<PAGE> 1
As filed with the Securities and Exchange Commission on February 7, 1995.
Registration No. __________
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
-------------------
BAYBANKS, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<Caption.
<S> <C> <C>
MASSACHUSETTS 6712 04-2008039
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code) Identification No.)
</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.
___________________________ (continued on following page)
<PAGE> 2
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.[ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===============================================================================
Proposed Proposed
Title of Each Maximum Maximum
Class of Amount Offering Aggregate Amount of
Securities to to be Price Offering Registration
be Registered Registered Per Share(1) Price(1) Fee
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$2.00 par
value(2) 600,600 shares $45.26 $27,185,438 $9,375
===============================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(f) under the Securities Act of 1933, as
amended. Pursuant to Rule 457(f), the maximum aggregate offering
price is based upon the market value of the shares of NFS Financial
Corp. common stock to be exchanged in the merger, computed in
accordance with Rule 457(c) as the average of the high and low sales
prices for February 1, 1995 as reported by the Nasdaq National
Market, minus $59,380,659, the amount of cash to be paid by the
Registrant in connection with the merger.
(2) Also includes associated Rights to purchase shares of the Registrant's
Series A Junior Participating Preferred Stock, which Rights are not
currently separable from the Common Stock and are not currently
exercisable.
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.
===============================================================================
<PAGE> 3
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
----------- --------------------------
<S> <C> <C>
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 . . . . . . . . . . . . . . . . . *
</TABLE>
______________________
* Not applicable or the answer is negative.
<PAGE> 4
<TABLE>
<CAPTION>
LOCATION OR HEADING IN
ITEM OF S-4 PROSPECTUS/PROXY STATEMENT
----------- --------------------------
<S> <C> <C>
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 . . . . . . . . . . . *
</TABLE>
______________________
* Not applicable or the answer is negative
<PAGE> 5
NFS FINANCIAL CORP.
157 MAIN STREET
NASHUA, NEW HAMPSHIRE 03061
(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,
James H. Adams
President and Chief Executive Officer
NOTE: PLEASE DO NOT SEND IN YOUR STOCK CERTIFICATES AT THE PRESENT TIME.
<PAGE> 6
NFS FINANCIAL CORP.
157 MAIN STREET
NASHUA, NEW HAMPSHIRE 03061
(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 and BayBanks, 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,
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.
<PAGE> 7
PROSPECTUS AND PROXY STATEMENT
------------------------------
<TABLE>
<CAPTION>
<S> <S>
BAYBANKS, INC. NFS FINANCIAL CORP.
175 FEDERAL STREET 157 MAIN STREET
BOSTON, MASSACHUSETTS 02110 NASHUA, NEW HAMPSHIRE 03061
(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 and BayBanks. 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, BayBank New
Hampshire, Inc. ("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.
<PAGE> 8
THE SHARES OF BAYBANKS COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR NON- BANK SUBSIDIARY 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> 9
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10A
Summary 1994 Financial Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10A
NFS ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Matters to be Considered at the Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Record Date; Outstanding Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Required Votes; Voting of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Agreement to Vote in Favor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Shareholder Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
BAYBANKS, INC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
BACKGROUND AND NFS's REASONS FOR THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Background of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Recommendation of the Board of Directors; NFS's Reasons for the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
TERMS OF THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Conversion of NFS Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Conditions of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Regulatory Approvals Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Waiver and Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Termination Fee; No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Affiliate Letter; Resales of BayBanks Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Interests of Certain Persons in the Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Merger and Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Treatment of NFS Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Conduct of NFS's Business Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
NFS Shareholder Appraisal Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
COMPARISON OF RIGHTS OF HOLDERS OF BAYBANKS AND NFS COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
</TABLE>
i
<PAGE> 10
<TABLE>
<CAPTION>
<S> <C>
NFS CORPORATE MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
NFS Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Report On Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Stock Owned By Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Principal Holders Of Voting Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Deadline for Shareholder Nominations and Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
LEGAL OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
FINANCIAL ADVISORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
EXPENSES OF SOLICITATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ACCOMPANYING REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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>
ii
<PAGE> 11
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,
1993.
(2) BayBanks's quarterly reports on Form 10-Q for the quarters ended March
31, 1994, June 30, 1994, and September 30, 1994.
(3) BayBanks's current report on Form 8-K filed with the Commission on
January 4, 1995.
(4) 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.
(5) 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, 1993.
(2) NFS's quarterly reports on Form 10-Q for the quarters ended March 31,
1994, June 30, 1994, and September 30, 1994.
1
<PAGE> 12
(3) NFS's current report on Form 8-K filed with the Commission on January
3, 1995.
(4) 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.
(5) 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> 13
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 banking subsidiaries
and their customers. Bank and non-bank subsidiaries also act as investment
advisers to BayFunds, 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 reported 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 03061. Its telephone number is (603) 880-2011.
3
<PAGE> 14
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, ________ 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 3.1% 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 beneficially
own no such shares. See "NFS Shareholder 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."
OPINION OF NFS'S FINANCIAL ADVISOR
Tucker Anthony has rendered a written opinion to the Board of Directors
of NFS dated December 22, 1994 stating that, as of that date, the
consideration to be received by the shareholders of NFS in the Merger is fair,
from a financial point of view, to such shareholders.
4
<PAGE> 15
The full text of the fairness opinion, 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 __, 1995 was $____ per share, based on the closing sale price for the
BayBanks Common Stock on that date of $____.
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, NFS has the right to terminate the Acquisition
Agreement, unless BayBanks agrees to increase 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. 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."
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:
5
<PAGE> 16
(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."
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."
6
<PAGE> 17
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, a 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> 18
SELECTED FINANCIAL DATA
SUMMARY FINANCIAL DATA
The summary financial data set forth below for BayBanks and NFS as of and
for each of the fiscal years ended December 31 are derived from the audited
financial statements of each company. The summary financial data set forth
below for each of the companies as of and for the nine-month periods ended
September 30, 1994 and 1993 are derived from their respective unaudited
financial statements, which, in the opinion of management of each such company,
contain all adjustments (consisting only of normal recurring items) necessary
for the fair presentation of this information. 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.
<TABLE>
<CAPTION>
Baybanks Nine Months Ended
September Year-Ended December 31
------------------------- --------------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
------------ --------- ------------ -------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
Interest income(1) $ 475,539 $ 443,739 $ 590,471 $ 656,521 $ 814,858 $ 925,074 $ 959,092
Interest expense 134,053 129,012 166,648 240,009 417,962 542,442 569,435
----------- --------- ---------- ---------- ---------- ---------- ----------
Net interest income 341,486 314,727 423,823 416,512 396,896 382,632 389,657
Provision for loan losses 18,000 29,500 36,500 106,836 165,400 289,958 75,000
----------- --------- ---------- ---------- ---------- ---------- ---------
Net interest income after
provision for loan losses 323,486 285,227 387,323 309,676 231,496 92,674 314,657
Noninterest income 156,303 147,551 198,524 183,881 169,753 155,811 141,037
Net securities gains 475 407 411 76,929 40,963 19,582 10,878
Operating expense 341,613 334,423 446,705 429,316 398,359 378,503 371,255
Provision for OREO reserve, net 7,852 22,692 24,830 45,482 27,450 14,582 -
------- --------- --------- ---------- ---------- ---------- ---------
Total operating expense after
OREO provision 349,465 357,115 471,535 474,798 425,809 393,085 371,255
Income (loss) before income
taxes and cumulative
effect of accounting change 130,799 76,070 114,723 95,688 16,403 (125,018) 95,317
Income taxes (benefit) 53,133 31,101 47,072 36,451 6,748 (55,216) 32,173
---------- --------- --------- ---------- ---------- ----------- ---------
Income (loss) before cumulative
effect of accounting change 77,666 44,969 67,651 59,237 9,655 (69,802) 63,144
Less cumulative effect of
accounting change 932 - - - - - -
---------- --------- --------- ---------- --------- ---------- ---------
Net income (loss) $ 76,734 $ 44,969 $ 67,651 $ 59,237 $ 9,655 $ (69,802) $ 63,144
=========== ========== =========== =========== ========== ============ ==========
PER SHARE DATA
Net income (loss) $ 4.01(2) $ 2.37 $ 3.57 $ 3.57 $ 0.60 $ (4.37) $ 3.95
Cash dividends declared 1.15 0.65 0.90 - - 1.05 1.80
Book value 40.30 36.56 37.52 34.81 31.30 30.49 37.67
Average shares outstanding 19,145,704 18,936,862 18,953,397 16,575,768 16,021,645 15,965,653 15,929,658
PERIOD-END BALANCE SHEET DATA
Total assets $10,536,937 $9,513,401 $10,110,584 $ 9,896,286 $9,515,788 $10,081,993 $9,913,271
Loans 6,352,975 5,913,857 6,103,170 5,937,999 6,353,034 7,130,341 8,012,894
Short-term investments
and securities 3,211,014 2,651,550 3,045,726 2,846,048 2,015,624 1,730,930 934,138
Earning assets 9,563,989 8,565,407 9,148,896 8,784,047 8,368,658 8,861,271 8,947,032
Deposits 8,696,066 8,605,306 8,778,821 8,982,548 8,757,570 8,960,310 8,784,310
Stockholders' equity 765,721 684,572 703,262 644,219 501,300 488,276 572,927
- ----------------------------------
<FN>
(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.
</TABLE>
8
<PAGE> 19
<TABLE>
<CAPTION>
NFS
Nine Months Ended
September Year-Ended December 31
---------------------- --------------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---------- -------- ------------ -------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
Interest income(1) $ 30,494 $ 30,480 $ 40,723 $ 39,634 $ 46,158 $ 49,715 $ 50,584
Interest expense 13,754 14,614 19,415 22,320 32,478 36,445 37,544
---------- -------- ---------- --------- -------- -------- --------
Net interest income 16,740 15,866 21,308 17,314 13,680 13,270 13,040
Provision for loan losses 1,180 1,675 2,200 2,600 5,960 13,683 1,450
---------- -------- ---------- -------- -------- -------- --------
Net interest income after
provision for loan losses 15,560 14,191 19,108 14,714 7,720 (413) 11,590
Noninterest income 2,358 2,443 3,435 2,298 1,705 1,599 1,510
Net securities gains (losses) (23) 236 234 437 (2) (374) (59)
Net OREO gains 742 1,220 1,328 532 558 80 65
Noninterest expense 11,642 12,435 16,280 12,781 11,889 11,773 9,811
---------- -------- ---------- -------- -------- -------- --------
Income (loss) before income
taxes and cumulative
effect of accounting change 6,995 5,655 7,825 5,200 (1,908) (10,881) 3,925
Income taxes (benefit) 1,813 608 1,002 1,687 758 1,122 1,391
---------- -------- ---------- --------- -------- -------- --------
Income (loss) before cumulative
effect of accounting change 5,182 5,047 6,823 3,513 (2,666) (12,003) 1,904
Cumulative effect of
accounting change - 4,473 4,473 - - - -
---------- -------- ---------- ---------- -------- -------- --------
Net income (loss) $ 5,182 $ 9,520 $ 11,296 $ 3,513 $ (2,666) $(12,003) $ 1,904
========== ======== ========== ========== ======== ======== ========
PER SHARE DATA
Net income (loss) $1.87 $3.45(2) $4.09(2) $1.27 $(0.97) $(4.35) $0.67
Cash dividends declared 0.37 0.34 0.44 0.07 - 0.21 0.28
Book value 19.86 18.36 19.13 15.26 14.05 15.00 19.50
Average shares outstanding 2,765,559 2,761,367 2,761,367 2,761,367 2,761,367 2,761,367 2,838,400
PERIOD-END BALANCE SHEET DATA
Total assets $613,650 $611,158 $612,906 $498,958 $517,032 $501,024 $511,098
Loans 423,433 412,115 412,607 336,477 345,291 371,347 384,177
Short-term investments
and securities 163,214 174,538 176,437 143,148 154,237 118,355 109,854
Earning assets 586,647 586,653 589,044 479,625 499,528 489,702 494,031
Deposits 519,385 513,698 514,790 433,850 433,886 402,891 390,689
Stockholders' equity 55,013 50,708 52,824 42,127 38,807 41,409 53,847
- ----------------------------------
<FN>
(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.
</TABLE>
9
<PAGE> 20
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.
<TABLE>
<CAPTION>
BAYBANKS
December 31, 1993 September 30, 1994
----------------------------------- ----------------------------------------
Historical Pro forma Historical Pro forma
---------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Earnings per share (1) $ 3.57 $ 3.80 $ 4.01 $ 3.97
Cash dividends declared 0.90 0.90 1.15 1.15
per share (2)
Book value per share (3) 37.52 38.40 40.30 40.81
</TABLE>
<TABLE>
<CAPTION>
NFS
December 31, 1993 September 30, 1994
------------------------------------ ----------------------------------------
Equivalent Equivalent
Historical Pro forma (4) Historical Pro forma (4)
---------- -------------- ---------- -------------
<S> <C> <C> <C> <C>
Earnings per share $ 4.09 (5) $ 7.03 $ 1.87 $ 3.22
Cash dividends declared 0.44 0.76 0.37 0.64
per share
Book value per share 19.13 32.86 19.86 34.11
____________________________________
<FN>
(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.
</TABLE>
10
<PAGE> 21
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 __, 1995) . . .
</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 __, 1995, such prices
were $_____ and $______, respectively.
SUMMARY 1994 FINANCIAL RESULTS
BayBanks. BayBanks has reported financial results for 1994 as follows.
Net income was $107.4 million, or $5.60 per share, both new highs for
BayBanks. This represents a 57% increase on a per share basis over 1993 net
income of $3.57 per share, or $67.7 million. Operating income (before
securities gains and provisions for loan losses and OREO reserves and on a
fully taxable basis) for the year was $223 million, up 23% from the $181
million reported in 1993. Provisions for loan losses and the net amount set
aside for OREO reserves (credit costs) declined from $61.3 million in 1993 to
$33.4 million in 1994, while nonperforming assets declined from $224 million
at year-end 1993 to $122 million, or 1.1% of total assets, at year-end 1994.
At December 31, 1994, BayBanks had total assets of $10.8 billion, total
deposits of $9 billion and total stockholders' equity of $789 million. At
December 31, 1994, BayBanks had reserved $147 million for loan losses, or 269%
of nonperforming loans. BayBanks's preliminary consolidated risk-based capital
ratios at December 31, 1994 were 11.47% for core capital and 13.03% for total
capital, and its preliminary leverage capital ratio was 7.35%.
NFS. NFS had net income in 1994 of $6.9 million, or $2.49 per share,
compared with 1993 income (before a $1.62 per share benefit from the adoption
of a new accounting principle) of $2.47 per share. 1993 earnings including the
change in accounting principle were $11.3 million, or $4.09 per share.
Operating income before provisions for loan losses, effect of change in
accounting principle, and taxes was $11.0 million, up from $10.0 million in
1993. Provisions for loan losses declined from $2.2 million in 1993 to $1.6
million in 1994, while nonperforming assets declined from $13.5 million at
year-end 1993 to $8.4 million, or 1.4% of total asssets, at year-end 1994. As
of December 31, 1994, NFS had total assets of $619 million, total deposits of
$515 million and total stockholders' equity of $56 million.
10A
<PAGE> 22
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 ____________ 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."
11
<PAGE> 23
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 03061, 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 3.1% 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 of 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 30601, (603) 880-2011, or Morrow & Co.,
Inc., 909 Third Avenue, 20th Fl., New York, New York 10022-4799, (800)
662-5200.
12
<PAGE> 24
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 banking 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 private
label 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 nearly
11.3 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
13
<PAGE> 25
hours a day, seven days a week, that provides customer service and product
information, opens consumer bank accounts, and arranges consumer loans.
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. also 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.
14
<PAGE> 26
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/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.
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.
15
<PAGE> 27
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 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.
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<PAGE> 28
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.
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.
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<PAGE> 29
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 a written opinion to the Board of Directors of
NFS dated December 22, 1994 stating that, as of that date, 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
DECEMBER 22, 1994, 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 fairness opinion, 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, 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, 1993 and interim period ended September
30, 1994, including their reports on Forms 10-K and 10-Q; 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, 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 opinion was necessarily based upon
conditions as they existed and could be evaluated on the date thereof and the
information made available to Tucker Anthony through the date 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 opinion, 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
18
<PAGE> 30
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 analyses performed by Tucker Anthony in rendering its opinion and of its
presentation to NFS's Board of Directors.
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, 1993 and interim period ended September
30, 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, non-performing 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,
non-performing 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, 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 90 unassisted acquisitions of thrift institutions in
the Northeast announced between January 1, 1986 and December 22, 1994 (the
"Selected Comparable Acquisition Transactions"). Tucker Anthony also performed
additional analyses on 31 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.
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<PAGE> 31
Excluding the highest and lowest ratios, the Selected Recent Transactions
involved financial institutions with three year average growth rates of 3.4%
for assets, (2.0)% for loans and 4.4% 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 0.91% and latest quarter annualized average return on equity of 9.70% 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 share
price of $53.25.
<TABLE>
<CAPTION>
Selected
Comparable
Acquisition Selected Recent
Transactions Transactions
---------------- -------------------
BayBanks 1986 - 1994 1993 - 1994
Offer Average Average
-------------- ---------------- -------------------
<S> <C> <C> <C>
Aggregate Consideration/Earnings 15.0x(1) 16.6x 14.3x
Aggregate Consideration/Book Value 159.8% 138.0% 157.0%
Aggregate Consideration/Total Assets 15.0% 13.4% 14.6%
Premium to Market Price(2) 40.9% 43.0% 41.3%
__________________________________________________________
<FN>
(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.
</TABLE>
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 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.
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<PAGE> 32
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> 33
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 share 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 $_____ per share on March __, 1995, was approximately $____ 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.
Under the Acquisition Agreement, NFS, by notice to BayBanks, may 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; provided that
BayBanks may negate such termination by notifying NFS prior to 5:00 p.m.,
Boston, Massachusetts time, on the Closing Date of its election to adjust the
Merger Consideration. If BayBanks exercises this right to negate NFS's
termination, the per share Merger Consideration shall be increased 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
shall 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.
In determining whether to elect to terminate the Acquisition Agreement if the
Closing Market Value of BayBanks Common Stock falls below $43.50 per share, 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, the advice of its financial advisors and legal counsel.
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.
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<PAGE> 34
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 (x) 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 (y) 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 (i) such
fraction multiplied by (ii) 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 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,
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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.
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
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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. This
assessment also includes an evaluation of the financial and managerial
resources of BayBanks and the effect of the Merger on those resources.
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 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.
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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 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
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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 (i) in favor of approval of the Acquisition
Agreement and the Merger and (ii) 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 3.1% 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.
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."
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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.
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
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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.
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"). On the Closing Date, 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.
Simultaneously with the effectiveness of the Merger, (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. Upon the effectiveness of the Merger,
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. 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 BBNH immediately prior to the Merger.
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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; (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
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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.
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 03061.
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 Closing Date. From and after the Closing Date, no
Dissenting Shareholder will be entitled to vote his or her
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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 Closing Date (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
Closing Date, 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 Closing Date, 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. 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".
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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) the occurrence of a Preliminary Purchase
Event (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%; (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 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.
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 (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 BayBanks in specified circumstances), (v) 12 months after
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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."
The term "Preliminary Purchase Event" means 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 NFS's Restated Certificate
of Incorporation:
(i) 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 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) with any person other than BayBanks or any
of its subsidiaries;
(ii) Any person, other than BayBanks or any of its
subsidiaries, shall have acquired beneficial ownership of 15% or more of
the outstanding shares of NFS Common Stock or the voting stock of either of
the NFS Banks;
(iii) Any person, other than BayBanks or any of its
subsidiaries, shall have made a bona fide proposal to NFS or, by a public
announcement or written communication that is or becomes the subject of
public disclosure, to NFS's shareholders to engage in an Acquisition
Transaction (including, without limitation, any situation in which any
person other than BayBanks or any of its subsidiaries 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 NFS 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 NFS
Common Stock (such an offer being referred to herein as a "Tender Offer" or
an "Exchange Offer," respectively);
(iv) There shall exist a Default by NFS and such Default
would entitle BayBanks to terminate the Acquisition Agreement;
(v) The holders of NFS Common Stock shall not have adopted
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 NFS's Board of Directors shall
have withdrawn or modified in a manner adverse to BayBanks the
recommendation of NFS's Board of Directors that NFS's shareholders adopt
the Acquisition Agreement; or
(vi) Any person, other than BayBanks or any of its
subsidiaries, shall have filed an application or notice in draft or final
form with the Office of Thrift Supervision, or the Board of Governors of
The Federal Reserve System for approval to engage in an Acquisition
Transaction.
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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.
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
On the Closing Date, 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").
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
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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 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.
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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.
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.
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<PAGE> 49
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 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
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<PAGE> 50
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 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
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<PAGE> 51
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
provisions 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 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.
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<PAGE> 52
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 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 or she 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.
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<PAGE> 53
<TABLE>
<CAPTION>
Director Term
Nominees for a Three-Year Term Age Since Expires Positions Held With The Company
- ------------------------------ --- ----- ------- -------------------------------
<S> <C> <C> <C> <C>
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
- --------------------
<FN>
(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.
</TABLE>
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/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 NFS 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.
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
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<PAGE> 54
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."
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.
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<PAGE> 55
<TABLE>
<CAPTION>
Long Term
Annual Compensation All Other
Year Salary Bonus Options Compensation (b)
---- ------ ----- ------- ----------------
<S> <C> <C> <C> <C> <C>
James H. Adams, 1994 $215,577 $ 0 11,450 $28,249
President and Chief 1993 204,427 0 0 29,798
Executive Officer 1992 193,405 2,851(a) 10,091 937
Robert J. Rzasa, 1994 120,241 0 5,451 17,017
Executive Vice 1993 114,714 0 0 16,915
President 1992 110,363 1,629(a) 5,450 535
- ---------------------
<FN>
(a) 1992 bonus of 1.5% of base annual salary paid to all employees.
(b) Profit Sharing and ESOP contributions.
</TABLE>
Option Grants in Last Fiscal Year. In January of 1994, NFS granted options
under its Stock Option Plan (the "Option Plan") covering 84,290 shares of NFS
Common Stock to 49 employees, including the named executive officers. The
following table sets forth information concerning grants to the named executive
officers of stock options pursuant to the Option Plan during the year ended
December 31, 1994.
<TABLE>
<CAPTION>
Potential Realization Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term
---------------------------------------------------- ---------------------------
% of Total
Number of Options
Securities Granted to
Underlying Employees Exercise or
Options in Fiscal Base price Expiration
Name Granted Year 1994 ($/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
- --------------------
<FN>
(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.
</TABLE>
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<PAGE> 56
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
- --------------------
<FN>
(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.
</TABLE>
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>
Remuneration 10 Years 15 Years 20 Years 25 Years 30 Years
- ------------ -------- -------- -------- -------- --------
<S> <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
- ------------------------
<FN>
(a) The Internal Revenue Code limits annual compensation that may be
covered by qualified plans to $150,000 for 1994.
</TABLE>
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,
45
<PAGE> 57
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.
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").
[Insert Table "Comparison of Five-Year Cumulative Total Return
Among NFS, Nasdaq Market Index and Peer Group Index"]
<TABLE>
<CAPTION>
YEAR-END
----------------------------------------------------------
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
NFS FINANCIAL CORP. $100 $41.79 $ 62.68 $168.70 $274.82 $503.16
PEER GROUP INDEX $100 $70.50 $114.59 $151.77 $184.57 $174.83
NASDAQ MARKET INDEX $100 $81.12 $104.14 $105.16 $126.14 $132.44
</TABLE>
46
<PAGE> 58
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' Personal 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 84,290
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 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
47
<PAGE> 59
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.
<TABLE>
<CAPTION>
Submitted by the Personnel and Compensation Committee
and the Board of Directors of NFS Savings.
<S> <C>
James H. Adams James J. Hebert
A. Jack Atkinson Roger H. Osgood, Jr.*
Philip R. Currier* George E. Shagory*
Philip L. Hall
--------------------------
* Member, Personnel and Compensation Committee
</TABLE>
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.
48
<PAGE> 60
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 64,795(b) 2.31%
Executive Officer, Director
A. Jack Atkinson, Vice Chairman 27,166(c)(d) *
of the Board
Philip R. Currier, Director 10,650(e) *
Philip L. Hall, Director 3,400(f)(g) *
James J. Hebert, Chairman of the 12,111(c)(h) *
Board
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 163,851(j) 5.75%
officers as a group (9 persons)
<FN>
* 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.
</TABLE>
49
<PAGE> 61
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 13D or
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) 9.99%
175 Federal Street
Boston, Massachusetts 02110
[FMR Corp. [266,800](c) [9.63]%
82 Devonshire Street
Boston, Massachusetts 02109]
[Dimensional Fund Advisors, Inc. [152,000](d) [5.49]%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401]
<FN>
- --------------------
(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) [FMR Corp. reported in a Schedule 13G filed with the Commission with
respect to its ownership at December 31, 1993, that the shares are
beneficially owned by Fidelity Management & Research Company, a
wholly-owned subsidiary of FMR Corp. and a registered investment
adviser, as a result of acting as investment adviser to several
investment companies (the "Funds") registered under Section 8 of the
Investment Company Act of 1940. The ownership of one of the Funds,
Fidelity Low-Priced Stock Fund, amounted to 200,000 shares, or 7.22%
of NFS Common Stock outstanding at December 31, 1993. FMR Corp.
reports that the power to vote shares held in the Funds resides with
the Funds' Boards of Trustees, whereas the power to dispose of the
shares is shared by Edward C. Johnson 3d, Chairman of FMR Corp., FMR
Corp., and the Funds.]
(d) [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, 1993, that
142,700 of these shares are owned by various advisory clients of
Dimensional and that 9,300 were held in open-end management investment
companies for which officers of Dimensional are officers.]
</TABLE>
DEADLINE 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.
50
<PAGE> 62
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 03061 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.
EXPERTS
The consolidated financial statements of BayBanks, Inc. and Subsidiaries as
of December 31, 1993 and 1992, and for each of the years in the three-year
period ended December 31, 1993, incorporated by reference into the BayBanks
Annual Report on Form 10-K for the year ended December 31, 1993, 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, 1993 and 1992, and for each of the years in
the three-year period ended December 31, 1993, incorporated by reference into
the NFS Annual Report on Form 10-K for the year ended December 31, 1993, 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 ADVISORS
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.
51
<PAGE> 63
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.
52
<PAGE> 64
APPENDIX A
ACQUISITION AGREEMENT
BY AND BETWEEN
BAYBANKS, INC. AND NFS FINANCIAL CORP.
DATED DECEMBER 22, 1994
<PAGE> 65
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.
A-2
<PAGE> 66
"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 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.
A-3
<PAGE> 67
"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.
"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.
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"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.
"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.
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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 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.
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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
(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
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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.
(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.
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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 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
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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 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.
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(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.
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
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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 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
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statements referred to in Section 4.1.8 above, neither Seller nor any
Subsidiary has any liability to or under any Benefit Arrangement.
(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, agreement, arrangement or
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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
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or that the NFS Banks' practices and policies in establishing such 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 Exchange Act) of any such officer or director,
has any material interest in any material contract or property (real or
personal),
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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
non assessable and were not issued in violation of any preemptive rights. When
issued in accordance with the terms of this Agreement, the shares of Buyer
Stock to be issued pursuant to the Merger will be duly authorized, validly
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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,
investigation, arbitration or proceeding challenging the validity or propriety
of any of the transactions contemplated by this Agreement.
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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 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
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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
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
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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
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;
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(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
(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;
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(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 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
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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.
(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,
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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 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
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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 Company,
shall cause Acquisition Company to take all such actions as may be required to
effect the transactions contemplated by this Agreement.
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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, non-
renewal 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.
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.
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(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 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
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(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.
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.
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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.
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.
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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;
(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);
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(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.
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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 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.
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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 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.
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<PAGE> 98
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
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
---------------------------
Its: Executive Vice President
--------------------------
ATTEST
By: /s/ Jerry V. Klima
------------------------
Its: Assistant Clerk
-----------------------
NFS FINANCIAL CORP.
By: /s/ James H. Adams
----------------------
Its: President / CEO
---------------------
ATTEST
By: /s/ Albert R. Rietheimer
------------------------------
Its: Treasurer / CFO
-----------------------------
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<PAGE> 99
LIST OF EXHIBITS
----------------
EXHIBITS:
EXHIBIT A OPTION AGREEMENT [INCLUDED AS APPENDIX B TO THIS FORM S-4]
EXHIBIT B AFFILIATE LETTER [INCLUDED AS APPENDIX C TO THIS FORM S-4]
A-36
<PAGE> 100
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 __, 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."
(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:
<PAGE> 101
(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
(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
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<PAGE> 102
(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 (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.
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<PAGE> 103
(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 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
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<PAGE> 104
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.
(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
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<PAGE> 105
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 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.
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(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.
(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
B-7
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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 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 certiticate 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.
B-8
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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 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
B-9
<PAGE> 109
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.
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.
<PAGE> 111
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 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.
C-2
<PAGE> 112
(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 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.
C-3
<PAGE> 113
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>
____________________________ __________________ __________________________
____________________________ __________________ __________________________
____________________________ __________________ __________________________
____________________________ __________________ __________________________
____________________________ __________________ __________________________
____________________________ __________________ __________________________
____________________________ __________________ __________________________
____________________________ __________________ __________________________
____________________________ __________________ __________________________
____________________________ __________________ __________________________
____________________________ __________________ __________________________
____________________________ __________________ __________________________
____________________________ __________________ __________________________
____________________________ __________________ __________________________
____________________________ __________________ __________________________
____________________________ __________________ __________________________
____________________________ __________________ __________________________
____________________________ __________________ __________________________
</TABLE>
C-4
<PAGE> 114
AGREED TO AND ACCEPTED
THIS 22nd DAY OF DECEMBER, 1994
BAYBANKS, INC.
By:______________________________
Title:___________________________
C-5
<PAGE> 115
APPENDIX D
December 22, 1994
Board of Directors
NFS Financial Corp.
157 Main Street
Nashua, NH 03061
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, 1993 and for the
three quarters ended March 31, June 30 and September 30,
1994, including the Company's and BayBanks' reports on
Forms 10-K and 10-Q;
(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;
<PAGE> 116
(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
(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
D-2
<PAGE> 117
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
s 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 s 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 s 251, s 252, s 254, s 257, s 258, s 263 or s 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 s
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 ss 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
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.
<PAGE> 118
(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 s 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 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
E-2
<PAGE> 119
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 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.
E-3
<PAGE> 120
(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.
E-4
<PAGE> 121
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 AND BAYBANKS, INC., 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> 122
<TABLE>
<S> <C>
/X/ Please mark votes as
in this example
1. APPROVAL AND ADOPTION OF 3. INDEPENDENT AUDITORS
ACQUISITION AGREEMENT
To ratify the appointment by the Board of
To approve and adopt the Directors of the firm of KPMG Peat Marwick
Acquisition Agreement dated LLP as independent auditors of NFS for the
December 22, 1994 between NFS and fiscal year ending December 31, 1995.
BayBanks, Inc. providing for the
merger of a wholly owned subsidiary FOR AGAINST ABSTAIN
of BayBanks, Inc. with and into NFS. / / / / / /
FOR AGAINST ABSTAIN
/ / / / / / Each stockholder should specify by a mark in
the appropriate box how he wishes his shares
voted.
2. ELECTION OF DIRECTORS IF NO SPECIFICATION IS MADE, SHARES WILL BE
VOTED TO APPROVE AND ADOPT THE ACQUISITION
NOMINEES: James H. Adams, A. Jack AGREEMENT, FOR THE ELECTION OF THE ABOVE
Atkinson, Roger H. Osgood, Jr. DIRECTORS, AND FOR RATIFICATION OF THE
APPOINTMENT OF THE INDEPENDENT AUDITORS.
FOR WITHHELD
/ / / / MARK HERE FOR
ADDRESS CHANGE / /
AND NOTE AT LEFT
/ / ___________________________________________
For all nominees except as noted above
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 Signature: ______________________________ Date __________
full title. Only one signature is required in the case
of stock ownership in the name of two or more persons. Signature: ______________________________ Date __________
</TABLE>
<PAGE> 123
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
Part II - 1
<PAGE> 124
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, 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.
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.
</TABLE>
Part II - 2
<PAGE> 125
<TABLE>
<S> <C>
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 herewith.
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 the Prospectus/Proxy Statement.
27. Financial Data Schedule. To be filed by amendment.
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, 1993 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, 1993 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;
Part II - 3
<PAGE> 126
(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.
(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.
Part II - 4
<PAGE> 127
(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 - 5
<PAGE> 128
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boston,
Commonwealth of Massachusetts, on February 3, 1995.
BAYBANKS, INC.
By: /s/ William M. Crozier, Jr.
-------------------------------
William M. Crozier, Jr.
Chairman of the Board and President
POWER OF ATTORNEY
We, the undersigned officers and directors of BayBanks, Inc., hereby
severally constitute and appoint William M. Crozier, Jr., Michael W. Vasily,
Ilene Beal, and Joan E. Tonra, and each of them singly, our true and lawful
attorneys-in-fact, with full power to them in any and all capacities, to sign
any amendments to this Registration Statement on Form S-4 (including any post-
effective amendments thereto), and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact may do or cause to be done by virtue hereof.
Witness our hands and common seal on the dates set forth below.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ William M. Crozier, Jr. Chairman of the Board, President and February 3, 1995
-------------------------------- Director
William M. Crozier, Jr. (Principal Executive Officer)
/s/ Michael W. Vasily Executive Vice President February 3, 1995
--------------------------------- (Principal Financial Officer)
Michael W. Vasily
/s/ Joan E. Tonra Senior Vice President and Controller February 3, 1995
----------------------------------- (Principal Accounting Officer)
Joan E. Tonra
/s/ Donald L. Isaacs Vice Chairman of the Board and February 3, 1995
---------------------------------- Director
Donald L. Isaacs
/s/ Richard F. Pollard Vice Chairman of the Board and Director February 3, 1995
---------------------------------
Richard F. Pollard
</TABLE>
Part II - 6
<PAGE> 129
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ John A. Cervieri Jr. Director February 3, 1995
---------------------------------
John A. Cervieri Jr.
/s/ Robert L. Gable Director February 3, 1995
---------------------------------
Robert L. Gable
/s/ Samuel J. Gerson Director February 3, 1995
---------------------------------
Samuel J. Gerson
/s/ Norman E. MacNeil Director February 3, 1995
------------------------------
Norman E. MacNeil
/s/ Arlene A. McNamee Director February 3, 1995
------------------------------
Arlene A. McNamee
/s/ Thomas R. Piper Director February 3, 1995
--------------------------------
Thomas R. Piper
/s/ Glenn P. Strehle Director February 3, 1995
----------------------------------
Glenn P. Strehle
/s/ Joseph H. Torras Director February 3, 1995
---------------------------------
Joseph H. Torras
</TABLE>
Part II - 7
<PAGE> 130
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
<S> <C> <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. ___
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 herewith. ___
23.1 Consent of KPMG Peat Marwick LLP, independent auditors to BayBanks, Inc. Filed herewith. ___
-------------------------------------------------------
</TABLE>
* Incorporated herein by reference to the document indicated.
Part II - 8
<PAGE> 131
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- ----------
<S> <C> <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 the Prospectus/Proxy Statement. *
27. Financial Data Schedule. To be filed by amendment. *
99.1 Fairness Opinion of Tucker Anthony Incorporated. Filed herewith as Appendix D to the
Prospectus/Proxy Statement. ___
</TABLE>
_______________________________________________________
* Incorporated herein by reference to the document indicated.
Part II - 9
<PAGE> 1
EXHIBIT 5
PALMER & DODGE
One Beacon Street
Boston, MA 02018
Telephone: (617) 573-0100 Facsimile: (617) 227-4420
February 6, 1995
BayBanks, Inc.
175 Federal Street
Boston, MA 02110
This opinion is furnished to you in connection with a registration
statement on Form S-4 (the "Registration Statement") filed with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended, for the registration of 600,600 shares of Common Stock, $2.00 par
value (the "Shares"), of BayBanks, Inc., a Massachusetts corporation (the
"Company"). We understand that the Shares are to be issued as described in the
Registration Statement at not less than their par value.
We are general counsel to the Company and are familiar with the
proceedings of its stockholders and Board of Directors, respectively. For
purposes of this opinion, we have examined and relied upon the Registration
Statement and such other documents and records as we have deemed necessary.
Based upon the foregoing, we are of the opinion that the Shares have
been duly authorized and, when issued as described in the Registration
Statement, will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion with and as part of
the Registration Statement and to the use of our name therein and in the
related prospectus and proxy statement under the caption "Legal Opinions."
Very truly yours,
/s/ Palmer & Dodge
<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
February 6, 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
February 6, 1995
<PAGE> 1
EXHIBIT 23.4
February 3, 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., dated December
22, 1994, 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
