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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
MARCH 23, 1995
BAYBANKS, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 0-959 04-2008039
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
175 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code:
(617) 482-1040
CONFORMED COPY
Exhibit Index appears on page 5
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ITEM 5. OTHER EVENTS.
On March 23, 1995, BayBanks, Inc., a Massachusetts corporation
("BayBanks") and Cornerstone Financial Corporation ("CFC") entered into an
Agreement and Plan of Merger (the "Acquisition Agreement") pursuant to which
BayBanks will acquire CFC (the "Acquisition") in exchange for cash. CFC is the
New Hampshire-based parent company of Cornerstone Bank, Derry, New Hampshire, a
commercial bank. The Acquisition will be effected through a merger of a wholly
owned subsidiary of BayBanks (BayBanks, Inc., a New Hampshire corporation) with
and into CFC, as a result of which CFC will become a wholly owned subsidiary of
BayBanks and will operate under the BayBanks name. In accordance with the terms
of the Acquisition Agreement, each issued and outstanding share of CFC common
stock, no par value per share ("CFC Stock"), other than shares as to which
dissenters' appraisal rights have been exercised, will be converted into the
right to receive an amount equal to $8.80 in cash.
Immediately upon the execution of the Acquisition Agreement, BayBanks
and CFC entered into a Stock Option Agreement (the "Option Agreement") pursuant
to which CFC granted to BayBanks an option (the "Option") to purchase at a price
of $6.625 per share up to 295,000 shares of newly issued CFC Stock, which would
represent approximately 12% of the outstanding shares of CFC Stock, assuming
exercise of the Option. The purchase price is subject to adjustment in the event
of certain issuances of CFC Stock. The Option is exercisable upon the occurrence
of certain events that create the potential for a third party to acquire CFC. If
the Option becomes exercisable, BayBanks or any permitted transferee of BayBanks
may under certain circumstances require CFC to repurchase the Option (in lieu of
its exercise).
Completion of the Acquisition is subject to certain conditions,
including (a) approval by the shareholders of CFC, (b) approval by all requisite
regulatory authorities, and (c) other closing conditions customary in a
transaction of this type. The Acquisition Agreement is subject to termination
under certain circumstances, including if the Acquisition is not consummated on
or before February 28, 1996. Under certain circumstances related to termination
of the Acquisition Agreement, CFC is required to pay BayBanks a termination fee
of $500,000.
Prior to the consummation of the Acquisition, holders of options to
purchase CFC Stock pursuant to CFC employee stock option plans shall be entitled
to exercise such options. If such options are not exercised prior to the
consummation of the Acquisition, such holders shall be entitled to receive from
the Company in cancellation of such options cash payments calculated in
accordance with the terms of the Agreement. Subject to the foregoing, all
options issued under the Company's employee stock option plans shall terminate
upon consummation of the Acquisition.
Directors and executive officers of CFC having the right to vote in the
aggregate 192,778 shares of CFC Stock, or approximately 9% of the presently
outstanding CFC Stock, have agreed to vote their shares in favor of approval of
the Acquisition and against any other acquisition proposal.
CFC has agreed to send notice of redemption to the holders of its
outstanding convertible debentures if so requested by BayBanks. Although
circumstances could cause this decision to change, BayBanks has informed CFC
that it currently expects to redeem the outstanding debentures in full.
BayBanks anticipates that redemption notices will be sent to bondholders after
receipt of all regulatory approvals for the Acquisition, and that the
redemption would become effective simultaneously with the Acquisition.
The Acquisition Agreement and Option Agreement are attached hereto as
exhibits and incorporated herein by reference. The foregoing summary of such
exhibits is qualified in its entirety by reference to the complete text of such
exhibits.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits:
Exhibit
No. Description
2(a) Agreement and Plan of Merger among Cornerstone Financial
Corporation and BayBanks, Inc. (a Massachusetts corporation)
and BayBanks, Inc. (a New Hampshire corporation) dated March
23, 1995.
2(b) Stock Option Agreement by and between Cornerstone Financial
Corporation, a New Hampshire corporation and BayBanks, Inc.,
a Massachusetts corporation dated March 23, 1995.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BAYBANKS, INC.
Date: March 30, 1995 By: /s/ Michael W. Vasily
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Michael W. Vasily
Executive Vice President and Treasurer
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EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
2(a) Agreement and Plan of Merger among Cornerstone Financial
Corporation and BayBanks, Inc. (a Massachusetts corporation)
and BayBanks, Inc. (a New Hampshire corporation) dated March
23, 1995.
2(b) Stock Option Agreement by and between Cornerstone Financial
Corporation, a New Hampshire corporation and BayBanks, Inc.,
a Massachusetts corporation dated March 23, 1995.
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EXHIBIT 2(a)
-------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
among
CORNERSTONE FINANCIAL CORPORATION
and
BAYBANKS, INC. (a Massachusetts corporation)
and
BAYBANKS, INC. (a New Hampshire corporation)
Dated as of March 23, 1995
-------------------------------------------------------
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TABLE OF CONTENTS
ARTICLE I
<TABLE>
<CAPTION>
<S> <C> <C> <C>
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2 Effective Time; Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.3 Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.4 Articles of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.5 Directors and Officers of the Surviving Corporation . . . . . . . . . . . . . . . 2
ARTICLE II
CONVERSION OF SECURITIES . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.1 Conversion of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.2 Employee Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.3 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.4 Surrender of Shares; Stock Transfer Books . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . 5
SECTION 3.1 Organization and Qualification; Subsidiaries . . . . . . . . . . . . . . . . . . . 5
SECTION 3.2 Articles of Incorporation; By-Laws; Corporate Records . . . . . . . . . . . . . . 6
SECTION 3.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3.4 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 3.5 No Conflict; Required Filings and Consents . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.6 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.7 Reports and Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.8 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.9 Absence of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.10 Employee Benefit Plans; Employee Relations . . . . . . . . . . . . . . . . . . . 11
SECTION 3.11 Real Property and Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.13 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.14 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.15 Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.16 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.17 Loan Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.18 Investment Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.19 Derivative Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.20 Bank Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.21 Certain Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.22 Material Interests of Certain Persons . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.23 Assistance Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.24 Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.25 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.26 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
SECTION 3.27 Administration of Fiduciary Accounts. . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT . . . . . . . . . . . . . . . . . . . . . 19
SECTION 4.1 Corporate Organization 20
SECTION 4.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4.3 No Conflict; Required Filings and Consents . . . . . . . . . . . . . . . . . . 20
SECTION 4.4 Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 4.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 4.6 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER. . . . . . . . . . . . . . . . 22
SECTION 5.1 Conduct of Business by the Company Pending the Merger . . . . . . . . . . . . 22
SECTION 5.2 Parent Products and Services . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 5.3 Covenant of Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VI
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . 26
SECTION 6.1 Stockholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 6.2 Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 6.3 Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 6.4 Access to Information; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 6.5 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 6.6 Employee Benefits Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 6.7 Bank Directors and Officers; Indemnification; Insurance . . . . . . . . . . . 31
SECTION 6.8 Financial and Other Statements . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 6.9 Further Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 6.10 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 6.11 Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 6.12 Update of Disclosure Schedules . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 6.13 Current Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 6.14 System Conversions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 6.15 Redemption of Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6.16 Affiliate Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VII
CONDITIONS TO THE MERGER . . . . . . . . . . . . . . . . . 35
SECTION 7.1 Conditions to Each Party's Obligations to Effect the Merger . . . . . . . . . 35
SECTION 7.2 Conditions to Obligations of Parent and Purchaser . . . . . . . . . . . . . . 36
SECTION 7.3 Conditions to Obligations of the Company . . . . . . . . . . . . . . . . . . . 38
(ii)
</TABLE>
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<TABLE>
<CAPTION>
ARTICLE VIII
<S> <C> <C> <C>
TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . 39
SECTION 8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 8.2 Termination Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 8.3 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.4 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.5 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.6 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE IX
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . 42
SECTION 9.1 Non-Survival of Representations, Warranties and Agreements . . . . . . . . . 42
SECTION 9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 9.3 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 9.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 9.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 9.6 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 9.7 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 9.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 9.9 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 9.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(iii)
</TABLE>
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AGREEMENT AND PLAN OF MERGER, dated as of March 23, 1995 (this
"Agreement"), by and among BayBanks, Inc., a Massachusetts corporation
("Parent"), BayBanks, Inc., a New Hampshire corporation that is a
wholly-owned subsidiary of Parent ("Purchaser"), and Cornerstone
Financial Corporation, a New Hampshire corporation (the "Company").
WHEREAS, the Boards of Directors of Parent and the Company have each
determined that it is in the best interests of their respective stockholders for
Parent to acquire the Company upon the terms and subject to the conditions set
forth herein;
WHEREAS, in furtherance of such acquisition, the Boards of Directors of
Parent and the Company have each approved the transactions contemplated by this
Agreement, including the merger of Purchaser with and into the Company in
accordance with the New Hampshire Business Corporation Act ("New Hampshire
Law") upon the terms and subject to the conditions set forth herein (the
"Merger");
WHEREAS, Parent and the Company have entered into a Stock Option
Agreement, dated as of the date hereof (the "Stock Option Agreement"), providing
for the granting by the Company to Parent of an option to purchase from the
Company up to 295,000 shares representing 14% of the outstanding shares of
common stock, without par value, of the Company ("Company Common Stock") (shares
of Company Common Stock being hereinafter collectively referred to as "Shares")
at $6.625 per Share subject to the conditions set forth therein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Purchaser and the Company hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions
set forth in Article VII, and in accordance with New Hampshire Law, at the
Effective Time (as hereinafter defined), Purchaser shall be merged with and into
the Company under the charter of the Company and the name of the Purchaser. As a
result of the Merger, the separate corporate existence of Purchaser shall cease
and the Company shall continue as the surviving corporation of the Merger (the
"Surviving Corporation").
SECTION 1.2 Effective Time; Closing. As promptly as practicable
after the approvals of all Governmental Entities (as hereinafter defined)
necessary to consummate the Merger have been received, all applicable waiting
periods in connection with such approvals shall have expired and all of the
conditions set forth in Article VII shall have been satisfied or, if
permissible, waived by the party entitled to the benefit of the same, Purchaser
and the Company shall duly execute and file articles of merger (the
"Articles of Merger") with the Secretary of State of the State of New
Hampshire in accordance with New Hampshire Law. The Merger shall become
effective at such time as the Articles of Merger are filed with the New
Hampshire Secretary of State or at such later time as is specified in the
Articles of Merger (the "Effective Time"). Prior to such filing, a
closing shall be held at the offices of Palmer & Dodge, One Beacon Street,
Boston, Massachusetts 02108, or such other place as the parties shall agree, for
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the purpose of confirming the satisfaction or waiver, as the case may be, of the
conditions set forth in Article VII (the date of such closing being the
"Effective Date").
SECTION 1.3 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided herein and in the applicable provisions of New
Hampshire Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers and
franchises of the Company and Purchaser shall vest in the Surviving Corporation,
and all debts, liabilities, obligations, restrictions, disabilities and duties
of the Company and Purchaser shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
SECTION 1.4 Articles of Incorporation. Unless otherwise determined by
Parent prior to the Effective Time, at the Effective Time, the Articles of
Incorporation of the Company shall be amended as set forth in Annex I to this
Agreement, and, as so amended, shall be the Articles of Incorporation of the
Surviving Corporation until thereafter further amended as provided by law and
such Articles of Incorporation.
SECTION 1.5 Directors and Officers of the Surviving Corporation. The
directors of Purchaser immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation, each to hold office in
accordance with the Articles of Incorporation and By-Laws of the Surviving
Corporation, and the officers of the Purchaser immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation, in
each case until their respective successors are duly elected or appointed and
qualified.
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.1 Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of Purchaser, the
Company or the holders of any of the following securities:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares to be cancelled pursuant to Section 2.1(b)
and any Dissenting Shares (as hereinafter defined)) shall be cancelled and shall
be converted automatically into the right to receive an amount equal to $8.80 in
cash (the "Merger Consideration") payable, without interest, to the
holder of such Share, upon surrender, in the manner provided in Section 2.4, of
the certificate that formerly evidenced such Share.
(b) Each Share held in the treasury of the Company and each
Share owned by Purchaser, Parent or any direct or indirect wholly owned
subsidiary of Parent or of the Company immediately prior to the Effective Time
shall be cancelled without any conversion thereof and no payment or distribution
shall be made with respect thereto.
(c) Each share of Common Stock of Purchaser issued and
outstanding immediately prior to the Effective Time shall be converted
automatically into one validly issued, fully paid and nonassessable share of
common stock of the Surviving Corporation.
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SECTION 2.2 Employee Stock Options. Commencing at least 15 days
prior to the Effective Time, each holder of a then outstanding stock option to
purchase Shares pursuant to the Company's 1984 Stock Option Plan and its 1987
Non-Qualified Stock Option Plan (the "Company Option Plans") (it being
understood and agreed that the aggregate number of Shares subject to purchase
under such stock options is not and shall not at the Effective Time be more than
102,605 Shares and that no additional stock options shall be granted after the
date of this Agreement) shall be entitled to exercise such option (whether or
not such option would otherwise have been exercisable), and if such options are
not so exercised prior to the Effective Time, immediately prior to the Effective
Time each such holder shall be entitled to receive from the Company in
cancellation of such option a cash payment in an amount equal to the excess of
the Merger Consideration over the per share exercise price of such option,
multiplied by the number of Shares covered by such option. To give effect to the
foregoing, prior to the Effective Time, the Company shall obtain all necessary
consents of the holders of options to the cancellation effective prior to the
Effective Time, of such options and the cancellation of any right to acquire
equity securities of the Company from and after the Effective Time. Subject to
the foregoing, the Company Option Plans and all options issued thereunder shall
terminate at the Effective Time.
SECTION 2.3 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, Shares that are outstanding immediately prior to the Effective Time
and that are held by stockholders who shall have not voted in favor of the
Merger or consented thereto in writing and who shall have demanded properly in
writing appraisal of such Shares in accordance with Sections 293-A:13.21 and
13.23 of New Hampshire Law (collectively, the "Dissenting Shares") shall
not be converted into or represent the right to receive the Merger
Consideration. Such stockholders shall be entitled to receive payment of the
appraised value of such Shares held by them in accordance with the provisions of
Section 293-A: 13.25 of New Hampshire Law, except that all Dissenting Shares
held by stockholders who shall have failed to perfect or who effectively shall
have withdrawn or lost their rights to appraisal of such Shares under such
sections shall thereupon be deemed to have been converted into and to have
become exchangeable for, as of the Effective Time, the right to receive the
Merger Consideration, without any interest thereon, upon surrender, in the
manner provided in Section 2.4, of the certificate or certificates that formerly
evidenced such Shares.
(b) The Company shall give Parent (i) prompt notice of any
demands for appraisal received by the Company, withdrawals of such demands, and
any other instruments served pursuant to New Hampshire Law and received by the
Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under New Hampshire Law consistent with the
obligations of the Company under New Hampshire Law. The Company shall not,
except with the prior written consent of Parent, make any payment with respect
to any demands for appraisal or offer to settle or settle any such demands.
SECTION 2.4 Surrender of Shares; Stock Transfer Books.
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(a) Prior to the Effective Time, Purchaser shall designate a
domestic bank or trust company with capital, surplus and undivided profits
aggregating in excess of $100 million (as shown on the most recent report of
condition of such bank or trust company filed with its principal federal bank
regulatory authority) to act as agent (the "Paying Agent") for the
holders of Shares in connection with the Merger to receive the funds to which
holders of Shares shall become entitled pursuant to Section 2.1(a). Immediately
prior to the Effective Time, Parent shall deposit, or cause to be deposited,
with the Paying Agent, for the benefit of the holders of Certificates (as
hereinafter defined), for exchange in accordance with this Article II, such
amount of cash as is sufficient to pay the aggregate Merger Consideration which
holders of Shares are entitled to receive pursuant to Section 2.1 and be paid
pursuant to this Section 2.4 in exchange for outstanding Shares. Such funds
shall be invested by the Paying Agent as directed by the Surviving Corporation,
provided that such investments shall be in obligations of or guaranteed by the
United States of America or of any agency thereof and backed by the full faith
and credit of the United States of America, in commercial paper obligations
rated A-1 or P-1 or better by Moody's Investors Services, Inc. or Standard &
Poor's Corporation, respectively, or in deposit accounts, certificates of
deposit or banker's acceptances of, repurchase or reverse repurchase agreements
with, or Eurodollar time deposits purchased from, commercial banks with capital,
surplus and undivided profits aggregating in excess of $100 million (as shown on
the most recent financial statements of such bank filed with its principal bank
regulatory authority).
(b) Promptly after the Effective Time (but in no event more
than three business days thereafter), Parent and the Surviving Corporation shall
cause to be mailed to each person who was, at the Effective Time, a holder of
record of Shares entitled to receive the Merger Consideration pursuant to
Section 2.1(a) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
evidencing such Shares (the "Certificates") shall pass, only upon proper
delivery of the Certificates to the Paying Agent) and instructions for use in
effecting the surrender of the Certificates pursuant to such letter of
transmittal. The Company shall have the right to review and approve the letter
of transmittal, the instructions and any accompanying letter. Upon surrender to
the Paying Agent of a Certificate, together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions thereto,
and such other documents as may be required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange therefor the
Merger Consideration for each Share formerly evidenced by such Certificate, and
such Certificate shall then be cancelled. No interest shall accrue or be paid on
the Merger Consideration payable upon the surrender of any Certificate for the
benefit of the holder of such Certificate. If payment of the Merger
Consideration is to be made to a person other than the person in whose name the
surrendered Certificate is registered on the stock transfer books of the
Company, it shall be a condition of payment that the Certificate so surrendered
shall be endorsed properly or otherwise be in proper form for transfer and that
the person requesting such payment shall have paid all transfer and other taxes
required by reason of the payment of the Merger Consideration to a person other
than the registered holder of the Certificate surrendered or shall have
established to the satisfaction of the Surviving Corporation that such taxes
either have been paid or are not applicable.
(c) At any time following the sixth month after the Effective
Time, the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any funds
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which had been made available to the Paying Agent and not disbursed to holders
of Shares (including, without limitation, all interest and other income received
by the Paying Agent in respect of all funds made available to it), and
thereafter such holders shall be entitled to look to Parent and the Surviving
Corporation (subject to abandoned property, escheat and other similar laws) only
as general creditors thereof with respect to any Merger Consideration that may
be payable upon due surrender of the Certificates held by them. Notwithstanding
the foregoing, neither the Surviving Corporation nor the Paying Agent shall be
liable to any holder of a Share for any Merger Consideration delivered in
respect of such Share to a public official pursuant to any abandoned property,
escheat or other similar law.
(d) At the close of business on the Effective Date, the stock
transfer books of the Company shall be closed and thereafter there shall be no
further registration of transfers of Shares on the records of the Company. From
and after the Effective Time, the holders of Shares outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to such
Shares except as otherwise provided herein or by applicable law.
(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
Parent or the Surviving Corporation, upon the posting by such person of a bond
in such amount as Parent or the Surviving Corporation may reasonably direct as
indemnity against any claim that may be made against it with respect to such
Certificate, the Paying Agent will issue in exchange for such lost, stolen or
destroyed Certificate, the cash representing the Merger Consideration
deliverable in respect thereof pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Purchaser as
of the date hereof and, unless otherwise stated herein, on and as of the
Effective Date that:
SECTION 3.1 Organization and Qualification; Subsidiaries.
(a) The Company is a corporation duly organized, validly
existing and in good standing under New Hampshire Law and a bank holding company
registered with the Board of Governors of the Federal Reserve System (the
"FRB") under the Bank Holding Company Act of 1956, as amended (the
"BHCA"). The deposit accounts of Cornerstone Bank, a New Hampshire
chartered trust company and a wholly-owned subsidiary of the Company (the
"Bank") are insured by the Bank Insurance Fund of the Federal Deposit
Insurance Corporation (the "FDIC") to the fullest extent permitted by
law, and all premiums and assessments required in connection therewith have been
paid by the Bank. The Bank is a New Hampshire chartered trust company duly
organized, validly existing and in good standing under the laws of the State of
New Hampshire. Each Subsidiary (as defined in Section 9.3(g) below), other than
the Bank, is a corporation or other entity duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
organization. Each of the Company and each
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<PAGE> 10
Subsidiary has the requisite power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as it is now being conducted, except where the failure to be so organized,
existing or in good standing or to have such power, authority and governmental
approvals would not, individually or in the aggregate, have a Material Adverse
Effect (as defined below). Each of the Company and each Subsidiary is duly
qualified or licensed as a foreign corporation (in the case of those
subsidiaries that are corporations) to do business and is in good standing in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except where the failure to be so qualified or licensed and
be in good standing would not, individually or in the aggregate, have a Material
Adverse Effect.
(b) When used in connection with the Company or any Subsidiary,
the term "Material Adverse Effect" means any change or effect that is or
would be, materially adverse to the business, properties, assets, liabilities,
prospects, financial condition or results of operations of the Company and its
Subsidiaries taken as a whole, other than any such change or effect attributable
to or resulting from changes in regulations or legislation affecting New
Hampshire banks generally or changes in federal, state or local tax laws.
(c) A true and complete list of all the Subsidiaries, together
with the jurisdiction of incorporation or organization of each Subsidiary and
the percentage of the outstanding capital stock or other ownership interest of
each Subsidiary owned directly or indirectly by the Company, is set forth in
Section 3.1 of the Disclosure Schedule previously delivered by the Company to
Parent (the "Disclosure Schedule"). Except for the Bank and Birchwood
Development Corporation, the Company does not directly own five percent or more
of the capital stock or other equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any equity or similar
interest in, any corporation, partnership, joint venture or other business
association or entity and, except as disclosed in Section 3.1 of the Disclosure
Schedule, the Company does not indirectly own any such interest.
SECTION 3.2 Articles of Incorporation; By-Laws; Corporate Records. The
Company has heretofore made available to Parent a complete and correct copy of
the Articles of Incorporation and the By-Laws or equivalent organizational
documents, each as amended to date, of the Company and each Subsidiary. Such
Articles of Incorporation, By-Laws and equivalent organizational documents are
in full force and effect and no proceeding for the amendment thereof has been
commenced. Neither the Company nor any Subsidiary is in violation of any
provision of its Articles of Incorporation or equivalent organizational
documents or in violation of its By-Laws. The minute books of the Company and
each Subsidiary contain true and correct records in all material respects of all
meetings of their respective stockholders and boards of directors.
SECTION 3.3 Capitalization.
(a) The authorized capital stock of the Company consists of
8,000,000 Shares. As of the date hereof, (a) 2,107,017 Shares are issued and
outstanding, all of which are validly issued, fully paid and nonassessable, (b)
146,502 Shares are held in the treasury of the Company, (c) no Shares are held
by the Subsidiaries, (d) 102,605 Shares are reserved for future
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<PAGE> 11
issuance upon the exercise of outstanding options granted pursuant to the
Company Option Plans, (e) 15,196 Shares are reserved for future issuance upon
conversion of the Company's 8.75% Convertible Subordinated Debentures due July
1, 1997 (the "8.75% Debentures"), (f) 214,935 Shares are reserved for future
issuance upon conversion of the Company's 7% Convertible Subordinated Debentures
due January 1, 1999 (the "7% Debentures") and (g) 295,000 Shares are reserved
for future issuance pursuant to the Stock Option Agreement. Except as set forth
in this Section 3.3, and except for the Stock Option Agreement, there are no
subscriptions, options, warrants, calls or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock of the Company or any Subsidiary, including without limitation any
commitments to make payments with respect to capital stock or the value thereof,
or obligating the Company or any Subsidiary to issue or sell any shares of
capital stock of, or other equity interests in, the Company or any Subsidiary.
All Shares subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and nonassessable. Except as
set forth in Section 3.3(a) of the Disclosure Schedule, there are no outstanding
contractual obligations of the Company or any Subsidiary to repurchase, redeem
or otherwise acquire any Shares or any capital stock of any Subsidiary or to
provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in, any Subsidiary. Each outstanding share of capital
stock of each Subsidiary is duly authorized, validly issued, fully paid, and
nonassessable. The Company owns, directly or indirectly through a Subsidiary,
all of the issued and outstanding shares of capital stock of the Bank and of
each of the other Subsidiaries (or, in the case of Subsidiaries that are not
corporations, all of the outstanding partnership interests or beneficial
interests, as the case may be), free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations on
the Company's or such other Subsidiary's voting rights, charges and other
encumbrances of any nature whatsoever.
(b) The Company has $155,000 of 8.75% Debentures outstanding,
which are convertible in to an aggregate of 15,196 Shares at a conversion price
of $10.20 per Share, and $3,353,000 of 7% Debentures outstanding, which are
convertible in to an aggregate of 214,935 Shares at a conversion price of $15.60
per Share. The Company has paid in full or accrued all amounts now or heretofore
due under each of the 8.75% Debentures and the 7% Debentures, and has satisfied
in full or provided for all of its liabilities and obligations thereunder that
are presently or heretofore were required to be satisfied or provided for, and
is not in default under any of the 8.75% Debentures or the 7% Debentures or
either of the respective Indentures between the Company and Amoskeag Bank, as
Trustee, with respect to the 8.75% Debentures and the 7% Debentures (each, an
"Indenture"), nor does any condition exist that with notice or lapse of time or
both would constitute a default under any of such Debentures or Indentures.
SECTION 3.4 Authority. The Company has all necessary corporate
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated by this Agreement
have been duly and validly authorized by all necessary corporate action and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or
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<PAGE> 12
to consummate the transactions contemplated by this Agreement (other than, with
respect to the Merger, the approval and adoption of this Agreement by the
holders of the then outstanding Shares, and the filing and recordation of
appropriate merger documents as required by New Hampshire Law). This Agreement
has been duly and validly executed and delivered by the Company and, assuming
the due authorization, execution and delivery by Parent and Purchaser,
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
SECTION 3.5 No Conflict; Required Filings and Consents.
(a) Except as set forth in Section 3.5 of the Disclosure
Schedule, the execution, delivery and performance of this Agreement by the
Company does not, and the consummation by the Company and its Subsidiaries of
the transactions contemplated by this Agreement will not, (i) conflict with or
violate the Articles of Incorporation or By-Laws or equivalent organizational
documents of the Company or the Bank, (ii) assuming that the consents and
approvals referred to in Section 3.5(b) are duly obtained, conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to the
Company or any Subsidiary or by which any property or asset of the Company or
any Subsidiary is bound or affected, or (iii) require a consent under or result
in any breach of or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of the Company
or any Subsidiary pursuant to, the 7% Debentures, the 8.75% Debentures, or any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary or any property
or asset of the Company or any Subsidiary is bound or affected.
(b) The execution, delivery and performance of this Agreement
by the Company does not require any consent, approval, authorization or permit
of, or filing with or notification to, any court, administrative agency or
commission or other governmental or regulatory authority or instrumentally,
domestic or foreign, including, without limitation, any Bank Regulator (as
hereinafter defined) (each a "Governmental Entity"), except (i) for
applicable requirements, if any, of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and filing and recordation of appropriate
merger documents as required by New Hampshire Law, and (ii) for consents and
approvals of or filings, registrations or negotiations with the FRB, the New
Hampshire Board of Trust Company Incorporation ("NHBTI"), and the
Massachusetts Board of Bank Incorporation (the "MBBI"), and those
required to satisfy Section 6.3(b) hereof.
SECTION 3.6 Compliance. Except as set forth in Section 3.6 of
the Disclosure Schedule, neither the Company nor any Subsidiary is in conflict
with, or in default or violation of, (a) any law, rule, regulation, order,
judgment or decree applicable to the Company or any Subsidiary or by which any
property or asset of the Company or any Subsidiary is bound or affected or (b)
the 7% Debentures, the 8.75% Debentures or any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary or any property or asset of the Company or any
Subsidiary is bound or affected.
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<PAGE> 13
SECTION 3.7 Reports and Financial Statements.
(a) The Company has filed, and made available to Parent, all
forms, reports and documents required to be filed by it with the SEC since
January 1, 1990, and has heretofore delivered to Parent, in the form filed with
the SEC, (i) its Annual Reports on Form 10-K for the fiscal years ended December
31, 1991, December 31, 1992 and December 31, 1993, respectively, (ii) its
Quarterly Reports on Form 10-Q for the periods ended March 31, June 30, and
September 30, 1994 and (iii) reports provided to stockholders, and all proxy
statements relating to the Company's meetings of stockholders (whether annual or
special) held, since January 1, 1991, and (iv) all other forms, reports and
registration statements (other than Quarterly Reports on Form 10-Q not referred
to in clause (ii) above) filed by the Company with the SEC since January 1, 1991
(the forms, reports and other documents referred to in clauses (i), (ii), (iii)
and (iv) above being referred to herein, collectively, as the "SEC
Reports"). The Company also has provided to Parent copies of the audited
consolidated balance sheet of the Company and its Subsidiaries dated December
31, 1994, and the audited consolidated income statement of the Company and its
Subsidiaries for the year ended December 31, 1994 and notes to such financial
statements (the "1994 Financial Statements"). As of their respective dates, the
SEC Reports (A) complied in all material respects as to form and substance with
the requirements of the Securities Act and the Exchange Act, as the case may be,
and the rules and regulations thereunder and (B) did not at the time they were
filed contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. No Subsidiary is required to file any form, report or
other document with the SEC.
(b) The Company and each of the Subsidiaries has filed, and,
except as prohibited by law, made available to Parent all forms, reports and
documents required to be filed by each of them with all appropriate federal or
state governmental or regulatory authorities charged with the supervision of
banks or bank holding companies or engaged in the insurance of bank deposits
("Bank Regulators") since January 1, 1991 (the "Bank Reports").
Such reports as of their respective date of filing complied in all material
respects with the requirements of all laws, rules and regulations enforced or
promulgated by such Bank Regulators.
(c) Each of the consolidated financial statements of the
Company and its Subsidiaries, including, in each case, the notes thereto,
contained in the SEC Reports or in the 1994 Financial Statements was prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated ("GAAP") (except as may be
indicated in the notes thereto) and each fairly presented the consolidated
financial position, results of operations and changes in financial position of
the Company and its Subsidiaries as at the respective dates thereof and for the
respective periods indicated therein, subject, in the case of unaudited
statements, to normal and recurring year-end adjustments which were not and are
not expected, individually or in the aggregate, to have a Material Adverse
Effect.
(d) Except as and to the extent set forth on the consolidated
balance sheet of the Company and its Subsidiaries as at December 31, 1994,
including the notes thereto (the
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<PAGE> 14
"1994 Balance Sheet"), neither the Company nor any subsidiary has any
liability or obligation of any nature (whether accrued, absolute, contingent or
otherwise) which would be required to be reflected on a balance sheet, or in the
notes thereto, prepared in accordance with GAAP, except for liabilities and
obligations incurred in the ordinary course of business consistent with past
practice since December 31, 1994, or which would not, individually or in the
aggregate, have a Material Adverse Effect.
(e) The Company has made available to Parent complete and
correct copies of all amendments and modifications that have not been filed by
the Company with the SEC to all agreements, documents and other instruments that
previously had been filed by the Company with the SEC and are currently in
effect.
SECTION 3.8 Absence of Certain Changes or Events. Since
December 31, 1993, except as set forth in Section 3.8 of the Disclosure
Schedule, as contemplated by Section 5.1 of this Agreement or as disclosed in
any SEC Report filed since December 31, 1993 and prior to the date of this
Agreement, the Company and the Bank have conducted their businesses only in the
ordinary course and in a manner consistent with past practice and, since
December 31, 1993, there has not been (a) any change in the results of
operations or financial condition of the Company or any Subsidiary having,
individually or in the aggregate, a Material Adverse Effect, (b) any damage,
destruction or loss with respect to any property or asset of the Company or any
Subsidiary having, individually or in the aggregate, a Material Adverse Effect,
(c) any change by the Company or any Subsidiary in its accounting methods,
principles or practices, other than changes required by applicable law or GAAP
or regulatory accounting as concurred in by the Company's independent
accountants, (d) any revaluation by the Company or any Subsidiary of any asset,
including, without limitation, any writing down of the value of assets or
writing off of notes or accounts receivable, other than in the ordinary course
of business consistent with past practice and which has not had a Material
Adverse Effect, (e) any entry by the Company or any Subsidiary into any contract
or commitment of more than $50,000 or with a term of more than one year, (f) any
declaration, setting aside or payment of any dividend or distribution in respect
of any capital stock of the Company or any Subsidiary or any redemption,
purchase or other acquisition of, or payment with respect to, any of its
securities, (g) 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 Company or any
Subsidiary, except, with respect to cash compensation, in the ordinary course of
business consistent with past practice, (h) any material election made by the
Company or any Subsidiary for federal or state income tax purposes, or (i) any
change in the credit policies or procedures of the Company or any Subsidiary,
the effect of which was or is to make any such policy or procedure less
restrictive in any material respect.
SECTION 3.9 Absence of Litigation. Except as set forth in
Section 3.9 of the Disclosure Schedule, there is no claim, action, suit,
proceeding or investigation pending or, to the knowledge of the Company,
threatened against the Company or any Subsidiary, or any
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<PAGE> 15
property or asset of the Company or any Subsidiary, before any court, arbitrator
or administrative, governmental or regulatory authority or body, domestic or
foreign. Such pending or threatened claims, actions, suits, proceedings or
investigations are not expected individually, or in the aggregate, to have a
Material Adverse Effect. Neither the Company nor any Subsidiary nor any property
or asset of the Company or any Subsidiary is subject to any order, writ,
judgment, injunction, decree, determination or award.
SECTION 3.10 Employee Benefit Plans; Employee Relations.
(a) Plans. Section 3.10(a) of the Disclosure Schedule
sets forth a list of every Employee Program (as hereinafter defined) that has
been maintained by the Company or any Affiliate (as hereinafter defined) at any
time during the three-year period ending on the Effective Date.
(b) Qualification Under the Code. Each Employee Program
which has ever been maintained by the Company or any Affiliate (as hereinafter
defined) and which has at any time been intended to qualify under Section 401(a)
or 501(c) of the Internal Revenue Code of 1986, as amended (the "Code")
has received a favorable determination or approval letter from the Internal
Revenue Service ("IRS") regarding its qualification under such section
and has, in fact, been continuously qualified under the applicable section of
the Code since the effective date of such Employee Program. No event or omission
has occurred which would cause any such Employee Program to lose its
qualification under the applicable Code section.
(c) Compliance with Laws. The Company and each
Affiliate are in compliance in all material respects with all applicable
statutes, orders, governmental rules or regulations, including without
limitation ERISA and the Code with respect to all Employee Programs. Without
limiting the generality of the foregoing, with respect to any Employee Program
ever maintained by the Company, there has occurred no "prohibited transaction,"
as defined in Section 406 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") or Section 4975 of the Code, or breach of any
duty under ERISA or other applicable law (including, without limitation, any
health care continuation requirements or any other tax law requirements, or
conditions to favorable tax treatment, applicable to such plan) which could
result, directly or indirectly, in any taxes, penalties or other liability to
the Company, Parent, Purchaser or the Surviving Corporation. All group health
plans of the Company have been operated in compliance with the health care
continuation coverage requirements of Sections 601 through 608 of ERISA and
Section 4980B of the Code. No litigation, arbitration, or governmental
administrative proceeding (or investigation) or other proceeding (other than
those relating to routine claims for benefits) is pending or threatened with
respect to any such Employee Program. The Company does not know, and has no
reason to know of any failure of any party to comply with any laws applicable to
the Employee Programs that have been maintained by the Company.
(d) Funding Status, Etc. Neither the Company nor any
Affiliate maintains or contributes to any plan subject to Title IV of ERISA.
There is no unpaid contribution due with respect to any Employee Program as
required under the minimum funding standards of Section 412 of the Code. All
contributions required to be made under the terms of any Employee
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<PAGE> 16
Program (or any insurance or other contract or funding arrangement maintained in
connection with any Employee Program) have been timely made. The present value
of the benefits accrued under the Company's Deferred Compensation Plan as
determined using reasonable actuarial assumptions do not exceed the fair market
value of the assets held under the related Trust Agreement.
(e) Retiree Benefits. Neither the Company nor any Affiliate
has ever provided health care or any other nonpension benefits to any employees
after their employment is terminated (other than as required by Section 4980B
of the Code or part 6 of subtitle B of title I of ERISA) or has ever promised
to provide such post-termination benefits.
(f) Multiemployer Plans. Neither the Company nor any
Affiliate has ever maintained or contributed to any "multiemployer plan" as that
term is defined in Section 4001(a)(3) of ERISA, and neither the Company nor any
Affiliate has incurred any liability under Sections 4062, 4063 or 4201 of ERISA.
(g) Documents Delivered. With respect to each Employee
Program maintained by the Company within three years preceding the Effective
Date, complete and correct copies of the following documents (if applicable to
such Employee Program) have previously been delivered to the Parent: (i) all
documents embodying or governing such Employee Program, and any funding medium
for the Employee Program (including, without limitation , trust agreements) as
they may have been amended to the date hereof; (ii) the most recent IRS
determination or approval letter with respect to such Employee Program under
Code Section 401 or 501(c)(9), and any applications for determination or
approval subsequently filed with the IRS; (iii) the three most recently filed
IRS Forms 5500, with all applicable schedules and accountants' opinions attached
thereto; (iv) the summary plan description for such Employee Program (or other
descriptions of such Employee Program provided to employees) and all
modifications thereto; (v) any insurance policy (including any fiduciary
liability insurance policy) related to such Employee Program; (vi) any documents
evidencing any loan to an Employee Program that is a leveraged employee stock
ownership plan; (vii) the three most recent actuarial valuations for any plan
subject to Title IV of ERISA; and (viii) all other materials reasonably
necessary for the Surviving Corporation and Purchaser to perform any of its
responsibilities with respect to any Employee Program which will remain in
effect subsequent to the Closing (including, without limitation, health care
continuation requirements).
(h) Definitions. For the purposes of this Section:
(i) "Employee Program" means (i) all employee
benefit plans within the meaning of ERISA Section 3(3), including, but
not limited to, multiple employer welfare arrangements (within the
meaning of ERISA Section 3(4)), plans to which more than one
unaffiliated employer contributes and employee benefit plans (such as
foreign or excess benefit plans) which are not subject to ERISA; and
(B) all stock or cash option plans, restricted stock plans, stock
purchase plans, bonus or incentive award plans, severance pay policies
or agreements, deferred compensation agreements, supplemental income
arrangements, vacation plans, health, disability, life insurance and
all other employee benefit plans, agreements, and arrangements not
described in (i) above. In the
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<PAGE> 17
case of an Employee Program funded through an organization described
in Code Section 501(c)(9), each reference to such Employee Program
shall include a reference to such organization.
(ii) An entity "maintains" an Employee Program
if such entity sponsors, contributes to, or provides (or has promised
to provide) benefits under such Employee Program, or has any obligation
(by agreement or under applicable law) to contribute to or provide
benefits under such Employee Program, or if such Employee Program
provides benefits to or otherwise covers employees of such entity (or
their spouses, dependents or beneficiaries).
(iii) An entity is an "Affiliate" of the
Company if it would have ever been considered a single employer with
Company under ERISA Section 4001(b) or part of the same "controlled
group" as Company for purposes of ERISA Section 302(d)(8)(C).
(i) Employee Relations. The Company and its
Subsidiaries have an aggregate of approximately 111 employees and generally
enjoy good employer-employee relationships. Neither the Company nor any
Subsidiary is a party to any collective bargaining or other labor union or guild
contract. There is no pending or, to the knowledge of the Company, threatened,
labor dispute, strike or work stoppage against the Company or any of the
Subsidiaries. Neither the Company nor any Subsidiary, nor, to the knowledge of
the Company, their respective representatives or employees, has committed any
unfair labor practices in connection with the operation of the respective
businesses of the Company or any Subsidiary, and there is no pending or, to the
knowledge of the Cmpany, threatened, charge or complaint against the Company or
any Subsidiary by the National Labor Relations Board or any comparable state
agency. The Company and its Subsidiaries are not delinquent in payments to any
of its employees or consultants for any wages, salaries, commissions, bonuses or
other direct compensation for any services performed by them to the date hereof
or amounts required to be reimbursed to such employees. Except as disclosed in
Section 3.10(i) of the Disclosure Schedule, upon termination of the employment
of any said employees, neither the Company and its Subsidiaries nor the
Purchaser will by reason of anything done prior to the Effective Date be liable
to any of said employees or consultants for severance pay or any other payments
(other than accrued salary, vacation or sick pay in accordance with the
Company's normal policies). Section 3.10(i) of the Disclosure Schedule contains
a list of all employees and consultants of the Company and its Subsidiaries who,
individually, have received or are scheduled to receive compensation from the
Company or its Subsidiaries for the current fiscal year in excess of $50,000,
including the current job title and aggregate annual compensation of each such
individual.
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SECTION 3.11
Real Property and Leases.
(a) The Company and the Subsidiaries have sufficient title to
all their real properties to conduct their respective businesses as currently
conducted or as currently contemplated to be conducted.
(b) Each parcel of real property owned or leased by the Company
or any Subsidiary (i) is owned or leased free and clear of all mortgages,
pledges, liens, security interests, conditional and installment sale agreements,
encumbrances, charges or other claims of third parties of any kind
(collectively, "Liens"), other than (A) Liens for current taxes and
assessments not yet past due or which are being contested in good faith, (B)
inchoate mechanics' and materialmen's Liens for construction in progress, (C)
workmen's, repairmen's, warehousemen's and carriers' Liens arising in the
ordinary course of business of the Company or such Subsidiary consistent with
past practice, and (D) all matters of record, none of which Liens interfere
materially with the use and enjoyment of the respective property by the Company
or such Subsidiary (collectively, "Permitted Liens"), and (ii) neither
is subject to any governmental decree or order to be sold nor is being
condemned, expropriated or otherwise taken by any public authority with or
without payment of compensation therefor, nor, to the knowledge of the Company,
has any such condemnation, expropriation or taking been proposed.
(c) Except as set forth in Section 3.11(c) of the Disclosure
Schedule, all leases of real property leased for the use or benefit of the
Company or any Subsidiary to which the Company or any Subsidiary is a party, and
all amendments and modifications thereto are in full force and effect, and there
exists no default under any such lease by the Company or any Subsidiary, nor, to
the knowledge of the Company, any event which with notice or lapse of time or
both would constitute a default thereunder by the Company or any Subsidiary.
SECTION 3.12 Taxes. The Company and its Subsidiaries have filed all
federal, state, local and foreign tax returns and reports required to be filed
by them and have paid, discharged or made provision for (as reflected in the
financial statements of the Company) all taxes shown as due thereon and have
paid all applicable ad valorem taxes as are due, other than (a) such payments as
are being contested in good faith by appropriate proceedings and have not been
finally determined and (b) except where the failure to make such filings or pay,
discharge or make provision for such taxes would not, individually or in the
aggregate, have a Material Adverse Effect. The Company and its Subsidiaries have
withheld proper and accurate amounts from their employees, customers,
depositors, shareholders and others from whom they are required to withhold
taxes in compliance with all applicable federal, state, local and foreign laws
and have paid all such withheld amounts to the appropriate taxing authority in a
timely manner. The Company and its Subsidiaries have filed in a timely manner
all required reports to federal, state, local or foreign taxing authorities of
interest and dividends paid, of interest received and of all other payments made
or received. The income tax returns of the Company and its Subsidiaries have
been audited by the IRS for all years through and including 1991, and the
deficiencies (if any) asserted as a result of such audits have been satisfied.
Except as set forth in Section 3.12(a) of the Disclosure Schedule, neither the
IRS nor any other taxing authority, domestic or foreign, is now asserting or, to
the knowledge of the Company, threatening to assert against the Company or any
Subsidiary any deficiency or claim for additional taxes or interest
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thereon or penalties in connection therewith or in connection with tax reporting
or tax withholding obligations. Except as set forth in Section 3.12(b) of the
Disclosure Schedule, neither the Company nor any Subsidiary has granted any
waiver of any statute of limitations with respect to, or any extension of a
period for the assessment of, any federal, state, county, municipal or foreign
income tax.
SECTION 3.13 Environmental Matters.
(a) For purposes of this Agreement, the following terms shall
have the following meanings: (i) "Hazardous Substances" means
(A) those substances defined in or regulated under the Comprehensive
Environmental Response, Compensation and Liability Act, and its state
counterparts, as each may be amended from time to time, and all regulations
thereunder, (B) petroleum and petroleum products including crude oil and any
fractions thereof, (C) natural gas, synthetic gas, and any mixtures thereof, (D)
radon, (E) any other contaminant, and (F) any substance with respect to which a
federal, state or local agency requires environmental investigation, monitoring,
reporting or remediation, (ii) "Environmental Laws" means any federal,
state or local law or regulation relating to (A) releases or threatened releases
of Hazardous Substances or materials containing Hazardous Substances, (B) the
manufacture, handling, transport, use, treatment, storage or disposal of
Hazardous Substances or materials containing Hazardous Substances, or (C)
otherwise relating to pollution of the environment and (iii) "Environmental
Permits" means all permits, licenses and other authorizations referred to
under any Environmental Law.
(b) Except as described in Section 3.13(a) of the Disclosure
Schedule, to the knowledge of the Company: (i) neither the Company nor any of
the Subsidiaries has violated during the last five years or is in violation of
any Environmental Law; (ii) none of the properties owned or leased by the
Company or any Subsidiary or that constitutes collateral for any loan by a
Subsidiary (including, without limitation, soils and surface and ground waters)
are contaminated with any Hazardous Substance; (iii) neither the Company nor any
of the Subsidiaries is liable for any off-site contamination; (iv) neither the
Company nor any of the Subsidiaries is liable under any Environmental Law; (v)
the Company and each of its Subsidiaries is, and has during the last five years
been, in compliance with, all of their respective Environmental Permits; and
(vi) none of the properties owned or leased by the Company or any of the
Subsidiaries or that constitutes collateral for any loan by a Subsidiary are the
subject of any enforcement or legal action concerning any Environmental Law. No
such violation, contamination, liability, lack of compliance, enforcement action
or legal action has had or could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect. For purposes of the
foregoing, all references to "properties" include, without limitation, any owned
real property, leased real property, and any real property subject to pending or
contemplated foreclosure proceedings by the Company or any Subsidiary.
(c) Except as described in Section 3.13(b) of the Disclosure
Schedule, to the knowledge of the Company, the Company and each of its
Subsidiaries has complied with all environmental laws concerning the
notification of any governmental authorities concerning any environmental
issues, and neither the Company nor any of its Subsidiaries has received any
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communication from any governmental authority either requesting additional
information or action or denying any request for exemption under any applicable
environmental law.
SECTION 3.14 Brokers. No broker, finder or investment banker, other
than Chatham Capital Management, Inc. ("Chatham") and Alex Sheshunoff & Co.
("Sheshunoff"), is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company. The fees payable to
Chatham and Sheshunoff in connection with the transactions contemplated by this
Agreement are as set forth in Section 3.14 of the Disclosure Schedule.
SECTION 3.15 Proxy Statement. The information supplied by the Company
and its Subsidiaries for inclusion in the proxy statement to be sent to the
stockholders of the Company in connection with the Stockholders' Meeting (the
"Proxy Statement") will not, on the date the Proxy Statement (or any amendment
or supplement thereto) is first mailed to stockholders of the Company, or at the
time of the Stockholders' Meeting (as defined below), contain any statement
which, at such time and in light of the circumstances under which it is made, 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
statements therein not false or misleading or necessary to correct any statement
in any earlier communication with respect to the solicitation of proxies for the
Stockholders' Meeting which shall have become false or misleading.
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to any information to be supplied by Parent or Purchaser or any of
their representatives which is contained in any of the foregoing documents. The
Proxy Statement shall comply in all material respects as to form with the
requirements of the Exchange Act and the rules and regulations thereunder.
SECTION 3.16 Insurance. Section 3.16 of the Disclosure Schedule sets
forth a list of all policies or binders of fire, liability, product liability,
workmen's compensation, vehicular, directors and officers and other insurance
held by or on behalf of the Company or any of its Subsidiaries as of the date
hereof. Such policies and binders are in full force and effect, all premiums
with respect thereto are currently paid, are reasonably believed to be adequate
for the businesses engaged in by the Company and its Subsidiaries and are in
conformity with the requirements of all contracts to which the Company or any of
its Subsidiaries is a party and to the best knowledge of the Company, are valid
and enforceable in accordance with their terms. Neither the Company nor any
Subsidiary is in default with respect to any provision contained in any such
policy or binder nor has the Company or any Subsidiary to its knowledge failed
to give any notice or present any claim under any such policy or binder in due
and timely fashion. There are no outstanding unpaid claims under any such policy
or binder. Neither the Company nor any Subsidiary has received notice of
cancellation or non-renewal of any such policy or binder.
SECTION 3.17 Loan Portfolio. Except as set forth in Section 3.17 of the
Disclosure Schedule, as of the date hereof, neither the Company 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 is, as of the date of this
Agreement, over 90 days
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delinquent in payment of principal or interest, or (b) Loan with any director,
executive officer or, to the knowledge of the Company, five percent stockholder
of the Company or any Subsidiary. Section 3.17 of the Disclosure Schedule sets
forth as of the date hereof, (i) all of the Loans in original principal amount
in excess of $100,000 of the Company or any Subsidiary that as of the date of
this Agreement are classified by the Bank 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 Company and the
Subsidiaries that as of the date of this Agreement are classified as such,
together with the aggregate principal amount of such Loans by category. The
Company shall promptly inform Parent in writing of any Loan the original
principal balance of which exceeds $100,000 that becomes classified in the
manner described in this Section 3.17, or any Loan the classification of which
is materially and adversely changed at any time after the date of this
Agreement.
SECTION 3.18 Investment Securities. Section 3.18(a) of the Disclosure
Schedule sets forth the book and market value as of February 28, 1995 of the
investment securities, mortgage backed securities and securities held for sale
by the Company and each Subsidiary. Section 3.18(b) of the Disclosure Schedule
sets forth the names of all the joint ventures in which the Company 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 Company included in the 1994 Financial
Statements, and none of the material investments made by the Company or any of
its Subsidiaries since December 31, 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.
SECTION 3.19 Derivative Transactions. Except for collateralized
mortgage obligations, shown in the 1994 Financial Statements, neither the
Company nor any of the Subsidiaries has engaged in transactions in or involving
structured notes, forwards, futures, options on futures, swaps or other
derivative instruments.
SECTION 3.20 Bank Regulatory Matters. Except as otherwise set forth in
Section 3.20 of the Disclosure Schedule, neither the Company nor any of the
Subsidiaries is a party to any written agreement or memorandum of understanding
with, or a party to any commitment letter or similar undertaking to, or is
subject to any order or directive by, or is a recipient of any extraordinary
supervisory letter from, any Bank Regulator which restricts materially the
conduct of its business, or in any manner relates to its capital adequacy, its
credit policies or its management, nor has the Company been informed by any Bank
Regulator that it is contemplating issuing or requesting any such order,
directive, agreement, memorandum of understanding, extraordinary supervisory
letter, commitment letter or similar submission. Except as disclosed in the SEC
Reports, no Bank Regulator has initiated any proceeding with respect to the
business or operations of the Company or any Subsidiary since December 31,
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1991. Except as otherwise set forth in Section 3.20 of the Disclosure Schedule,
there is no material unresolved violation, criticism, or exception by any Bank
Regulator relating to any examination of Company or any of its Subsidiaries.
Except as set forth in Section 3.20 of the Disclosure Schedule, the Company has
furnished to Parent copies of each examination report of any federal or state
regulatory or examination authority with respect to the condition or activities
of the Company or any of its Subsidiaries that has been issued since December
31, 1991.
SECTION 3.21 Certain Contracts.
(a) Except as set forth in Section 3.21 of the Disclosure
Schedule, none of the Company or any of the Subsidiaries is a party to or bound
by any contract, arrangement, commitment or understanding (i) with respect to
the employment, election, retention in office or severance of any current or
former directors, officers, employees or consultants or with respect to the
payment of deferred compensation or other payments to any former director,
officer, employee or consultant, (ii) which, upon the consummation of the
transactions contemplated by this Agreement will result in any payment becoming
due from the Company or any of the Subsidiaries to any director, officer or
employee thereof, (iii) which is a material contract (as defined in Item
601(b)(10) of Regulation S-K of the SEC) to be performed in whole or in part
after the date of this Agreement that has not been filed or incorporated by
reference in the SEC Reports, (iv) which is a consulting or other agreement
(including agreements entered into in the ordinary course and data processing,
software programming and licensing contracts) not terminable on 60 days or less
notice and involving the payment of more than $50,000 per annum or (v) which
materially restricts the conduct of any line of business by the Company or any
of the Subsidiaries. Each contract, arrangement, commitment or understanding of
the type described in this Section 3.21(a), whether or not set forth in Section
3.21 of the Disclosure Schedule, is referred to herein as a "Company
Contract".
(b) The Company and each of the Subsidiaries have performed all
obligations required to be performed by them under each Company Contract and, to
the knowledge of the Company, no event or condition exists which constitutes or,
after notice or lapse of time or both, would constitute, a default on the part
of the Company or any of the Subsidiaries under any such Company Contract.
(c) Except as set forth in Section 3.21 of the Disclosure
Schedule, to the knowledge of the Company, each Company Contract is binding upon
each other party thereto in accordance with its terms and no other party to any
Company Contract is in default thereunder, nor does any condition exist that
with notice or lapse of time or both would constitute a default of any party
thereunder.
SECTION 3.22 Material Interests of Certain Persons. No officer or
director of the Company, or any "associate" (as such term is defined in Rule
14a-1 under the Exchange Act) of any such officer or director, has any material
interest in any material contract or property (real or personal), tangible or
intangible, used in or pertaining to the business of the Company or any of the
Subsidiaries that would be required to be disclosed in a proxy statement to
stockholders under Regulation 14A of the Exchange Act.
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SECTION 3.23 Assistance Agreements. None of the Company or any of the
Subsidiaries is a party to any agreement or arrangement entered into in
connection with the consummation of a federally-assisted acquisition of a
depository institution pursuant to which the Company or any of the Subsidiaries
is entitled to receive financial assistance or indemnification from any
governmental agency.
SECTION 3.24 Fairness Opinion. The Company has received an opinion,
dated as of the date hereof, from Sheshunoff to the effect that the Merger
Consideration is fair to the stockholders of the Company from a financial point
of view.
SECTION 3.25 Intellectual Property. The Company and each of its
Subsidiaries owns or possesses valid and binding licenses and other rights to
use without payment all material patents, copyrights, trade secrets, trade
names, service marks and trademarks used in its businesses and neither the
Company nor any of its Subsidiaries has received any notice of conflict with
respect thereto that asserts the right of others. The Company and each of its
Subsidiaries 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 commitment relating to any of the
foregoing, except where such nonperformance or default would not, individually
or in the aggregate, have a Material Adverse Effect.
SECTION 3.26 Undisclosed Liabilities. Except (a) as set forth in
Section 3.26 of the Disclosure Schedule and (b) for those liabilities that are
fully reflected or reserved against on the consolidated balance sheets of the
Company included in the 1994 Financial Statements, neither the Company nor any
of its Subsidiaries 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 have, a Material Adverse Effect on the Company or the
Surviving Corporation.
SECTION 3.27 Administration of Fiduciary Accounts. Each of the Company
and the Bank has properly administered in all material respects all accounts for
which it acts as a fiduciary, including but not limited to accounts for which it
serves as a trustee, agent, custodian, personal representative, guardian,
conservator or investment advisor, in accordance with the terms of the governing
documents and applicable state and federal law and regulation and common law.
Neither the Company nor the Bank nor any of their respective directors, officers
or employees has committed any breach of trust with respect to any such
fiduciary account which has had or could reasonably be expected to have a
Material Adverse Effect, and the accountings for each such fiduciary account are
true and correct in all material respects and accurately reflect the assets of
such fiduciary account.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to the Company, as of the date
hereof and, unless otherwise stated herein, as of the Effective Date, that:
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SECTION 4.1 Corporate Organization.
(a) Parent is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Massachusetts
("Massachusetts Law") and a bank holding company registered with the FRB under
the BHCA. Parent has the requisite power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry on
its business as it is now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power, authority and
governmental approvals would not, individually or in the aggregate, have a
material adverse effect on the business, financial condition or results of
operations of Parent and its subsidiaries taken as a whole.
(b) Purchaser is a corporation duly organized, validly existing
and in good standing under New Hampshire Law and all of its outstanding Capital
Stock is owned by Parent. Purchaser has the requisite power and authority and
all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as it is now being conducted, except where the
failure to have such power would not, individually or in the aggregate have a
material adverse effect on the business, financial condition or results of
operations of Parent and its subsidiaries taken as a whole.
SECTION 4.2 Authority. Parent and Purchaser have all necessary
corporate power and authority to execute and deliver this Agreement, to perform
their obligations hereunder and to consummate the transactions contemplated by
this Agreement. The execution and delivery of this Agreement by Parent and
Purchaser and the consummation by Parent and Purchaser of the transactions
contemplated by this Agreement have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of
Parent or Purchaser are necessary to authorize this Agreement or to consummate
the transactions contemplated by this Agreement (other than, with respect to the
Merger, the filing and recordation of appropriate merger documents as required
by New Hampshire Law). This Agreement has been duly and validly executed and
delivered by Parent and Purchaser and, assuming the due authorization, execution
and delivery by the Company, constitutes a legal, valid and binding obligation
of Parent and Purchaser, enforceable against Parent and Purchaser in accordance
with its terms.
SECTION 4.3 No Conflict; Required Filings and Consents.
(a) The execution, delivery and performance of this Agreement
by Parent and Purchaser does not (i) conflict with or violate the Articles of
Organization or By-Laws or equivalent organizational documents of Parent or
Purchaser, (ii) assuming that the consents and approvals referred to in Section
3.5(b) are duly obtained, conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to Parent or Purchaser or by which any
property or asset of Parent or Purchaser is bound or affected, or (iii) result
in any breach of or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of Parent or
Purchaser pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Parent or Purchaser
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is a party or by which Parent or Purchaser or any property or asset of Parent or
Purchaser is bound or affected, except, in the case of clauses (ii) or (iii)
above, for any such conflicts, violations, breaches, defaults or other
occurrences which would not prevent or significantly delay consummation of the
Merger or otherwise prevent Parent or Purchaser from performing the obligations
contemplated under this Agreement to be performed by them.
(b) The execution, delivery and performance of this Agreement
by Parent and Purchaser does not require any consent, approval, authorization or
permit of, or filing with or notification to any Governmental Entity except for
(i) those referred to in clauses (i) and (ii) of Section 3.5(b) and (ii) any
consent, approval, authorization, permit of, or filing with, or notification to,
any Governmental Entity where failure to obtain any such consent, approval,
authorization or permit, or to make any such filing or notification, would not
prevent or significantly delay consummation of the Merger, or otherwise prevent
Parent or Purchaser from performing the obligations contemplated under this
Agreement to be performed by each of them.
SECTION 4.4 Proxy Statement. The information supplied by Parent
or Purchaser for inclusion in the Proxy Statement will not, on the date the
Proxy Statement (or any amendment or supplement thereto) is first mailed to
stockholders of the Company, or at the time of the Stockholders' Meeting,
contain any statement which, at such time and in light of the circumstances
under which it is made, 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 statements therein not false or misleading or
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Stockholders' Meeting which shall have
become false or misleading. Notwithstanding the foregoing, Parent and Purchaser
make no representation or warranty with respect to any information supplied by
the Company, any of its Subsidiaries or any of their representatives which is
contained in any of the foregoing documents.
SECTION 4.5 Financial Statements. Parent has previously made
available to the Company copies of the consolidated balance sheets of Parent and
its subsidiaries as of the fiscal years of Parent ending December 31, 1993 and
December 31, 1994, and the related consolidated statements of income, changes in
shareholders' equity and cash flows for the fiscal years ending on December 31
of each of 1992 through 1994, inclusive. Such financial statements were prepared
in accordance with GAAP (except as may be indicated in the notes thereto) and
each fairly presented the consolidated financial position, results of operations
and changes in financial position of Parent and its consolidated subsidiaries as
at the respective dates thereof and for the respective periods indicated
therein.
SECTION 4.6 Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Parent or Purchaser.
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ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1 Conduct of Business by the Company Pending the Merger.
(a) The Company covenants and agrees that, between the date of
this Agreement and the Effective Time, unless Parent shall otherwise agree in
writing, the businesses of the Company and the Subsidiaries shall be conducted
only in, and the Company and the Subsidiaries shall not take any action except
in, the ordinary course of business and in a manner consistent with past
practice and generally to conduct their business in substantially the same way
as conducted during 1994, and without limiting the foregoing, to continue to
operate in the same geographic markets serving the same market segments and
without significant increase in the rate of growth of the Company's loan
portfolio; and the Company shall use all commercially reasonable efforts to
preserve substantially intact the business organization of the Company and the
Subsidiaries, to keep available the services of the current officers, employees
and consultants of the Company and the Subsidiaries and to preserve the current
relationships of the Company and the Subsidiaries with customers, suppliers and
other persons with which the Company or any Subsidiary has business relations.
(b) By way of amplification and not limitation of clause (a)
above, except as contemplated by this Agreement, Section 5.1 of the Disclosure
Schedule and the Stock Option Agreement, the Company shall not, nor shall it
permit any Subsidiary, between the date of this Agreement and the Effective
Time, directly or indirectly to do, or publicly announce an intention to do, any
of the following without the prior written consent of Parent:
(i) amend or otherwise change its Certificate or
Articles of Incorporation or By-laws or equivalent organizational
documents;
(ii) issue, sell, pledge, dispose of, grant, encumber,
or authorize the issuance, sale, pledge, disposition, grant or
encumbrance of, any shares of capital stock of any class of the Company
or any Subsidiary, any stock appreciation rights, or any options,
warrants, convertible securities or other rights of any kind to acquire
any shares of such capital stock, or any other ownership interest, of
the Company or any Subsidiary (except for the issuance of a maximum of
102,605 shares issuable pursuant to stock options outstanding under the
Company Option Plans on the date hereof, a maximum of 230,131 shares
issuable upon conversion of the 7% Debentures or the 8.75% Debentures,
and Shares issuable pursuant to the Stock Option Agreement);
(iii) with respect to the Company, declare, set aside,
make or pay any dividend or other distribution, payable in cash, stock,
property or otherwise, with respect to any of its capital stock;
(iv) split, combine or reclassify any shares of its
capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for
shares of its capital stock;
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<PAGE> 27
(v) repurchase, redeem or otherwise acquire any shares
of the capital stock of the Company or any Subsidiary, or any
securities convertible into or exercisable for any shares of the
capital stock of the Company or any Subsidiary;
(vi) enter into any new line of business;
(vii) merge or consolidate with, or purchase an equity
interest in or a portion of the assets of, or acquire by any other
manner, any business or any corporation, partnership, other business
organization or any division thereof, or sell or purchase any material
amount of assets 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;
(viii) incur any indebtedness for borrowed money or
issue any debt securities or assume, guarantee or endorse, or otherwise
as an accommodation become responsible for, the obligations of any
individual, corporation or other entity, other than short-term
borrowings with a maturity of less than 90 days in the ordinary course
of business consistent with past practice;
(ix) (A) enter into or amend any lease of real
property or (B) enter into or amend any other contract or agreement
other than in the ordinary course of business consistent with past
practice and, in any event, regardless of whether consistent with past
practice, undertake or enter into any contract or other commitment
involving an aggregate payment by or to the Company, the Bank or any
other Subsidiary under any such contract or commitment of more than
$50,000 or having a term of one year or more from the time of execution
or any amendment involving an aggregate increase in payments by the
Company or any Subsidiary of more than $50,000;
(x) authorize any single capital expenditure which is
in excess of $50,000 or capital expenditures which are, in the
aggregate, in excess of $250,000 for the Company and the Subsidiaries
taken as a whole, except for contractual commitments entered into prior
to the date of this Agreement as heretofore disclosed in writing to
Parent;
(xi) increase the compensation payable or to become
payable to its officers or employees, except for increases in
accordance with past practices in salaries or wages of employees of the
Company or any Subsidiary who are not officers of the Company or any
Subsidiary, or grant any severance (including severance in connection
with a change in control) or termination pay to, or (except as provided
in Section 7.2(k)) enter into or amend any employment or severance
agreement with any director, officer or other employee of the Company
or any Subsidiary, or establish, adopt, enter into or amend any
collective bargaining, bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance, life insurance or
split dollar life insurance, retiree medical or life insurance or other
plan, agreement, trust, fund, policy or arrangement for the benefit of
any director, officer or employee, or make any contribution to fund
existing non-
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qualified deferred compensation obligations of the Company or any
Subsidiary, or accrue or make any contribution with respect to any plan
year under the existing profit sharing plan in an amount or at a rate
in excess of the rate at which such contributions were accrued on the
September 30, 1994 financial statements of the Company and its
Subsidiaries;
(xii) take any action with respect to accounting
policies or procedures in effect at December 31, 1994, other than in
the ordinary course of business or required by changes to GAAP or
regulatory accounting principles as concurred in by the Company's
independent auditors;
(xiii) file any application to relocate or terminate
the operations of any banking office of it or any of the Subsidiaries
or relocate or terminate any such operations;
(xiv) 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;
(xv) sell any securities in its securities
portfolios, except in the ordinary course of business, acquire any
securities for the Company's or its Subsidiaries' securities portfolios
with a final maturity of more than two years, or engage in any
transaction in or involving structured notes, forwards, futures,
options on futures, swaps or other derivative instruments;
(xvi) other than activities in the ordinary course of
business consistent with past practice, sell, lease, encumber, assign
or otherwise dispose of, or agree to sell, lease, encumber, assign or
otherwise dispose of, any of its material assets, properties or other
rights or agreements;
(xvii) 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 Effective Time, or any of the
conditions to the Merger or the other transactions contemplated by this
Agreement set forth in Article VII not being satisfied in any material
respect, or in any material violation of any provision of this
Agreement or the Stock Option Agreement, except, in every case, as may
be required by applicable law, but only after reasonable consultation
with Parent;
(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 Effect; or
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(xix) agree to do any of the foregoing or permit any
of the foregoing to occur.
(c) The Company covenants and agrees that, between the date of this
Agreement and the Effective Date, unless Parent shall otherwise agree in
writing, the Company shall:
(i) take any and all actions necessary or desirable
for the Bank to qualify with respect to any real property identified in
Section 5.1(c) of the Disclosure Schedule, for the secured party
exemption under RSA 146-C and the safe harbor requirements of RSA 146-A
and 147-B and obtain letters from the New Hampshire Department of
Justice confirming that the Bank so qualifies;
(ii) obtain a report from an environmental consulting
firm, mutually agreeable to the Company and Parent, that, with respect
to any real property identified in Section 5.1(c) of the Disclosure
Schedule, describes the environmental response actions necessary to
perform all work identified in any letter from the New Hampshire
Department of Environmental Services identified in said Section 5.1(c),
including performing all work identified in the Remedial Action Plan
referred to therein, that contains, based on said consulting firm's
best judgment, a schedule for and an estimate of the total cost of,
completing all such actions; and
(iii) take any and all actions necessary or desirable
to qualify any real property identified in Section 5.1(c) of the
Disclosure Schedule for reimbursement from the New Hampshire Oil
Discharge and Clean-up Fund and obtain a letter from the New Hampshire
Department of Environmental Services confirming that such property so
qualifies.
SECTION 5.2 Parent Products and Services. From and after the
date hereof, Parent and the Company shall consult with each other on products
and services not currently offered by the Company which Parent would expect to
make available to customers of the Bank, and the Company shall consider offering
such products and services to Bank's customers prior to the Effective Date, on
terms and conditions mutually acceptable to Parent and the Company; provided,
however, that nothing herein shall obligate the Company or the Bank to offer any
such products or services.
SECTION 5.3 Covenant of Parent. During the period from the date
of this Agreement and continuing until the Effective Time, the Parent shall not,
and shall not permit any of its subsidiaries to, take any action or publicly
announce an intention to take any action that is intended or which reasonably
can be expected to result in any of its representations and warranties set forth
in this Agreement being untrue in any material respect as of any time to and
including the Effective Time, or in any of the conditions to the Merger or other
transactions contemplated in this Agreement as set forth in Article VII not
being satisfied in any material respect, or in a material violation of any
provision of this Agreement, or the Stock Option Agreement, except, in every
case, as may be required by applicable law.
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ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Stockholders' Meeting. In order to consummate the Merger,
the Company, acting through its Board of Directors (the "Company Board"), shall,
in accordance with applicable law and the Company's Articles of Incorporation
and By-laws, (a) duly call, give notice of, convene and hold an annual or
special meeting of its stockholders as soon as reasonably practicable for the
purpose of considering and approving this Agreement and the transactions
contemplated hereby (the "Stockholders' Meeting") and (b) (i) include in the
Proxy Statement the recommendation of the Board that the stockholders of the
Company approve and adopt this Agreement and the transactions contemplated
hereby and (ii) use all reasonable efforts to obtain such approval and adoption;
provided that nonperformance of the obligations of this clause (b) required by
the fiduciary duties of the Company Board under applicable law as determined by
such Board with the advice of the Company's independent counsel shall not
constitute a breach of this Agreement. The Parent and the Company shall
coordinate and cooperate with respect to the foregoing matters.
SECTION 6.2 Proxy Statement. As soon as practicable after the date
hereof, the Company shall file the Proxy Statement with the SEC under the
Exchange Act and shall use all reasonable efforts to have the Proxy Statement
cleared by the SEC. Parent, Purchaser and the Company shall cooperate with each
other in the preparation of the Proxy Statement, and the Company shall notify
Parent promptly of the receipt of any comments of the SEC with respect to the
Proxy Statement and of any requests by the SEC for any amendment or supplement
thereto or for additional information and shall provide to Parent promptly
copies of all correspondence between the Company or any representative of the
Company and the SEC. The Company shall give Parent and its counsel the
opportunity to review the Proxy Statement prior to its being filed with the SEC
and shall give Parent and its counsel the opportunity to review all amendments
and supplements to the Proxy Statement and all responses to requests for
additional information and replies to comments prior to their being filed with,
or sent to, the SEC. Each of the Company, Parent and Purchaser agrees to use all
reasonable efforts, after consultation with the other parties hereto, to respond
promptly to all such comments of and requests by the SEC and to cause the Proxy
Statement and all required amendments and supplements thereto to be mailed to
the holders of Shares entitled to vote at the Stockholders' Meeting at the
earliest practicable time.
SECTION 6.3 Regulatory Matters.
(a) The parties hereto shall cooperate with each other and use
their best efforts to promptly prepare and file all necessary documentation, to
effect all applications, notices, petitions and filings, and to obtain as
promptly as practicable all permits, consents, approvals and authorizations of
all third parties and Governmental Entities which are necessary or advisable to
consummate the transactions contemplated by this Agreement (including without
limitation the Merger). Parent and the Company shall have the right to review in
advance, and to the extent practicable, each will consult the other on, in each
case subject to applicable laws relating to the exchange of information, all the
information relating to either of them, as the case
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may be, and any of their respective subsidiaries, which appear in any filing
made with, or written materials submitted to, any third party or any
Governmental Entity in connection with the transactions contemplated by this
Agreement. In exercising the foregoing right, each of the parties hereto shall
act reasonably and as promptly as practicable. The parties hereto agree that
they will consult with each other with respect to the obtaining of all permits,
consents, approvals and authorizations of all third parties and Governmental
Entities necessary or advisable to consummate the Merger, and other transactions
contemplated by this Agreement and each party will keep the other apprised of
the status of matters relating to completion of all of the transactions
contemplated herein.
(b) If so requested by Parent and in cooperation with Parent
and at Parent's expense, the Company and the Bank and their respective directors
and officers shall promptly take all necessary corporate and other action,
prepare and file all necessary documentation, effect all necessary applications
and filings and obtain as promptly as practicable all permits, consents,
approvals and authorizations of all third parties and Governmental Entities that
are necessary (i) to change the name of the Bank, (ii) to amend the charter and
bylaws of the Bank, (iii) to convert the Bank into a national banking
association or federal savings association and/or (iv) to merge the Bank into a
bank or savings association controlled by Parent, so that such name change,
amendments, conversion or merger transaction may be consummated in conjunction
with the consummation of the Merger, whether effective as of the Effective Time
or immediately before or after the Effective Time. The Company and the Bank
shall not be required by the preceding sentence to take any action that would
make consummation of any such name change, amendment, conversion or merger
transaction irreversible other than in conjunction with consummation of the
Merger.
(c) Parent and the Company shall, upon request, furnish each
other with all information concerning themselves, their subsidiaries, directors,
officers and stockholders and such other matters as may be reasonably necessary
or advisable in connection with any statement, filing, notice or application
made by or on behalf of Parent, the Company or any of their respective
subsidiaries to any Governmental Entity in connection with the Merger, or the
transactions contemplated by this Agreement.
(d) Parent and the Company shall promptly furnish each other
with copies of written communications received by Parent or the Company, as the
case may be, or any of their respective subsidiaries, affiliates or associates
(as such terms are defined in Rule 12b-2 under the Exchange Act as in effect on
the date of this Agreement) from, or delivered by any of the foregoing to, any
Governmental Entity in respect of the transactions contemplated hereby.
SECTION 6.4 Access to Information; Etc.
(a) Upon reasonable notice and subject to applicable laws
relating to the disclosure or exchange of information, the Company shall, and
shall cause each of the Subsidiaries to, afford to the officers, employees,
accountants, counsel and other representatives of Parent, reasonable access,
during normal business hours during the period prior to the Effective Time, to
all its officers, employees, agents, properties, books, contracts, commitments
and records and, during such period, the Company shall, and shall cause the
Subsidiaries to,
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make available to Parent (i) a copy of each report, schedule, registration
statement and other document filed or received by it during such period pursuant
to the requirements of federal securities laws or federal or state banking laws
(other than reports or documents which the Company is not permitted to disclose
under applicable law), (ii) copies of all periodic reports to senior management,
including, without limitation, reports on non-performing loans and other asset
quality matters and all materials furnished to the Company Board relating to
asset quality generally, and (iii) all other information concerning the
business, properties, assets and personnel of the Company as Parent may
reasonably request, including but not limited to environmental reports. Neither
the Company nor any of the Subsidiaries shall be required to provide access to
or to disclose information where such access or disclosure would violate or
prejudice the rights of the Company's customers, jeopardize the attorney-client
privilege of the institution in possession or control of such information or
contravene any law, rule, regulation, order, judgment, decree, fiduciary duty or
binding agreement entered into prior to the date of this Agreement (the
existence of which agreement has heretofore been disclosed in writing to Parent)
or, in the event of any litigation or threatened litigation between the Company
and Parent over the terms of this Agreement, where access to information will be
adverse to the interests of the Company. To the extent reasonably practicable,
the parties hereto will make appropriate substitute disclosure arrangements
under circumstances in which the restrictions of the preceding sentence apply.
Parent will hold all such information in confidence to the extent required by,
and in accordance with, the provisions of the confidentiality agreement dated
September 2, 1994, between Parent and the Company (the "Confidentiality
Agreement").
(b) Parent may, at its sole option, undertake an environmental
site assessment at any of the properties owned or leased by the Company or any
of its Subsidiaries. The site assessments, if any, shall be completed prior to
the Closing. Throughout the period of time for this site assessment, Parent and
its designated employees, agents, and consultants shall have a reasonable right
of access to the properties during mutually agreed-upon hours to perform said
site assessment. The site assessment may include, in the sole discretion of the
Parent, engineering or geological tests, physical inspections, intrusive
testing, document reviews, interviews, or other evaluation as deemed necessary
by the Parent to determine the presence, nature and extent of any Hazardous
Substances on the properties, provided that the Parent shall restore the
properties to their condition as it existed before any such action was
performed. For purposes of the foregoing, all references to "properties"
include, without limitation, any owned real property or leased real property.
(c) No investigation by any of the parties or their respective
representatives shall affect the representations and warranties of the other set
forth herein or any condition to the obligations of the parties hereto.
(d) All information furnished by Parent to the Company or its
representatives pursuant hereto shall be treated as the sole property of Parent
and, if the Merger shall not occur, the Company and its representatives shall
return to Parent all of such written information and all documents, notes,
summaries or other materials containing, reflecting or referring to, or derived
from, such information. The Company shall, and shall use its best efforts to
cause its representatives to, keep confidential all such information, and shall
not directly or indirectly use such information for any competitive or other
commercial purpose. The obligation to keep such
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information confidential shall continue for two years from the date the proposed
Merger is abandoned and shall not apply to (i) any information which (x) was
legally in the Company's possession prior to the disclosure thereof by Parent;
(y) was then generally known to the public; or (z) was disclosed to the Company
by a third party not bound by an obligation of confidentiality or (ii)
disclosures made as required by law. It is further agreed that, if in the
absence of a protective order or the receipt of a waiver hereunder the Company
is nonetheless, in the written opinion of its outside counsel, compelled to
disclose information concerning Parent to any tribunal or governmental body or
agency or else stand liable for contempt or suffer other censure or penalty, the
Company may disclosure such information to such tribunal or governmental body or
agency without liability hereunder.
SECTION 6.5 No Solicitation. Neither the Company nor any
Subsidiary shall, directly or indirectly, through any officer, director, agent
or otherwise, initiate contact with, solicit or encourage the submission of any
proposal or offer from any person relating to any acquisition or purchase of all
or (other than in the ordinary course of business) any material portion of the
assets of, or any equity interest in, the Company or any Subsidiary or any
business combination with the Company or any Subsidiary or, except to the extent
determined by the Company Board, with the advice of its independent counsel, to
be required by its fiduciary obligations under applicable law (in which case
such actions shall not constitute a breach of this Agreement), participate in
any discussions or negotiations regarding, or furnish to any other person any
information with respect to, or otherwise cooperate in any way with, or assist
or participate in, facilitate, any effort or attempt by any other person to do
or seek any of the foregoing. Nothing contained in this Section 6.5 shall
prohibit the Company or the Company Board from taking and disclosing to the
Company's stockholders a position with respect to a tender offer by a third
party pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act or
making such other disclosure to the Company's stockholders which, in the
judgment of the Company Board, may be required under applicable law. The Company
immediately shall cease and cause to be terminated all existing discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing. The Company shall notify Parent promptly if any such proposal or
offer, or any inquiry or contact with any person with respect thereto, is made
and shall, in any such notice to Parent, indicate in reasonable detail the
identity of the person making such proposal, offer, inquiry or contact and the
terms and conditions of such proposal, offer, inquiry or contact. The Company
agrees not to release any third party from, or waive any provision of, any
confidentiality or standstill agreement to which the Company is a party.
SECTION 6.6 Employee Benefits Matters.
(a) Insurance Coverages. For the period from the
Effective Date through December 31, 1995, the Surviving Corporation and/or its
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 those of their employees who were
employees of the Company and/or its Subsidiaries on the Effective Date as those
covering employees of the Company 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 or by
the insurance carriers. Effective as of January 1, 1996 or at any time
thereafter, the foregoing insurance coverages provided by the Surviving
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Corporation and/or its subsidiaries may at the option of Parent be discontinued,
in which case those employees of the Surviving Corporation and/or its
subsidiaries who had been employees of the Company and its Subsidiaries will
become eligible for the same insurance coverages generally available to the
majority of the other employees of Parent and its subsidiaries in the same
region as the Surviving Corporation and its subsidiaries, subject to the
applicable terms and conditions of the benefit plans and/or insurance contracts
providing such coverages.
(b) Personnel Policies. Except as otherwise provided in
this Agreement, all personnel policies and procedures of the Company and/or its
Subsidiaries will be discontinued as of the Effective Date and employees of the
Company and its Subsidiaries will become covered as of the Effective Date under
the human resources policies and procedures of Parent. For all purposes of
applying the human resources policies and procedures of Parent, the employees of
Company and its Subsidiaries will be treated as new employees as of the
Effective Date.
(c) Cornerstone Bank Severance Pay Plan. The Company's
Severance Pay Plan will be continued in effect for a period of twelve months
following the Effective Date.
(d) Profit Sharing and Similar Plans.
(i) Parent will cause the Surviving Corporation and/or
its subsidiaries to maintain the Company's profit sharing plan in
effect through December 31, 1995. Thereafter Parent will either (A)
cause the Surviving Corporation and/or its subsidiaries to maintain
Company's profit sharing plan, or (B) permit employees of the Surviving
Corporation and its subsidiaries to participate in one or more savings,
profit-sharing, employee stock ownership and/or retirement plans
maintained by another subsidiary of Parent (to be designated by Parent)
in accordance with the terms of such plan(s) as in effect from time to
time once the employees have satisfied the eligibility requirements of
such plan(s), or (C) permit employees of the Surviving Corporation and
its subsidiaries to participate in Parent's Savings, Profit Sharing and
Stock Ownership Plan ("Savings Plan") in accordance with its terms as
in effect from time to time once they have satisfied the eligibility
requirement under such plan. If such employees are permitted to
participate in Parent's Savings Plan or a plan or plans of another
subsidiary of Parent, they will receive credit for service with the
Company and its Subsidiaries for purposes of eligibility and vesting,
but not accrual of benefits, under such plans.
(ii) For any plan year in which the Surviving
Corporation and/or its subsidiaries are maintaining the Company's
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 Parent contributes on behalf of its
own employees for such year under Parent's Savings Plan.
(e) Other Employee Benefit Plans. Except as specified
herein, any other employee benefit plans of the Company and/or its Subsidiaries
will be discontinued as of the Effective Date, and the Surviving Corporation
and/or its subsidiaries will thereafter have no obligation of any kind under
such discontinued plans.
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(f) No Third-Party Beneficiaries. This Section 6.6
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 Company, the
Surviving Corporation, or the subsidiaries of either will be treated as a
third-party beneficiary of the provisions of this Section 6.6. Nothing in this
Section 6.6 or elsewhere in this Agreement will preclude Parent or the Surviving
Corporation or any of the subsidiaries of either, after the Effective Time, from
terminating the employment of any person who was an employee of the Company or
any of its Subsidiaries, or preclude Parent or the Surviving Corporation, or any
of the subsidiaries of either, from amending or terminating in its discretion
any employee benefit plan maintained by such party.
SECTION 6.7 Bank Directors and Officers; Indemnification; Insurance.
(a) Parent will invite at least three of the current directors
of the Bank, which number shall include John M. Terravecchia, and such
additional number as it may determine in its discretion after consultation with
the Board of Directors of the Bank, to continue to serve as directors at least
until the annual meeting of the Bank following the Effective Date, subject to
any changes as a result of any transaction involving a reorganization or merger
of the Bank. John M. Terravecchia will be invited to serve as Vice Chairman and
Chief Executive Officer of the Bank during the term of his Amended and Restated
Employment Agreement with the Company and the Bank, subject to any changes as a
result of any transaction involving a reorganization or merger of the Bank.
(b) The Articles of Incorporation and By-laws of the Surviving
Corporation and the Bank shall not contain provisions that are less favorable
with respect to indemnification than are set forth in the current By-laws of the
Company and the Bank, respectively; provided, however, that neither the
Surviving Corporation nor the Bank shall be required to indemnify any person
seeking indemnification in connection with (i) a proceeding (or part thereof)
that was initiated by such person, unless the initiation thereof was approved or
ratified by the Board of Directors of the Corporation or Bank, as the case may
be, or (ii) a proceeding (or part thereof) by or in the right of the Surviving
Corporation or Bank, as the case may be.
(c) Parent acknowledges, and the Surviving Corporation shall
honor, the right of the present and former directors and officers of the Company
to be indemnified by the Surviving Corporation after the Effective Time against
losses, claims, damages or liabilities arising out of actions or omissions
occurring at or prior to the Effective Time to the extent provided in the
Company's By-laws as in effect as of the date of this Agreement (to the extent
consistent with applicable law); provided, however, that the Surviving
Corporation shall not be required to indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) that was
initiated by such person, unless the initiation thereof was approved or ratified
by the Board of Directors of the Corporation, nor any proceeding or part thereof
by or in the right of the Surviving Corporation.
(d) Parent and the Surviving Corporation shall use their best
efforts to maintain in effect for a period of one year from the Effective Time,
if available, the current directors' and officers' liability insurance policies
maintained by the Company (provided that
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Parent and the Surviving Corporation may substitute therefor policies of at
least the same coverage, if available, containing terms and conditions which are
not materially less favorable) with respect to matters occurring prior to the
Effective Time; provided, however, that in no event shall Parent and the
Surviving Corporation be required to expend pursuant to this Section 6.7(d) more
in the aggregate than an amount equal to the lesser of 200% of current annual
premiums paid by the Company for such insurance or $50,000.
(e) In the event Parent, the Surviving Corporation or any of
their respective successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation or entity
of such consolidation or merger or (ii) transfers all or substantially all of
its properties and assets to any person, then, and in each such case, proper
provision shall be made so that the successors and assigns of Parent or the
Surviving Corporation, as the case may be, shall assume the obligations set
forth in subsections (b)-(d) of this Section 6.7, which obligations are
expressly intended to be for the irrevocable benefit of, and shall be
enforceable by, each director, officer and employee covered hereby.
SECTION 6.8 Financial and Other Statements. Notwithstanding
anything to the contrary in, and without limitation of its obligations under,
Section 6.4, during the term of this Agreement, the Company shall provide to
Parent the following documents and information:
(a) As soon as reasonably available, but in no event more than
45 days after the end of each fiscal quarter ending after the date of this
Agreement, the Company will deliver to Parent its Quarterly Report on Form 10-Q
as filed under the Exchange Act and the Bank's Quarterly Call Report as filed
with the FDIC. As soon as reasonably available, but in no event more than 90
days after December 31, 1994 and the end of each fiscal year ending after the
date of this Agreement, the Company will deliver to Parent its Annual Report on
Form 10-K, as filed under the Exchange Act. The Company will also deliver to
Parent, contemporaneously with its being filed with the SEC, a copy of each
Current Report on Form 8-K.
(b) Promptly upon receipt thereof, the Company will furnish to
Parent copies of all internal control reports submitted to the Company or the
Subsidiaries by independent accountants in connection with each annual, interim
or special audit of the books of the Company or the Subsidiaries made by such
accountants.
(c) As soon as practicable, the Company will furnish to Parent
copies of all such financial statements and reports as it or any Subsidiary
shall send to its stockholders, the SEC or any other regulatory authority, to
the extent any such reports furnished to any such regulatory authority are not
confidential and except as legally prohibited thereby.
(d) Promptly upon receipt thereof, the Company will furnish to
Parent copies of each examination report of any federal or state regulatory or
examination authority with respect to the condition or activities of the Company
or any of the Subsidiaries, except to the extent prohibited by law. With respect
to any examination report the disclosure of which is prohibited by law, the
Company will use its reasonable efforts to obtain authority to deliver to Parent
copies of such examination report; provided, however, that the Company cannot
provide any assurance that any such authority can be obtained.
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(e) With reasonable promptness, the Company will furnish to
Parent such additional financial data as Parent may reasonably request. In each
case where the Company would be obligated to furnish information or materials to
Parent hereunder except for a legal prohibition, the Company shall promptly
inform Parent of the existence and nature of such information or materials and
the basis for such legal prohibition.
SECTION 6.9 Further Action. Each of Parent and the Company shall, and
shall cause its subsidiaries to, use its best efforts (a) to take, or cause to
be taken, all actions necessary, proper or advisable to comply promptly with all
legal requirements which may be imposed on such party or its subsidiaries with
respect to the Merger and, subject to the conditions set forth in Article VII
hereof, to consummate the transactions contemplated by this Agreement and (b) to
obtain (and to cooperate with the other party to obtain) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity and any other third party which is required to be obtained by the Company
or Parent or any of their respective subsidiaries in connection with the Merger
and any of the transactions contemplated by this Agreement.
SECTION 6.10 Public Announcements. Company shall consult with Parent
before issuing any press release or otherwise making any public statements with
respect to this Agreement or any transaction contemplated by this Agreement and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by law or any requirement of any
agreement with any automated interdealer quotation system.
SECTION 6.11 Additional Agreements. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, or to vest the Surviving Corporation with full title
to all properties, assets, rights, approvals, immunities and franchises of any
of the parties to the Merger, the proper officers and directors of each party to
this Agreement and their respective subsidiaries shall take all such necessary
action as may be reasonably requested by, and at the sole expense of, Parent.
SECTION 6.12 Update of Disclosure Schedules. From time to time prior to
the Effective Time, the Company will promptly supplement or amend the Disclosure
Schedules to reflect any matter which, if existing, occurring or known at the
date of this Agreement, would have been required to be set forth or described in
the Disclosure Schedules or which is necessary to correct any information in the
Disclosure Schedules which has been rendered inaccurate thereby as of such later
time. No supplement or amendment to the Disclosure Schedules shall limit the
right of Parent and Purchaser to rely on the representations and warranties as
of the date of this Agreement or have any effect for the purpose of determining
satisfaction of the conditions set forth in Sections 7.2(a) or 7.2(b) hereof, as
the case may be, or the compliance by the Company with the covenants set forth
in Article V hereof.
SECTION 6.13 Current Information.
(a) During the period from the date of this Agreement to the
Effective Time, the Company 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 Parent to report on the general status of the
ongoing operations of the Company and the Subsidiaries and (ii) to cooperate and
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communicate fully with respect to the manner in which the business of the Bank
will be operated after the Effective Time, the type, mix and pricing 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, the Company and Parent shall promptly establish a liaison
committee (the "Committee") which will be chaired by representatives of Parent
and the Company 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 Effective Time, the
Company shall provide Parent with timely and sufficient information to review
new extensions of credit, renewals, and restructurings and information detailing
overall asset quality and risk.
(b) The Company will promptly notify Parent of any material
change in the normal course of business or in the operation of the properties of
the Company or any of the Subsidiaries and of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated), or the institution or the threat of significant litigation
involving the Company or any of the Subsidiaries, and will keep Parent
reasonably informed of such events. Parent will promptly notify the Company of
any material change in the normal course of business or in the operation of the
properties of Parent or any of its subsidiaries or the institution or the threat
of significant litigation or administrative proceedings involving Parent or any
of its subsidiaries that could materially delay or prevent consummation of the
transaction, and will keep the Company fully informed of such events.
(c) To the extent not covered by paragraphs (a) and (b) above,
the Company shall give prompt notice to Parent, and Parent shall give prompt
notice to the Company, of (i) the occurrence, or non occurrence, of any event
the occurrence, or non-occurrence, of which would be reasonably likely to cause
any representation or warranty contained in this Agreement to be or to become
untrue or inaccurate in any material respect as of any time before the Effective
Time and (ii) any failure of the Company, Parent or Purchaser, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement; provided, however, that
the delivery of any notice pursuant to this paragraph (c) shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
SECTION 6.14 System Conversions. From and after the date hereof, Parent
and the Company shall meet on a regular basis to discuss and plan for the
conversion of the Company's data processing and related electronic information
systems to those used by Parent and its subsidiaries, which planning shall
include, but not be limited to, discussion of the possible termination by the
Company of third-party service provider arrangements effective at the Effective
Time or at a date thereafter, non-renewal of personal property leases and
software licenses used by the Company in connection with its systems operations
and outsourcing, as appropriate, of proprietary or self-provided system
services, it being understood that the Company shall not be obligated to take
any such action and, unless the Company otherwise agrees, no conversion shall in
fact take place prior to the Effective Time. In the event that, at the request
of Parent, the Company 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, Parent shall indemnify the Company on terms
reasonably satisfactory to the Company
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for any such fees and expenses, and the costs of reversing the conversion
process, if for any reason the Effective Time does not occur in accordance with
the terms of this Agreement.
SECTION 6.15 Redemption of Debentures. The Company shall, upon the
written request of Parent and under such conditions as are set forth in a
certain letter from Parent to the Company of even date herewith, take all such
actions, including without limitation adopting appropriate resolutions of the
Company Board and sending timely notice of redemption to each holder of 8.75%
Debentures and each holder of 7% Debentures, in order to permit the Surviving
Corporation to redeem 100% of the principal amount of the 8.75% Debentures and
the 7% Debentures outstanding as of the Effective Time, such redemption to occur
at or after the Effective Time, as determined by Parent, all in conformity with
the respective Indentures. The Company shall send the notices of redemption
(which may, at the option of Parent, provide that the redemption shall take
place only if and when the Merger is effective) to the holders at such time as
Parent determines, but shall not be required to send such notices until all
necessary approvals of Governmental Entities referred to in Section 7.1(b) have
been obtained.
SECTION 6.16 Affiliate Letter. The Company 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 1933, as amended) of the
Company to deliver to Parent, 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 Annex II hereto.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.1 Conditions to Each Party's Obligations to Effect the
Merger. The respective obligations of each party to effect the Merger shall
be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Stockholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the affirmative vote
of the stockholders of the Company to the extent required by New Hampshire Law
and the Articles of Incorporation of the Company;
(b) Regulatory Approvals. All necessary approvals, authorizations
and consents of all Governmental Entities, including, without limitation the
FRB, the NHBTI, and the MBBI and those required to satisfy Section 6.3(b)
hereof, required to consummate the Merger and the other transactions
contemplated hereby shall have been obtained and remain in full force and
effect, and all waiting periods relating to such approvals, authorizations and
consents shall have expired or been terminated; provided, however, that no
approval, authorization or consent referred to in this Section 7.1(b) shall be
deemed to have been received if it shall include any condition or requirement
that, in the reasonable opinion of Parent, would so materially and adversely
affect the economic or business benefit to Parent of the transactions
contemplated by this Agreement as to render inadvisable the consummation of the
Merger.
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(c) No Orders, Injunctions or Restraints: Illegality.
No federal or state governmental authority or other agency or commission 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.
SECTION 7.2 Conditions to Obligations of Parent and Purchaser. The
obligations of Parent and Purchaser to effect the Merger are also subject to the
following conditions, each of which is an independent condition and shall not be
affected by any other condition:
(a) Representations and Warranties. Each of the
representations and warranties of the Company in this Agreement which is
qualified as to materiality shall be true and correct and each such
representation or warranty that is not so qualified shall be true and correct in
all material respects, in each case as of the date of this Agreement and as of
the Effective Time; provided, however, that, for purposes hereof, such
representations and warranties shall be deemed to be true and correct in all
material respects unless the failure or failures of such representations and
warranties to be so true and correct represent, in the aggregate, a Material
Adverse Effect. The Company shall have delivered to Parent a certificate of the
Company to such effect signed by the Chief Executive Officer and the Chief
Financial Officer of the Company as of the Effective Date.
(b) Agreements and Covenants. The Company shall have
performed in all material respects all obligations and complied in all material
respects with all agreements or covenants of the Company to be performed or
complied with by it at or prior to the Effective Date under this Agreement; all
of the conditions to the obligations of Parent and Purchaser to effect the
Merger shall have been satisfied; there shall not exist any default or any
condition that, with notice and/or the passage of time, would constitute a
default under this Agreement on the part of the Company; and Parent shall have
received a certificate signed on behalf of the Company by the Chief Executive
Officer and Chief Financial Officer of the Company to such effect dated as of
the Effective Date.
(c) Consents Under Agreements.
(i) The consent, approval or waiver of each person
(other than regulatory approvals contemplated in Section 7.1(b)) whose
consent or approval shall be required in order to permit the succession
by the Surviving Corporation pursuant to the Merger to any obligation,
right or interest of the Company or any Subsidiary of the Company under
any loan or credit agreement, note, mortgage, indenture, lease, license
or other agreement or instrument shall have been obtained, except where
the failure to obtain such consent, approval or waiver (A) would not
have a Material Adverse Effect and (B) would not materially adversely
affect the business or economic benefits to Parent of consummation of
any of the transactions contemplated in this Agreement.
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(ii) In addition to paragraph (i) of this subsection,
the consent, approval or waiver of each person (other than regulatory
approvals) whose consent or approval shall be required under any loan
or credit agreement, note, mortgage, indenture, lease, license or other
agreement or instrument in order to permit the operation by the Bank,
following any of the transactions contemplated by Section 6.3(b), of
any and all of its branches and business as operated on the date of
this Agreement shall have been obtained.
(d) Federal Tax Opinion. Parent shall have received an opinion
of its counsel, Palmer & Dodge, or a ruling from the Internal Revenue Service
substantially to the effect that on the basis of the facts and representations
set forth in this Agreement and assuming that the Merger is consummated in
accordance with the terms of this Agreement, no gain or loss shall be recognized
by and no federal income tax liability shall result to Parent, Purchaser, the
Company or any of its Subsidiaries by reason of the Merger.
(e) Legal Opinion. Parent shall have received the opinion of
Devine, Millimet & Branch, counsel to the Company, dated the Effective Date, in
a form that is customary for transactions of this type. As to any matter in such
opinion which involves matters of fact, such counsel may rely upon certificates
of officers and directors of the Company and its Subsidiaries and of public
officials and opinions of local counsel, reasonably acceptable to Parent.
(f) Accountant's Letter. The Company shall have caused to be
delivered to Parent a letter from the Company's independent public accountants
dated the Effective Date and addressed to Parent and the Company with respect to
the Company'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 Parent, which procedures shall be consistent with applicable
professional standards for letters delivered by independent accountants in
connection with comparable transactions.
(g) Dissenting Shares. Immediately prior to the Effective Time
not more than 200,000 Shares of Company Common Stock shall be Dissenting Shares.
(h) Total Stockholders' Equity. As of the Effective Date the
total stockholders' equity shown on the consolidated financial statements of the
Company and its Subsidiaries prepared in accordance with GAAP shall not be less
than $8,921,000 and neither the Company nor the Bank shall have a Tier 1
leverage ratio of less than 6.00%.
(i) Asset Quality. As of the Effective Date the total of
consolidated nonperforming assets (including nonaccrual loans and leases,
restructured accruing loans and leases, other real estate owned, in-substance
foreclosures whether or not classified as other real estate owned, and loans
considered to be impaired under FAS 114) and loans and leases 90 days or more
past due shown on the consolidated financial statements of the Company and its
Subsidiaries prepared in accordance with GAAP shall not exceed $5,500,000.
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(j) Subsidiary Directors. Parent shall have received the
resignations of such of the directors of the Company's Subsidiaries, including
the Bank, as Parent shall have requested.
(k) Employment Agreements. The employment agreements between
the Company and/or the Bank and each of the officers of the Company and/or the
Bank designated by Parent as of the date hereof shall have terminated and be of
no further effect as of the Effective Time and shall be replaced by agreements
in the respective forms executed by Parent and such officers on or before the
date of this Agreement.
(l) Corporate Actions. Any name change, charter or bylaw
amendment, charter conversion or merger of the Bank requested by Parent shall
have been authorized by all corporate action necessary to permit such name
change, amendment, conversion or merger to be consummated in conjunction with
the consummation of the Merger.
(m) Company's Stock Options and Other Rights. All options,
warrants and other rights to purchase equity securities of the Company, whether
pursuant to the Company Option Plans or otherwise, shall have been exercised in
full or terminated before the Effective Time, in each case following the receipt
of all necessary consents and waivers, and no such options, warrants or other
rights shall be outstanding.
(n) No Material Adverse Change. Since the date of this
Agreement, there shall have been no material adverse change in the financial
condition, business, assets or operations of the Company or the Bank, nor shall
any event have occurred that so far as can reasonably be foreseen on the
Effective Date appears reasonably likely to have a Material Adverse Effect.
(o) Environmental Matters. The Company shall have received and
provided to Parent each of the following:
(i) the letters from the New Hampshire Department of
Justice described in Section 5.1(c)(i) hereof;
(ii) the report described in Section 5.1(c)(ii)
hereof, which report shall contain an estimate of the total cost of
completing all actions described therein of $250,000 or less, after
deducting all reimbursements from the New Hampshire Oil Discharge and
Clean-up Fund; and
(iii) the letter described in Section 5.1(c)(iii)
hereof.
SECTION 7.3 Conditions to Obligations of the Company. The obligations
of the Company to effect the Merger are also subject to the following
conditions, each of which is an independent condition and shall not be affected
by any other condition:
(a) Representations and Warranties. Each of the representations
and warranties of Parent and Purchaser in this Agreement which is qualified as
to materiality shall be true and
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correct and each such representation or warranty that is not so qualified shall
be true and correct in all material respects, in each case as of the date of
this Agreement and as of the Effective Date; provided, however, that, for
purposes hereof, such representations and warranties shall be deemed to be true
and correct in all material respects unless the failure or failures of such
representations and warranties to be so true and correct represent, in the
aggregate, a material adverse effect on the business, financial condition or
results of Parent and its subsidiaries taken as a whole. Parent and Purchaser
shall each have delivered to the Company a certificate of such party to such
effect signed by the Chief Financial Officer of Parent dated as of the Effective
Date.
(b) Agreements and Covenants. Parent and Purchaser shall have
performed in all material respects all obligations and complied in all material
respects with all of the respective agreements or covenants to be performed or
complied by such party under this Agreement; all of the conditions to the
obligations of the Company to effect the Merger shall have been satisfied; there
shall not exist any default or any condition that, with notice and/or the
passage of time, would constitute a default under this Agreement on the part of
Parent or Purchaser; and the Company shall have received a certificate signed by
the Chief Financial Officer of the Parent to such effect dated as of the
Effective Date.
(c) Consents Under Agreements. The consent, approval or waiver
of each person (other than regulatory approvals contemplated in Section 7.1(b))
whose consent or approval shall be required in order to permit the succession by
the Surviving Corporation pursuant to the Merger, to any obligation, right or
interest of the Company under any loan or credit agreement, note, mortgage,
indenture, lease, license or other agreement or instrument shall have been
obtained, except where the failure to obtain such consent, approval or waiver
would not have a Material Adverse Effect.
(d) Legal Opinion. The Company shall have received the opinion
of Palmer & Dodge, counsel to Parent, dated the Effective Date, in a form that
is customary for transactions of this type. As to any matter in such opinion
which involves matters of fact or matters relating to laws other than
Massachusetts or Federal laws, such counsel may rely upon the certificates of
officers and directors of Parent and of public officials and opinions of local
counsel, reasonably acceptable to the Company.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination. This Agreement may be terminated and
the Merger and the other transactions contemplated in this Agreement may be
abandoned at any time prior to the Effective Time, notwithstanding any requisite
approval and adoption of this Agreement and the transactions contemplated in
this Agreement by the stockholders of the Company:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent, Purchaser and the Company;
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(b) by either Parent and Purchaser or the Company if the
Effective Time shall not have occurred on or before February 28, 1996; provided,
however, that the right to terminate this Agreement under this Section 8.1(b)
shall not be available to any party whose failure to fulfill any material
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date;
(c) by either Parent and Purchaser or the Company (i) ninety
days after the date on which any request or application for a regulatory
approval required to consummate the Merger shall have been denied or withdrawn
at the request or recommendation of the Governmental Entity which must grant
such requisite regulatory approval, unless within the ninety day period
following such denial or withdrawal a petition for rehearing, a request for
reconsideration or an amended application has been filed with such Governmental
Entity; provided, however, that no party shall have the right to terminate this
Agreement pursuant to this Section 8.1(c) if such denial or request or
recommendation for withdrawal shall be due to the failure of the party seeking
to terminate this Agreement to perform or observe the covenants and agreements
of such party set forth herein or (ii) if any court of competent jurisdiction or
other governmental authority shall have issued an order, decree, ruling or taken
any other action restraining, enjoining or otherwise prohibiting the Merger and
such order, decree, ruling or other action shall have become final and
nonappealable;
(d) by either Parent and Purchaser or the Company if there
shall have been a material breach of any of the representations or warranties
set forth in this Agreement on the part of the other party, which breach by its
nature cannot be cured in time to permit the Effective Time to occur no later
than February 28, 1996;
(e) by either Parent and Purchaser or the Company if there
shall have been a material breach of any of the covenants or agreements set
forth in this Agreement on the part of the other party, which breach shall not
have been cured within forty-five days following receipt by the breaching party
of written notice of such breach from the other party hereto; or
(f) by any of Parent or Purchaser or the Company (provided,
that if the terminating party is the Company, the Company shall not be in
material breach of any of its obligations under Section 6.1) if any approval of
the stockholders of the Company required for the consummation of the Merger
shall not have been obtained by reason of the failure to obtain the required
vote at a duly held meeting of stockholders or at any adjournment or
postponement thereof.
SECTION 8.2 Termination Fee. In order to induce Parent to enter
into this Agreement and to reimburse Parent for incurring the costs and expenses
related to entering into this Agreement and consummating the transactions
contemplated by this Agreement, the Company will make a cash payment to Parent
of $500,000 (the "Expense Fee") if and only if:
(a) (i) Parent, Purchaser or the Company has terminated this
Agreement pursuant to Section 8.1(f) or (ii) Parent has terminated this
Agreement pursuant to Sections 8.1(d) or 8.1(e), and
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For pu
(b) (i) within twelve (12) months before or after any such
termination, (A) the Company shall have entered into an agreement to engage in
an Acquisition Transaction with any person other than Parent or any subsidiary
or affiliate of Parent or (B) the Board of Directors of the Company shall have
approved an Acquisition Transaction or recommended that shareholders of the
Company approve or accept any Acquisition Transaction with any person other than
Parent or any subsidiary or affiliate of Parent, or (ii) in the case of a
termination pursuant to Section 8.1(f), at the time of such termination it shall
have been publicly announced that any person (other than Parent or any
subsidiary or affiliate of Parent) 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, under the BHC Act or the
Change in Bank Control Act of 1978, for approval to engage in an Acquisition
Transaction.
Any payment required by the previous sentence will be payable by the Company to
Parent (by wire transfer of immediately available funds to an account designated
by Parent) within five business days after demand by Parent. In the event of a
termination under circumstances that would trigger a payment under this Section
8.2, 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 the Company or any
of its Subsidiaries, (ii) any sale, lease or other disposition of 15% or more of
the consolidated assets of the Company 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
the Company or any Subsidiary.
SECTION 8.3 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 8.1, this Agreement shall forthwith become
void, and there shall be no liability on the part of any party hereto, except
(i) as set forth in Section 9.1 and (ii) nothing herein shall relieve any party
from liability for any breach hereof. In no event shall any officer, director or
agent of Parent, Purchaser, the Company or any of their respective subsidiaries
be personally liable for any default by any party in its obligations hereunder
unless any such default was intentionally caused by such officer, director or
agent.
SECTION 8.4 Fees and Expenses. All costs and expenses incurred in
connection with this Agreement, and the transactions contemplated hereby and
thereby shall be paid by the party incurring such expenses, whether or not any
of the transactions contemplated by this Agreement are consummated.
SECTION 8.5 Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; provided, however, that, after the
approval and adoption of this Agreement and the transactions contemplated hereby
by the stockholders of the Company, no amendment may be made which would reduce
the amount or change the type of consideration into which each
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Share shall be converted upon consummation of the Merger. This Agreement may not
be amended except by an instrument in writing signed by the parties hereto.
SECTION 8.6 Waiver. At any time prior to the Effective Time, any party
hereto may (i) extend the time for the performance of any obligation or other
act of any other party hereto, (ii) waive any inaccuracy in the representations
and warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any agreement or condition contained herein;
provided, however, that after the approval and adoption of this Agreement and
the approval of the transactions contemplated hereby by the stockholders of the
Company there may not be, without further approval of such stockholders, any
extension or waiver of this Agreement or any portion thereof which would reduce
the amount or change the form of the consideration into which each Share shall
be converted upon consummation of the Merger and delivered to the Company's
stockholders hereunder other than as contemplated by this Agreement. Any such
extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Non-Survival of Representations, Warranties and Agreements.
The representations, warranties and agreements in this Agreement shall terminate
at the Effective Time or upon the termination of this Agreement pursuant to
Section 8.1, as the case may be, except that the agreements set forth in
Articles I and II and Sections 6.7 and 6.11 shall survive the Effective Time
indefinitely and those set forth in the last sentence of Section 6.4(a), Section
6.4(d) and in Sections 8.2, 8.3 and Article IX hereof shall survive termination
indefinitely.
SECTION 9.2 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given in
accordance with this Section 9.2):
if to Parent or Purchaser:
BayBanks, Inc.
175 Federal Street
Boston, Massachusetts 02110
Facsimile: (617) 556-6328
Attention: Michael W. Vasily
Executive Vice President
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with a copy to:
Palmer & Dodge
One Beacon Street
Boston, Massachusetts 02108
Facsimile: (617) 227-4420
Attention: Jerry V. Klima, Esquire
if to the Company:
Cornerstone Financial Corporation
15 East Broadway
Derry, New Hampshire 03038
Facsimile: (603) 437-4336
Attention: John Terravecchia
Chairman, President and Chief
Executive Officer
with a copy to:
Devine, Millimet & Branch, P.A.
111 Amherst Street
Manchester, NH 03101
Facsimile: (603) 669-8547
Attention: Paul C. Remus, Esquire
SECTION 9.3 Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliate" of a specified person means a person
who directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with, such specified person,
including, without limitation, any partnership or joint venture in which the
Company (either alone, or through or together with any subsidiary) has, directly
or indirectly, an interest of 5% or more;
(b) "beneficial owner" with respect to any Shares means
a person who shall be deemed to be the beneficial owner of such Shares (i) which
such person or any of its affiliates or associates (as such term is defined in
Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly or
indirectly, (ii) which such person or any of its affiliates or associates has,
directly or indirectly, (A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of consideration
rights, exchange rights, warrants or options, or otherwise, or (B) the right to
vote pursuant to any agreement, arrangement or understanding or (iii) which are
beneficially owned, directly or indirectly, by any other persons with whom such
person or any of its affiliates or associates or person with whom such person or
any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of any
Shares;
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(c) "business day" means any day on which the principal offices
of the SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized to close in the City of Boston;
(d) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, as
trustee or executor, by contract or credit arrangement or otherwise;
(e) "knowledge" as used herein in the context of the Company
shall mean knowledge of the Company and of the Bank;
(f) "person" means an individual, corporation, partnership,
limited partnership, syndicate, person (including, without limitation, a
"person" as defined in Section 13(d)(3) of the Exchange Act), trust, association
or entity or government, political subdivision, agency or instrumentality of a
government; and
(g) "Subsidiary" means any corporation, partnership or other
organization, whether incorporated or unincorporated, which is consolidated with
the Company for financial purposes, or of which the Company holds, directly or
indirectly, 25% or more of the shares or equity interest, or which the Company
controls, directly or indirectly, through one or more intermediaries.
SECTION 9.4 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated by this Agreement is not affected in
any manner materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated by this Agreement
be consummated as originally contemplated to the fullest extent possible.
SECTION 9.5 Entire Agreement. This Agreement (including the Disclosure
Schedule) and the Stock Option Agreement constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and undertakings, both written and oral, among the parties, or any of
them, with respect to the subject matter hereof except for the Confidentiality
Agreement.
SECTION 9.6 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than subsections (b)-(e) of Section 6.7
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(which are intended to be for the benefit of the persons covered thereby and
may be enforced by such persons).
SECTION 9.7 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 9.8 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Massachusetts
applicable to contracts executed in and to be performed in that State. All
actions and proceedings arising out of or relating to this Agreement shall be
heard and determined in any state or federal court sitting in the City of
Boston, and each party hereto hereby consents and agrees to submit to the
jurisdiction of such courts for such purpose.
SECTION 9.9 Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 9.10 Counterparts. This Agreement may be executed (including by
facsimile) in one or more counterparts, and by the different parties hereto in
separate counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement.
[The rest of this page is intentionally blank.]
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IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be executed as a sealed instrument as of the date first written
above by their respective officers thereunto duly authorized.
Attest: BAYBANKS, INC., a Massachusetts corporation
(Parent)
/s/ Jerry V. Klima By: /s/ Michael W. Vasily
- --------------------------- ---------------------------------------
Assistant Clerk Name: Michael W. Vasily
Title: Executive Vice President
Attest: BAYBANKS, INC., a New Hampshire corporation
(Purchaser)
/s/ William W. Abendroth By: /s/ Joan E. Tonra
- --------------------------- ---------------------------------------
Assistant Secretary Name: Joan E. Tonra
Title: Treasurer
Attest: CORNERSTONE FINANCIAL CORPORATION
/s/ Edward D. Bureau By: /s/ John Terravecchia
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Secretary Name: John Terravecchia
Title: Chairman, President and
Chief Executive Officer
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<PAGE> 51
ANNEX I
AMENDMENTS TO
ARTICLES OF INCORPORATION
OF
CORNERSTONE FINANCIAL CORPORATION
The Articles of Incorporation of Cornerstone Financial Corporation are
amended in their entirety to be as follows and all previous provisions are
revoked upon the Effective Time of the Agreement and Plan of Merger:
FIRST: The name of the corporation is changed to BayBanks, Inc.
SECOND: The corporation shall have authority to issue 8,000,000 shares
of common stock, no par value.
All of such shares shall have unlimited voting rights and shall carry
the right to participate on a pro rata basis in any distribution of net assets
upon dissolution of the corporation.
The Board of Directors shall have the right to determine any further
preferences, limitations, and relative rights of any class of shares before the
issuance of any shares of that class, or any series within a class before the
issuance of any shares of that series.
THIRD: The capital stock will be sold or offered for sale within the
meaning of RSA 421-B (New Hampshire Securities Act).
FOURTH: To the fullest extent now or hereafter permitted by law, any
action that may be taken at a shareholders' meeting may be taken without a
meeting without prior notice and without a vote if the action is taken in the
form of one or more written consents by all of the number of shareholders having
not less than the minimum number of votes that would be necessary to take the
action at a meeting at which all shares entitled to vote on the action were
present and voted.
FIFTH: Shareholders may adopt or amend bylaw provisions fixing greater
quorum and voting requirements for shareholders or voting groups of shareholders
than are required by New Hampshire RSA Chapter 293-A.
Annex I-1
<PAGE> 52
ANNEX II
March 23, 1995
BayBanks, Inc.
175 Federal Street
Boston, Massachusetts 02110
Gentlemen:
Each of the undersigned (a "Stockholder") beneficially owns and has
sole voting power with respect to the number of shares of the common stock,
without par value (the "Shares"), of Cornerstone Financial Corporation (the
"Company") indicated opposite such Stockholder's name below.
Simultaneously with the execution of this letter agreement, BayBanks,
Inc. ("Parent") and the Company are entering into an Agreement and Plan of
Merger (the "Merger Agreement") providing, among other things, for the merger of
a subsidiary of Parent with the Company (the "Merger"). We understand that
Parent has undertaken and will continue to undertake substantial expenses in
connection with the negotiation and execution of the Merger Agreement and the
subsequent actions necessary to consummate the Merger and the other transactions
contemplated by the Merger Agreement.
In consideration of, and as a condition to, Parent's entering into the
Merger Agreement, and in consideration of the expenses incurred and to be
incurred by Parent in connection therewith, each Stockholder and Parent agree as
follows:
1. Each Stockholder shall vote or cause to be voted for the
approval of the Merger 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 Parent and its subsidiaries, all of the Shares
that such Stockholder shall be entitled to so vote, whether such Shares
are held 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 4 below)) or permit to be sold,
assigned, transferred or otherwise disposed of any Shares owned by such
Stockholder, whether such Shares are held 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, (c) for transfers by gift to family members who agree to
be bound by this letter agreement, and (d) as Parent may otherwise
agree.
Annex II-1
<PAGE> 53
3. The agreements contained herein are intended to relate to
restrictions on transferability and to continue only for such time as
may reasonably be necessary to obtain Stockholder and regulatory
approval of Parent's acquisition of the Shares pursuant to the Merger
and thereafter to consummate the Merger.
4. 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 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.
5. 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 Merger Agreement in accordance with Article VIII
thereof.
6. Each of the Stockholders has signed this letter agreement
intending to be bound severally thereby and not to be bound as joint
obligors.
7. This letter agreement is to be governed by the laws of the
Commonwealth of Massachusetts, without giving effect to the principles
of conflicts of laws thereof. If any provision hereof is deemed
unenforceable, the enforceability of the other provisions hereof shall
not be affected.
Please confirm our agreement with you by signing a copy of this letter.
Very truly yours,
Annex II-2
<PAGE> 54
Director or Number of
Executive Officer Shares Signatures
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AGREED TO AND ACCEPTED
THIS ___ DAY OF MARCH, 1995
BAYBANKS, INC.
Annex II-3
<PAGE> 55
By:________________________________
Name: Michael W. Vasily
Title: Executive Vice President
Annex II-4
<PAGE> 1
Exhibit 2(b)
STOCK OPTION AGREEMENT, dated as of March 23, 1995 (this " Agreement"),
by and between Cornerstone Financial Corporation, a New Hampshire corporation
(the "Company"), and BayBanks, Inc., a Massachusetts corporation ("Parent").
WHEREAS, the Company and Parent propose to enter into an Agreement and
Plan of Merger dated as of the date hereof (the "Merger Agreement")
providing for, among other things, the merger of a wholly owned subsidiary of
Parent with and into the Company with the Company as the surviving corporation;
and
WHEREAS, as a condition and an inducement to Parent's willingness to
enter into the Merger Agreement, Parent has requested that the Company agree,
and the Company has agreed, to grant Parent the Option (as defined below);
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, the Company and Parent agree as follows:
1. Grant of Option.
(a) Subject to the terms and conditions set forth herein, the
Company hereby grants to Parent an irrevocable option (the "Option") to acquire
up to 295,000 shares (the "Option Shares") of common stock, without par value,
of the Company ("Company Common Stock") at an acquisition price of $6.625 per
Option Share (the "Purchase Price"); provided, however, that the number of
shares of Company Common Stock that may be received upon the exercise of the
Option and the Purchase Price are subject to adjustment as herein set forth and
in no event shall the number of shares of Company Common Stock for which this
Option is exercisable exceed 14% of the issued and outstanding shares of Company
Common Stock (without giving effect to any shares of Company Common Stock
subject to or issued pursuant to the Option), less the number of shares
previously issued pursuant to exercise of the Option.
(b) In the event that any additional shares of Company Common
Stock are issued or otherwise become outstanding after the date of this
Agreement (other than pursuant to exercise of the Option pursuant to this
Agreement or as contemplated by Section 6(a) of this Agreement), including,
without limitation, pursuant to Company stock option plans or as a result of the
exercise of conversion rights, the number of shares of Company Common Stock
subject to the Option shall be increased so that, after such issuance, such
number equals 14% of the number of shares of Company Common Stock then issued
and outstanding without giving effect to any shares subject to or issued
pursuant to the Option. Nothing contained in this Section 1(b) or elsewhere in
this Agreement shall be deemed to authorize Company or Parent to breach any
provision of the Merger Agreement.
<PAGE> 2
2. Exercise of Option.
(a) Parent may exercise the Option, in whole or in part, at any
time and from time to time following the occurrence of an Exercise Event (as
defined below); provided that, except as otherwise provided in
this Section 2(a), the right to exercise the Option pursuant to this Section 2
shall expire and be of no further force and effect upon the occurrence of any of
the following (a "Termination Event"): (i) the Effective Time, (ii) 12
months following the first occurrence of an Exercise Event, or (iii) termination
of the Merger Agreement prior to the occurrence of an Exercise Event (other than
a termination of the Merger Agreement by Parent pursuant to Section 8.1(e)
thereof which termination is due to a breach of Section 6.1 or Section 6.5
thereof) or (iv) 12 months after the termination of the Merger Agreement by
Parent pursuant to Section 8.1(e) thereof which termination is due to a breach
of Section 6.1 or Section 6.5 thereof (provided, however, that if within 12
months after a termination of the Merger Agreement under the circumstances
described in this clause (iv) an Exercise Event shall occur, then,
notwithstanding anything to the contrary contained herein, this Option shall
terminate 12 months after the first occurrence of such Exercise Event); and
provided further that any purchase of shares upon exercise of
the Option shall be subject to compliance with applicable law, including,
without limitation, the Bank Holding Company Act of 1956, as amended (the
"BHC Act"). Notwithstanding the expiration of the Option, Parent shall
be entitled to acquire those Option Shares with respect to which it has
exercised the Option in accordance with the terms hereof prior to the expiration
of the Option.
(b) An "Exercise Event" shall occur for purposes of this
Agreement upon the occurrence of any of the following:
(i) any person (other than Parent or any affiliate of
Parent) shall have commenced (as such term is defined in Rule 14d-2
under the Securities Exchange Act of 1934, as amended (the " Exchange
Act")), or shall have filed a registration statement under the
Securities Act of 1933, as amended (the " Securities Act") with respect
to, a tender offer or exchange offer to purchase any shares of Company
Common Stock such that, upon consummation of such offer, such person
would own or control 15% or more of the then outstanding Company Common
Stock;
(ii) without having received Parent's prior written
consent the Company or any Subsidiary, shall have entered into or
proposed or announced an agreement, or intention to enter into an
agreement, or the Board of Directors of the Company shall have approved
or recommended that the shareholders of the Company approve or accept,
an agreement with any person (other than Parent or any affiliate of
Parent) to (x) effect a merger, consolidation or similar transaction
involving the Company or any Subsidiary, (y) sell, lease or otherwise
dispose of assets of the Company or any Subsidiary representing 15% or
more of the consolidated assets of the Company and the Subsidiaries in
a single transaction or series of transactions, or (z) issue, sell,
transfer, exchange or otherwise dispose 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 the Company or any Subsidiary (any of the foregoing is
an "Acquisition Transaction");
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<PAGE> 3
(iii) any person (other than Parent or any affiliate
of Parent) shall have acquired beneficial ownership (as such term is
defined in Rule 13d-3 under the Exchange Act) or the right to acquire
beneficial ownership of, or any "group" (as such term is defined under
the Exchange Act) shall have been formed which beneficially owns or has
the right to acquire beneficial ownership of, 15% or more of the then
outstanding Company Common Stock; or
(iv) the holders of Company Common Stock shall not
have approved the Merger Agreement at the Stockholders' Meeting held
for the purpose of voting on the Merger Agreement, or such meeting
shall not have been held or shall have been cancelled prior to
termination of the Merger Agreement, in each case after it shall have
been publicly announced that any person (other than Parent or any
affiliate of Parent) 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, under the BHC Act or
the Change in Bank Control Act of 1978, for approval to engage in an
Acquisition Transaction.
As used in this Agreement, "person" shall have the meaning specified in Sections
3(a)(9) and 13(d)(3) of the Exchange Act.
(c) In the event Parent wishes to exercise the Option, it shall
send to the Company a written notice (the date of such notice being herein
referred to as the "Notice Date") specifying (i) the total number of
Option Shares it intends to acquire pursuant to such exercise and (ii) a place
and date not earlier than three business days nor later than 15 business days
from the Notice Date for the closing of such acquisition (the "Closing
Date"); provided that, if the closing of the acquisition pursuant to
the exercise of the Option (the "Closing") cannot be consummated by
reason of any applicable judgment, decree or order, the period of time that
otherwise would run pursuant to this sentence shall run instead until the date
on which such judgment, decree or order becomes final and nonappealable; and
provided further, without limiting the foregoing, that if prior
notification to or approval of the FRB or an other regulatory authority is
required in connection with such purchase, Parent shall promptly file the
required notice or application for approval and shall expeditiously process the
same (and the Company shall cooperate with Parent in the filing of any such
notice or application and the obtaining of any such approval), and the period of
time that otherwise would run pursuant to this sentence shall run instead from
the date on which, as the case may be, (i) any required notification period has
expired or been terminated or (ii) such approval has been obtained, and in
either event, any requisite waiting period has passed.
(d) Notwithstanding Section 2(c), in no event shall any Closing
Date be more than 12 months after the related Notice Date, and if the Closing
Date shall not have occurred within 12 months after the related Notice Date due
to the failure to obtain any such required approval, the exercise of the Option
effected on the Notice Date shall be deemed to have expired.
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<PAGE> 4
3. Payment and Delivery of Certificates.
(a) On each Closing Date, Parent shall pay the Company, in
immediately available funds by wire transfer to a bank account designated by the
Company, an amount equal to the Purchase Price multiplied by the number of
Option Shares to be purchased on such Closing Date.
(b) At each Closing, simultaneously with the delivery of the
consideration specified in Section 3(a), the Company shall deliver to Parent a
certificate or certificates representing the Option Shares to be acquired at
such Closing, which Option Shares shall be free and clear of all liens, claims,
charges and encumbrances of any kind whatsoever (including any preemptive rights
of any stockholder).
(c) Certificates evidencing the shares delivered at each
Closing pursuant to Section 3(b) shall be endorsed with the restrictive legend
set forth below in its entirety:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO REGISTRATION OF
TRANSFER OF SUCH SECURITIES WILL BE MADE ON THE BOOKS OF THE ISSUER
UNLESS SUCH TRANSFER IS MADE IN CONNECTION WITH AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH ACT DOES NOT APPLY."
It is understood and agreed that this legend shall be removed by
delivery of substitute certificate(s) without such legend if Parent shall have
delivered to the Company a copy of a letter from the staff of the Securities and
Exchange Commission, or an opinion of counsel (from counsel reasonably
acceptable to the Company) in form and substance reasonably satisfactory to the
Company and its counsel, to the effect that such legend is not required for
purposes of the Securities Act.
4. Representations and Warranties of the Company. The Company
hereby represents and warrants to Parent as follows:
(a) Due Authorization. The Company has all necessary
corporate power and authority to execute and deliver this Agreement. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of the Company. This Agreement has been
duly and validly executed and delivered by the Company.
(b) Authorized Stock. The Company has taken all
necessary corporate and other action to authorize and reserve and, subject to
obtaining the governmental and other approvals and consents referred to herein,
to permit it to issue, and, at all times from the date hereof until the
obligation to deliver Company Common Stock upon the exercise of the Option
terminates, will have reserved for issuance, upon exercise of the Option, shares
of Company Common Stock necessary for Parent to exercise the Option, and the
Company will take all
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<PAGE> 5
necessary corporate action to authorize and reserve for issuance all additional
shares of Company Common Stock or other securities which may be issued pursuant
to Section 6 upon exercise of the Option. The shares of Company Common Stock to
be issued upon due exercise of the Option, including all additional shares of
Company Common Stock or other securities which may be issuable pursuant to
Section 6, upon issuance pursuant hereto, shall be duly and validly issued,
fully paid and nonassessable, and shall be delivered free and clear of all
liens, claims, charges and encumbrances of any kind or nature whatsoever,
including any preemptive rights of any stockholder of the Company.
(c) No Conflicts. 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 Articles of
Incorporation or By-laws or equivalent organizational document of the Company or
any Subsidiary or, subject to obtaining any required approvals or consents,
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 Company or any 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, statue, law, ordinance, rule or regulation
applicable to the Company or any Subsidiary or their respective properties or
assets except as would not, individually or in the aggregate, have a Material
Adverse Effect.
5. Representations and Warranties of Parent. Parent hereby
represents and warrants to the Company that:
(a) Due Authorization. Parent has all necessary
corporate power and authority to execute and deliver this Agreement. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of Parent. This Agreement has been duly
and validly executed and delivered by Parent.
(b) No Conflicts. 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 Articles of Organization
or By-laws or equivalent organizational document of Parent or any subsidiary of
Parent or, subject to obtaining any required approvals or consents, violate,
conflict with or result in any breach of any provisions of, constitute a default
(or 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 Parent or any of
its subsidiaries 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 Parent or any subsidiary of Parent or their respective properties or assets
except as would not have a material adverse effect on the business, financial
condition or results of operations of Parent and its subsidiaries taken as a
whole.
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<PAGE> 6
(c) Purchase Not for Distribution. Any Option Shares or
other securities acquired by Parent upon exercise of the Option will not be
taken with a view to the public distribution thereof and will not be transferred
or otherwise disposed of except in a transaction registered or exempt from
registration under the Securities Act.
6. Adjustment upon Share Issuances, Changes in
Capitalization, Etc.
(a) In the event of any change in Company Common Stock by
reason of a stock dividend, split-up, recapitalization, combination, exchange of
shares or similar transaction, the type and number of shares or securities to be
delivered by the Company pursuant to the Option shall be adjusted appropriately,
and proper provision shall be made in the agreements governing such transaction,
so that Parent shall receive upon exercise of the Option the number and class of
shares or other securities or property that Parent would have received if the
Option had been exercised immediately prior to such event, or the record date
therefor, as applicable.
(b) In the event that the Company shall enter into an
agreement (i) to consolidate with or merge into any person, other than Parent or
one of its affiliates, and shall not be the continuing or surviving corporation
of such consolidation or merger, (ii) to permit any person, other than Parent or
one of its affiliates, to merge into the Company and shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of Company Common Stock shall be changed into or exchanged for stock or
other securities of the Company or any other person or cash or any other
property or the then outstanding shares of Company 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 Parent or one of its
affiliates, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
in this Agreement, be converted into, or exchanged for, an option to acquire the
same consideration received by the holders of Company Common Stock pursuant to
such a transaction. The provisions of this Agreement, including Sections 1, 2, 6
and 8, shall apply with appropriate adjustments to any securities for which the
Option becomes exercisable pursuant to this Section 6.
7. Repurchase at the Option of Parent.
(a) At the request of Parent at any time commencing upon the
occurrence of the Exercise Event specified in Section 2(b)(ii) or (iii) (a
"Repurchase Event") and ending upon the earlier to occur of (x) 12
months immediately thereafter or (y) a Termination Event, the Company (or any
successor entity thereof shall repurchase from Parent (I) the Option (unless the
Option shall have expired or been terminated in accordance with the terms
hereof) and (II) all shares of Company Common Stock purchased by Parent pursuant
hereto with respect to which Parent then has beneficial ownership. The date on
which Parent exercises its rights under this Section 7 is referred to as the
"Request Date". Such repurchase shall be at an aggregate price (the
"Section 7 Repurchase Consideration") equal to the sum of:
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<PAGE> 7
(i) the aggregate exercise price paid by Parent for
any shares of Company Common Stock acquired pursuant to the Option with
respect to which Parent then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price
(as defined below) for each share of Company Common Stock over (y) the
Purchase Price (subject to adjustment pursuant to Section 6),
multiplied by the number of shares of Company Common Stock with respect
to which the Option has not been exercised; and
(iii) the excess, if any, of the Applicable Price over
the Purchase Price (subject to adjustment pursuant to Section 6) paid
(or, in the case of Option Shares with respect to which the Option has
been exercised but the Closing Date has not occurred, payable) by
Parent for each share of Company Common Stock with respect to which the
Option has been exercised and with respect to which Parent then has
beneficial ownership, multiplied by the number of such shares.
(b) If Parent exercises its rights under this Section 7, the
Company shall, within 10 business days after the Request Date, pay the Section 7
Repurchase Consideration to Parent in immediately available funds, and Parent
shall surrender to the Company the Option and the certificates evidencing the
shares of Company Common Stock purchased thereunder with respect to which Parent
then has beneficial ownership; and Parent shall warrant that it has sole record
and beneficial ownership of such shares and that the same are then free and
clear of all liens, claims, charges and encumbrances of any kind whatsoever.
Notwithstanding the foregoing, to the extent that prior notification to or
approval of the FRB or other Governmental Entity is required in connection with
the payment of all or any portion of the Section 7 Repurchase Consideration or
is not then permissible under Section 293-A:6.40 of the New Hampshire Law, the
Company shall deliver from time to time that portion of the Section 7 Repurchase
Consideration that it is not then so prohibited from paying and shall promptly
file the required notice or application for approval and shall expeditiously
process the same (and Parent shall cooperate with the Company in the filing of
any such notice or application and the obtaining of any such approval), and the
period of time that otherwise would run pursuant to the preceding sentence for
the payment of the portion of the Section 7 Repurchase Consideration requiring
such notification or approval shall run instead from the date on which, as the
case may be, (i) any required notification period has expired or been terminated
or (ii) such approval has been obtained and, in either event, any requisite
waiting period shall have passed. If the FRB or any other Governmental Entity
disapproves of any part of the Company's proposed repurchase pursuant to this
Section 7, the Company shall promptly give notice of such fact to Parent and
redeliver to Parent the Option Shares it has acquired from Parent pursuant
hereto and is then prohibited from repurchasing, and Parent shall have the right
to exercise the Option as to the number of Option Shares for which the Option
was exercisable at the Request Date less the number of shares as to which
payment has been made pursuant to Section 7(a); provided that if the Option
shall have expired prior to the date of such notice or shall be scheduled to
expire at any time before the expiration of a period ending on the thirtieth
business day after such date, Parent shall nonetheless have the right so to
exercise the Option or exercise its rights under Section 8 until the expiration
of such period of 30 business days.
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<PAGE> 8
(c) For purposes of this Agreement, the "Applicable
Price" means the highest of (i) the highest price per share at which a
tender or exchange offer has been made for shares of Company Common Stock after
the date hereof and on or prior to the Request Date, (ii) the price per share to
be paid by any third party for shares of Company Common Stock or the
consideration per share to be received by holders of Company Common Stock, in
each case pursuant to an agreement for a merger or other business combination
transaction with the Company entered into on or prior to the Request Date or
(iii) the highest bid price per share as quoted on the Nasdaq Stock Market (or,
if the shares of Company Common Stock are not quoted thereon, on the principal
trading market on which such shares are traded as reported by a recognized
source) during the 60 business days preceding the Request Date. If the
consideration to be offered, paid or received pursuant to either of the
foregoing clauses (i) or (ii) shall be other than in cash, the value of such
consideration shall be determined in good faith by an independent nationally
recognized investment banking firm selected by Parent and reasonably acceptable
to the Company, which determination shall be conclusive for all purposes of this
Agreement.
8. Registration Rights. The Company shall, if requested by Parent at
any time and from time to time within two years of the first Closing Date, as
expeditiously as possible prepare and file up to two registration statements
under the Securities Act if such registration is necessary in order to permit
the sale or other disposition of any or all shares of Company Common Stock or
other securities that have been acquired by or are issuable to Parent upon
exercise of the Option by Parent, including a "shelf" registration statement
under Rule 415 under the Securities Act or any successor provision, and the
Company shall use all reasonable efforts to qualify such shares or other
securities under any applicable state securities laws. Parent agrees to use all
reasonable efforts to cause, and to cause any underwriters of any sale or other
disposition to cause, any sale or other disposition pursuant to such
registration statement to be effected on a widely distributed basis so that upon
consummation thereof no purchaser or transferee shall own beneficially 3% or
more of the then outstanding voting power of the Company. The Company shall use
all reasonable efforts to cause each such registration statement to become
effective, to obtain all consents or waivers of other parties which are required
therefor and to keep such registration statement effective for such period not
in excess of 120 days from the day such registration statement first becomes
effective as may be reasonably necessary to effect such sale or other
disposition. The obligations of the Company hereunder to file a registration
statement and to maintain its effectiveness may be suspended for one or more
periods of time not exceeding 90 days in the aggregate for all such periods if
the Board of Directors of the Company shall have determined that the filing of
such registration statement or the maintenance of its effectiveness would
require disclosure of nonpublic information that would materially and adversely
affect the Company. Any registration statement prepared and filed under this
Section 8, and any sale covered thereby, shall be at the Company's expense
except for underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Parent's counsel related thereto. Parent shall provide all
information reasonably requested by the Company for inclusion in any
registration statement to be filed hereunder. If, during the time periods
referred to in the first sentence of this Section 8, the Company effects a
registration under the Securities Act of Company Common Stock for its own
account or for any other stockholders of the Company (other than on Form S-4 or
Form S-8, or any successor form), it shall allow Parent the right to participate
in such registration, and such participation shall not affect the obligation of
the Company to effect two registrations for Parent under this is Section 8;
provided that, if the managing underwriters of such offering
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advise the Company in writing that in their opinion the number of shares of
Company Common Stock requested to be included in such registration exceeds the
number which can be sold in such offering without adversely affecting the price,
timing or distribution of the Company Common Stock being sold, the Company shall
include in such registration first, the shares intended to be included therein
by the Company, and second, the number of shares requested to be included
therein by Parent which, in the opinion of such managing underwriters, can be
sold in such offering without adversely affecting the price, timing or
distribution of the Company Common Stock being sold. In connection with any
registration pursuant to this Section 8, the Company and Parent shall provide
each other and any underwriter of the offering with customary representations,
warranties, covenants, indemnification and contribution in connection with such
registration. In the event of an Acquisition Transaction, proper provision shall
be made in the definitive acquisition agreement executed in connection therewith
to provide that the acquiring party or successor party thereto shall be bound by
the provisions of this Section 8 as if such party was a signatory hereto.
9. First Refusal. At any time after the first occurrence of an
Exercise Event and prior to the later of (a) the expiration of 24 months
immediately following the first purchase of shares of Company Common Stock
pursuant to the Option and (b) the termination of the Option pursuant to Section
2(a), if Parent shall desire to sell, assign, transfer or otherwise dispose of
all or any of the shares of Company Common Stock or other securities acquired by
it pursuant to the Option, it shall give the Company written notice of the
proposed transaction (an "Offeror's Notice"), identifying the proposed
transferee, accompanied by a copy of a binding offer to purchase such shares or
other securities signed by such transferee and setting forth the terms of the
proposed transaction. An Offeror's Notice shall be deemed an offer by Parent to
the Company, which may be accepted within 20 business days of the receipt of
such Offeror's Notice, on the same terms and conditions and at the same price at
which Parent is proposing to transfer such shares or other securities to such
transferee. The purchase of any such shares or other securities by the Company
shall be settled within 10 business days of the date of the acceptance of the
offer and the purchase price shall be paid to Parent in immediately available
funds; provided that, if prior notification to or approval of the FRB or
any other regulatory authority is required in connection with such purchase, the
Company shall promptly file the required notice or application for approval and
shall expeditiously process the same (and Parent shall cooperate with the
Company in the filing of any such notice or application and the obtaining of any
such approval) and the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which, as the case may be, (a) any
required notification period has expired or been terminated or (b) such approval
has been obtained and, in either event, any requisite waiting period shall have
passed. In the event of the failure or refusal of the Company to purchase all
the shares or other securities covered by an Offeror's Notice or if the FRB or
any other regulatory authority disapproves the Company's proposed purchase of
such shares or other securities, Parent may, within 60 days from the date of the
Offeror's Notice (subject to any necessary extension for regulatory
notification, approval or waiting periods), sell all, but not less than all, of
such shares or other securities to the proposed transferee at no less than the
price specified and on terms no more favorable than those set forth in the
Offeror's Notice. The requirements of this Section 9 shall not apply to (w) any
disposition as a result of which the proposed transferee would own beneficially
not more than 3% of the outstanding voting power of the Company, (x) any
disposition of Company Common Stock or other securities by a person to whom
Parent has assigned its rights under the Option
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with the consent of the Company, (y) any sale by means of a public offering
registered under the Securities Act in which steps are taken to reasonably
assure that no purchaser will acquire securities representing more than 3% of
the outstanding voting power of the Company or (z) any transfer to a wholly
owned subsidiary of Parent which agrees in writing to be bound by the terms
hereof.
10. Division of Option. This Agreement and the Option granted
hereby are exchangeable, without expense, at the option of Parent upon partial
exercise of the Option or partial assignment of the Option, in both instances as
provided herein, upon presentation and surrender of this Agreement at the
principal office of the Company, for other Agreements providing for Options of
different denominations entitling the holder thereof to acquire in the aggregate
the same number of shares of Company Common Stock which may be acquired
hereunder. The terms "Agreement" and "Option" as used herein
include any other Agreements and related Options for which this Agreement and
the Option granted hereby may be exchanged.
11. Miscellaneous.
(a) Expenses. Except as otherwise provided in the
Merger Agreement, each of the parties hereto shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own counsel.
(b) Waiver and Amendment. Any provision of this
Agreement may be waived at any time by the party that is entitled to the
benefits of such provision. This Agreement may not be modified, amended, altered
or supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
(c) Entire Agreement; No Third-Party Beneficiary;
Severability. Except as otherwise set forth in the Merger Agreement, this
Agreement (including other documents and instruments referred to herein or
therein) (i) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof and (ii) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder. If any
term, provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction or a regulatory agency to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. If for any reason such court or
regulatory agency determines that the Parent is not permitted to acquire, or the
Company is not permitted to repurchase pursuant to Section 7 or Section 9 either
or the full number of shares of Company Common Stock provided under the Option,
or the Option, it is the express intention of the Company to allow Parent to
acquire or to require the Company to repurchase such number of shares and such
part of the Option as may be permissible, without any amendment or modification
hereof.
(d) Governing Law. This Agreement shall be governed by
the internal laws of the Commonwealth of Massachusetts without regard its
conflicts of law principles.
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<PAGE> 11
(e) Descriptive Headings. The descriptive headings contained herein are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered by receipted hand delivery or
mailed by prepaid registered or certified mail (return receipt requested) or by
overnight courier, cable telegram, telex or facsimile addressed as follows (or
at such other address for a party as shall be specified by like notice):
if to Parent:
BayBanks, Inc.
175 Federal Street
Boston, Massachusetts 02110
Facsimile: (617) 556-6328
Attention: Michael W. Vasily
Executive Vice President
with a copy to:
Palmer & Dodge
One Beacon Street
Boston, Massachusetts 02108
Facsimile: (617) 227-4420
Attention: Jerry V. Klima, Esquire
if to the Company:
Cornerstone Financial Corporation
15 East Broadway
Derry, New Hampshire 03038
Facsimile: (603) 437-4336
Attention: John Terravecchia
Chairman, President and
Chief Executive Officer
with a copy to:
Devine, Millimet & Branch, P.A.
111 Amherst Street
Manchester, New Hampshire 03101
Attention: Paul C. Remus, Esquire
Facsimile: (603) 669-8547
(g) Counterparts. This Agreement and any amendments hereto may be
executed including by facsimile, in two counterparts, each of which shall be
considered one and
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<PAGE> 12
the same agreement and shall become effective when both counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that both parties need not sign the same counterpart.
(h) Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder or under the Option shall be assigned
by any of the parties hereto (whether by operation of law or otherwise) without
the prior written consent of the other party, except that: (i) Parent may assign
this Agreement to any subsidiary or affiliate, provided that, notwithstanding
any such assignment, Parent shall continue to be liable for the performance of
its obligations under this Agreement; and (ii) Parent may assign its rights
under Section 8 of this Agreement in connection with the sale of Company Common
Stock to any purchaser thereof. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
(i) Further Assurances. In the event of any exercise of
the Option by Parent, the Company and Parent 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.
(j) Specific Performance. The parties hereto agree that
this Agreement may be enforced by either party through specific performance,
injunctive relief and 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.
(k) Certain Definitions. Capitalized terms not defined herein
shall have the meanings set forth in the Merger Agreement.
IN WITNESS WHEREOF, the Company and Parent have caused this Stock
Option Agreement to be executed as a sealed instrument by their respective
officers thereunto duly authorized, all as of the date first written above.
Attest: CORNERSTONE FINANCIAL CORPORATION
/s/ Edward D. Bureau By: /s/ John Terravecchia
- ---------------------------- ------------------------------
Secretary Name: John Terravecchia
Title: Chairman, President
and Chief Executive Officer
Attest: BAYBANKS, INC.
/s/ Jerry V. Klima By: /s/ Michael W. Vasily
- ---------------------------- ------------------------------
Assistant Clerk Name: Michael W. Vasily
Title: Executive Vice President
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