has unanimously approved the merger. In arriving at its
decision, the Board considered a number of factors, including the opinion of
NFS's financial advisor, Tucker Anthony Incorporated, as to the fairness from a
financial point of view of the consideration to be received by NFS's
shareholders. Information about BayBanks and details of the proposed merger are
included in the attached Prospectus/Proxy Statement. I urge you to read these
materials carefully. If you have any questions about the meeting, you may call
Barbara J. Foran, Secretary of NFS, at the above number.
In addition, the normal annual meeting business will be conducted,
including election of three members of the Board of Directors of NFS, who will
continue to hold office until the merger is consummated, and ratification of the
appointment of independent auditors.
We appreciate the loyalty and support our shareholders have demonstrated
over the years. We hope that you will continue this support by voting FOR the
merger proposal now. I intend to vote FOR the proposal, and recommend that all
shareholders do the same. Approval of the merger requires the vote of 2/3 of the
NFS shares. THEREFORE, REGARDLESS OF THE NUMBER OF SHARES YOU MAY OWN, IT IS
IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. ACCORDINGLY, PLEASE
PROMPTLY SIGN AND RETURN YOUR PROXY CARD IN THE ENVELOPE PROVIDED, WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING.
Sincerely,
/s/ JAMES H. ADAMS
James H. Adams
President and Chief Executive Officer
NOTE: PLEASE DO NOT SEND IN YOUR STOCK CERTIFICATES AT THE PRESENT TIME.
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NFS FINANCIAL CORP.
157 MAIN STREET
NASHUA, NEW HAMPSHIRE 03060
(603) 880-2011
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, APRIL 25, 1995
------------------------
NOTICE IS HEREBY GIVEN that the 1995 Annual Meeting of Shareholders of NFS
Financial Corp. ("NFS") will be held on Tuesday, April 25, 1995, at 11:00 a.m.,
at the Sheraton Tara located on Tara Boulevard, Nashua, New Hampshire, for the
following purposes:
(1) To approve and adopt the Acquisition Agreement dated December 22,
1994 between NFS, BayBanks, Inc. and BayBank New Hampshire, Inc.;
(2) To elect three directors, in accordance with the Restated
Certificate of Incorporation;
(3) To ratify the appointment by the Board of Directors of the firm of
KPMG Peat Marwick LLP as independent auditors of NFS for the
fiscal year ending December 31, 1995; and
(4) To transact such other business as may be in furtherance of or
incidental to the foregoing or as may properly come before the
meeting or any adjournments thereof.
Pursuant to the NFS By-laws, the Board of Directors has fixed the close of
business on March 6, 1995 as the record date for the determination of
shareholders entitled to notice of and to vote at the Annual Meeting. Only
holders of common stock of record at the close of business on that date will be
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof. A list of the shareholders of NFS entitled to vote at the Annual
Meeting will be open to the examination of any shareholder for any purpose
germane to the meeting during ordinary business hours for a period of ten (10)
days before the meeting at the offices of NFS.
By Order of the Board of Directors,
/s/ JAMES H. ADAMS
James H. Adams
President and Chief Executive Officer
Nashua, New Hampshire
March 21, 1995
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR
NOT YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE SIGN, DATE
AND COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE MEETING
AND WISH TO VOTE IN PERSON, YOUR PROXY WILL NOT BE USED.
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PROSPECTUS AND PROXY STATEMENT
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BAYBANKS, INC. NFS FINANCIAL CORP.
175 FEDERAL STREET 157 MAIN STREET
BOSTON, MASSACHUSETTS 02110 NASHUA, NEW HAMPSHIRE 03060
(617) 482-1040 (603) 880-2011
PROSPECTUS PROXY STATEMENT
COMMON STOCK, $2.00 PAR VALUE FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 25, 1995
</TABLE>
This Prospectus and Proxy Statement (the "Prospectus/Proxy Statement"),
which is first being mailed on or about March 21, 1995, is being furnished to
shareholders of NFS Financial Corp., a Delaware corporation ("NFS"), in
connection with the solicitation by the Board of Directors of NFS of proxies to
be used at the 1995 Annual Meeting of Shareholders of NFS (the "NFS Annual
Meeting") to be held on Tuesday, April 25, 1995 and any adjournments or
postponements thereof.
The principal item on the agenda at the NFS Annual Meeting will be to vote
on approving the proposed acquisition of NFS by BayBanks, Inc. ("BayBanks")
pursuant to the terms of an Acquisition Agreement dated December 22, 1994 (the
"Acquisition Agreement") between NFS, BayBanks and BayBank New Hampshire, Inc.
("BBNH"). The Acquisition Agreement is attached as Appendix A to this
Prospectus/Proxy Statement and is incorporated herein by reference.
In accordance with the terms of the Acquisition Agreement, BBNH, a
wholly-owned subsidiary of BayBanks, will be merged into NFS (the "Merger"),
resulting in NFS becoming a wholly-owned subsidiary of BayBanks. The outstanding
shares of common stock of NFS, $0.01 par value ("NFS Common Stock"), will each
be converted into the right to receive $20.15 in cash and 0.2038 shares of the
common stock, $2.00 par value, of BayBanks ("BayBanks Common Stock"), as
described in detail in this Prospectus/Proxy Statement. This consideration is
subject to adjustment in certain circumstances, as provided in the Acquisition
Agreement and described in detail in this Prospectus/Proxy Statement under
"Terms of the Merger -- Conversion of NFS Common Stock."
Under Delaware law, NFS shareholders have certain rights of appraisal in
connection with the Merger. See "Terms of the Merger -- NFS Shareholder
Appraisal Rights."
This Prospectus/Proxy Statement is also the prospectus of BayBanks covering
the shares of BayBanks Common Stock to be issued pursuant to the Acquisition
Agreement.
Because of the uncertainty of the timing of the receipt of the required
regulatory approvals, if granted, the Merger may not be consummated for several
months after the approval of the Acquisition Agreement by the shareholders of
NFS. In accordance with the Acquisition Agreement, the Board of Directors of NFS
is soliciting shareholder approval of the Acquisition Agreement at this time to
be in a position to consummate the Merger as soon as practicable after the
receipt of the required regulatory approvals.
In addition, shareholders will conduct the usual annual meeting business,
including the election of three members of the NFS Board of Directors, who will
continue to hold office until the Merger is consummated, and the ratification of
the appointment of KPMG Peat Marwick LLP ("KPMG") as independent auditors of NFS
for the fiscal year ending December 31, 1995.
THE ABOVE MATTERS ARE DISCUSSED IN DETAIL IN THIS PROSPECTUS/PROXY
STATEMENT. THE PROPOSED MERGER IS A COMPLEX TRANSACTION. SHAREHOLDERS ARE
STRONGLY URGED TO READ AND CONSIDER CAREFULLY THIS PROSPECTUS/PROXY STATEMENT IN
ITS ENTIRETY.
THE SHARES OF BAYBANKS COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR NON-BANK SUBSIDIARY
<PAGE> 6
OF BAYBANKS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE BANK INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND, OR ANY OTHER
GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROSPECTUS/PROXY STATEMENT, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS/PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES OFFERED BY THIS
PROSPECTUS/PROXY STATEMENT OR A SOLICITATION OF A PROXY IN ANY JURISDICTION
WHERE, OR TO OR FROM ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION OF AN OFFER OR PROXY SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS/PROXY STATEMENT NOR ANY DISTRIBUTION OF THE SECURITIES OFFERED
PURSUANT TO THIS PROSPECTUS/PROXY STATEMENT SHALL CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF BAYBANKS OR NFS SINCE THE DATE OF
THIS PROSPECTUS/PROXY STATEMENT OR THAT THE INFORMATION IN THIS PROSPECTUS/PROXY
STATEMENT OR IN THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE IS CORRECT AS OF
ANY TIME AFTER THE DATES HEREOF OR THEREOF.
The date of this Prospectus/Proxy Statement is March 21, 1995, and it is
first being mailed or delivered to NFS shareholders on or about that date.
<PAGE> 7
TABLE OF CONTENTS
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PAGE
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AVAILABLE INFORMATION................................................................. 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................... 1
SUMMARY............................................................................... 3
SELECTED FINANCIAL DATA............................................................... 8
Summary Financial Data.............................................................. 8
Comparative Per Share Financial Information......................................... 10
Comparative Stock Prices............................................................ 11
NFS ANNUAL MEETING.................................................................... 12
Matters to be Considered at the Meeting............................................. 12
Record Date; Outstanding Securities................................................. 12
Required Votes; Voting of Proxies................................................... 12
Agreement to Vote in Favor.......................................................... 13
Security Ownership of Certain Beneficial Owners and Management...................... 13
Shareholder Assistance.............................................................. 13
BAYBANKS, INC......................................................................... 14
BACKGROUND AND NFS's REASONS FOR THE MERGER........................................... 16
Background of the Merger............................................................ 16
Recommendation of the Board of Directors; NFS's Reasons for the Merger.............. 18
Opinion of Financial Advisor........................................................ 19
TERMS OF THE MERGER................................................................... 23
General............................................................................. 23
Conversion of NFS Common Stock...................................................... 23
Exchange of Certificates............................................................ 24
Conditions of Merger................................................................ 24
Regulatory Approvals Required....................................................... 26
Waiver and Amendment................................................................ 27
Termination......................................................................... 27
Termination Fee; No Solicitation.................................................... 28
Affiliate Letter; Resales of BayBanks Common Stock.................................. 28
Interests of Certain Persons in the Acquisition..................................... 29
Certain Federal Income Tax Consequences............................................. 30
Accounting Treatment................................................................ 31
Merger and Closing Date............................................................. 31
Treatment of NFS Options............................................................ 31
Conduct of NFS's Business Pending the Merger........................................ 31
Expenses............................................................................ 33
NFS Shareholder Appraisal Rights.................................................... 33
Option Agreement.................................................................... 34
COMPARISON OF RIGHTS OF HOLDERS OF BAYBANKS AND
NFS COMMON STOCK.................................................................... 36
ELECTION OF DIRECTORS................................................................. 42
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS................................... 44
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NFS CORPORATE MATTERS................................................................. 44
Corporate Governance................................................................ 44
Executive Compensation.............................................................. 45
NFS Performance..................................................................... 48
Report On Executive Compensation.................................................... 48
Stock Owned By Management........................................................... 51
Principal Holders Of Voting Securities.............................................. 52
Deadline for Shareholder Nominations and Proposals.................................. 52
LEGAL OPINIONS........................................................................ 52
EXPERTS............................................................................... 53
FINANCIAL ADVISOR..................................................................... 53
EXPENSES OF SOLICITATION.............................................................. 53
OTHER MATTERS......................................................................... 53
ACCOMPANYING REPORTS.................................................................. 53
APPENDICES
A -- Acquisition Agreement............................................................ A-1
B -- Option Agreement................................................................. B-1
C -- Form of Affiliate Letter......................................................... C-1
D -- Opinion of Tucker Anthony Incorporated on the Fairness of the Merger
Consideration....................................................................... D-1
E -- Section 262 of the Delaware General Corporation Law.............................. E-1
</TABLE>
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AVAILABLE INFORMATION
BayBanks and NFS are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, file periodic reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission")
relating to their respective businesses, financial statements and other matters.
Reports, proxy and information statements filed pursuant to Sections 14(a) and
14(c) of the Exchange Act and other information filed with the Commission as
well as copies of the Registration Statement, of which this Prospectus/Proxy
Statement is a part, can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549, and at the following Regional Offices
of the Commission: Midwest Regional Office, 500 West Madison Avenue, Suite 1400,
Chicago, Illinois 60661; and Northeast Regional Office, 7 World Trade Center,
13th Floor, New York, New York 10048. Copies of such material can also be
obtained at prescribed rates from the Public Reference Section of the Commission
at its principal office at 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549.
BayBanks has filed with the Commission a registration statement on Form S-4
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the securities offered hereby (together with all amendments and
exhibits, the "Registration Statement"). This Prospectus/Proxy Statement also
constitutes the prospectus of BayBanks filed as part of the Registration
Statement and does not contain all of the information set forth in the
Registration Statement and the exhibits thereto, certain parts of which are
omitted in accordance with the rules and regulations of the Commission.
Statements made in this Prospectus/Proxy Statement as to the contents of any
contract, agreement or other document referred to are not necessarily complete.
With respect to each such contract, agreement or other document filed as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference. The Registration
Statement and any amendments thereto, including exhibits filed or incorporated
by reference as a part thereof, are available for inspection and copying at the
Commission's offices as described above. All information herein with respect to
NFS and its shareholders has been furnished by NFS.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by BayBanks with the Commission
(File No. 0-959) under the Exchange Act are incorporated by reference herein,
except as superseded or modified herein:
(1) BayBanks's annual report on Form 10-K for the year ended December
31, 1994.
(2) BayBanks's current report on Form 8-K filed with the Commission on
January 4, 1995.
(3) The description of the BayBanks Common Stock contained in its
Registration Statement filed under Section 12 of the Exchange Act,
including any amendment or reports filed for the purpose of
updating any such description.
(4) All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal period covered by the
annual report referred to in (1) above.
The following documents heretofore filed by NFS with the Commission (File
No. 0-13795) under the Exchange Act are incorporated by reference herein, except
as superseded or modified herein:
(1) NFS's annual report on Form 10-K for the year ended December 31,
1994.
(2) NFS's current report on Form 8-K filed with the Commission on
January 3, 1995.
(3) The description of the NFS Common Stock contained in NFS's
Registration Statement on Form S-1 (File No. 33-6030) under the
heading "Description of Capital Stock -- Holding Company Stock,"
including any amendment or report filed thereunder for the purpose
of updating such description.
1
<PAGE> 10
(4) All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal period covered by the
annual report referred to in (1) above.
All documents filed by BayBanks and NFS pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus/Proxy
Statement and before the date of the NFS Annual Meeting shall be deemed to be
incorporated by reference in this Prospectus/Proxy Statement and to be a part
hereof from the date of filing such documents.
Any statement contained in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document which also is or is deemed to be incorporated
herein by reference) 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 Prospectus/Proxy Statement.
THIS PROSPECTUS/PROXY STATEMENT INCORPORATES BY REFERENCE DOCUMENTS OF
BAYBANKS AND NFS THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF
SUCH DOCUMENTS THAT RELATE TO BAYBANKS (NOT INCLUDING EXHIBITS THERETO, UNLESS
SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE IN THE INFORMATION
INCORPORATED HEREIN BY REFERENCE) ARE AVAILABLE WITHOUT CHARGE TO EACH PERSON TO
WHOM A COPY OF THIS PROSPECTUS/ PROXY STATEMENT IS DELIVERED, UPON WRITTEN OR
ORAL REQUEST, FROM MICHAEL W. VASILY, EXECUTIVE VICE PRESIDENT AND TREASURER, AT
THE EXECUTIVE OFFICES OF BAYBANKS, 175 FEDERAL STREET, BOSTON, MASSACHUSETTS
02110 (TELEPHONE (617) 482-1040). COPIES OF SUCH DOCUMENTS THAT RELATE TO NFS
(NOT INCLUDING EXHIBITS THERETO, UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE IN THE INFORMATION INCORPORATED HEREIN BY REFERENCE)
ARE AVAILABLE WITHOUT CHARGE TO EACH PERSON TO WHOM A COPY OF THIS
PROSPECTUS/PROXY STATEMENT IS DELIVERED, UPON WRITTEN OR ORAL REQUEST, FROM
ALBERT R. RIETHEIMER, CHIEF FINANCIAL OFFICER AND TREASURER, AT THE EXECUTIVE
OFFICES OF NFS, 157 MAIN STREET, NASHUA, NEW HAMPSHIRE 03060 (TELEPHONE (603)
880-2011). IN ORDER TO ENSURE TIMELY DELIVERY OF THESE DOCUMENTS, ANY REQUEST
SHOULD BE MADE BY APRIL 18, 1995.
2
<PAGE> 11
SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information contained elsewhere in this Prospectus/Proxy Statement,
including the exhibits hereto. You are urged to read this Prospectus/Proxy
Statement, the Acquisition Agreement, which is attached hereto as Appendix A and
incorporated herein by reference, and the other exhibits attached hereto in
their entirety. Cross-references in this summary are to captions in this
Prospectus/Proxy Statement. Certain capitalized terms used in this summary are
defined in the Acquisition Agreement or elsewhere in this Prospectus/Proxy
Statement.
THE PARTIES
BAYBANKS
BayBanks, a Massachusetts corporation, was established in 1928 and is one
of the largest bank holding companies in New England. Through its bank and
non-bank subsidiaries, it provides a complete range of banking, investment, and
related financial services in the New England region, with particular emphasis
on consumer and middle market business customers. A recognized leader in
consumer banking, BayBanks has an extensive banking network with 205
full-service offices and 366 automated banking facilities serving 151 cities and
towns in Massachusetts and two in Connecticut. BayBanks's strategy is to use
state-of-the-art computer and telecommunications technology to provide superior
products and services to its customers. It offers a wide variety of products,
including FDIC-insured checking, money market, savings and time deposit
accounts, credit cards, home mortgages and home equity financing, instalment
loans, and trust and private banking services. BayBanks operates the proprietary
X-Press 24(R) and X-Press 24 Cash(R) automated teller machine ("ATM") networks,
with more than 1,300 ATMs in New England, and participates in the CIRRUS and
NYCE ATM Networks. BayBanks also provides a comprehensive range of credit,
deposit, cash management, international banking, and related services to
business and not-for-profit customers, with particular emphasis on the middle
market. Non-bank subsidiaries provide instalment loan, credit card, and mortgage
loan and servicing operations, and brokerage, investment management, and general
management services to BayBanks's subsidiaries and their customers. Bank and
non-bank subsidiaries also act as investment advisers to BayFunds(R), BayBanks's
proprietary mutual fund family. As of December 31, 1994, BayBanks had total
assets of $10.8 billion, total deposits of $9.0 billion, and total stockholders'
equity of $789 million. See "BayBanks, Inc." BayBanks's net income for 1994 was
$107.4 million, or $5.60 per share, both new highs for BayBanks, which represent
a 57% increase on a per share basis over 1993 net income. BayBanks's executive
offices are located at 175 Federal Street, Boston, Massachusetts 02110. Its
telephone number is (617) 482-1040.
BBNH is a wholly-owned subsidiary of BayBanks incorporated in Delaware in
1995 for the sole purpose of effecting the Merger. BBNH's executive offices are
located at 175 Federal Street, Boston, Massachusetts 02110. Its telephone number
is (617) 482-1040.
NFS
NFS is a savings and loan holding company incorporated in Delaware in 1986.
It provides a full range of financial services to customers located throughout
southern New Hampshire and in the Pepperell, Massachusetts area through its two
federal savings bank subsidiaries, NFS Savings Bank, FSB ("NFS Savings") and
Plaistow Co-operative Bank, FSB ("Plaistow Co-operative," together with NFS
Savings, the "NFS Banks"). As of December 31, 1994, NFS had total assets of $619
million, total deposits of $515 million, and total stockholders' equity of $56
million. NFS's principal executive offices are located at 157 Main Street,
Nashua, New Hampshire 03060. Its telephone number is (603) 880-2011.
3
<PAGE> 12
NFS ANNUAL MEETING
THE MEETING
The NFS Annual Meeting will be held on April 25, 1995, at 11:00 a.m., at
the Sheraton Tara located on Tara Boulevard, Nashua, New Hampshire. At the NFS
Annual Meeting, the shareholders of NFS will be asked to (i) approve and adopt
the Acquisition Agreement, (ii) elect three directors and (iii) ratify the
selection of KPMG as NFS's independent auditors for the current fiscal year. The
Board of Directors of NFS has fixed the close of business on March 6, 1995 as
the record date for determining shareholders entitled to notice of and to vote
at the NFS Annual Meeting (the "Record Date"). At the close of business on the
Record Date, 2,789,763 shares of NFS Common Stock were outstanding.
REQUIRED VOTES; AFFILIATE LETTER
The affirmative vote of the holders of two-thirds of the shares of NFS
Common Stock outstanding as of the Record Date and entitled to vote is required
to approve and adopt the Acquisition Agreement, which is a condition to
consummation of the Merger. Directors will be elected by a plurality of the
votes properly cast at the meeting, and the selection of auditors will be
ratified by a majority of such votes. In a letter delivered to BayBanks (the
"Affiliate Letter"), directors and executive officers of NFS who beneficially
own approximately 3% of the outstanding shares of NFS Common Stock have agreed
to vote FOR the approval of the Acquisition Agreement. See "Terms of the
Merger -- Affiliate Letter; Resales of BayBanks Common Stock." BayBanks and its
subsidiaries, directors, and executive officers own no such shares, although
BayBanks is deemed under Commission rules to be the beneficial owner of the
shares subject to the Option. See "NFS Annual Meeting -- Security Ownership of
Certain Beneficial Owners and Management" and "NFS Corporate
Matters -- Principal Holders of Voting Securities."
THE MERGER
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS OF NFS
The Merger will permit BayBanks to expand its operations directly into the
southern New Hampshire market through NFS's existing branch system and
relationships. This will be a natural extension of BayBanks's already strong
presence in the Massachusetts portion of the Merrimack Valley. See "BayBanks,
Inc."
The Merger will enable NFS shareholders to maximize the value of their
shares both by a sale at a premium over the preexisting market price and by
becoming stockholders in a larger financial institution with a more diversified
market opportunity. The NFS Board considers the composition of the proposed
Merger Consideration of cash and BayBanks Common Stock that NFS shareholders
will receive in exchange for their NFS Common Stock to be advantageous for NFS
shareholders, since they will obtain cash liquidity, including liquidity to meet
any tax obligations, as well as acquiring stock in a company with a ready
trading market. The NFS Board also considered the financial information and
analysis prepared by Tucker Anthony Incorporated ("Tucker Anthony"), financial
advisor to NFS, and its opinion that the consideration to be paid in the Merger
is fair, from a financial point of view, to NFS shareholders. The opportunity
for growth of the NFS banking operations should be enhanced by the addition of
BayBanks's financial and managerial resources, and the expanded range of
products and services that will be offered through the NFS branch network will
benefit NFS's customers.
The Board of Directors of NFS believes for the reasons set forth herein
that the Merger is in the best interests of the NFS shareholders and unanimously
recommends a vote in favor of approving and adopting the Acquisition Agreement.
See "Background and NFS's Reasons for the Merger."
4
<PAGE> 13
OPINION OF NFS'S FINANCIAL ADVISOR
Tucker Anthony has rendered written opinions to the Board of Directors of
NFS to the effect that, as of December 22, 1994 and as of the date of this
Prospectus/Proxy Statement, the consideration to be received by the shareholders
of NFS in the Merger is fair, from a financial point of view, to such
shareholders.
The full text of the fairness opinion as of the date of this
Prospectus/Proxy Statement, setting forth the assumptions made, the procedures
followed, the matters considered and certain limitations on the review
undertaken by Tucker Anthony, is included in Appendix D to this Prospectus/Proxy
Statement and should be read in its entirety. See "Background and NFS's Reasons
for the Merger -- Opinion of Financial Advisor."
PRINCIPAL TERMS OF THE MERGER
BayBanks's acquisition of NFS will be structured as a merger of BBNH into
NFS. Following the Merger, NFS will be the surviving corporation and will
operate as a wholly-owned subsidiary of BayBanks under the name BayBank New
Hampshire, Inc. On the date on which the Merger is consummated (the "Closing
Date"), each issued and outstanding share of NFS Common Stock, other than
Dissenting Shares, shall, by virtue of the Merger, automatically and without any
action on the part of the holder thereof, be converted into the right to receive
(i) $20.15 in cash and (ii) 0.2038 shares of BayBanks Common Stock (the "Merger
Consideration"). The Merger Consideration was agreed to as a result of
arm's-length negotiations between representatives of BayBanks and NFS, during
which NFS had the benefit of advice from Tucker Anthony, its financial advisor.
The total value of the Merger Consideration when the NFS Board of Directors
approved the Acquisition Agreement was approximately $31.00 per share of NFS
Common Stock, based on the closing sale price for the BayBanks Common Stock on
December 21, 1994 of $53.25, and the total value of the Merger Consideration on
March 13, 1995 was $32.63 per share, based on the closing sale price for the
BayBanks Common Stock on that date of $61.25.
Under the Acquisition Agreement, the Merger Consideration is subject to
adjustment as follows. If, as of the closing date of the Merger, the Closing
Market Value of BayBanks Common Stock (determined as described below) is less
than $43.50 per share (which would result in a per share Merger Consideration of
less than $29.00), NFS has the right to terminate the Acquisition Agreement.
However, BayBanks may elect to negate the termination by increasing the Merger
Consideration to an aggregate of $29.00 per share. The increase can be through
an increase in either the cash or the BayBanks Common Stock portion of the
Merger Consideration or, alternatively, BayBanks may elect to pay all cash at
$29.00 per share. NFS may elect not to terminate the Acquisition Agreement even
if the Closing Market Value of BayBanks Common Stock falls below $43.50 per
share. In determining whether to terminate the Agreement in those circumstances,
the NFS Board of Directors will take into account, consistent with its fiduciary
duties, all relevant facts and circumstances existing at the time, including,
without limitation, whether BayBanks is prepared to increase the per share
Merger Consideration, the market for financial institution stocks in general,
the relative value of the BayBanks Common Stock in the market and the advice of
its financial advisors and legal counsel. By approving the Acquisition
Agreement, the NFS shareholders would be permitting the Board of Directors to
determine, in the exercise of its fiduciary duties, to proceed with the Merger
even though the per share Merger Consideration was less than $29.00 because the
Closing Market Value of the BayBanks Common Stock was below $43.50 per share. In
such event, the per share Merger Consideration to be received by the NFS
Shareholders would in any event include the $20.15 cash portion, plus the then
Closing Market Value of 0.2038 shares of BayBanks Common Stock. The Board of
Directors of NFS has made no determination as to the circumstances in which it
would elect not to terminate the Agreement even if the Closing Market Value of
the BayBanks Common Stock fell below $43.50 per share.
If, as of the Closing Date, the Closing Market Value of BayBanks Common
Stock is greater than $63.00 per share, the BayBanks Common Stock portion of the
Merger Consideration will be reduced so that the Merger Consideration equals
$33.00 per share. Under the Acquisition Agreement, the Closing Market Value of
the BayBanks Common Stock as of any day is equal to the average of the closing
sale price of the BayBanks Common Stock, as reported on the Nasdaq National
Market, on each of the 10 trading days immediately preceding the second business
day before such day. See "Terms of the Merger -- Conversion of NFS Common Stock"
and "-- Exchange of Certificates."
5
<PAGE> 14
The Merger will become effective upon the filing of a certificate of merger
with the Secretary of State of Delaware, unless a different date and time is
specified as the effective time in the certificate of merger. BayBanks and NFS
have targeted the third quarter of 1995 for completion of the Merger. See "Terms
of the Merger -- Merger and Closing Date." In the event that the Merger is
consummated after September 1, 1995 and NFS's shareholders have approved the
Acquisition Agreement before that date, the cash amount payable for each issued
and outstanding share of NFS Common Stock will be increased by $0.005 per day
from and including September 1, 1995 until consummation of the Merger.
EXCHANGE OF CERTIFICATES
As soon as practicable after the Closing Date, BayBanks shall cause the
Exchange Agent to mail to the holders of record of NFS Common Stock at the
Closing Date instructions for surrendering their certificate(s) representing NFS
Common Stock in exchange for certificate(s) representing BayBanks Common Stock.
The Exchange Agent will mail each NFS shareholder a check for the cash portion
of the Merger Consideration at the same time as it mails the BayBanks Common
Stock certificate. NFS shareholders are requested not to surrender their NFS
Common Stock certificates for exchange until they receive a letter of
instruction from the Exchange Agent. See "Terms of the Merger -- Exchange of
Certificates."
CONDITIONS OF THE MERGER; REGULATORY APPROVALS
The respective obligations of BayBanks and NFS to effect the Merger are
subject to satisfaction, on or prior to the Closing Date, of certain conditions
customary in a transaction of this nature, including, but not limited to: (i)
the Acquisition Agreement shall not have been terminated in accordance with its
terms; (ii) approval of the Acquisition Agreement and the transactions
contemplated thereby by the appropriate regulatory authorities, including the
Office of Thrift Supervision, the Board of Governors of the Federal Reserve
System, the New Hampshire Board of Trust Company Incorporation, and the
Massachusetts Board of Bank Incorporation; (iii) approval and adoption of the
Acquisition Agreement and the Merger by the requisite vote of NFS shareholders;
(iv) receipt of all necessary state securities law permits and other
authorizations required in connection with the issuance of BayBanks Common Stock
in the Merger; (v) the Registration Statement shall have been declared effective
by the Commission, and shall remain effective and not be subject to a stop order
or any threatened stop order suspending its effectiveness; and (vi) the absence
of any action that would have the effect of making the Merger illegal or
otherwise restricting, preventing or prohibiting consummation of the
transactions contemplated by the Acquisition Agreement, including the Merger.
See "Terms of the Merger -- Conditions of Merger" and "-- Regulatory Approvals
Required."
TERMINATION
The Acquisition Agreement may be terminated prior to the Closing Date in
certain circumstances, including if the Closing has not occurred by December 31,
1995 for any reason other than a default by the party seeking to terminate and
if the Acquisition Agreement is not approved by NFS's shareholders. See "Terms
of the Merger -- Termination."
TERMINATION FEE; NO SOLICITATION
In the event the Acquisition Agreement is terminated and certain
circumstances occur involving the acquisition or proposed acquisition of NFS by
another party, NFS may be required to pay BayBanks a termination fee of
$900,000. See "Terms of the Merger -- Termination Fee; No Solicitation" and
"-- Termination."
Subject to the provisions of the Acquisition Agreement, NFS has agreed
that, from the date of the Acquisition Agreement through the Closing Date,
neither NFS nor any of its subsidiaries, nor any of its or their directors,
officers, advisors or other representatives may, directly or indirectly, without
the prior written consent of BayBanks, solicit or encourage the solicitation
from, or, subject to the conditions set forth in the Acquisition Agreement,
engage in negotiations with, any third party concerning any possible proposal
regarding the issuance or sale of NFS Common Stock or other equity securities of
NFS or a merger, consolidation or sale of substantial assets or other similar
transaction involving NFS or any of its subsidiaries. See "Terms of the
Merger -- Termination Fee; No Solicitation."
6
<PAGE> 15
BAYBANKS STOCK OPTION
At the time of execution of the Acquisition Agreement, BayBanks and NFS
entered into an Option Agreement pursuant to which NFS granted BayBanks an
option to purchase up to 274,266 shares of NFS Common Stock, representing
approximately 9.9% of the shares of NFS Common Stock outstanding on December 22,
1994. The option is exercisable upon the occurrence of certain events
principally involving the acquisition or proposed acquisition of NFS by a party
other than BayBanks. See "Terms of the Merger -- Option Agreement."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendations of NFS's Board of Directors with respect
to the Merger, shareholders should be aware that certain members of the Board of
Directors and management of NFS have certain interests in the Merger that are in
addition to the interests of shareholders of NFS generally. The prospective
affiliation with BayBanks may provide expanded employment opportunities for
management. In this connection, BayBanks has agreed with James H. Adams, the
President and a director of NFS, to support a one-year extension of his
employment agreement, to August 1998, when the agreement is next reviewed. In
addition, because the transaction with BayBanks constitutes a change in control
of NFS, certain members of NFS management will receive severance payments if
their employment terminates within prescribed periods following the transaction.
The Board of Directors of NFS was aware of these interests and considered them,
among other matters, in approving and adopting the Acquisition Agreement and the
transactions contemplated thereby. See "Terms of the Merger -- Interests of
Certain Persons in the Acquisition."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger will be treated as a taxable sale of the Common Stock of NFS.
Accordingly, none of NFS, BayBanks or BBNH will recognize any gain or loss as a
result of the Merger. NFS shareholders who exchange their NFS shares for cash
and BayBanks Common Stock will be treated as if they sold their NFS shares in a
fully taxable transaction for the cash and BayBanks Common Stock they receive.
See "Terms of the Merger -- Certain Federal Income Tax Consequences."
CONDUCT OF NFS'S BUSINESS PENDING THE MERGER
NFS has made certain covenants and agreements in the Acquisition Agreement
relating to, among other things, the conduct of its business pending the
consummation of the Merger, including (i) actions taken by NFS in relation to
issuing shares of stock, (ii) actions relating to employment and compensation,
(iii) payment of dividends on NFS Common Stock, (iv) securities trading
activity, (v) acquisition transactions, and other matters. See "Terms of the
Merger -- Conduct of NFS's Business Pending the Merger."
NFS SHAREHOLDER APPRAISAL RIGHTS
The Delaware General Corporation Law ("DGCL") gives NFS's shareholders the
right to demand appraisal of their shares. NFS shareholders who demand appraisal
of their shares in accordance with the DGCL ("Dissenting Shareholders") have the
right to be paid the "fair value" of their shares (excluding any appreciation or
depreciation in anticipation of the Merger) as determined by a court. In order
to exercise these appraisal rights under the DGCL, an NFS shareholder must (i)
deliver a written demand for appraisal to NFS prior to the taking of the vote on
the Merger, (ii) not vote in favor of the Merger and (iii) follow the other
procedures described by the DGCL. See "Terms of the Merger -- NFS Shareholder
Appraisal Rights" and Appendix E -- Section 262 of the Delaware General
Corporation Law.
It is a condition to BayBanks's obligation to consummate the Merger that
immediately prior to the Closing Date the holders of not more than 330,000
shares of NFS Common Stock shall have properly perfected their appraisal rights
under the DGCL.
7
<PAGE> 16
SELECTED FINANCIAL DATA
SUMMARY FINANCIAL DATA
The summary financial data set forth below for BayBanks and NFS are derived
from the audited financial statements of each company. The financial data should
be read in conjunction with the historical financial statements and notes
thereto, and related Management's Discussion and Analysis of Financial Condition
and Results of Operations, of BayBanks and NFS incorporated by reference in this
Prospectus/Proxy Statement from their respective Annual Reports on Form 10-K.
Amounts are in thousands, except for per share amounts.
BAYBANKS
<TABLE>
<CAPTION>
YEAR-ENDED DECEMBER 31
---------------------------------------------------------------------
1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
Interest income(1)............ $ 657,800 $ 590,471 $ 656,521 $ 814,858 $ 925,074
Interest expense.............. 192,858 166,648 240,009 417,962 542,442
----------- ----------- ----------- ----------- -----------
Net interest income........... 464,942 423,823 416,512 396,896 382,632
Provision for loan losses..... 24,000 36,500 106,836 165,400 289,958
----------- ----------- ----------- ----------- -----------
Net interest income after
provision for loan losses... 440,942 387,323 309,676 231,496 92,674
Noninterest income............ 207,288 198,524 183,881 169,753 155,811
Net securities gains.......... 203 411 76,929 40,963 19,582
Operating expense............. 457,170 446,705 429,316 398,359 378,503
Provision for OREO reserve,
net......................... 9,372 24,830 45,482 27,450 14,582
----------- ----------- ----------- ----------- -----------
Total operating expense after
OREO provision.............. 466,542 471,535 474,798 425,809 393,085
Income (loss) before income
taxes and cumulative effect
of accounting change........ 181,891 114,723 95,688 16,403 (125,018)
Income taxes (benefit)........ 73,522 47,072 36,451 6,748 (55,216)
----------- ----------- ----------- ----------- -----------
Income (loss) before
cumulative effect of
accounting change........... 108,369 67,651 59,237 9,655 (69,802)
Less cumulative effect of
accounting change........... 932 -- -- -- --
----------- ----------- ----------- ----------- -----------
Net income (loss)............. $ 107,437 $ 67,651 $ 59,237 $ 9,655 $ (69,802)
========== ========== ========== ========== ==========
PER SHARE DATA
Net income (loss)............. $ 5.60(2) $ 3.57 $ 3.57 $ 0.60 $ (4.37)
Cash dividends declared....... 1.60 0.90 -- -- 1.05
Book value.................... 41.51 37.52 34.81 31.30 30.49
Average shares outstanding.... 19,173,524 18,953,397 16,575,768 16,021,645 15,965,653
PERIOD-END BALANCE SHEET DATA
Total assets.................. $10,770,947 $10,110,584 $ 9,896,286 $ 9,515,788 $10,081,993
Loans......................... 6,648,520 6,103,170 5,937,999 6,353,034 7,130,341
Short-term investments and
securities.................. 2,970,553 3,045,726 2,846,048 2,015,624 1,730,930
Earning assets................ 9,619,073 9,148,896 8,784,047 8,368,658 8,861,271
Deposits...................... 9,000,359 8,778,821 8,982,548 8,757,570 8,960,310
Stockholders' equity.......... 788,612 703,262 644,219 501,300 488,276
</TABLE>
- ---------------
(1) Interest income is recorded on an accrual basis. Thus, loans that are
nonperforming do not contribute to net interest income or the net interest
margin.
(2) Based on net income after accounting change. The per share effect of the
cumulative accounting change was $.05 per share.
8
<PAGE> 17
NFS
<TABLE>
<CAPTION>
YEAR-ENDED DECEMBER 31
-------------------------------------------------------------
1994 1993 1992 1991 1990
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
Interest income(1).................... $ 41,396 $ 40,723 $ 39,634 $ 46,158 $ 49,715
Interest expense...................... 18,438 19,415 22,320 32,478 36,445
--------- --------- --------- --------- ---------
Net interest income................... 22,958 21,308 17,314 13,680 13,270
Provision for loan losses............. 1,630 2,200 2,600 5,960 13,683
--------- --------- --------- --------- ---------
Net interest income after provision
for loan losses..................... 21,328 19,108 14,714 7,720 (413)
Noninterest income.................... 3,116 3,435 2,298 1,705 1,599
Net securities gains (losses)......... (23) 234 437 (2) (374)
Net OREO gains........................ 888 1,328 532 558 80
Noninterest expense................... 15,903 16,280 12,781 11,889 11,773
--------- --------- --------- --------- ---------
Income (loss) before income taxes and
cumulative effect of accounting
change.............................. 9,406 7,825 5,200 (1,908) (10,881)
Income taxes (benefit)................ 2,503 1,002 1,687 758 1,122
--------- --------- --------- --------- ---------
Income (loss) before cumulative effect
of accounting change................ 6,903 6,823 3,513 (2,666) (12,003)
Cumulative effect of accounting
change.............................. -- 4,473 -- -- --
--------- --------- --------- --------- ---------
Net income (loss)..................... $ 6,903 $ 11,296 $ 3,513 $ (2,666) $ (12,003)
======== ======== ======== ======== ========
PER SHARE DATA
Net income (loss)..................... $ 2.49 $ 4.09(2) $ 1.27 $ (0.97) $ (4.35)
Cash dividends declared............... 0.51 0.44 0.07 -- 0.21
Book value............................ 20.19 19.13 15.26 14.05 15.00
Average shares outstanding............ 2,766,771 2,761,367 2,761,367 2,761,367 2,761,367
PERIOD-END BALANCE SHEET DATA
Total assets.......................... $ 619,140 $ 612,906 $ 498,958 $ 517,032 $ 501,024
Loans................................. 438,748 412,607 336,477 345,291 371,347
Short-term investments and
securities.......................... 149,494 176,437 143,148 154,237 118,355
Earning assets........................ 588,242 589,044 479,625 499,528 489,702
Deposits.............................. 515,117 514,790 433,850 433,886 402,891
Stockholders' equity.................. 55,927 52,824 42,127 38,807 41,409
</TABLE>
- ---------------
(1) Interest income is recorded on an accrual basis. Thus, loans that are
nonperforming do not contribute fully to net interest income or the net
interest margin.
(2) Based on net income after accounting change. The per share effect of the
cumulative accounting change was $1.62 per share.
9
<PAGE> 18
COMPARATIVE PER SHARE FINANCIAL INFORMATION
The following summary sets forth certain unaudited per share information on
a historical basis for BayBanks and NFS, and then on a pro forma combined basis
for BayBanks and for NFS, both assuming consummation of the Merger as of the
beginning of the respective periods presented. For each period, the pro forma
data should be compared to the historical data. This information should be read
in conjunction with the consolidated historical financial statements of BayBanks
and NFS, including the respective notes thereto, which are incorporated by
reference in this Prospectus/Proxy Statement. See "Information Incorporated by
Reference." The pro forma data is presented for comparative purposes only and is
not necessarily indicative of the parties' combined financial position or
results of operations, either in the future or if the Merger had been
consummated during the periods or as of the dates for which the pro forma data
is presented.
BAYBANKS
<TABLE>
<CAPTION>
DECEMBER 31, 1993 DECEMBER 31, 1994
--------------------------- ---------------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Earnings per share(1).................. $ 3.57 $ 3.80 $ 5.60 $ 5.54
Cash dividends declared per share(2)... 0.90 0.90 1.60 1.60
Book value per share(3)................ 37.52 38.40 41.51 42.00
</TABLE>
NFS
<TABLE>
<CAPTION>
DECEMBER 31, 1993 DECEMBER 31, 1994
--------------------------- ---------------------------
EQUIVALENT EQUIVALENT
HISTORICAL PRO FORMA(4) HISTORICAL PRO FORMA(4)
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Earnings per share..................... $ 4.09(5) $ 7.03 $ 2.49 $ 4.29
Cash dividends declared per share...... 0.44 0.76 0.51 0.88
Book value per share................... 19.13 32.86 20.19 34.68
</TABLE>
- ---------------
(1) Earnings per share on a pro forma combined basis for BayBanks, assuming
consummation of the Merger at the beginning of the above disclosed periods,
takes into account: the combined net income of BayBanks and NFS; interest
income foregone, at an assumed rate of 5% tax effected at the combined
federal and state statutory rate of 43.15%, on $55.8 million paid to NFS
shareholders based on $20.15 per share multiplied by the number of
outstanding shares of NFS Common Stock; and the expense related to the
amortization of $40.5 million of goodwill over 15 years.
(2) Cash dividends declared per share on a pro forma combined basis for BayBanks
assuming consummation of the Merger were assumed to be unchanged.
(3) Book value per share on a pro forma combined basis for BayBanks, assuming
consummation of the Merger at the beginning of the above disclosed periods,
takes into account: the combined net income of BayBanks and NFS; interest
income foregone, at an assumed rate of 5% tax effected at the combined
federal and state statutory rate of 43.15%, on $55.8 million paid to NFS
shareholders based on $20.15 per share multiplied by the number of
outstanding shares of NFS Common Stock; the expense related to the
amortization of $40.5 million of goodwill over 15 years; and $36.4 million
related to the issuance of 683,239 shares of BayBanks Common Stock to NFS
shareholders, less dividends paid on those shares at the pro forma per share
amounts disclosed above.
(4) Pro forma amounts assume, for illustrative purposes only, 100% conversion of
each share of NFS Common Stock into .5822 shares of BayBanks Common Stock.
(5) NFS earnings per share for the year ended December 31, 1993 included a $4.5
million benefit related to the cumulative effect of adoption of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes."
Excluding the effect of the change in accounting principle, earnings per
share for 1993 were $2.47 and the related pro forma calculation was $4.24
per share.
10
<PAGE> 19
COMPARATIVE STOCK PRICES
BayBanks Common Stock and NFS Common Stock are quoted on the Nasdaq
National Market. The table below sets forth the high and low closing sales
prices for BayBanks Common Stock and NFS Common Stock as reported on the Nasdaq
National Market for the periods indicated.
<TABLE>
<CAPTION>
BAYBANKS NFS
------------- -----------------
YEAR HIGH LOW HIGH LOW
----------------------------------------------- ---- ---- ------ -----
<S> <C> <C> <C> <C>
1992........................................... $40 3/4 $18 3/4 $10 1/2 $3 3/4
1993........................................... $52 1/8 $38 1/4 $18 1/2 $9 3/4
1994........................................... $64 1/8 $50 $28 1/8 $15 1/4
1995 (through March 13, 1995).................. $64 1/4 $52 $31 1/4 $28 1/8
</TABLE>
On December 22, 1994, the last business day preceding the public
announcement of the proposed Merger on which BayBanks Common Stock and NFS
Common Stock traded on the Nasdaq National Market, the closing sales prices for
BayBanks Common Stock and NFS Common Stock as reported by the Nasdaq National
Market were $53.00 and $21.25, respectively. On March 13, 1995, such prices were
$61.25 and $31.25, respectively.
11
<PAGE> 20
NFS ANNUAL MEETING
MATTERS TO BE CONSIDERED AT THE MEETING
The NFS Annual Meeting will be held on April 25, 1995, at 11:00 a.m., at
the Sheraton Tara located on Tara Boulevard, Nashua, New Hampshire. At the NFS
Annual Meeting, the shareholders of NFS will consider and vote upon the approval
and adoption of the Acquisition Agreement under which (i) the Merger and the
other transactions contemplated by the Acquisition Agreement are to be
consummated, (ii) holders of NFS Common Stock are to receive the Merger
Consideration in exchange for the NFS Common Stock held by each of them as of
the Closing Date, (iii) options for NFS Common Stock are to be converted into
options to acquire BayBanks Common Stock and (iv) NFS is to become a
wholly-owned subsidiary of BayBanks. See "Terms of the Merger -- General,"
"-- Conversion of NFS Common Stock" and "-- Treatment of NFS Options." At the
NFS Annual Meeting, NFS shareholders will also elect three directors to the
Board of Directors and will be asked to ratify the NFS Board of Directors'
selection of KPMG as NFS's independent auditors for the current fiscal year.
RECORD DATE; OUTSTANDING SECURITIES
Only NFS shareholders of record at the close of business on March 6, 1995
will be entitled to receive notice of and to vote at the NFS Annual Meeting. At
that date, there were 2,789,763 shares of NFS Common Stock outstanding, each of
which is entitled to one vote. The presence, in person or by proxy, of at least
a majority of the total number of shares of NFS Common Stock outstanding will
constitute a quorum at the NFS Annual Meeting.
REQUIRED VOTES; VOTING OF PROXIES
Under NFS's Restated Certificate of Incorporation, the affirmative vote of
the holders of two-thirds of the outstanding shares of NFS Common Stock entitled
to vote is required to adopt the Acquisition Agreement. No vote of BayBanks
stockholders is required, or will be sought, to consummate the transaction. NFS
directors will be elected by a plurality of the votes properly cast at the NFS
Annual Meeting, and the selection of independent auditors will be ratified by
the affirmative vote of a majority of the votes cast.
All shares of NFS Common Stock represented in person or by proxy at the NFS
Annual Meeting (including proxies that abstain from one or more of the matters
presented at the meeting and broker non-votes, as described below) will be
tabulated to determine whether or not a quorum is present. Abstentions and
broker non-votes will be treated as shares that are present and entitled to vote
on each matter, but will not count as votes in favor of such matter.
Accordingly, an abstention from voting or a broker non-vote with respect to
adoption of the Acquisition Agreement would have the same legal effect as a vote
"against" adoption, while an abstention from voting or a broker non-vote with
respect to ratification of the independent auditors or the election of directors
would have no effect. A "broker non-vote" occurs when a broker holding a
customer's shares in the name of the broker receives no instructions to vote
those shares on a particular matter and indicates on the proxy that it does not
have discretionary authority to vote such shares on the matter.
All proxies that are properly executed and returned, unless previously
revoked, will be voted at the NFS Annual Meeting in accordance with the
instructions thereon. EXECUTED BUT UNMARKED PROXIES WILL BE VOTED (1) FOR THE
PROPOSAL TO APPROVE AND ADOPT THE ACQUISITION AGREEMENT; (2) FOR THE PROPOSAL TO
ELECT THE THREE NOMINEES OF THE BOARD OF DIRECTORS AS DIRECTORS; AND (3) FOR THE
PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT
AUDITORS OF NFS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1995. Except for
procedural matters incident to the conduct of the NFS Annual Meeting, NFS does
not know of any matters other than those described in the Notice of Annual
Meeting that are to come before the NFS Annual Meeting. If any other matters are
properly brought before the NFS Annual Meeting, shares represented by properly
executed proxies will be voted at the discretion of the persons named in the
relevant proxy. The execution of a proxy will not affect a shareholder's right
to attend the NFS Annual Meeting and vote in person. However, giving a proxy
will, unless it is revoked prior to exercise, disqualify the shareholder from
obtaining dissenter's rights. See "Terms of the Merger -- NFS Shareholder
Appraisal Rights."
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ANY NFS SHAREHOLDER GIVING A PROXY HAS THE POWER TO REVOKE THE PROXY PRIOR
TO ITS EXERCISE. A PROXY MAY BE REVOKED BY (A) FILING WITH THE SECRETARY OF NFS,
AT OR BEFORE THE TAKING OF THE VOTE AT THE NFS ANNUAL MEETING, (1) A WRITTEN
NOTICE OF REVOCATION SPECIFYING THE NUMBER OF SHARES AND CLEARLY IDENTIFYING THE
PROXY TO BE REVOKED OR (2) DULY EXECUTING AND FILING A NEW PROXY BEARING A LATER
DATE, OR (B) ATTENDING THE NFS ANNUAL MEETING AND VOTING IN PERSON (ALTHOUGH
ATTENDANCE AT THE MEETING WILL NOT IN AND OF ITSELF CONSTITUTE A REVOCATION OF A
PROXY). ANY WRITTEN NOTICE OF REVOCATION OR SUBSEQUENT PROXY SHOULD BE SENT AND
DELIVERED TO NFS FINANCIAL CORP., 157 MAIN STREET, NASHUA, NEW HAMPSHIRE 03060,
ATTENTION: BARBARA J. FORAN, SECRETARY, OR HAND DELIVERED TO MS. FORAN AT OR
BEFORE THE TAKING OF THE VOTE AT THE NFS ANNUAL MEETING.
THE BOARD OF DIRECTORS OF NFS HAS UNANIMOUSLY RECOMMENDED A VOTE IN FAVOR
OF APPROVING AND ADOPTING THE ACQUISITION AGREEMENT. See "Background and NFS's
Reasons for the Merger."
AGREEMENT TO VOTE IN FAVOR
By executing the Affiliate Letter, directors and executive officers who are
affiliates of NFS and who beneficially own an aggregate of 84,672 of the
outstanding shares of NFS Common Stock, or approximately 3% of the shares
entitled to vote at the NFS Annual Meeting (excluding shares that the
shareholder has the right to acquire upon the exercise of stock options), have
agreed to vote in favor of adopting the Acquisition Agreement. See "Terms of the
Merger -- Affiliate Letter; Resales of BayBanks Common Stock."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to the security holdings of beneficial owners of
more than 5% of NFS Common Stock and of NFS's management is provided below. See
"NFS Corporate Matters -- Stock Owned by Management" and "-- Principal Holders
of Voting Securities." The directors and executive officers of BayBanks
beneficially own no shares of NFS Common Stock. Pursuant to Rule 13d-3 under the
Exchange Act, BayBanks may be deemed to beneficially own the 274,266 shares of
NFS Common Stock that are subject to the Option. See " Terms of the
Merger -- Option Agreement."
SHAREHOLDER ASSISTANCE
If you have any questions about giving your NFS proxy or require
assistance, please contact either Barbara J. Foran at NFS Financial Corp., 157
Main Street, Nashua, New Hampshire 03060, (603) 880-2011, or Morrow & Co., Inc.,
909 Third Avenue, 20th Fl., New York, New York 10022-4799, (800) 662-5200.
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BAYBANKS, INC.
GENERAL
BayBanks, established in 1928, is one of the largest bank holding companies
in New England. It is headquartered in Boston, Massachusetts and conducts a
banking operation in that city through BayBank Boston, N.A., a bank that had
total assets of $992 million at December 31, 1994. BayBanks's largest subsidiary
is BayBank, a Massachusetts commercial bank based in Burlington, Massachusetts
that had total assets of $9.7 billion at December 31, 1994. BayBank Connecticut,
N.A., located in Hartford, Connecticut, had total assets of $88 million at
December 31, 1994. BayBanks also maintains a loan production office in Portland,
Maine. At December 31, 1994, BayBanks had total assets of $10.8 billion, total
deposits of $9 billion, total stockholders' equity of $789 million, and 5,654
full-time equivalent employees.
BayBanks has an extensive banking network with 205 full-service offices and
366 automated banking facilities serving 151 cities and towns in Massachusetts
and two in Connecticut. The hallmark of BayBanks's operating approach is its use
of advanced banking technology, featuring state-of-the-art computer and
telecommunications technology to process customer transactions, provide customer
information, and increase the efficiency of its data processing activities.
BayBank Systems, Inc., a non-bank subsidiary, engages in data processing,
product and systems development, and other technologically oriented operations,
principally for BayBanks but also for franchisees and correspondents. In
particular, BayBank Systems, Inc. operates the proprietary X-Press 24(R) and
X-Press 24 Cash(R) ATM Networks. BayBanks Credit Corp. and BayBanks Mortgage
Corp. provide instalment loan, credit card, and mortgage loan operations and
services, and BayBanks Mortgage Corp. also services approximately $1.9 billion
of residential mortgage loans originated by BayBanks's banking subsidiaries that
have been placed in the secondary market. Other non-bank subsidiaries provide
brokerage, investment management, and general management services to BayBanks's
subsidiaries and their customers.
The Merger will permit BayBanks to expand its operations directly into the
southern New Hampshire market through NFS's existing branch system and
relationships. This will be a natural extension of BayBanks's already strong
presence in the Massachusetts portion of the Merrimack Valley.
BUSINESS
BayBanks provides a complete range of banking and related financial
services, with particular emphasis on consumer and middle market business
customers. In addition to its normal deposit and lending activities, BayBanks
aggressively pursues fee income opportunities, both in traditional and automated
banking services and in the investment field, including acting as investment
adviser and shareholder servicing agent for BayFunds(R), a proprietary mutual
fund family.
Consumer Banking. BayBanks, a recognized leader in consumer banking, has
the largest consumer market share in Massachusetts. More households in
Massachusetts do business with BayBanks's banking subsidiaries than any other
banking organization. BayBanks offers a wide variety of products, including
FDIC-insured checking, money market, savings and time deposit accounts, credit
cards, home mortgages and home equity financing, instalment loans, and trust and
private banking services.
BayBanks operates over 1,000 ATMs in Massachusetts and Connecticut,
including 200 cash machines located in retail stores. More than 90
non-affiliated financial institutions add an additional 280 ATMs to the X-Press
24 Network. The X-Press 24 and X-Press 24 Cash Networks produce approximately 11
million transactions per month. Furthermore, X-Press 24 cardholders can perform
automated banking transactions at over 130,000 CIRRUS and NYCE terminals
worldwide. Cardholders can also use their cards to make point-of-sale purchases
at retail establishments worldwide, including grocery stores, automobile service
stations and, through BayBank X-Press Check(R), anywhere a MasterCard is
accepted. BayBanks provides a broad range of support and maintenance services to
the X-Press 24 Network member institutions. In addition to its branch and ATM
networks, BayBanks operates a state-of-the-art customer sales and service center
twenty-four hours a day, seven days a week, that provides customer service and
product information, opens consumer bank accounts, and arranges consumer loans.
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Corporate Banking. BayBanks provides a comprehensive range of cash
management, credit, deposit, international banking and related services to
businesses, hospitals, educational institutions and local governments, with
particular emphasis on the middle market. Specialized products available to
BayBanks's business and governmental customers include: personal computer-based
cash management services with which a customer may perform a range of deposit
transactions; X-Press Trade(R), offering automated international letter of
credit services; BayBank X-Press Tax(R), for automated payroll tax depositing; a
Collateralized Municipal Money Market Account, and the Escrow Client Account
Service. BayBank also acts as trustee or custodian for employee benefit and
pension plans.
Specific lending groups provide a focus on healthcare and educational
institutions, municipalities, automobile dealers, construction and contracting
companies, retailers, emerging technology companies and international trade
finance. BayBanks also provides secured financing, in the form of asset-based
lending, leasing and real estate lending, for commercial customers. BayBanks's
general corporate lending activities are directed toward small and middle market
companies in the New England region, with a primary emphasis on Massachusetts
and southern New Hampshire enterprises.
Investment Services. BayBanks's subsidiaries offer a wide range of
investment services to individuals and business customers. The government and
municipal securities dealerships at BayBank Boston, N.A. participate in the
underwriting of Massachusetts municipal obligations and engage in private
placement activities. BayBanks Brokerage Services, Inc. provides retail
brokerage services. BayBanks Investment Management, Inc., a registered
investment adviser, provides portfolio advice and asset management for
individuals and businesses and manages the BayBank trust department's common
trust funds. As of year-end 1994, the BayBank trust department had total assets
with a book value of $5.3 billion under management or in custody. BayBanks
Investment Management, Inc. and BayBank Boston, N.A. act as investment advisers
to BayFunds, BayBanks's proprietary mutual fund family, which consists of money
market, equity, and bond portfolios with aggregate assets of more than $1.3
billion at year-end 1994.
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BACKGROUND AND NFS'S REASONS FOR THE MERGER
BACKGROUND OF THE MERGER
Since its formation in 1986 as a financial institution holding company, NFS
has pursued a strategy of growth in earnings and assets as an independent
entity. NFS has continuously examined its strategic alternatives in terms of the
corporate objective of enhancing shareholder value. In attempting to maximize
shareholder value, the Board and senior management of NFS have evaluated various
strategic alternatives, including acquisitions of other institutions or
strategic combinations. In this regard, NFS has periodically considered its
prospects as an independent entity and the viability of those prospects given
NFS's size and the markets in which it operates.
NFS's assessment of its prospects as an independent entity has in part been
in the context of its experience in attempting to grow through acquisitions. In
1991, NFS expanded its branch network into Massachusetts through the acquisition
of the Pepperell branch of ComFed Savings Bank, F.A. from the Resolution Trust
Corporation. In 1993, NFS consummated a supervisory conversion and acquisition
of Plaistow Co-operative Bank, a $99.6 million New Hampshire mutual co-operative
bank. Based on its evaluation of other possible acquisition transactions, NFS
generally has determined that it would be unlikely to achieve further
significant growth through acquisitions within its market area in the next three
to five years.
In June 1994, James H. Adams, President and Chief Executive Officer of NFS,
and Albert R. Rietheimer, Treasurer and Chief Financial Officer of NFS, met with
an executive officer of a larger financial institution (the "Other Institution")
regarding the compatibility of their two banking organizations and their
business philosophies and operations. This meeting was initiated by the Other
Institution. NFS was not seeking acquisition proposals at that time. Executives
of NFS and the Other Institution met again in early August 1994, again at the
initiation of the Other Institution, to discuss further the compatibility of the
two organizations and their operations. At this time, there were preliminary
discussions regarding a possible strategic combination of NFS and the Other
Institution. Although no agreements or understandings were arrived at, and
although the Other Institution had not conducted any due diligence review of
NFS, the parties expressed an expectation that, if the negotiations regarding a
transaction should occur, the valuation range for consideration for NFS Common
Stock would be in the "low $30's" per share. Later in August, the Other
Institution and NFS executed a confidentiality agreement, and the Other
Institution conducted preliminary on-site due diligence.
In early September 1994, NFS engaged Tucker Anthony to serve as its
financial adviser in any potential transaction with the Other Institution.
Executives of NFS and the Other Institution also met. By mid-September, Tucker
Anthony had been authorized to request a letter of interest from the Other
Institution and, in late September, the Other Institution furnished a
non-binding indication of interest regarding a potential transaction for an
aggregate consideration, in the form of cash and stock of the Other Institution
in approximately equal parts, of $89.3 million or, based on the stock price of
the Other Institution at the time of the letter, of $30 per share. The Board of
NFS met to consider this letter and concluded that although the proposed
consideration was not acceptable, NFS was interested in continuing discussions
with the Other Institution and would permit the Other Institution to conduct
further on-site due diligence. This occurred on September 24 and 25, 1994.
During the month of October, informal discussions continued between the
parties and between their financial advisers, such discussions essentially
revolving around the question of valuation. In early November, the Other
Institution transmitted a new non-binding indication of interest which revised
the Other Institution's previous letter. Specifically, the revised indication of
interest contemplated that NFS would merge with the Other Institution, with NFS
shareholders to receive a combination of the Other Institution's stock (45%) and
cash (55%) with an aggregate value of approximately $96.8 million, or a
per-share value of $32.50, based on the Other Institution's stock price shortly
prior to submission of the new letter of interest. It was unclear from this
letter, however, what, if any, provisions would apply to changes in the value of
the Other Institution's stock as it related to the value of the consideration
proposed to be paid to NFS shareholders in the business combination.
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The Board of NFS met on November 10, 1994 to analyze and discuss the new
indication of interest and, following such meeting, the Board authorized the
negotiation of a definitive agreement with the Other Institution. On November
11, 1994, following an increase in the market price of the NFS Common Stock, NFS
announced that it was in discussions with respect to a possible merger
transaction and that NFS had engaged Tucker Anthony to act as its financial
adviser. NFS did not name the Other Institution or describe any terms and
conditions involved in the discussions. NFS indicated that there could be no
assurances as to whether the discussions would result in any agreement.
Following the November 11, 1994 announcement, NFS was contacted, directly
or indirectly through Tucker Anthony, by seven additional financial institutions
(including BayBanks) or their representatives expressing possible interest in
acquiring or merging with NFS. Tucker Anthony informed inquiring parties that
although NFS had not made a decision to enter into a sale transaction or solicit
acquisition proposals, it would appropriately review any indications of interest
presented to it. Two of the seven institutions subsequently submitted written
indications of interest regarding a possible transaction with NFS, which were
based on analysis of publicly available information pertaining to NFS's
operations and financial condition. One of these indications was for an all cash
transaction in the range of $30 to $31 per share; the other was for an all stock
or part stock, part cash transaction with an aggregate value of $81.8 million
based on the current trading value of that institution's stock, or approximately
$28 per share.
Also, on November 11, the Other Institution furnished a draft definitive
agreement to NFS. Such agreement contained specific provisions regarding the
calculation of the consideration, which effectively clarified that the purchase
price to be paid by the Other Institution could float within a range depending
on a 20-day average price of its stock.
On November 18, the Board of NFS met to consider the proposed definitive
agreement and to evaluate in particular the pricing mechanism being proposed.
These discussions were followed by another meeting of the Board on November 19,
which the Chief Executive Officer of the Other Institution attended in order to
answer questions as to the proposed transaction. It was believed at the
conclusion of this meeting that issues regarding the pricing mechanism to
preserve the originally contemplated $32.50 per share consideration could be
resolved. On November 21, however, the Chief Executive Officer of the Other
Institution confirmed to the Chief Executive Officer of NFS that the Other
Institution was unable to proceed with a transaction at that time. Based on the
closing price of the Other Institution's stock on November 21, 1994, the
consideration under the Other Institution's proposed definitive agreement would
have amounted to approximately $29.83 per share of NFS Common Stock. On November
22, NFS publicly announced the termination of merger discussions with the Other
Institution and held a special meeting of its Board to review the other
indications of interest in NFS that had been presented to NFS or Tucker Anthony
following the announcement of November 11.
On November 23, NFS publicly announced that, at the prior day's special
meeting, the Board had affirmed a policy of seeking to maximize shareholder
value and had authorized Tucker Anthony to evaluate possible business
combination opportunities. This decision was based on an analysis of the various
indications of interest that NFS had received as well as an analysis of
potential strategies under which NFS would remain independent.
Following NFS's announcement of November 23, Tucker Anthony commenced to
investigate the prospective sale of NFS through a confidential "competitive
sale" or "auction" process. In addition to the Other Institution and the seven
parties which had previously contacted Tucker Anthony, an additional 10
potential buyers were solicited on the basis of a variety of factors including
previous acquisition activity, proximity of operations to those of NFS,
financial capability to complete an acquisition and having previously made
inquiry to NFS regarding a potential combination. Of the 18 parties which Tucker
Anthony contacted, BayBanks and three others entered into confidentiality
agreements and received extensive and highly detailed public and non-public due
diligence information packages describing NFS and its business and containing
financial information. Also, the confidentiality agreement with the Other
Institution continued to be applicable. Of the five parties who signed
confidentiality agreements with NFS, BayBanks and two others, selected on the
basis of their continued indications of interest and their preliminary
indications of possible
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transaction values in the ranges of $28 to $31 per share, were permitted to meet
with NFS's senior executive officers. These three parties were then asked by
Tucker Anthony to refine their indications of interest in writing and to submit
what they considered to be their final and best proposals. Tucker Anthony
received responses from these three parties with proposed transaction values
ranging from $28.50 to $31 per share and with forms of consideration varying
from all cash to mixed cash and stock.
The Board of NFS, with the advice of Tucker Anthony, evaluated the three
proposals and, considering all relevant factors, including without limitation
the amount of the bid, the ability of the bidder to finance the transaction and
the regulatory approvals that would be required, chose to pursue the final
negotiations with BayBanks. These commenced on December 19 following a special
meeting of the Board of NFS at which the Board authorized management to
negotiate a definitive agreement with BayBanks and to execute a seven-day
exclusivity agreement with BayBanks to permit finalization of documentation for
a transaction. After further discussions and negotiations with BayBanks,
considering BayBanks's bid reflected in the final agreement, which BayBanks
stated was its best and final proposal, and for all the reasons discussed below
in "Recommendation of the Board of Directors; NFS's Reasons for the Merger," the
Board of Directors concluded that the Merger represented the best available
alternative for the NFS shareholders. On December 22, 1994, Tucker Anthony
issued its fairness opinion on the Merger, and the Board approved the
Acquisition Agreement.
RECOMMENDATION OF THE BOARD OF DIRECTORS; NFS'S REASONS FOR THE MERGER
The Board of Directors of NFS unanimously approved the Acquisition
Agreement and has determined that the Merger is fair to, and in the best
interests of, NFS shareholders. The Board of Directors of NFS unanimously
recommends that the shareholders of NFS vote FOR the approval and adoption of
the Acquisition Agreement.
In reaching its determination that the Acquisition Agreement is fair to,
and in the best interests of, NFS shareholders, the NFS Board considered a
number of business and financial factors, including, without limitation, the
following:
1. The Merger will enable NFS shareholders to maximize the value of their
shares both by a sale at a premium over the preexisting market price and by
becoming stockholders in a larger financial institution with a more diversified
market opportunity. The NFS Board considers the composition of the proposed
Merger Consideration of cash and BayBanks Common Stock that NFS shareholders
will receive in exchange for their NFS Common Stock to be advantageous for NFS
shareholders, since they will obtain cash liquidity, including liquidity to meet
any tax obligations, as well as acquiring stock in a company with a ready
trading market. The NFS Board also considered the financial information and
analysis prepared by Tucker Anthony and its opinion that the consideration to be
paid in the Merger is fair, from a financial point of view, to NFS shareholders.
2. In view of the current and prospective market in which NFS operates, and
in considering national and local economic conditions, the competitive
environment for financial institutions generally, the increased regulatory
burden on financial institutions, and the trend toward consolidation in the
financial services industry, the Board perceived that it would become
increasingly difficult for NFS to meet competition and continue to achieve
efficiencies and economies of scale as an independent institution.
3. The opportunity for growth of the NFS banking operations in and beyond
NFS's existing market should be enhanced by the addition of the financial and
managerial resources of BayBanks. NFS's customers and communities also should be
better served by the availability of the expanded range of products and services
available through BayBanks.
While the NFS Board did not quantify or otherwise attempt to assign
relative weights to the factors considered in reaching its determination that
the Merger is in the best interests of NFS's shareholders, the ordering of the
foregoing factors reflects their relative importance.
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OPINION OF FINANCIAL ADVISOR
Tucker Anthony was retained by the Board of Directors of NFS in September
1994 for the purpose of providing financial advice and consultation, including
the development of information with respect to the valuation of NFS, the
evaluation of any acquisition proposals that might be received, including a
possible proposal from the Other Institution (see "Background of the Merger"),
and, if appropriate, the rendering of a fairness opinion in connection with an
acquisition proposal. In connection with its services, Tucker Anthony was
subsequently authorized by NFS to solicit, and did solicit, potential purchasers
of NFS and was directed to provide, and did provide, information concerning NFS
to certain third parties requesting such information which were believed capable
of making a viable proposal to acquire NFS and who had executed a
confidentiality agreement.
NFS selected Tucker Anthony because of its familiarity with NFS and its
business. Tucker Anthony makes a market in NFS Common Stock. NFS also considered
Tucker Anthony's experience and reputation in the area of valuation generally
and financial institution valuation specifically. Tucker Anthony 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. From time to time, Tucker Anthony and its
affiliates may hold long or short positions in the NFS Common Stock.
Tucker Anthony has rendered written opinions to the Board of Directors of
NFS to the effect that, as of December 22, 1994 and as of the date of this
Prospectus/Proxy Statement, the consideration per share of NFS Common Stock of
$20.15 in cash and 0.2038 shares of BayBanks Common Stock to be received in the
Merger is fair, from a financial point of view, to the NFS shareholders. THE
FULL TEXT OF THE FAIRNESS OPINION DATED AS OF THE DATE OF THIS PROSPECTUS/PROXY
STATEMENT, SETTING FORTH THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS
CONSIDERED AND CERTAIN LIMITATIONS ON THE REVIEW UNDERTAKEN BY TUCKER ANTHONY,
IS INCLUDED IN APPENDIX D TO THIS PROXY STATEMENT. HOLDERS OF THE NFS COMMON
STOCK ARE URGED TO READ THE FAIRNESS OPINION IN ITS ENTIRETY. The fairness
opinion is directed to the Board of Directors of NFS only and does not
constitute a recommendation to any NFS shareholder as to how such shareholder
should vote at the meeting.
As compensation for its services as financial advisor, including the
issuance of the two fairness opinions, NFS has agreed to pay Tucker Anthony a
fee of approximately $1.15 million, of which amount $225,000 has been paid as of
the date hereof and the balance is payable at the closing of the Merger. NFS has
also agreed to reimburse Tucker Anthony for its out-of-pocket expenses and to
indemnify Tucker Anthony against certain liabilities arising out of its services
as financial advisor.
In arriving at its opinion dated the date hereof, Tucker Anthony, among
other things, reviewed the Acquisition Agreement and Option Agreement; reviewed
certain historical financial and other information concerning NFS and BayBanks
for the five fiscal years ended December 31, 1994, including their reports on
Form 10-K; held discussions with the senior management of NFS and BayBanks with
respect to their past and current financial performance, financial condition and
future prospects; reviewed certain internal financial and other information of
NFS including financial projections prepared by management; analyzed certain
publicly available information of other financial institutions that Tucker
Anthony deemed comparable or otherwise relevant to its inquiry and compared NFS
and BayBanks from a financial point of view with certain of these institutions;
compared the consideration to be received by the shareholders of NFS with the
consideration received by shareholders in certain other acquisitions of
financial institutions that Tucker Anthony deemed comparable or otherwise
relevant to its inquiry; reviewed the terms of the Option Agreement, and
compared such terms with the terms of certain other stock option agreements
granted in connection with other acquisitions of financial institutions that
Tucker Anthony deemed comparable or otherwise relevant to its inquiry; reviewed
publicly available earnings estimates, historical trading activity and ownership
data of the NFS Common Stock and BayBanks Common Stock and considered the
prospects for dividends and price movement in each; and conducted such other
financial studies, analyses and investigations and reviewed such other
information as Tucker Anthony deemed appropriate to enable it to render its
opinion. In its review,
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Tucker Anthony also took into account an assessment of general economic, market
and financial conditions and certain industry trends and related matters. Tucker
Anthony's opinions were necessarily based upon conditions as they existed and
could be evaluated on the dates thereof and the information made available to
Tucker Anthony through the dates thereof.
No limitations were imposed by the Board of Directors of NFS upon Tucker
Anthony with respect to the investigations made or procedures followed by Tucker
Anthony in its review and analysis. In its review and analysis and in arriving
at its opinions, Tucker Anthony assumed and relied upon the accuracy and
completeness of all the financial information provided to it by NFS and BayBanks
and other publicly available financial information, and has not attempted
independently to verify any of such information. Tucker Anthony has assumed that
(i) the financial forecasts of NFS provided to it have been reasonably prepared
on the basis reflecting the best currently available estimates and judgments of
the management of NFS as to its future financial performance and (ii) such
forecasts will be realized in the amounts and time periods currently estimated
by NFS's management. Tucker Anthony has also assumed that the mean of the
publicly available future earnings estimates for BayBanks available through the
Institutional Brokers Estimate System will be realized in the amounts and time
periods currently estimated. Tucker Anthony has further assumed, without
independent verification, that the aggregate reserves for possible loan losses
for NFS and BayBanks are adequate to cover such losses. Tucker Anthony did not
make or obtain any independent evaluations or appraisals of any assets or
liabilities of NFS, BayBanks or any of their respective subsidiaries nor did it
verify any of NFS's or BayBanks's books and records or review any individual
loan credit files.
Tucker Anthony made a presentation and rendered a written opinion to NFS's
Board of Directors on December 22, 1994, just prior to the execution and public
announcement of the Acquisition Agreement. Set forth below is a brief summary of
the report presented to the NFS Board of Directors on December 22, 1994 and
updated through the date of the fairness opinion included as Appendix D to this
Prospectus/Proxy Statement.
Review of Selected Data of NFS and BayBanks. Tucker Anthony reviewed
selected historical financial and other information of NFS and BayBanks for the
five fiscal years ended December 31, 1994. This review included consolidated
income statements and balance sheets for NFS and BayBanks as well as selected
financial ratios relating to liquidity, loan portfolio composition,
nonperforming assets, net charge-offs, loan quality, profitability and capital
adequacy.
Stock Trading Analysis. Tucker Anthony examined the historical trading
prices, volume, price/book value and price/earnings multiples of the NFS Common
Stock and BayBanks Common Stock, and compared the historical trading prices of
the NFS Common Stock and BayBanks Common Stock in relationship to movements in
certain stock indices, specifically the Standard & Poor's Regional Bank Index,
the Standard and Poor's Savings & Loan Index and the Standard and Poor's 500
Composite Index. Tucker Anthony also analyzed and compared the historical
trading prices, price/book value and price/earnings multiples of NFS and
BayBanks to certain other publicly traded financial institutions deemed to be
comparable to NFS and BayBanks as described below.
Analysis of Selected Publicly Traded Comparable Financial
Institutions. Tucker Anthony compared the selected financial data and financial
ratios of NFS to the corresponding data and ratios of certain publicly traded
financial institutions located in Northeastern Massachusetts and Southern New
Hampshire with total assets and loan compositions comparable to NFS. The
financial institutions included in the comparison to NFS were: Andover Bancorp,
Inc., Bank of New Hampshire Corporation, Community Bancshares, Inc., CFX
Corporation, Century Bancorp, Inc., Co-operative Bank of Concord, Family
Bancorp, First Essex Bancorp, Inc., Medford Savings Bank, New Hampshire Thrift
Bancshares, Inc., Peterborough Savings Bank and Warren Bancorp, Inc. (the
"Selected Comparable Banks"). The Selected Comparable Banks, as a group,
exhibited certain characteristics -- loan composition, ratios of equity to
assets, nonperforming assets to total assets and returns on average assets and
average equity -- that were similar to those exhibited by NFS. The comparison of
NFS to the Selected Comparable Banks showed among other things that (i) as of
December 22, 1994, the ratio of NFS's market price to its September 30, 1994
book value per common share was 110.8%, compared to an average of 91.5% for the
Selected Comparable Banks; (ii) as of September 30,
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<PAGE> 29
1994, the ratio of NFS's equity to total assets was 9.0%, compared to an average
of 7.7% for the Selected Comparable Banks; (iii) as of September 30, 1994, the
ratio of NFS's nonperforming assets to total assets was 1.4%, compared to an
average of 2.1% for the Selected Comparable Banks; (iv) as of September 30,
1994, the ratio of NFS's nonperforming assets to the sum of shareholders' equity
and loan loss reserves was 13.2%, compared to an average of 24.0% for the
Selected Comparable Banks; (v) as of December 22, 1994, the average latest
quarter annualized dividend yield for the Selected Comparable Banks was 2.6% as
compared to 2.2% for NFS; and (vi) as of December 22, 1994, the average
price/earnings ratio for the Selected Comparable Banks based on earnings for the
twelve months ended September 30, 1994 was 9.1x compared to 8.8x for NFS.
Analysis of Selected Comparable Merger and Acquisition
Transactions. Tucker Anthony reviewed 98 unassisted acquisitions of thrift
institutions in the Northeast announced between January 1, 1986 and January 27,
1995 (the "Selected Comparable Acquisition Transactions"). Tucker Anthony also
performed additional analyses on 36 recently announced transactions (the
"Selected Recent Transactions") comparing the target financial institutions'
asset quality, capital structure, profitability and asset, loan and deposit
growth rates to NFS's current results of operations and financial condition. The
Selected Recent Transactions were chosen because they were the most recently
announced and therefore were considered most indicative of prevailing conditions
in the thrift merger market. Excluding the highest and lowest ratios, the
Selected Recent Transactions involved financial institutions with three year
average growth rates of 3.9% for assets, (1.6)% for loans and 4.7% for deposits
as compared to 7.0%, 5.6% and 8.8%, respectively, for NFS. Excluding the highest
and lowest ratios, the target financial institutions involved in the Selected
Recent Transactions had latest quarter annualized (prior to announcement date)
average return on assets of 0.88% and latest quarter annualized average return
on equity of 9.82% as compared to 1.20% and 13.32%, respectively, for NFS. Set
forth below is a summary of the information presented to NFS's Board of
Directors with respect to the Selected Comparable Acquisition Transactions,
based on a BayBanks closing sale price of $53.25 on the day before the
announcement of the transaction.
<TABLE>
<CAPTION>
SELECTED
COMPARABLE SELECTED
ACQUISITION RECENT
TRANSACTIONS TRANSACTIONS
------------ ------------
BAYBANKS 1986 - 1995 1993 - 1995
OFFER AVERAGE AVERAGE
-------- ------------ ------------
<S> <C> <C> <C>
Aggregate Consideration/Earnings......................... 15.0x(1) 16.9x 15.5x
Aggregate Consideration/Book Value....................... 159.8% 139.0% 156.9%
Aggregate Consideration/Total Assets..................... 15.0% 13.2% 14.2%
Premium to Market Price(2)............................... 40.9% 43.0% 43.2%
</TABLE>
- ---------------
(1) Calculated based upon NFS recurring net income for the twelve month period
ending September 30, 1994.
(2) Calculated based upon the target's stock price seven days prior to
announcement of the transactions.
Discounted Cash Flow Analysis. At the NFS Board of Directors meeting on
December 22, 1994, Tucker Anthony presented the results of a discounted cash
flow analysis through December 31, 1999 designed to compare the present value,
under certain assumptions, that would be attained if NFS remained independent
through 1999 or was acquired in 1999 by a larger financial institution, with the
value of the BayBanks offer. The results produced in the analysis did not
purport to be indicative of actual values or expected values of NFS or the
shares of NFS Common Stock.
For the purpose of the analysis Tucker Anthony assumed, in conjunction with
its discussions with management, that NFS would achieve an annual return on
average assets of 1.10%, generate annual growth in assets of 4.0% and have a
dividend payout ratio of 40%. The forecast period assumptions regarding dividend
payout ratio and return on average assets represented substantially higher
levels than NFS's comparable historical operating performance and dividend
policy. In estimating the appropriate terminal value of NFS in 1999, Tucker
Anthony applied to the 1999 estimated earnings price/earnings multiples in the
range of 9.0x to 17.0x. This range of price/earnings multiples was based upon
Tucker Anthony's review of the Selected
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<PAGE> 30
Comparable Financial Institutions and Selected Comparable Acquisition
Transactions. The lower levels of the price/earnings multiples range reflected
an estimated future trading range of NFS, while the higher levels of the
price/earnings multiples were more indicative of an estimated future sale of NFS
to a larger financial institution. Acquisition and trading multiples from time
to time fluctuate considerably, and no assurance can be made that future
acquisition or trading multiples will be comparable to historical levels.
The cash flows of NFS were comprised of the projected dividends per share
in years 1995 through 1999 plus the terminal value of the NFS Common Stock at
year end 1999 (calculated by applying each one of the assumed terminal
price/earnings multiples as stated above to NFS's projected earnings per share).
The cash flows were discounted at rates of 11.0%, 13.0% and 15.0%. Based upon
Tucker Anthony's experience and judgment, Tucker Anthony believes that holders
of NFS Common Stock would typically seek returns within the indicated range of
discount rates in view of NFS's historical operating performance, financial
condition and market capitalization, among other matters.
The discounted cash flow analysis showed, among other things, that using
discount rates of 11.0% and 15.0%, and a terminal price/earnings multiple of
10.0x, each holder of NFS Common Stock would receive a present value of
$21.26 -- $18.02 per share, respectively. The analysis also showed, among other
things, that using discount rates of 11.0% and 15.0% and a terminal
price/earnings multiple of 16.0x, each holder of the NFS Common Stock would
receive a present value of $31.86 -- $26.91 per share. These cash flow
projections were based upon discussions with management of NFS in regard to
estimates of asset growth, profitability and dividend payout ratio, and are
based upon many factors and assumptions, many of which are beyond management's
control.
Pro Forma Analysis of BayBanks Offer. Tucker Anthony analyzed certain pro
forma effects resulting from the Merger, based on average closing prices of
BayBanks Common Stock ranging from $43.50 per share to $63.00 per share. This
analysis, based upon the closing prices of BayBanks Common Stock described
above, and based upon projections of the management of NFS and, with respect to
BayBanks, the mean projections of the Institutional Brokers Estimate System,
projected minimal dilution in BayBanks's 1995 earnings per share. The analysis
did not take into account the effects of possible revenue enhancements or cost
savings for BayBanks following the Merger.
Other Factors. Tucker Anthony believes that its analyses must be
considered as a whole and that selecting portions of such analyses and the
factors considered therein without considering all factors and analyses, could
create an incomplete view of the analyses and the processes underlying Tucker
Anthony's fairness opinion. Tucker Anthony made no attempt to assign specific
weights to particular analyses in arriving at its opinion. The preparation of a
fairness opinion is a complex process involving subjective judgments and is not
necessarily susceptible to partial analysis or summary description. In its
analyses, Tucker Anthony relied upon the financial forecasts prepared by
management of NFS and made numerous assumptions with respect to industry
performance, business and economic conditions, and other matters, many of which
are beyond the control of NFS's management. Any estimates contained in Tucker
Anthony's analyses are not necessarily indicative of future results or values,
which may be more or less favorable than such estimates. Estimates of values of
companies do not purport to be appraisals or necessarily reflect the prices at
which companies or their securities may actually be sold.
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<PAGE> 31
TERMS OF THE MERGER
This portion of the Prospectus/Proxy Statement describes various aspects of
the Merger. The following description does not purport to be complete and is
qualified in its entirety by reference to the Acquisition Agreement, which is
incorporated herein by reference and a conformed copy of which is attached
hereto as Appendix A. Capitalized terms used herein and not otherwise defined
have the respective meanings ascribed to them in the Acquisition Agreement.
NFS'S SHAREHOLDERS ARE URGED TO READ THE ACQUISITION AGREEMENT CAREFULLY.
GENERAL
The Acquisition Agreement provides that, subject to the satisfaction or, in
certain cases, waiver of certain conditions (including the approval of the
Acquisition Agreement by the shareholders of NFS and receipt of all necessary
regulatory approvals), BBNH will be merged with and into NFS. NFS will be the
surviving corporation under the name BayBank New Hampshire, Inc. and will be a
wholly-owned subsidiary of BayBanks. The outstanding shares of NFS will
automatically be converted into the right to receive the Merger Consideration
(as described below), and the shareholders of NFS will become stockholders of
BayBanks.
CONVERSION OF NFS COMMON STOCK
On the Closing Date, subject to adjustment as discussed below, each issued
and outstanding share of NFS Common Stock, other than shares of NFS Common Stock
owned by Dissenting Shareholders ("Dissenting Shares"), shall, by virtue of the
Merger, automatically and without any action on the part of the holder thereof,
be converted into the right to receive (i) $20.15 in cash and (ii) 0.2038 shares
of BayBanks Common Stock (the "Merger Consideration"). The Merger Consideration
was agreed to as a result of arms'-length negotiations between representatives
of BayBanks and NFS, during which NFS had the benefit of advice from its
financial advisor, the investment banking firm of Tucker Anthony. The total
value of the Merger Consideration when the NFS Board of Directors approved the
Acquisition Agreement was approximately $31.00 per share of NFS Common Stock,
based on the closing sale price for the BayBanks Common Stock on December 21,
1994 of $53.25. The total value of the Merger Consideration, based on the
closing sale price for the BayBanks Common Stock of $61.25 per share on March
13, 1995, was approximately $32.63 per share of NFS Common Stock. If the Closing
Date is after September 1, 1995 and the Acquisition Agreement and the Merger
have been approved by NFS's shareholders prior to that date, the per share
Merger Consideration will be increased by a cash amount determined by
multiplying (x) the number of calendar days from and including September 1, 1995
through but excluding the Closing Date by (y) $0.005.
NFS may, by notice to BayBanks, terminate the Acquisition Agreement if,
prior to the Closing Date, the Closing Market Value of BayBanks Common Stock
(defined below) is less than $43.50 per share (which would result in a per share
Merger Consideration of less than $29.00). However, BayBanks may negate such
termination by notifying NFS prior to 5:00 p.m. on the Closing Date of its
election to increase the Merger Consideration so that the sum of the cash and
the Closing Market Value of BayBanks Common Stock comprising the per share
Merger Consideration equals $29.00. The increase would take the form of
additional cash or BayBanks Common Stock valued at the Closing Market Value, as
BayBanks may elect, or, alternatively, BayBanks may elect to make the per share
Merger Consideration all cash at $29.00 per share.
NFS may elect not to terminate the Acquisition Agreement even if the
Closing Market Value of BayBanks Common Stock falls below $43.50 per share. In
determining whether to elect to terminate the Agreement in those circumstances,
the NFS Board of Directors will take into account, consistent with its fiduciary
duties, all relevant facts and circumstances existing at the time, including,
without limitation, whether BayBanks is prepared to increase the per share
Merger Consideration, the market for financial institution stocks in general,
the relative value of the BayBanks Common Stock in the market and the advice of
its financial advisors and legal counsel. By approving the Acquisition
Agreement, the NFS shareholders would be permitting the Board of Directors to
determine, in the exercise of its fiduciary duties, to proceed with the Merger
even though the per share Merger Consideration was less than $29.00 because the
Closing Market Value of the BayBanks Common Stock was below $43.50 per share. In
such event, the per share Merger
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<PAGE> 32
Consideration to be received by the NFS Shareholders would in any event include
the $20.15 cash portion, plus the then Closing Market Value of 0.2038 shares of
BayBanks Common Stock. The Board of Directors of NFS has made no determination
as to the circumstances in which it would elect not to terminate the Agreement
even if the Closing Market Value of the BayBanks Common Stock fell below $43.50
per share.
If the Closing Market Value of BayBanks Common Stock is greater than
$63.00, the per share Merger Consideration shall be adjusted by reducing the
BayBanks Common Stock portion so that the sum of the cash and the Closing Market
Value of BayBanks Common Stock comprising the per share Merger Consideration
equals $33.00.
The "Closing Market Value" of BayBanks Common Stock is the Market Value of
BayBanks Common Stock on the Closing Date. "Market Value" means, as of any day,
the average, without respect to the number of shares traded, of the closing sale
price of BayBanks Common Stock as reported on the Nasdaq National Market on each
of the 10 trading days immediately preceding the second business day prior to
such day.
EXCHANGE OF CERTIFICATES
The conversion of NFS Common Stock into BayBanks Common Stock will occur
automatically on the Closing Date. As soon as practicable after the Closing
Date, BayBanks shall cause the Exchange Agent to mail to each holder of record
of NFS Common Stock at the Closing Date instructions for surrendering his or her
certificate(s) representing shares of NFS Common Stock in exchange for
certificate(s) representing BayBanks Common Stock. NFS SHAREHOLDERS ARE
REQUESTED NOT TO SURRENDER THEIR CERTIFICATES FOR EXCHANGE UNTIL THEY RECEIVE A
LETTER OF INSTRUCTION FROM THE EXCHANGE AGENT.
Upon surrender of a duly executed certificate for exchange and cancellation
to the Exchange Agent, the holder of such certificate shall be entitled to
receive in exchange therefor a certificate representing the number of whole
shares of BayBanks Common Stock to which such holder of NFS Common Stock shall
have become entitled under the Acquisition Agreement, and a check representing
the amount of cash that such holder has the right to receive in respect of the
certificate surrendered under the Acquisition Agreement, together with any cash
payable in lieu of a fractional share, as described below, and the certificate
so surrendered shall forthwith be cancelled. No interest will be paid or accrued
on the cash and unpaid dividends and distributions, if any, payable to holders
of certificates.
After the Closing Date, there shall be no transfers on the stock transfer
books of NFS of the shares of NFS Common Stock that were issued and outstanding
immediately prior to the Closing Date. If, after the Closing Date, certificates
representing such shares are presented for transfer to the Exchange Agent, they
shall be cancelled and exchanged for certificates representing shares of
BayBanks Common Stock and cash as provided above. No fractional shares of
BayBanks Common Stock will be issued to any NFS shareholder upon consummation of
the Merger. Each holder of NFS Common Stock otherwise entitled to a fraction of
a share of BayBanks Common Stock shall be entitled to receive an amount of cash
in lieu thereof equal to such fraction multiplied by the Closing Market Value of
BayBanks Common Stock. Following consummation of the Merger, no former holder of
NFS Common Stock shall be entitled to dividends or any other rights in respect
of any such fraction.
CONDITIONS OF MERGER
The respective obligations of BayBanks and NFS to effect the Merger are
subject to satisfaction, on or prior to the Closing Date, of certain conditions,
including: (i) the Acquisition Agreement shall not have been terminated in
accordance with its terms; (ii) approval of the Acquisition Agreement and the
transactions contemplated thereby by the appropriate regulatory authorities and
the expiration of any waiting periods (see "Terms of the Merger -- Regulatory
Approvals Required"); (iii) approval of the Acquisition Agreement and the Merger
by the requisite vote of NFS shareholders; (iv) receipt of all necessary state
securities laws and "blue sky" permits and other authorizations required in
connection with the issuance of BayBanks Common Stock in the Merger; (v) the
Registration Statement of which this Prospectus/Proxy Statement forms a part
shall have been declared effective by the Commission, shall remain effective and
not be subject to a stop order
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<PAGE> 33
or any threatened stop order suspending the effectiveness of the Registration
Statement; and (vi) no law, rule, regulation, executive order, injunction,
decree, or other order issued, enacted, promulgated, enforced or entered which
has the effect of making the Merger illegal or otherwise restricting, preventing
or prohibiting consummation of the transactions contemplated by the Acquisition
Agreement, including the Merger shall be in effect.
The obligations of BayBanks and BBNH to consummate the transactions
contemplated by the Acquisition Agreement are further subject to the
satisfaction, or waiver by BayBanks, on or before the Closing Date, of the
following conditions: (i) the representations and warranties of NFS contained in
the Acquisition Agreement shall be true, correct, and complete in all material
respects as of the date of the Acquisition Agreement and (except to the extent
that such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date and BayBanks shall
have received a certificate signed on behalf of NFS by its Chief Executive
Officer and its Chief Financial Officer to the foregoing effect; (ii) except for
such consents, approvals, permits and other authorizations that, if not
obtained, would not, individually or in the aggregate, have a material adverse
effect on the business, financial condition, results of operations or prospects
of NFS and its subsidiaries, taken as a whole, NFS shall have obtained (a) the
consent or approval of other persons in connection with any lease, agreement,
processing contract or other arrangement, the benefits of which cannot be
retained upon consummation of the transactions contemplated by the Acquisition
Agreement without such consent or approval and (b) all permits or other
authorizations other than Regulatory Approvals required to consummate the
transactions contemplated by the Acquisition Agreement; (iii) as of the Closing
Date, there shall have been no Material Adverse Change in NFS from that which
was represented and warranted on the date of the Acquisition Agreement; (iv) NFS
shall have in all material respects performed all obligations and agreements and
complied with all covenants contained in the Acquisition Agreement to be
performed and complied with by NFS on or prior to the Closing Date and there
shall not exist a Default or matter that, with notice and/or passage of time,
would constitute a Default by NFS under the Acquisition Agreement; (v) BayBanks
shall have received from KPMG a customary letter with respect to certain
financial information about NFS; (vi) BayBanks shall have received the opinion
of Hogan & Hartson L.L.P., counsel to NFS, dated the Closing Date, in a form
that is customary for transactions of this type; (vii) immediately prior to the
Closing, not more than 330,000 shares of NFS Common Stock shall be Dissenting
Shares; (viii) BayBanks shall have received the resignations of such of the
directors of NFS's subsidiaries, including the NFS Banks, as BayBanks shall have
requested; (ix) a certain number of specified key employees of NFS or its
subsidiaries shall have remained employed by NFS or its subsidiaries through the
Closing Date, except as such employment may have terminated as a result of death
or disability; (x) any name change, charter amendment, by-law amendment, charter
conversion, or merger of the NFS Banks requested by BayBanks shall have been
authorized by all necessary corporate action and all necessary permits,
consents, approvals and authorizations of third parties and Governmental
Authorities shall have been obtained so that such name change, charter
amendment, by-law amendment, conversion or merger may be consummated in
conjunction with consummation of the Merger.
The obligations of NFS to consummate the transactions contemplated by the
Acquisition Agreement are further subject to the satisfaction, or waiver by NFS,
on or before the Closing Date, of the following conditions: (i) the
representations and warranties of BayBanks contained in the Acquisition
Agreement shall be true, correct, and complete in all material respects as of
the date of the Acquisition Agreement and (except to the extent that such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date and NFS shall have received a
certificate signed on behalf of BayBanks by its Chief Executive Officer or its
Chief Financial Officer to the foregoing effect; (ii) as of the Closing Date,
there shall have been no Material Adverse Change in BayBanks from that which was
represented and warranted on the date of the Acquisition Agreement; (iii)
BayBanks and BBNH shall have in all material respects performed all obligations
and agreements and complied with all covenants contained in the Acquisition
Agreement to be performed and complied with by BayBanks and BBNH on or prior to
the Closing Date and there shall not exist a Default or matter that, with notice
and/or passage of time, would constitute a Default by BayBanks or BBNH under the
Acquisition Agreement; and (iv) NFS shall have received the opinion of Palmer &
Dodge, counsel to BayBanks, dated the Closing Date, in a form that is customary
for transactions of this type.
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<PAGE> 34
REGULATORY APPROVALS REQUIRED
Consummation of the Merger is subject to receipt of all necessary approvals
of Regulatory Authorities, including the Office of Thrift Supervision (the
"OTS"), the Board of Governors of the Federal Reserve System (the "Federal
Reserve"), the New Hampshire Board of Trust Company Incorporation (the "New
Hampshire Board"), and the Massachusetts Board of Bank Incorporation (the
"Massachusetts Board"). IT IS ANTICIPATED THAT SUCH REGULATORY APPROVALS WILL BE
OBTAINED IN TIME TO ALLOW FOR CONSUMMATION OF THE MERGER DURING THE THIRD
QUARTER OF 1995, BUT NO ASSURANCE CAN BE GIVEN THAT SUCH APPROVALS WILL BE
OBTAINED SO AS TO PERMIT CONSUMMATION OF THE MERGER OR THAT SUCH APPROVALS WILL
NOT BE CONDITIONED UPON MATTERS THAT WOULD CAUSE THE PARTIES TO ABANDON THE
MERGER.
The Merger is subject to approval of the OTS under Section 10(e) of the
Home Owners' Loan Act (the "HOLA"). Section 10(e) requires that the OTS take
into consideration the financial resources, managerial resources, and future
prospects of BayBanks, BBNH, NFS and the NFS Banks, the effect of the Merger on
the NFS Banks, the insurance risk to the federal deposit insurance funds and the
convenience and needs of the communities to be served. The OTS may not approve
the Merger if (a) it would result in a monopoly or would be in furtherance of
any combination or conspiracy to monopolize the business of banking in any part
of the United States or (b) its effect in any section of the country may be
substantially to lessen competition or to tend to create a monopoly or would be
in restraint of trade in any other manner, unless the OTS finds that any
anticompetitive effects of the Merger are clearly outweighed in the public
interest by the probable effect of the transaction in meeting the convenience
and needs of the communities to be served. In addition, the OTS may take into
account the records of performance of the bank subsidiaries of BayBanks and NFS
in meeting the credit needs of each community, including low- and
moderate-income neighborhoods, served by such bank subsidiaries. Under the HOLA,
the OTS must request the views of the United States Department of Justice on the
competitive factors involved. The Department of Justice may, if it deems it
necessary, challenge the Merger on antitrust grounds, which would stay the
effectiveness of the OTS's approval unless a court specifically orders
otherwise. BayBanks and NFS believe that antitrust concerns will not interfere
with the consummation of the Merger.
The Merger also is subject to approval by the Federal Reserve under Section
4 of the Bank Holding Company Act of 1956, as amended (the "BHCA"). Under
Section 4 of the BHCA and related regulations, the Federal Reserve must assess
whether BayBanks's acquisition and operation of NFS's business can reasonably be
expected to produce benefits to the public such as greater convenience,
increased competition, or gains in efficiency, that outweigh any possible
adverse effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest, or unsound banking practices. The Federal
Reserve's assessment also includes an evaluation of the financial and managerial
resources of BayBanks and the effect of the Merger on those resources and the
record of performance of BayBanks's subsidiary banks under the federal Community
Reinvestment Act.
In order to consummate the Merger, BayBanks also must receive a certificate
to affiliate with NFS Savings and Plaistow Co-operative from the New Hampshire
Board. In considering whether to grant the certificate, the New Hampshire Board
will consider, among other factors, BayBanks's plans for capital investment in
New Hampshire, including the manner in which the affiliation will bring net new
funds to the state, the record of BayBanks's subsidiary banks in serving the
credit needs of the communities in which they do business, BayBanks's plans for
serving the credit needs of the New Hampshire communities in which NFS's
subsidiaries operate, and the strength of the BayBanks management. In addition,
because BayBanks is a Massachusetts bank holding company, the Merger requires
the approval of the Massachusetts Board. The Massachusetts Board's approval is
based primarily upon its determination that the proposed acquisition does not
unreasonably affect competition among Massachusetts banking institutions and
that it promotes public convenience and advantage. In making such a
determination, the Board will consider, among other factors, whether the Merger
will result in net new benefits within NFS's local community.
BayBanks's right to exercise the Option also is subject to the prior
approval of the Federal Reserve, the New Hampshire Board and the Massachusetts
Board, to the extent that the exercise of the Option would result in BayBanks
directly or indirectly owning more than 5% of the voting stock of NFS, NFS
Savings and
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<PAGE> 35
Plaistow Co-operative. In determining whether to approve BayBanks's right to
exercise the Option, the regulatory agencies would generally apply the same
statutory criteria that they apply to their consideration of approval of the
Merger.
BayBanks has filed applications for the required approvals with the OTS,
the Federal Reserve, the Massachusetts Board, and the New Hampshire Board. 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 such agencies. If such
approvals are received, there can be no assurance as to the date of such
approvals, the absence of conditions to such approvals that would cause the
parties to abandon the Merger or the absence of any litigation challenging such
approvals.
In addition, it is contemplated that NFS Savings and Plaistow Co-operative
may be combined into a single entity contemporaneously with the Merger. Such a
transaction would require the approval of the OTS.
BayBanks and NFS are not aware of any other governmental approvals or
actions, other than those of the Commission and state securities administrators,
that are required before the parties may consummate the Merger. It is presently
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.
WAIVER AND AMENDMENT
Waiver. Except as expressly provided in the Acquisition Agreement, no
waiver by any party of any failure or refusal of any other party to comply with
its obligations under the Acquisition Agreement shall be deemed a waiver of any
other or subsequent failure or refusal to so comply by such other party. No
waiver shall be valid unless in writing signed by the party to be charged and
only to the extent therein set forth.
Amendment. The Acquisition Agreement may be amended by the parties to it
by written instrument executed by all parties (subject to compliance with
applicable law), by action taken or authorized by the respective Boards of
Directors, at any time before or after approval of the matters presented in
connection with the Merger by NFS shareholders; provided, however, that after
any approval of the transactions contemplated by the Acquisition Agreement by
NFS's shareholders, there may not be, without further approval of such
shareholders, any amendment of the Acquisition Agreement which reduces the
amount or changes the form of the Merger Consideration other than as
contemplated by the Acquisition Agreement.
TERMINATION
The Acquisition Agreement may be terminated at any time by mutual written
consent of BayBanks and NFS. In addition, the Acquisition Agreement may be
terminated by either party, provided that it is not then in default, by giving
appropriate notice to the other at the time and in the manner specified in the
Acquisition Agreement. Either party may terminate the Acquisition Agreement if:
(i) at any time after December 31, 1995, the Closing has not occurred for any
reason other than a Default by the party seeking to terminate; (ii) the
Acquisition Agreement is not approved by NFS shareholders in the manner provided
for in the agreement; (iii) any application for regulatory approval is denied or
withdrawn and 90 days have passed without a petition for rehearing, a request
for reconsideration or an amended application being filed with the appropriate
Governmental Authority; or (iv) a court or other Governmental Authority of
competent jurisdiction has taken any of certain actions permanently restraining
or otherwise prohibiting the Merger and such action has become final and
nonappealable.
BayBanks may terminate the Acquisition Agreement: (i) at any time if NFS is
in default; (ii) on the Closing Date if certain Closing Conditions set forth in
the Acquisition Agreement have not been satisfied; or (iii) at any time if a
Material Adverse Change in NFS has occurred.
NFS may terminate the Acquisition Agreement: (i) at any time if BayBanks or
BBNH is in default; (ii) on the Closing Date if certain Closing Conditions set
forth in the Acquisition Agreement have not been satisfied; (iii) at any time if
a Material Adverse Change in BayBanks has occurred; or (iv) subject to certain
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<PAGE> 36
rights of BayBanks to negate the termination, if prior to the Closing Date, the
Closing Market Value of BayBanks Common Stock is less than $43.50. See "Terms of
the Merger -- Conversion of NFS Common Stock."
TERMINATION FEE; NO SOLICITATION
In order to induce BayBanks to enter into the Acquisition Agreement and to
reimburse it for its expenses involved in investigating NFS and negotiating and
entering into the Acquisition Agreement and related matters, NFS agreed in the
Acquisition Agreement that it will make a cash payment to BayBanks of $900,000
(the "Termination Fee") if: (a) (i) either NFS or BayBanks has terminated the
Acquisition Agreement as a result of NFS shareholders not adopting the
Acquisition Agreement or (ii) BayBanks has terminated the Acquisition Agreement
as a result of a Default by NFS and (b) (i) within 12 months of any such
termination, (A) NFS has entered into an agreement to engage in an Acquisition
Transaction (defined below) with any person other than BayBanks or any of its
subsidiaries or (B) NFS's Board of Directors has approved an Acquisition
Transaction or recommended that NFS shareholders approve or accept any
Acquisition Transaction with any person other than BayBanks or any of its
subsidiaries, or (ii) in the case of termination as a result of NFS shareholders
not approving the Acquisition Agreement, at the time of such termination it
shall have been publicly announced that any person (other than BayBanks or any
of its subsidiaries) shall have (x) made, or disclosed an intention to make, a
proposal to engage in an Acquisition Transaction or (y) filed an application or
notice in draft or final form with any of certain Regulatory Authorities
(including those identified in "Regulatory Approvals Required" above) for
approval or clearance to engage in an Acquisition Transaction.
For purposes of the above discussion, an "Acquisition Transaction" means
(i) a merger, consolidation or other similar transaction with NFS or any of its
subsidiaries, (ii) any sale, lease or other disposition of 15% or more of the
consolidated assets of NFS and its subsidiaries, taken as a whole, in a single
transaction or series of transactions or (iii) any issuance, sale, transfer,
exchange or other disposition of (including by way of merger, consolidation,
share exchange, acceptance of a tender or exchange offer or any similar
transaction) securities representing 15% or more of the voting power of NFS or
any subsidiary.
AFFILIATE LETTER; RESALES OF BAYBANKS COMMON STOCK
Affiliate Letter. NFS has agreed to use its best efforts to cause each
director, executive officer and other Affiliate (for purposes of Rule 145 under
the Securities Act) of NFS to execute an Affiliate Letter as soon as possible
after the execution of the Acquisition Agreement and prior to the date of the
NFS Annual Meeting. A copy of the form of Affiliate Letter is attached hereto as
Appendix C and is incorporated herein by reference. The Affiliate Letter
provides that the signatory will vote all shares of NFS Common Stock that such
person is entitled to vote in favor of approval of the Acquisition Agreement and
the Merger and against approval of any proposal for the acquisition of NFS or
any subsidiary by any other party. Each signatory also agrees not to sell,
transfer, assign or otherwise dispose of any shares of NFS Common Stock owned by
such person without BayBanks's consent other than by will or operation of law or
to another person who has executed an Affiliate Letter. Directors and executive
officers having the right to vote in the aggregate 84,672 shares of NFS Common
Stock, or approximately 3% of the NFS Common Stock outstanding as of the Record
Date (excluding shares that the shareholder has the right to acquire upon the
exercise of stock options), have executed the Affiliate Letter.
Resales. The shares of BayBanks Common Stock to be issued pursuant to the
Acquisition Agreement have been registered under the Securities Act and may be
traded without restriction by all former holders of shares of NFS Common Stock
who are not Affiliates of NFS. Directors and certain executive officers of NFS,
and certain members of their immediate families and associates, may be deemed to
be Affiliates. The ability of Affiliates to sell the shares of BayBanks Common
Stock they receive in connection with the Merger is restricted by the terms of
Rule 145 under the Securities Act, and each person executing the Affiliate
Letter has agreed to comply with such restrictions.
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It is expected that the shares of BayBanks Common Stock to be issued in
connection with the Merger will constitute approximately 4% of the total number
of shares of BayBanks Common Stock outstanding immediately after the Merger.
INTERESTS OF CERTAIN PERSONS IN THE ACQUISITION
In considering the recommendations of NFS's Board of Directors with respect
to the Merger, shareholders should be aware that certain members of the Board of
Directors and management of NFS have certain interests in the Merger that are in
addition to the interests of shareholders of NFS generally. The prospective
affiliation with BayBanks may provide expanded employment opportunities for
management. In addition, because the transaction with BayBanks constitutes a
change in control of NFS, Mr. Adams, the President and a director of NFS, and
certain other members of NFS management will receive severance payments if their
employment terminates within prescribed periods following the transaction. The
terms of the employment and severance arrangements with NFS management are
described below and under "NFS Corporate Matters -- Executive Compensation." The
Board of Directors of NFS was aware of these interests and considered them,
among other matters, in approving and adopting the Acquisition Agreement and the
transactions contemplated thereby. See "Recommendation of the Board of
Directors; NFS's Reasons for the Merger."
Employment Agreements. NFS and NFS Savings have employment agreements with
James H. Adams, Robert J. Rzasa and Albert R. Rietheimer. Such agreements,
including the officers' current salaries, are described in more detail in "NFS
Corporate Matters -- Executive Compensation" below. Under the terms of the
respective agreements, Mr. Adams will serve as President and Chief Executive
Officer of NFS and NFS Savings until August 1997 and Messrs. Rzasa and
Rietheimer will serve in their executive capacities until August 1996. Each
agreement provides that the term of the agreement may be extended annually by
one additional year, subject to the mutual agreement of the employee, NFS
Savings and NFS. In addition, under the terms of the Acquisition Agreement, any
such extension also requires the consent of BayBanks. BayBanks has agreed with
Mr. Adams to support an extension of his employment agreement for an additional
year beyond its current term when it comes up for review in May 1995.
Severance Payments after Change in Control. Messrs. Adams, Rzasa and
Rietheimer's employment agreements with NFS and NFS Savings each provide that
if, during the term of the agreement, there is a change of control of NFS or NFS
Savings and the officer's employment terminates voluntarily or involuntarily for
any reason (other than for cause or by normal retirement, permanent disability
or death) within two years thereafter, he will be entitled to receive a
severance payment in the amount of his current annual salary plus a lump sum
payment of the amount of his current salary for the remainder of the term of the
employment agreement. The total payments to the employee in the event of a
change in control may not exceed the lesser of (i) three times current salary
for Mr. Adams or two times current salary for Messrs. Rzasa and Rietheimer and
(ii) the "parachute payment" limit under Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code"). See "NFS Corporate Matters -- Executive
Compensation." Six other employees of NFS or the NFS Banks also have agreements
that provide for severance payments in the event of a termination of employment
within either one or two years following a change in control. The acquisition
transaction constitutes a "change in control" for purposes of these agreements.
Indemnification; Insurance. In the Acquisition Agreement, BayBanks has
agreed that it will, for three years after the Closing Date, provide to
directors and officers of NFS and each of NFS's subsidiaries the same rights to
indemnification as provided to such directors and officers in each of the NFS
and NFS subsidiaries' charters and bylaws as in effect on the date of the
Acquisition Agreement or as provided by applicable law and regulation. The NFS
Bylaws provide for indemnification or reimbursement of directors and officers
for expenses, judgments, fines and amounts paid in settlement of claims incurred
by them by reason of their position with NFS, if the director or officer has
acted in good faith and with the reasonable belief that his or her conduct was
in the best interest of NFS. In addition, BayBanks has agreed to use its best
efforts, subject to certain limits on its cost, to extend NFS's directors' and
officers' liability insurance as in effect on the date of the Acquisition
Agreement for a period of one year after the Merger.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
consequences of the Merger to NFS shareholders. The discussion is based on
current provisions of the Code, existing and proposed Treasury Regulations,
current administrative rulings of the Internal Revenue Service ("IRS") and
judicial decisions, all of which are subject to change, and assumes that the
Merger is carried out as described herein. If changes are made to current law or
if the Merger is not carried out as described herein, the federal income tax
consequences of the Merger may vary from those described in this summary. The
discussion does not purport to be a complete analysis or listing of all
potential tax effects relevant to a particular NFS shareholder nor does it
address the tax consequences that may be relevant to particular categories of
shareholders subject to special treatment under certain federal income tax laws.
In addition, it does not describe any tax consequences arising under the laws of
any state, local or foreign jurisdiction. The discussion also may not be
applicable with respect to NFS Common Stock received pursuant to the exercise of
employee stock options or otherwise as compensation. Accordingly, each NFS
shareholder is urged to consult his or her own tax advisor regarding the tax
consequences of the Merger in his or her own particular tax situation and
regarding state, local and foreign tax implications of the Merger and any tax
reporting requirements of the Merger.
Tax Treatment of NFS, BayBanks and BBNH. The Merger will be treated as a
sale of the NFS Common Stock. Accordingly, NFS, BayBanks and BBNH will recognize
no gain or loss by reason of the Merger and the basis and holding periods of
NFS's and BBNH's assets immediately after the Merger will include the basis and
holding periods in their hands immediately before the Merger.
Tax Consequences to NFS's Shareholders. An NFS shareholder who exchanges
NFS Common Stock for BayBanks Common Stock and cash will be treated as if the
NFS shares had been sold in a taxable transaction. Gain or loss realized will be
recognized by the NFS shareholder with respect to the receipt of BayBanks Common
Stock and cash in exchange for NFS Common Stock in the Merger. The amount of
gain or loss realized will be measured by the difference between the fair market
value of the BayBanks Common Stock as of the consummation of the Merger and the
amount of cash received and the adjusted basis of the NFS shares. Such gain or
loss will be capital gain or loss, assuming the NFS shares were a capital asset
in the shareholder's hands at the time of the Merger, and will be long-term
capital gain or loss if the shareholder has held the NFS Common Stock for more
than one year at the time of the Merger. The basis of the BayBanks Common Stock
received by the NFS shareholder will be equal to the fair market value of the
BayBanks Common Stock received, and, assuming the BayBanks Common Stock received
is a capital asset in the hands of the NFS shareholder, a new holding period for
determining long-term capital gain or loss treatment for the BayBanks Common
Stock received will begin at such time. An NFS shareholder will also recognize
gain or loss in an amount equal to the difference between the amount of cash
received in lieu of a fractional share of BayBanks Common Stock and the portion
of the shareholder's basis that is allocable to the fractional share. Generally,
any such gain or loss will be capital gain or loss, assuming the NFS Common
Stock surrendered is held as a capital asset, and will be long-term capital gain
or loss if the shareholder has held the NFS Common Stock for more than one year.
An NFS shareholder who exercises dissenters' rights with respect to his or
her shares will be subject to tax on the receipt of the payments pursuant to
Section 302 of the Code (taking into account the application of the stock
attribution rules of Section 318 of the Code). In general, if the shares of NFS
Common Stock are held by the shareholder as a capital asset and such shareholder
holds, actually or constructively, no other shares which will be converted into
BayBanks Common Stock, such shareholder will recognize capital gain or loss
measured by the difference between the amount of cash received by such
shareholder and the basis for his or her shares.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY
AND IS BASED UPON PRESENT LAW. EACH NFS SHAREHOLDER SHOULD CONSULT HIS OR HER
OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING THE
APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS AND THE
POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER LAWS.
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ACCOUNTING TREATMENT
BayBanks expects to account for the Merger under the purchase method of
accounting.
MERGER AND CLOSING DATE
The Merger will become effective upon the filing of a Certificate of Merger
with the Secretary of State of the State of Delaware, unless a different date
and time is specified as the effective time in such Certificate of Merger (the
"Effective Time"). At the Effective Time, BBNH shall be merged with and into NFS
as permitted by and in accordance with applicable laws and on the terms and
subject to the conditions contained in the Acquisition Agreement. At the
Effective Time, (a) the separate existence of BBNH shall cease and (b) NFS, as
the surviving corporation ("Surviving Corporation"), shall continue to exist
under and be governed by the DGCL, with the name BayBank New Hampshire, Inc. At
the Effective Time, the certificate of incorporation and by-laws of the
Surviving Corporation shall be the certificate of incorporation and by-laws of
BBNH as in effect immediately prior to the Merger and the directors and officers
of the Surviving Corporation shall be those persons who were the directors and
officers of BBNH immediately prior to the Merger.
BayBanks and NFS have targeted the third quarter of 1995 for completion of
the Merger. Under the Acquisition Agreement, either party may terminate the
Acquisition Agreement at any time after December 31, 1995, if the Closing has
not occurred for any reason other than a Default by the party seeking to
terminate.
TREATMENT OF NFS OPTIONS
Upon the effectiveness of the Merger, each option to purchase shares of NFS
Common Stock, or other right, granted under the NFS Stock Option Plan that is
then outstanding and unexercised will be converted automatically into an option
to purchase shares of BayBanks Common Stock subject to the terms of the
BayBanks, Inc. 1988 Stock Option Plan in an amount and at an exercise price
determined as follows. The number of shares of BayBanks Common Stock to be
subject to the new option will be equal to the product of the number of shares
of NFS Common Stock subject to the original option and an Adjustment Factor
determined by dividing the per share Merger Consideration (valuing the BayBanks
Common Stock portion of the Merger Consideration at the Closing Market Value) by
the Closing Market Value of BayBanks Common Stock, rounded to the nearest share.
The exercise price per share of BayBanks Common Stock under the new option will
be equal to the exercise price per share of NFS Common Stock under the original
option divided by the Adjustment Factor, rounded up to the nearest cent, and the
duration of the new option shall be the same as the original option.
CONDUCT OF NFS'S BUSINESS PENDING THE MERGER
NFS has agreed in the Acquisition Agreement that, to the extent not
otherwise restricted or limited by the terms of the Acquisition Agreement, NFS
and its subsidiaries shall: (i) carry on their businesses in all material
respects in a manner substantially consistent with past practice, except for
changes approved in writing by BayBanks; (ii) use their best efforts to preserve
their business, to keep available their present officers and key employees, to
preserve the current relationships of customers and others having business
relationships with them, and to comply in all material respects with applicable
laws; and (iii) maintain in full force and effect all insurance policies and
bonds that were in force on the date of the Acquisition Agreement.
The Acquisition Agreement also contains certain restrictions on the conduct
of NFS's business pending consummation of the Acquisition. In particular, the
Acquisition Agreement provides that, except with the prior written consent of
BayBanks, neither NFS nor its subsidiaries shall, among other things, (i) except
for NFS Common Stock issued upon exercise of NFS Options existing at the date of
the Acquisition Agreement, issue, sell, pledge, dispose of, grant, encumber or
authorize the issuance, sale, pledge, disposition, grant or encumbrance of any
shares of NFS Common Stock or shares of stock of the NFS Banks or securities
exercisable for or convertible into any such shares (including the grant of
additional options or other rights under any option or similar plan of NFS) or
stock appreciation or similar rights with respect to such shares;
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(ii) (a) amend or enter into any agreement with any employee establishing the
terms of employment or severance or termination benefits or permit any such
agreement to be so renewed or extended except as BayBanks may otherwise request,
(b) adopt or establish any Employee Plan or Benefit Arrangement or, except as
reasonably necessary to comply with applicable law or to maintain the qualified
status of a Qualified Plan, amend, supplement or otherwise modify any existing
Employee Plan or Benefit Arrangement, or (c) make additional grants or
contributions under any existing Employee Plans or Benefit Arrangements except
in accordance with past practices or as otherwise provided in the Acquisition
Agreement; provided that NFS's and its subsidiaries' contributions with respect
to the 1994 year under any profit sharing plan or employee stock ownership plan
shall not exceed the rate at which such contributions were accrued on their
September 30, 1994 financial statements; (iii) other than with respect to
increases consistent with past practices, increase the compensation payable to
any director, officer or employee, or pay any bonuses to any officer or
employee, except for certain salary increases for all officers and other
employees of NFS and its subsidiaries agreed to by BayBanks; (iv) except as
otherwise provided in the Acquisition Agreement, incur any indebtedness with a
maturity of one year or more other than deposits taken in the ordinary course of
business consistent with past practice; (v) sell, purchase or lease, or commit
to sell, purchase or lease, any material assets, except for (a) transactions
pursuant to legally binding agreements or commitments entered into or approved
and disclosed to BayBanks before the date of the Acquisition Agreement and (b)
transactions otherwise permitted by the Acquisition Agreement; (vi) sell,
purchase, open, close or relocate any banking office except as agreed to by
BayBanks; (vii) except as otherwise provided in the Acquisition Agreement, pay
any dividend, acquire any of its capital stock (by repurchase, tender,
redemption or otherwise) or make any other capital distribution, except for
quarterly cash dividends on the NFS Common Stock in accordance with past
practice not exceeding $0.14 per share per quarter and except for cash dividends
on the capital stock of the NFS Banks consistent with past practices; (viii)
engage in any securities or other trading activity, except in the ordinary
course of business and consistent with past practice, or acquire any securities
with a final maturity of more than two years, or engage in transactions
involving structured notes, forwards, futures, options on futures, swaps or
other derivative instruments; (ix) make any capital expenditure in excess of
$50,000, except in accordance with the budget terms agreed to by BayBanks; (x)
make any change in its capital stock by split, reverse split, reclassification,
reorganization, subdivision, or other similar action; (xi) amend its certificate
of incorporation or charter (as the case may be) or by-laws; (xii) merge,
combine, or consolidate with or into, or permit the merger into it of, any other
corporation, association, trust, or entity or change in any manner the character
of its business; (xiii) change or modify in any way current accounting policy or
practice with respect to NFS's financial statements prepared in accordance with
generally accepted accounting principles ("GAAP") except as may be required by
GAAP or Governmental Authorities; (xiv) engage in any other transaction that is
not consistent with past practices and in the ordinary course of the business of
NFS or such subsidiary, as the case may be; (xv) make any payment to any
director, officer, employee or independent contractor, in connection with or as
a result of the transactions contemplated by the Acquisition Agreement or
otherwise, that is not deductible under either Section 162(a)(1) or 404 of the
Code; (xvi) make any equity investment or commitment to make such an investment
in equity securities or in real estate or in any real estate development
project, other than in connection with foreclosures, settlements in lieu of
foreclosure or troubled loan or debt restructuring in the ordinary course of
business consistent with past practice; (xvii) take any action that is intended
or reasonably can be expected to result in any of NFS's representations and
warranties set forth in the Acquisition Agreement being or becoming untrue in
any material respect as of any time to and including the Closing Date, or any of
the conditions to the Merger or the other transactions set forth in the
Acquisition Agreement not being satisfied in any material respect, or in any
material violation of any provision of the Acquisition Agreement or the Option
Agreement, except, in each case, as may be expressly permitted by the
Acquisition Agreement or as may be required by applicable law, but only after
reasonable consultation with BayBanks; (xviii) foreclose upon or take a deed or
title to any commercial real estate without first conducting a Phase I
environmental assessment of the property or foreclose upon any commercial real
estate if such environmental assessment indicates the presence of Hazardous
Material in amounts which, if such foreclosure were to occur, would result in a
Material Adverse Change in NFS; or (xix) agree to do any of the foregoing or
permit any of the foregoing to occur.
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EXPENSES
Fees, expenses and out-of-pocket expenses incurred by BayBanks, NFS and
BBNH in connection with the transactions contemplated by the Acquisition
Agreement will be borne by the party that incurs such expenses. BayBanks will
bear all expenses in connection with obtaining regulatory approvals and the
registration, quotation and "blue sky" registration and approvals of the
BayBanks Common Stock to be issued as part of the Merger Consideration. NFS will
bear the expenses of solicitation of NFS shareholders, including the expenses of
printing and mailing this Proxy Statement/Prospectus. See "Expenses of
Solicitation."
NFS SHAREHOLDER APPRAISAL RIGHTS
Pursuant to Section 262 of the DGCL, any holder of record of NFS Common
Stock who follows the procedures specified therein (a "Dissenting Shareholder")
is entitled to have his or her shares appraised by the Delaware Court of
Chancery and to receive the appraised value of such shares in lieu of the amount
of Merger Consideration that he or she would otherwise be entitled to receive
pursuant to the Acquisition Agreement. Reference is made to Section 262, a copy
of which is attached to this Prospectus/Proxy Statement as Appendix E, for a
complete statement of the appraisal rights of NFS Shareholders. To the extent
there are any inconsistencies between the following summary and Section 262, the
terms of Section 262 shall control.
Under Section 262, a shareholder who desires to demand appraisal of his or
her shares must deliver to NFS, prior to the shareholder vote on the Merger, a
written demand for appraisal of his or her shares and must not vote in favor of
adopting the Acquisition Agreement. Voting in person or by proxy against the
Merger will not constitute the required demand. The demand must adequately
identify the shareholder, including mailing address, and be sent to NFS
Financial Corp., Attention Barbara J. Foran, Secretary, 157 Main Street, Nashua,
New Hampshire 03060.
Only a holder of record is entitled to assert appraisal rights for the
shares of NFS Common Stock registered in that holder's name. If shares are held
in a fiduciary capacity, such as by a trustee, guardian or custodian, or by
another record holder, such as a broker holding for its customer, the demand
should be made by the record owner in his or its respective capacity as such. If
the shares are held of record by more than one person, the demand should be
executed by or on behalf of all such holders. If a record holder holds shares
for more than one beneficial owner, he or it may exercise appraisal rights with
respect to the shares held for one or more such owners while not exercising such
rights with respect to the shares held for other beneficial owners. In such
case, the written demand must state the number of shares as to which appraisal
is sought; otherwise the demand will be presumed to cover all shares of NFS
Common Stock held in the name of the record owner.
If the Merger is approved by the NFS shareholders and is consummated, the
Surviving Corporation will notify Dissenting Shareholders within 10 days after
the Effective Time. From and after the Effective Time, no Dissenting Shareholder
will be entitled to vote his or her shares for any purpose or be entitled to
receive payments of dividends or other distributions on the stock, if any;
however, if (i) such shareholder delivers to the Surviving Corporation a written
withdrawal of his or her appraisal demand and acceptance of the Merger within 60
days after the Effective Time (or thereafter with the written approval of the
Surviving Corporation) or (ii) no petition is timely filed in the Court of
Chancery (as discussed below), then such shareholder will be entitled to receive
the Merger Consideration that such shareholder would be entitled to receive
pursuant to the Acquisition Agreement and his or her right to an appraisal will
cease. Dissenting Shareholders shall be entitled to receive from the Surviving
Corporation within 120 days after the Effective Time, upon written request, a
statement setting forth the aggregate number of (i) shares of NFS Common Stock
not voted in favor of the Merger and for which appraisal demands have been
received and (ii) Dissenting Shareholders, which statement will be mailed to
such shareholder either within 10 days of receipt of such request by the
Surviving Corporation or within 10 days after the expiration of the period for
delivery of demands for appraisals, whichever is later.
Within 120 days after the Effective Time, any Dissenting Shareholder may
file a petition in the Court of Chancery demanding a determination of the value
of the NFS Common Stock of all Dissenting Shareholders.
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Within 20 days after such a petition is filed, the Surviving Corporation will
file in the office of the Register in Chancery a list of the Dissenting
Shareholders with whom the Surviving Corporation has not reached agreement as to
the value of their shares. At a hearing on such petition, the Court of Chancery
will determine the shareholders who have complied with Section 262 of the DGCL
and are entitled to appraisal rights. The Court of Chancery will determine the
fair value of the shares, excluding any appreciation or depreciation in
anticipation of the Merger, including a fair rate of interest, if any, which
will be paid by the Surviving Corporation upon the surrender of the certificates
representing such shares. Court costs may be determined by the Court of Chancery
and allocated as it deems equitable.
In the event that NFS shareholders elect to exercise these appraisal
rights, the receipt of cash for shares of NFS Common Stock will be a taxable
transaction to the NFS shareholders receiving such cash, as described above
under "Terms of the Merger -- Certain Federal Income Tax Consequences." IT IS
SUGGESTED THAT SHAREHOLDERS CONSIDERING EXERCISING STATUTORY APPRAISAL RIGHTS
CONSULT WITH THEIR OWN TAX ADVISORS WITH REGARD TO THE TAX CONSEQUENCES OF SUCH
ACTIONS.
It is a condition to BayBanks's obligation to consummate the Merger that
the holders of not more than 330,000 shares of NFS Common Stock shall have
properly perfected their statutory appraisal rights.
OPTION AGREEMENT
As an inducement to BayBanks entering into the Acquisition Agreement, NFS
and BayBanks entered into an Option Agreement on December 22, 1994
contemporaneously with the execution of the Acquisition Agreement. The Option
Agreement may have the effect of discouraging the making of alternative
acquisition proposals for NFS and increasing the likelihood that the Merger will
be consummated in accordance with the terms of the Acquisition Agreement. A copy
of the Option Agreement is attached hereto as Appendix B, and the following
discussion is qualified by reference to the Option Agreement. Capitalized terms
used and not defined in this discussion have the same respective meanings as
when used in the Option Agreement.
Pursuant to the Option Agreement, NFS granted BayBanks an Option to
purchase up to 274,266 shares of NFS Common Stock ("Option Shares"),
representing approximately 9.9% of the shares of NFS Common Stock outstanding on
December 22, 1994, at an exercise price of $21.50 per share, which was the last
closing sale price of the NFS Common Stock on December 21, 1994, as reported by
the Nasdaq National Market. The number of Option Shares is subject to
proportionate adjustment in the event of any stock dividends, split-ups,
mergers, recapitalizations, combinations, subdivisions, conversions, exchanges
of shares or similar occurrences, and, in any such event, the exercise price
will be adjusted by multiplying the exercise price in effect before such event
by a fraction the numerator of which is the number of Option Shares before
adjustment and the denominator is the number of Option Shares thereafter. The
exercise price also is subject to adjustment in the event that NFS issues
additional shares of NFS Common Stock (other than pursuant to outstanding
options under the NFS Stock Option Plan) at a lower price, in which case the
exercise price will be adjusted to equal such lower price. The exercise price,
as adjusted from time to time, is hereinafter referred to as the "Option Price."
Exercisability. The Option is exercisable upon the occurrence of a
"Purchase Event." The occurrence of any of the following events or transactions
prior to an Exercise Termination Event (discussed below) constitutes a "Purchase
Event": (i) the acquisition by any person (other than BayBanks or its
subsidiaries) of beneficial ownership (other than on behalf of NFS) of 20% or
more of the then outstanding NFS Common Stock or voting stock of either of NFS's
subsidiaries; (ii) without having received BayBanks's prior written consent, NFS
shall have entered into any letter of intent or definitive agreement to engage
in an Acquisition Transaction (as defined below) with any person other than
BayBanks or any of its subsidiaries, or the Board of Directors of NFS shall have
recommended that the shareholders of NFS approve or accept any Acquisition
Transaction (as defined below except that, for purposes of this provision, the
threshold amount for a purchase or acquisition of securities of NFS or its
subsidiaries is 20%) with any person other than BayBanks or any of its
subsidiaries; (iii) NFS enters into an agreement with a person (other than
BayBanks or its subsidiaries) for an Acquisition Transaction without such person
assuming NFS's Repurchase Obligations (described below) in the event that
BayBanks elects to have such person perform such obligations; or (iv) NFS enters
into a letter
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of intent or definitive agreement (x) to consolidate or merge with any person
(other than BayBanks or its subsidiaries), and NFS will not be the continuing or
surviving corporation of such consolidation or merger, (y) to permit any person
(other than BayBanks or its subsidiaries) to merge into NFS, and NFS will be the
continuing or surviving corporation, but, in connection with such merger, the
then outstanding shares of NFS 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 NFS Common Stock shall after such merger
represent less than 50% of the outstanding shares and share equivalents of the
merged company, or (z) to sell or otherwise transfer all or substantially all of
its assets to any person (other than BayBanks or its subsidiaries), and such
letter of intent or definitive agreement governing such transaction does not
provide for, at BayBanks's election and in accordance with the terms and
conditions set forth in the Option Agreement, the conversion or exchange of the
Option into or for an option of either (i) the continuing or surviving
corporation, NFS or the transferee of NFS's assets, as applicable, or (ii) any
person that controls such corporation.
The term "Acquisition Transaction" means (i) a merger, consolidation or
other business combination involving NFS or either of the NFS Banks, (ii) a
purchase, lease or other acquisition of more than 25% of the consolidated assets
of NFS and the NFS Banks, in a single transaction or series of transactions, or
(iii) a purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of beneficial ownership (other than
by a reporting person meeting the requirements for filing under Schedule 13G of
the Exchange Act) of securities representing 10% or more of the voting power of
NFS or either of the NFS Banks.
NFS's Repurchase Obligations. If the Option becomes exercisable, BayBanks
or any permitted transferee of BayBanks may under certain circumstances require
NFS to repurchase the Option (in lieu of its exercise) and any issued Option
Shares for a formula price that under no circumstances shall exceed $4.5
million, as follows. Following the occurrence of a Purchase Event that occurs
prior to an Exercise Termination Event, (i) at the request (the date of such
request being the "Option Repurchase Request Date") of BayBanks, NFS will
repurchase the Option from BayBanks 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 the
Option may then be exercised and (ii) at the request (the date of such request
being the "Option Share Repurchase Request Date") of the owner of Option Shares
from time to time (the "Owner"), NFS will repurchase such number of the Option
Shares from the Owner as the Owner shall designate at a price (the "Option Share
Repurchase Price") equal to the market/offer price multiplied by the number of
Option Shares so designated. The term "market/offer price" means the highest of
(i) the price per share of NFS Common Stock at which a tender offer or exchange
offer therefor has been made after the date of the Option Agreement and on or
prior to the Option Repurchase Request Date or the Option Share Repurchase
Request Date, as the case may be, (ii) the price per share of NFS Common Stock
paid or to be paid by any third party pursuant to an agreement with NFS (whether
by way of a merger, consolidation or otherwise), (iii) the average of the
highest last sale prices for shares of NFS Common Stock as reported on the
Nasdaq National Market for the 20-day period ending on the Option Repurchase
Request Date or the Option Share Repurchase Request Date, as the case may be and
(iv) in the event of a sale of all or substantially all of NFS's assets, the sum
of the price paid in such sale for such assets and the current market value of
the remaining assets of NFS as determined by an investment banking firm selected
by BayBanks or the Owner, as the case may be, and reasonably acceptable to NFS,
divided by the number of shares of NFS Common Stock outstanding at the time of
such sale. In determining the market/offer price, the value of consideration
other than cash will be the value determined by an investment banking firm
selected by BayBanks or the Owner, as the case may be, and reasonably acceptable
to NFS. The investment banking firm's determination will be conclusive and
binding on all parties.
Termination. The Option will terminate and be of no further force and
effect upon the earliest to occur of (i) the time immediately prior to the
consummation of the Merger, (ii) 12 months after the first occurrence of a
Purchase Event, (iii) 12 months after the termination of the Acquisition
Agreement following the occurrence of a Preliminary Purchase Event, (iv) upon
the termination of the Acquisition Agreement in accordance with the terms
thereof prior to the occurrence of a Purchase Event or a Preliminary Purchase
Event (other than a termination of the Acquisition Agreement by BayBanks in
specified circumstances),
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(v) 12 months after the termination of the Acquisition Agreement by BayBanks due
to a material breach of that Agreement by NFS that results in the failure to
obtain the requisite NFS shareholder vote or a Default by NFS or a Material
Adverse Change in NFS, if such breach was not a willful or intentional breach of
the Acquisition Agreement by NFS, or (vi) 18 months after the termination of the
Acquisition Agreement by BayBanks due to a material breach of that Agreement by
NFS that results in the failure to obtain the requisite NFS shareholder vote or
a Default by NFS or a Material Adverse Change in NFS, if such breach was a
willful or intentional breach of the Acquisition Agreement by NFS; provided,
however, that if within the period specified in either clause (v) or (vi),
whichever is applicable, a Preliminary Purchase Event shall occur, then the
Option shall terminate on the later of 12 months after the occurrence of such
Preliminary Purchase Event or the termination date specified in clause (v) or
(vi), as applicable. Each of the events described in clauses (i) - (vi) in the
preceding sentence is referred to as an "Exercise Termination Event."
Registration Rights. When the Option becomes exercisable, NFS will, at
BayBanks's request and NFS's expense, promptly prepare, file and keep current a
shelf registration statement under the Securities Act covering any shares issued
and issuable pursuant to the Option and will use its best efforts to cause such
registration statement to become effective, and to remain current and effective
for a period not in excess of 180 days, in order to permit the sale or other
disposition of any Option Shares in accordance with any plan of disposition
requested by BayBanks; provided, however, that NFS may postpone filing such a
registration statement for a period of time (not in excess of 30 days) if in its
judgment such filing would require the disclosure of material information that
NFS has a bona fide business purpose for preserving as confidential. BayBanks
will have the right to obtain two such registrations. In addition, if, at the
time of any request by BayBanks for registration of Option Shares, NFS is in the
process of registration with respect to an underwritten public offering of
shares of NFS Common Stock, BayBanks will have the right to have the Option
Shares included in the registration statement with respect to such offering. If
in the good faith judgment of the underwriters of such offering, the inclusion
of the Option Shares in such registration would interfere materially with the
successful marketing of the shares of NFS Common Stock offered by NFS, the
number of Option Shares otherwise to be covered in such registration statement
may be reduced but not below 20% of the total number of Option Shares and NFS
shares covered in such registration statement. If such a reduction occurs, then
NFS shall file a registration statement for the balance of shares requested by
BayBanks as promptly as practicable thereafter as to which no reduction will be
permitted to occur, and BayBanks will thereafter be entitled to one additional
registration statement. In connection with any such registration, NFS and
BayBanks will provide each other with representations, warranties, indemnities
and other agreements customarily given in connection with such registrations. If
requested by BayBanks in connection with such registration, NFS and BayBanks
will become a party to any underwriting agreement relating to the sale of such
shares, but only to the extent of obligating themselves in respect of
representations, warranties, indemnities and other agreements customarily
included in such underwriting agreements.
COMPARISON OF RIGHTS OF HOLDERS OF BAYBANKS AND NFS COMMON STOCK
At the Effective Time of the Merger, the shareholders of NFS will become
stockholders of BayBanks, a corporation governed by Massachusetts law and
Articles of Organization and By-laws adopted thereunder. The following
discussion summarizes the material differences between the rights of holders of
NFS Common Stock and holders of BayBanks Common Stock, based on a comparison of
the Delaware and Massachusetts corporation laws and differences between the
charters and by-laws of NFS and BayBanks. The Restated Certificate of
Incorporation and By-laws of NFS are referred to herein as the "NFS Charter" and
the "NFS By-laws," respectively, and the Articles of Organization and By-laws of
BayBanks are referred to herein as the "BayBanks Charter" and the "BayBanks
By-laws," respectively. This summary does not purport to be complete and is
qualified in its entirety by reference to the NFS Charter and NFS By-laws, the
BayBanks Charter and BayBanks By-laws, the BayBanks Stockholder Rights Plan
referred to below and the relevant provisions of the DGCL and the Massachusetts
Business Corporation Law (the "MBCL").
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MEETINGS OF STOCKHOLDERS
Delaware law provides that special meetings of shareholders may be called
only by the directors or by any other person authorized by a corporation's
certificate of incorporation or by-laws. The NFS Charter and NFS By-laws
authorize the president, the chairman or the Board of Directors to call special
meetings. The BayBanks By-laws provide for the call of a special meeting of
stockholders by the president or directors of BayBanks, or upon written
application of the owners of not less than 66 2/3% (or such lesser percentage as
may be required by law, but not less than the statutory minimum for a
corporation with a class of voting stock registered under the Exchange Act (a
"public company") of 40%) in interest of the corporation's stock entitled to
vote at such meeting.
INSPECTION RIGHTS
Inspection rights under the Delaware corporation statute are more extensive
than under the Massachusetts statute. Under Delaware law, shareholders
demonstrating a proper purpose have the right to inspect a corporation's stock
ledger, stockholder list, and other books and records. Under Massachusetts law,
a corporation's stockholders have the right for a proper purpose to inspect the
corporation's articles of organization, by-laws, records of all meetings of
incorporators and stockholders, and stock and transfer records, including the
stockholder list. In addition, stockholders of a Massachusetts business
corporation have a qualified common law right under certain circumstances to
inspect other books and records of the corporation.
ACTION BY CONSENT OF STOCKHOLDERS
Under the NFS Charter, action may be taken by written consent of
shareholders without a meeting only if such consent is unanimous. Under
Massachusetts law, any action to be taken by stockholders may be taken without a
meeting only by unanimous written consent, and a corporation may not provide
otherwise in its articles of organization or by-laws.
CUMULATIVE VOTING
Under Delaware law, a corporation may provide in its certificate of
incorporation for cumulative voting by shareholders in elections of directors
(i.e., each shareholder casts as many votes for directors as he has shares of
stock multiplied by the number of directors to be elected). The NFS Charter
denies cumulative voting rights in the election of directors. Neither the MBCL
nor the BayBanks Charter has cumulative voting provisions.
ISSUANCE OF STOCK; PREFERRED STOCK
Shares of NFS Common Stock may be issued by NFS from time to time as
approved by the NFS Board without shareholder approval. Holders of the capital
stock of NFS are not entitled to preemptive or preferential rights to purchase
or to subscribe for any shares of capital stock or other securities that may be
issued by NFS. NFS has 5,000,000 authorized shares of serial Preferred Stock.
None of such shares are outstanding. The Preferred Stock is issuable in one or
more series. The NFS Board of Directors can authorize, without shareholder
approval, the issuance of each series of Preferred Stock and can fix the voting
rights, if any, dividend rate, liquidation preferences, optional and sinking
fund redemption provisions, if any, conversion rights, if any, and other rights
of each such series, any of which rights could adversely affect the voting and
other rights of the holders of NFS Common Stock.
Shares of BayBanks Common Stock may be issued from time to time, in such
amounts and for such consideration, as may be determined by the BayBanks Board
of Directors. No holder of BayBanks Common Stock has any preemptive or
preferential rights to purchase or to subscribe for any shares of capital stock
or other securities that may be issued by BayBanks. BayBanks has 1,100,000
authorized shares of Preferred Stock, par value $10.00 per share. None of such
shares are outstanding. The Preferred Stock is issuable in one or more series.
The BayBanks Board of Directors is empowered to authorize without stockholder
approval the issuance of each series of Preferred Stock and except for (i) a
series of 110,000 shares (of which 5,626 shares
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have been issued and reacquired by the Company and may not be reissued), the
rights of which are fixed by the Articles of Organization, and (ii) a series of
200,000 shares of Series A Junior Participating Preferred Stock authorized and
reserved for issuance upon exercise of stock purchase rights issued under the
Stockholder Rights Plan described in " 'Anti-Takeover' Provisions" below, is
empowered to fix the voting rights, if any (in addition to those prescribed by
law), dividend rate, liquidation preferences, optional and sinking fund
redemption provisions, if any, conversion rights, if any, and other rights of
each such series, any of which rights could adversely affect the voting and
other rights of the holders of BayBanks Common Stock.
DIVIDENDS AND REPURCHASES OF STOCK
Under Delaware law, a corporation generally is permitted to declare and pay
dividends out of surplus or out of net profits for the current and/or preceding
fiscal year, provided that such dividends will not reduce capital below the
amount of capital represented by all classes of stock having a preference upon
the distribution of assets. Also under Delaware law, a corporation may generally
redeem or repurchase shares of its stock if such redemption or repurchase will
not impair the capital of the corporation. The directors of a Delaware
corporation may be jointly and severally liable to the corporation for a willful
or negligent violation of such provisions of Delaware law. Under Massachusetts
law, the payment of dividends and the repurchase of the corporation's stock are
generally permissible if such actions are not taken when the corporation is
insolvent, do not render the corporation insolvent, and do not violate the
corporation's articles of organization. The directors of a Massachusetts
corporation may be jointly and severally liable to the corporation to the extent
that a dividend authorized by the directors exceeds such permissible amounts and
is not repaid to the corporation.
CLASSIFICATION OF THE BOARD OF DIRECTORS
Delaware law permits (but does not require) classification of a
corporation's board of directors into one, two or three classes. The NFS Charter
provides that the NFS Board of Directors is divided into three classes, elected
for staggered three-year terms. In the case of a public company, Section 50A of
the MBCL provides that the number of directors may only be fixed by the board of
directors and requires that the board be divided into three classes with
staggered three-year terms. A public company may exempt itself from the
provisions of Section 50A by vote of the board of directors or of the holders of
two-thirds of the voting stock. BayBanks is subject to Section 50A.
REMOVAL OF DIRECTORS
Under Delaware law, shareholders may remove directors with or without cause
by a majority vote unless otherwise provided in the certificate of
incorporation. The NFS Charter provides that directors may only be removed for
cause by at least two-thirds of the votes eligible to be cast by shareholders at
a meeting duly called for such purpose. Unlike Massachusetts law, Delaware law
does not permit directors to remove other directors. Under Section 50A of the
MBCL, directors of a public company subject to that section may be removed from
office only by the holders of a majority of the shares outstanding and entitled
to vote in the election of directors or a majority of the directors then in
office, in each case only for certain causes specified in the law.
VACANCIES ON THE BOARD OF DIRECTORS
Under Delaware law, unless otherwise provided in the charter or by-laws,
vacancies on the board of directors and newly created directorships resulting
from any increase in the authorized number of directors may be filled by the
remaining directors. The NFS Charter and By-laws do not provide otherwise. Under
Section 50A of the MBCL, vacancies and newly created directorships of a
Massachusetts public company subject to that section may only be filled by the
vote of a majority of the remaining directors in office.
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EXCULPATION OF DIRECTORS
Delaware law and Massachusetts law have substantially similar provisions
relating to exculpation of directors. Each state's law permits a corporation to
provide that no director shall be personally liable to the company or its
stockholders for monetary damages for breaches of fiduciary duty except where
such exculpation is expressly prohibited. The circumstances under which such
exculpation is prohibited are substantially similar. Under both the NFS and
BayBanks Charters, directors are not exculpated for (i) any breach of their duty
of loyalty to the corporation or its stockholders, (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of law
or (iii) any transactions from which such director derived an improper benefit.
In addition, under the BayBanks Charter, a director is not exculpated from
liability under provisions of Massachusetts law relating to unauthorized
distributions and loans to insiders, while under the NFS Charter, a director is
not exculpated from liability under provisions of Delaware law relating to
unlawful payments of dividends and unlawful stock purchases or redemptions.
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
Both Delaware and Massachusetts law generally permit indemnification, or
reimbursement, of directors and officers for expenses, judgments, fines and
amounts paid in settlement of claims incurred by them by reason of their
position with the corporation, if the director or officer has acted in good
faith and with the reasonable belief that his conduct was in the best interest
of the corporation. However, Delaware law, unlike Massachusetts law, does not
permit a corporation to indemnify persons against judgments in actions brought
by or in the right of the corporation (although it does permit indemnification
in such situations if approved by the Delaware Court of Chancery and for
expenses of such actions). The BayBanks Charter and By-laws provide for the
indemnification of officers and directors to the maximum extent legally
permissible, with substantially the same effect as the NFS Charter as
supplemented by Delaware statutory provisions. However, because Massachusetts
law does not prohibit indemnification for judgments in actions by or in the
right of the corporation, the BayBanks Charter and By-laws to this extent appear
to afford BayBanks officers and directors greater rights to indemnification for
judgments in derivative actions than would be available under Delaware law (but
BayBanks is not aware of any Massachusetts court that has approved
indemnification under such circumstances).
INTERESTED DIRECTOR TRANSACTIONS
The DGCL and the NFS By-laws provide that no transaction between a
corporation and one or more of its directors or officers or an entity in which
one or more of its directors or officers are directors or officers or have a
financial interest, shall be void or voidable solely for that reason. In
addition, no such transaction shall be void or voidable solely because the
director or officer is present at, participates in, or votes at the meeting of
the board of directors, or committee thereof, which authorizes the transaction.
In order that such a transaction not be found void or voidable, it must, after
disclosure of material facts, be approved by the disinterested directors, a
committee of disinterested directors, or the stockholders, or the transaction
must be fair as to the corporation. The MBCL has no comparable provision.
However, the BayBanks Charter provides that no transaction by BayBanks shall be
invalidated by the fact that one or more of BayBanks's directors or officers is
a party to the transaction or has a position or financial interest in a party to
the transaction. In order that such a transaction not be found void or voidable,
it must, after disclosure of material facts, be approved by the disinterested
directors or an authorized committee of disinterested directors.
SALE, LEASE OR EXCHANGE OF ASSETS AND MERGERS
Delaware law requires the approval of the directors and the vote of the
holders of a majority of the outstanding stock entitled to vote thereon for the
sale, lease, or exchange of all or substantially all of a corporation's property
and assets or a merger or consolidation of the corporation into any other
corporation, although the certificate of incorporation may require a higher
shareholder vote. If such a transaction involves an NFS shareholder who
beneficially owns 10% or more of the voting stock of NFS (or an affiliate or
associate of such a shareholder), even if shareholder approval of such
transaction is not required by law, the NFS Charter requires such transaction be
approved by at least (i) the holders of 80% of the outstanding voting
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stock of NFS and (ii) the holders of two-thirds of the voting power of the
voting stock other than shares of voting stock owned by the shareholder involved
in the transaction or its affiliates or associates. Massachusetts law provides
that a vote of two-thirds of the shares of each class of stock outstanding and
entitled to vote thereon is required to authorize the sale, lease, or exchange
of all or substantially all of a corporation's property and assets or a merger
or consolidation of the corporation into any other corporation, except that the
articles of organization may provide that the vote of a greater or lesser
proportion, but not less than a majority of the outstanding shares of each
class, is required. The BayBanks Charter increases the stockholder vote required
to approve such transactions in certain circumstances. See " 'Anti-Takeover'
Provisions" below.
AMENDMENTS TO CHARTER
Under the DGCL, charter amendments require the approval of the directors
and the vote of the holders of a majority of the outstanding stock and a
majority of each class of stock outstanding and entitled to vote thereon as a
class, unless the certificate of incorporation requires a greater proportion.
The NFS Charter does not require a greater proportion. In addition, Delaware law
requires a class vote when, among other things, an amendment will adversely
affect the powers, preferences or special rights of a class of stock. Under the
MBCL, amendments to a corporation's articles of organization relating to certain
changes in capital or in the corporate name require the vote of at least a
majority of each class of stock outstanding and entitled to vote thereon.
Amendments relating to other matters require a vote of at least two-thirds of
each class outstanding and entitled to vote thereon or, if the articles of
organization so provide, a greater or lesser proportion but not less than a
majority of the outstanding shares of each class. Except in certain
circumstances, the BayBanks Charter does not require a greater proportion. See "
'Anti-Takeover' Provisions" below. Under Massachusetts law, the articles of
organization or by-laws may provide that all outstanding classes of stock vote
as a single class, but the separate vote of any class of stock the rights of
which would be adversely affected by the amendment, is also required.
APPRAISAL RIGHTS
Dissenting stockholders have the right to obtain the fair value of their
shares (so-called "appraisal rights") in more circumstances under Massachusetts
law than under Delaware law. Under Delaware law, a shareholder is entitled to
appraisal rights in the event of certain mergers or consolidations, but not in
the event of the sale, lease, or exchange of all or substantially all of a
corporation's assets or the adoption of an amendment to its certificate of
incorporation, unless such rights are granted in the corporation's certificate
of incorporation. The NFS Charter does not grant such rights. Under
Massachusetts law, a properly dissenting stockholder is entitled to receive the
appraised value of his shares when the corporation votes (i) to sell, lease, or
exchange all or substantially all of its property and assets, (ii) to adopt an
amendment to its articles of organization which adversely affects the rights of
the stockholder or (iii) to merge or consolidate with another corporation.
"ANTI-TAKEOVER" PROVISIONS
Contractual Measures. The Charters and By-laws of both BayBanks and NFS
contain provisions that could discourage potential takeover attempts and prevent
stockholders from changing the company's management, including provisions
authorizing the Board of Directors to issue shares of preferred stock in series,
enlarge the size of the Board of Directors and fill any vacancies on the Board
of Directors, and restrictions on the ability of stockholders to call a special
meeting of stockholders, bring business before an annual meeting and nominate
candidates for election as directors. NFS has agreements with certain officers,
and BayBanks has a Severance Benefits Plan applicable to certain employees, in
each case providing benefits for certain terminations following a change of
control.
BayBanks has a Stockholders Rights Plan under which stock purchase rights
have been distributed to BayBanks stockholders and are attached to each new
share of BayBanks Common Stock issued in the future, including those to be
issued to the NFS shareholders. The stock purchase rights, which are not
currently exercisable and which expire in December 1998, may become exercisable
in the event of certain unsolicited attempts to acquire BayBanks. The rights
become exercisable 10 business days after a person (including a
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group) acquires 20% or more of the outstanding shares of BayBanks Common Stock,
or commences a tender offer that would result in such person owning 25% or more
of such shares, or the Board of Directors determines that a person owning 10% or
more of such shares is an "adverse person." If any person becomes the owner of
25% or more of the outstanding shares of BayBanks Common Stock or the Board
determines that a person is an adverse person, the rights of holders other than
such owner or adverse person become rights to buy shares of BayBanks Common
Stock (or of the acquiring company if BayBanks is acquired in any of certain
types of merger or business combination) having a market value of twice the
exercise price of each right, with the result that such owner's or adverse
person's interest in BayBanks would be substantially diluted. BayBanks may
redeem the stock purchase rights at a price of $.01 per right until 10 business
days after a person acquires 20% or more of the outstanding shares of BayBanks
Common Stock or the Board has determined that a person is an adverse person. The
description and terms of the Share Purchase Rights are set forth in a Rights
Agreement dated December 23, 1988, between BayBanks and The First National Bank
of Boston, as Rights Agent.
The BayBanks Charter contains a fair price protection provision designed to
discourage attempts to acquire BayBanks in two steps whereby remaining
stockholder interests would be "squeezed out" in a second-step business
combination at a price less than that paid in a first-step hostile tender offer.
Under this provision, in addition to such vote of the BayBanks stockholders as
is otherwise required, any merger, consolidation, other business reorganization
or combination or other transaction with a stockholder who owns beneficially 10%
or more of BayBanks's voting stock (a "Substantial Stockholder") or with an
affiliate of a Substantial Stockholder would require the approval of either a
majority of the Disinterested Directors (as defined in the provision) of
BayBanks or the holders of two-thirds of the voting stock of BayBanks held by
stockholders other than Substantial Stockholders and affiliates thereof unless
(a) the fair market value per share of the consideration to be paid to the
holders of BayBanks Common Stock was at least equal to the highest per share
price paid by the Substantial Stockholder for its shares of BayBanks Common
Stock, and (b) certain procedural and other requirements were satisfied,
including the requirement that the consideration to be paid to BayBanks's
stockholders must be cash or the same type of consideration previously used by
the Substantial Stockholder.
In addition, the BayBanks Charter includes an "anti-greenmail" provision
whereby BayBanks's purchase of shares of its voting capital stock from a
Substantial Stockholder at a premium over Fair Market Value (as defined in the
provision) would be precluded unless approved by the holders of at least the sum
of two-thirds of BayBanks's voting stock held by stockholders other than
Substantial Stockholders and affiliates thereof plus the number of shares of
voting stock held by Substantial Stockholders. Purchases by BayBanks pursuant to
an open-market purchase program or an offer to all holders of the same class of
stock being purchased would not require a stockholder vote.
The NFS Charter also contains an "anti-greenmail" provision. This provision
states that NFS may not purchase or acquire shares of NFS voting stock from a
shareholder of NFS who (i) owns five percent or more of the NFS voting stock and
(ii) has owned such shares for less than two years unless such purchase or
acquisition is approved by the holders of at least a majority of the aggregate
number of outstanding shares of voting stock less the number of shares owned by
such shareholder. The vote is not required if (i) the purchase or acquisition is
part of a tender or exchange offer by NFS to purchase shares of its voting stock
on the same terms to all holders of the same class of voting stock and is in
compliance with the applicable requirements of the Exchange Act or (ii) if such
shares will be purchased by NFS at a purchase price per share that does not
exceed the fair market value of the voting stock, as determined by the NFS Board
of Directors based on the average closing price or the mean bid and ask price of
a share of the voting stock for the twenty trading days immediately preceding
the execution of the definitive purchase agreement.
With regard to acquisitions of control, the NFS Charter contains a
provision that no person may make an offer to acquire 10% or more of NFS's
voting stock without obtaining prior approval of the offer by a two-thirds vote
of the NFS Board of Directors or alternatively, before the offer is made,
obtaining approval of the acquisition from the OTS. The NFS Charter provides
that the Board of Directors, when evaluating any acquisition offer, shall give
due consideration to all relevant factors, including, without limitation, the
economic effects of acceptance of the offer on depositors, borrowers and
employees of the insured institution
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subsidiary or subsidiaries of NFS and on the communities in which such
subsidiary or subsidiaries operate or are located as well as on the ability of
such subsidiary or subsidiaries to fulfill the objectives of an insured
institution under applicable federal statutes and regulations.
Business Combination Statute. Delaware's Business Combination statute is
substantially similar to the Massachusetts Business Combination statute.
However, while the Delaware statute provides that, if a person acquires 15% or
more of the stock of a Delaware corporation without the approval of its board of
directors (an "interested stockholder"), such person may not engage in certain
transactions with the corporation for a period of three years, the Massachusetts
statute lowers the 15% threshold to 5% (except in the case of certain
stockholders eligible to file Schedule 13G under the Exchange Act). Both the
Delaware and Massachusetts statutes include certain exceptions to this
prohibition; for example, if the board of directors approves the acquisition of
stock or the transaction prior to the time that the person became an interested
stockholder, or if the interested stockholder acquires 85% (in the Delaware
statute) or 90% (in the Massachusetts statute) of the voting stock of the
corporation voting stock owned by directors who are also officers and certain
employee stock plans in one transaction, or if the transaction is approved by
the board of directors and by the affirmative vote of two-thirds of the
outstanding voting stock which is not owned by the interested stockholder, the
prohibition does not apply. NFS currently is subject to the Delaware Business
Combination statute, and BayBanks is subject to the Massachusetts Business
Combination statute.
Control Share Acquisition Statute. Under the Massachusetts Control Share
Acquisition statute, a person (hereinafter, the "acquiror") who makes a bona
fide offer to acquire, or acquires, shares of stock of a Massachusetts
corporation that when combined with shares already owned, would increase the
acquiror's ownership to at least 20%, 33 1/3%, or a majority of the voting stock
of the corporation, must obtain the approval of a majority in interest of the
shares held by all stockholders, except the acquiror and the officers and inside
directors of the corporation, in order to vote the shares acquired. The statute
does not require the acquiror to consummate the purchase before the stockholder
vote is taken.
The Control Share Acquisition statute permits a Massachusetts corporation
to elect not to be governed by these provisions by including such an election in
its articles of organization or by-laws. The BayBanks By-laws contain a
provision pursuant to which BayBanks elected not to be governed by the
Massachusetts Control Share Acquisition statute. However, if at a future date
the Board of Directors of BayBanks determines that it is in the best interests
of BayBanks and its stockholders that BayBanks be governed by the statute, the
By-laws may be amended to permit BayBanks to be governed by such statute. Any
such amendment would apply only to acquisitions crossing the thresholds which
occur after the effective date of such amendment.
Delaware does not have a Control Share Acquisition statute.
ELECTION OF DIRECTORS
In addition to being asked to consider and vote upon the approval and
adoption of the Acquisition Agreement, at the NFS Annual Meeting, the
shareholders of NFS also will be asked to elect three directors of NFS. While
NFS and BayBanks have targeted the third quarter of 1995 for consummation of the
Merger, it will be necessary for NFS to maintain its Board of Directors pending
the consummation of the Merger. Upon the consummation of the Merger, the
directors of the Surviving Corporation shall be those persons who were the
directors of BBNH immediately prior to the Merger.
The NFS By-laws fix the number of directors of NFS at eight. Under the NFS
Charter, the directors are divided into three classes, which are to be as nearly
equal in number as possible. The term of office of one class of directors
expires in each year, and their successors are elected for terms of three years
and until their successors are elected and qualified. This year's class has
three members and at the NFS Annual Meeting, three directors will be elected to
the NFS Board of Directors, each for a three-year term, to fill those seats. The
nominees, James H. Adams, A. Jack Atkinson and Roger H. Osgood, Jr., have served
on the Board since 1982, 1970 and 1980, respectively. Currently, as a result of
the resignation of Caroline B. Mason from the NFS Board of Directors in May
1994, there is one vacancy on the NFS Board of Directors in the class of
42
<PAGE> 51
directors whose term expires in 1996. Although it is authorized under the NFS
By-laws to fill such vacancy, the NFS Board of Directors has opted not to do so
at this time.
Unless otherwise specified on the proxy, it is the intention of the persons
named in the proxy to vote the shares represented by each properly executed
proxy for the election as directors of the persons named below as nominees. The
NFS Board of Directors believes that the nominees will stand for election and
will serve if elected as directors. However, if any of the persons nominated by
the NFS Board of Directors fails to stand for election or will be unable to
accept election, the proxies will be voted for the election of such other person
or persons as the NFS Board of Directors may recommend.
INFORMATION AS TO NOMINEES AND CONTINUING DIRECTORS
The following table sets forth the names and ages of the NFS Board of
Directors' nominees for election as directors and those directors who will
continue to serve after the NFS Annual Meeting, each such person's principal
occupation or employment during the past five years, the periods during which he
has served as a director and any positions currently held with NFS. Each serves
as a director of NFS Savings and certain of such individuals, as indicated, also
serve as directors of Plaistow Co-operative.
<TABLE>
<CAPTION>
DIRECTOR TERM
AGE SINCE EXPIRES POSITIONS HELD WITH THE COMPANY
--- -------- ------- ----------------------------------
<S> <C> <C> <C> <C>
NOMINEES FOR A THREE-YEAR TERM
James H. Adams.................. 51 1982(a)(b) 1995 President, Chief Executive Officer
A. Jack Atkinson................ 63 1970(a) 1995 Vice Chairman of the Board
Roger H. Osgood, Jr............. 54 1980(a)(b) 1995
CONTINUING DIRECTORS
George E. Shagory............... 58 1990 1996
Philip R. Currier............... 54 1988 1997
Philip L. Hall.................. 65 1989 1997
James J. Hebert................. 59 1973(a)(b) 1997 Chairman of the Board
</TABLE>
- ---------------
(a) Served as a director of NFS since its formation in May 1986. Previously
served as a director of Nashua Federal Savings and Loan Association, the
predecessor of NFS Savings.
(b) Director of Plaistow Co-operative.
The principal occupation of each nominee and continuing director of NFS for
the past five years is set forth below:
JAMES H. ADAMS, who has been employed by NFS Savings since 1974, has served
as NFS Savings' President and Chief Executive Officer since January 1986 and has
served as President and Chief Executive Officer of NFS since its formation in
August 1986.
A. JACK ATKINSON has been Chairman and President of The Bronze Craft
Corporation, Nashua, New Hampshire, a producer of custom non-ferrous hardware,
architectural and engineered products, since 1980. In January 1989, Mr. Atkinson
was elected Vice Chairman of the Board of Directors of both NFS and NFS Savings.
ROGER H. OSGOOD, JR. is owner of Osgood Co., Nashua, New Hampshire, a
hardware company, and has been President and Treasurer of that company since
July 1981.
GEORGE E. SHAGORY has been Professor and Chairman of the Graduate
Department of Business Administration of Rivier College, Nashua, New Hampshire
since 1976.
PHILIP R. CURRIER has been an attorney with the Philip R. Currier
Professional Corporation since 1993. Formerly, he was Senior Partner of the law
firm of Currier, Zall, Durmer, Shepard and Barry, Nashua, New Hampshire from
1984, when the firm was established, until 1993.
PHILIP L. HALL has been President of J. Lawrence Hall Company, Inc.,
Nashua, New Hampshire, a heating and air conditioning contracting firm, since
1975.
43
<PAGE> 52
JAMES J. HEBERT, President of Rice's Pharmacy, Inc., Nashua, New Hampshire,
has been owner of that company since 1964. In 1988, Mr. Hebert served as Vice
Chairman of the Board of Directors of both NFS and NFS Savings. In January 1989,
he was elected Chairman of the Board of Directors of both NFS and NFS Savings.
COMPENSATION OF DIRECTORS
The arrangements for compensation of non-employee directors of NFS, all of
whom are directors of NFS Savings and certain of whom are directors of Plaistow
Co-operative, for attendance at meetings of the Boards of Directors are as
follows. Directors of NFS, NFS Savings, and Plaistow Co-operative are paid fees
of $425, $525, and $400, respectively, for each meeting of the Board they
attend. The Chairman of the Board of NFS receives $3,150 per annum and the
Chairman of the Board of NFS Savings receives $5,250 per annum. For each meeting
chaired, the Vice Chairman of the Board of both NFS and NFS Savings receives
$150. In addition, Board members receive fees for attending committee meetings
ranging from $100 to $250 per meeting, depending on the committee. Officers who
are directors do not receive additional compensation for their service as
directors.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The NFS Board of Directors has appointed KPMG to continue as independent
auditors for NFS for the fiscal year ending December 31, 1995, subject to
ratification of such appointment by the shareholders. KPMG has acted as the
independent auditors of NFS Savings since 1973, and of NFS since its
organization as the holding company of NFS Savings. Unless otherwise indicated,
properly executed proxies will be voted in favor of ratifying the appointment of
KPMG to audit the consolidated financial statements of NFS for the fiscal year
ending December 31, 1995. If the Merger is consummated during 1995, the
financial statements of BBNH for the fiscal year ending December 31, 1995 would
be audited by independent auditors selected by BayBanks. KPMG also currently
acts as auditors for BayBanks.
Representatives of KPMG are expected to be present at the NFS Annual
Meeting, to be available to respond to appropriate questions, and to have the
opportunity to make a statement if they so desire.
NFS CORPORATE MATTERS
CORPORATE GOVERNANCE
During fiscal 1994, the NFS Board of Directors held 21 meetings. The NFS
Board of Directors acts as a nominating committee for selecting nominees for
election as directors. The NFS Board of Directors has appointed an Audit
Committee which, during the fiscal year ended December 31, 1994, conducted 9
meetings. The members of the Audit Committee during 1994 were Messrs. Atkinson,
Hall and Osgood and Mr. Hebert ex-officio. During 1995, the Audit Committee
Members are Messrs. Atkinson, Hall, and Shagory and Mr. Hebert ex-officio. The
Audit Committee reviews the scope of the independent annual audit, the
independent auditors' letter to the NFS Board of Directors concerning the
effectiveness of NFS's internal financial and accounting controls and the NFS
Board of Directors' response to that letter, if deemed necessary. Compensation
matters are considered by the Personnel and Compensation Committee of NFS
Savings and the Boards of Directors of NFS and NFS Savings. See "Executive
Compensation."
44
<PAGE> 53
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth a summary of
all compensation during the last three fiscal years for NFS's chief executive
officer and each of NFS's executive officers whose aggregate annual salary and
bonus exceeded $100,000 for the year ended December 31, 1994 (collectively the
"named executive officers"). Compensation has been paid by NFS Savings, and none
of the executive officers has received any separate form of compensation from
NFS. Officers receive compensation in their positions as officers of NFS
Savings.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
---------------------- UNDERLYING ALL OTHER
YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)(B)
----- --------- -------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
James H. Adams,................ 1994 $ 215,577 $ 0 11,450 $ 28,249
President and Chief 1993 204,427 0 0 29,798
Executive Officer 1992 193,405 2,851(a) 10,091 937
Robert J. Rzasa,............... 1994 120,241 0 5,451 17,017
Executive Vice President 1993 114,714 0 0 16,915
1992 110,363 1,629(a) 5,450 535
</TABLE>
- ---------------
(a) 1992 bonus of 1.5% of base annual salary paid to all employees.
(b) Profit Sharing and ESOP contributions.
Option Grants in Last Fiscal Year. In January of 1994, NFS granted options
under its Stock Option Plan (the "Option Plan") covering 84,289 shares of NFS
Common Stock to 49 employees, including the named executive officers. The
following table sets forth information concerning grants to the named executive
officers of stock options pursuant to the Option Plan during the year ended
December 31, 1994.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZATION
---------------------------------------------------- VALUE
% OF TOTAL AT ASSUMED ANNUAL RATES
NUMBER OF OPTIONS OF STOCK PRICE
SECURITIES GRANTED TO EXERCISE APPRECIATION
UNDERLYING EMPLOYEES OR FOR OPTION TERM
OPTIONS IN FISCAL BASE PRICE EXPIRATION -----------------------
NAME GRANTED(#) YEAR 1994 ($/SH)(A) DATE(B) 5%($) 10%($)
- -------------------------- ---------- ---------- ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
James H. Adams............ 11,450 13.58% $16.75 1/13/04 312,402 497,447
Robert J. Rzasa........... 5,451 6.47 16.75 1/13/04 79,912 127,246
</TABLE>
- ---------------
(a) The exercise price is equal to the fair market value of the NFS Common Stock
as of the close of business on January 13, 1994.
(b) The exercisability of the options by the named executive officers and
certain other officers of NFS was based on the performance objectives for
1994 of NFS Savings and Plaistow Co-operative relating to profitability,
solvency, assets, liabilities, interest rate risk and regulatory compliance.
Based on actual performance achievement, options to purchase 8,890 of such
shares held by Mr. Adams and 4,066 shares held by Mr. Rzasa became
exercisable, and the balance have expired.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values. The following table sets forth the value of all unexercised options
held at year-end 1994 by the named executive officers. No named executive
officer exercised any stock options during the fiscal year.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
NAME DECEMBER 31, 1994(A) DECEMBER 31, 1994(B)
- ---------------------------------------------- ------------------------------- -----------------------
<S> <C> <C>
James H. Adams................................ 34,791 $ 551,480
Robert J. Rzasa............................... 14,516 231,107
</TABLE>
- ---------------
(a) All options are exercisable.
(b) Based on the difference between the closing price of NFS Common Stock on
December 30, 1994, which was $28.125, and the option price for each
underlying grant.
45
<PAGE> 54
Pension Plan Table. NFS Savings maintains a defined benefit pension plan
(the "Pension Plan") for its eligible employees. All employees of NFS Savings
and Plaistow Co-operative are eligible to participate in the Pension Plan upon
attaining age 21 and completing one year of service (working a minimum of 1,000
hours in such year). The following table illustrates estimated annual pension
benefits for employees retiring in 1994 at age 65 (normal retirement age) for
various levels of compensation and years of benefit service under the Pension
Plan.
<TABLE>
<CAPTION>
10 15 20 25 30
REMUNERATION YEARS YEARS YEARS YEARS YEARS
- ------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$100,000.................... $17,420 $26,130 $34,839 $43,549 $52,259
125,000.................... 22,170 33,255 44,339 55,424 66,509
150,000.................... 26,920 40,380 53,839 67,299 80,759
175,000(a)................. 26,920 40,380 53,839 67,299 80,759
</TABLE>
- ---------------
(a) The Internal Revenue Code limits annual compensation that may be covered by
qualified plans to $150,000 for 1994.
Benefits under the Pension Plan are funded solely by contributions made by
NFS Savings and are determined according to a formula which provides a
participant with an annual benefit for his or her lifetime equal to (a) the
total of (i) 1.25% of his or her average annual salary (as reported in the
Summary Compensation table above) for the five consecutive years out of the last
10 years of employment with NFS Savings that produce the highest average, plus
(ii) .65% of such average annual salary that exceeds Covered Compensation,
multiplied by (b) the participant's years of benefit service not exceeding 30
years. Covered Compensation is the average of the Social Security Taxable Wage
Base for the 35 years prior to the Social Security Retirement Age. For employees
attaining normal retirement age in 1994, Covered Compensation was $24,312.
Compensation for pension purposes for the named executive officers as of
December 31, 1994 was as follows: Mr. Adams, $150,000, and Mr. Rzasa, $120,241.
Messrs. Adams and Rzasa had 20 and 6 years, respectively, of benefit service
under the Pension Plan as of December 31, 1994. The sample benefit amounts
listed above are computed as straight-life annuity amounts and are not subject
to any deduction for social security or other offset amounts.
Employment Agreements; Severance. NFS and NFS Savings have employment
agreements with James H. Adams, Robert J. Rzasa and Albert R. Rietheimer. Under
the terms of the respective agreements, Mr. Adams will serve as President and
Chief Executive Officer of both NFS and NFS Savings until August 1997 and
Messrs. Rzasa and Rietheimer will serve in their executive capacities until
August 1996. Each agreement provides that the term of the agreement may be
extended annually by one additional year subject to mutual agreement of the
employee, NFS Savings and NFS. In addition, under the terms of the Acquisition
Agreement, any such extension also requires the consent of BayBanks. Mr. Adams
has an agreement with BayBanks that his employment will be extended an
additional year beyond its current term, to August 1998, when it comes up for
review in May 1995. Under the agreements, the Boards of Directors of NFS and NFS
Savings have approved an annual salary rate of $228,960 for Mr. Adams, $127,187
for Mr. Rzasa, and $104,637 for Mr. Rietheimer for the fiscal year ending
December 31, 1995. Messrs. Adams, Rzasa and Rietheimer will be entitled to
participate in any discretionary bonuses and retirement or other benefit plans
applicable to NFS's or NFS Savings's executive officers. Their employment may be
terminated by the Boards of Directors of NFS and NFS Savings at any time;
provided, however, that if the termination is not for cause, as defined in the
agreement, they are entitled to receive a lump sum payment equal to their salary
for the remainder of the contract term and will continue to receive all benefits
provided by the agreement for the remaining term thereof. If they terminate
their employment without the consent of the Boards of both NFS and NFS Savings
then the agreements restrict them from having any other employment for one year
or the remaining term of the agreement plus six months, whichever is less, with
a competing bank, savings institution, mortgage banking firm or a holding
company affiliate of any such entity if such entity has total consolidated
assets, or a loan servicing portfolio, of $100 million or more and if they
maintain an office in New Hampshire (or within 50 miles of Nashua) or conduct
business in New Hampshire for 25% or more of their normal annual working hours.
46
<PAGE> 55
If during the term of the agreements there is a "change in control" of NFS
or NFS Savings and the employment of Mr. Adams, Mr. Rzasa or Mr. Rietheimer
terminates voluntarily or involuntarily for any reason (other than for cause or
by normal retirement, permanent disability or death) within two years
thereafter, in addition to receiving a lump sum payment of current salary for
the remainder of the contract term, such officer will be entitled to receive a
severance payment in the amount of his current annual salary. The acquisition
transaction constitutes a change in control for this purpose. Under the
agreements, however, Mr. Adams will not be entitled to receive severance or
other termination payments in excess of three times his current annual salary
and Messrs. Rzasa and Rietheimer will not be entitled to more than two times
their respective current annual salaries. Accordingly, assuming termination as
of February 28, 1995 as a result of a change in control, Mr. Adams would be
entitled to a payment of not more than $686,880, Mr. Rzasa would be entitled to
a payment of not more than $254,374, and Mr. Rietheimer would be entitled to a
payment of not more than $209,274. Such maximum amounts also would be reduced to
the extent necessary to avoid exceeding the "parachute payment" limit under
Section 280G of the Code.
Messrs. Adams and Rzasa also are entitled to monthly supplemental
retirement benefits if they retire at or after age 60 and 62, respectively, with
provision for continuation of such payments if any such officer dies before the
full amount is paid to him. The total amount of supplemental retirement benefits
to which Mr. Adams is entitled is $240,000, and the total amount to which Mr.
Rzasa is entitled is $100,000. If Mr. Adams or Mr. Rzasa terminates employment
due to permanent and total disability before age 60 or 62, respectively, he will
be entitled to monthly payments totaling these amounts.
NFS PERFORMANCE
The following table sets forth comparative information regarding NFS's
cumulative shareholder return on its common stock over the last five fiscal
years. Total shareholder return is measured by dividing total dividends
(assuming dividend reinvestment) plus share price change for a period by the
share price at the beginning of the measurement period. NFS's cumulative
shareholder return based on an investment of $100 at the beginning of the
five-year period ending December 31, 1994 is compared to the cumulative total
return of the Nasdaq Market Index and an index comprised of all federally
chartered savings institutions (including 239 thrift holding companies),
reporting under the same Standard Industrial Classification Number (SIC 6035) as
NFS, whose securities have been publicly traded since December 31, 1989 ("Peer
Group Index").
<TABLE>
<CAPTION>
Measurement Period NFS Finan- Peer Group NASDAQ Market
(Fiscal Year Covered) cial Corp. Index Index
<S> <C> <C> <C>
1989 100.00 100.00 100.00
1990 41.79 70.50 81.12
1991 62.68 114.59 104.14
1992 168.70 151.77 105.16
1993 274.82 184.57 126.14
1994 503.16 174.83 132.44
</TABLE>
47
<PAGE> 56
REPORT ON EXECUTIVE COMPENSATION
NFS's overall philosophy regarding executive compensation is to offer
competitive and fair compensation based on the particular officer's
contributions and personal performance. For 1994, the principal components of
NFS's executive compensation program, reflected in the foregoing tables as to
named executive officers, were base salary and stock options, the exercise of
which were conditioned on satisfaction by NFS Savings and/or Plaistow
Co-operative of specific performance objectives. Executives also participate on
the same terms as non-executive employees of NFS Savings in the NFS Savings Bank
Profit Sharing and ESOP (the "Profit Sharing and ESOP") and the NFS Savings Bank
Retirement Plan (the "Pension Plan"), which are broad-based plans that accord
benefits based on pre-established formulas and eligibility criteria, as well as
group life, disability and health insurance plans of NFS Savings.
For fiscal 1994, preliminary compensation determinations for all executive
officers except Mr. Adams, the Chief Executive Officer, were made initially by
NFS Savings' Personnel and Compensation Committee (the "Committee"), at its
meeting in November 1993. During 1993, the members of the Committee were Messrs.
Atkinson (Chair), Currier and Hall and Mrs. Mason. All determinations by the
Committee were presented in the form of recommendations to the full Board of
Directors of NFS Savings for consideration and approval at its meeting in
January 1994. The directors of NFS Savings are also the directors of NFS. In
addition to reviewing the recommendations of the Committee, the Board of
Directors of NFS Savings also reviewed the terms of Mr. Adams' compensation in
1993 and established his compensation for 1994. Mr. Adams did not attend that
portion of the meeting devoted to the consideration and decisions regarding his
compensation.
In determining base compensation for executive officers, the Committee
considered the report of an independent compensation consultant as to the New
England and New Hampshire banking environment, compensation trends, new tax
laws, stock options and executive compensation. The Committee reviewed the
compensation and performance of executive officers during 1993, including
managerial ability and quality and quantity of work. The Committee also
considered the financial performance of NFS and NFS Savings during 1993. In
making base compensation determinations, the Committee did not employ any exact
mathematical model or formula, nor did it link compensation amounts to any
specific financial or performance criteria. The Committee did, however, place
particular emphasis on two general principles: (1) compensation for executive
officers of NFS should generally be in the mid-range of executive officer
compensation for New England-based financial institutions with assets of
$500-$900 million and (2) compensation increases should be supported by
increases in net income of NFS.
Based on these same factors and criteria, the Board of Directors of NFS
Savings determined that Mr. Adams' base annual salary rate for 1994 would be
raised from $205,000 to $216,000. Mr. Adams' base annual salary rate was
originally established in 1986 at $115,000 when he was promoted to the position
of President and Chief Executive Officer of NFS Savings. Later that year this
annual salary was incorporated into Mr. Adams' employment agreement which
provides for an annual salary review. In August 1986, NFS was formed and Mr.
Adams was appointed President and Chief Executive Officer of that entity for no
additional compensation. Since 1986, the Board of Directors of NFS Savings has
approved annual increases in Mr. Adams's salary of 0 - 22%.
Compensation recommendations for 1995 base annual salary rates for
executive officers of NFS and NFS Savings, with the exception of Mr. Adams, were
made initially by the Committee. These recommendations, which included a
proposed base annual salary rate of $127,187 in 1995 for Mr. Rzasa, were
reviewed and approved by the Boards of Directors of NFS Savings and of NFS. The
Boards also established Mr. Adams' base annual salary rate of $228,960 for 1995.
In 1994, the Board of NFS determined that it would use options for
compensation based on specific performance objectives of NFS Savings and
Plaistow Co-operative. In January 1994, NFS granted options covering 84,289
shares of common stock to 49 employees, including the named executive officers,
based on compensation level and job responsibility. The exercise price on such
options was the fair market value as of the close of business on January 13,
1994. The exercise of the options by the named executive officers and certain
other officers of NFS was based on specific performance objectives of both NFS
Savings and Plaistow
48
<PAGE> 57
Co-operative. The exercise of the options by all other grantees was based on the
performance objectives of either NFS Savings or Plaistow Co-operative. Factors
upon which the exercise of the options were based included specifically
identified targets for profitability, solvency, assets, liabilities, interest
rate risk and regulatory compliance of NFS Savings and Plaistow Co-operative.
Messrs. Adams and Rzasa, whose options were based on performance objectives of
both NFS Savings and Plaistow Co-operative, were granted 11,450 and 5,451
options, respectively. Based on actual performance achievement, only 8,890 and
4,066 of such options granted to Messrs. Adams and Rzasa, respectively, became
exercisable, and the balance have expired. For additional information regarding
such option grants, see "Executive Compensation Options Grants in Last Fiscal
Year" above. All decisions with respect to option grants under the Option Plan
are made by outside directors of NFS upon recommendation from the Option
Committee. Option Committee members during the last fiscal year were Messrs.
Atkinson and Osgood, Dr. Shagory and Mrs. Mason. Mr. Hebert replaced Mrs. Mason
following her resignation from the NFS Board.
The Profit Sharing and ESOP and the Pension Plan are broad-based plans
under which generally all employees of NFS Savings are eligible to participate
after attaining age 21 and completing one year of credited service (1,000 hours)
to NFS Savings. Under the Profit Sharing and ESOP, NFS Savings makes annual
contributions of not less than 5% of its pre-tax net profits but not more than
15% of the aggregate compensation earned during the year by all participants.
Accordingly, contributions under the Profit Sharing and ESOP, are tied to net
profit performance of NFS Savings and Plaistow Co-operative. Compensation in the
form of option grants under the Option Plan or contributions under the Profit
Sharing and ESOP result in ownership of NFS Common Stock. This ownership will
increase in value to the extent that the price of NFS's Common Stock increases.
Employees of Plaistow Co-operative are eligible to participate in these plans
under the same participation rules as NFS Savings's employees.
SUBMITTED BY THE PERSONNEL AND COMPENSATION COMMITTEE
AND THE BOARD OF DIRECTORS OF NFS SAVINGS.
<TABLE>
<S> <C>
James H. Adams James J. Hebert
A. Jack Atkinson Roger H. Osgood, Jr.*
Philip R. George E. Shagory*
Currier*
Philip L. Hall
</TABLE>
- ---------------
* Member, Personnel and Compensation Committee
Compensation Committee Interlocks and Insider Participation. From time to
time NFS Savings and Plaistow Co-operative make loans to their directors,
officers and other employees for the financing of their homes, as well as home
improvement and consumer loans. These loans are made in the ordinary course of
business, and NFS's management believes that they neither involve more than
normal risk of collectibility nor present other unfavorable features. All loans
to directors and executive officers must be approved by the full board of
directors, and loans to all other employees are approved by one of two
designated officers. Loans to such individuals are made pursuant to the same
underwriting criteria, interest rates and origination fees as apply to loans to
the general public. Employees pay the attorney's and appraisal fees and other
direct costs incurred by NFS in originating a loan.
49
<PAGE> 58
STOCK OWNED BY MANAGEMENT
The following table sets forth information as of March 6, 1995 with respect
to the shares of NFS Common Stock beneficially owned by each director and each
executive officer named in the Summary Compensation Table and by all directors
and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME AND POSITIONS WITH NFS BENEFICIAL OWNERSHIP(A) CLASS
- ------------------------------------------------------------------ ----------------------- -------
<S> <C> <C>
James H. Adams, President, Chief Executive Officer, Director...... 64,795(b) 2.3%
A. Jack Atkinson, Vice Chairman of the Board...................... 27,166(c)(d) *
Philip R. Currier, Director....................................... 10,650(e) *
Philip L. Hall, Director.......................................... 3,400(f)(g) *
James J. Hebert, Chairman of the Board............................ 12,111(c)(h) *
Roger H. Osgood, Jr., Director.................................... 9,266(c) *
George E. Shagory, Ph.D., Director................................ 1,100(f)(g) *
Robert J. Rzasa, Executive Vice President......................... 22,516(i) *
All directors and executive officers as a group (9 persons)....... 163,851(j) 5.7%
</TABLE>
- ---------------
* Less than 1%
(a) In accordance with Rule 13d-3 under the Exchange Act, a person is deemed to
be the beneficial owner, for purposes of this table, of any shares of NFS
Common Stock (1) over which he or she has or shares voting or investment
power, or (2) of which he or she has the right to acquire beneficial
ownership at any time within 60 days from March 6, 1995. "Voting power" is
the power to vote or direct the voting of shares and "investment power" is
the power to dispose or direct the disposition of shares. All persons shown
in the table above have sole voting and investment power, except as
otherwise indicated. This table includes shares of NFS Common Stock subject
to outstanding options granted pursuant to NFS's Stock Option Plan.
(b) Includes 34,791 shares subject to options.
(c) Includes 6,000 shares subject to options.
(d) Includes 5,520 shares for which voting and investment power is shared with a
family member and 5,067 shares owned by a family member living at the same
residence.
(e) Includes 6,650 shares owned by family members living at the same residence.
(f) Voting and investment power shared with a family member.
(g) Includes 100 shares subject to options.
(h) Includes 3,711 shares for which voting and investment power is shared with a
family member.
(i) Includes 14,516 shares subject to options.
(j) Includes 79,179 shares subject to options.
50
<PAGE> 59
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth information with respect to persons known by
NFS as of March 6, 1995 to be the beneficial owners of more than five percent of
the outstanding NFS Common Stock based on the most recent Schedule 13G of each
such person or entity delivered to NFS.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP(A) STOCK OUTSTANDING
- -------------------------------------------------------- ----------------------- -----------------
<S> <C> <C>
BayBanks, Inc........................................... 274,266(b) 8.95%
175 Federal Street
Boston, Massachusetts 02110
Dimensional Fund Advisors, Inc.......................... 157,600(c) 5.65%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
</TABLE>
- ---------------
(a) See Note (a) above under "Corporate Matters -- Stock Owned by Management."
(b) BayBanks owns no shares of the outstanding NFS Common Stock, but, under
Commission rules, it is deemed for purposes of this table to be the
beneficial owner of the shares of NFS Common Stock subject to the Option.
The Option may be exercised, and shares of NFS Common Stock issued to
BayBanks, in the circumstances described above under "Terms of the
Merger -- Option Agreement."
(c) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
adviser, reported in a Schedule 13G filed with the Commission with respect
to its ownership at December 31, 1994, that all of these shares are owned by
various investment entities for which Dimensional serves as investment
manager. Dimensional disclaims beneficial ownership of all such shares.
DEADLINES FOR SHAREHOLDER NOMINATIONS AND PROPOSALS
NFS's By-laws permit shareholders eligible to vote at the NFS Annual
Meeting to make nominations for directors but only if such nominations are made
pursuant to timely notice in writing to the Secretary of NFS. To be timely,
notice must be delivered to, or mailed to and received at, the principal
executive offices of NFS not less than 30 days nor more than 90 days prior to
the date of the meeting, provided that at least 45 days' notice or prior public
disclosure of the date of the meeting is given or made to shareholders. Public
disclosure of the date of the 1995 Annual Meeting was made on March 10, 1995, by
filing a Current Report on Form 8-K under the Exchange Act with the Commission
and by the issuance of a press release. A shareholders' notice of nomination
must also set forth certain information specified in Article III, Section 13 of
NFS's By-laws concerning each person the shareholder proposes to nominate for
election and the nominating shareholder. March 27, 1995 is the deadline for
shareholder nominations. To date, no such nominations have been received.
It is anticipated that the Merger will occur during 1995, so that there
will not be any 1996 Annual Meeting of NFS Shareholders. However, in the event
there will be such a meeting, any proposal intended to be presented by any
shareholder for action at the 1996 Annual Meeting of NFS Shareholders must be
received by Barbara J. Foran, Secretary of NFS at 157 Main Street, Nashua, New
Hampshire 03060 not later than November 22, 1995 in order for the proposal to be
considered for inclusion in NFS's proxy statement and proxy relating to the 1996
Annual Meeting.
LEGAL OPINIONS
The validity of the BayBanks Common Stock to be issued in connection with
the Merger will be passed upon for BayBanks by Palmer & Dodge, Boston,
Massachusetts, counsel for BayBanks.
Hogan & Hartson L.L.P., Washington, D.C., is acting as counsel for NFS in
connection with certain legal matters relating to the Merger and the
transactions contemplated thereby.
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EXPERTS
The consolidated financial statements of BayBanks, Inc. and Subsidiaries as
of December 31, 1994 and 1993, and for each of the years in the three-year
period ended December 31, 1994, incorporated by reference into the BayBanks
Annual Report on Form 10-K for the year ended December 31, 1994, have been
incorporated by reference into this Prospectus/Proxy Statement in reliance upon
the report of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and on the authority of said firm as experts
in accounting and auditing.
The consolidated financial statements of NFS Financial Corp. and
Subsidiaries as of December 31, 1994 and 1993, and for each of the years in the
three-year period ended December 31, 1994, incorporated by reference into the
NFS Annual Report on Form 10-K for the year ended December 31, 1994, have been
incorporated by reference into this Prospectus/Proxy Statement in reliance upon
the report of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and on the authority of said firm as experts
in accounting and auditing.
FINANCIAL ADVISOR
Tucker Anthony acted as financial advisor to NFS in connection with the
Merger. As compensation for its services as financial advisor, including the
issuance of two fairness opinions, NFS has agreed to pay Tucker Anthony a fee of
approximately $1.15 million. $225,000 of such amount has been paid as of the
date hereof and the balance is payable upon consummation of the Merger. NFS has
also agreed to reimburse Tucker Anthony for its out-of-pocket expenses and to
indemnify Tucker Anthony against certain liabilities arising out of its services
as financial advisor.
EXPENSES OF SOLICITATION
The cost of soliciting proxies from NFS shareholders will be borne by NFS.
In addition to soliciting proxies by mail, officers and employees of NFS and
BayBanks, without receiving additional compensation therefor, may solicit
proxies by telephone, by telegram, or in person. NFS has retained Morrow & Co.,
Inc. to assist in the solicitation of proxies for a fee of $6,500, plus
reimbursement for reasonable out-of-pocket costs and expenses. NFS will also
make arrangements with brokerage firms and other custodians, nominees, and
fiduciaries to send proxy materials to their principals.
OTHER MATTERS
NFS knows of no other business that will be presented for action by the
shareholders at the NFS Annual Meeting. If other business is properly presented
for consideration at the NFS Annual Meeting, the enclosed proxy authorizes the
persons named therein to vote the shares in their discretion. The Board of
Directors of NFS has approved the contents and mailing of this Prospectus/Proxy
Statement.
ACCOMPANYING REPORTS
A copy of the NFS Annual Report to Shareholders for the year ended December
31, 1994, and a copy of the BayBanks Annual Report to Stockholders for the year
ended December 31, 1994 are being delivered to NFS shareholders with this
Prospectus/Proxy Statement.
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APPENDIX A
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT ("this Agreement") is made and entered into
effective as of December 22, 1994, by and between BAYBANKS, INC., a
Massachusetts corporation ("Buyer"), and NFS FINANCIAL CORP., a Delaware
corporation ("Seller").
RECITALS
A. Buyer is a publicly held and traded corporation whose $2.00 par value
per share common stock (the "Buyer Stock") is quoted on the Nasdaq National
Market (the "Nasdaq NNM").
B. Seller is a publicly held and traded corporation whose $0.01 par value
per share common stock (the "Seller Stock") is quoted on the Nasdaq NNM. Seller
owns all of the issued and outstanding capital stock of NFS Savings Bank, FSB,
Nashua, New Hampshire ("NFS Bank") and Plaistow Co-operative Bank, FSB,
Plaistow, New Hampshire ("Plaistow"), both of which are federally chartered
savings banks. Collectively, NFS Bank and Plaistow are sometimes referred to
herein as the "NFS Banks".
C. Buyer has agreed to effect the acquisition of Seller through the merger
of a wholly owned subsidiary of Buyer ("Acquisition Company") with and into
Seller, on the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals, the
representations, warranties, covenants and agreements contained in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby represent, warrant,
covenant and agree as follows.
ARTICLE I
INCORPORATION BY REFERENCE
1.1 RECITALS. The foregoing Recitals are incorporated into this Agreement
by reference as if set forth in full in the body hereof.
1.2 EXHIBITS AND SCHEDULES. Each exhibit and schedule appended to or
required by and delivered with this Agreement is incorporated into this
Agreement by reference as if set forth in full in the body hereof.
ARTICLE II
WORDS, TERMS AND PHRASES
2.1 NUMBER AND GENDER. When used in this Agreement, all words in the
singular number shall extend to and include the plural number, where the context
so requires; all words used in the plural number shall extend to and include the
singular number where the context so requires; and all words used in any gender,
whether male, female or neuter, shall extend to and include all genders that may
be applicable in any particular context.
2.2 DEFINITIONS. In addition to any other definitions contained in this
Agreement, the following words, terms and phrases shall have the following
meanings when utilized in this Agreement:
"APPLICATION": Any application, notice, request, correspondence or other
filing, material or communication submitted to any Governmental Authority in
connection with any Regulatory Approval.
"BENEFIT ARRANGEMENT": Any form of current or deferred compensation, bonus,
stock option, stock appreciation right, severance pay, salary continuation,
retirement or incentive plan or arrangement or any
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group or individual health, disability or life insurance plan or welfare or
similar plan or arrangement for the benefit of any one or more of the directors,
officers and employees of Seller or any Subsidiary, whether active or retired,
by reason of their employment by or service with Seller or any Subsidiary, other
than Employee Plans and plans and agreements providing for base salary and base
wages.
"BHCA": The Bank Holding Company Act of 1956, as amended.
"BLUE SKY LAWS": The securities laws of any applicable state.
"BUSINESS DAY": Any day other than a Saturday, a Sunday, an official
federal or State of New Hampshire holiday, a day on which banks operating in
Nashua, New Hampshire, generally are not open for business and a day on which
the OTS and/or the FDIC are not open for business.
"BUYER DISCLOSURE SCHEDULE": All of the disclosure schedules required of
Buyer pursuant to this Agreement, which disclosure schedules shall be
cross-referenced to the specific sections and subsections of this Agreement and
delivered herewith.
"BUYER OPTION": The option granted to Buyer pursuant to the Option
Agreement.
"BUYER SUBSIDIARY": Each corporation, partnership or other business
enterprise which is consolidated with Buyer for financial reporting purposes or
of which Buyer owns, directly or indirectly, a majority of the outstanding
capital stock or other ownership interest.
"CLOSING": The consummation of the Merger and any other transactions
contemplated by this Agreement on the Closing Date.
"CLOSING CONDITIONS": All conditions precedent to the obligation of any one
or more parties hereto to consummate the transactions contemplated by this
Agreement, including, without limitation, those conditions set forth in Article
VI.
"CLOSING DATE": The date on which the Closing occurs, which shall be the
fifth Business Day after the satisfaction or waiver of all Closing Conditions or
such other earlier Business Day as the parties may mutually determine after the
satisfaction or waiver of all of the Closing Conditions.
"CLOSING MARKET VALUE": The Market Value of the Buyer Stock on the Closing
Date.
"CRA": The Community Reinvestment Act of 1977, as amended.
"DEFAULT": A party shall be in Default hereunder if:
(i) any representation or warranty of said party contained in this
Agreement shall have been incorrect, incomplete or otherwise misleading
when made or deemed to be made in any material respect; or
(ii) such party shall have failed to perform or otherwise breached in
any material respect any of its covenants and obligations contained in this
Agreement and, unless such failure or breach cannot by its nature be cured
within the specified time period and prior to the Closing Date, such
failure or breach shall remain uncured for 10 business days after notice
thereof to the defaulting party by any other party hereto.
"DISSENTING SHARES": The shares of Seller with respect to which holders
thereof have timely and properly perfected their appraisal rights pursuant to
Section 262 of the DGCL.
"DGCL": The General Corporation Law of the State of Delaware.
"ERISA": The Employee Retirement Income Security Act of 1974, as amended.
"EMPLOYEE PLAN": Any "employee benefit plan" (as that term is defined in
Section 3(3) of ERISA) that is subject to any provisions of ERISA and covers any
one or more of the directors, officers and employees of Seller or any
Subsidiary, whether active or retired, by reason of employment by or service
with Seller or any Subsidiary.
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"EXCHANGE ACT": The Securities Exchange Act of 1934, as amended.
"FDIA": The Federal Deposit Insurance Act, as amended.
"FDIC": The Federal Deposit Insurance Corporation.
"GAAP": Generally accepted accounting principles.
"GOVERNMENTAL AUTHORITY": Any federal, state, county, municipal or other
local legislative, regulatory or judicial body or other entity with jurisdiction
over all or any portion of any one or more of Seller, Buyer, the NFS Banks, or
any of their respective properties, businesses and affairs.
"HOLA": The Home Owners' Loan Act of 1933, as amended.
"IRC": The United States Internal Revenue Code of 1986, as amended.
"KNOWLEDGE": As to any person, and as of the date of the statement in
question, such person's actual knowledge or what such person should have known
in the ordinary exercise of that person's duties in the capacity referred to
herein.
"LAWS": Any and all statutes, laws, ordinances, rules, regulations, orders,
permits, judgments, injunctions, decrees, case law and other rules of law
enacted, promulgated or issued by any Governmental Authority.
"MARKET VALUE": As of any day, the average, without respect to the number
of shares traded, of the closing sale price of the Buyer Stock as reported on
the Nasdaq NNM on each of the ten trading days immediately preceding the second
Business Day prior to such day.
"MATERIAL ADVERSE CHANGE IN BUYER": (a) Any material adverse change in the
business, financial condition, or operating results of Buyer and the Buyer
Subsidiaries taken as a whole (other than from changes in laws and regulations
and GAAP affecting financial institutions generally) or the occurrence of any
event or condition that would result in such a change; or (b) the existence of
any pending or threatened litigation or administrative action which challenges
any portion of the transactions contemplated hereby, and which, in the
reasonable opinion of Seller, would be likely to enjoin consummation, or result
in rescission, of any of such transactions to the detriment of holders of Seller
Stock.
"MATERIAL ADVERSE CHANGE IN SELLER": (a) any material adverse change in the
business, financial condition, or operating results of Seller and the
Subsidiaries taken as a whole (other than from changes in laws and regulations
and GAAP affecting financial institutions generally) or the occurrence of any
event or condition that would result in such a change; or (b) the existence of
any pending or threatened litigation or administrative action which (i) creates
any reasonable possibility that Seller or the Subsidiaries may incur a material
loss that has not been reserved against (other than as set forth in the Seller
Disclosure Schedule); or (ii) challenges any portion of the transactions
contemplated hereby, and which, in the reasonable opinion of Buyer, would be
likely to enjoin consummation, or result in rescission, of such transactions.
The expenses of Seller related to the Merger, including those expenses
contemplated hereby, shall not be taken into consideration in determining if
there has been a Material Adverse Change in Seller.
"MERGER": The merger of Acquisition Company with and into Seller in
accordance with the terms and provisions of the Plan of Merger.
"MERGER CONSIDERATION": Collectively, the Buyer Stock and cash to be
received by the holders of the Seller Stock in accordance with Section 3.2 of
this Agreement.
"NHBCA": The New Hampshire Business Corporation Act.
"OPTION AGREEMENT": The Option Agreement by and between Buyer and Seller,
dated as of the date hereof, in the form of Exhibit A hereto.
"PEAT MARWICK": KPMG Peat Marwick LLP, independent public accountants with
respect to Buyer and with respect to Seller.
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"PROXY STATEMENT/PROSPECTUS": The proxy statement and prospectus to be used
to solicit Seller's stockholders for the approvals required to consummate the
transactions contemplated by this Agreement, and to offer Buyer Stock in
connection therewith.
"REGISTRATION STATEMENT": The registration statement filed with the SEC by
Buyer for the purpose of registering the Buyer Stock to be issued as part of the
Merger Consideration, in the form declared effective by the SEC, together with
all amendments and supplements thereto, as declared effective by the SEC.
"REGULATIONS": The rules and regulations of the FDIC, the OTS and any other
Governmental Authority.
"REGULATORY APPROVALS": Each and every consent, approval, expiration of a
waiting period and similar action or inaction by any governmental authority
(including, without limitation, the FDIC, OTS, the United States Federal Trade
Commission, the United States Department of Justice, the Board of Governors of
the Federal Reserve System, the Office of the Comptroller of the Currency, the
Massachusetts Board of Bank Incorporation and the New Hampshire Board of Trust
Company Incorporation) that is required under any applicable statute, regulation
or other legal or governmental requirement in connection with and as a condition
precedent to the consummation of the Merger and any other transactions
contemplated by this Agreement.
"SEC": The United States Securities and Exchange Commission.
"SECURITIES ACT": The Securities Act of 1933, as amended.
"SELLER DISCLOSURE SCHEDULE": All of the disclosure schedules required by
Article IV dated as of the date hereof and referenced to the specific sections
and subsections of Article IV and delivered herewith.
"SELLER ESOP": The NFS Financial Corp. Employee Stock Ownership Plan,
effective January 1, 1986, as amended.
"SELLER OPTIONS": Options to purchase shares of the Seller Stock, or any
other rights, granted by Seller pursuant to NFS Financial Corp. Stock Option
Plan.
"SUBSIDIARY": Each corporation, partnership or other business enterprise,
including the NFS Banks, which is consolidated with Seller for financial
reporting purposes or of which Seller owns, directly or indirectly, 25% or more
of the outstanding capital stock or other ownership interest.
"SURVIVING CORPORATION": Seller, as the surviving corporation of the
Merger.
"TAX RETURNS": All federal, state and local tax returns, reports and
declarations of estimated tax with respect to income and all other applicable
taxes, and all other tax returns and reports, the filing of which is required by
applicable Laws (including returns and reports with respect to taxes withheld
from or imposed in respect of employees' wages and with respect to deposit
accounts, of interest and dividends paid, of interest received, and of all other
payments made or received).
"TUCKER ANTHONY": Tucker Anthony Incorporated, the Seller's financial
adviser.
ARTICLE III
THE MERGER
3.1 THE MERGER. On the Closing Date, Acquisition Company shall be merged
with and into Seller as permitted by and in accordance with applicable Laws and
on the terms and subject to the conditions contained in this Agreement and the
Plan of Merger. Simultaneously with the effectiveness of the Merger, (a) the
separate existence of Acquisition Company shall cease and (b) Seller, as the
Surviving Corporation, shall continue to exist under and be governed by the
DGCL. Upon the effectiveness of the Merger, the certificate of incorporation and
bylaws of the Surviving Corporation shall be the certificate of incorporation
and bylaws of
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Acquisition Company as in effect immediately prior to the Merger. Upon the
effectiveness of the Merger, the directors and officers of the Surviving
Corporation shall be those persons who were the directors and officers of the
Acquisition Company immediately prior to the Merger. The Merger shall become
effective upon the filing of a Certificate of Merger with the Secretary of State
of the State of Delaware, unless a different date and time is specified as the
effective time in such Certificate of Merger.
3.2 CONSIDERATION FOR SELLER STOCK. In order to consummate the Merger:
3.2.1 CONVERSION OF SELLER STOCK. On the Closing Date, subject to
adjustment as provided in Section 3.2.2, each issued and outstanding share of
the Seller Stock, other than Dissenting Shares, shall, by virtue of the Merger,
automatically and without any action on the part of the holder thereof, be
converted into the right to receive (i) $20.15 in cash and (ii) 0.2038 share of
Buyer Stock. In the event that the Closing Date is after September 1, 1995 and
the condition in Section 6.1.3 has been satisfied prior to September 1, 1995,
the per share Merger Consideration shall be increased by a cash amount
determined by multiplying (x) the number of calendar days from and including
September 1, 1995 through but excluding the Closing Date by (y) $0.005.
3.2.2 ADJUSTMENT OF MERGER CONSIDERATION.
(a) If, as a result of the Closing Market Value of Buyer Stock being less
than $43.50, Seller elects to terminate this Agreement pursuant to Section
8.2.3(d) and Buyer exercises the right to negate such termination as provided
therein, the per share Merger Consideration shall be increased so that the sum
of the cash and the Closing Market Value of Buyer Stock comprising the per share
Merger Consideration equals $29.00. The increase shall take the form of
additional cash or Buyer Stock valued at the Closing Market Value, as Buyer may
elect, or, alternatively, Buyer may elect to make the per share Merger
Consideration all cash at $29.00 per share.
(b) If the Closing Market Value of Buyer Stock is greater than $63.00, the
per share Merger Consideration shall be adjusted by reducing the Buyer Stock
portion so that the sum of the cash and the Closing Market Value of Buyer Stock
comprising the per share Merger Consideration equals $33.00.
3.2.3 FRACTIONAL SHARES. Certificates for fractions of shares of Buyer
Stock will not be issued. In lieu of a fraction of a share of Buyer Stock, each
holder of Seller Stock otherwise entitled to a fraction of a share of Buyer
Stock shall be entitled to receive an amount of cash equal to (i) the fraction
of a share of Buyer Stock to which such holder would otherwise be entitled,
multiplied by (ii) the Closing Market Value of Buyer Stock. Following
consummation of the Merger, no holder of Seller Stock shall be entitled to
dividends or any other rights in respect of any such fraction.
3.2.4 CANCELLATION OF UNISSUED AND TREASURY SHARES. No payment shall be
made in respect of authorized but unissued shares of the Seller Stock or
treasury shares of Seller Stock, and such shares shall be canceled upon the
Closing.
3.2.5 DISSENTING SHARES. Notwithstanding anything to the contrary herein,
Dissenting Shares shall not be converted into or represent a right to receive
the consideration specified in Sections 3.2.1 and 3.2.2, but the holder thereof
(to the extent that such holder, as of the Effective Time of the Merger, has not
effectively withdrawn or lost his dissenters' rights) shall be entitled only to
such rights as are granted by applicable Law.
3.3 SELLER OPTIONS. Upon the effectiveness of the Merger, each Seller
Option then outstanding and unexercised shall be converted automatically into an
option under the Buyer's 1988 Stock Option Plan ("Buyer's Plan") to purchase
shares of Buyer Stock in an amount and at an exercise price determined as
provided below and otherwise subject to the terms of the Buyer's Plan:
(i) The number of shares of Buyer Stock to be subject to the new
option shall be equal to the product of the number of shares of Seller
Stock subject to the original option and the Adjustment Factor, provided,
that any fractional shares of Buyer Stock resulting from such
multiplication shall be rounded to the nearest share; and
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(ii) The exercise price per share of Buyer Stock under the new option
shall be equal to the exercise price per share of Seller Stock under the
original option divided by the Adjustment Factor, provided that such
exercise price shall be rounded up to the nearest cent.
The "Adjustment Factor" shall be the factor determined by dividing the per
share Merger Consideration (valuing the Buyer Stock portion of the Merger
Consideration at the Closing Market Value) by the Closing Market Value of Buyer
Stock.
The adjustment provided herein with respect to any options which are
"incentive stock options" (as defined in Section 422 of the IRC) shall be and is
intended to be effected in a manner which is consistent with Section 424(a) of
the IRC. The duration and other terms of the new option shall be the same as the
original option, except that all references to Seller shall be deemed to be
references to Buyer.
3.4 BUYER OPTION. Concurrently with the execution of this Agreement,
Seller and Buyer shall execute and deliver the Option Agreement. Buyer and
Seller confirm that the execution and delivery of the Option Agreement
constitute a material inducement to them to enter into this Agreement and that
absent the execution and delivery of the Option Agreement, they would not enter
into this Agreement on the terms and subject to the conditions contained herein.
3.5 ACQUISITION COMPANY STOCK. Each share of capital stock of Acquisition
Company issued and outstanding on the Closing Date shall, by virtue of the
Merger, automatically and without any action on the part of the holder thereof,
be converted into the same number of shares of common stock of the Surviving
Corporation.
3.6 BUYER STOCK ADJUSTMENTS. The Buyer Stock portion of the per share
Merger Consideration shall be subject to appropriate adjustments in the event
that, subsequent to the date of this Agreement but prior to the Closing Date,
the outstanding Buyer Stock shall have been increased, decreased, changed into
or exchanged for a different number or kind of shares or securities through
reorganization, recapitalization, reclassification, stock dividend, stock split,
or other like changes in Buyer's capitalization.
3.7 EXCHANGE OF SELLER STOCK. To effect the exchange of Seller Stock for
the Merger Consideration:
3.7.1 BUYER TO MAKE MERGER CONSIDERATION AVAILABLE. At or prior to the
Closing Date, Buyer shall deposit, or shall cause to be deposited, with a bank
or trust company selected by Buyer (and reasonably acceptable to Seller) (the
"Exchange Agent"), for the benefit of the holders of certificates of Seller
Stock (the "Certificates"), for exchange in accordance with this Section 3.7,
certificates representing the shares of Buyer Stock and cash which together
constitute the Merger Consideration (such certificates for shares of Buyer Stock
and cash, together with any dividends or distributions with respect thereto,
being hereinafter referred to as the "Exchange Fund") to be issued and paid,
respectively, pursuant to this Agreement in exchange for outstanding shares of
Seller Stock.
3.7.2 EXCHANGE PROCEDURES.
(a) As soon as practicable after the Closing Date, Buyer shall cause the
Exchange Agent to mail to each holder of record of a Certificate or Certificates
at the Closing Date a form letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent) containing
instructions for use in effecting the surrender of the Certificates. Seller
shall have the right to approve the form of the letter of transmittal, which
approval shall not unreasonably be withheld.
(b) Upon surrender of a Certificate for exchange and cancellation to the
Exchange Agent, duly executed, the holder of such Certificates shall be entitled
to receive in exchange therefor (x) a certificate representing that number of
whole shares of Buyer Stock to which such holder of Seller Stock shall have
become entitled pursuant to the provisions of this Agreement, and (y) a check
representing the amount of cash, if any, which such holder has the right to
receive in respect of the Certificate surrendered pursuant to the provisions of
this Agreement and the Certificate so surrendered shall forthwith be cancelled.
No interest will be paid or accrued on the cash and unpaid dividends and
distributions, if any, payable to holders of Certificates.
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(c) After the Closing Date, there shall be no transfers on the stock
transfer books of Seller of the shares of Seller Stock which were issued and
outstanding immediately prior to the Closing Date. If, after the Closing Date,
Certificates representing such shares are presented for transfer to the Exchange
Agent, they shall be cancelled and exchanged for certificates representing
shares of Buyer Stock and cash as provided in this Section 3.7.
(d) Any portion of the Exchange Fund that remains unclaimed by the
shareholders of Seller for 120 days after the Closing Date shall be paid to
Buyer. Any shareholders of Seller who have not theretofore complied with this
Section 3.7 shall thereafter look only to Buyer for payment of their shares of
Buyer Stock, cash and unpaid dividends and distributions of the Buyer Stock
deliverable in respect of each share of Seller Stock such shareholder holds as
determined pursuant to this Agreement, in each case, without any interest
thereon. Notwithstanding the foregoing, none of Buyer, Seller, the Exchange
Agent nor any other person shall be liable to any former holder of shares of
Seller Stock for any amount 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 the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by Buyer, the
posting by such person of a bond in such amount as Buyer may direct as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate, the shares of Buyer Stock and cash deliverable in respect thereof
pursuant to this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby makes the
following representations and warranties to Buyer, each of which is being relied
upon by Buyer as a material inducement to enter into and perform this Agreement:
4.1.1 ORGANIZATION OF SELLER. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Seller has full corporate power and authority to own or lease all of its
properties and assets and to carry on its business as now being conducted, which
business is described in Seller's Annual Report on Form 10-K for the year ended
December 31, 1993 filed with the SEC. Seller is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the nature of the
business conducted by it or the character or location of the employees or of the
properties or assets owned or leased by it makes such licensing or qualification
necessary. The certificate of incorporation and bylaws of Seller and all
amendments thereto to the date hereof (true, correct, and complete copies of
which have been filed as exhibits to Seller's reports under the Exchange Act)
are in full force and effect as of the date of this Agreement. The minute books
of Seller reflect all meetings held and contain complete and accurate records of
all corporate actions taken by Seller's board of directors (or any committee
thereof) and stockholders.
4.1.2 SUBSIDIARIES. (a) Section 4.1.2(a) of the Seller Disclosure
Schedule contains a true, correct and complete list of the Subsidiaries, and
sets forth the correct name of each Subsidiary, the jurisdiction in which it is
incorporated or otherwise organized, each jurisdiction in which such Subsidiary
is qualified to do business as a foreign corporation, the number of shares of
capital stock or other ownership interest outstanding and the number of such
shares or interests and the respective ownership percentage held by Seller or
any other Subsidiary. All the shares of capital stock or other ownership
interest of a Subsidiary that are owned by Seller or a Subsidiary are owned free
and clear of any liens, claims, charges or other encumbrances. Each Subsidiary
is duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has full corporate power and
authority to own or lease its properties and assets and to carry on its business
as now being conducted and is duly licensed or qualified to do business and is
in good standing in each jurisdiction in which the nature of the business
conducted by it or the character or location of the employees or of the
properties or assets owned or leased by it makes such licensing or qualification
necessary. The minute books of each Subsidiary reflect all meetings held and
contain complete and accurate records of all corporate
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actions taken by such Subsidiary's board of directors (or any committee thereof)
and stockholder(s). There is no agreement to which Seller or any Subsidiary is
subject with respect to the issuance, sale, or voting of issued or unissued
shares of the capital stock of such Subsidiaries.
4.1.3 CAPITALIZATION. The entire authorized capital stock of Seller
consists of 15,000,000 shares of the Seller Stock, of which 2,770,367 shares
have been issued and are outstanding as of the date hereof, and 5,000,000 shares
of preferred stock, $.01 par value per share, of which none has been issued or
is outstanding as of the date hereof. All the issued and outstanding shares of
the Seller Stock and the capital stock of each corporate Subsidiary have been
duly authorized and validly issued and are fully paid and non-assessable, free
of any preemptive right, and with no personal liability attaching to the
ownership thereof. Except for the Seller Options and the Buyer Option, there are
no options, warrants, calls, preemptive rights or commitments of any character
relating to the authorized but unissued capital stock or treasury stock or any
other equity security of Seller or any Subsidiary or any securities or
obligations convertible into or exchangeable for or giving any person any right
to subscribe for or acquire from Seller or any corporate Subsidiary any shares
of such capital stock, nor are there any stock appreciation rights, limited
rights or other similar rights or obligations of Seller or any Subsidiary
exercisable upon any circumstance, including upon a change in control of Seller
or any Subsidiary. The Seller Options, in the aggregate, grant to the holders
thereof the right to acquire up to 204,286 shares of the Seller Stock. The
Seller Options and the Buyer Option have been validly and properly issued.
Section 4.1.3 of the Seller Disclosure Schedule contains a true, correct and
complete list of the holders of all Seller Options, identifying with respect to
each such holder the number of shares of the Seller Stock subject to such
option, the date of grant, the exercise price, the vesting schedule and the
expiration date.
4.1.4 AUTHORIZATION. Seller has all requisite corporate power and
authority to execute and deliver this Agreement and, subject to the approval of
this Agreement by the stockholders of Seller entitled to vote thereon and to the
receipt of all Regulatory Approvals, to consummate the transactions contemplated
by this Agreement in accordance with the terms hereof. This Agreement has been
duly authorized by the board of directors of Seller and, except for the approval
of the stockholders of Seller as to this Agreement and the Merger, no other
corporate proceedings on the part of Seller or any Subsidiary are necessary to
consummate the transactions so contemplated. This Agreement has been duly and
validly executed and delivered by Seller and constitutes a valid and legally
binding obligation of Seller enforceable against Seller in accordance with its
terms.
4.1.5 NON-CONTRAVENTION. The execution and delivery of this Agreement by
Seller does not, and the performance of this Agreement by Seller, in accordance
with the terms hereof, will not (a) violate any provision of the charter or
certificate of incorporation or bylaws of Seller or any Subsidiary or (b)
conflict with or result in a breach of, or default under, or result in the
creation of any lien, claim, charge or other encumbrance upon any of the assets
or properties of Seller or any Subsidiary pursuant to the provisions of, or
right of termination or acceleration under, any agreement, mortgage, indenture
or other document or instrument to which Seller or any Subsidiary is a party or
by which Seller, any Subsidiary or any of their respective properties or assets
is bound.
4.1.6 PROPERTIES AND ASSETS; ENVIRONMENTAL MATTERS.
(a) Except for (a) items reflected in the financial statements of Seller as
of September 30, 1994, (b) exceptions to title that do not interfere materially
with any Subsidiary's use and enjoyment of owned or leased real property (other
than real property acquired through foreclosure or a transaction in lieu of
foreclosure), (c) liens for current real estate taxes not yet delinquent, or
being contested in good faith, properly reserved against (and reflected on the
financial statements referred to in Section 4.1.8 below), and (d) properties and
assets sold or transferred in the ordinary course of business consistent with
past practice since September 30, 1994, Seller and the Subsidiaries have good
and, as to owned real property, marketable and insurable title to all their
respective properties and assets, including the properties and assets reflected
in the financial statements of Seller as of September 30, 1994, whether real,
personal, tangible or intangible, free and clear of all liens, claims, charges
and other encumbrances. Seller and the Subsidiaries, as lessees, have the right
under valid and subsisting leases to occupy, use and possess all property leased
by them. All properties
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and assets used by Seller and the Subsidiaries are in good operating condition
and repair suitable for the purposes for which they are currently utilized.
(b) Except as set forth at Section 4.1.6(b) of the Seller Disclosure
Schedule, to the Knowledge of any of Seller's officers and directors and those
of its Subsidiaries, none of Seller, any Subsidiary or any predecessor in title
of any of them has used any real property owned, leased, subject to purchase, or
otherwise occupied or to be occupied by Seller or any of the Subsidiaries for
the manufacture, handling, disposal, or storage of hazardous wastes, petroleum
products, polychlorinated biphenyls, chemicals, pollutants, contaminants,
pesticides, radioactive substances, or other toxic materials, or other materials
or substances (in each such case, other than small quantities of such substances
in retail containers) regulated under the environmental or public health Laws
(collectively, "Hazardous Substances"). Except as set forth at Section 4.1.6(b)
of the Seller Disclosure Schedule, to the Knowledge of any of Seller's officers
and directors and those of its Subsidiaries, no Hazardous Substances have been
manufactured, stored, or discharged on any property owned, leased, subject to
purchase, or occupied or to be occupied by Seller or any of the Subsidiaries,
and all real property owned, leased, subject to purchase, or occupied or to be
occupied by Seller or any of the Subsidiaries is free from Hazardous Substances
and from asbestos, and asbestos compounds, except for such Hazardous Substances,
asbestos and asbestos compounds which are present on or in such real property in
compliance with applicable Laws.
(c) Except as set forth at Section 4.1.6(c) of the Seller Disclosure
Schedule, neither Seller nor any Subsidiary has violated during the last five
years or is in violation of or liable under any environmental or public health
laws, including, without limitation, the federal Comprehensive Environmental
Response, Compensation and Liability Act and its state counterparts.
4.1.7 BOOKS AND RECORDS. Except as set forth at Section 4.1.6(c) of the
Seller Disclosure Schedule, true and complete copies of the charter and bylaws,
and of the minute books, of Seller and of each Subsidiary, as in effect on the
date hereof, have been made available to Buyer.
4.1.8 FINANCIAL STATEMENTS.
(a) Seller has previously delivered or made available to Buyer accurate and
complete copies of the consolidated statements of financial condition of Seller
as of December 31, 1993, and the related consolidated statements of income,
stockholders' equity and cash flows for the years ended December 31, 1993, 1992
and 1991, in each case accompanied by the audit report of Peat Marwick, and the
unaudited consolidated statements of financial condition of Seller as of
September 30, 1994 and 1993, and the related unaudited consolidated statements
of income, stockholders' equity and cash flows for the nine months ended
September 30, 1994 and 1993. The consolidated statements of financial condition
of Seller referred to herein (including the related notes, where applicable)
fairly present the consolidated financial condition of Seller as of the
respective dates set forth therein, and the related consolidated statements of
income, stockholders' equity and cash flows (including the related notes, where
applicable) fairly present the consolidated results of operations, stockholders'
equity and cash flows of Seller for the respective periods or as of the
respective dates set forth therein.
(b) Each of the financial statements referred to in Section 4.1.8(a) has
been prepared in accordance with GAAP consistently applied during the periods
involved, except as may be noted therein. The audits of Seller and the
Subsidiaries have been conducted in accordance with generally accepted auditing
standards. The books and records of Seller and the Subsidiaries are being
maintained in material compliance with applicable legal and accounting
requirements.
(c) Except (i) as set forth in Section 4.1.8(c) of the Seller Disclosure
Schedule, (ii) for those liabilities that are fully reflected or reserved
against on the consolidated statement of financial condition of Seller as of
September 30, 1994 delivered to Buyer and (iii) for liabilities incurred in the
ordinary course of business consistent with past practice since September 30,
1994, neither Seller nor any of its Subsidiaries has or has incurred any
liability of any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether due or to become due) that, either alone or when combined
with all similar liabilities, is, or could reasonably be expected to result in,
a Material Adverse Change in Seller or the Surviving Corporation.
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4.1.9 ABSENCE OF CHANGES. Except with respect to the transactions
contemplated hereby, since September 30, 1994, (i) the business of Seller and
each Subsidiary has been conducted only in the ordinary course consistent with
past practice, (ii) there has not been any Material Adverse Change in Seller
(except for the effects of adjustments under Statement of Financial Accounting
Standards No. 115 on the investment securities available for sale and the
mortgage-backed securities available for sale of Seller or its Subsidiaries
through November 30, 1994), (iii) there has not been any material change in any
policy or practice followed by Seller nor any Subsidiary in the ordinary course
of business, (iv) neither the Seller nor any Subsidiary has incurred any
material liability, except in the ordinary course of its business consistent
with prudent banking practices, (v) there has not been any agreement, contract
or commitment entered into, or agreed to be entered into, except for those in
the ordinary course of business, none of which has caused a Material Adverse
Change in Seller; (vi) there has not been any increase in or establishment of
any bonus, insurance, severance (including severance after a change in control),
deferred compensation, pension, retirement, profit sharing, stock option
(including, without limitation, the granting of any stock options, stock
appreciation rights, performance awards, or restricted stock awards), stock
purchase, life insurance or split dollar life insurance, retiree medical or life
insurance, or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any officers or key employees of
the Seller or any Subsidiary, except, with respect to cash compensation, in the
ordinary course of business consistent with past practice; and (vii) there has
not been any change in any of the accounting methods or practices of the Seller
or any Subsidiary other than changes required by applicable law or GAAP.
4.1.10 LEGAL PROCEEDINGS.
(a) Section 4.1.10 of the Seller Disclosure Schedule sets forth a
description of all legal, administrative or other claims, actions, suits or
other proceedings pending, or to the Knowledge of any of Seller's officers and
directors or those of any Subsidiary, threatened, to which Seller or any
Subsidiary is a party (other than mortgage foreclosure proceedings on
single-family residences or other routine legal proceedings) before any court or
arbitration tribunal or before or by any Governmental Authority. Neither Seller
nor any Subsidiary is a party to any pending or, to the Knowledge of any of
Seller's officers and directors, threatened legal, administrative or other
claim, action, suit, investigation, arbitration or proceeding challenging the
validity or propriety of any of the transactions contemplated by this Agreement
or the Option Agreement. Neither Seller nor any Subsidiary is subject to any
judgment, order, writ, injunction, decree or arbitration award.
(b) Except as set forth at Section 4.1.10(b) of the Seller Disclosure
Schedule, there are no claims, actions, suits, or other proceedings pending, or,
to the Knowledge of any of Seller's officers and directors or those of any
Subsidiary, threatened by or against any officer, director, agent, or employee
of Seller or any Subsidiary in connection with the business, assets or
properties of Seller or any Subsidiary.
4.1.11 CERTAIN CONTRACTS.
(a) Except as set forth at Section 4.1.11 of the Seller Disclosure Schedule
or as have been filed as an exhibit to Seller's Annual Report on Form 10-K for
the year ended December 31, 1993 or to subsequent reports filed with the SEC
under the Exchange Act prior to the date hereof, and except as contemplated by
this Agreement, neither Seller nor any Subsidiary is a party to or is bound or
affected by, or receives benefits under (i) any material agreement, arrangement
or understanding not made in the ordinary course of business; (ii) any
agreement, arrangement or understanding relating to the employment, election,
retention in office or severance of any present or former director, officer or
employee of Seller or any Subsidiary; (iii) any agreement, arrangement or
understanding pursuant to which any payment (whether of severance pay or
otherwise) became or may become due to any director, officer or employee of
Seller or any Subsidiary upon execution of this Agreement or upon or following
consummation of the transactions contemplated by this Agreement (either alone or
in connection with the occurrence of any additional acts or events); (iv) any
agreement, arrangement or understanding with a labor union; (v) any assistance
agreement, supervisory agreement, memorandum of understanding, consent order,
cease and desist order or condition of any regulatory order or decree with or by
the OTS, the FDIC, the SEC or any other regulatory agency; or (vi) any other
agreement, arrangement or understanding which would be required to be filed as
an exhibit to Seller's Annual Report on Form 10-K under the Exchange Act and
which has not been so filed, in each case whether
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written or oral. True and complete copies of all written contracts, arrangements
and understandings listed at Section 4.1.11 of the Seller Disclosure Schedule,
as in effect on the date hereof, have been made available to Buyer.
(b) Neither Seller nor any Subsidiary is in default under, or with the
giving of notice or the lapse of time, or both, would be in default under, any
of the terms or conditions of any contract, agreement or commitment to which
Seller or any Subsidiary is a party (including but not limited to the matters
listed in paragraph (a) above). To the Knowledge of any of Seller's officers and
directors, or those of any of the Subsidiaries, there has occurred no default or
event which, with the giving of notice or the lapse of time, or both, would
constitute a default by any other party to any such contract, agreement, or
commitment.
4.1.12 INSURANCE. All insurance policies and bonds maintained by Seller
and the Subsidiaries are in full force and effect and have been in full force
and effect at all times during which Seller or any Subsidiary had any insurable
interest in the subject of such insurance policies and bonds. As of the date
hereof, neither Seller nor any Subsidiary has received any notice of
cancellation or amendment of any such policy or bond or is in default under any
such policy or bond, no coverage thereunder is being disputed and all material
claims thereunder have been filed in a timely fashion. True and complete copies
of all such policies and bonds referred to in this Section 4.1.12 have been made
available to Buyer. Section 4.1.12 of the Seller Disclosure Schedule sets forth
a true and complete list of all claims pending under each such policy or bond.
4.1.13 EMPLOYEE BENEFIT PLANS AND MATTERS.
(a) Except as set forth at Section 4.1.13(a) of the Seller Disclosure
Schedule, neither Seller nor any Subsidiary maintains, administers, or otherwise
contributes to or has any liability to or under any Employee Plan. For purposes
of this Section 4.1.13, "Seller" shall include any controlled group (within the
meaning of Section 414(b) of the IRC) of which Seller is a member, all trades or
businesses under common control (within the meaning of Section 414(c) of the
IRC) of which Seller is a member and all affiliated service groups (within the
meaning of Section 414(m) of the IRC) of which Seller is a member. True, correct
and complete copies of each Employee Plan identified on the Seller Disclosure
Schedule, including amendments and trust agreements relating thereto, have been
made available to Buyer, together with (i) a complete and correct copy of the
most recent annual report (Form 5500 including, if applicable, Schedule B
thereto) prepared in connection with any such Employee Plan, (ii) a true,
correct and complete copy of the most recent actuarial valuation report, if any,
prepared in connection with any such Employee Plan, and (iii) a true, correct
and complete copy of the most recent summary plan description (including any
summaries of material modifications) of each such Employee Plan. None of such
Employee Plans is a "multiemployer plan," as defined in Section 3(37) of ERISA,
and neither Seller nor any Subsidiary has been obligated to make a contribution
to any such multiemployer plan within the past five years. Since its inception,
each such Employee Plan which is intended to be qualified under Section 401(a)
of the IRC (a "Qualified Plan") has been operated and administered in all
material respects in accordance with the requirements for a qualified plan under
Section 401(a) of the IRC and each trust maintained in connection with each
Qualified Plan has been operated and administered in all material respects in
accordance with the requirements for a qualified trust under Section 401(a) of
the IRC and for a tax exempt trust under Section 501 of the IRC. Seller has
received from the Internal Revenue Service a determination letter with respect
to the qualification of each such Employee Plan and has delivered to Buyer a
true and complete copy of the most recent determination letter for each
Qualified Plan, as well as all correspondence relating to the application
therefor. The representations made as a part of the application for each such
determination letter were true and complete when made and continue to be true
and complete. Nothing has occurred since the date of the most recent applicable
determination letter that would adversely affect the qualified status of any
Qualified Plan and any trust forming a part thereof.
(b) True and complete copies of all Benefit Arrangements of Seller have
been made available to Buyer. Except as set forth at Section 4.1.13(b) of the
Seller Disclosure Schedule or as set forth in the Seller financial statements
referred to in Section 4.1.8 above, neither Seller nor any Subsidiary has any
liability to or under any Benefit Arrangement.
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(c) Except as set forth at Section 4.1.13(c) of the Seller Disclosure
Schedule, each of the Employee Plans and Benefit Arrangements of Seller and its
Subsidiaries is in compliance with the requirements prescribed by any and all
applicable laws and regulations, including, but not limited to, ERISA and the
IRC. Except as set forth at Section 4.1.13(c) of the Seller Disclosure Schedule,
no Employee Plan of Seller and its Subsidiaries which is subject to Title IV of
ERISA has been terminated other than in a standard termination under Section
4041(b) of ERISA and no condition exists that could constitute grounds for the
termination of any such Employee Plan under Section 4042 of ERISA. Neither
Seller nor any Subsidiary has incurred, or reasonably expects to incur, any
liability to the Pension Benefit Guaranty Corporation, except for required
premium payments which have been paid when due. Neither Seller nor any
Subsidiary nor any Employee Plan of Seller and its Subsidiaries has engaged in a
"prohibited transaction," as defined in Section 406 of ERISA and Section 4975 of
the IRC, which could subject any of them or Buyer or Acquisition Company to
material liability under Section 409 or 502(i) of ERISA or Section 4975 of the
IRC. Neither Seller nor any Subsidiary has incurred or reasonably expects to
incur any material withdrawal liability under Title IV of ERISA. No Employee
Plan of Seller and its Subsidiaries subject to Part 3 of Subtitle B of Title I
of ERISA or Section 412 of the IRC, or both, has any "accumulated funding
deficiency," as defined in Section 302(a)(2) of ERISA, whether or not waived, or
"unfunded current liability" as defined in Section 412(l) of the IRC, taking
into account contributions made within the period described in Section
412(c)(10) of the IRC. Neither Seller nor any Subsidiary failed to make any
contribution or pay any amount due and owing as required by the terms of any
Employee Plan or Benefit Arrangement. No events have occurred or are reasonably
expected to occur with respect to any Employee Plan of Seller or any Subsidiary
that would cause a material change in the value of the assets (except, with
respect to the Seller ESOP, for changes in the market value of the Seller Stock)
or amount or present value of accrued benefits and other liabilities of such
Employee Plan.
(d) Except as set forth at Section 4.1.13(d) of the Seller Disclosure
Schedule, no assets of any Employee Plan other than the Seller ESOP are directly
or indirectly invested in any personal or real property used by Seller or any
stock, obligations or securities issued by Seller.
(e) No Employee Plan, Benefit Arrangement or other agreement, plan or
arrangement, individually or collectively, provides for any payment by Seller or
any Subsidiary to any employee or independent contractor, in connection with or
as a result of the transactions contemplated by this Agreement, that is not
deductible under Section 162(a)(1), 280G or 404 of the IRC.
(f) Neither Seller nor any Subsidiary is a party to, or is bound by, any
collective bargaining agreement, contract, or other agreement or understanding
with a labor union or labor organization, nor is Seller or any Subsidiary the
subject of any material proceeding asserting that Seller or any such Subsidiary
has committed an unfair labor practice or seeking to compel Seller or such
Subsidiary to bargain with any labor organization as to wages or conditions of
employment, nor is there any strike involving Seller or any Subsidiary pending
or, to the Knowledge of any of Seller's directors and officers, threatened, nor
to their Knowledge is there any activity involving its or any Subsidiary's
employees seeking to certify a collective bargaining unit or engaging in any
other organizational activity.
4.1.14 COMPLIANCE WITH APPLICABLE LAWS. Except as set forth at Section
4.1.14 of the Seller Disclosure Schedule, each of Seller and the Subsidiaries
has complied with all Laws applicable to it or to the operation of its business
and none of them has received any notice of any alleged claim, threatened claim
or violation of or liability or potential responsibility under any such Laws
that has not heretofore been cured and for which there is no remaining
liability.
4.1.15 REGULATORY FILINGS AND REPORTS. Since January 1, 1990, each of
Seller and the Subsidiaries has filed all documents required to be filed by it
under federal securities Laws or applicable savings and loan and savings bank
Laws and regulations, and all such documents, as finally amended, were complete
and accurate, complied in all material respects as to form and substance with
all applicable Laws and did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
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4.1.16 TAX MATTERS. Except as set forth at Section 4.1.16 of the Seller
Disclosure Schedule:
(a) Seller has timely filed on behalf of itself and all of the
Subsidiaries, with the appropriate Governmental Authorities, the Tax Returns.
All of the Tax Returns are accurate and complete in all material respects.
(b) Seller and the Subsidiaries have collected and withheld all taxes which
they are or have been required to collect or withhold and have timely submitted
all such collected and withheld amounts to the appropriate authorities. Seller
and the Subsidiaries are in compliance with the back-up withholding and
information reporting requirements under the IRC, and the rules and regulations
of the Internal Revenue Service thereunder.
(c) All federal, state and local taxes, due and payable by Seller or any
Subsidiary thereof pursuant to the Tax Returns, or pursuant to any assessment
with respect to taxes, penalties or interest in any of such jurisdictions, have
been accrued or paid.
(d) The reserves for taxes contained in the financial statements (including
the notes thereto) described in Section 4.1.8 of this Agreement are adequate to
cover the tax liabilities, including penalties and interest, of Seller and the
Subsidiaries for all periods up to and including September 30, 1994.
(e) Neither Seller nor any Subsidiary has received any notice of any
deficiency or assessment or proposed deficiency or assessment by the Internal
Revenue Service or any other taxing authority in connection with the Tax Returns
which, individually or in the aggregate, exceeds $50,000 and which has not been
resolved. There is no action, suit, proceeding, audit, examination,
investigation, or claim pending, or to the Knowledge of any of Seller's officers
and directors, or those of any of the Subsidiaries, threatened, in respect of
any taxes for which Seller or any Subsidiary thereof is or may become liable if
such action, suit, proceeding, audit, examination, investigation, or claim were
to be resolved, in whole or in part, adversely to Seller or any Subsidiary
thereof. To the Knowledge of any of Seller's officers and directors, or those of
any of the Subsidiaries, no fact exists which constitutes grounds for the
assessment of material additional taxes with respect to Seller or any
Subsidiary. Seller has made available to Buyer a true, correct and complete copy
of the agreement for the allocation or sharing of taxes among the Seller and the
Subsidiaries.
(f) Except as set forth at Section 4.1.16(f) of the Seller Disclosure
Schedule, neither Seller nor any Subsidiary has waived any Law fixing, or
consented to the extension of, any period of time for assessment of any tax.
Section 4.1.16(f) of the Seller Disclosure Schedule sets forth a true and
complete list of all tax returns of Seller and its Subsidiaries which are open
to audit.
(g) Each of the NFS Banks is, and for all taxable years for which the
applicable statute of limitations on assessment of taxes has not run on the date
hereof has been, a "domestic building and loan association" as defined in
Section 7701(a)(19) of the IRC, with a "qualifying assets test" ratio for
purposes of such definition of not less than 60 percent.
4.1.17 BROKER'S FEES. Except for payments due to Tucker Anthony from
Seller as a result of the Merger and pursuant to that certain letter agreement
between Seller and Tucker Anthony dated as of September 21, 1994 (the "Tucker
Agreement"), a true, correct and complete copy of which has been provided to
Buyer, no agent, finder, broker, investment banker or other person or entity
acting on behalf or under authority of Seller or any Subsidiary is or will be
entitled to any fee as compensation for services as broker or finder or any
other commission or similar fee directly or indirectly in connection with this
Agreement, or any of the transactions contemplated hereby.
4.1.18 INTELLECTUAL PROPERTY. Except where there would be no Material
Adverse Change in Seller, Seller and each Subsidiary owns or possesses valid and
binding licenses and other rights to use without payment all material patents,
copyrights, trade secrets, trade names, servicemarks and trademarks used in its
businesses and neither Seller nor any Subsidiary has received any notice of
conflict with respect thereto that asserts the right of others. Seller and each
Subsidiary have in all material respects performed all the obligations required
to be performed by them and are not in default in any material respect under any
contract,
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agreement, arrangement or commitment relating to any of the foregoing, except
where such nonperformance or default would not, individually or in the
aggregate, result in a Material Adverse Change in Seller.
4.1.19 TAKEOVER RESTRICTIONS. (a) The Board of Directors of Seller has
approved the transactions contemplated by this Agreement such that the
supermajority vote provisions and restrictions of Section 203 of the DGCL and of
Seller's Certificate of Incorporation will not apply to this Agreement or any of
the transactions contemplated hereby.
(b) No "business combination", "moratorium", "control share", or other
federal or state antitakeover or change in control statute or regulation
(collectively, "Antitakeover Provisions") other than HOLA, FDIA, BHCA or other
banking regulatory statutes (i) prohibits or restricts Seller's ability to
perform its obligations under this Agreement, or its ability to consummate the
transactions contemplated hereby, (ii) would have the effect of invalidating or
voiding this Agreement, or any provision hereof, (iii) would subject Buyer or
Acquisition Company to any material impediment or condition in connection with
the exercise of any of its rights under this Agreement or the Option Agreement,
or (iv) would provide severance payments to any employee of Seller or any
Subsidiary.
4.1.20 MATTERS REGARDING THE NFS BANKS.
(a) The NFS Banks are stock savings banks organized and validly existing
under the laws of the United States of America. The NFS Banks are members in
good standing of the Federal Home Loan Bank System.
(b) All eligible deposit accounts issued by the NFS Banks are insured by
the FDIC to the full extent permitted under applicable Law.
(c) Neither of the NFS Banks is a party to any agreements, arrangements or
understandings with, or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, OTS or the FDIC which
was a result of a violation of any Laws, restricts materially the conduct of its
business, or relates in any manner to its capital adequacy, credit policies or
management, nor has it or Seller been informed by the OTS or the FDIC that it is
issuing or requesting any of the foregoing.
(d) Each of the NFS Banks is a "qualified thrift lender" (as that term is
used in Section 10(m) of HOLA).
(e) No action currently is being taken, proposed or, to the Knowledge of
Seller's directors and officers, threatened by the OTS or the FDIC to restrict
the operations of the NFS Banks in any way, to issue a capital or other
directive to the NFS Banks, to subject the NFS Banks to a supervisory,
management, operating or other written agreement or a cease-and-desist order,
nor to appoint a manager, conservator or receiver for the NFS Banks.
(f) Except as disclosed at Section 4.1.20(f) of the Seller Disclosure
Schedule, or except as noted in the OTS or FDIC examination reports of each of
the NFS Banks referred to in Section 4.1.26 below and made available to Buyer,
each of the NFS Banks has conducted its business in accordance with all
applicable Laws, including, without limitation, disclosure, usury, equal credit
opportunity, equal employment, fair credit reporting, antitrust and other Laws
and the forms, procedures and practices used by each of the NFS Banks comply
with such Laws.
(g) NFS Bank has a CRA rating of "outstanding" and Plaistow has a CRA
rating of "satisfactory". To the Knowledge of the officers and directors of
Seller, since their last Federal regulatory authority examination of CRA
compliance, there has been no protest of any application of either NFS Bank or
Plaistow based on CRA compliance.
4.1.21 RESERVES FOR LOSSES. All reserves or other allowances for possible
losses reflected in Seller's most recent Quarterly Report on Form 10-Q filed
with the SEC under the Exchange Act complied with all statutory and regulatory
requirements, and except as specifically noted in the OTS or FDIC examination
reports of the NFS Banks referred to in Section 4.1.26 below and made available
to Buyer, neither Seller nor any Subsidiary has been notified by the OTS, the
FDIC or Seller's independent auditor, in writing or otherwise, that such
reserves are inadequate or that the NFS Banks' practices and policies in
establishing such
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reserve and in accounting for delinquent and classified assets materially fails
to comply with applicable accounting or regulatory requirements, or that the
OTS, the FDIC or the independent auditors of Seller believe such reserves to be
inadequate or inconsistent with the NFS Banks' historical loss experience.
4.1.22 LOAN PORTFOLIO. Except as set forth in Section 4.1.22 of the
Seller Disclosure Schedule, as of November 30, 1994, neither the Seller nor any
Subsidiary is a party to any written or oral (a) loan agreement, note or
borrowing arrangement (including, without limitation, leases and credit
enhancements) (collectively, "Loans") the unpaid principal balance of which
exceeds $100,000 and as to which the obligor was, as of that date, over 90 days
delinquent in payment of principal or interest, or (b) Loan with any director,
executive officer or, to the Knowledge of the officers and directors of Seller,
five percent stockholder of the Seller or any Subsidiary. Section 4.1.22 of the
Disclosure Schedule sets forth as of November 30, 1994, (i) all of the Loans in
original principal amount in excess of $100,000 of the Seller or any Subsidiary
that as of that date was classified as "Other Loans Specially Mentioned",
"Special Mention", "Substandard", "Doubtful", "Loss", "Classified",
"Criticized", "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 and the
Subsidiaries that as of November 30, 1994 were classified as such, together with
the aggregate principal amount of such Loans by category. Since November 30,
1994, there has been no material adverse change in the Loan portfolio of Seller
and its Subsidiaries. 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 4.1.22, or any Loan the classification
of which is materially and adversely changed at any time after the date of this
Agreement.
4.1.23 INVESTMENT SECURITIES. Section 4.1.23(a) of the Seller Disclosure
Schedule sets forth the book and market value as of November 30, 1994 of the
investment securities, mortgage backed securities and securities classified as
available for sale by the Seller and each Subsidiary. Section 4.1.23(b) of the
Disclosure Schedule sets forth the names of all the joint ventures in which the
Seller or any Subsidiary has an investment (whether or not such joint ventures
remain active). Except for pledges to secure public and trust deposits,
borrowings, repurchase agreements and reverse repurchase agreements entered into
in arms'-length transactions pursuant to normal commercial terms and conditions
and other pledges required by law, none of the investments reflected in the
consolidated balance sheet of the Seller included in its Quarterly Report on
Form 10-Q for the period ended September 30, 1994, and none of the material
investments made by the Seller or any of its Subsidiaries since September 30,
1994, is subject to any restriction (contractual, statutory or otherwise) that
would materially impair the ability of the entity holding such investment freely
to dispose of such investment within a reasonable time.
4.1.24 DERIVATIVE TRANSACTIONS. Except as set forth in Section 4.1.24 of
the Seller Disclosure Schedule, neither the Seller nor any of the Subsidiaries
has engaged in transactions in or involving structured notes, forwards, futures,
options on futures, swaps or other derivative instruments.
4.1.25 DEPOSITS AND BORROWINGS. The deposit accounts and any borrowings
of the NFS Banks comply in all material respects with all applicable Laws.
4.1.26 EXAMINATION REPORTS. The last safety and soundness examinations of
NFS Bank and Plaistow by the OTS or the FDIC prior to the date of this Agreement
were performed as of June 27, 1994, and access to true, correct and complete
copies of the reports of examination related thereto have been made available to
Buyer. If either of NFS Bank or Plaistow was notified of any deficiencies as a
result of said examinations or any prior examinations of either of NFS Bank or
Plaistow by the OTS or the FDIC, it has taken action to correct each such
deficiency, which action it believes is to the satisfaction of the appropriate
agency, and it has not received notice of any kind that such action is
inadequate, and if any changes in operating methods or organization were
required by reason of such examinations, or such other examinations, such
changes have been made.
4.1.27 MATERIAL INTERESTS OF CERTAIN PERSONS. Except as disclosed in
Seller's proxy statement for its 1994 annual meeting of shareholders or set
forth in Section 4.1.27 of the Seller Disclosure Schedule, no officer or
director of Seller or its Subsidiaries, or any "associate" (as such term is
defined in Rule 14a-1 under the
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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 Seller or any of Seller's Subsidiaries that
would be required to be disclosed in a proxy statement to shareholders under
Regulation 14A of the Exchange Act.
4.1.28 FAIRNESS OPINION. Seller has received from Tucker Anthony an
opinion, dated the date of or immediately before the date of this Agreement,
concluding that, in such financial adviser's opinion, the Merger Consideration
is fair, from a financial point of view, to the Seller's stockholders.
4.1.29 NO MISREPRESENTATION. None of the representations and warranties
of Seller or any Subsidiary set forth in this Agreement, nor any matter
disclosed in the Seller Disclosure Schedule or in any of the schedules, lists,
certificates, exhibits or other documents prepared by Seller or any Subsidiary
and delivered to Buyer hereunder or in connection with the transactions
contemplated hereby (excluding the informational materials supplied to Buyer by
Tucker Anthony, with respect to which neither Tucker Anthony nor Seller makes
any representation except as set forth below) contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances in which they were
made, not misleading. With respect to the informational materials supplied to
Buyer by Tucker Anthony, Seller represents that such informational materials
were prepared in good faith and to the Knowledge of Seller's officers and
directors they are not, taken as a whole, untrue in any material respect.
4.2 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby makes the
following representations and warranties to Seller, each of which is being
relied upon by Seller as a material inducement to enter into and perform this
Agreement:
4.2.1 ORGANIZATION.
(a) Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts. Buyer has full
corporate power and authority to own or lease its properties and assets and to
carry on its business as now being conducted. Buyer is duly licensed or
qualified to do business and is in good standing in each jurisdiction in which
the nature of the business conducted by it or the character or location of the
employees or of the properties or assets owned or leased by it makes such
licensing or qualification necessary, except where the failure to be so licensed
or qualified would not result in a Material Adverse Change in Buyer.
(b) Acquisition Company is or will be at the Closing Date a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Acquisition Company has or will have at the Closing Date full
corporate power and authority to participate in the Merger.
4.2.2 SUBSIDIARIES. Each Buyer Subsidiary which is a Significant
Subsidiary (within the meaning of Regulation S-X of the SEC) is duly organized,
validly existing and in good standing under the laws of its state of
incorporation or organization, has full corporate or similar power and authority
to own or lease its properties and assets and to carry on its business as now
being conducted, and is duly licensed or qualified to do business and is in good
standing in each jurisdiction in which the nature of the business conducted by
it or the character or location of the employees or of the properties or assets
owned or leased by it makes such licensing or qualification necessary, except
where the failure to be so licensed or qualified would not result in a Material
Adverse Change in Buyer. The shares of capital stock or other ownership interest
of each such Buyer Subsidiary are owned by Buyer or a Buyer Subsidiary as set
forth in Buyer's Annual Report on Form 10-K for the year ended December 31, 1993
filed with the SEC.
4.2.3 CAPITALIZATION.
(a) The entire authorized capital stock of Buyer consists of 50,000,000
shares of the Buyer Stock, of which 18,999,093 shares were issued and
outstanding as of September 30, 1994, and 1,000,000 shares of preferred stock,
$10.00 par value per share, none of which has been issued or are outstanding as
of the date hereof. All the issued and outstanding shares of Buyer Stock have
been duly authorized and validly issued and are fully paid and nonassessable and
were not issued in violation of any preemptive rights. When issued in
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accordance with the terms of this Agreement, the shares of Buyer Stock to be
issued pursuant to the Merger will be duly authorized, validly issued, fully
paid and nonassessable, without liability attaching to the ownership thereof,
and will not have been issued in violation of any preemptive rights.
(b) All the issued and outstanding shares of capital stock of Acquisition
Company have been or, at the Closing Date, will be duly authorized and validly
issued, fully paid and nonassessable, will not have been issued in violation of
any preemptive rights and will be owned by Buyer.
4.2.4 AUTHORIZATION. Buyer has all requisite corporate power and
authority to execute and deliver this Agreement and, subject to receipt of all
Regulatory Approvals, to consummate the transactions contemplated hereby in
accordance with the terms hereof. The execution, delivery and performance of
this Agreement has been duly authorized by the board of directors of Buyer and
has been or will be prior to the Closing Date duly authorized by the stockholder
and board of directors of Acquisition Corporation, and no other corporate
proceedings or stockholder approvals on the part of Buyer or Acquisition Company
are necessary to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Buyer and constitutes a valid and
legally binding obligation of Buyer enforceable against Buyer in accordance with
its terms.
4.2.5 NON-CONTRAVENTION. The execution and delivery of this Agreement by
Buyer does not, and the performance of this Agreement, in accordance with the
terms hereof, will not (a) violate any provision of the articles of
incorporation or charter or bylaws of Buyer or Acquisition Company or (b)
conflict with or result in a breach of, or default under, or result in the
creation of any lien, claim, charge or other encumbrance upon any of the assets
or properties of Buyer or Acquisition Company pursuant to the provisions of any
provision of, any agreement, mortgage, indenture or other document or instrument
to which Buyer or Acquisition Company is a party or by which it or any of their
respective properties or assets are bound, or (c) violate any existing Laws
binding on Buyer or Acquisition Company or any of their properties or assets.
4.2.6 FINANCIAL MATTERS. (a) Buyer has previously delivered or made
available to Seller accurate and complete copies of the consolidated balance
sheets of Buyer as of December 31, 1993 and 1992, and the related consolidated
statements of income, changes in stockholders' equity and cash flows for the
years ended December 31, 1993, 1992 and 1991, in each case accompanied by the
audit report of Peat Marwick, and the unaudited consolidated balance sheets of
Buyer as of September 30, 1994 and 1993, and the related unaudited consolidated
statements of income, changes in stockholders' equity and cash flows for the
nine months ended September 30, 1994 and 1993. The consolidated statements of
financial condition of Buyer referred to herein (including the related notes,
where applicable), fairly present the consolidated financial condition of Buyer
as of the respective dates set forth therein, and the related consolidated
statements of income, stockholders' equity and cash flows (including the related
notes, where applicable) fairly present the consolidated results of operations,
stockholders' equity and cash flows of Buyer for the respective periods or as of
the respective dates set forth therein.
(b) Each of the financial statements referred to in Section 4.2.6(a) has
been prepared in accordance with GAAP consistently applied during the periods
involved, except as may be noted therein. The audits of Buyer have been
conducted in accordance with GAAP. The books and records of Buyer and each Buyer
Subsidiary included in such financial statements are being maintained in
material compliance with applicable legal and accounting requirements.
(c) Buyer has available to it sources of capital and financing sufficient
to fulfill its obligations hereunder, including, without limitation, the
obtaining of all Regulatory Approvals.
4.2.7 ABSENCE OF CHANGES. Since September 30, 1994, the business of Buyer
has been conducted only in the ordinary course consistent with past practice and
there has not been any Material Adverse Change in Buyer, nor has there been any
material change in any policy or practice followed by Buyer or any Buyer
Subsidiary in the ordinary course of business.
4.2.8 LEGAL PROCEEDINGS. Neither Buyer nor any Buyer Subsidiary is a
party to any pending or, to the Knowledge of any of Buyer's officers and
directors, threatened legal, administrative or other claim, action, suit,
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investigation, arbitration or proceeding challenging the validity or propriety
of any of the transactions contemplated by this Agreement.
4.2.9 REGULATORY FILINGS AND REPORTS. Since January 1, 1990, each of
Buyer and the Buyer Subsidiaries has filed all documents required to be filed by
it under federal securities laws or applicable federal and state savings and
loan and savings bank laws and regulations, and all such documents, as finally
amended, were complete and accurate, complied in all material respects as to
form and substance with all applicable requirements of law and regulation and
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
4.2.10 BROKER'S FEES. Except for payments due to Morgan Stanley & Co.
Incorporated from Buyer as a result of the Merger, no agent, finder, broker,
investment banker, person or firm acting on behalf or under authority of Buyer
or Acquisition Company is or will be entitled to any fee as compensation for
services as broker or finder or any other commission or similar fee directly or
indirectly in connection with this Agreement or any of the transactions
contemplated hereby.
4.2.11 BENEFICIAL OWNERSHIP OF SELLER STOCK. As of the date hereof,
neither Buyer nor any Buyer Subsidiary beneficially owns any shares of Seller
Stock or has any option, warrant or right of any kind to acquire the beneficial
ownership of any Seller Stock, other than pursuant to this Agreement and the
Buyer Option. Section 4.2.11 of the Buyer Disclosure Schedule (which Section
shall be updated hereafter by Buyer upon the request of Seller) sets forth the
number of shares of Seller Stock, if any, beneficially owned by Buyer as of the
date hereof, or the date of such update, as the case may be.
4.2.12 MATTERS REGARDING BANKING SUBSIDIARIES. The Buyer Subsidiaries
which are banks have the CRA ratings set forth in Section 4.2.12 of Buyer
Disclosure Schedule. To the Knowledge of the officers and directors of Buyer,
since their last Federal regulatory authority examination of CRA compliance,
there has been no protest of any application of such Buyer Subsidiaries based on
CRA compliance.
4.2.13 NO MISREPRESENTATION. None of the representations and warranties
of Buyer set forth in this Agreement nor any matter disclosed in any of the
schedules, lists, certificates, exhibits or other documents delivered to Seller
hereunder or in connection with the transactions contemplated hereby contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which they were made, not misleading.
ARTICLE V
COVENANTS
5.1 REGULATORY APPLICATIONS.
(a) Upon the execution and delivery of this Agreement, the parties hereto
shall thereupon cause to be prepared and filed, as soon as is reasonably
practical, but not later than 45 days after the date of this Agreement, all
required Applications and any other filings with Governmental Authorities that
are necessary or contemplated for consummation of the Merger and the other
transactions contemplated by this Agreement. Such filing deadline is subject to
receipt by the filing party from the other party hereto of all information
required in connection with the filing of such Applications and other filings.
The parties hereto will use their best efforts to supply, on a timely basis, to
the other party all information required in connection with the preparation and
filing of such Applications and other filings. Such Applications and filings
shall be in such forms as may be prescribed by the respective Governmental
Authorities and shall contain such information as they may require. The parties
hereto will cooperate with each other, including their respective attorneys,
advisers and other representatives, and will use their best efforts to prepare
and execute all necessary documentation, to effect all necessary or contemplated
filings and to obtain all necessary or contemplated permits, consents,
Regulatory Approvals, and authorizations of Governmental Authorities and third
parties which are necessary or contemplated to consummate the transactions
contemplated by this Agreement. Buyer shall deliver to Seller, and Seller shall
deliver to Buyer, reasonably in advance of the time it intends to file any
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such Application or other filing, a draft of the proposed Application or other
filing, and each shall cooperate with the other in responding to and considering
any reasonable questions or comments regarding such draft before it is finalized
and filed, provided that such questions or comments are received on a timely
basis so as to permit response or incorporation. Without limiting the generality
of the foregoing, each of the parties shall have the right to review and approve
in advance all characterizations of the information relating to it and any of
its subsidiaries that appears in any Application to any Governmental Authority
in connection with the transactions contemplated by this Agreement. Each party
shall deliver to the others, promptly after receipt, copies of all written
communications regarding Applications and Regulatory Approvals and shall
immediately advise the others of all oral communications regarding Applications
and Regulatory Approvals.
(b) If so requested by Buyer and in cooperation with Buyer, Seller and its
directors and officers shall, and shall use their best efforts to cause the NFS
Banks and their respective directors and officers to, promptly take all
necessary corporate and other action, prepare and file all necessary
documentation, make all necessary applications and filings and obtain as
promptly as practicable all permits, consents, approvals and authorizations of
all third parties and Governmental Authorities that are necessary to change the
names of the NFS Banks, to amend the charter and by-laws of the NFS Banks, to
convert the NFS Banks to a state or national bank charter or to merge the NFS
Banks into a national banking association controlled by Buyer, so that such name
changes, amendments, conversions or mergers may be consummated in conjunction
with the consummation of the Merger, whether effective at the time of or
immediately before or after the Merger.
5.2 PROXY STATEMENT/REGISTRATION STATEMENT.
(a) Upon the execution and delivery of this Agreement, Buyer shall
thereupon cause to be prepared and filed with the SEC, as soon as reasonably
practical, but not later than 45 days after the date hereof (provided that
Seller has given to Buyer all information concerning Seller which is required
for inclusion in the Registration Statement, including the Proxy
Statement/Prospectus), a Registration Statement, including the Proxy
Statement/Prospectus, complying in form and substance in all material respects
with the requirements of applicable Laws for the purpose of registering the
Buyer Stock to be issued as part of the Merger Consideration and will use its
best efforts to have the Registration Statement declared effective by the SEC
upon receipt of the Regulatory Approvals, or as soon thereafter as possible and
remain effective through the Closing Date.
(b) Buyer shall deliver to Seller, reasonably in advance of the time it
intends to file the Registration Statement with the SEC, a draft Registration
Statement for review and comment upon all information relating to Seller and any
of the Subsidiaries that appears in the Registration Statement. Buyer shall
cooperate with Seller in responding to and considering any reasonable questions
or comments regarding such draft Registration Statement before it is finalized
and filed, provided that such questions or comments are received on a timely
basis so as to permit response or incorporation.
(c) If at any time after the Registration Statement is first filed with the
SEC, and prior to the Closing Date, any event relating to Seller or any of the
Subsidiaries should be discovered which should be set forth in an amendment of,
or a supplement to, the Registration Statement, including the Proxy
Statement/Prospectus, Seller shall promptly so inform Buyer, and will furnish
all necessary information to Buyer relating to such event. Buyer shall thereupon
cause an amendment to the Registration Statement to be filed with the SEC, and
upon the effectiveness of such amendment, if appropriate, Seller will take any
necessary action as promptly as practicable to permit an appropriate amendment
or supplement to be transmitted to the holders of Seller Stock entitled to vote
at the Stockholders Meeting, and will transmit such amendment or supplement as
promptly as practicable.
5.3 STOCKHOLDER APPROVAL.
(a) Concurrent with calling the 1995 annual meeting of Seller's
stockholders, or at such other time as Buyer and Seller may reasonably agree,
but in no event earlier than five Business Days following the date the
Registration Statement (including any amendments necessitated by Regulatory
Approvals) is declared effective by the SEC, Seller will (i) duly and properly
call, and give notice of, and thereafter cause to be convened and held no later
than 30 days after such notice, a meeting of its stockholders (including any
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adjournment of such meeting which may be necessary), for the purpose of
approving this Agreement (including the Plan of Merger) and for such other
purposes as may be necessary to effect the transactions contemplated hereby (the
"Stockholders Meeting"), and (ii) subject to the fiduciary duty of its
directors, recommend to its stockholders the approval of this Agreement
(including the Plan of Merger) and use its best efforts to obtain, as promptly
as reasonably practical, such approval. Seller shall mail the Proxy Statement/
Prospectus to its stockholders who are entitled to vote at the Stockholders
Meeting. Seller shall publish such notice or notices of the Stockholders Meeting
as may be required, and at the times and in the form and manner required, by
applicable provisions of federal and state statutes, regulations, rules, and
orders.
(b) At the time the Proxy Statement/Prospectus is mailed to the
stockholders of Seller for the solicitation of proxies for the approvals
referred to above and at all times subsequent to such mailing up to and
including the Closing Date, Buyer shall cause the Proxy Statement/Prospectus
(including any supplements thereto) and any other documents or notices delivered
to stockholders in connection therewith:
(i) to comply in all material respects with applicable provisions of
the Exchange Act and rules and regulations of the SEC thereunder and all
other applicable Laws; and
(ii) with respect to all information set forth therein relating to
Buyer and its subsidiaries, this Agreement, the Merger, the Option
Agreement, and all other transactions contemplated hereby and thereby, to
not contain any statement which, at the time and in light of the
circumstances under which it is made, is false or misleading with respect
to any material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
false or misleading, or necessary to correct any statement in an earlier
communication with respect to the solicitation of a proxy for the same
meeting or subject matter which has become false or misleading.
Buyer's obligations hereunder are subject to Seller promptly furnishing
Buyer with the information relating to Seller and the Subsidiaries which is
required under applicable Laws for inclusion in the Proxy Statement/Prospectus,
which information Seller represents and warrants to Buyer shall not contain any
statement which, at the time and in light of the circumstances under which it is
furnished, is false or misleading with respect to any material fact or omits to
state any material fact required to be stated therein or necessary in order to
make the information furnished therein not false or misleading. Seller further
represents and warrants to Buyer that it will amend, supplement or revise any
information so furnished as necessary to make the foregoing sentence correct and
true in all material respects at and as of all times from the date of the
mailing of the Proxy Statement/Prospectus to the stockholders of Seller to and
including the Closing Date.
5.4 BLUE SKY LAWS.
(a) Buyer shall take all actions necessary to have the shares of Buyer
Stock to be delivered as part of the Merger Consideration qualified or
registered for offering and sale, or to identify and perfect an exemption
therefrom, under the securities or "Blue Sky" laws of each jurisdiction within
the United States in which stockholders of Seller reside.
(b) Buyer shall provide all notices and make all filings with the Nasdaq
NNM as may be required in connection with the transactions contemplated hereby.
5.5 OTHER APPROVALS. The parties shall cooperate and use their best
efforts to obtain all written consents and approvals of other persons in
connection with any lease or other agreement the benefits of which cannot be
retained upon consummation of the transactions contemplated hereby without such
written consent or approval.
5.6 CONDUCT OF THE BUSINESS OF SELLER AND ITS SUBSIDIARIES.
5.6.1 NEGATIVE COVENANTS. From and after the date of this Agreement up to
and including the Closing Date, none of Seller or the Subsidiaries shall, except
with the prior written consent of Buyer, do any one or more of the following:
(a) Except for Seller Stock issued upon exercise of Seller Options existing
at the date of this Agreement, issue, sell, pledge, dispose of, grant, encumber
or authorize the issuance, sale, pledge, disposition, grant or
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encumbrances of any shares of Seller Stock or shares of stock of the NFS Banks
or securities exercisable for or convertible into any such shares (including the
grant of additional options or other rights under any option or similar plan of
Seller) or stock appreciation or similar rights with respect to such shares;
(b) (i) Amend or enter into any agreement with any employee establishing
the terms of employment or severance or termination benefits or permit any such
agreement to be so renewed or extended except as Buyer may otherwise request;
(ii) adopt or establish any Employee Plan or Benefit Arrangement or, except as
reasonably necessary to comply with applicable Law or to maintain the qualified
status of a Qualified Plan, amend, supplement or otherwise modify any existing
Employee Plan or Benefit Arrangement; or (iii) make additional grants or
contributions under any existing Employee Plans or Benefit Arrangements except
in accordance with past practices or as otherwise provided in this Agreement;
provided that Seller's and its Subsidiaries contributions with respect to the
1994 year under any profit sharing plan or employee stock ownership plan shall
not exceed the rate at which such contributions were accrued on their September
30, 1994 financial statements.
(c) Other than with respect to increases consistent with past practices,
increase the compensation payable to any director, officer or employee, or pay
any bonuses to any officer or employee, except for salary increases for all
officers and other employees of Seller and its Subsidiaries, as described at
Section 5.6.1(c) of the Seller Disclosure Schedule.
(d) Except as otherwise provided in this Agreement, incur any indebtedness
with a maturity of one year or more other than deposits taken in the ordinary
course of business consistent with past practice;
(e) Sell, purchase or lease, or commit to sell, purchase or lease, any
material assets, except for (i) transactions pursuant to legally binding
agreements or commitments entered into or approved before the date hereof and
disclosed to Buyer before the date hereof and (ii) transactions otherwise
permitted by this Agreement;
(f) Sell, purchase, open, close or relocate any banking office except as
described at Section 5.6.1(f) of the Seller Disclosure Schedule;
(g) Except as otherwise provided herein, pay any dividend, acquire any of
its capital stock (by repurchase, tender, redemption or otherwise) or make any
other capital distribution, except for quarterly cash dividends on the Seller
Stock in accordance with past practice not exceeding $0.14 per share per quarter
and except for cash dividends on the capital stock of the NFS Banks consistent
with past practices;
(h) Engage in any securities or other trading activity, except in the
ordinary course of business and consistent with past practice, or acquire any
securities with a final maturity of more than two years, or engage in
transactions involving structured notes, forwards, futures, options on futures,
swaps or other derivative instruments;
(i) Make any capital expenditure in excess of $50,000, except in accordance
with the budget terms supplied to Buyer by Seller before the date hereof, or in
accordance with budget terms supplied to Buyer by Seller thereafter and
specifically approved in writing by Buyer;
(j) Make any change in its capital stock by split, reverse split,
reclassification, reorganization, subdivision, or other similar action;
(k) Amend its certificate of incorporation or charter (as the case may be)
or by-laws;
(l) Merge, combine, or consolidate with or into, or permit the merger into
it of, any other corporation, association, trust, or entity or change in any
manner the character of its business;
(m) Change or modify in any way current accounting policy or practice with
respect to Seller's financial statements prepared in accordance with GAAP except
as may be required by GAAP or Governmental Authorities;
(n) Engage in any other transaction that is not consistent with past
practices and in the ordinary course of the business of Seller or such
Subsidiary, as the case may be; or
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(o) Make any payment to any director, officer, employee or independent
contractor, in connection with or as a result of the transactions contemplated
by this Agreement, or otherwise, that is not deductible under either Section
162(a)(1) or 404 of the IRC;
(p) Make any equity investment or commitment to make such an investment in
equity securities or in real estate or in any real estate development project,
other than in connection with foreclosures, settlements in lieu of foreclosure
or troubled loan or debt restructurings in the ordinary course of business
consistent with past practice;
(q) Take any action that is intended or reasonably can be expected to
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue in any material respect as of any time to and including
the Closing Date, or any of the conditions to the Merger or the other
transactions contemplated by this Agreement set forth in Article VI not being
satisfied in any material respect, or in any material violation of any provision
of this Agreement or the Option Agreement, except, in each case, as may be
expressly permitted by this Agreement or as may be required by applicable law,
but only after reasonable consultation with Buyer;
(r) Foreclose upon or take a deed or title to any commercial real estate
without first conducting a Phase I environmental assessment of the property or
foreclose upon any commercial real estate if such environmental assessment
indicates the presence of Hazardous Material in amounts which, if such
foreclosure were to occur, would result in a Material Adverse Change; or
(s) Agree to do any of the foregoing or permit any of the foregoing to
occur.
5.6.2 AFFIRMATIVE COVENANTS. To the extent not otherwise restricted or
limited by the terms of this Agreement, Seller and each of its Subsidiaries
shall:
(a) carry on its business in all material respects in substantially the
same manner as heretofore conducted, except for changes approved in writing by
Buyer; and
(b) use its best efforts to preserve intact the business of Seller and its
Subsidiaries, to keep available their present officers and key employees, to
preserve the current relationships of customers and others having business
relationships with Sellers and its Subsidiaries, and to comply in all material
respects with applicable Laws; provided, however, that Buyer acknowledges that
Seller has not made any representation regarding the continued service or
employment of any director, officer or other employee of Seller or any
Subsidiary, and that the retention of any such person is not a condition to
Buyer's obligations to consummate the Merger.
(c) maintain in full force and effect from the date of this Agreement
through the Closing Date all insurance policies and bonds identified in Section
4.1.12 of the Seller Disclosure Schedule as now being in force with coverages
and at least at levels now in force.
5.6.3 DISCLOSURE STATEMENTS. Prior to the Closing, Seller promptly will
supplement or amend the Seller Disclosure Schedule delivered pursuant hereto
with respect to any matter hereafter arising which, if existing, occurring or
known at the date of this Agreement, would have been required to be set forth or
described in such Schedule or which is necessary to correct any information in
such Schedule which has been rendered materially inaccurate thereby. No
supplement or amendment to the Seller Disclosure Schedule shall affect the
conditions to Buyer's obligation to consummate the Merger.
5.7 INDEMNIFICATION AND INSURANCE.
5.7.1 CERTIFICATE AND BYLAWS. Buyer agrees that the rights to
indemnification provided to Seller's and each of the Subsidiary's directors and
officers by such entities' certificate of incorporation or charter or bylaws as
in effect on the date of this Agreement, and by applicable law and regulation
shall survive the Closing Date and continue in full force and effect at least
until and including the third anniversary of the Closing Date and as otherwise
specified therein.
5.7.2 INSURANCE. Buyer shall use its best efforts to obtain and maintain
for a period of one year after the Closing Date an endorsement extending the
period in which claims may be made under Seller's directors' and officers'
liability insurance policy in effect on the date of this Agreement, or a policy
of such other
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responsible carrier as Buyer may elect, with respect to causes of action that
arise out of acts or omissions occurring on or before the Closing Date,
provided, however, that in no event shall the Buyer be required to expend
pursuant to this Section 5.7.2 more than an amount per year equal to 125% of
current annual premiums paid by the Seller for such insurance (which premiums
the Seller represents and warrants to be approximately $60,000 per annum in the
aggregate).
5.8 EMPLOYEE BENEFITS MATTERS.
5.8.1 INSURANCE COVERAGES. (i) For the period from the Closing through
December 31, 1995, Buyer and Buyer Subsidiaries will continue to provide the
same or similar insurance coverages (medical, dental, life, accidental death and
dismemberment, short-term disability, and long-term disability) to employees who
were employees of Seller and/or its Subsidiaries on the Closing Date as those
covering employees of Seller and its Subsidiaries on the date of this Agreement,
except for increases in employee premiums reflecting any increases charged by
insurance carriers and any changes required by applicable law. Effective as of
January 1, 1996 or at any time thereafter, the foregoing insurance coverages
provided by Seller and/or its Subsidiaries may at the option of Buyer be
discontinued, in which case those employees who had been employees of Seller and
its Subsidiaries will become eligible for the same insurance coverages generally
available to the other employees of Buyer and Buyer Subsidiaries, subject to the
applicable terms and conditions of the benefit plans providing such coverages.
5.8.2 PERSONNEL POLICIES. Except as otherwise provided in this Agreement,
all personnel policies and procedures of the Seller and/or its Subsidiaries will
be discontinued as of the Closing Date and employees of the Seller and its
Subsidiaries will become covered as of the Closing Date under the human
resources policies and procedures of Buyer. For all purposes of applying the
human resources policies and procedures of Buyer, the employees of Seller and
its Subsidiaries will be treated as new employees as of the Effective Date.
5.8.3 QUALIFIED PLANS. Buyer will maintain the Seller's Qualified Plans
in effect through December 31, 1995. Thereafter Buyer will either maintain
Seller's Qualified Plans or permit employees of Seller and its Subsidiaries to
participate in Buyer's Savings, Profit Sharing and Stock Ownership Plan
("Savings Plan") and Buyer's Retirement Plan ("Retirement Plan") in accordance
with their terms, as in effect from time to time, once such employees have
satisfied the eligibility requirements under each such plan. If such employees
are permitted to participate in Buyer's Savings Plan and Retirement Plan, they
will receive credit in accordance with each such plan's terms for service with
the Seller and its Subsidiaries for purposes of eligibility and vesting, but not
accrual of benefits under such plans.
In any plan year in which Buyer is maintaining a Qualified Plan of Seller
that is a profit-sharing plan, the percentage of compensation that is
contributed on behalf of participants in such profit sharing plan will not
exceed the percentage of compensation that Buyer contributes on behalf of its
own employees for such year under Buyer's Savings Plan.
Nothing in this Section 5.8 or elsewhere in this Agreement will preclude
Buyer from amending or terminating in its discretion any employee benefit plan
maintained by Buyer.
5.8.4 NO THIRD-PARTY BENEFICIARIES. This Section 5.8 reflects the
agreements of the parties but does not create any rights or obligations except
as among the parties to this Agreement, and it is specifically agreed that no
present or future employee of the Seller or its Subsidiaries will be treated as
a third-party beneficiary of the provisions of this Section 5.8. Nothing in this
Section 5.8 or elsewhere in this Agreement will preclude Seller or any of its
Subsidiaries from terminating the employment of any employee of Seller or its
Subsidiaries, or preclude Seller from amending or terminating in its discretion
any employee benefit plan maintained by Seller or any of its Subsidiaries.
5.9 DIRECTORS, OFFICERS AND EMPLOYEES.
(a) Buyer will invite at least three of the current directors of NFS Bank,
and such additional number as it may determine after consultation with the Board
of Directors of such bank, to continue to serve as directors at least until the
annual meeting of such bank following the Closing Date.
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(b) Buyer and the Buyer Subsidiaries shall offer employment, as employees
of Buyer or the Buyer Subsidiaries, immediately following the Closing Date, to
any persons who, immediately before the Closing Date, are full time employees of
Seller or any Seller Subsidiary. To the extent that the employment of any
full-time employee of Seller or any Seller Subsidiary with at least three years
of credited service (other than any employee who is party to an employment
agreement or a severance agreement) or any of the employees listed at Section
5.9(b) of the Seller Disclosure Schedule (the "Scheduled Employees") is
involuntarily terminated within one year following the Closing Date as a result
of the elimination of a job position and such employee is not offered another
position with Buyer or the Buyer Subsidiaries, such employee will be entitled to
receive severance payments equal to two weeks of then-current base pay for each
year of service (as determined pursuant to the Seller's retirement plan) at
Seller or any Seller Subsidiary (including credited years of service for
employees of Plaistow), provided that such severance shall not be less than two
weeks or greater than six months of then-current base pay and, in the case of
the Scheduled Employees, shall be two weeks.
(c) Except as otherwise agreed to by the parties, following the Closing
Date, Buyer shall assume all duties, liabilities and obligations of Seller under
any existing Employment and Severance Agreements described at Section 5.9(c) of
the Seller Disclosure Schedule. Seller shall cooperate with Buyer and assist it
in obtaining such amendments to the existing Employment and Severance Agreements
as Buyer may reasonably request to assure continuity of management following the
Merger.
5.10 ACCESS TO INFORMATION.
(a) From the date hereof until the Closing, and subject to legal
requirements and fiduciary and commercial privacy rights and obligations, Seller
and the Subsidiaries will authorize and permit Buyer, its representatives,
accountants and counsel, to have access to all of the operations and activities
of Seller and the Subsidiaries. From the date hereof until the Closing, Seller
shall furnish to Buyer and its authorized representatives, upon reasonable
notice and during ordinary business hours, access to all of its respective
books, records and properties. Such examination shall be made in a manner that
will not unreasonably interfere with the conduct of the business of the entity
being examined and shall not affect or limit in any way any of the
representations and warranties hereunder.
(b) Simultaneously with the filing of any reports under the Exchange Act,
Seller and Buyer shall furnish a copy thereof to each other. Seller shall
likewise promptly furnish to Buyer copies of all of its and any of its
Subsidiaries quarterly and annual financial reports filed with federal or state
regulatory authorities, including, but not limited to, the OTS, the FDIC and the
SEC, as well as access to any examination or similar reports received from such
authorities, to the extent permitted by applicable law.
(c) Seller shall provide to Buyer complete and correct copies of all
reports presented to Seller or any of its Subsidiaries by their independent
accountants after the date hereof and for any preceding fiscal years with
respect to internal accounting controls. Seller represents and warrants that all
recommendations made in such prior reports have been implemented.
(d) To the extent permitted by Law, Seller shall provide Buyer, or its
agents, counsel, and representatives access to (i) all examination reports of
Seller or any Subsidiary, by the OTS or the FDIC from the date hereof through
the Closing Date; (ii) any correspondence relating to such examination reports
during such period; and (iii) any written agreements, arrangements or
understandings entered into as a result of matters raised in such examination
reports or correspondence;
5.11 CONFIDENTIALITY. Any and all commercial, financial, technical, or
other information regarding Seller, Buyer or their respective subsidiaries or
their respective businesses, properties, and personnel, or that of their
respective officers, directors, control persons, or affiliates, including such
information obtained in accordance with Section 5.11 above (the "Confidential
Information"), which is derived or results from access by such party (or their
authorized agents and representatives) to the properties, books, contracts,
commitments, and records of the other party or its subsidiaries pursuant to the
provisions of this Agreement, whether obtained before or after the execution of
this Agreement, shall be held in strict confidence; and the party in possession
of the Confidential Information shall exercise the same degree of care with
respect thereto, that it
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uses to preserve and safeguard its own confidential proprietary information.
Such Confidential Information shall not directly or indirectly be divulged,
disclosed or communicated to any other person or entity or used for any purposes
other than those expressly contemplated by this Agreement, except as otherwise
required by judicial or regulatory authorities having jurisdiction in respect
thereof. Each party shall cause its authorized agents and representatives to
maintain the confidentiality of Confidential Information. In the event the
transactions contemplated by this Agreement are not consummated for any reason,
the confidentiality of such Confidential Information shall be maintained by such
party and its authorized agents and representatives (except to the extent that
such Confidential Information can be shown to be previously known to such party
or later acquired by it from legitimate sources or otherwise available to the
public). Seller and Buyer acknowledge and agree that any prior agreements
regarding the confidentiality of Confidential Information shall not merge into
and shall survive the execution and delivery of this Agreement, except that to
the extent that the terms and provisions of this Section impose more stringent
restrictions and limitations on the parties, the terms and provisions of this
Section shall supersede the previously executed and delivered confidentiality
agreements.
5.12 PUBLIC ANNOUNCEMENTS. Neither Buyer nor Seller shall make any press
releases, announcements and other public disclosures relating to this Agreement,
the termination of this Agreement, Regulatory Approvals or otherwise relating to
any of the transactions contemplated by this Agreement without the prior consent
of the other party, which consent shall not be unreasonably withheld, delayed or
conditioned, provided that the foregoing shall not require Buyer to obtain
Seller's consent for discussions with financial analysts in the ordinary course.
Each party shall consult with the other regarding the form, substance, timing
and method of distribution, and cooperate with each other in good faith in the
development and distribution of all such public disclosure. Nothing contained in
this Section shall prohibit any party from making any public disclosure which
Buyer or Seller deems necessary in order to fulfill its respective disclosure
obligations imposed by Law; provided, however, that the legal obligation to make
such disclosure shall not relieve such party from its obligations under this
Section to cooperate, consult with and seek the consent of the other party.
5.13 NO SOLICITATIONS. From the date of this Agreement, through the
Closing Date, neither Seller nor any Subsidiary, nor any of its or their
directors, officers, advisers or other representatives shall, directly or
indirectly, without the prior written consent of Buyer, solicit or encourage the
solicitation from, or, subject to the conditions set forth below, engage in
negotiations with any third party concerning any possible proposal regarding the
issuance or sale of Seller Stock or other equity securities of Seller or a
merger, consolidation, sale of substantial assets or other similar transaction
involving Seller or any of the Subsidiaries. Notwithstanding the preceding
sentence, Seller shall be permitted to engage in such negotiations with any
third party provided such action is, based upon the written advice of Seller's
counsel, required in accordance with the fiduciary duties of Seller's board of
directors. Seller shall notify Buyer promptly in writing and in reasonable
detail if any such proposal or offer, or inquiry or contact with respect
thereto, is made or if any such negotiations occur. Seller agrees not to release
any third party from, or waive any provision of, any confidentiality or
standstill agreement to which Seller is a party.
5.14 AFFILIATE LETTER. Seller shall use its best efforts to cause each
director, executive officer and other person who is an "affiliate" (for purposes
of Rule 145 under the Securities Act) of Seller (each an "Affiliate") to deliver
to Buyer, as soon as practicable after the date of this Agreement, and prior to
the date of the Stockholders Meeting, a written agreement, in substantially the
form of Exhibit B hereto.
5.15 CONDUCT OF BUYER AND BUYER SUBSIDIARIES. To the extent not otherwise
restricted or limited by the terms of this Agreement, Buyer and each of the
Buyer Subsidiaries shall:
(a) Not take any affirmative action which would cause to not be true as of
the Closing Date any of the representations and warranties of Buyer; and
(b) Promptly notify Seller in writing of the existence or happening of any
Material Adverse Change in Buyer, Default, or any event or matter that, with
notice or passage of time, would constitute a Default.
5.16 BEST EFFORTS. Each party hereto agrees to use such party's best
efforts to cause the conditions within its control to be satisfied and to effect
the Merger. Buyer, as the sole stockholder of Acquisition
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Company, shall cause Acquisition Company to take all such actions as may be
required to effect the transactions contemplated by this Agreement.
5.17 LIAISON. During the period from the date of this Agreement to the
Closing Date, Seller will cause one or more of its designated representatives
(i) to confer on a regular and frequent basis (not less than monthly) with
representatives of Buyer to report on the general status of the ongoing
operations of Seller and its Subsidiaries and (ii) to cooperate and communicate
fully with respect to the manner in which the business of Seller will be
operated after the Closing Date, the type and mix of products and services,
personnel matters, branch alignment, the granting of credit, and problem loan
management, reserve adequacy and accounting. In order to facilitate the
foregoing, Seller and Buyer shall promptly establish a liaison committee (the
"Committee") which will be chaired by representatives of Buyer and Seller and
which will meet on a regular basis to discuss these matters and may establish
sub-committees from time-to-time to pursue various issues. During the period
from the date of this Agreement to the Closing Date, Seller shall provide Buyer
with timely and sufficient information to review new extensions of credit,
renewals, and restructurings, securities, transactions and information detailing
overall asset quality and risk, including interest rate risk.
5.18 SYSTEM CONVERSIONS. From and after the date hereof, Buyer and Seller
and its Subsidiaries shall meet on a regular basis to discuss and plan for the
conversion of the Seller's data processing and related electronic informational
systems to those used by Buyer and Buyer Subsidiaries, which planning shall
include, but not be limited to, discussion of the possible termination by Seller
and its Subsidiaries of third-party service provider arrangements effective at
the Closing Date or at a date thereafter, nonrenewal of personal property leases
and software licenses used by Seller and its Subsidiaries in connection with its
systems operations and outsourcing, as appropriate, of proprietary or
self-provided system services, it being understood that Seller and its
Subsidiaries shall not be obligated to take any such action and, unless Seller
otherwise agrees, no conversion shall in fact take place prior to the Closing
Date. In the event that Buyer so requests in writing, and Seller or any of its
Subsidiaries determines to take, and so takes, any action relative to third
parties to facilitate the conversion that results in the imposition of any
termination fees or charges, Buyer shall indemnify Seller and such Subsidiary on
terms reasonably satisfactory to Seller for any such fees and expenses, and the
costs of reversing the conversion process, if for any reason the Closing does
not occur in accordance with the terms of this Agreement.
ARTICLE VI
CONDITIONS
6.1 CONDITIONS TO OBLIGATIONS OF ALL PARTIES. The obligations of each
party to consummate the transactions contemplated by this Agreement are subject
to the satisfaction, on or before the Closing Date, of each of the following
conditions precedent:
6.1.1 TERMINATION. This Agreement shall not have been terminated in
accordance with its terms.
6.1.2 REGULATORY APPROVALS. All Regulatory Approvals shall have been
obtained; no Regulatory Approval shall contain any condition that would require
any material modification or nonperformance of the terms of this Agreement or
shall include any non- customary condition or requirement that, in the
reasonable opinion of Buyer, would so materially and adversely affect the
economic or business benefit to Buyer of the transactions contemplated by this
Agreement as to render inadvisable the consummation of the Merger; all
Regulatory Approvals shall remain in full force and effect and all conditions
and requirements set forth in any Regulatory Approvals that are required to be
satisfied on or before the Closing Date, including the expiration of any waiting
periods, shall have been satisfied or properly waived.
6.1.3 STOCKHOLDER APPROVAL. This Agreement and the Merger shall have been
approved by the requisite vote of Seller's stockholders in accordance with
applicable Laws and Seller's certificate of incorporation and bylaws.
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6.1.4 MATTERS REGARDING BUYER STOCK.
(a) REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC, shall remain effective and shall not be subject
to a stop order or any threatened stop order.
(b) LISTING. The shares of Buyer Stock to be issued as part of the Merger
Consideration shall be approved for listing quotation on Nasdaq NNM.
(c) BLUE SKY. The shares of Buyer Stock to be issued in exchange for
Seller Stock as part of the Merger Consideration shall have been qualified or
registered for offering and sale under the securities or "Blue Sky" Laws of each
jurisdiction within the United States in which stockholders of Seller reside,
and such qualification or registration is necessary, no order suspending the
sale of such shares of Buyer Stock in any such jurisdiction shall have been
issued on or before the Closing Date, such qualification or registration shall
remain in effect and no proceedings to suspend the sale of such shares shall
have been instituted or, to the Knowledge of any of Buyer's directors and
officers, shall be contemplated.
6.1.5 NO ORDERS, INJUNCTIONS OR RESTRAINTS: ILLEGALITY. No Governmental
Authority or federal or state court of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any Law, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is then in effect and has the effect of making
the Merger illegal or otherwise restricting, preventing or prohibiting
consummation of the transactions contemplated by this Agreement, including the
Merger.
6.2 CONDITIONS TO THE OBLIGATIONS OF BUYER AND ACQUISITION COMPANY. The
obligations of Buyer and Acquisition Company to consummate the transactions
contemplated by this Agreement are subject to the satisfaction, on or before the
Closing Date, of each of the following conditions precedent, any one or more of
which may be waived by Buyer, in its sole and absolute discretion:
6.2.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Seller contained in this Agreement shall be true, correct and complete in all
material respects when made on the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date. Buyer shall have
received a certificate signed on behalf of Seller by the Chief Executive Officer
and the Chief Financial Officer of Seller to the foregoing effect.
6.2.2 OTHER APPROVALS. Except for such consents, approvals, permits and
other authorizations that, if not obtained, would not, individually or in the
aggregate, have a material adverse effect on the business, financial condition,
results of operations or prospects of Seller and the Subsidiaries, taken as a
whole, Seller shall have obtained (i) the consent or approval of other persons
in connection with any lease, agreement, processing contract or other
arrangement, the benefits of which cannot be retained upon consummation of the
transactions contemplated hereby without such consent or approval and (ii) all
permits or other authorizations other than Regulatory Approvals required to
consummate the transactions contemplated hereby.
6.2.3 NO MATERIAL ADVERSE CHANGE. As of the Closing Date, there shall
have been no Material Adverse Change in Seller from that which was represented
and warranted on the date of this Agreement pursuant to this Agreement, it being
understood that the update provided pursuant to Section 5.6.3 of this Agreement
does not constitute a waiver or other consent to any Material Adverse Change in
Seller.
6.2.4 COMPLIANCE. Seller shall have in all material respects performed
all obligations and agreements and complied with all covenants contained in this
Agreement to be performed and complied with by Seller on or prior to the Closing
Date. There shall not exist a Default or matter that, with notice and/or passage
of time, would constitute a Default by Seller under this Agreement.
6.2.5 ACCOUNTANT'S LETTER. Buyer shall have received from Peat Marwick,
independent accountants, a letter dated the date of the Proxy
Statement/Prospectus and the Closing Date (a) with respect to Seller's
consolidated financial position and results of operation, which letter shall be
based upon SAS 72 and certain agreed upon procedures to be specified by Buyer,
which procedures shall be consistent with applicable
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professional standards for letters delivered by independent accountants in
connection with comparable transactions, and (b) to the effect that:
(i) with respect to Seller, they are independent accountants within
the meaning of Rule 101 of the Code of Professional Ethics of the American
Institute of Certified Public Accountants and applicable SEC requirements;
and
(ii) it is their opinion that the audited financial statements of
Seller and the Subsidiaries included or incorporated by reference in the
Proxy Statement/Prospectus comply as to form in all material respects with
Regulation S-X and other applicable accounting requirements.
6.2.6 LEGAL OPINION. Buyer shall have received the opinion of Hogan &
Hartson, L.L.P., counsel to Seller, dated the Closing Date, in a form that is
customary for transactions of this type. Such counsel may rely upon the
certificates of officers and directors of Seller and its Subsidiaries and of
public officials as to any matter in such opinion which involves matters of
fact, and upon opinions of local counsel, reasonably acceptable to Buyer.
6.2.7 DISSENTING SHARES. Immediately prior to the Closing not more than
330,000 Shares of Seller Stock shall be Dissenting Shares.
6.2.8 SUBSIDIARY DIRECTORS. Buyer shall have received the resignations of
such of the directors of the Subsidiaries, including the NFS Banks, as Buyer
shall have requested.
6.2.9 KEY EMPLOYEES. Each of the key employees of Seller or its
Subsidiaries named at Section 6.2.9(a) of the Seller Disclosure Schedule and at
least three of the key employees of Seller or its Subsidiaries named in Section
6.2.9(b) of the Seller Disclosure Schedule shall have been from the date of this
Agreement through the Closing Date an employee of Seller or its Subsidiaries,
except as such employee's employment may have terminated as a result of death or
disability.
6.2.10 CORPORATE ACTIONS OF THE NFS BANKS. Any name change, charter
amendment, by-law amendment, charter conversion, or merger of the NFS Banks
requested by Buyer shall have been authorized by all necessary corporate action
and all necessary permits, consents, approvals and authorizations of third
parties and Governmental Authorities shall have been obtained so that such name
change, charter amendment, by-law amendment, conversion or merger may be
consummated in conjunction with consummation of the Merger.
6.3 CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of Seller to
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, on or before the Closing Date, of each of the following conditions
precedent, any one or more which may be waived by Seller, at its sole and
absolute discretion:
6.3.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Buyer contained in this Agreement and as of the date of this Agreement shall
be true, correct and complete in all material respects when made on the date of
this Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Closing Date as though made on and as of
the Closing Date. Seller shall have received a certificate signed on behalf of
Buyer by the Chief Executive Officer or the Chief Financial Officer of Buyer to
the foregoing effect.
6.3.2 NO MATERIAL ADVERSE CHANGE. As of the Closing Date, there shall
have been no Material Adverse Change in Buyer from that which was represented
and warranted on the date of this Agreement pursuant to this Agreement.
6.3.3 COMPLIANCE. Buyer and Acquisition Company shall have in all
material respects performed all obligations and agreements and complied with all
covenants contained in this Agreement to be performed and complied with by Buyer
and Acquisition Company on or prior to the Closing Date. There shall not exist a
Default or matter that, with notice and/or passage of time, would constitute a
Default by Buyer or Acquisition Company under this Agreement.
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6.3.4 LEGAL OPINION. Seller shall have received the opinion of Palmer &
Dodge, counsel to Buyer, dated the Closing Date, in a form that is customary for
transactions of this type. Such counsel may rely upon the certificates of
officers and directors of Buyer and Buyer's Subsidiaries and of public officials
as to any matter in such opinion which involves matters of fact, and upon
opinions of local counsel, reasonably acceptable to Seller.
ARTICLE VII
CLOSING
7.1 TIME AND PLACE OF CLOSING. The Closing shall take place on the
Closing Date at 9:00 a.m. Boston, Massachusetts Time at Buyer's corporate
office, located at 175 Federal Street, Boston, Massachusetts, or at such other
time and place on the Closing Date as the parties may mutually agree.
7.2 BUYER DELIVERIES. On the Closing Date, Buyer shall deliver or cause
to be delivered to Seller or, in the case of the Merger Consideration, to an
exchange and payment agent, selected by Buyer and reasonably acceptable to
Seller (the "Agent"), with each instrument being dated as of the Closing Date
and fully executed, attested, notarized and acknowledged, as appropriate, as
follows:
7.2.1 The Merger Consideration shall be paid in accordance with the
provisions of Section 3.7.
7.2.2 Such certificates, executed by the Chief Executive Officer,
President or any Executive or Senior Vice President and attested by the Clerk or
any Assistant Clerk of Buyer, as may be reasonably necessary to evidence the
satisfaction or waiver of the Closing Conditions set forth in Section 6.2.
7.2.3 Photocopies of all Regulatory Approvals received by Buyer and/or
Acquisition Company certified as true, correct and complete by any officer of
Buyer.
7.2.4 A certificate of the Clerk or Secretary of each of Buyer and
Acquisition Company with respect to all resolutions of their respective Board of
Directors authorizing the execution, delivery and performance of this Agreement
and the Merger, the resolutions of Buyer as sole stockholder of Acquisition
Company approving this Agreement and the Merger, the incumbency and specimen
signatures of the persons executing on behalf of Buyer or Acquisition Company
any documents and instruments delivered pursuant to this Agreement, the by-laws
of Buyer and Acquisition Company and such other similar matters as Seller or its
counsel may reasonably request.
7.2.5 A certificate, executed by the Exchange Agent, as to such matters as
may be necessary to evidence the implementation of the Merger.
7.2.6 Evidence of the directors' and officers' liability insurance as
provided in Section 5.7.2.
7.2.7 The certificate as to representations and warranties as required by
Section 6.3.1 hereof.
7.2.8 Such other documents and instruments as Seller may deem reasonably
necessary to consummate the Merger and any other transactions contemplated by
this Agreement, provided that such documents and instruments are consistent with
the parties' intent as expressed in this Agreement.
7.3 SELLER DELIVERIES. On the Closing Date, Seller shall deliver or cause
to be delivered to Buyer and Acquisition Company, with each document and
instrument being dated as of the Closing Date and fully executed, attested,
notarized and acknowledged, as appropriate, the following:
7.3.1 Such certificates executed by the President, Chief Executive
Officer, or any Executive or Senior Vice President and attested by the Secretary
or any Assistant Secretary of Seller and the NFS Banks, as may be reasonably
necessary to evidence the satisfaction or waiver of the Closing Conditions set
forth in Section 6.3.
7.3.2 Photocopies of all Regulatory Approvals received by Seller,
certified as true, correct and complete by any officer of Seller.
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7.3.3 A certificate of the Secretary of Seller, with respect to all
resolutions of its Board of Directors authorizing the execution, delivery and
performance of this Agreement, all resolutions of the stockholders of Seller
with respect to their approval of this Agreement and the Merger, the incumbency
and specimen signatures of the persons executing on behalf of Seller any
documents and instruments delivered pursuant to this Agreement, the by-laws of
Seller and such other similar matters as Buyer or Acquisition Company may
reasonably request.
7.3.4 A certificate, executed by the Seller's transfer agent and in form
and substance reasonably satisfactory to Buyer, stating that, to such transfer
agent's knowledge, the stock transfer records of Seller are complete and
correct, reflect all issuances and transfers of the capital stock of Seller and
have been maintained in accordance with industry standards in the normal course
of such transfer agent's business, and stating such additional matters as may be
reasonable and necessary in connection with implementation of the Plan of
Merger. The Seller's transfer agent shall further certify that, with respect to
its duties and responsibilities as Seller's transfer agent, it is not aware of
any violation of applicable Laws.
7.3.5 The certificate as to representations and warranties as required by
Section 6.2.1 hereof.
7.3.6 Such other documents and instruments as Buyer or Acquisition Company
may deem reasonably necessary to consummate the Merger and any other
transactions contemplated by this Agreement, provided that such documents and
instruments are consistent with the parties' intent as expressed in this
Agreement.
7.4 FEES AND CLOSING COSTS.
7.4.1 Each party shall pay all fees and costs of its own attorneys,
accountants, financial advisers and other professionals incurred in connection
with the transactions contemplated by this Agreement, and Buyer and Acquisition
Company hereby expressly consent to the payment by Seller, before or
simultaneously with the Closing, of such fees and costs for which Seller is
responsible under this Section.
7.4.2 Except as provided in Section 7.4.1 above, expenses in connection
with obtaining approval of the transactions contemplated hereby by the
stockholders of Seller, including, without limitation, expenses in connection
with the printing and mailing of the Proxy Statement/Prospectus shall be paid by
Seller.
7.4.3 Expenses in connection with obtaining the Regulatory Approvals shall
be paid by Buyer.
7.4.4 Expenses in connection with the registration, quotation and "Blue
Sky" registration and approvals of the Buyer Stock shall be paid by Buyer.
7.4.5 All other fees and expenses incurred in connection with the
transactions contemplated hereby shall be paid by the party incurring such
expenses.
ARTICLE VIII
TERMINATION
8.1 MUTUAL CONSENT. The parties may terminate this Agreement at any time
by mutual written agreement.
8.2 OTHER TERMINATION. Provided that there does not then exist any
Default by the party or parties giving such notice, Seller, on the one hand, or
Buyer, on the other, may terminate this Agreement by giving notice (a
"Termination Notice") to the other at the time designated in this Section or, in
the absence of such designation, at any time up to and including the Closing
Date, if any one or more of the following shall have occurred and be continuing:
8.2.1 TERMINATION BY ANY PARTY. Any party may terminate this Agreement
under any one or more of the following circumstances:
(a) At any time after December 31, 1995, if the Closing shall not have
occurred for any reason other than a Default by the party giving such notice;
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(b) This Agreement is not approved by the requisite vote of Seller's
stockholders at the Stockholders Meeting referred to in Section 5.3 (including
any adjournment thereof);
(c) Any Application for Regulatory Approval is denied or withdrawn and 90
days shall have passed without a petition for rehearing, a request for
reconsideration or an amended application being filed with the appropriate
Governmental Authority; or
(d) A court or other Governmental Authority of competent jurisdiction shall
have issued an order, writ, injunction or decree or shall have taken any other
action permanently restraining or otherwise prohibiting the Merger and such
order, writ, injunction, decree or other action shall have become final and
nonappealable.
8.2.2 TERMINATION BY BUYER. Buyer may terminate this Agreement under any
one or more of the following circumstances:
(a) At any time if there shall have occurred a Default by Seller;
(b) On the Closing Date, if any Closing Condition set forth in Section 6.1
or Section 6.2 shall not have been satisfied; or
(c) At any time if a Material Adverse Change in Seller has occurred.
8.2.3 TERMINATION BY SELLER. Seller may terminate this Agreement under
any one or more of the following circumstances:
(a) At any time if there shall have occurred a Default by Buyer or
Acquisition Company;
(b) On the Closing Date, if any Closing condition set forth in Section 6.1
or Section 6.3 shall not have been satisfied;
(c) At any time if a Material Adverse Change in Buyer has occurred; or
(d) Prior to the Closing Date, by notice to Buyer if the Closing Market
Value of Buyer Stock shall be less than $43.50; PROVIDED that Buyer may negate
such termination by notifying Seller prior to 5:00 p.m., Boston, Massachusetts
time, on the Closing Date of its election to adjust the Merger Consideration as
provided in Section 3.2.2 (any notice under this clause to be given by personal
delivery in writing or by telephone communication confirmed by receipted
facsimile).
8.3 TERMINATION FEE. In order to induce Buyer to enter into this
Agreement and to reimburse Buyer for incurring the costs and expenses related to
entering into this Agreement and consummating the transactions contemplated by
this Agreement, the Seller will make a cash payment to Buyer of $900,000 (the
"TERMINATION FEE") if and only if:
(a) (i) Buyer or Seller has terminated this Agreement pursuant to
Section 8.2.1(b) or (ii) Buyer has terminated this Agreement pursuant to
Section 8.2.2(a), and
(b) (i) within twelve (12) months of any such termination, (A) the
Seller shall have entered into an agreement to engage in an Acquisition
Transaction with any person other than Buyer or any Buyer Subsidiary or (B)
the Board of Directors of the Seller shall have approved an Acquisition
Transaction or recommended that shareholders of the Seller approve or
accept any Acquisition Transaction with any person other than Buyer or any
Buyer Subsidiary, or (ii) in the case of a termination pursuant to Section
8.2.1(b), at the time of such termination it shall have been publicly
announced that any person (other than Buyer or any Buyer Subsidiary) shall
have (x) made, or disclosed an intention to make, a proposal to engage in
an Acquisition Transaction or (y) filed an application or notice in draft
or final form with the OTS, the Board of Governors of the Federal Reserve
System or any other regulatory authority identified in the "Regulatory
Approvals" definition of this Agreement, for approval or clearance to
engage in an Acquisition Transaction.
Any payment required by the previous sentence will be payable by Seller to Buyer
(by wire transfer of immediately available funds to an account designated by
Buyer) within five business days after demand by
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Buyer. In the event of a termination under circumstances that would trigger a
payment under this Section 8.3, the standstill provisions contained in the
Confidentiality Agreement shall terminate.
For purposes of this Agreement, "ACQUISITION TRANSACTION" shall mean (i) a
merger, consolidation or other similar transaction with Seller or any of it
Subsidiaries, (ii) any sale, lease or other disposition of 15% or more of the
consolidated assets of Seller and its Subsidiaries, taken as a whole, in a
single transaction or series of transactions, or (iii) any issuance, sale,
transfer, exchange or other disposition of (including by way of merger,
consolidation, share exchange, acceptance of a tender or exchange offer or any
similar transaction) securities representing 15% or more of the voting power of
Seller or any Subsidiary.
8.4 EFFECT OF TERMINATION. Except as expressly provided otherwise herein,
termination of this Agreement pursuant to this Article shall not relieve any
party of any liability for a Default or other breach, default or nonperformance
under this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 NOTICES. Unless expressly provided otherwise in this Agreement, any
notice, request, demand or other communication required to be given under this
Agreement shall be in writing, shall be deemed to be given or delivered (a) on
the date of personal delivery of the notice, request, demand or other
communication at or before 5:00 p.m. Boston, Massachusetts Time, (b) on the
third Business Day after the day of mailing of such notice, request, demand or
other communication by United States Registered Mail or United States Certified
Mail, postage prepaid, or (c) on the next Business Day after mailing of such
notice, request, demand or other communication by express courier, freight
charges prepaid, to the parties (including any person or entity designated for
receipt of a photocopy thereof) at the following addresses or at such other
address as any of the parties may hereafter specify in the aforementioned
manner:
If to Buyer and/or Acquisition Company:
BayBanks, Inc.
175 Federal Street
Boston, Massachusetts 02110
Attention: Michael W. Vasily,
Executive Vice President
With a copy to:
Palmer & Dodge
One Beacon Street
Boston, Massachusetts 02108
Attention: Jerry V. Klima, Esq.
If to Seller:
NFS Financial Corp.
157 Main Street
Nashua, New Hampshire 03060
Attention: James H. Adams, President
With a copy to:
Hogan & Hartson, L.L.P.
Columbia Square
555 Thirteenth Street N.W.
Washington, D.C. 20004-1109
Attention: David B. H. Martin, Jr., Esq.
9.2 ENTIRE AGREEMENT. Except as expressly provided otherwise in this
Agreement, this Agreement, together with the Option Agreement constitutes the
entire agreement of the parties hereto with respect to the matters addressed
herein and therein and, except as expressly set forth herein, supersedes all
prior or
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contemporaneous contracts, covenants, agreements, representations, warranties
and statements, whether written or oral, with respect to such matters.
9.3 AMENDMENT. Subject to compliance with applicable law, this Agreement
may be amended by the parties hereto, by action taken or authorized by their
respective Boards of Directors, at any time before or after approval of the
matters presented in connection with the Merger by Seller's stockholders;
provided, however, that after any approval of the transactions contemplated by
this Agreement by Seller's stockholders, there may not be, without further
approval of such stockholders, any amendment of this Agreement which reduces the
amount or changes the form of the Merger Consideration other than as
contemplated by this Agreement. This Agreement may not be amended, changed,
modified or terminated, except by written instrument executed by all parties to
this Agreement.
9.4 WAIVER. Except as expressly provided herein, no waiver by any party
of any failure or refusal of any other party to comply with its obligations
under this Agreement shall be deemed a waiver of any other or subsequent failure
or refusal to so comply by such other party. No waiver shall be valid unless in
writing signed by the party to be charged and only to the extent therein set
forth.
9.5 SEVERABILITY. If any term or provision of this Agreement or
application thereof to any person or circumstances shall, to any extent, be
found by a court of competent jurisdiction to be invalid or unenforceable, the
remainder of this Agreement, or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby and each other term or provision of
this Agreement shall be valid and be enforced to the fullest extent permitted by
law unless, as a result, the intent of the parties as expressed in this
Agreement would be violated.
9.6 CAPTIONS. The title of this Agreement and the headings of the various
paragraphs of this Agreement have been inserted only for the purposes of
convenience, and are not part of this Agreement and shall not be deemed in any
manner to modify, explain, expand or restrict any of the provisions of this
Agreement.
9.7 GOVERNING LAW. This Agreement shall be construed and enforced
according to the laws of the State of Delaware applicable to agreements made and
entirely to be performed within such jurisdiction except to the extent federal
law may be applicable, unless and to the extent that the laws of the United
States govern the performance of this Agreement.
9.8 NO THIRD PARTY BENEFICIARIES. Except as expressly provided herein,
this Agreement is made and entered into for the sole protection and benefit of
the parties hereto, and no other person or entity shall have any right of action
hereon, right to claim any right or benefit from the terms contained herein or
be deemed a third party beneficiary hereunder.
9.9 ASSIGNABILITY. All terms and provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto, and their
respective transferees, successors and assigns; provided, however, that neither
this Agreement nor any rights, privileges, duties and obligations of the parties
hereto may be assigned or delegated by any party hereto without the prior
written consent of all the parties to this Agreement and any such purported or
attempted assignment shall be null and void ab initio and of no force or effect.
9.10 PARTIES NOT PARTNERS. Nothing contained in this Agreement shall
constitute any party as a partner with, agent for or principal of any one or
more of the other parties or their successors and assigns.
9.11 NO SURVIVAL. None of the representations, warranties, covenants or
agreements contained herein shall survive the Closing, except to the extent that
performance thereof is to occur subsequent to Closing Date. No investigation by
either of the parties or their respective representatives shall affect the
representations and warranties of the other set forth in this Agreement.
9.12 FURTHER ASSURANCES. Subject to the terms and conditions of this
Agreement, each of the parties agrees to use its best efforts to take, or cause
to be taken, all action and do, or cause to be done, all things necessary,
proper or desirable to satisfy the Closing Conditions and to consummate and make
effective the Merger and the other transactions contemplated by this Agreement.
If, any time after the Closing Date, any
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further action is necessary, proper or desirable to effect the purposes of this
Agreement, the proper officers and directors of each party of this Agreement
shall take all such further action.
9.13 ALTERNATIVE STRUCTURE. Notwithstanding anything to the contrary
contained in this Agreement, prior to the Closing, Buyer shall be entitled to
revise the structure of the Merger and related transactions provided that each
of the transactions comprising such revised structure shall (i) not subject any
of the stockholders to adverse tax consequences or change the amount of Merger
Consideration to be received by such stockholders and (ii) be capable of
consummation without material delay. This Agreement and any related documents
shall be appropriately amended in order to reflect any such revised structure.
9.14 TIME OF ESSENCE. Time is of the essence of this Agreement.
9.15 COUNTERPARTS. This Agreement and the documents and instruments to be
executed and delivered pursuant to this Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
BAYBANKS, INC.
By: /s/ Michael W. Vasily
------------------------------------
Executive Vice President
ATTEST
By: /s/ Jerry V. Klima
----------------------------------
Assistant Clerk
NFS FINANCIAL CORP.
By: /s/ James H. Adams
------------------------------------
President/CEO
ATTEST
By: /s/ Albert R. Rietheimer
----------------------------------
Treasurer/CFO
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<PAGE> 95
LIST OF EXHIBITS
<TABLE>
<C> <S>
EXHIBITS:
EXHIBIT A OPTION AGREEMENT [INCLUDED AS APPENDIX B TO THIS PROSPECTUS/PROXY STATEMENT]
EXHIBIT B AFFILIATE LETTER [INCLUDED AS APPENDIX C TO THIS PROSPECTUS/PROXY STATEMENT]
</TABLE>
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<PAGE> 96
BayBank New Hampshire, Inc., a Delaware corporation, hereby agrees to
become a party to the Acquisition Agreement dated as of December 22, 1994 by and
between BayBanks, Inc. and NFS Financial Corp. and to perform the obligations of
Acquisition Company thereunder.
BAYBANK NEW HAMPSHIRE, INC.
By: /S/ Michael W. Vasily
-----------------------------
Its: Treasurer
Agreed:
BAYBANKS, INC.
By: /S/ Michael W. Vasily
------------------------
Its: Executive Vice President
NFS FINANCIAL CORP.
By: /S/ James H. Adams
------------------------
Its: President/CEO
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<PAGE> 97
APPENDIX B
THE TRANSFER OF THE OPTION GRANTED
BY THIS AGREEMENT IS SUBJECT TO RESALE RESTRICTIONS
OPTION AGREEMENT
OPTION AGREEMENT, dated as of December 22, 1994 (this "Agreement"), between
NFS FINANCIAL CORP., a Delaware corporation ("Issuer"), and BayBanks, Inc., a
Massachusetts corporation ("Grantee").
WITNESSETH:
WHEREAS, Issuer, and Grantee have entered into an Acquisition Agreement,
dated as of December 22, 1994 (the "Acquisition Agreement"), which was executed
by the parties hereto prior to the execution of this Agreement; and
WHEREAS, as a condition and inducement to Grantee's entering into the
Acquisition Agreement and in consideration therefor, Issuer has agreed to grant
Grantee the Option (as defined below).
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:
SECTION 1. Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 274,266
fully paid and non-assessable shares of common stock, par value $.01 per share
of Issuer ("Issuer Common Stock") (which number of shares is equal to 9.9% of
the number of outstanding shares of Issuer Common Stock on the date hereof), at
a price of $21.50 per share (the "Initial Price"); provided, however, that in
the event Issuer issues or agrees to issue any additional shares of Issuer
Common Stock at a price less than the Initial Price (other than up to 204,286
shares pursuant to existing stock options), as adjusted pursuant to Section 5(b)
hereof, such price shall be equal to such lesser price (such price, as adjusted,
is hereinafter referred to as the "Option Price"). The number of shares of
Issuer Common Stock that may be received upon the exercise of the Option and the
Option Price are subject to adjustment as herein set forth.
SECTION 2. (a) Grantee may exercise the Option, in whole or part, at any
time and from time to time following the occurrence of a Purchase Event (as
defined below); provided that the Option shall terminate and be of no further
force and effect upon the earliest to occur of (i) the time immediately prior to
the effective time of the Merger pursuant to Section 8.1 of the Acquisition
Agreement, (ii) 12 months after the first occurrence of a Purchase Event, (iii)
12 months after the termination of the Acquisition Agreement following the
occurrence of a Preliminary Purchase Event (as defined below), (iv) upon the
termination of the Acquisition Agreement in accordance with the terms thereof
prior to the occurrence of a Purchase Event or a Preliminary Purchase Event
(other than a termination of the Acquisition Agreement by Grantee pursuant to
Sections 8.2.1(b), 8.2.2(a) or 8.2.2(c) thereof), (v) 12 months after the
termination of the Acquisition Agreement by Grantee pursuant to Sections
8.2.1(b), 8.2.2(a) or 8.2.2(c) thereof as a result of any material breach of the
Acquisition Agreement by Issuer, if such breach was not a willful or intentional
breach of the Acquisition Agreement by Issuer, or (vi) 18 months after the
termination of the Acquisition Agreement by Grantee pursuant to Sections
8.2.1(b), 8.2.2(a) or 8.2.2(c) thereof as a result of any material breach of the
Acquisition Agreement by Issuer, if such breach was a willful or intentional
breach of the Acquisition Agreement by Issuer; provided, however, that if within
the period specified in either clause (v) or (vi), whichever is applicable, a
Preliminary Purchase Event shall occur then, notwithstanding anything to the
contrary contained herein, the Option shall terminate on the later of 12 months
after the occurrence of such Preliminary Purchase Event or the termination date
specified in clause (v) or (vi), as applicable. The events described in clauses
(i) - (vi) in the preceding sentence are hereinafter collectively referred to as
an "Exercise Termination Event."
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(b) The term "Preliminary Purchase Event" shall mean any of the following
events or transactions occurring on or after the date hereof and prior to an
Exercise Termination Event, and which are not in violation of Issuer's
certificate of incorporation:
(i) Issuer without having received Grantee's prior written consent,
shall have entered into any letter of intent or definitive agreement to
engage in an Acquisition Transaction (as defined below) with any person (as
defined below) other than Grantee or any of its subsidiaries (each a
"Grantee Subsidiary") or the Board of Directors of Issuer shall have
recommended that the shareholders of Issuer approve or accept any
Acquisition Transaction with any Person (as the term "person" is defined in
Section 3(a)9 and 13(d)(3) of the Securities Exchange Act of 1934 (the
"Exchange Act") and the rules and regulations thereunder) other than
Grantee or any Grantee Subsidiary. For purposes of this Agreement,
"Acquisition Transaction" shall mean (x) a merger, consolidation or other
business combination involving Issuer or either of the NFS Banks (as
defined in the Acquisition Agreement), (y) a purchase, lease or other
acquisition of more than 25% of the consolidated assets of Issuer and NFS
Banks, in a single transaction or series of transactions, or (z) a purchase
or other acquisition (including by way of merger, consolidation, share
exchange or otherwise) of Beneficial Ownership (as the term "beneficial
ownership" is defined in Regulation 13d-3(a) of the Exchange Act, except
that for purposes of this Agreement such term shall not include voting
stock held by a reporting person meeting the requirements for a filing
under Schedule 13G of the Exchange Act) of securities representing 10% or
more of the voting power of Issuer or either of the NFS Banks;
(ii) Any Person (other than Grantee or any Grantee Subsidiary) shall
have acquired Beneficial Ownership of 15% or more of the outstanding shares
of Issuer Common Stock or the voting stock of either of the NFS Banks
("Bank Stock");
(iii) Any Person (other than Grantee or any Grantee Subsidiary) shall
have made a bona fide proposal to Issuer or, by a public announcement or
written communication that is or becomes the subject of public disclosure,
to Issuer's shareholders to engage in an Acquisition Transaction
(including, without limitation, any situation in which any Person other
than Grantee or any Grantee Subsidiary shall have commenced (as such term
is defined in Rule 14d-2 under the Exchange Act), or shall have made a
filing under applicable securities laws, with respect to a tender offer or
exchange offer to purchase any shares of Issuer Common Stock such that,
upon consummation of such offer, such person would have Beneficial
Ownership of 15% 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));
(iv) There shall exist a Default (as defined in the Acquisition
Agreement) by Issuer and such Default would entitle Grantee to terminate
the Acquisition Agreement;
(v) The holders of Issuer Common Stock shall not have approved the
Acquisition Agreement at the meeting of such shareholders held for the
purpose of voting on the Acquisition Agreement, or such meeting of
shareholders shall not have been held or shall have been canceled prior to
termination of the Acquisition Agreement, or Issuer's Board of Directors
shall have withdrawn or modified in a manner adverse to Grantee the
recommendation of Issuer's Board of Directors that Issuer's shareholders
approve the Acquisition Agreement; or
(vi) Any Person (other than Grantee or any Grantee Subsidiary) shall
have filed an application or notice in draft or final form with the Office
of Thrift Supervision ("OTS"), or the Board of Governors of The Federal
Reserve System ("FRB") for approval to engage in an Acquisition
Transaction.
(c) The term "Purchase Event" shall mean any of the following events or
transactions occurring on or after the date hereof and prior to an Exercise
Termination Event:
(i) The acquisition by any Person (other than Grantee or any Grantee
Subsidiary) of Beneficial Ownership (other than on behalf of the Issuer) of
20% or more of the then outstanding Issuer Common Stock or Bank Stock; or
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(ii) The occurrence of a Preliminary Purchase Event described in
Section 2(b)(i) except that the percentage referred to in clause (z)
thereof shall be 20%; or
(iii) The breach by Issuer of Section 7(d) or 8(a) hereof.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Preliminary Purchase Event or Purchase Event; provided, however, that the
giving of such notice by Issuer shall not be a condition to the right of Grantee
to exercise the Option.
(e) In the event that Grantee is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the "Option Notice" and the
date of which being hereinafter referred to as the "Notice Date") specifying (i)
the total number of shares of Issuer Common Stock it will purchase pursuant to
such exercise and (ii) the time (which shall be on a business day that is not
less than three nor more than ten business days from the Notice Date) on which
the closing of such purchase shall take place (the "Closing Date"); such closing
to take place at the principal office of the Issuer; provided, that, if prior
notification to or approval of the OTS, the FRB, the Federal Deposit Insurance
Corporation ("FDIC") or any other Governmental Authority is required in
connection with such purchase (each, a "Notification" or an "Approval," as the
case may be), (a) Grantee shall promptly file the required notice or application
for approval ("Notice/Application"), (b) Grantee shall expeditiously process the
Notice/Application and (c) for the purpose of determining the Closing Date
pursuant to clause (ii) of this sentence, the period of time that otherwise
would run from the Notice Date shall instead run from the later of (x) in
connection with any Notification, the date on which any required notification
periods have expired or been terminated and (y) in connection with any Approval,
the date on which such approval has been obtained and any requisite waiting
period or periods shall have expired. For purposes of Section 2(a) hereof, any
exercise of the Option shall be deemed to occur on the Notice Date relating
thereto. On or prior to the Closing Date, Grantee shall have the right to revoke
its exercise of the Option by written notice to the Issuer given not less than
three business days prior to the Closing Date.
(f) At the closing referred to in Section 2(e) hereof, Grantee shall pay to
Issuer the aggregate purchase price for the number of shares of Issuer Common
Stock specified in the Option Notice in immediately available funds by wire
transfer to a bank account designated by Issuer; provided, however, that failure
or refusal of Issuer to designate such a bank account shall not preclude Grantee
from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in Section 2(f) hereof, Issuer shall deliver to
Grantee a certificate or certificates representing the number of shares of
Issuer Common Stock specified in the Option Notice and, if the Option should be
exercised in part only, a new Option evidencing the rights of Grantee thereof to
purchase the balance of the shares of Issuer Common Stock purchasable hereunder.
(h) Certificates for Issuer Common Stock delivered at a closing hereunder
shall be endorsed with a restrictive legend substantially as follows:
The transfer of the shares represented by this certificate is subject
to resale restrictions arising under applicable federal and state
securities laws and to certain provisions of an Acquisition Agreement by
and between NFS Financial Corp. and BayBanks, Inc. dated as of December 22,
1994. A copy of such agreement is on file at the principal office of NFS
Financial Corp. and will be provided to the holder hereof without charge
upon receipt by NFS Financial Corp. of a written request therefor.
It is understood and agreed that: (i) the reference to the resale restrictions
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if Grantee shall have delivered to Issuer a copy of a
letter from the staff of the Securities and Exchange Commission or the
Governmental Authority responsible for administering any applicable state
securities laws or an opinion of counsel to the effect that such legend is not
required for purposes of applicable federal or state securities laws; (ii) the
reference to the provisions of this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and
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(iii) the legend shall be removed in its entirety if the conditions in the
preceding clauses (i) and (ii) are both satisfied. In addition, such
certificates shall bear any other legend as may be required by law.
(i) Upon the giving by Grantee to Issuer of an Option Notice and the tender
of the applicable purchase price in immediately available funds on the Closing
Date, unless prohibited by applicable law, Grantee shall be deemed to be the
holder of record of the number of shares of Issuer Common Stock specified in the
Option Notice, notwithstanding that the stock transfer books of Issuer shall
then be closed or that certificates representing such shares of Issuer Common
Stock shall not then actually be delivered to Grantee. Issuer shall pay all
expenses and other charges that may be payable in connection with the
preparation, issuance and delivery of stock certificates under this Section 2 in
the name of Grantee.
SECTION 3. Issuer agrees: (i) that it shall at all times until the
termination of this Agreement have reserved for issuance upon the exercise of
the Option that number of authorized and reserved shares of Issuer Common Stock
equal to the maximum number of shares of Issuer Common Stock at any time and
from time to time issuable hereunder, all of which shares will, upon issuance
pursuant hereto, be duly authorized, validly issued, fully paid, non-assessable,
and delivered free and clear of all claims, liens, encumbrances and security
interests and not subject to any preemptive rights; (ii) that it will not, by
amendment of its certificate of incorporation or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer; (iii) promptly to take all reasonable action as may from time to time be
requested by the Grantee, at Grantee's expense (including (x) complying with all
premerger notification, reporting and waiting period requirements specified in
15 U.S.C. Section 18a and regulations promulgated thereunder and (y) in the
event prior approval of or notice to the OTS, the FRB, the FDIC or any other
Governmental Authority, under the Home Owners' Loan Act of 1933, as amended, the
Bank Holding Company Act of 1956, as amended, the Change in Bank Control Act of
1978, as amended, or any other applicable federal or state banking law, is
necessary before the Option may be exercised, cooperating with Grantee in
preparing such applications or notices and providing such information to each
such Governmental Authority as it may require in order to permit Grantee to
exercise the Option and Issuer duly and effectively to issue shares of Issuer
Common Stock pursuant hereto; and (iv) to take all action provided herein to
protect the rights of Grantee against dilution.
SECTION 4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Grantee, upon presentation and
surrender of this Agreement at the principal office of Issuer, for other
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 Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any agreements and related Options and options for which this Agreement
(and the Option granted hereby) may be exchanged. Upon receipt by Issuer of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Agreement, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and cancellation of
this Agreement, if mutilated, Issuer will execute and deliver a new Agreement of
like tenor and date.
SECTION 5. The number of shares of Issuer Common Stock purchasable upon
the exercise of the Option shall be subject to adjustment from time to time as
follows:
(a) In the event of any change in the Issuer Common Stock by reason of
stock dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares or the like, the type and
number of shares of Issuer Common Stock purchasable upon exercise hereof
shall be appropriately adjusted and proper provision shall be made so that,
in the event that any additional shares of Issuer Common Stock are to be
issued or otherwise become outstanding as a result of any such change
(other than pursuant to an exercise of the Option or pursuant to the
exercise of options for up to 204,286 shares of Issuer Common Stock
pursuant to presently outstanding stock options), the number of shares of
Issuer Common Stock that remain subject to the Option shall be increased so
that, after such issuance and together with shares of Issuer Common Stock
previously issued pursuant to the exercise of the
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Option (as adjusted on account of any of the foregoing changes in the
Issuer Common Stock), it equals 9.9% of the number of shares of Issuer
Common Stock then issued and outstanding.
(b) Whenever the number of shares of Issuer Common Stock purchasable
upon exercise hereof is adjusted as provided in this Section 5, the Option
Price shall be adjusted by multiplying the Option Price by a fraction, the
numerator of which shall be equal to the number of shares of Issuer Common
Stock purchasable prior to the adjustment and the denominator of which
shall be equal to the number of shares of Issuer Common Stock purchasable
after the adjustment.
SECTION 6. (a) Following the occurrence of a Purchase Event that occurs
prior to an Exercise Termination Event, Issuer shall, at the request of Grantee
(whether on its own behalf or on behalf of any subsequent holder of the Option
(or part thereof) or of any of the shares of Issuer Common Stock issued pursuant
hereto), promptly prepare, file and keep current a shelf registration statement
under the Securities Act covering any shares issued and issuable pursuant to the
Option and shall use its best efforts to cause such registration statement to
become effective, and to remain current and effective for a period not in excess
of 180 days from the day such registration statement first becomes effective, in
order to permit the sale or other disposition of any shares of Issuer Common
Stock issued upon total or partial exercise of the Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee; provided, however,
that Issuer may postpone filing a registration statement relating to a
registration request by Grantee under this Section 6(a) for a period of time
(not in excess of 30 days) if in its judgment such filing would require the
disclosure of material information that Issuer has a bona fide business purpose
for preserving as confidential. Grantee shall have the right to obtain two such
registrations. In addition to the foregoing, if, at the time of any request by
Grantee for registration of Option Shares as provided above, Issuer is in the
process of registration with respect to an underwritten public offering of
shares of Issuer Common Stock, Grantee shall have the right to have the Option
Shares included in the registration statement with respect to such offering;
provided, however, that if in the good faith judgment of the managing
underwriter or managing underwriters, or, if none, the sole underwriter or
underwriters, of such offering, the inclusion of the Option Shares in such
registration would interfere materially with the successful marketing of the
shares of Issuer Common Stock offered by Issuer, the number of Option Shares
otherwise to be covered in the registration statement contemplated hereby may be
reduced; provided, however, that after any such required reduction the number of
Option Shares to be included in such offering for the account of Grantee shall
constitute at least 20% of the total number of shares of Grantee and Issuer
covered in such registration statement; provided further, however, that if such
reduction occurs, then Issuer shall file a registration statement for the
balance as promptly as practicable thereafter as to which no reduction pursuant
to this Section 6(a) shall be permitted or occur and the Grantee shall
thereafter be entitled to one additional registration statement. Grantee shall
provide all information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder. In connection with any such
registration, Issuer and Grantee shall provide each other with representations,
warranties, indemnities and other agreements customarily given in connection
with such registrations. If requested by Grantee in connection with such
registration, Issuer and Grantee shall become a party to any underwriting
agreement relating to the sale of such shares, but only to the extent of
obligating themselves in respect of representations, warranties, indemnities and
other agreements customarily included in such underwriting agreements.
Notwithstanding the foregoing, if Grantee revokes any exercise notice or fails
to exercise any Option with respect to any exercise notice pursuant to Section
2(e) hereof, Issuer shall not be obligated to continue any registration process
with respect to the sale of Option Shares issuable upon the exercise of such
Option and Grantee shall not be deemed to have demanded registration of Option
Shares.
(b) In the event that Grantee requests Issuer to file a registration
statement following the failure to obtain any approval required to exercise the
Option as described in Section 9 hereof, the closing of the sale or other
disposition of the Issuer Common Stock or other securities pursuant to such
registration statement shall occur substantially simultaneously with the
exercise of the Option.
(c) Concurrently with the filing of a registration statement under Section
6(a) hereof, Issuer shall also make all filings required to comply with state
securities laws in such states as Grantee may reasonably request.
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(d) The expenses of any registration or state securities law compliance
under this Section 6, except for underwriting discounts, broker's fees and
commissions and fees and disbursements of Grantee's counsel related thereto,
shall be borne by Issuer.
SECTION 7. (a) Following the occurrence of a Purchase Event that occurs
prior to an Exercise Termination Event, (i) at the request (the date of such
request being the "Option Repurchase Request Date") of Grantee, Issuer shall
repurchase the Option from Grantee 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 the
Option may then be exercised and (ii) at the request (the date of such request
being the "Option Share Repurchase Request Date") of the owner of Option Shares
from time to time (the "Owner"), Issuer shall repurchase such number of the
Option Shares from the Owner as the Owner shall designate at a price (the
"Option Share Repurchase Price") equal to the market/offer price multiplied by
the number of Option Shares so designated. The term "market/offer price" shall
mean the highest of (i) the price per share of Issuer Common Stock at which a
tender offer or exchange offer therefor has been made after the date hereof and
on or prior to the Option Repurchase Request Date or the Option Share Repurchase
Request Date, as the case may be, (ii) the price per share of Issuer Common
Stock paid or to be paid by any third party pursuant to an agreement with Issuer
(whether by way of a merger, consolidation or otherwise), (iii) the average of
the highest last sale prices for shares of Issuer Common Stock as reported on
the Nasdaq Stock Market for the 20-day period ending on the Option Repurchase
Request Date or the Option Share Repurchase Request Date, as the case may be,
and (iv) in the event of a sale of all or substantially all of 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 Issuer as determined by an investment banking
firm selected by Grantee or the Owner, as the case may be, and reasonably
acceptable to Issuer, divided by the number of shares of Issuer Common Stock
outstanding at the time of such sale. In determining the market/offer price, the
value of consideration other than cash shall be the value determined by an
investment banking firm selected by Grantee or the Owner, as the case may be,
and reasonably acceptable to Issuer. The investment banking firm's determination
shall be conclusive and binding on all parties.
(b) Grantee or the Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and/or any Option Shares pursuant to
this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that Grantee or
the Owner, as the case may be, elects to require Issuer to repurchase the Option
and/or the Option Shares in accordance with the provisions of this Section 7. As
promptly as practicable, and in any event within 30 business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto, Issuer shall deliver or
cause to be delivered to Grantee the Option Repurchase Price or to the Owner the
Option Share Repurchase Price or the portion thereof that Issuer is not then
prohibited from so delivering under applicable law and regulation or as a
consequence of administrative policy (including policies relating to the
maintenance of capital levels and a sound financial condition).
(c) Issuer hereby undertakes to use its best efforts to obtain all required
regulatory, shareholder and legal approvals and to file any required notices as
promptly as practicable in order to accomplish any repurchase contemplated by
this Section 7. Nonetheless, to the extent that Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy
(including policies relating to the maintenance of capital levels and a sound
financial condition), from repurchasing any Option and/or any Option Shares in
full, Issuer shall promptly so notify Grantee and/or the Owner and thereafter
deliver or cause to be delivered, from time to time, to Grantee and/or the
Owner, as appropriate, the portion of the Option Repurchase Price and the Option
Share Repurchase Price, respectively, that it is no longer prohibited from
delivering, within five business days after the date on which Issuer is no
longer so prohibited; provided, however, that if Issuer at any time after
delivery of a notice of repurchase pursuant to Section 7(b) hereof is prohibited
under applicable law or regulation, or as a consequence of administrative policy
(including policies relating to the maintenance of capital levels and a sound
financial condition), from delivering to Grantee and/or the Owner, as
appropriate, the Option Repurchase Price or the Option Share Repurchase Price,
respectively, in full, Grantee or the Owner, as appropriate, may revoke its
notice of repurchase of the Option or the Option Shares either in
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whole or in part whereupon, in the case of a revocation in part, Issuer shall
promptly (i) deliver to Grantee and/or the Owner, as appropriate, that portion
of the Option Purchase Price or the Option Share Repurchase Price that Issuer is
not prohibited from delivering after taking into account any such revocation and
(ii) deliver, as appropriate, either (A) to Grantee, a new Agreement evidencing
the right of Grantee to purchase that number of shares of Issuer Common Stock
equal to the number of shares of Issuer Common Stock purchasable immediately
prior to the delivery of the notice of repurchase less the number of shares of
Issuer Common Stock covered by the portion of the Option repurchased or (B) to
the Owner, a certificate for the number of Option Shares covered by the
revocation.
(d) Issuer shall not enter into any agreement with any Person (other than
Grantee or a Grantee Subsidiary) for an Acquisition Transaction unless the other
Person assumes all the obligations of Issuer pursuant to this Section 7 in the
event that Grantee or the Owner elects, in its sole discretion, to require such
other Person to perform such obligations.
(e) Notwithstanding anything to the contrary in this Section 7, the maximum
aggregate Option Repurchase Price or Option Share Repurchase Price to be paid by
Issuer pursuant to this Section 7 shall be $4,500,000.
SECTION 8. (a) In the event that prior to an Exercise Termination Event,
Issuer shall enter into a letter of intent or definitive agreement (i) to
consolidate or merge with any Person (other than Grantee or a Grantee
Subsidiary), and Issuer shall not be the continuing or surviving corporation of
such consolidation or merger, (ii) to permit any Person (other than Grantee or a
Grantee Subsidiary) to merge into Issuer, and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of Issuer 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 Issuer Common Stock shall after such merger represent less
than 50% of the outstanding shares and share equivalents of the merged company,
or (iii) to sell or otherwise transfer all or substantially all of its assets to
any Person (other than Grantee or a Grantee Subsidiary) then, and in each such
case, such letter of intent or definitive agreement governing such transaction
shall make proper provision so that the Option shall, upon the consummation of
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 Grantee, of either (x) the Acquiring Corporation (as defined below)
or (y) any person that controls the Acquiring Corporation (the Acquiring
Corporation and any such controlling person being hereinafter referred to as the
"Substitute Option Issuer").
(b) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock (as is hereinafter defined) as is equal to the
market/offer price (as defined in Section 7 hereof) multiplied by the number of
shares of Issuer Common Stock for which the Option was theretofore exercisable,
divided by the Average Price (as hereinafter defined). The exercise price of the
Substitute Option per share of the Substitute Common Stock (the "Substitute
Purchase Price") shall then be equal to the Option Price multiplied by a
fraction in which the numerator is the number of shares of Issuer Common Stock
for which the Option was theretofore exercisable and the denominator is the
number of shares for which the Substitute Option is exercisable.
(c) The Substitute Option shall otherwise have the same terms as the
Option, provided that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as possible
and in no event less advantageous to Grantee, provided further that the terms of
the Substitute Option shall include (by way of example and not limitation)
provisions for the repurchase of the Substitute Option and Substitute Common
Stock by the Substitute Option Issuer on the same terms and conditions as
provided in Section 7 hereof.
(d) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than
Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving corporation, and (iii) the transferee of all or any substantial
part of Issuer's assets.
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(ii) "Substitute Common Stock" shall mean the common stock issued by
the Substitute Option Issuer upon exercise of the Substitute Option.
(iii) "Average Price" shall mean the average closing price of a share
of Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer
of the Substitute Option, the Average Price shall be computed with respect
to a share of Issuer Common Stock issued by Issuer, the corporation merging
into Issuer or by any company which controls or is controlled by such
merging corporation, as Grantee may elect.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 9.9% of the aggregate of the
shares of Substitute Common Stock outstanding immediately prior to the issuance
of the Substitute Option. In the event that the Substitute Option would be
exercisable for more than 9.9% of the aggregate of the shares of Substitute
Common Stock but for this clause (e), the Substitute Option Issuer shall make a
cash payment to Grantee equal to the excess of (i) the value of the Substitute
Option without giving effect to the limitation in this clause (e) over (ii) the
value of the Substitute Option after giving effect to the limitation in this
clause (e). This difference in value shall be determined by a nationally
recognized investment banking firm selected by Grantee and the Substitute Option
Issuer. In addition, the provisions of Section 5(a) hereof shall not apply to
the issuance of any Substitute Option and for purposes of applying Section 5(a)
hereof thereafter to any Substitute Option the percentage referred to in Section
5(a) hereof shall thereafter equal the percentage that the percentage of the
shares of Substitute Common Stock subject to the Substitute Option bears to the
number of shares of Substitute Common Stock outstanding.
SECTION 9. Notwithstanding Sections 2, 6 and 7 hereof, if Grantee has
given the notice referred to in one or more of such Sections, the exercise of
the rights specified in any such Section shall be extended (a) if the exercise
of such rights requires obtaining regulatory approvals (including any required
waiting periods) to the extent necessary to obtain all regulatory approvals for
the exercise of such rights, and (b) to the extent necessary to avoid liability
under Section 16(b) of the Exchange Act by reason of such exercise; provided
that in no event shall any closing date occur more than 12 months after the
related notice date, and, if the closing date shall not have occurred within
such period due to the failure to obtain any required approval by the OTS, the
FRB, the FDIC or any other Governmental Authority despite the best efforts of
Issuer or the Substitute Option Issuer, as the case may be, to obtain such
approvals, the exercise of the rights shall be deemed to have been rescinded as
of the related notice date. In the event (a) Grantee receives official notice
that an approval of the OTS, the FRB, the FDIC or any other Governmental
Authority required for the purchase and sale of the Option Shares will not be
issued or granted or (b) a closing date has not occurred within 12 months after
the related notice date due to the failure to obtain any such required approval,
Grantee shall be entitled to exercise the Option in connection with the
concurrent resale of the Option Shares pursuant to a registration statement as
provided in Section 6 hereof. Nothing contained in this Agreement shall restrict
Grantee from specifying alternative means of exercising rights pursuant to
Sections 2, 6 or 7 hereof in the event that the exercising of any such rights
shall not have occurred due to the failure to obtain any required approval
referred to in this Section 9.
SECTION 10. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has the 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 and the consummation of the
transactions contemplated hereby have been duly approved by the Board of
Directors of Issuer and no other corporate proceedings on the part of Issuer are
necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly executed and delivered by, and
constitutes a valid and binding obligation of, Issuer, enforceable against
Issuer in accordance with its terms, subject to any required Governmental
Approval, and except as enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific
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performance or injunctive relief is subject to the discretion of the court
before which any proceeding may be brought.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Issuer Common Stock equal to the maximum number of shares of Issuer 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,
non-assessable, and will be delivered free and clear of all claims, liens,
encumbrances and security interests and not subject to any preemptive rights.
(c) The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not, conflict with or
violate any provision of the certificate of incorporation or By-laws of Issuer
or the equivalent organizational documents of any subsidiary of Issuer or,
subject to obtaining any of the Regulatory Approvals, violate, conflict with or
result in any 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 the creation of any lien, security interest, charge or other encumbrance upon
any of the respective properties or assets of the Issuer or any such subsidiary
under any of the terms, conditions or provisions of any note, bond, capital
note, debenture, mortgage, indenture, deed of trust, license, lease, agreement,
obligation, instrument, permit, concession, franchise, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Issuer or any such
subsidiary or their respective properties or assets.
SECTION 11. (a) Neither of the parties hereto may assign any of its rights
or delegate any of its obligations under this Agreement or the Option created
hereunder to any other Person without the express written consent of the other
party, except that Grantee may assign this Agreement to a wholly owned
subsidiary of Grantee and Grantee may assign its rights hereunder in whole or in
part after the occurrence of a Preliminary Purchase Event. The term "Grantee" as
used in this Agreement shall also be deemed to refer to Grantee's permitted
assigns.
(b) Any assignment of rights of Grantee to any permitted assignee of
Grantee hereunder shall bear the restrictive legend at the beginning thereof
substantially as follows:
The transfer of the option represented by this assignment and the
related option agreement is subject to resale restrictions arising under
applicable federal and state securities laws and to certain provisions of
an Acquisition Agreement by and between NFS Financial Corp. and BayBanks,
Inc. dated as of December 22, 1994. A copy of such agreement is on file at
the principal office of NFS Financial Corp. and will be provided to any
permitted assignee of the Option without charge upon receipt of a written
request therefor.
SECTION 12. Each of Grantee and Issuer will use its 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
OTS, the FRB, the FDIC and any other Governmental Authority for approval to
acquire the shares issuable hereunder.
SECTION 13. 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. Both parties further agree
to waive any requirement for the securing or posting of any bond in connection
with the obtaining of any such equitable relief and that this provision is
without prejudice to any other rights that the parties hereto may have for any
failure to perform this Agreement.
SECTION 14. 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 Grantee is not permitted to acquire, or Issuer is not permitted to
repurchase
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pursuant to Section 7 hereof, the full number of shares of Issuer Common Stock
provided in Section 1(a) hereof (as adjusted pursuant hereto), it is the express
intention of Issuer to allow Grantee to acquire or to require Issuer to
repurchase the greatest number of shares as may be permissible, without any
amendment or modification hereof.
SECTION 15. 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.
SECTION 16. This Agreement, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto shall be governed by and
construed in accordance with the laws of the State of Delaware (but not
including the choice of law rules thereof).
SECTION 17. 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 and shall be effective at the time of
execution and delivery.
SECTION 18. 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.
SECTION 19. Except as otherwise expressly provided herein or in the
Acquisition Agreement, 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, expressed or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
except as assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided herein.
SECTION 20. Capitalized terms used in this Agreement and not defined
herein but defined in the Acquisition Agreement shall have the meanings assigned
thereto in the Acquisition Agreement.
SECTION 21. Nothing contained in this Agreement shall be deemed to
authorize or require Issuer or Grantee to breach any provision of the
Acquisition Agreement or any provision of law applicable to the Grantee or
Issuer.
SECTION 22. In the event that any selection or determination is to be made
by Grantee or the Owner hereunder and at the time of such selection or
determination there is more than one Grantee or Owner, such selection shall be
made by a majority in interest of such Grantees or Owners.
SECTION 23. In the event of any exercise of the option by Grantee, Issuer
and such Grantee shall execute and deliver all other documents and instruments
and take all other action that may be reasonably necessary in order to
consummate the transactions provided for by such exercise.
SECTION 24. Except to the extent Grantee exercises the Option, Grantee
shall have no rights to vote or receive dividends or have any other rights as a
shareholder with respect to shares of Issuer Common Stock covered hereby.
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IN WITNESS WHEREOF, each of the parties has caused this Option Agreement to
be executed on its behalf by their officers thereunto duly authorized, all as of
the date first above written.
NFS FINANCIAL CORP.
By: /s/ JAMES H. ADAMS
------------------------------------
Name: James H. Adams
Title: President/CEO
BAYBANKS, INC.
By: /s/ MICHAEL W. VASILY
------------------------------------
Name: Michael W. Vasily
Title: Executive Vice President
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APPENDIX C
December 22, 1994
BayBanks, Inc.
175 Federal Street
Boston, Massachusetts 02110
Gentlemen:
Each of the undersigned (a "Stockholder") beneficially owns, with sole
voting and/or investment power, the number of shares of the common stock, $.01
par value per share (the "Shares"), of NFS Financial Corp. (the "Company")
indicated opposite such Stockholder's name below and/or may be considered an
"affiliate" of the Company as described below.
BayBanks, Inc. ("Buyer") and the Company are, simultaneously with the
execution of this letter agreement, entering into or have entered into an
Acquisition Agreement (the "Agreement") providing, among other things, for the
merger of a subsidiary of Buyer with the Company (the "Merger"). We understand
that Buyer has undertaken and will continue to undertake substantial expenses in
connection with the negotiation and execution of the Agreement and the
subsequent actions necessary to consummate the Merger and the other transactions
contemplated by the Agreement. We also understand that in connection with the
Merger we may receive shares of common stock, $2.00 par value, of Buyer (such
shares, together with any securities which may be paid as a dividend or
otherwise issued or delivered in exchange or substitution therefor, hereinafter
collectively referred to as the "Buyer Shares") in exchange for the Shares owned
by the undersigned in accordance with the Agreement.
In consideration of, and as a condition to, Buyer's entering into the
Agreement, and in consideration of the expenses incurred and to be incurred by
Buyer in connection therewith, each Stockholder and Buyer agree as follows:
A. STOCKHOLDER AGREEMENTS REGARDING THE SHARES
1. Each Stockholder shall vote or cause to be voted for the approval
of the Agreement and the Merger, and shall vote or cause to be voted
against the approval of any other agreement providing for a merger,
consolidation, sale of assets or other business combination of the Company
or any of its subsidiaries with any person or entity other than Buyer and
its subsidiaries, all of the Shares that such Stockholder shall be entitled
to so vote or direct the voting of, whether such Shares are beneficially
owned by such Stockholder on the date of this letter agreement or are
subsequently acquired whether pursuant to the exercise of stock options or
otherwise.
2. Each Stockholder will not sell, assign, transfer or otherwise
dispose of (including, without limitation, by the creation of a Lien (as
defined in paragraph C.1. below)) or permit to be sold, assigned,
transferred or otherwise disposed of any Shares owned by such Stockholder
or the disposition of which is under the control of such Stockholder,
whether such Shares are beneficially owned by such Stockholder on the date
of this letter agreement or are subsequently acquired, whether pursuant to
the exercise of stock options or otherwise, except (a) for transfers by
will or by operation of law (in which case this letter agreement shall bind
the transferee), (b) for transfers to any other Stockholders, and (c) as
Buyer may otherwise agree in writing.
3. The agreements contained herein are intended to restrict the
transferability of the Shares and to continue only for such time as may
reasonably be necessary to obtain Stockholder and regulatory approval of
Buyer's acquisition of the Shares pursuant to the Merger and thereafter to
consummate the Merger.
B. RULE 145 MATTERS
1. Each of the undersigned has been advised that as of the date the
Merger is submitted to stockholders of the Company for approval, the
undersigned may be an "affiliate" of the Company, as the
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<PAGE> 109
term is defined for purposes of paragraph (c) of Rule 145 of the Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as
amended (the "Act"), although nothing contained herein shall be construed
as an admission of such fact.
2. In connection therewith, each of the undersigned severally
represents warrants and agrees that:
(a) The undersigned shall not make any sale, transfer or other
disposition of the Buyer Shares in violation of the registration
requirements of the Act or the rules and regulations of the SEC thereunder.
(b) The undersigned has been advised that the issuance of the Buyer
Shares to the undersigned pursuant to the Merger will be registered under
the Act on a registration statement on Form S-4. However, the undersigned
has also been advised that if the undersigned is in fact an "affiliate" of
the Company at the time the Merger is submitted for a vote of the
stockholders of the Company and the distribution by the undersigned of the
Buyer Shares has not been registered under the Act, Rule 145 under the Act
will restrict the undersigned's sale of Buyer Shares received in the
Merger. The undersigned will not sell or otherwise dispose of any Buyer
Shares, except pursuant to Rule 145(d) under the Act, an effective
registration statement under the Act or exemption from the registration
requirements under the Act (provided that the undersigned may make bona
fide gifts or distributions) without consideration so long as the
recipients thereof agree not to sell, transfer or otherwise dispose of
Buyer Shares except as provided herein).
(c) The undersigned has carefully read this letter agreement and the
Agreement and has discussed the requirements of each and the limitations
upon the disposition of the Buyer Shares received by the undersigned, to
the extent deemed necessary, with the undersigned's counsel or with counsel
for the Company.
3. Each of the undersigned severally understands and agrees that:
(a) Buyer is under no further obligation to register the sale,
transfer or other disposition of the Buyer Shares to be received by the
undersigned or, except as provided in paragraph B.4.(a) below, to take any
action necessary in order to make an exemption from registration available.
(b) Stop transfer instructions will be given to the transfer agent of
Buyer with respect to the Buyer Shares the undersigned will receive, and
there will be placed on the certificate representing such stock, or any
certificates delivered in substitution therefor, a legend stating in
substance:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 UNDER THE SECURITIES ACT OF 1933 (THE "ACT")
APPLIES. THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH RULE 145(D) OR AN EFFECTIVE REGISTRATION
STATEMENT OR EXEMPTION FROM REGISTRATION UNDER THE ACT."
(c) Unless the transfer by the undersigned of the Buyer Shares is a
sale made in conformity with the provisions of Rule 145(d), or made
pursuant to a registration statement under the Act, Buyer reserves the
right to put an appropriate legend on the certificates issued to a
transferee.
(d) This agreement shall be binding upon and enforceable against
administrators, executors, representatives, heirs, legatees, devisees and
successors of the undersigned and any pledgee holding Buyer Shares as
collateral.
4. Buyer represents and agrees as follows:
(a) For so long as and to the extent necessary to permit the
undersigned to sell the Buyer Shares pursuant to Rule 145 and, to the
extent applicable, Rule 144 under the Act, Buyer shall use its best efforts
to file, on a timely basis, all reports and data required to be filed with
the SEC by it pursuant to Section 13 of the Securities Exchange Act of 1934
(the "1934 Act") so long as it is subject to such requirement, furnish to
the undersigned upon request a written statement as to whether Buyer has
complied with such reporting requirements during the 12 months preceding
any proposed sale under Rule 145, and otherwise use its reasonable best
efforts to permit such sales pursuant to Rule 145 and
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<PAGE> 110
Rule 144. Buyer has filed all reports required to be filed with the SEC
under Section 13 of the 1934 Act during the preceding 12 months.
(b) Buyer agrees that the stop transfer instructions and legends
referred to above shall be terminated or removed if the undersigned shall
have delivered to Buyer a copy of a letter from the staff of the SEC, an
opinion of counsel in form and substance satisfactory to Buyer or other
evidence satisfactory to Buyer, to the effect that such instructions and
legends are no longer required for the purposes of the Act.
C. GENERAL PROVISIONS
1. Each of the Stockholders severally represents that such Stockholder
has the complete and unrestricted power and the unqualified right to enter
into and perform the terms of this letter agreement. Each of the
Stockholders further severally represents that this letter agreement
constitutes a valid and binding agreement with respect to such party,
enforceable against such party in accordance with its terms. Each of the
Stockholders severally represents that such Stockholder beneficially owns
the number of Shares indicated opposite such Stockholder's name below, free
and clear of any liens, claims, charges or other encumbrances and
restrictions of any kind whatsoever ("Liens"), and has sole and
unrestricted voting power with respect to such Shares.
2. Notwithstanding anything herein to the contrary, the agreements
contained herein shall remain in full force and effect until the earlier of
(i) the consummation of the Merger and (ii) the termination of the
Agreement in accordance with Article 8 thereof.
3. Each of the Stockholders has signed this letter agreement intending
to be bound severally thereby and not to be bound as joint obligors.
4. This letter agreement is to be governed by the laws of the State of
Delaware, 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.
5. This letter agreement may be executed in any number of
counterparts.
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<PAGE> 111
Please confirm our agreement with you by signing a copy of this letter.
Very truly yours,
<TABLE>
<CAPTION>
DIRECTOR OR
EXECUTIVE OFFICER NUMBER OF SHARES SIGNATURES
- ------------------------------ ------------------------- ------------------------------
<S> <C> <C>
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</TABLE>
AGREED TO AND ACCEPTED
THIS 22nd DAY OF DECEMBER, 1994
BAYBANKS, INC.
By:
----------------------------------------------------------
Title:
--------------------------------------------------------
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<PAGE> 112
APPENDIX D
March 21, 1995
Board of Directors
NFS Financial Corp.
157 Main Street
Nashua, NH 03060
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, of the consideration to be received by the holders of NFS Financial
Corp. (the "Company") common stock, par value $.01 per share (the "Common
Stock"), pursuant to the Acquisition Agreement dated December 22, 1994 (the
"Agreement") between the Company and BayBanks, Inc. ("BayBanks"). Pursuant to
the Agreement, a newly formed, wholly owned subsidiary of BayBanks will be
merged (the "Merger") with and into the Company in accordance with applicable
law. Under the terms of the Agreement, each outstanding share of Common Stock
(other than shares held by dissenting stockholders, if any, and shares held by
BayBanks) will be converted into the right to receive $20.15 in cash and
approximately 0.2038 shares of BayBanks common stock, par value $2.00 per share,
subject to the terms, conditions, limitations and procedures set forth in the
Agreement.
Tucker Anthony Incorporated ("Tucker Anthony") as part of its investment
banking business is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for corporate and other
purposes. We are acting as financial advisor to the Company in connection with
the Merger and will receive a fee for its services, a significant portion of
which is payable upon the consummation of the Merger. In the ordinary course of
our business, we may actively trade the securities of both the Company and
BayBanks 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.
In arriving at our opinion, we have among other things:
(i) Reviewed the Agreement and Option Agreement dated December 22,
1994;
(ii) Reviewed certain historical financial and other information
concerning the Company and BayBanks for the five fiscal years ended
December 31, 1994, including the Company's and BayBanks' reports on Form
10-K;
(iii) Held discussions with the senior management of the Company and
BayBanks with respect to their past and current financial performance,
financial condition and future prospects;
(iv) Reviewed certain internal financial and other information of the
Company including financial projections prepared by management;
(v) Analyzed certain publicly available information of other financial
institutions that we deemed comparable or otherwise relevant to our
inquiry, and compared the Company and BayBanks from a financial point of
view with certain of these institutions;
(vi) Compared the consideration to be received by the stockholders of
the Company pursuant to the Agreement with the consideration received by
stockholders in other acquisitions of financial institutions that we deemed
comparable or otherwise relevant to our inquiry;
(vii) Reviewed the terms of the Option Agreement, and compared such
terms with the terms of certain other stock option agreements granted in
connection with other acquisitions of financial institutions that we deemed
comparable or otherwise relevant to our inquiry;
(viii) Reviewed publicly available earnings estimates, historical
trading activity and ownership data of the Common Stock and BayBanks'
common stock and considered the prospects for dividends and price movement
in each; and
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<PAGE> 113
(ix) Conducted such other financial studies, analyses and
investigations and reviewed such other information as we deemed appropriate
to enable us to render our opinion. In our review, we have also taken into
account an assessment of general economic, market and financial conditions
and certain industry trends and related matters.
In our review and analysis and in arriving at our opinion we have assumed
and relied upon the accuracy and completeness of all the financial information
publicly available or provided to us by the Company and BayBanks and have not
attempted to verify any of such information. We have assumed (i) the financial
forecasts of the Company provided to us have been reasonably prepared on the
basis reflecting the best currently available estimates and judgments of the
Company's management as to future financial performance and (ii) that such
forecasts will be realized in the amounts and time periods currently estimated
by management. We have also assumed, without independent verification, that the
aggregate reserves for possible loan losses for the Company and BayBanks are
adequate to cover such losses. We did not make or obtain any independent
evaluations or appraisals of any assets or liabilities of the Company, BayBanks
or any of their respective subsidiaries nor did we verify any of the Company's
or BayBanks' books or records or review any individual loan credit files.
Based upon and subject to the foregoing, it is our opinion that as of the
date hereof the consideration to be received by the stockholders of the Company
pursuant to the Agreement is fair to such stockholders from a financial point of
view.
Very truly yours,
/s/ Tucker Anthony Incorporated
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<PAGE> 114
APPENDIX E
DELAWARE CODE ANNOTATED
TITLE 8. CORPORATIONS
CHAPTER 1. GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER OR CONSOLIDATION
Copyright (c) 1975-1994 by The State of Delaware. All rights reserved.
Current through Second Sess. of the 137 Del. Gen. Assembly (1994) Ch. 469
sec. 262 Appraisal rights.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251, sec. 252, sec. 254, sec. 257, sec. 258, sec. 263
or sec. 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000
holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
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<PAGE> 115
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under s 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to
sec.sec. 228 or 253 of this title, the surviving or resulting corporation,
either before the effective date of the merger or consolidation or within
10 days thereafter, shall notify each of the stockholders entitled to
appraisal rights of the effective date of the merger or consolidation and
that appraisal rights are available for any or all of the shares of the
constituent corporation, and shall include in such notice a copy of this
section. The notice shall be sent by certified or registered mail, return
receipt requested, addressed to the stockholder at his address as it
appears on the records of the corporation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of the
notice, demand in writing from the surviving or resulting corporation the
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting
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<PAGE> 116
corporation or within 10 days after expiration of the period for delivery of
demands for appraisal under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or
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<PAGE> 117
consolidation); provided, however, that if no petition for an appraisal shall be
filed within the time provided in subsection (e) of this section, or if such
stockholder shall deliver to the surviving or resulting corporation a written
withdrawal of his demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding
in the Court of Chancery shall be dismissed as to any stockholder without the
approval of the Court, and such approval may be conditioned upon such terms as
the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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<PAGE> 118
NFS FINANCIAL CORP.
ANNUAL MEETING OF STOCKHOLDERS APRIL 25, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of NFS Financial Corp. ("NFS"), revoking all
prior proxies, hereby appoints Barbara J. Foran and Albert R. Rietheimer, or
either of them, with full power of substitution to each, proxies to represent
the undersigned at the Annual Meeting of Shareholders to be held at 11:00 A.M.
on April 25, 1995, at the Sheraton Tara, located on Tara Boulevard, Nashua, New
Hampshire, and at any adjournment thereof, and to vote as designated on the
reverse all shares of stock of NFS that the undersigned would be entitled to
vote at said meeting.
UNLESS CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSAL 1
TO APPROVE AND ADOPT THE ACQUISITION AGREEMENT DATED DECEMBER 22, 1994 BETWEEN
NFS, BAYBANKS, INC. AND BAYBANK NEW HAMPSHIRE INC. ("BBNH"), FOR PROPOSAL 2 TO
ELECT THE NOMINEES FOR THE BOARD OF DIRECTORS, AND FOR PROPOSAL 3 TO RATIFY THE
SELECTION OF INDEPENDENT AUDITORS. SAID PROXIES ARE AUTHORIZED TO VOTE IN THEIR
DISCRETION UPON ANY OTHER MATTERS THAT MAY COME BEFORE THE MEETING. The
undersigned shareholder may revoke this proxy at any time before it is voted by
delivering to the Secretary of NFS either a written revocation of proxy or a
duly executed proxy bearing a later date or by appearing at the Annual Meeting
and voting in person. The undersigned shareholder hereby acknowledges receipt of
the Notice of Annual Meeting and Prospectus and Proxy Statement with respect to
the meeting.
(Continued and to be Signed and Dated on Reverse Side)
<PAGE> 119
(Continued from Reverse Side)
/X/ Please mark votes as in this example
1. APPROVAL AND ADOPTION OF ACQUISITION AGREEMENT. To approve and adopt the
Acquisition Agreement dated December 22, 1994 between NFS, BayBanks, Inc. and
BBNH providing for the merger of BBNH with NFS.
FOR / / AGAINST / / ABSTAIN / /
2. ELECTION OF DIRECTORS
NOMINEES: James H. Adams, A. Jack Atkinson, Roger H. Osgood, Jr.
FOR / / WITHHELD / / / /
-----------------------------------
For all nominees except as
noted above
3. INDEPENDENT AUDITORS. To ratify the appointment by the Board of Directors of
the firm of KPMG Peat Marwick LLP as independent auditors of NFS for the
fiscal year ending December 31, 1995.
FOR / / AGAINST / / ABSTAIN / /
Each stockholder should specify by a mark in the appropriate box how he wishes
his shares voted.
IF NO SPECIFICATION IS MADE, SHARES WILL BE VOTED TO APPROVE AND ADOPT THE
ACQUISITION AGREEMENT, FOR THE ELECTION OF THE ABOVE DIRECTORS, AND FOR
RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT AUDITORS.
<R/>
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW / /Please sign exactly as name
appears hereon, date, and return
by April 25, 1995. Each executor,
administrator, trustee, guardian,
attorney-in-fact and other
fiduciary should sign and
indicate his or her full title.
Only one signature is required in
the case of stock ownership in
the name of two or more persons.
Signature:
---------------------------------
Date:
---------------------------------
Signature:
---------------------------------
Date:
---------------------------------
<PAGE> 120
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 67 of Chapter 156B of the Massachusetts Business Corporation Law
grants BayBanks the power to indemnify any director, officer, employee or agent
to whatever extent permitted by BayBanks's Articles of Organization, By-Laws or
a vote adopted by the holders of a majority of the shares entitled to vote
thereon, unless the proposed indemnitee has been adjudicated in any proceeding
not to have acted in good faith in the reasonable belief that his action was in
the best interests of BayBanks or to the extent that the matter for which
indemnification is sought relates to service with respect to an employee benefit
plan, in the best interests of the participants or beneficiaries of such
employee benefit plan. Such indemnification may include payment by BayBanks of
expenses incurred in defending a civil or criminal action or proceeding in
advance of the final disposition of such action or proceeding, upon receipt of
an undertaking by the person indemnified to repay such payment if he shall be
adjudicated to be not entitled to indemnification under the statute.
Article VI of BayBanks's By-Laws provides that BayBanks shall, to the
fullest extent legally permissible, indemnify each person at any time elected or
appointed a director or officer of BayBanks, or who serves at BayBanks's request
as a director or officer of another organization or in any capacity with respect
to any employee benefit plan against any and all costs and expenses (including
but not limited to court costs and legal fees) reasonably incurred by, and any
and all liabilities imposed upon, him in connection with, or arising out of, or
resulting from, any claim made, or any action, suit or proceeding (whether
civil, criminal, administrative or investigative) threatened or brought, against
him or in which he may be involved as a party or otherwise by reason of his
having so served or by reason of any action taken or omitted or alleged to have
been taken or omitted by him in such capacity unless in any proceeding such
person shall have been finally adjudicated with respect to the matter or matters
as to which indemnification is sought not to have acted in good faith in the
reasonable belief that his action was in the best interest of BayBanks or, to
the extent that such matter or matters relate to service with respect to an
employee benefit plan, in the best interests of the participants or
beneficiaries of such employee benefit plan. Such indemnification shall include
payment by BayBanks of expenses incurred in defending any such action, suit or
proceeding in advance of the final disposition of such action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the person
indemnified to repay such payment if he shall be adjudicated to be not entitled
to indemnification under Article VI, which undertaking shall be accepted without
reference to the financial ability of such person to make repayment.
The right of indemnification under Article VI does not extend to amounts
incurred or paid in connection with any matter which shall be disposed of
through a compromise payment or other settlement prior to final adjudication,
whether by or pursuant to a consent decree or otherwise, unless such compromise
or other settlement is approved by BayBanks, which approval shall not
unreasonably be withheld, or by a court of competent jurisdiction. Article VI
sets forth certain circumstances under which the payment of indemnification is
conclusively deemed approved by BayBanks. Article VI also contains certain
procedural and other provisions which provide additional protection for persons
seeking indemnification.
The indemnification provided for in Article VI is a contract right inuring
to the benefit of the directors, officers and others entitled to
indemnification. In addition, the indemnification is expressly in addition to
and not exclusive of any other rights to which such director, officer or other
person may be entitled and inures to the benefit of the heirs, executors,
administrators and legal representatives of such a person.
Section 13(b)(1 1/2) of Chapter 156B of the Massachusetts Business
Corporation Law provides that a corporation may, in its Articles of
Organization, eliminate the directors' personal liability to the corporation and
its stockholders for monetary damages for breaches of fiduciary duty, except in
circumstances involving (i) a breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
unauthorized distributions and loans to insiders, and (iv) transactions from
which the director derived an improper personal benefit. BayBank's Articles of
Organization include a provision providing that no director shall be personally
liable to BayBanks or its stockholders for monetary damages for any breach of
fiduciary duty as a director,
Part II-1
<PAGE> 121
except to the extent that such exculpation is not permitted under the provisions
of the Massachusetts Business Corporation Law summarized above. No amendment or
repeal of the provision of the Articles of Organization shall apply or have any
effect on the liability of any director for or with respect to acts or omissions
occurring prior to the amendment or repeal.
BayBanks maintains an insurance policy on behalf of the directors and
officers of BayBanks and its subsidiaries covering certain liabilities which may
arise as a result of the actions of said directors and officers.
The provisions described above may be sufficiently broad to indemnify
Directors and officers and control persons of BayBanks against liability arising
under the Securities Act of 1933 ("the Act"). Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers or persons controlling BayBanks pursuant to the foregoing
provisions, BayBanks has been informed that, in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Act and is therefore unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -------------------------------------------------------------------------------------
<S> <C>
2 Acquisition Agreement dated December 22, 1994 by and between the Registrant and NFS
Financial Corp. Filed herewith as Appendix A to the Prospectus/Proxy Statement.
Pursuant to Item 601(b)(2) of Regulation S-K, the schedules referred to in the
Acquisition Agreement are omitted. The Registrant hereby undertakes to furnish
supplementally a copy of any omitted schedule to the Commission upon request.
</TABLE>
<TABLE>
<S> <C>
4.1 Articles of Organization as amended through June 28, 1988. Filed as Exhibit 4 to
Registration Statement on Form S-8 (No. 33-22834) and incorporated herein by
reference.
4.2 Certificate of Vote of Directors Establishing a Series of a Class of Stock filed
March 10, 1989. Filed as Exhibit 3.1(b) to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1993 and incorporated herein by reference.
4.3 Certificate of Vote of Directors adopted July 26, 1990, electing to have certain
Massachusetts legislation concerning the classification of boards of directors apply
to the Registrant. Filed as Exhibit 4.1(d) to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1990, and incorporated herein by reference.
4.4 By-Laws as amended through October 27, 1994. Filed as Exhibit 3.1 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1994 and
incorporated herein by reference.
4.5 Specimen Common Stock Certificate. Filed as Exhibit 4.5 to Registration Statement on
Form S-3 (No. 33-50558) and incorporated herein by reference.
4.6 Rights Agreement between the Registrant and The First National Bank of Boston, as
Rights Agent, dated December 23, 1988. Filed as Exhibit 2 to the Registrant's
Registration Statement on Form 8-A dated December 29, 1988, and incorporated herein
by reference.
4.7 Indenture dated as of September 15, 1985. Filed as Exhibit 4.1 to Registration
Statement on Form S-3 (No. 33-00130) and incorporated herein by reference.
4.8 The Registrant has certain long-term debt instruments under which the total amount of
securities authorized does not exceed 10% of the total assets of the Registrant and
its subsidiaries on a consolidated basis. The Registrant hereby agrees to furnish a
copy of any such instrument to the Commission upon request.
5 Opinion of Palmer & Dodge. Filed as Exhibit 5 to this Registration Statement (No.
33-57617) on February 7, 1995, and incorporated herein by reference.
23.1 Consent of KPMG Peat Marwick LLP, independent auditors to BayBanks, Inc. Filed
herewith.
</TABLE>
Part II-2
<PAGE> 122
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -------------------------------------------------------------------------------------
<S> <C>
23.2 Consent of KPMG Peat Marwick LLP, independent auditors to NFS Financial Corp. Filed
herewith.
23.3 Consent of Palmer & Dodge (contained in Exhibit 5).
23.4 Consent of Tucker Anthony Incorporated. Filed herewith.
24 Power of Attorney. Contained on the Signature Page to this Registration Statement
(No. 33-57617) as filed February 7, 1995, and incorporated herein by reference.
27 Financial Data Schedule. Filed as Exhibit 27 to the Registrant's Annual Report on
Form 10-K for 1994, and incorporated herein by reference.
99.1 Fairness Opinion of Tucker Anthony Incorporated. Filed herewith as Appendix D to the
Prospectus/Proxy Statement.
</TABLE>
(B) FINANCIAL STATEMENT SCHEDULES.
(1) All Financial Statement Schedules for BayBanks were omitted from Item
14 of BayBanks's Annual Report on Form 10-K for its fiscal year ended December
31, 1994 because either the required information is shown in the financial
statements or notes incorporated by reference or the data is not significant or
the schedules were not applicable.
(2) All Financial Statement Schedules for NFS were omitted from Item 14 of
NFS's Annual Report on Form 10-K for its fiscal year ended December 31, 1994
because either the required information is shown in the financial statements or
notes incorporated by reference or the data is not significant or the schedules
were not applicable.
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represents a fundamental change in the information set forth in this
Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
Part II-3
<PAGE> 123
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(c) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(d) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through the date
of responding to the request.
(e) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
(f)(1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is part of this registration statement, by any person or party
who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by the
other Items of the applicable form.
(f)(2) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Part II-4
<PAGE> 124
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston, Commonwealth of Massachusetts,
on March 16, 1995.
BAYBANKS, INC.
By: /s/ MICHAEL W. VASILY
------------------------------------
Michael W. Vasily
Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, this amendment
has been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------------- ---------------
<S> <C> <C>
/s/ * Chairman of the Board, March 16, 1995
- --------------------------------------------- President and Director
William M. Crozier, Jr. (Principal Executive Officer)
/s/ MICHAEL W. VASILY Executive Vice President March 16, 1995
- --------------------------------------------- (Principal Financial Officer)
Michael W. Vasily
/s/ * Senior Vice President March 16, 1995
- --------------------------------------------- and Controller
Joan E. Tonra (Principal Accounting Officer)
/s/ * Vice Chairman of the Board March 16, 1995
- --------------------------------------------- and Director
Donald L. Isaacs
/s/ * Vice Chairman of the Board March 16, 1995
- --------------------------------------------- and Director
Richard F. Pollard
/s/ * Director March 16, 1995
- ---------------------------------------------
John A. Cervieri Jr.
/s/ * Director March 16, 1995
- ---------------------------------------------
Robert L. Gable
/s/ * Director March 16, 1995
- ---------------------------------------------
Samuel J. Gerson
/s/ * Director March 16, 1995
- ---------------------------------------------
Norman E. MacNeil
/s/ * Director March 16, 1995
- ---------------------------------------------
Arlene A. McNamee
/s/ * Director March 16, 1995
- ---------------------------------------------
Thomas R. Piper
</TABLE>
Part II-5
<PAGE> 125
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------------- ---------------
<S> <C> <C>
/s/ * Director March 16, 1995
- ---------------------------------------------
Glenn P. Strehle
/s/ * Director March 16, 1995
- ---------------------------------------------
Joseph H. Torras
*By: /s/ MICHAEL W. VASILY
- ---------------------------------------------
Michael W. Vasily
Attorney-in-Fact
</TABLE>
Part II-6
<PAGE> 126
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------
<C> <S>
2 Acquisition Agreement dated December 22, 1994 by and between the Registrant and
NFS Financial Corp. Filed herewith as Appendix A to the Prospectus/Proxy
Statement. Pursuant to Item 601(b)(2) of Regulation S-K, the schedules referred to
in the Acquisition Agreement are omitted. The Registrant hereby undertakes to
furnish supplementally a copy of any omitted schedule to the Commission upon
request.
4.1 Articles of Organization as amended through June 28, 1988. Filed as Exhibit 4 to
Registration Statement on Form S-8 (No. 33-22834) and incorporated herein by
reference.
4.2 Certificate of Vote of Directors Establishing a Series of a Class of Stock filed
March 10, 1989. Filed as Exhibit 3.1(b) to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1993 and incorporated herein by reference.
4.3 Certificate of Vote of Directors adopted July 26, 1990, electing to have certain
Massachusetts legislation concerning the classification of boards of directors
apply to the Registrant. Filed as Exhibit 4.1(d) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1990, and incorporated herein
by reference.
4.4 By-Laws as amended through October 27, 1994. Filed as Exhibit 3.1 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30,
1994 and incorporated herein by reference.
4.5 Specimen Common Stock Certificate. Filed as Exhibit 4.5 to Registration Statement
on Form S-3 (No. 33-50558) and incorporated herein by reference.
4.6 Rights Agreement between the Registrant and The First National Bank of Boston, as
Rights Agent, dated December 23, 1988. Filed as Exhibit 2 to the Registrant's
Registration Statement on Form 8-A dated December 29, 1988, and incorporated
herein by reference.
4.7 Indenture dated as of September 15, 1985. Filed as Exhibit 4.1 to Registration
Statement on Form S-3 (No. 33-00130) and incorporated herein by reference.
4.8 The Registrant has certain long-term debt instruments under which the total amount
of securities authorized does not exceed 10% of the total assets of the Registrant
and its subsidiaries on a consolidated basis. The Registrant hereby agrees to
furnish a copy of any such instrument to the Commission upon request.
5 Opinion of Palmer & Dodge. Filed as Exhibit 5 to this Registration Statement (No.
33-57617) on February 7, 1995, and incorporated herein by reference.
23.1 Consent of KPMG Peat Marwick LLP, independent auditors to BayBanks, Inc. Filed
herewith.
23.2 Consent of KPMG Peat Marwick LLP, independent auditors to NFS Financial Corp.
Filed herewith.
23.3 Consent of Palmer & Dodge (contained in Exhibit 5).
23.4 Consent of Tucker Anthony Incorporated. Filed herewith.
24 Power of Attorney. Contained on the Signature Page to this Registration Statement
(No. 33-57617) as filed February 7, 1995, and incorporated herein by reference.
</TABLE>
Part II-7
<PAGE> 127
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------
<C> <S>
27 Financial Data Schedule. Filed as Exhibit 27 to the Registrant's Annual Report on
Form 10-K for 1994, and incorporated herein by reference.
99.1 Fairness Opinion of Tucker Anthony Incorporated. Filed herewith as Appendix D to
the Prospectus/Proxy Statement.
</TABLE>
Part II-8
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
BayBanks, Inc.:
We consent to the use of our report incorporated herein by reference and to
the reference to our firm under the heading "EXPERTS" in the prospectus and
proxy statement.
/s/ KPMG Peat Marwick LLP
Boston, Massachusetts
March 16, 1995
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
NFS Financial Corp.:
We consent to the use of our report incorporated herein by reference and to
the reference to our firm under the heading "EXPERTS" in the prospectus and
proxy statement.
/s/ KPMG Peat Marwick LLP
Boston, Massachusetts
March 16, 1995
<PAGE> 1
EXHIBIT 23.4
March 16, 1995
BayBanks, Inc.
175 Federal Street
Boston, MA 02110
Gentlemen:
Tucker Anthony Incorporated hereby consents to the inclusion of our
fairness opinion letter to the Board of Directors of NFS Financial Corp. in
Appendix D of the Prospectus and Proxy Statement forming a part of the BayBanks,
Inc. Form S-4 registration statement relating to the merger of a newly formed,
wholly owned subsidiary of BayBanks with and into NFS Financial Corp.
Sincerely,
Tucker Anthony Incorporated
By: /s/ Gregory W. Benning
--------------------------------
Gregory W. Benning
Vice President
