December 13, 1994
Securities and Exchange Commission
450 5th Street
Washington, D.C. 20549
RE: CHITTENDEN CORPORATION - REGISTRATION NO. 0-7974
REGISTRATION STATEMENT (ON FORM S-4)
Gentlemen:
Pursuant to the requirements of Regulation S-t under the Securities Exchange
Act of 1934, there is appended to this transmittal, an electronic file of the
Registration Statement for Chittenden Corporation (on Form S-4) relating to
the Agreement and Plan of Reorganization between Chittenden Corporation and
the Bank of Western Massachusetts (the "Merger"). The Registration Statement
relating to the Merger is hoped to be declared effective by February 14, 1995
and closed by the end of March, 1995.
Chittenden Corporation will wire the filing fee of $3,073.00 via Fedwire.
If you have any questions concerning this Registration Statement Filing, please
telephone the undersigned at (802) 660-1410.
Kindly acknowledge receipt of this letter by Compuserve E-Mail.
Thank you.
Very truly yours,
S/F. SHELDON PRENTICE
F. Sheldon Prentice
Secretary
As filed with the Securities and Exchange Commission on December 6, 1994
Registration No. 33-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________
FORM S-4
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
______________
CHITTENDEN CORPORATION
(Exact name of registrant as specified in its charter)
Vermont 0-7974 03-0228404
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Identification
organization) Number) Number)
Two Burlington Square
Burlington, Vermont 05401
(802) 660-1410
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
______________
F. Sheldon Prentice, Esq.
Secretary
Chittenden Corporation
Two Burlington Square
Burlington, Vermont 05401
(802) 660-1410
(Address, including zip code, and telephone number, including area code,
of agent for service)
______________
Approximate date of commencement of the proposed sale of the securities to the
public:
As soon as practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following. ____
CALCULATION OF REGISTRATION FEE
Title of Each Proposed Proposed
Class of Securities Amount to be Maximum Maximum Amount of
to be Registered Registered(1) Offering Aggregate Registration Fee
Price Per Offering
Unit (2) Price (3)
- --------------------------------------------------------------------------------
Common Stock 630,000
($1.00 par) Shares
value) . . . $8,912,080 $3,073
- --------------------------------------------------------------------------------
(1) This Registration Statement covers the maximum number of shares of the
Registrant's common stock that may be issued in the transaction described
herein.
(2) Not applicable.
(3) Estimated solely for the purpose of calculating the registration fee and
computed in accordance with Rule 457(f)(2), based on the book value of
the common stock of The Bank of Western Massachusetts on September 30,
1994, ($878.73) and the maximum number of such shares (10,142) that may
be exchanged for the securities being registered.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
THE BANK OF WESTERN MASSACHUSETTS
29 State Street
Springfield, Massachusetts 01103
(Not available at this time), 1995
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of The
Bank of Western Massachusetts ("BWM") to be held on (not available at this
time), 1995, at (not available at present),Springfield, Massachusetts, at
10:00 a.m. (the "Special Meeting").
At the Special Meeting, stockholders will be asked to approve the Agreement
and Plan of Reorganization dated as of August 17, 1994, (the "Merger
Agreement"), by and among Chittenden Corporation ("CC"), Chittenden
Acquisition Bank ("CAB") and BWM,and to authorize BWM to enter into a Plan of
Merger with CAB. CAB, a Massachusetts corporation, is a wholly-owned
subsidiary of CC, a Vermont corporation, which is a registered bank holding
company with its principal place of business in Burlington, Vermont. CC's
sole banking subsidiary, Chittenden Trust Company, is the largest bank in the
State of Vermont, and CC is Vermont's second largest bank holding company,
with assets of $1.2 billion at September 30, 1994. Chittenden conducts
business through a network of 40 offices.
If the Merger Agreement is approved and the merger between CAB and BWM is
consummated (the "Merger"), each outstanding share of BWM Common Stock, other
than BWM Class A stock, shares as to which dissenters' rights have been
perfected and shares held by BWM as treasury stock, will be converted into the
right to receive, at the election of each BWM stockholder and subject to the
allocation procedures set forth in the Merger Agreement, (i) $1,225.00 in cash
or (ii) 57.3099 shares of CC Common Stock, with each of (i) and (ii) to be
subject to adjustment pursuant to Section 1.6 of the Merger Agreement which is
attached to this Proxy Statement and Prospectus, and subject to possible
further adjustment pursuant to Section 1.5 of the Merger Agreement. The
Section 1.6 adjustment relates to the pro-rata allocations which may occur to
achieve an aggregate payment of the Merger consideration by CC of 55% stock
and 45% cash. The Section 1.5 adjustment relates to the fixing of total
consideration to a price of CC's Common Stock at $25.50 per share if the
Market Value of the CC Common Stock(as determined under the Merger Agreement)
is greater than $25.50 per share. In the event the price of CC Common Stock
exceeds or is equal to $25.50 per share, CC will adjust the amounts of stock
and cash paid in order to limit the aggregate value of the Merger to $28.1
million, including the purchase of BWM Class A Stock, as determined in the
manner specified in the accompanying Proxy Statement and Prospectus.
Either BWM or CC may terminate the Merger Agreement if the Market Value of
the CC Common Stock (as determined under the Merger Agreement) during a
twenty-day period ending five days before receipt of the last regulatory
approval falls below $17.50 per share.
If there are not sufficient votes at the time of the Special Meeting to
approve and adopt the Merger Agreement, BWM's stockholders may be asked to
approve adjournment of the Meeting to permit additional solicitation of proxies.
BWM stock certificates should not be returned to BWM with the proxy and should
not be forwarded until you receive a letter of transmittal that will be provided
shortly after the Merger is consummated.
The Merger Agreement and Merger is described in the accompanying Proxy
Statement and Prospectus, the forepart of which includes a summary of the terms
of the Merger and certain other information relating to the proposed
transaction. Consummation of the Merger is subject to certain conditions,
including the approval of the Merger Agreement by BWM stockholders. We urge
you to read the Proxy Statement and Prospectus carefully.
The BWM Board of Directors has received the opinion of its financial advisor,
Brown Brothers Harriman & Co., ("Brown Brothers"), that the consideration
provided in the Merger Agreement is fair to the stockholders of BWM from a
financial point of view, and has determined that the Merger Agreement is in the
best interest of BWM stockholders.
ACCORDINGLY, THE BOARD UNANIMOUSLY HAS APPROVED THE MERGER AGREEMENT AND
RELATED TRANSACTIONS AND RECOMMENDS THAT YOU VOTE IN FAVOR OF THE MERGER
AGREEMENT AT THE SPECIAL MEETING.
Brown Brothers' opinion is summarized in the Proxy Statement and
Prospectus, and the complete opinion is included as Appendix B to the Proxy
Statement and Prospectus. We urge you to read these items carefully.
YOUR VOTE IS IMPORTANT. THE FAILURE TO VOTE WILL HAVE THE SAME EFFECT AS A
VOTE AGAINST THE MERGER AGREEMENT. Approval of the Merger Agreement by BWM
stockholders requires the affirmative vote of at least two-thirds of the shares
of BWM Common Stock outstanding and entitled to vote at the Special Meeting.
Regardless of the size of your holdings or whether you plan to attend the
meeting, we urge you to sign, date and mail the enclosed proxy card promptly in
the postage-prepaid envelope provided. If you attend the Special Meeting, you
may vote in person even if you have already mailed your proxy card.
On behalf of the Board of Directors, we thank you for your continued
support. We appreciate your interest.
Sincerely yours,
Frank P. Fitzgerald, Esq. Timothy P. Crimmins, Jr.
Chairman President and Chief Executive
Officer
<PAGE>
THE BANK OF WESTERN MASSACHUSETTS
29 State Street
Springfield, Massachusetts 01103
(Not available at this time), 1995
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To the Stockholders of The Bank of Western Massachusetts:
Notice is hereby given that a Special Meeting of the Stockholders of The Bank
of Western Massachusetts ("BWM") will be held at (not available at this time),
Springfield, Massachusetts on (not available at this time), 1995 commencing at
10:00 a.m. for the purpose of considering and voting upon the following matters:
1. A proposal to approve and adopt the Agreement and Plan of Reorganization
(the "Merger Agreement"), dated as of August 17, 1994, by and among
Chittenden Corporation ("CC"), Chittenden Acquisition Bank ("CAB") and
BWM, and to authorize BWM to enter into a Plan of Merger with CC,
pursuant to which Merger Agreement and Plan of Merger, BWM would be merged
with and into CAB, and stockholders of BWM would receive cash or shares of
CC Common Stock, all as more fully described in the attached Proxy
Statement and Prospectus. A copy of the Merger Agreement is attached as
Appendix A to the attached Proxy Statement and Prospectus. A copy of the
Plan of Merger is attached as Exhibit A to the Merger Agreement.
2. Such other matter or matters which may properly come before the meeting or
any adjournment or adjournments thereof.
Only stockholders of record at the close of business on (not available at this
time), 1995 (the "Record Date") are entitled to notice of, and to vote at, the
Special Meeting and any and all adjournments or postponements thereof. The
affirmative vote of the holders of two-thirds of the shares of Common Stock of
BWM outstanding on the Record Date is required for approval of the Merger
Agreement and related Plan of Merger.
If the proposal described in Item 1 above is approved by the stockholders at
the Special Meeting, and effected by BWM, any stockholder of BWM (i) who files
with BWM before the taking of the vote on the approval of such action, written
objection to the proposed action stating that he or she intends to demand
payment for his or her shares if the action is taken, and (ii) whose shares are
not voted in favor of such action, has or may have the right to demand in
writing from BWM within twenty (20) days after the date of the mailing to him or
her of notice in writing that the corporate action has become effective,
payment of his or her shares and an appraisal of the value thereof. BWM, CC
and any such stockholder shall in such cases have the rights and duties and
shall follow the procedures set forth in Sections 85 to 98,inclusive, of
Chapter 156B of the General Laws of Massachusetts.
A Proxy Statement and Prospectus is set forth on the following pages and a
proxy card is enclosed herewith. To ensure that your vote is counted, please
complete, sign, date and return the proxy card in the enclosed, postage-paid
return envelope,whether or not you plan to attend the Special Meeting in person.
If you attend the Special Meeting, you may revoke your proxy and vote your
shares in person. However, attendance at the meeting will not of itself
constitute revocation of a proxy. If your shares are not registered in your
own name, you will need additional documentation from your recordholder in
order to vote personally at the Special Meeting.
By Order of the Board of Directors
Springfield, Massachusetts James P. Russell
(not available at this time), 1995 Secretary
<PAGE>
THE BANK OF WESTERN MASSACHUSETTS
PROXY STATEMENT
_________________
CHITTENDEN CORPORATION
PROSPECTUS FOR
627,525 SHARES COMMON STOCK
($1.00 Par Value)
This Proxy Statement and Prospectus is furnished in connection with the
solicitation of proxies from the holders of the common stock of The Bank of
Western Massachusetts("BWM"),par value $66.67 per share ("BWM Common Stock"),
for use at the Special Meeting of Stockholders of BWM to be held on (not
available at this time), 1995 and any adjournments or postponements thereof (the
"Special Meeting"). The solicitation of proxies from BWM Stockholders is made by
BWM's Board of Directors.
At the Special Meeting, the BWM stockholders will be asked to consider and act
upon a proposal to approve and adopt the Agreement and Plan of Reorganization
between Chittenden Corporation ("CC"), Chittenden Acquisition Bank ("CAB")
and BWM dated as of August 17, 1994 and a related Plan of Merger (together,
the "Merger Agreement"), pursuant to which BWM would be merged with and into
CAB, a wholly-owned subsidiary of CC, with CAB being the surviving corporation
doing business as BWM (the "Merger"). A copy of the Merger Agreement is
attached hereto as Appendix A and is incorporated herein by reference.
This Proxy Statement and Prospectus also constitutes a prospectus of CC in
respect of up to (not available at this time) shares of CC Common Stock to be
issued to BWM stockholders in connection with the Merger. Such shares of CC
Common Stock are to be issued on the conversion of the outstanding shares of BWM
Common Stock, as described in this Proxy Statement and Prospectus. See "THE
MERGER - Terms of the Merger."
Upon consummation of the Merger, each outstanding share of BWM Common Stock,
other than BWM Class A Stock, shares as to which dissenters' rights have been
perfected and shares held by BWM as treasury stock, will be converted into (i)
$1,225.00 in cash (the "Per Share Cash Consideration") or (ii) 57.3099 shares
(the "Per Share Stock Consideration"), both of which are subject to adjustment
to achieve an aggregate 55% Per Share Stock Consideration and a 45% Per Share
Cash Consideration. Total consideration, including purchase of the BWM Class A
Stock, equals approximately $25.5 million. To the extent the average closing
price of CC (as determined in the Merger Agreement) is greater than $25.50 per
share, the total consideration shall be fixed as if CC Common Stock were
equal to $25.50 per share. To the extent the average closing price of CC (as
determined in the Merger Agreement) is less than $17.50 per share, either CC or
BWM may elect to terminate the Merger Agreement. BWM stockholders will receive
cash in lieu of fractional shares. See "THE MERGER - Terms of the Merger."
The CC Common Stock is listed on NASDAQ-NMS system. The last reported sale
price of CC Common Stock on NASDAQ-NMS on (not available at this time),1995 was
$ (not available at this time) per share.
Consummation of the Merger is conditioned upon, among other things, receipt of
all required stockholder and regulatory approvals. If there are not sufficient
votes at the time of the Special Meeting to approve and adopt the Merger
Agreement, the stockholders of BWM may be asked to approve adjournment of the
Special Meeting to permit further solicitation of proxies.
THE BOARD OF DIRECTORS OF BWM UNANIMOUSLY RECOMMENDS APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT TO THE STOCKHOLDERS OF BWM.
This Proxy Statement and Prospectus does not cover any resales of CC Common
Stock received by BWM stockholders in connection with the Merger, and no person
is authorized to make use of this Proxy Statement and Prospectus in connection
with any such resale.
This Proxy Statement and Prospectus and the form of proxy for the Special
Meeting are first being mailed to stockholders of BWM on or about
(not available at this time) 1995.
______________________
THE SHARES OF CC COMMON STOCK OFFERED HEREBY HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES AUTHORITY NOR HAS THE COMMISSION OR
ANY STATE SECURITIES AUTHORITY PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT AND PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
______________________
THE SHARES OF CC COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF
A BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
______________________
The date of this Proxy Statement and Prospectus is
(Not available at this time), 1995
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 9
INCORPORATION OF DOCUMENTS BY REFERENCE . . . . . . . . . . . . . . . . . 9
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SELECTED HISTORICAL AND SUMMARY PRO FORMA FINANCIAL DATA . . . . . . . . 18
THE SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Quorum and Voting for BWM Special Meeting . . . . . . . . . . . . . . 24
Vote Required at BWM Special Meeting . . . . . . . . . . . . . . . . . 25
Beneficial Ownership of BWM Common Stock . . . . . . . . . . . . . . . 25
Incorporator's Warrants . . . . . . . . . . . . . . . . . . . . . . 26
Class A Common Stock . . . . . . . . . . . . . . . . . . . . . . . . 26
Certain Transactions . . . . . . . . . . . . . . . . . . . . . . . . 27
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Background of and Reasons for the Merger;
Recommendation of BWM Board of Directors . . . . . . . . . . . . . . . 28
Background of and Reasons of BWM for the Merger . . . . . . . . . . 28
Recommendation of BWM Board of Directors . . . . . . . . . . . . . . 29
Terms of the Merger; Consideration to be Received
by BWM Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . 32
Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . 33
Surrender of BWM Common Stock Certificates . . . . . . . . . . . . . . 33
Conditions to Consummation of the Merger . . . . . . . . . . . . . . . 34
Regulatory Approvals Required . . . . . . . . . . . . . . . . . . . . 35
Waiver and Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 35
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Corporate Transactions . . . . . . . . . . . . . . . . . . . . . . . . 36
Stock Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . 36
Business Pending the Merger . . . . . . . . . . . . . . . . . . . . . 37
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . 37
Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Management and Operations After the Merger . . . . . . . . . . . . . . 38
Rights of BWM Dissenting Stockholders . . . . . . . . . . . . . . . . 39
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . 40
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . 41
Resale of CC Common Stock Received by BWM Stockholders . . . . . . . . 41
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Certain Differences in Rights of Stockholders . . . . . . . . . . . . 42
Significant Differences Between the Corporation Laws
of Massachusetts and Vermont . . . . . . . . . . . . . . . . . . . . . 42
Significant Differences Between the Charters
and By-Laws of BWM and CC . . . . . . . . . . . . . . . . . . . . . . 44
BUSINESS OF CC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Description of CC Capital Stock . . . . . . . . . . . . . . . . . . . 46
BUSINESS OF BWM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Market Price of and Dividends on BWM Common Stock . . . . . . . . . . 47
SUPERVISION AND REGULATION . . . . . . . . . . . . . . . . . . . . . . . 47
Regulation of CC . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Interstate Acquisitions . . . . . . . . . . . . . . . . . . . . . . 48
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Certain Transactions by Bank Holding Companies
with their Affiliates . . . . . . . . . . . . . . . . . . . . . . . 48
Holding Company Support of Subsidiary Banks . . . . . . . . . . . . 48
Liability of Commonly Controlled Depository Institutions . . . . . . 48
Regulation of CB and BWM . . . . . . . . . . . . . . . . . . . . . . . 49
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Examinations and Supervision . . . . . . . . . . . . . . . . . . . . 49
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . 49
Deposit Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 49
Federal Reserve Board Policies . . . . . . . . . . . . . . . . . . . 49
Consumer Protection Regulation; Bank Secrecy Act . . . . . . . . . . 50
Capital Requirements . . . . . . . . . . . . . . . . . . . . . . . . . 50
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Leverage Capital Ratio . . . . . . . . . . . . . . . . . . . . . . . 50
Risk-Based Capital Requirements . . . . . . . . . . . . . . . . . . 50
Recent Banking Legislation . . . . . . . . . . . . . . . . . . . . . . 51
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Prompt Corrective Action . . . . . . . . . . . . . . . . . . . . . . 51
Risk-Based Deposit Insurance Assessments . . . . . . . . . . . . . . 52
Brokered Deposits and Pass-Through Deposit
Insurance Limitations . . . . . . . . . . . . . . . . . . . . . . . 52
Conservatorship and Receivership Amendments . . . . . . . . . . . . 53
Real Estate Lending Standards . . . . . . . . . . . . . . . . . . . 53
Standards for Safety and Soundness . . . . . . . . . . . . . . . . . 53
Activities and Investments of Insured State Banks . . . . . . . . . 53
Consumer Protection Provisions . . . . . . . . . . . . . . . . . . . 54
Depositor Priority Statute . . . . . . . . . . . . . . . . . . . . . 54
Interstate Banking and Branching . . . . . . . . . . . . . . . . . . 54
PRO FORMA FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . 55
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
VALIDITY OF CC COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . 61
APPENDICES
Appendix A - Agreement and Plan of Reorganization
(with Exhibits, including Plan of Merger) . . . . . . . . . . . . A-1
Appendix B - Opinion of Brown Brothers Harriman & Co . . . . . . . . . B-1
Appendix C - Massachusetts General Law, Chapter 156B,
Sections 85 through 98 . . . . . . . . . . . . . . . . . . . . . . . . C-1
Appendix D - Stock Option Agreement . . . . . . . . . . . . . . . . . .D-1
Appendix E - Annual Report on Form F-2 of BWM for the
Year Ended December 31, 1993. . . . . . . . . . . . . . . .E-1
Appendix F - Quarterly Report on Form F-4 of BWM for the
Nine Months Ended September 30, 1994. . . . . . . . . . . .F-1
No dealer, salesperson or other individual has been authorized to give any
information or make any representations not contained in this Proxy Statement
and Prospectus in connection with the Merger and offering covered by this Proxy
Statement and Prospectus. If given or made, such information or representations
must not be relied upon as having been authorized by CC or BWM. This Proxy
Statement and Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, the CC Common Stock in any jurisdiction where,
or to any person to whom, it is unlawful to make such offer or solicitation.
Neither the delivery of this Proxy Statement and Prospectus nor any issuance of
securities made hereunder shall, under any circumstances, create an implication
that there has not been any change in the facts set forth in this Proxy
Statement and Prospectus or in the affairs of CC or BWM since the date hereof.
AVAILABLE INFORMATION
CC is subject to the informational requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and, in accordance therewith, files
reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the Commission's office at 450 Fifth
Street, N.W., Washington, D.C. 20549 and the Regional Offices of the Commission
in New York - 7 World Trade Center, Suite 1300, New York, New York, 10048; and
Chicago - Citicorp Center, 500 West Madison Avenue, Suite 1400, Chicago,
Illinois, 60611-2511. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. CC Common Stock is listed on NASDAQ-NMS and such
reports, proxy statements and other information concerning CC may be inspected
at the offices of the National Association of Security Dealers, 33 Whitehall,
New York, NY 10004.
CC has also filed a registration statement on Form S-4 (together with all
amendments and exhibits thereto, including documents and information
incorporated by reference, the "Registration Statement") with the Commission
under the Securities Act of 1933, as amended (the "Securities Act"), relating to
the shares of CC Common Stock to be issued in connection with the Merger. This
Proxy Statement and Prospectus does not contain all the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information,
reference is hereby made to the Registration Statement. Statements contained in
this Proxy Statement and Prospectus as to the contents of any document are not
necessarily complete, and in each instance reference is made to such document
itself, each such statement being qualified in all respects by such reference.
The Registration Statement (and exhibits thereto) may be inspected at the Office
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies
thereof may be obtained from the Commission at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
CC.
This Proxy Statement and Prospectus incorporates documents by reference,
certainof which are not presented herein or delivered herewith. These documents
(excluding exhibits unless specifically incorporated therein) are available
without charge upon written or oral request to F. Sheldon Prentice, Esq.,
Secretary, CC, Two Burlington Square, Burlington, Vermont, 05401, telephone
number (802) 660-1410. In order to ensure timely delivery of the documents, any
request should be made by March (not available at this time), 1995.
Incorporated by reference into this Proxy Statement and Prospectus are the
following documents and information heretofore filed with the Commission by CC.
Except as noted below, these documents are not presented herein or delivered
herewith:
(i) Annual Report on Form 10-K for the year ended December 31, 1993;
(ii) Quarterly Reports on Form 10-Q for each of the quarters ended March 31,
1994, June 30, 1994, and September 30, 1994; and
(iii) Current Reports on Form 8-K dated August 17, September 9 and September
23, and December 13, 1994.
All documents subsequently filed by CC pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act prior to the date of the Special Meeting shall be
deemed to be incorporated by reference into this Proxy Statement and Prospectus
and to be a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement and Prospectus to the extent that a statement contained
herein, or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Proxy Statement and Prospectus.
BWM.
Incorporated by reference into this Proxy Statement and Prospectus are the
following documents, without exhibits, heretofor filed with the Federal Deposit
Insurance Corporation, which documents are being delivered with this Proxy
Statement and Prospectus:
(i) Annual Report on Form F-2 for the year ended December 31, 1993; and
(ii) Quarterly Report on Form F-4 for the nine months ended September 30,
1994.
Any statement incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Proxy Statement and Prospectus to the extent
that a statement contained herein or in any other document which is also
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Proxy Statement and Prospectus.
All information in this Proxy Statement and Prospectus regarding BWM and its
affiliates has been furnished by BWM, and all information herein regarding CC
and its affiliates has been furnished by CC. No person is authorized to give
any information or to make any representation not contained in this Proxy
Statement and Prospectus in connection with the solicitation of proxies and
offering made hereby and, if given or made, such information or representation
should not be relied upon as having been authorized by CC or BWM. This Proxy
Statement and Prospectus does not constitute the solicitation of a proxy, or an
offer to sell or a solicitation of any offer to purchase any securities, in any
jurisdiction in which such solicitation of an offer to purchase any securities
may not be lawfully made. This Proxy and Prospectus does not cover any resales
of the CC Common Stock offered hereby to be received by stockholders of BWM
deemed to be "affiliates" of BWM or CC upon the consummation of the Merger. No
person is authorized to make use of this Proxy Statement and Prospectus in
connection with such resales. Neither the delivery of this Proxy Statement and
Prospectus nor any distribution of securities made hereunder shall imply that
there has been no change in the information set forth herein or in the affairs
of CC or BWM since the date hereof.
<PAGE>
SUMMARY
The following summary is not intended to be complete and is qualified in all
respects by the more detailed information in this Proxy Statement and
Prospectus, the appendices hereto and the documents incorporated herein by
reference.
The Companies
CC. CC is a bank holding company, the principal asset of which is Chittenden
Trust Company ("CB"), with 40 banking locations in Vermont. At September 30,
1994, CC and its consolidated subsidiaries had consolidated assets of
$1,223,593,000, consolidated deposits of $1,039,728,000, and stockholders'
equity of $103,081,000. CAB, also a wholly-owned subsidiary of CC, will be a
newly-formed, Massachusetts-chartered trust company. The sole purpose of CAB
is to facilitate the Merger and, after the Effective Time, CAB will be the
surviving entity after the Merger of BWM into CAB, but CAB will operate under
the name of The Bank of Western Massachusetts.
CC and CB are subject to federal, state and local laws applicable to savings
banks, banks and bank holding companies and to the regulations of the Board of
Governors of the Federal Reserve System, the State of Vermont and the Federal
Deposit Insurance Corporation.
For further information concerning CC, see "BUSINESS OF CC" herein and the CC
documents incorporated by reference herein as described under "Incorporation of
Certain Documents by Reference." The principal executive offices of CC are
located at Two Burlington Square, P.O. Box 820, Burlington, Vermont 05402
(telephone number (802) 660-1400).
BWM. BWM is a state-chartered Massachusetts trust company which has four
branch locations in western Massachusetts. BWM is principally engaged in the
business of attracting deposits from its banking offices and investing these
funds primarily in commercial loans. At September 30, 1994, BWM had
consolidated assets of $214,184,000, consolidated deposits of $185,755,000, and
stockholders' equity of $16,204,000.
The principal executive offices of BWM are located at 29 State Street,
Springfield, Massachusetts 01103. BWM's telephone number is (413) 781-2265.
BWM is subject to federal, state and local laws applicable to savings banks,
banks, and bank holding companies and to the regulations of the Federal Deposit
Insurance Corporation and the Banking Commissioner of the Commonwealth of
Massachusetts.
For further information concerning BWM, see "--Selected Financial Data of BWM"
and "BUSINESS OF BWM."
The Merger
The Merger Agreement provides for the merger of BWM with and into CAB, a
wholly-owned subsidiary of CC, with CAB to be the surviving corporation doing
business as The Bank of Western Massachusetts. Upon consummation of the Merger,
each outstanding share of BWM Common Stock, other than BWM Class A Stock, shares
held by BWM as treasury stock and shares as to which dissenters' rights have
been perfected, will be converted into the right to receive, at the election of
each BWM stockholder and subject to the allocation procedures set forth in the
Merger Agreement, (i) $1,225.00 in cash or (ii) 57.3099 shares of CC Common
Stock, each of (i) and (ii) to be subject to adjustment pursuant to Section 1.6
of the Merger Agreement, which is attached to this Proxy Statement and
Prospectus, and subject to possible further adjustment pursuant to Section 1.5
of the Merger Agreement. The Section 1.6 adjustment relates to the pro-rata
allocations which may occur to achieve an aggregate payment of the Merger
consideration by CC of 55% stock and 45% cash. The Section 1.5 adjustment
relates to the fixing of total consideration to a price of CC's Common Stock at
$25.50 per share if the Market Value of the CC Common Stock (as determined under
the Merger Agreement) is greater than $25.50 per share. In the event the price
of CC Common Stock exceeds or is equal to $25.50 per share, CC will adjust the
amounts of stock and cash paid in order to limit the aggregate value of the
Merger to $28.1 million, including the purchase of BWM Class A Stock.
Either BWM or CC may terminate the Merger Agreement if the Market Value of the
CC Common Stock (as determined under the Merger Agreement) during a twenty-day
period ending five days before receipt of the last regulatory approval falls
below $17.50 per share.
BWM stockholders will receive a cash payment in lieu of the issuance of
fractional shares of CC Common Stock equal to the product obtained by
multiplying the fraction of a share by $21.375.
At the Effective Date and in consideration of the Merger, each share of BWM
Class A Stock, par value $0.25 per share, issued and outstanding immediately
prior to the Effective Date shall be cancelled in return for rights to receive
$826.88 in cash and 47.2808 shares of CC Common Stock per share subject to the
following conditions:
(a) CC Common Stock shall be subject to transfer restrictions as set forth in
the Merger Agreement and will become vested at a rate of 20% per annum over a
5-year period after Closing; and
(b) the Holder shall continue employment through each subsequent annual
anniversary of the Closing; provided, however, in the event that the Holder is
terminated unilaterally by CC, dies or becomes disabled, the Restricted Stock
will become fully vested; provided further, in the event that the Holder is
terminated for cause (defined as deliberate dishonesty, conviction of a crime
involving moral turpitude or gross and willful failure to perform a substantial
portion of duties and responsibilities) any unvested shares of Restricted Stock
will become null and void; and provided further, in the event of a change in
control of CC as such event is defined in CC's current "Change in Control"
agreements with certain key employees of CC, all shares of Restricted Stock will
become fully vested. In the interim, all shares of Restricted Stock will have
full voting and dividend rights.
BWM's stockholders shall receive an aggregate of 627,525 shares of CC Common
Stock and $10,974,561 in cash. Each BWM stockholder will elect to receive 100%
of the Per Share Consideration in the form of either CC Common Stock or cash, or
make no election. In the event the BWM stockholders elect less or greater than
the 627,525 shares of CC Common Stock, shares of CC Common Stock and cash will
be allocated on a pro-rata basis to achieve an aggregate 55% stock and 45% cash
consideration which would result in $551.25 in cash and 31.5205 shares of stock,
for each share of BWM stock in the event that all BWM stockholders elected to
receive either all cash or all stock. The total consideration, including
cashing out of BWM's stock options and warrants, based upon the price of CC
Common Stock at $21.375 per share, equals $25,500,095.
Based on the number of shares of CC Common Stock outstanding at December 31,
1994, BWM stockholders would hold, in the aggregate, approximately (not
available at this time)% of the CC Common Stock outstanding immediately after
consummation of the Merger. All stockholders of BWM currently are minority
stockholders and, following the Merger, such stockholders will be minority
stockholders of CC. However, BWM's stockholders' percentage interest in CC will
be smaller than their prior percentage interest in BWM, and accordingly, their
ability to affect the business direction of CC through the right to vote as a CC
stockholder will be reduced. The Purchase Price was negotiated by the Chief
Executive Officers of CC and BWM and approved by each corporation's Board of
Directors.
Effective Time of the Merger
The Merger will become effective upon the filing of Articles of Merger
relating thereto with, and the issuance of a Certificate of Merger with respect
thereto by, the Secretary of State of the Commonwealth of Massachusetts. The
Merger cannot become effective until the BWM stockholders have approved the
Merger Agreement and all regulatory approvals and actions have been taken.
Special Meeting of BWM Stockholders
The Special Meeting of BWM stockholders to consider and vote upon the Merger
Agreement will be held at (not available at this time), Springfield,
Massachusetts on (not available at this time), 1995 at 10:00 a.m. local time.
Only holders of record of BWM Common Stock at the close of business on (not
available at this time), 1995 (the "BWM Record Date"), will be entitled to
notice of and to vote at the BWM Special Meeting. At the close of business on
the BWM Record Date, there were outstanding and entitled to vote 18,440 shares
of BWM Common Stock. Each share of BWM Common Stock is entitled to one vote on
the Merger Agreement.
Votes Required to Approve the Merger
Approval of the Merger Agreement by BWM stockholders requires the affirmative
vote of at least two-thirds of all shares of BWM Common Stock outstanding and
entitled to vote at the Special Meeting.
It is expected that all of the shares of BWM Common Stock beneficially owned
by directors and executive officers of BWM and their affiliates at the BWM
Record Date for the BWM Special Meeting (%(not available at this time) of the
total number of outstanding shares of BWM Common Stock at such date) will be
voted for approval and adoption of the Merger Agreement. As of the BWM Record
Date, neither CC nor its directors and executive officers and their affiliates
beneficially owned any shares of BWM Common Stock. See "THE SPECIAL MEETING -
Quorum and Voting for Special Meeting."
If sufficient votes in favor of the Merger are not received before the Special
Meeting, the Special Meeting may be adjourned to a future date in order to
permit further solicitation of proxies in respect of the Merger. In connection
therewith, however, proxies voting against the Merger may not be used by the
proxyholders to vote in favor of adjournment pursuant to such proxyholders'
discretionary authority.
See "THE SPECIAL MEETING - Quorum and Voting for the Special Meeting" and "THE
MERGER - Rights of BWM Dissenting Stockholders."
Recommendation of the Board of Directors of BWM
THE BOARD OF DIRECTORS OF BWM RECOMMENDS THAT BWM STOCKHOLDERS VOTE FOR
APPROVAL OF THE MERGER AGREEMENT.
The Board of Directors of BWM believes that the Merger Agreement, including
the Purchase Price, and each of the transactions contemplated therein are in the
best interests of BWM and are fair to and in the best interests of its
stockholders. The Board unanimously recommends that the stockholders of BWM
vote for approval and adoption of the Merger Agreement.
In reaching its determination, the Board of Directors of BWM consulted with
management of BWM and with BWM's financial and legal advisors, and considered a
number of factors, including, but not limited to, the following: BWM's
business, results of operations, prospects and financial condition; the cost to
BWM of continuing to operate independently as a relatively small banking
institution in a consolidating market, the advantages of a business combination
with CC, and the possible values to BWM's shares by remaining independent; the
oral presentation of BWM's financial advisor, Brown Brothers Harriman & Co.
("Brown Brothers"), which was subsequently confirmed in writing, that as of
August 16, 1994 (the date the Board approved the Merger Agreement), and as of
the date of this Proxy Statement and Prospectus the consideration set forth in
the Merger Agreement was fair to BWM stockholders from a financial point of
view; certain information concerning CC's financial condition; results of
operations and prospects; recent market prices for shares of BWM Common Stock
and CC Common Stock and the Purchase Price, and the possible impact of the
Merger on BWM's business, prospects, employees, customers and community. See
"THE MERGER - Reasons of BWM for the Merger."
Opinion of BWM's Financial Advisor
Brown Brothers, the financial advisor to BWM in connection with the Merger,
has delivered its written opinion to the Board of Directors of BWM to the effect
that, as of August 17, 1994 and as of the date of this Proxy Statement and
Prospectus, the Purchase Price provided in the Merger Agreement is fair to BWM
stockholders from a financial point of view. The full text of the opinion of
Brown Brothers, which sets forth assumptions made, matters considered and the
limits on the review undertaken in connection with such opinion, is attached
hereto as Appendix B. BWM stockholders are encouraged to read this opinion in
its entirety. Brown Brothers' opinion is directed only to the Purchase Price
and does not constitute a recommendation to any BWM stockholder as to how such
stockholder should vote at the BWM Special Meeting. See "THE MERGER -
Background of the Merger, - Reasons of BWM for the Merger, and - Opinion of
Financial Advisor to BWM."
Corporate Transactions
Pursuant to the Merger Agreement, BWM has agreed that neither it, nor any of
its directors, officers, employees, advisors, agents or affiliates shall
encourage or solicit or hold discussions or negotiations with, or, except to the
extent required by their fiduciary duties after consultation with counsel,
provide any information to anyone other than CC concerning any acquisition or
purchase of substantial assets other than as contemplated by the Merger
Agreement. See "THE MERGER - Corporate Transactions."
Regulatory Approvals Required
The Merger is subject to the approval of the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board"), the Federal Deposit Insurance
Corporation ("FDIC"), and the Massachusetts Board of Bank Incorporation (the
"Massachusetts Board"). CC has filed applications seeking these required
regulatory approvals, and, on (not available at this time), 1995, the Federal
Reserve Board issued an order approving the Merger. On (not available at this
time), 1995, the FDIC issued an order approving the Merger. As of the date of
this Proxy Statement and Prospectus, the approval of the Massachusetts Board had
not been received. There can be no assurance that such approval will be
received, or as to the timing of such approval or as to the conditions on which
it will be given if it is received. However, neither CC nor BWM is aware of any
reason as to why the Massachusetts Board application would not be approved.
Conditions, Waiver and Amendment, and Termination
The respective obligations of CC and BWM to consummate the Merger are subject
to the satisfaction of a number of conditions, including the receipt of all
required regulatory approvals, and the approval of the Merger by the requisite
vote of BWM's stockholders, and certain other conditions customary in
transactions of this kind. See "THE MERGER - Conditions to Consummation of the
Merger."
The Merger Agreement may be amended by BWM and CC at any time prior to the
Effective Time of the Merger, provided, however, that after any approval of the
Merger Agreement by the stockholders of BWM, any amendment of the Merger
Agreement, or waiver of any condition contained therein, which reduces the
amount or changes the form of consideration to be delivered to BWM stockholders,
or which makes any other change that is prohibited by applicable law, requires
the further approval of such stockholders. See "THE MERGER - Waiver and
Amendment."
The Merger Agreement may be terminated at any time before the Merger becomes
effective under special circumstances specified in the Merger Agreement,
including, without limitation, (i) by mutual consent of CC and BWM; (ii) by CC
or BWM if the Effective Time shall not have occurred on or prior to June 30,
1995; (iii) by BWM if the Merger Agreement and the transactions contemplated
thereby are not approved by the legally required vote of the stockholders of
BWM; (iv) by CC, if there shall have been any material breach of any obligation
of BWM under the Merger Agreement; or (v) by BWM, if there shall have been any
material breach of any obligation of CC under the Merger Agreement. BWM and CC
may both terminate the Merger Agreement, subject to certain limitations, after
approval of the Merger by the BWM stockholders, if the value of the CC Common
Stock (as determined under the Merger Agreement) during a twenty-day period
ending five days before the receipt of the last regulatory approvals, falls
below $17.50 per share, as adjusted for any stock split or stock dividend. The
Merger Agreement provides, however, that CC and BWM may waive the $17.50 per
share condition by CC's delivering written notice to BWM which sets forth the
adjusted number of shares that will be issued in the Merger and BWM's agreement
to that adjustment. See "THE MERGER - Terms of the Merger; Termination."
Interests of Certain Persons in the Merger
Certain members of BWM's management and Board of Directors have certain
interests in the Merger in addition to their interests as stockholders of BWM.
These include provisions in the Merger Agreement relating to CC's agreement to
continue the rights of BWM officers and directors to be indemnified against
certain liabilities arising before and including consummation of the Merger to
the extent such persons would be entitled to indemnification under Massachusetts
law and CC's charter and by-laws. Additionally, CC has entered into agreements
with the following officers of BWM as to their continued employment after the
Merger: (i) Frank P. Fitzgerald, and (ii) Timothy P. Crimmins, Jr. These
agreements provide for the continued employment of these individuals after the
Merger at their current salary levels. These agreements also contain provisions,
effective after the Merger, entitling each of these officers to certain
severance and other benefits if his employment terminates under certain
circumstances after a "change in control" of CC. In addition, Messrs. Fitzgerald
and Crimmins are Holders of BWM Class A Stock and warrants, and will receive the
benefits accruing to such Holders. In addition, certain legal matters in
connection with the Merger will be passed on by Frank P. Fitzgerald, P.C.,
Counsel to BWM, of which Mr. Fitzgerald is Chairman. See "THE MERGER - Interest
of Certain Persons in the Merger."
Business Pending the Merger
The Merger Agreement provides that, pending completion of the Merger, BWM will
limit the manner in which it operates, including conducting its business only in
the ordinary, regular and usual course consistent with past practice; using its
best efforts to keep intact its business organization; and generally maintaining
the status quo of its business and operations. See "THE MERGER - Business
Pending the Merger."
Stock Option Agreement
At the same time as CC and BWM entered into the Merger Agreement, and as
consideration therefor, CC and BWM entered into a stock option agreement (the
"Stock Option Agreement") whereby BWM granted CC an option (the "Option") to
purchase up to 7,558 fully-paid and nonassessable shares of BWM Common Stock
(24.9%) at a price of $800.00 per share. The Option is exercisable on the
occurrence of certain events which create the potential for a third party to
acquire control of BWM. To the best knowledge of CC and BWM, no such event as
would permit exercise of the Option has occurred to date.
The Stock Option Agreement and BWM's agreement that neither it nor its
directors, officers, employees or their affiliates will encourage or hold
discussions with potential acquirors (with an exception for actions required by
fiduciary duty), may have the effect of discouraging persons who might now or
prior to the Effective Date be interested in acquiring all or a significant
portion of shares of BWM Common Stock from considering such an acquisition, even
if such persons were to pay a higher price per share than under the Merger
Agreement. See "THE MERGER - Stock Option Agreement and Appendix D."
Certain Federal Income Tax Consequences
It is intended that the Merger will constitute a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, and,
therefore, that holders of BWM Common Stock who receive solely CC Common Stock
in the Merger will not recognize gain or loss for federal income tax purposes as
a result of the Merger. The foregoing tax treatment will not apply to BWM
stockholders' receipt of cash in lieu of fractional shares of CC Common Stock or
pursuant to dissenter's rights of appraisal. A BWM stockholder who receives CC
Common Stock and cash in lieu of fractional shares will be treated as having
received capital gain in the amount of the cash received provided that his BWM
shares are held as capital assets. A BWM stockholder who receives solely cash
in exchange for his BWM shares will recognize gain or loss equal to the
difference between the amount of cash received and the adjusted basis of his BWM
shares provided he is not considered to be the constructive owner of any CC
shares held by any other person. Such gain or loss could be a capital gain or
loss provided that his BWM shares are held as capital assets. A BWM stockholder
who receives both cash and CC Common Stock pursuant to the election procedures
will not recognize any loss upon the exchange. Such a BWM stockholder will
recognize gain in an amount equal to the lesser of (i) the excess of (A) the sum
of the fair market value of the CC Common Stock received and the amount of cash
received over (B) the adjusted basis of the BWM stock surrendered or (ii) the
amount of cash received. Any gain recognized by such a BWM stockholder will be
capital gain or loss provided that (i) he holds his BWM Shares as capital assets
and (ii) the ratio of (A) the number of shares of CC Common Stock that he owns,
both directly and indirectly under certain attribution of ownership principles,
immediately after the Merger to (B) the total number of shares of CC Common
Stock that is outstanding immediately after the Merger is less than 80% of an
Hypothetical Ratio, as defined in the following sentence. A BWM stockholder's
Hypothetical Ratio is the ratio of (A) the number of CC Common Stock that he
would have owned, both directly and indirectly under certain attribution of
ownership principles, immediately after the Merger, if all outstanding BWM stock
had been converted into CC Common Stock at the rate of 57.3099 to 1, to (B) the
total number of CC Common Stock that would have been outstanding immediately
after the Merger, if all outstanding BWM Shares had been converted into CC
Common Stock at the rate of 57.3099 to 1. If such a BWM stockholder is unable
to satisfy the 80% test described above, the gain recognized may be treated as
ordinary dividend income, unless it is determined, based upon all of the facts
and circumstances, that receipt of the cash was not essentially equivalent to a
dividend; if it is determined that their receipt of the cash was not essentially
equivalent to a dividend, the recognized gain will be capital gain. A BWM
stockholder who receives CC Common Stock in the Merger will have an adjusted
basis in such stock equal to his adjusted basis in the BWM Common Stock
surrendered minus (i) the amount of any cash received, plus (ii) the amount of
any gain recognized. The holding period of the CC Common Stock received in the
Merger will include the holding period of the BWM Common Stock surrendered in
exchange therefor provided that the latter were held as capital assets.
It is recommended that each BWM stockholder consult his or her own tax advisor
concerning the federal income tax consequences of the Merger, as well as any
applicable state, local or foreign tax consequences, based upon such
stockholders' own particular facts and circumstances. Consummation of the
Merger is conditioned upon, among other things, the receipt by each of CC and
BWM of an opinion of counsel dated as of the Effective Time, substantially to
the foregoing effect. See "THE MERGER - Certain Federal Income Tax
Consequences."
Resales of CC Common Stock
The shares of CC Common Stock issuable to stockholders of BWM, other than
holders of Class A stock, upon consummation of the Merger may be traded freely
by those stockholders who are not "affiliates" of CC or BWM. See "THE MERGER -
Resale of CC Common Stock received by BWM Stockholders."
Accounting Treatment
CC expects to account for the Merger using the purchase method of
accounting in accordance with Accounting Principles Board Opinion No. 16,
"Business Combinations," as amended ("APB No. 16"). Under this method of
accounting, the purchase price will be allocated to assets acquired and
liabilities assumed based on their estimated fair values at the Effective Time.
Income of the newly consolidated companies will not include income (or loss) of
BWM prior to the Effective Time. See "SELECTED HISTORICAL AND PRO FORMA
FINANCIAL DATA", "THE MERGER - ACCOUNTING TREATMENT" and "PRO FORMA FINANCIAL
DATA."
Dissenters' Rights of Appraisal
Under Massachusetts law, holders of BWM Common Stock who do not vote to
approve the Merger Agreement may elect to have the "fair value" of their shares
(determined in accordance with Massachusetts law) judicially appraised and paid
to them, if the Merger is consummated and if they strictly comply with the
provisions of Massachusetts General Laws Annotated Ch. 156B Sections 85 through
98, inclusive, a copy of which is attached hereto as Appendix D. Any deviation
from such requirements may result in the loss of dissenters' rights. See "THE
MERGER - Rights of BWM Dissenting Stockholders" and Appendix C. Cash received
on the exercise of appraisal rights will not be subject to the tax treatment
afforded under Section 368(a) of the Internal Revenue Code. See "THE MERGER -
Certain Federal Income Tax Consequences."
Markets and Prices
CC Common Stock is listed on NASDAQ-NMS. There is no public market for BWM
Common Stock. The following table sets forth the closing price per share of CC
Common Stock as reported on NASDAQ-NMS and the "equivalent per share price" (as
defined below) of BWM Common Stock, each as of (i) August 16, 1994, the last
trading day before CC and BWM announced plans for the Merger, and (ii) (not
available at this time)1995. The "equivalent per share price" of the BWM Common
Stock as of such dates is calculated by multiplying the last reported sales
price of CC Common Stock (set forth below under the heading "Historical CC
Common Stock") by 57.3099 (the Per Share stock price under the Merger
Agreement).
Historical
Historical Historical BWM Equivalent
CC Common Stock BWM Common Stock Per Share Price
--------------- ---------------- ---------------
August 16, 1994 $21.625 $878.73 (1) $1,239.33
_________, 1995 $______ $______ (1) $
______________________
(1) BWM Common Stock is not traded on any established market, and management of
BWM is not aware of transaction prices for any recent transactions in BWM
Common Stock. At September 30, 1994, the book value per share of BWM's
Common Stock was $878.73.
No assurance can be given as to what the market price of CC Common Stock will
be if and when the Merger is consummated or when such shares are actually issued
in the Merger.
Certain Differences in Rights of Stockholders
The rights of BWM stockholders are currently governed by Massachusetts
corporate law, BWM's Articles of Organization and Bylaws. On completion of the
Merger, BWM stockholders will become stockholders of CC, and their rights will
be governed by the Vermont Business Corporation Law, CC's Articles of
Incorporation and Bylaws. See "THE MERGER - Certain Differences in Rights of
Stockholders" for a discussion of the material differences in the rights of the
holders of CC Common Stock and BWM Common Stock.
Management and Operations After the Merger
At the Effective Time of the Merger, the separate corporate existence of BWM
will cease to exist and CAB will be the surviving corporation but will do
business under the name of The Bank of Western Massachusetts. CAB will remain a
direct subsidiary of CC. It is anticipated that the management of BWM
immediately after the Effective Time will continue largely as before. Further,
certain senior members of BWM's management have entered into employment and
management continuity agreements with BWM. The Merger Agreement provides that
CC intends to keep BWM's Board separate from CC's and to name up to two
additional directors, who may be employees of CC or an affiliate. The Merger
Agreement contains no other agreement as to the makeup of BWM's Board of
Directors after the Merger. See "THE MERGER - Interests of Certain Persons in
the Merger; Management and Operations After the Merger."
<PAGE>
SELECTED HISTORICAL AND SUMMARY PRO FORMA FINANCIAL DATA
The following tables set forth certain selected historical financial
information for CC and BWM, and certain unaudited pro forma financial
information giving effect to the Merger as of January 1, 1993 (as of September
30, 1994 and for the nine months ended September 30, 1994 and for the year ended
December 31, 1993) using the purchase method of accounting. For a description
of the purchase method of accounting with respect to the Merger and the related
effects on the historical financial statements of BWM, see "THE MERGER -
Accounting Treatment." The historical income statement data included in the
selected financial data for the five years ended December 31, 1993 are derived
from audited consolidated financial statements included in the Annual Reports on
Form 10-K by CC and are derived from audited financial statements included in
Annual Reports on Form F-2 by BWM. The unaudited historical financial data for
the nine months ended September 30, 1994 have been derived from amounts reported
on the Quarterly Report on Form 10-Q by CC and from unaudited financial
statements on the Quarterly Report on Form F-4 by BWM. This information should
be read in conjunction with the consolidated financial statements of each of CC
and BWM, and the related notes thereto, delivered herewith and/or incorporated
herein by reference, and in conjunction with the unaudited pro forma financial
information, including the notes thereto, appearing elsewhere in this Proxy
Statement and Prospectus. See "INCORPORATION OF DOCUMENTS BY REFERENCE", "PRO
FORMA FINANCIAL DATA."
The pro forma financial information included are for information purposes only
and are not necessarily indicative of the results of the future operations of
the merged entity or the actual results that would have been achieved had the
Merger been consummated prior to the periods indicated.
<PAGE>
THE SPECIAL MEETING
General
This Proxy Statement and Prospectus is being furnished to the holders of BWM
Common Stock in connection with the solicitation of proxies for use at the
Special Meeting. The solicitation of proxies is being made by the Board of
Directors of BWM.
The Special Meeting will be held for the purpose of considering and voting on
a proposal to approve the Merger Agreement, including the Plan of Merger, and
the transactions contemplated thereby, which is being submitted to the BWM
stockholders.
Quorum and Voting for BWM Special Meeting
Only stockholders of BWM of record at the close of business on March
(not available at this time), 1995 (the "BWM Record Date") are entitled to
notice of and to vote at the Special Meeting. As of the BWM Record Date, there
were issued and outstanding (not available at this time) shares of BWM Common
Stock entitled to vote, of which (not available at this time) shares,
representing (not available at this time)% of the shares issued and outstanding,
were beneficially owned by directors and officers of BWM and their respective
affiliates. Each such director, officer and affiliate has indicated his or her
intention to vote the shares of BWM Common Stock beneficially owned by him or
her in favor of approval of the Merger Agreement. See "--Beneficial Ownership
of BWM Common Stock."
The presence in person or by proxy of a majority of the aggregate number of
shares of BWM Common Stock issued and outstanding on the BWM Record Date is
necessary to constitute a quorum for the transaction of business at the Special
Meeting.
Each BWM stockholder is entitled to one vote, in person or by proxy, for each
share of BWM Common Stock held of record in such stockholder's name at the close
of business on the BWM Record Date.
Vote Required at BWM Special Meeting
The approval and adoption of the Merger Agreement, including the Plan of
Merger, and the transactions contemplated thereby, requires the affirmative vote
of the holders of two-thirds of the outstanding shares of the BWM Common Stock.
As a consequence, abstentions and broker non-votes have the effect of a vote
against the Merger Agreement. Abstentions and broker non-votes are counted only
for purposes of determining whether a quorum is present at the meeting.
Assuming that each director and officer and affiliate of BWM votes in favor of
the Merger Agreement, the affirmative vote of the holders of an additional
(not available at this time) shares of BWM Common Stock, representing (not
available at this time) % of the total number of shares issued and outstanding
on the BWM Record Date, will be required to carry the proposal. If the
requisite vote to carry the Merger proposal is not obtained at the Special
Meeting, BWM has the right to terminate the Merger Agreement, subject to
certain limitations. See "THE MERGER -- Termination."
The enclosed proxy is being solicited by the Board of Directors of BWM. Each
proxy will be voted as directed; however, if no direction is indicated, each
properly executed proxy will be voted FOR the approval and adoption of the
Merger Agreement, including the Plan of Merger, and the transactions
contemplated thereby, and in such a manner as management's proxyholders shall
decide on such other matters, if any, as may properly come before the Special
Meeting. Any stockholder who returns a proxy before the Special Meeting has the
right to revoke it prior to its exercise by delivering written notice to the
Clerk of BWM, or by returning a duly executed proxy bearing a later date, or by
attending the Special Meeting and voting in person. However, if shares are held
in street name, a stockholder will need additional documentation to vote in
person at the Special Meeting.
In addition to soliciting proxies by mail, proxies may also be solicited by
telephone or personal interview by employees of BWM, who will not receive
additional compensation for such solicitation activity. BWM reserves the right
to retain a proxy solicitor who would be paid a fee and reasonable out-of-pocket
expenses.
If sufficient votes in favor of the Merger are not received before the Special
Meeting, the Special Meeting may be adjourned to a future date in order to
permit further solicitation of proxies in respect of the Merger. In connection
therewith, however, proxies voting against the Merger may not be used by the
proxyholders to vote in favor of adjournment pursuant to such proxy holders'
discretionary authority.
Beneficial Ownership of BWM Common Stock
The following table sets forth information as of December 31, 1993, the BWM
Record Date, with respect to the shares of BWM Common Stock beneficially owned
by each director of BWM, by the chief executive officer of BWM, and by all
directors and executive officers as a group.
Amount and Nature of Percent of BWM
Name Beneficial Ownership (1) Common Stock
- ---- ------------------------ ---------------
John J. Cardone 112.5(2) *
Edward J. Carroll, Jr. 112.5 *
Martin J. Clayton 137.5(3) *
Timothy P. Crimmins, Jr. 140.5(4) *
James J. Falcone 292.125(5) 1.58%
Frank P. Fitzgerald 374.875(6) 2.03%
William F. Frain 150.0 *
John P. Isenburg 112.5 *
Edward C. Leavy 174.5(7) *
Carl B. Martin, III 112.5 *
William G. Mazeine 137.5(8) *
Emilio J. Sibilia, Jr. 112.5 *
Andrew E. Skroback, Jr. 112.5(9) *
Benjamin A. Surner, Jr. 112.5 *
All directors and officers as a
group (17 persons) 2,474.5(10) 11.70%
___________________________
*Beneficial owner of less than 1%
(1) Each person named has sole voting and investment power with respect to all
shares of Common Stock indicated, except as set forth in Notes (2) to (10)
below. The number of shares owned by each director includes 37.5 shares
of Common Stock that such director has a right to acquire under warrants
granted to the incorporators of the Bank. See "Incorporators' Warrants."
(2) Includes 75 shares held by Mr.Cardone jointly with his wife, Sylvia
Cardone.
(3) Includes 15 shares held by the Trustee of Mr. Clayton's Individual
Retirement Account and 10 shares held by the Trustee of his wife's
Individual Retirement Account, as to which Mr. Clayton disclaims beneficial
ownership.
(4) Includes 85 shares held by the Trustee of Mr. Crimmins' Individual
Retirement Account.
(5) Includes 75 shares held by Mr. Falcone's wife, Linda A. Falcone, as to
which shares Mr.Falcone disclaims beneficial ownership; 22.5 shares held by
Mr. Falcone's sister, Claire M.Falcone, as to which shares Mr. Falcone
disclaims beneficial ownership; 60 shares held by Mr. Falcone's children,
as to which shares Mr. Falcone disclaims beneficial ownership; and 15
shares held by the Trustee of Mr.Falcone's Individual Retirement Account as
to which Mr. Falcone does not disclaim beneficial ownership.
(6) Includes 75 shares held by Mr. Fitzgerald's wife, Joyce S. Fitzgerald, as
to which shares Mr. Fitzgerald disclaims beneficial ownership; 93 shares
are held in the Bank's 401K Plan and 37.5 shares held by Mr. Fitzgerald
jointly with members of his family.
(7) Includes 137 shares held by Mr. Leavy jointly with his wife Jean L. Leavy.
(8) Includes 25 shares held by the Trustee of Mr. Mazeine's Simplified Employee
Pension - Individual Retirement Account.
(9) Includes 60 shares held by the Trustee of Mr. Skroback's Pension and Profit
Sharing Plan.
(10) Includes Incorporators' Warrants to purchase 525 shares of Common Stock,
and currently exercisable stock options to purchase 280 shares of Common
Stock.
The Directors and officers of BWM who own options to acquire shares of BWM
Common Stock have indicated that they do not intend to exercise any such
options at any time prior to the BWM Special Meeting.
Incorporator's Warrants. BWM's Incorporators presently consist of 72
individuals, some of whom were parties to the agreement pursuant to which BWM
was chartered.
Each of the 36 Incorporators of BWM, including two persons who are no longer
Incorporators, who was a party to the original Agreement of Association pursuant
to which BWM was chartered was granted a warrant to purchase 37.5 shares of
Common Stock, at a price of $666.67 per share (as adjusted for the February 13,
1989 stock split). In addition to the 36 original Incorporators, the Board of
Directors approved 38 additional individual Incorporators of BWM. BWM has
issued to each of these additional Incorporators an Incorporator's warrant to
purchase 25 shares of Common Stock for $1,000.00 per share. Like those granted
to the original Incorporators, each of these Incorporators' Warrants will expire
if not fully exercised on or prior to December 31, 1995. Each Incorporator
Warrant is fully vested. Currently there are 950 warrants at $1,000.00 per
share and 1,350 warrants at $666.67 per share outstanding.
The Merger Agreement provides that each outstanding Incorporator Warrant will
be converted into an amount of cash equal to the difference between $1,225.00
and the applicable warrant price for a total cash payment of $967,496.
Class A Common Stock. BWM's charter provides for the issuance of shares of
Class A Common Stock, in addition to shares of Common Stock. The Class A Common
Stock was created for the purpose of providing senior executive officers of BWM
with a significant performance incentive by permitting them to increase their
equity ownership interest in BWM at nominal cost, provided the book value of BWM
Common Stock exceeds a fixed minimum value.
Pursuant to the present conversion rights, up to twenty percent (20%) of the
shares of Class A Common Stock outstanding is eligible for conversion each year
beginning in 1990 at a rate of one and one-half shares of fully paid and non-
assessable Common Stock per share of Class A Common Stock eligible for
conversion (subject to equitable adjustment for any stock split, combination,
reclassification or similar event involving the Common Stock); provided that the
maximum number of shares of Class A Common Stock which may be converted into
Common Stock of BWM during any fiscal year of BWM does not exceed that number of
shares which if converted during that fiscal year would (i) result in an
incremental expense to BWM equal to or greater than twenty percent (20%) of
BWM's pre-tax earnings for that fiscal year (such limit is computed without
regard to the incremental expense occasioned by such conversion); or (ii) dilute
the book value of the Common Stock (computed after such conversion) to a value
less than the value representing a four percent (4%) compounded annual growth
rate on the original offering price of the Common Stock.
To the extent that shares of Class A Common Stock become eligible for
conversion in any year, BWM will be required to accrue as a charge against
earnings an amount equal to the difference between the fair market value of the
number of shares of Common Stock into which each share of Class A Common Stock
is convertible at such time, minus the price paid per share of Class A Common
Stock ($0.25) multiplied by the total number of shares of Common Stock issuable
upon such conversion. As of January 31, 1994, no shares of Class A Common Stock
were eligible for conversion into Common Stock, as determined by the Audit
Committee of BWM. Accordingly, BWM did not expense any amount in connection
with such eligibility in fiscal year 1993. Prior to their conversion to Common
Stock, shares of Class A Common Stock have no voting rights and are not entitled
to participate in any dividends paid on the Common Stock.
Timothy P. Crimmins, Jr., the President and Chief Executive Officer of BWM,
presently holds 238 shares of Class A Common Stock of which no shares are
currently eligible for conversion and Frank P. Fitzgerald, the Chairman of the
Board of Directors of BWM, presently holds 741 shares of Class A Common Stock,
of which no shares are currently eligible for conversion. BWM does not intend
to issue any more shares of Class A Common Stock.
The Merger Agreement provides that each share of Class A Common Stock
issued and outstanding will be exchanged for consideration as specifically set
forth in the Merger Agreement. (See "THE MERGER--Terms of the Merger;
Consideration to be Received by BWM Stockholders.")
Certain Transactions. BWM paid a total of $284,200 during 1993 in rental
payments for its main office space pursuant to two separate leases with
Courthouse Park Associates, a partnership in which Frank P. Fitzgerald is a
partner. One lease covers the first floor and lower level of BWM's premises.
This lease is for a term of ten years which commenced on July 1, 1993 and
provides for minimum base annual rent of $140,000 (subject to certain credits
and adjustments) for the first five years and adjusted annually thereafter to
reflect changes in the Consumer Price Index. The second floor lease is for a
term of five years, which commenced July 1, 1993 with a five-year option and
provides for minimum base annual rent of $60,000 (subject to certain
adjustments) and adjusted annually commencing on the first day of each option
year to reflect changes in the Consumer Price Index.
During 1993, BWM retained the services of Frank P. Fitzgerald, P.C., a law
firm in which Frank P. Fitzgerald is currently a principal, paying approximately
$35,300 in legal fees. BWM paid premiums on various life insurance policies to
Martin J. Clayton Insurance Agencies, Inc., an insurance agency in which Martin
J. Clayton, a BWM director, is a principal, and to Skroback and Associates, a
financial planning consulting firm owned by Andrew Skroback, a BWM director.
During 1993, Asset Management Partners, Boston, Massachusetts, BWM's securities
portfolio manager, retained the services of Kidder, Peabody & Co., a registered
broker-dealer of which William Frain and John Isenburg, each a BWM director, are
officers, to perform certain portfolio transactions for BWM. BWM also retained
the services of the Momentum Group, Inc., a marketing firm of which William
Mazeine, a BWM director, is Chairman of the Board of Directors.
During 1994, BWM continued to retain the services set forth above, paying
amounts not yet finally determined.
Other than as indicated above, there are no persons who are beneficial owners
of more than 5% of the outstanding shares of BWM Common Stock.
THE MERGER
This section of the Proxy Statement and Prospectus describes certain aspects
of the proposed Merger. To the extent that it relates to the Merger Agreement
or the Stock Option Agreement, the following description does not purport to be
complete and is qualified in its entirety by reference to the Merger Agreement
or the Stock Option Agreement, copies of which are attached hereto,
respectively, as Appendix A and Appendix E and are incorporated herein by
reference. All stockholders are urged to read the Merger Agreement, the Stock
Option Agreement and the other appendices hereto in their entirety.
Background of and Reasons for the Merger;
Recommendation of BWM Board of Directors
Background of and Reasons of BWM for the Merger. In 1994, CC initiated
discussions with BWM regarding possible participations of credits and other
mutually beneficial business relationships. Gradually, during the course of
their discussions, BWM and CC both recognized the mutually complementary
characteristics of the two organizations' market areas, business lines and
management structures and orientations. CC and BWM discussed recent changes in
the competitive economic and regulatory characteristics of the market for
banking services in New England, and of the continuing desire of both CC and BWM
to provide a broad range of convenient and competitive credit, depository and
trust services to their local communities at competitive rates. The managements
of both CC and BWM came to believe that a merger would provide a resulting bank
with increased product capabilities, service and geographic scope of operations.
Both BWM and CC also came to believe that a merger would result in BWM's being
able to attract commercial banking business which BWM, on a stand-alone basis,
could not attract. CC and BWM also came to believe that the potential economies
of scale and more favorable access to capital markets generally enjoyed by
larger financial institutions would place a resulting organization in a
stronger position to satisfy the financial needs of its customers, respond to
changes affecting the banking and financial services industries and to compete
effectively with other larger financial institutions in Vermont and
Massachusetts. Beginning in May, 1994, representatives of BWM and CC met on
several occasions to discuss the terms of a possible combination of the two
organizations. At these meetings, the last of which occurred in July, 1994,
representatives of BWM and CC discussed structures for a possible combination,
regulatory review of the transaction, the value of BWM Common Stock and a
possible exchange rate, adjustments to such exchange rate based upon changes in
the price of CC Common Stock, and other terms and conditions of a possible
combination. The representatives of BWM and CC considered structuring the
proposed combination to provide for the payment to BWM stockholders of cash or
CC Common Stock, but determined that a blended stock and cash transaction was
preferable to a cash or stock transaction because a stock and cash transaction
would combine the tax-free features to the stockholders of BWM and create a
common stake in the success of the combined enterprises without causing the
degree of dilution which would be caused by an all stock transaction.
Similarly, the reduced cash needed in a blended transaction would not impact
CC's capital position as much as would an all cash transaction. The
representatives of BWM and CC negotiated a combined stock and cash purchase
price based upon the then current market value of CC Common Stock and their
respective views of the value of BWM Common Stock. The representatives
recognized that the proposed transaction could not be concluded for several
months because of the need for regulatory approvals, and therefore discussed a
mechanism under which the exchange rate would automatically adjust based upon
changes in the market price of CC Common Stock. The parties determined that the
combination of cash and stock should mitigate these concerns and concluded that
setting ranges in CC's stock price would be appropriate. Under this approach,
BWM or CC would have the right to terminate the transaction if the market price
of CC Common Stock fell below $17.50 per share. The upper range would be fixed
at a CC Common Stock price of $25.50 per share so that CC stockholders would not
bear a disproportionate burden for independent success of CC Common Stock. The
representatives of BWM and CC also discussed certain conditions to the
obligation of each party to conclude the transaction, including the receipt
of required regulatory approvals, and the treatment of expenses if the
transaction was not concluded. These negotiations resulted in the approval of
the proposed Merger by the Board of Directors of BWM on August 16, 1994, the
announcement of the proposed Merger of August 17, 1994, and execution of the
Merger Agreement.
The Board of Directors of BWM, after careful study and evaluation of economic,
financial, legal and market factors, believes that the Merger Agreement is in
the best interest of BWM and its stockholders.
The Board believes that the CC Common Stock (see "THE MERGER--Terms of the
Merger; Consideration to be Received by BWM Stockholders") represents an
opportunity for the holders of BWM Common Stock to exchange their shares of BWM
Common Stock on a favorable basis for cash or a security with a greater market
liquidity than BWM Common Stock. Among the factors considered by the Board of
Directors of BWM in deciding to approve and recommend the execution of the
Merger Agreement were the terms and conditions of the Merger, the earnings and
dividend records, financial condition, business, assets and liabilities, and
management of each of BWM and CC; recent market prices for CC Common stock;
trading statistics, including volume statistics for CC Common Stock; the lack of
a public trading market for BWM Common Stock; the nature of the banking markets
of BWM and CC; BWM's and CC's respective positions in their markets; the outlook
for BWM in a changing banking and financial services industry, including the
advent of interstate branching, and alternatives available to BWM for raising
capital necessary to fund the growth required to achieve competitive economies
of scale; the consideration to be received by the stockholders of BWM in the
Merger; and the price ranges of comparable transactions. The Board of Directors
also determined that the Merger will afford BWM stockholders improved potential
for long-term growth.
In reaching its decision to approve and recommend that BWM stockholders
approve the Merger Agreement, including issuing the option to CC pursuant to the
Stock Option Agreement, the Board of Directors determined that, considering
their respective earnings and dividend records, financial condition, business,
assets and liabilities, the business prospects of CC were favorable; the
management of CC was strong and compatible with BWM; the prospects for the
market price of CC Common Stock were also favorable; the lack of a public market
for shares of BWM Common Stock was disadvantageous to BWM stockholders; that
each of CC and BWM were well positioned in their respective markets; that BWM's
and CC's geographic markets were complementary, permitting CC to increase its
market share and competitive position into western Massachusetts; that
increasing levels of bank regulation, and the cost to small banks such as BWM of
complying with such regulations, could adversely affect BWM's earnings; and that
the consideratiion to be received by stockholders of BWM, which reflects a
premium above the book value of BWM Common Stock, is fair from a financial point
of view.
While the Board of Directors did not give greater weight to any one of the
factors listed above, the Board of Directors of BWM considered the proposed
purchase of BWM Common Stock to be advantageous to its stockholders.
Recommendation of BWM Board of Directors. The Board of Directors of BWM
recommends approval of the Merger Agreement. The Board believes that the terms
of the Merger Agreement are fair and that the Merger is in the best interest of
BWM and its stockholders. In making its recommendation, the Board has
considered the advice of BWM's financial advisor, Brown Brothers, as to the
fairness of the purchase price to the stockholders of BWM. The directors and
officers of BWM have unanimously indicated that they intend to vote the BWM
Common Stock that they hold in favor of the Merger Agreement. See "THE SPECIAL
MEETING--Beneficial Ownership of BWM Common Stock."
THE BOARD OF DIRECTORS OF BWM UNANIMOUSLY RECOMMENDS THAT BWM'S STOCKHOLDERS
VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
Opinion of Financial Advisors. BWM has retained Brown Brothers as its
financial advisor in connection with the Merger. Brown Brothers has delivered
to the Board of Directors of BWM its written opinion dated August 9, 1994,
that, as of such date and on the basis set forth therein, the purchase
price and terms set forth in the Merger Agreement are fair, from a financial
point of view, to BWM stockholders. The Board of Directors retained Brown
Brothers because of its reputation and because Brown Brothers has substantial
experience in transactions such as the Merger. Brown Brothers has, from time to
time, provided other financial advisory services to BWM and they are a
nationally recognized financial advisor. No limitations were imposed
by the BWM Board upon Brown Brothers with respect to the investigations
made or procedures followed by Brown Brothers. A copy of Brown Brothers'
opinion, which sets forth the assumptions made, matters considered and
limitations on the review undertaken, is attached as Appendix B to this Proxy
Statement and Prospectus and should be read in its entirety by BWM
stockholders.
In October, 1993 Brown Brothers began assisting BWM in evaluating certain
ownership alternatives, including the possible sale of BWM to a third party
or a merger of equals transaction. In May, 1994, when approached by CC
concerning a possible acquisition, BWM retained Brown Brothers to act as BWM's
financial advisor in evaluating the attractiveness of a transaction with CC
versus BWM's other alternatives. Brown Brothers is regularly engaged in the
valuation of bank and bank holding company securities in connection with
mergers, acquisitions, and other securities transactions. Brown Brothers has
knowledge of, and experience with, New England banking markets and banking
organizations operating in those markets. Brown Brothers was selected by BWM
based upon its qualifications, expertise, and reputation in the financial
institutions industry.
In such capacity, Brown Brothers participated in the negotiations with respect
to the pricing and other terms of the BWM Merger, but the decision to accept the
CC offer was made by the Board of Directors of BWM. On August 9, 1994, eight
days prior to the announcement of the BWM Merger Agreement, Brown Brothers
delivered to the BWM Board of Directors its opinion that, as of such date, the
consideration to be paid by CC pursuant to the BWM Merger was fair to BWM and
its stockholders from a financial point of view.
The full written text of the opinion of Brown Brothers dated as of August 9,
1994, which sets forth the assumptions made, matters considered, and limits on
the review undertaken by Brown Brothers, is attached hereto as Appendix B.
Stockholders are urged to read this opinion in its entirety. Brown Brothers'
opinions are directed only to the Merger Consideration and do not constitute a
recommendation to any stockholder as to how such stockholder should vote at the
BWM Special Meeting. The summary of the opinion of Brown Brothers set forth in
this Proxy Statement and Prospectus is qualified in its entirety by reference to
the full text of such opinion.
For purposes of its opinion and in connection with the review of the proposed
transaction, Brown Brothers (i) reviewed a draft of the Merger Agreement and the
Stock Option Agreement; (ii) analyzed certain publicly available financial
statements, both audited and unaudited, for BWM and CC, (iii) analyzed certain
financial statements and other financial and operating data, concerning BWM and
CC prepared by their respective managements', (iv) analyzed certain financial
projections of BWM, prepared by the management of BWM, (v) discussed the past
and current operations and financial position and the prospects of BWM and CC
with the management of BWM and CC, (vi) reviewed and evaluated reported market
prices and historical trading activity of CC Common Stock, (vii) reviewed the
financial performance of BWM and CC together with the stock market data relating
to CC and similar data available for certain companies deemed comparable by
Brown Brothers and their publicly-traded securities, (viii) reviewed the
financial terms, to the extent publicly available, of certain recent business
combinations involving financial institutions deemed comparable by Brown
Brothers, (ix) analyzed the pro forma financial impact of the BWM Merger on CC,
and (x) conducted such other studies, analyses and examinations as deemed
appropriate.
In connection with its review, Brown Brothers relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information regarding BWM and CC provided to Brown Brothers by both
companies and their representatives, including, without limitation, the
financial projections of BWM. Brown Brothers also did not independently verify
and has relied on and assumed that the allowances for loan and lease losses set
forth in the balance sheets of BWM and CC at June 30, 1994 were adequate and
complied fully with applicable law, regulatory policy, and sound banking
practice as of the date of such financial statements. With respect to the
financial projections, Brown Brothers assumed that they had been reasonably
prepared on bases reflecting the best currently available estimates and
judgements of BWM's management as to the future financial performance of BWM.
Brown Brothers was not retained to conduct a physical inspection of any of the
properties or facilities of BWM or CC, nor did Brown Brothers make any
independent evaluation or appraisal of BWM's or CC's assets (including loans) or
liabilities. Brown Brothers also assumed that the BWM Merger in all respects is
is and will be in compliance with all laws and regulations that are applicable
to BWM and CC.
Brown Brothers' opinion was based solely upon the information available to it
and the economic, market and other circumstances as they existed as of August 9,
1994, including the market price of CC Common Stock. Events occuring after that
date, including a material change in the market price of CC Common Stock, could
materially affect the assumptions and conclusions contained in this opinion.
Brown Brothers has not undertaken to reaffirm or revise its opinion or otherwise
comment upon any events occurring after August 9, 1994.
In rendering its opinion, Brown Brothers assumed that in the course of
obtaining the necessary regulatory and governmental approvals for the proposed
BWM Merger, no restriction will be imposed on CC that would have a material
adverse effect on the contemplated benefits of the BWM Merger. Brown Brothers
also assumed that there would not occur any change in applicable law or
regulation that would cause a material adverse change in the prospects or
operations of CC after the BWM Merger.
In connection with rendering its opinion, Brown Brothers performed a variety
of financial analyses, which are summarized below. Although the evaluation of
the fairness, from a financial point of view, of the consideration to be paid in
the BWM Merger was to some extent a subjective one based on the experience and
judgment of Brown Brothers and not merely the result of mathematical analyses
be considered as a whole and that selecting portions of such analyses and
factors considered by Brown Brothers eithout considering all such analyses and
factors could create an incomplete view of the process underlying Brown
Brothers' opinion. In its analyses, Brown Brothers made numerous assumptions
with respect to business, market, monetary, and economic conditions, industry
performance and other matters, many of which are beyond BWMs' and CCs' control.
Any estimates contained in Brown Brothers' analyses are not necessarily
indicative of future results or values, which may be significantly more or less
favorable than such estimates. None of the anaylses performed by Brown Brothers
was assigned a greater significance by Brown Brothers than any other.
Valuation Summary. Brown Brothers analyzed the BWM Merger consideration of
$1,225.00 in cash or 57.3099 shares of CC Common Stock (or an aggregate 55%
stock - 45% cash pro-rata allocation invloving $551.25 in cash and 31.5205
shares of CC Common Stock) per share of BWM Common Stock and the total
transaction value of $25.5 million. Brown Brothers noted that the merger
consideration represented a multiple of 19.2x reported last twelve month
earnings and 16.9x estimated earnings for the twelve month period ending
December 31,1994 and a multiple of 1.51x estimated December 31, 1994 book value.
Contribution Analysis. Brown Brothers analyzed the changes in the amount of
earnings and pro forma book value represented by one share of BWM Common Stock
before the Merger and 57.3099 shares of CC Common Stock, the consideration to be
received in exchange for 55% of the outstanding shares of BWM's Common Stock,
after the Merger. The analysis showed, among other things, that trading one
share of BWM Common Stock before the Merger for 57.3099 shares of CC Common
Stock after the Merger, based upon the internal estimates of BWM and CC,
resulted in a pro forma 66.9% increase in estimated earnings per original BWM
share for the year ending 1994 and a 24.1% increase in pro forma book value per
original BWM share for the twelve months ending December 31, 1994. In addition,
based on CC's annual dividend of $0.52 per share, the analysis showed that
trading one share of BWM Common Stock before the Merger for 57.3099 shares of CC
Common Stock after the Merger resulted in a pro forma annual dividend of $29.80
per original BWM share. Historically, BWM did not pay a dividend.
Comparable Companies and Comparable Acquisition Transactions. Using public
and other available information, Brown Brothers compared the profitability,
capitalization, and asset quality of BWM to companies which Brown Brothers
considered to be comparable. These companies included 45 banks and bank holding
companies operating in Western Massachusetts, with total assets between $50 and
$300 million. Using public and othe available information, Brown Brothers
compared the historical trading prices of CC Common Stock from July 1989 through
July 1994, and the profitability, capitalization and asset quality of CC to
companies which Brown Brothers considered to be comparable. These companies
included 20 banks and bank holding companies operating in New England, with
total assets between $500 million and $3 billion.
Brown Brothers also compared the BWM Merger on the basis of multiples of
stated book value and earnings of BWM implied by the value of the consideration
to be paid to the holders of BWM Common Stock as of the date of the
determination with the same ratios in acquisitions of banks and bank holding
companies which Brown Brothers deemed comparable. Such comparable acquisitions
included banks and bank holding companies within the New England region acquired
during 1993 and 1994. The average multiple medians paid in these transactions
was 1.51 times the stated book value of the acquired companies' common stock and
17.59 times the acquired companies' last twelve months earnings.
Pursuant to the terms of an engagement letter dated August 9, 1994, BWM had
agreed to pay Brown Brothers $50,000 for its financial advisory services,
including the rendering of the fairness opinion. In addition, BWM has agreed to
pay Brown Brothers a Closing Fee of $75,000, less any financial advisory fees
previously paid to Brown Brothers. Whether or not the transaction is
consummated, BWM has agreed to reimburse Brown Brothers for out-of-pocket
expenses and has agreed to indemnify Brown Brothers, its affiliates and their
respective partners, directors, officers, agents, consultants, employees, and
controlling persons against certain expenses and liabilites, including
liabilites under certain Federal securities laws.
Terms of the Merger; Consideration to be Received by BWM Stockholders.
At the time the Merger becomes effective, BWM will merge with and into CAB,
and CAB will be the surviving corporation, doing business as The Bank of Western
Massachusetts. The Articles of Incorporation and Bylaws of CAB as in effect
immediately prior to the Merger will be the Articles of Incorporation and
Bylaws of CAB after the Merger as the surviving corporation.
Upon consummation of the Merger, each outstanding share of BWM Common Stock,
other than BWM Class A Stock, shares held by BWM as treasury shares or as to
which dissenters' rights have been perfected, will be converted into the right
to receive, at the election of each BWM stockholder and subject to the
allocation procedures set forth in the Merger Agreement, (i) $1,225.00 in cash
or (ii) 57.3099 shares of CC Common Stock, with each of (i) and (ii) to be
subject to adjustment pursuant to Section 1.6 of the Merger Agreement, which is
attached to this Proxy Statement and Prospectus, and subject to possible further
adjustment pursuant to Section 1.5 of the Merger Agreement. The Section 1.6
adjustment relates to the pro-rata allocations which may occur to achieve an
aggregate payment of the Merger consideration by CC of 55% stock and 45% cash.
The Section 1.5 adjustment relates to the fixing of total consideration to a
price of CC's Common Stock at $25.50 per share if the Market Value of the CC
Common Stock (as determined under the Merger Agreement) is greater than $25.50
per share. In the event the price of CC Common Stock exceeds or is equal to
$25.50 per share, CC will adjust the amounts of stock and cash paid in order to
limit the aggregate value of the Merger to $28.1 million, including the
purchase of BWM Class A Stock, and the conversion to cash of all stock options
and warrants.
At the Effective Date and in consideration of the Merger, each share of BWM
Class A Stock, par value $0.25 per share, issued and outstanding immediately
prior to the Effective Date shall be cancelled in return for rights to receive
$826.88 in cash and 47.2808 shares of CC Common Stock per share subject to the
following conditions:
(a) CC Common Stock shall be subject to transfer restrictions as set forth in
the Merger Agreement and will become vested at a rate of 20% per annum over a
5-year period after Closing; and
(b) the Holder shall continue employment through each subsequent annual
anniversary of the Closing; provided, however, in the event that the Holder is
terminated unilaterally by CC, dies or becomes disabled, the Restricted Stock
will become fully vested; provided further, in the event that the Holder is
terminated for cause (defined as deliberate dishonesty, conviction of a crime
involving moral turpitude or gross and willful failure to perform a substantial
portion of duties and responsibilities) any unvested shares of Restricted Stock
will become null and void; and provided further, in the event of a change in
control of CC as such event is defined in CC's current "Change in Control"
agreements with certain key employees of CC, all shares of Restricted Stock will
become fully vested. In the interim, all shares of Restricted Stock will have
full voting and dividend rights.
BWM's stockholders shall receive an aggregate of 627,525 shares of CC Common
Stock and $10,974,561 in cash. Each BWM stockholder will elect to receive 100%
of the Per Share Consideration in the form of either CC Common Stock or cash, or
make no election. In the event the BWM stockholders elect less or greater than
the 627,525 shares of CC Common Stock, shares of CC Common Stock and cash will
be allocated on a pro-rata basis to achieve an aggregate 55% stock and 45% cash
consideration which would translate to $551.25 in cash and 31.5205 shares of
stock, on a theoretical basis, for each share of BWM stock. The total
consideration, including cashing out of BWM's options and warrants, based upon
the price of CC Common Stock at $21.375 per share, equals $25,500,095.
Based on the number of shares of CC Common Stock outstanding at December 31,
1994, BWM stockholders would hold, in the aggregate, approximately (not
available at this time) % of the CC Common Stock outstanding immediately after
consummation of the Merger. All stockholders of BWM currently are minority
stockholders and, following the Merger, such stockholders will be minority
stockholders of CC. However, BWM's stockholders' interest in CC will be smaller
than their prior percentage interest in BWM, and accordingly, their ability to
affect the business direction of CC through the right to vote as a CC
stockholder will be reduced. The Purchase Price was negotiated by Chief
Executive Officers of CC and BWM and approved by each corporation's Board of
Directors.
No fractional shares of CC Common Stock will be issued in the Merger.
Instead, the Merger Agreement provides that BWM stockholders will receive cash
in lieu of such fractional shares. The cash amount paid in lieu of fractional
shares will be determined by multiplying the fraction of a share to which the
holder would otherwise be entitled by $21.375.
Shares of CC Common Stock issued and outstanding at the time the Merger
becomes effective will remain issued and outstanding thereafter and will not be
affected by the Merger.
Effective Time of the Merger
The Merger will become effective upon the filing of Articles of Merger
relating thereto with the Secretary of State of the Commonwealth of
Massachusetts and the issuance by the Secretary of State of the Commonwealth of
Massachusetts of a Certificate of Merger with respect thereto. The parties to
the Merger Agreement will promptly cause such Articles of Merger and Certificate
of Merger to be so filed after each of the conditions to consummation of the
Merger has been satisfied or waived and following approval by the stockholders
of BWM. The Merger cannot become effective until BWM stockholders have approved
the Merger Agreement and all required regulatory approvals and actions have been
obtained and taken. See "--Regulatory Approvals Required." Subject to
satisfaction of the conditions contained in the Merger Agreement, the parties
currently anticipate that the Merger will become effective during the quarter
ending June 30, 1995, although there can be no assurance as to whether or when
the Merger will become effective. See "--Conditions to Consummation of the
Merger."
Surrender of BWM Common Stock Certificates
As soon as practicable after the Merger becomes effective, the Exchange Agent
will send a notice and transmittal form to each holder of BWM Common Stock of
record at the time the Merger becomes effective (other than holders who have
properly exercised dissenters' rights of appraisal, see "--Rights of BWM
Dissenting Stockholders," advising such holder of the effectiveness of the
Merger and of the procedure for surrendering to the Exchange Agent such holder's
certificate or certificates formerly evidencing BWM Common Stock in exchange for
a new certificate(s) evidencing CC Common Stock, cash or both CC Common Stock
and cash.
BWM stockholders should not send in their stock certificates until they
receive the letter of transmittal form and instructions from the Exchange Agent.
Upon surrender to the Exchange Agent of certificates formerly evidencing BWM
Common Stock, together with a properly completed and signed letter of
transmittal, there will be issued and mailed to the holder thereof (i) a new
certificate or certificates representing the number of whole shares of CC Common
Stock to which such holder is entitled under the Merger Agreement and, where
applicable, a check for the amount of cash payable in lieu of a fractional share
of CC Common Stock; (ii) cash or (iii) CC Common Stock and cash. If the holder
requests participation in the CC Dividend Reinvestment Plan, a notification of
shares held on deposit by the Exchange Agent will be mailed to the holder in
lieu of the stock certificate (and/or check noted above). A certificate
representing CC Common Stock or a check in lieu of a fractional share will be
issued in a name other than the name in which the surrendered BWM stock
certificate was registered only if (i) the BWM stock certificate surrendered is
properly endorsed or accompanied by appropriate stock powers and is otherwise in
proper form for transfer, and (ii) the holder requesting the issuance of such
certificate or check either pays to the Exchange Agent any transfer or other
taxes required by reason of the issuance of such certificate or check in a name
other than that of the registered holder of the certificate surrendered or
establishes to the satisfaction of the Exchange Agent that such tax has been
paid or is not applicable.
After the Merger becomes effective, each certificate formerly evidencing BWM
Common Stock (other than certificates as to which dissenters' rights of
appraisal have been exercised or to which cash shall be paid) will, until it is
surrendered to the Exchange Agent, be deemed for all corporate purposes to
evidence ownership of that number of whole shares of CC Common Stock into which
it was converted as a result of the Merger.
If any certificate formerly evidencing BWM Common Stock has been lost, stolen
or destroyed, the Exchange Agent shall issue in exchange for such lost, stolen
or destroyed certificate, upon the making of an affidavit of that fact by the
holder thereof, such shares of CC Common Stock and cash for fractional shares,
if any, as may be required pursuant to the Merger Agreement; provided, however,
that CC may, in its discretion and as a condition to the issuance of a
certificate representing the CC Common Stock into which such BWM Common Stock
has been converted, require the owner thereof to deliver a bond in such sum as
CC may direct as indemnity against any claim that may be made against BWM, CC,
the Exchange Agent or any other party with respect to the certificate alleged to
have been lost, stolen or destroyed. After the Merger becomes effective, no
further registration of transfers on the records of BWM will be made as to
certificates formerly evidencing BWM Common Stock and any certificates which are
presented for such registration of transfer will be cancelled and exchanged for
certificates representing shares of CC Common Stock as described above.
Conditions to Consummation of the Merger
The obligations of both CC and BWM to consummate the Merger are subject to
satisfaction of the following conditions, among others: (i) the Merger
Agreement and the transactions contemplated thereby shall have been approved by
the stockholders of BWM; (ii) all regulatory approvals required for the
consummation of the Merger shall have been obtained; (iii) the Registration
Statement relating to the shares of CC Common Stock to be issued pursuant to the
Merger Agreement shall have become effective; and (iv) neither CC nor BWM shall
be subject to any order, decree or injunction of a court or agency of competent
jurisdiction which enjoins or prohibits consummation of the Merger.
The obligation of CC to consummate the Merger is further subject to additional
conditions, including, without limitation, the following:
(a) There shall not have occurred any change in the business, assets,
financial condition, results of operations or prospects of BWM which has, or is
reasonably likely to have, individually or in the aggregate, a material adverse
effect on the business, results of operations, financial condition or prospects
of BWM.
(b) BWM shall have complied with and performed in all material respects its
obligations under the Merger Agreement, and its representations and warranties
in the Merger Agreement shall be true and correct in all material respects at
the Effective Time.
(c) CC shall have received the opinion of Piper & Marbury,its special counsel,
as to certain tax aspects of the Merger.
(d) CC shall have received the opinion of M.A. Schapiro & Co., Inc. as to the
fairness of the purchase price to CC's stockholders from a financial point of
view.
(e) The average closing price of CC Common Stock for the twenty (20)
consecutive trading days ending on the fifth trading day before the last
regulatory approval shall be at least $17.50 per share.
The obligation of BWM to consummate the Merger is subject to additional
conditions, including, without limitation, the following:
(a) There shall not have occurred any change in the business, assets,
financial condition, results of operations or prospects of CC or any of its
subsidiaries which has, or is reasonably likely to have, individually or in the
aggregate, a material adverse effect on the business, results of operations,
financial condition or prospects of CC.
(b) CC shall have complied with and performed in all material respects its
obligations under the Merger Agreement, and its representations and warranties
in the Merger Agreement shall be true and correct in all material respects at
the Effective Time.
(c) BWM shall have received the opinion of Piper & Marbury, CC's special tax
counsel, as to certain tax aspects of the Merger.
(d) BWM shall have received the opinion of Brown Brothers Harriman & Co. as to
the fairness of the purchase price to BWM's stockholders from a financial point
of view.
(e) The average closing price of CC Common Stock for the twenty (20)
consecutive trading days ending on the fifth trading day before the last
regulatory approval shall be at least $17.50 per share.
Regulatory Approvals Required
Consummation of the Merger is subject to, among other things, prior receipt of
all necessary regulatory approvals from state and federal authorities and
expiration of all required waiting periods. CC has filed an application (the
"FRB Application) for approval of the Federal Reserve Board under Section
3(a)(5) of the Bank Holding Company Act of 1956 (12 U.S.C. 1842), of the Merger
of BWM with and into CAB. On (not available at this time), 1995, the Federal
Reserve Board issued an order approving the Merger.
In addition to the FRB Application, CC has submitted an application to the
Massachusetts Board for approval under Massachusetts General Statutes Annotated,
to operate CC as a bank holding company in Massachusetts.
CAB has filed an insurance application (the "FDIC Insurance Application") for
approval of the Federal Deposit Insurance Corporation ("FDIC") to grant CAB
deposit insurance. CAB also has filed an application (the "FDIC Application)
for approval of the FDIC of the merger of BWM into and with CAB and for CAB to
acquire and operate the main and banking offices of BWM located in Springfield,
Holyoke, South Hadley and Amherst, respectively, as banking offices of CAB,
doing business as The Bank of Western Massachusetts, following consummation of
the Merger.
In addition to the FDIC Insurance Application and FDIC Application, CAB has
submitted an application to the Massachusetts Board for approval under
Massachusetts General Statutes Annotated to form a trust company and to merge
BWM and CAB.
As of the date of this Proxy Statement and Prospectus, the approval of the
Massachusetts Board has not been received. There can be no assurance that such
approval will be received, or as to the timing or conditions of such approval,
if any. However, neither CC nor BWM is aware of any reason why the Massachusetts
Board application would not be approved.
Waiver and Amendment
Generally, before the Special Meeting, CC and BWM can amend, extend the time
for performance under, or waive compliance of the other party with, any of the
terms or conditions of the Merger Agreement. After approval of the Merger at
the Special Meeting, BWM and CC cannot amend the Merger Agreement in any such
manner which reduces or changes the form of consideration to be delivered to the
BWM stockholders in connection with the Merger without further stockholder
approval. CC and BWM cannot waive compliance with the mutual closing conditions
that (a) the Merger must be approved by the legally required vote of BWM's
stockholders, (b) the Merger must have received all requisite regulatory
approvals, (c) the Registration Statement shall have become effective, and (d)
neither party be subject to a decree, order or injunction of a court of
competent jurisdiction which enjoins or prohibits the Merger.
Termination
The Merger Agreement may be terminated at any time before the Merger becomes
effective (i) by mutual written consent of CC and BWM duly authorized by their
respective Boards of Directors; (ii) by CC or BWM if the Effective Time shall
not have occurred on or prior to June 30, 1995 (unless the failure of such
occurrence shall be due to the failure of the party seeking to terminate the
Merger Agreement to perform or observe its agreements required to be performed
or observed by such party at or before the Effective Time); or (iii) by BWM if
the Merger Agreement and the transactions contemplated thereby are not approved
by the legally required affirmative vote of the stockholders of BWM at the
Special Meeting or at any adjournments thereof. CC may terminate the Merger
Agreement if there shall have been any material breach of any obligation of BWM
under the Merger Agreement and any such breach shall not have been remedied
within 30 days after receipt by BWM of notice in writing from CC specifying the
nature of such breach and requesting that it be remedied. BWM may terminate the
Merger Agreement if there shall have been any material breach of any obligation
of CC under the Merger Agreement and such breach shall not have been remedied
within 30 days after receipt by CC of notice in writing from BWM specifying the
nature of such breach and requesting that it be remedied.
CC or BWM may terminate the Merger Agreement after stockholder approval, by
giving written notice of such election to the other party, in the event that the
per share value of the CC Common Stock during the termination period as defined
in and calculated pursuant to Section 8.14 of the Plan of Merger is less than
$17.50; provided, however, that CC may waive this condition by delivering
written notice to BWM and adjusting the number of CC shares that will be issued
in the Merger pursuant to Section 1.4(b) of the Merger Agreement.
Corporate Transactions
BWM has agreed that during the term of the Merger Agreement it will not
encourage, solicit, or participate in any discussions or negotiations, or
(subject to the fiduciary duties of the BWM Board of Directors as advised in
writing by outside counsel) provide any information to any third party
concerning any acquisition or purchase of substantial assets, other than as
contemplated by the Merger Agreement. BWM further agreed that it will use its
best efforts to cause its officers, directors, employees, advisors and agents
(including investment bankers, attorneys and accountants) to comply with the
above limitation on solicitation activity. Such limitation does not prohibit
BWM or its Board of Directors from making disclosures to BWM's stockholders
which, in the judgment of the Board on written advice from outside counsel, may
be required by their fiduciary duty.
The foregoing provisions may have the effect of discouraging competing offers
from third parties to acquire or merge with BWM, even if such offers were to be
at a higher price.
Stock Option Agreement
Simultaneously with the execution of the Merger Agreement, on August 17, 1994,
CC and BWM entered into a Stock Option Agreement (the "Stock Option Agreement"),
a copy of which is attached hereto as Appendix D and incorporated herein by
reference. Pursuant to the Stock Option Agreement, BWM granted CC an option
(the "Option") to purchase up to 7,558 (24.9% of the shares of BWM Common Stock
that would be outstanding after such issuance) authorized but unissued shares of
BWM Common Stock for $800.00 per share.
The Option becomes exercisable in whole or in part, after the occurrence of
the following events (each a "Triggering Event"):
(a) any person or group (as such terms are defined in the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations thereunder, other than CC or a wholly-owned subsidiary of CC,
acquires after August 17, 1994 beneficial ownership of or the right to acquire
such beneficial ownership or to vote at least 15 percent of the then outstanding
BWM Common Stock, other than any person acquiring such beneficial ownership by
will or operation of law; or
(b) there shall be publicly announced any proposal by such a person or group
relating to (i) any merger, consolidation or acquisition of all or substantially
all of the assets of BWM or other business combination involving BWM prior to
the meeting of BWM's stockholders contemplated by the Merger Agreement and BWM's
stockholders fail to adopt the Merger Agreement at such meeting, or (ii) a
change in the composition of 20 percent or more of the BWM Common Stock then
outstanding.
The Stock Option Agreement may have the effect of discouraging persons or
companies which might now or prior to the Effective Time be interested in
acquiring all or a significant portion of the outstanding shares of BWM Common
Stock from considering such a transaction, even if such persons were to pay a
higher price per share than under the Merger Agreement.
The Option will expire on the earliest to occur of (i) one year after one of
the foregoing Triggering Events has occurred; (ii) immediately after the
Effective Time of the Merger; (iii) the termination of the Merger Agreement in
accordance with its terms before the occurrence of a Triggering Event; or (iv)
180 days after CC shall have terminated the Merger Agreement on account of a
material breach thereof by BWM.
In the event of a change in the number of outstanding shares of BWM due to a
stock dividend, merger, recapitalization, subdivision, conversion, exchange of
shares or similar transaction, the type and number of shares of BWM Common Stock
subject to the Option will be adjusted appropriately so that CC shall receive on
exercise of the Option the number and class of shares or other securities or
property that it would have held if the Option had been exercised immediately
before such event. Whenever the number of shares subject to the Option is so
adjusted, the exercise price of the Option shall be adjusted by multiplying the
original price by a fraction, the numerator of which shall equal the number of
shares subject to the Option before adjustment and the denominator of which
shall be the number of shares subject to the Option after adjustment.
Upon the occurrence of a Triggering Event, CC may request BWM to prepare, file
and keep current with respect to the Option and the shares of BWM Common Stock
subject thereto a registration statement under the Securities Act of 1933 with
the Commission. BWM is required to use its best efforts to cause such
registration statement to become effective and then remain effective for at
least 90 days. CC has the right to demand two such registrations.
After the occurrence of a Triggering Event, CC may sell, assign or otherwise
transfer its rights and obligations under the Stock Option Agreement to any
person or group of persons, subject only to compliance with applicable law.
Business Pending the Merger
BWM agreed in the Merger Agreement that during the period of time from August
17, 1994 to the Effective Time, it would conduct its business and engage in
transactions only in the usual, regular and ordinary course of business,
consistent with past practice. The Merger Agreement defines the permitted scope
of BWM's business under this provision as "conducting its business in the usual,
regular and ordinary course consistent with past practice," and refraining from
a series of activities listed in the Merger Agreement, which include, without
limitation, the following:
(a) engaging or participating in any material transaction or incurring any
material liability out of the ordinary course of business.
(b) disposing of any assets, except in the ordinary course of business and in
an immaterial aggregate amount.
(c) declaring or paying any dividend in respect of the BWM Common Stock.
(d) issuing additional shares of capital stock or securities convertible into
such shares or options, warrants or conversion rights to acquire such shares of
capital stock.
(e) incurring additional debt obligations or other obligations in respect of
borrowed money except in the ordinary course of business consistent with past
practice.
(f) incurring or committing to capital expenditures in excess of $100,000.
Interests of Certain Persons in the Merger
Employment Agreements. Two senior officers of BWM have entered into
employment agreements at the request of CC which will extend beyond the
Effective Time. The agreements will be rendered ineffective if the Merger is
not consummated or the Merger Agreement is terminated in accordance with its
terms.
Frank P. Fitzgerald, BWM's current Chairman, executed an agreement with CC
under which it is agreed that he will be Chairman of BWM. Mr. Fitzgerald's base
salary will be equal to his current salary at the Effective Time. Mr.
Fitzgerald's current salary is $65,000.
Additionally, CC has entered into an agreement to employ Timothy P. Crimmins,
Jr., President and Chief Executive Officer of BWM after the consummation of the
Merger. Under this agreement, Mr. Crimmins is to receive his current salary of
$140,000.
In addition to and as a part of the foregoing agreements, Messrs. Fitzgerald
and Crimmins have entered into management continuity agreements which are
similar in form to agreements currently in force between CC and its senior
officers. Under the management continuity agreements, the above officers would
be entitled to the following severance payments if terminated under certain
circumstances after a change in control of CC: 100% of base salary at the time
of termination.
The management continuity agreements define a "change in control" as (i) the
acquisition by a person or group of 25% of the combined voting power of CC's
then outstanding securities; (ii) during any two-year period those persons, who
at the beginning of such period were members of CC's Board of Directors and any
new director whose election was approved by at least two-thirds of the
directors then still in office who either were directors at the beginning of
such period or whose election or nomination was previously so approved, cease to
constitute a majority of such board; or (iii) the stockholders of CC approve a
merger or consolidation of CC which would result in such stockholders holding
less than 70% of the combined voting power of the surviving entity immediately
thereafter, or if such stockholders approve the sale of all or substantially all
of the assets of CC.
The management continuity agreements do not provide for severance benefits in
instances where termination is due to death, disability or retirement. Further,
no benefits are payable in instances of termination for cause, defined as (i)
the willful and continued failure of the officer to perform his duties and (ii)
willful conduct materially injurious to CC.
In addition, Mr. Crimmins is entitled to certain severance benefits in the
event he is terminated without cause: within two years of the Effective Time,
two year's base salary; within three to five years of the Effective Time, one
year's base salary.
Indemnification. The Merger Agreement requires CC to indemnify and hold
harmless, to the extent permitted by law, each director and officer, and each
former director and officer, of BWM with respect to actions or failures to act
which occurred on or prior to the date on which the Merger is consummated, upon
the same terms and conditions as each such person would be entitled to be
indemnified by CC, at the Effective Time of the Merger pursuant to the Charter
or by-laws of CC.
Stock Options and Warrants. All rights with respect to BWM Common Stock
pursuant to stock options or warrants granted by BWM prior to the date of the
Merger Agreement shall be converted into cash equal to the difference between
$1,225.00 and the applicable option or warrant price. Currently, there are 550
options at $1,000 per share, 37.5 options at $666.67 per share, 950 warrants at
$1,000 per share and 1,350 warrants at $666.67 per share outstanding. The total
consideration related to the stock options and warrants is $1,112,182.
Employee Matters
CC has agreed in the Merger Agreement that the current employment benefits
shall be unaffected by the Merger subject to CC's discretion to revise such
benefits in a manner consistent with CC's strategic plan in effect from time to
time.
Management and Operations after the Merger
At the Effective Time, the separate corporate existence of BWM shall cease to
exist, and the surviving corporation will be CAB. CAB and CB will be direct
subsidiaries of CC.
It is anticipated that the management, including the Board, of BWM immediately
after the Effective Time will continue largely as before. The Merger Agreement
provides that CC intends to keep BWM's Board separate from that of CC and to
name, in CC's discretion, two additional directors who may be employees of CC or
a subsidiary.
Rights of BWM Dissenting Stockholders
Any BWM stockholder who elects to exercise his or her rights of dissent and
who complies with the procedures set forth in Sections 86 through 98, inclusive,
of Chapter 156B of the Massachusetts Business Corporation Act ("MBCA"), attached
hereto as Appendix C, shall be entitled to receive cash for the fair value of
those shares for which such stockholder exercises his or her dissenter rights.
Stockholders contemplating the exercise of dissenters' rights should carefully
review Appendix C containing the pertinent provisions of the MBCA, Chapter 156B,
Sections 86 through 98, inclusive. The following, qualified in its entirety by
the provisions set forth in Appendix C, is a summary of the steps which must be
taken for the effective exercise of dissenters' rights:
(a) Written Objection. Any stockholder electing to exercise the right of
dissent shall file with BWM, prior to or at the BWM Special Meeting, a written
objection to the proposed Merger stating said stockholder's intention to demand
payment for his or her shares if the proposed Merger is approved.
(b) Not Vote in Favor of the Merger. Shares for which dissenters' rights are
sought must not be voted in favor of the Merger.
(c) Notice of Effectiveness of Action. If the Merger is approved by the BWM
stockholders at the Special Meeting, CC is required, within ten (10) days of the
Effective Time of the Merger, to send to each dissenting stockholder of BWM who
properly filed a written objection thereto and whose shares were not voted in
favor of the approval of such Merger, a notice (the "Company Notice") that the
Merger has become effective.
(d) Written Demand. Each dissenting stockholder must, within twenty (20) days
after the date on which such stockholder receives the Company Notice, make
written demand on CC that it pay such stockholder the fair value of his or her
shares. Any stockholder failing to make demand within the twenty (20) day
period shall be bound by the terms of the Merger Agreement. Any stockholder
making such demand shall thereafter be entitled only to payment of such shares
and shall not be entitled to vote or to exercise any other rights of a
stockholder. No further notice will be given of the time periods within which a
dissenting stockholder must give notice of his or her intention to exercise his
or her dissenters' rights.
UNLESS THE AFOREMENTIONED REQUIREMENTS ARE STRICTLY MET, SUCH SHARES WILL
AUTOMATICALLY LOSE ANY DISSENTERS' RIGHTS. SUCH SHARES WILL BE DEEMED TO HAVE
MADE NO ELECTION.
(e) Fair Value. The fair value of a dissenter's share is determined as of the
day prior to the date on which the vote was taken approving the proposed Merger,
excluding any appreciation or depreciation in anticipation of the Merger.
(f) Payment. If within thirty (30) days after the Effective Time of the
Merger, the fair value of such shares is agreed upon between any such dissenting
stockholder and the Board of Directors, of CC, payment therefor shall be made
within thirty (30) days after the expiration of the period during which demand
could be made. Upon payment of the agreed value, the dissenting stockholder
shall cease to have any interest in such shares. If CC and a dissenting
stockholder do not agree on the fair value of the dissenting shares within
thirty (30) days, the stockholder may, within four (4) months of the expiration
of the thirty (30) day period, file a bill of equity in the Superior Court of
Massachusetts to determine the fair value of such shares.
Only a holder of record of shares of BWM Common Stock is entitled to assert
appraisal rights for the shares of BWM Common Stock registered in that holder's
name. A demand for appraisal should be executed by or on behalf of the holder
of record fully and correctly as his or her name appears on his or her stock
certificates. If the shares of BWM Common Stock are owned of record in a
fiduciary capacity, such as by a trustee, guardian or custodian, execution of
the demand should be made in that capacity, and if the shares of BWM Common
Stock are owned of record by more than one person, as in a joint tenancy or
tenancy in common, the demand should be executed by or on behalf of all joint
owners. An authorized agent, including one or more joint owners, may execute a
demand for appraisal on behalf of a holder of record; however, the agent must
identify the record owner or owners and expressly disclose the fact that, in
executing the demand, the agent is agent for such owner or owners. A record
holder such as a broker who holds shares of BWM Common Stock as nominee for
several beneficial owners may exercise appraisal rights with respect to the
shares of BWM Common stock held for one or more beneficial owners while not
exercising such rights with respect to the shares of BWM Common Stock held for
other beneficial owners; in such case, the written demand should set forth the
number of shares of BWM Common Stock as to which appraisal is sought and
where no number of shares of BWM Common Stock is expressly mentioned, the demand
will be presumed to cover all shares of BWM Common Stock held in the name of the
record owner. Stockholders who hold their shares of BWM Common Stock in
brokerage accounts or other nominee forms and who wish to exercise appraisal
rights must take all necessary steps in order that a demand for appraisal is
made by the record holder of such shares and are urged to consult with their
brokers to determine the appropriate procedures for the making of a demand for
appraisal by the record holder and for surrendering the certificates for such
shares to the transfer agent for BWM Common Stock for notation of appraisal
rights as set forth below.
Any BWM stockholder who desires to exercise his or her rights to dissent
should carefully review the MBCA, Chapter 156B, Sections 86 through 98,
inclusive, set forth in Appendix C and is urged to consult such stockholder's
legal advisor before exercising or attempting to exercise such rights.
The foregoing summary of the applicable provisions of the MBCA, Chapter 156B,
Sections 86 through 98, inclusive, is not intended to be a complete statement of
such provisions and is qualified in its entirety by reference to such Sections,
the full texts of which are attached as Appendix C to this Proxy Statement and
Prospectus.
Certain Federal Income Tax Consequences
Neither CC nor BWM has requested or will receive an advance ruling from the
Internal Revenue Service as to the tax consequences of the Merger. Consummation
of the Merger is conditioned on there being delivered the opinion of Piper &
Marbury, special counsel to CC, that for Federal income tax purposes, under
current law, assuming that the Merger and related transactions will take place
as described in the Merger Agreement and certain related instruments described
therein (including the Plan of Merger), the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code. The Merger Agreement provides that this condition may be waived by either
CC or BWM. However, it is unlikely that the Merger will be consummated if this
condition is not satisfied. If the Merger constitutes such a reorganization,
the following would be the material Federal income tax consequences of the
Merger:
(a) No gain or loss will be recognized by BWM or CC by reason of the Merger.
(b) No gain or loss will be recognized by a BWM stockholder upon the exchange
of his or her BWM Common Stock for CC Common Stock other than as a result of
cash payments made in lieu of fractional shares or payments to BWM stockholders
who exercise dissenters' rights.
(c) The basis of the CC Common Stock received by a stockholder who exchanges
his or her BWM Common Stock for CC Common Stock will be the same as the basis of
the BWM Common Stock surrendered in exchange therefor (subject to any
adjustments required by the receipt of cash in lieu of a fractional share
interest of CC Common Stock).
(d) The holding period for tax purposes of the CC Common Stock received by a
BWM stockholder will include the period during which the BWM Common Stock
surrendered in exchange therefor was held (provided that such BWM Common Stock
was held by such BWM stockholder as a capital asset at the Effective Time of the
Merger).
(e) Cash, if any, received by a BWM stockholder in lieu of a fractional share
interest of CC Common Stock will be treated as having been received as a
distribution in full payment in exchange for the fractional share interest of CC
Common Stock which he or she would otherwise be entitled to receive and will
qualify as capital gain or loss (assuming the BWM Common Stock was a capital
asset in such stockholder's hands at the Effective Time of the Merger).
(f) Cash which a BWM dissenting stockholder receives as payment for his or her
shares of BWM Common Stock will be capital gain or loss to the extent that the
amount received varies from the dissenting stockholder's adjusted basis in the
BWM Common Stock (assuming the BWM Common Stock was a capital asset in such
stockholder's hands at the Effective Time of the Merger).
(g) A BWM stockholder who receives both cash and CC Common Stock pursuant to
the election procedures will not recognize any loss upon the exchange. Such a
BWM stockholder will recognize gain in an amount equal to the lesser of (i) the
excess of a (A) the sum of the fair market value of the CC Common Stock received
and the amount of cash received over (B) the adjusted basis of the BWM stock
surrendered or (ii) the amount of cash received. Any gain recognized by such a
BWM stockholder will be capital gain or loss provided that (i) he holds his BWM
Shares as capital assets and (ii) the ratio of (A) the number of shares of CC
Common Stock that he owned, both directly and indirectly under certain
attribution of ownership principles, immediately after the Merger to (B) the
total number of CC Common Stock that is outstanding immediately after the Merger
is less than 80% of an Hypothetical Ratio, as defined in the following sentence.
A BWM stockholder's Hypothetical Ratio is the ratio of (A) the number of CC
Common Stock that he would have owned, both directly and indirectly under
certain attribution of ownership principles, immediately after the Merger, if
all outstanding BWM stock had been converted into CC Common Stock at the rate of
57.3099 to 1, to (B) the total number of CC Common Stock that would have been
outstanding immediately after the Merger, if all outstanding BWM Shares had been
converted into CC Common Stock at the rate of 57.3099 to 1. If such a BWM
stockholder is unable to satisfy the 80% test described above, the gain
recognized may be treated as ordinary dividend income, unless it is determined,
based upon all of the facts and circumstances, that receipt of the cash was not
essentially equivalent to a dividend; if it is determined that their receipt
of the cash was not essentially equivalent to a dividend, the recognized gain
will be capital gain.
The foregoing is only a general description of certain anticipated Federal
income tax consequences of the Merger without regard to the particular facts and
circumstances or the tax posture of each stockholder of BWM. It does not
discuss all of the consequences that may be relevant to BWM stockholders
entitled to special treatment under the Code (such as insurance companies,
dealers in securities, exempt organizations or foreign persons). The summary
set forth above does not purport to be a complete analysis of all potential tax
effects of the transactions contemplated by the Merger Agreement or the Merger
itself. No information is provided herein with respect to the tax consequences,
if any, of the Merger under state, local or foreign tax laws. BWM stockholders
should consult their own tax advisors with respect to the specific tax
consequences of the Merger to them, including the application of state, local
and foreign tax laws.
Accounting Treatment
CC expects to account for the Merger using the purchase method of accounting
in accordance with Accounting Principles Board Opinion No. 16, "Business
Combinations," as amended ("APB No. 16"). Under this method of accounting, the
purchase price will be allocated to assets acquired and liabilities assumed
based on their estimated fair values at the Effective Time. Income of the newly
consolidated companies will not include income (or loss) of BWM prior to the
Effective Time.
The pro forma financial information presented in this Proxy Statement and
Prospectus has been prepared using the purchase method of accounting to account
for the Merger. See "PRO FORMA FINANCIAL DATA."
Resale of CC Common Stock Received by BWM Stockholders
The shares of CC Common Stock issuable to stockholders of BWM upon
consummation of the Merger have been registered under the Securities Act. Such
shares may be traded freely without restriction by those stockholders who are
not deemed to be "Affiliates" of CC or BWM. An "Affiliate" is generally defined
as a person (usually executive officers and directors) who controls, is
controlled by, or is under common control with, CC or BWM at the time of the
Special Meeting or CC at or after the Effective Time of the Merger.
Shares of CC Common Stock received by those stockholders of BWM who are deemed
to be "affiliates" of BWM at the time of the Special Meeting may be resold
without registration under the Securities Act as provided for by Rule 145 under
the Securities Act or as otherwise permitted under the Securities Act. This
Proxy Statement and Prospectus does not cover any resales of CC Common Stock
received by persons who are deemed to be "Affiliates" of BWM.
Expenses
The Merger Agreement provides that, generally, all legal and other costs and
expenses incurred in connection with the Merger Agreement and the transactions
contemplated thereby are to be paid by the party which incurred them. The costs
and expenses of printing and mailing this Proxy Statement and Prospectus are to
be shared equally by BWM and CC.
Certain Differences in Rights of Stockholders
The rights of BWM stockholders are governed by the Articles of Organization of
BWM (the "BWM Articles"), the Bylaws of BWM (the "BWM Bylaws") and the laws of
of the Commonwealth of Massachusetts. The rights of CC stockholders are
governed by the Articles of Incorporation of CC, as amended and restated (the
"CC Articles"), the Bylaws of CC (the "CC Bylaws") and the laws of the State of
Vermont. After the Merger becomes effective, the rights of BWM stockholders who
become CC stockholders will be governed by the CC Articles and the CC Bylaws.
In most respects, the rights of BWM stockholders and CC stockholders are
similar. See "BUSINESS OF CC - Description of CC Capital Stock." While it is
not practical to describe all changes in the rights of BWM stockholders that
will result from the difference between the BWM Articles and Bylaws, the
following is a summary of the material differences.
Significant Differences Between the Corporation Laws of Massachusetts
and Vermont
Appraisal Rights. Massachusetts grants appraisal rights in more circumstances
than does Vermont. Unlike Vermont, Massachusetts grants appraisal rights to
stockholders when the corporation sells all or substantially all of its assets
or when the corporation adopts any amendments to its Articles of Organization
which "adversely affects" the rights of a stockholder. Both Vermont and
Massachusetts provide for appraisal rights in the event of a merger or
consolidation.
Calling Stockholders' Meetings. Under Massachusetts law, a special meeting of
stockholders may be called by the board of directors, the president or by the
secretary upon the written request of the holders of at least 10% of the
outstanding shares entitled to vote as such meeting. In the case of corporations
with a class of stock registered under the Exchange Act, the holders of at least
40% of the outstanding shares entitled to vote at the meeting (or such other
percentage, if any, as may be specified in the articles or organization or
bylaws) may call a special meeting. Under Vermont law, a special meeting of
stockholders may be called by the board of directors, any person authorized to
do so in the articles of incorporation or the bylaws, or by the secretary upon
written request of the holders of at least 10% of all votes entitled to be cast
on any issue.
Cumulative Voting for Directors. Unlike Massachusetts corporate law, Vermont
law permits cumulative voting for directors, if provided in the articles of
incorporation. CC's Articles and Bylaws do not provide for cumulative voting.
Stockholder Inspection Rights. Stockholder inspection rights are more
extensive in Vermont, extending to books and records of the corporaiton, whereas
in Massachusetts, statutory inspection rights only apply to the articles of
organization, bylaws, stock transfer records and records of the meetings of
incorporators and stockholders.
Stockholder Approval for Certain Mergers. Under Vermont law, the surviving
corporation need not obtain stockholder approval of a merger if the certificate
of incorporation of the surviving corporation is not changed and any stock
issued by the surviving corporation in the merger does not exceed 20% of its
total shares. Under Massachusetts law, such a merger would require approval by
the stockholders of the surviving corporation.
Indemnification Provisions. Under both Vermont and Massachusetts law, a
corporation may indemnify officers and directors against certain liabilities and
expenses. However, Vermont law, but not Massachusetts law, requires a
corporation to indemnify directors and officers against expenses (including
attorneys' fees) reasonably incurred in connection with litigation, to the
extent that the director or officer has been successful on the merits or
otherwise in defense of the litigation, unless limited by its articles of
incorporation. CC's Articles have no such limitation. Vermont law is also more
specific than Massachusetts law as to the scope of permissible indemnification
in a number of respects, including the propriety of making advances to reimburse
litigation expenses (including attorneys' fees) incurred by an officer or
director prior to final disposition of the litigation.
Removal of Directors. Under Vermont and Massachusetts law,except as otherwise
provided in a corporation's articles of organization or bylaws, directors may be
removed from office with or without cause by the holders of a majority of the
shares entitled to vote in the election of directors or with cause by a majority
of the directors then in office. Unlike Massachusetts law, Vermont law does not
permit directors to remove other directors. Massachusetts law requires that a
director may be removed for cause only after a reasonable notice and opportunity
to be heard before the body proposing removal. There is no comparable provision
in the Vermont law.
Under Vermont law, a director may be removed by judicial proceeding commenced
by either the corporation or holders of 10% of the voting stock if the court
finds that the director engaged in fraudulent or dishonest conduct relating to
the corporation, or in a gross abuse of authority or discretion relating to the
corporation and removal is in the best interest of the Corporation. There is no
comparable provision in Massachusetts law.
Interested Director Transactions. Vermont law provides that a transaction
between a corporation and one of its directors or an entity in which a director
has an interest shall not be void or voidable because of such fact, and sets
forth the criteria by which such a transaction will be upheld. Massachusetts
law has no comparable provision.
Sale of Assets; Merger. Massachusetts law requires a two-thirds (2/3) vote of
the shares of each class of stock outstanding and entitled to vote thereon to
authorize a sale, lease or exchange of all or substantially all of a
corporation's assets or a merger or consolidation to which the corporation is a
party, except that the articles of organization can provide for a greater or
lesser (but not less than a majority) vote. Vermont law requires the vote of
only the holders of a majority of the outstanding shares entitled to vote to
approve such transactions, although the certificate of incorporation may require
a higher vote, as do the CC Articles relating to certain "Related" business
combinations.
Certain Business Combinations. The Articles of CC provide that certain
"Business Combinations" (as defined therein) require the affirmative vote of at
least two-thirds of the "Continuing Directors" (as defined therein), rather than
the otherwise required vote of a majority of the Board of Directors, together
with the affirmative vote of the holders of two-thirds of the outstanding shares
of CC Common Stock. The Articles of CC also contains a so-called "fair price"
provision wherein certain "Related Persons" (as defined therein) are required to
pay either (i) the highest price per share paid by such Related Person within
the two-year period immediately prior to the proposal of the Business
Combination or, if higher, the price paid in the transaction in which the
Related Person became a Related Person, or (ii) the fair market value on the
"Proposal Date" (as defined therein), unless the holders of at least 80 percent
of the outstanding shares entitled to vote thereon, exclusive of the shares
owned by any Related Person, vote to accept a different price. The Articles of
BWM do not contain a similar provision.
The CC provisions may have the effect of making it more difficult for a third
party to acquire, or of discouraging a third party from acquiring, control of
CC.
Charter Amendments. Under Massachusetts law, certain amendments to the
articles of organization require a two-thirds vote of each class of stock
outstanding and entitled to vote thereon, unless the articles of organization
provide for a greater or lesser (but not less than a majority) vote. Under
Vermont law, amendments to the certificate of incorporation require a majority
vote unless the certificate of incorporation requires a higher vote, as do the
CC Articles, in certain cases.
Dividends. Massachusetts does not specify the sources out of which dividends
must be paid, nor does it forbid the impairment of capital. Rather, the law
imposes liability on the directors if, at the time the Board of Directors
authorizes any distribution, such distribution violates the articles of
organization of the corporation or if the corporation is then or is thereby
rendered insolvent. Vermont does not specify the sources out of which dividends
must be paid but it does specify an indebtedness test and an asset-liabilities
test.
Significant Differences Between the Charters and Bylaws of BWM and CC
The provisions of the BWM Articles and Bylaws differ from those of the CC
Articles and Bylaws in certain material respects, as described below:
Authorized Stock. The CC Articles authorize CC to issue up to 30,200,000
shares of capital stock, of which 30,000,000 are CC Common Stock and 200,000 are
CC Preferred Stock. As of (not available at this time), 1995, CC had not issued
any shares of CC Preferred Stock. No holder of CC Common Stock has any
preemptive rights to purchase or subscribe for any shares of capital stock of
other securities which may be issued by CC.
The BWM Articles authorize BWM to issue up to 50,000 shares of capital stock,
of which 18,440 are BWM Common Stock. As of (not available at this time), 1995,
BWM had issued and outstanding 979 shares of BWM Class A Stock. No holder of
BWM Common Stock has any preemptive rights to purchase or subscribe for any
shares of capital stock or other securities which may be issued by BWM.
Size and Classification of Board of Directors. The CC Articles provide for a
classified Board of Directors consisting of three classes of directors, with
directors of each class elected by the stockholders to serve for staggered
three-year terms. Only one class of directors may be elected by the CC
stockholders at each annual meeting, with the remaining directors (in the other
classes) continuing with their respective three-year terms. The CC Articles
requires that the respective classes of directors be as nearly equal in size as
possible. Consequently, the Board of Directors of CC currently consists of one
class of 3, 4 and 5 members, for a total number of directors equal to 12. BWM
does not have a staggered board and consists of eight members. Only the Board
may nominate BWM directors.
Although CC's provision for a classified Board was designed to facilitate
continuity, stability and experienced leadership, the classified board
significantly extends the time required to make a change in control of the Board
and, therefore, may tend to discourage a potential takeover. For information
concerning the current directors of CC and BWM, see "BUSINESS OF CC - Directors
and Executive Officers of CC."
Director Nominations and Other Stockholder Matters. The CC bylaws provide
that director nominations may be made only by the Board of Directors although
any stockholder entitled to vote in the election of directors may make a
proposal concerning the corporate affairs by submitting the proposal in writing
to the Secretary by the second Friday in November.
Both CC and BWM Bylaws provide indemnification for each respective director to
the fullest extent permitted by Vermont and Massachusetts law for certain
expenses and liabilities arising out of such individual's actions as a director,
but provides no such indemnification for any director's willful misconduct in
the performance of his or her duties as a director.
The foregoing discussion of certain similarities and material differences
between the laws of Massachusetts and Vermont generally and between rights of
BWM stockholders and the rights of CC stockholders under their respective
charter documents and Bylaws is only a summary of certain laws and provisions
and does not purport to be a complete description of such similarities and
differences, and is qualified in its entirety by reference to the full text of
the Massachusetts and Vermont statutes and the charter documents and Bylaws of
BWM and CC.
BUSINESS OF CC
General
CC, a Vermont corporation organized in 1971, is a registered bank holding
company under the Bank Holding Company Act of 1956, as amended, and its main
office is located in Burlington, Vermont. Assets of CC were $1.2 billion at
September 30, 1994. CC owns 100 percent of the stock of CB. CC has no other
active subsidiaries/1/ and engages in no activities other than holding the stock
of CB.
CB was chartered by the Vermont legislature as a commercial bank in 1904 and
is the largest bank in Vermont, based on total deposits of $1,052,993,000 and
total assets of $1,233,756,000 at September 30, 1994. CB has its principal
office in Burlington, Vermont and operates from 40 locations throughout Vermont.
CB offers a wide range of personal and commercial banking services, including
the acceptance of demand, savings, and time deposits; making secured and
unsecured loans; issuing letters of credit; and offering fee based services. In
addition, CB offers a wide range of trust and trust-related services, including
services as executor, trustee, administrator, custodian and guardian. CB
lending services include making real estate, commercial, industrial,
agricultural and consumer loans. CB also offers data processing services
consisting primarily of payroll and automated clearing house for several outside
clients. CB provides financial and investment counseling to municipalities and
school districts within its service area and also provides central depository,
lending, payroll and other banking services for such customers. CB also
provides safe deposit facilities, MasterCard and VISA credit card services.
Over 90 percent of CB's loans are made to individuals and businesses located in
Vermont.
CB competes on the local and the regional levels with other commercial banks
and financial institutions for all types of deposits, loans and trust accounts.
Competitors include metropolitan banks and financial institutions based in
southern New England and New York, many of which have greater financial
resources.
In the retail market for financial services, competitors include other banks,
credit unions, finance companies, and mortgage loan companies.
In the personal and commercial trust business, competitors include mutual
funds, insurance companies, and investment advisory firms.
On April 26, 1993, CC acquired VerBanc Financial Corp., the holding company of
Bellows Falls Trust Company, a Vermont-chartered, FDIC-insured commercial bank
with total assets of approximately $73 million, based in Bellows Falls, Vermont
with branch offices in Brattleboro, Putney and Londonderry, Vermont. Bellows
Falls Trust Company merged into CB upon consummation of that transaction.
For further discussion of the business of CC, see its Annual Report on Form
10-K incorporated herein by reference.
- -------------------------------------
/1/ CAB was formed for the purpose of consummating the Merger.
Description of CC Capital Stock
Common Stock
The following description of the capital stock of CC does not purport to be
complete and is subject, in all respects, to applicable Vermont law and to the
provisions of the Articles of CC. The following description is qualified by
reference to the CC Articles, a copy of which is incorporated by reference as an
exhibit to the Registration Statement of which this Proxy Statement and
Prospectus is a part.
General. As of December 31, 1994, CC Common Stock consisted of 30,000,000
authorized shares, $1.00 par value per share, of which (not available at this
time) were issued and outstanding and held by approximately 2,000 stockholders
(exclusive of treasury shares). CC Common Stock is traded on NASDAQ-NMS. The
transfer agent and registrar for CC Common Stock is Bank of Boston.
Shares of CC Common Stock may be issued from time to time, in such amount and
proportions and for such consideration as may be fixed by the Board of Directors
of CC. No holder of CC Common Stock has any preemptive or preferential rights
to purchase or to subscribe for any shares of capital stock or other securities
which may be issued by CC. CC Common Stock has no redemption or sinking fund
provisions applicable thereto and has no conversion rights.
The outstanding shares of CC Common Stock are fully paid and non-assessable.
Liquidation. In the event of any liquidation, dissolution or winding up of
CC, whether voluntary or involuntary, the holders of CC Common Stock are
entitled to receive, on a share-for-share basis, any assets or funds of CC which
are distributable to the holders of CC Common Stock upon such events, subject to
the prior rights of creditors of CC and the holders of outstanding shares of CC
Preferred Stock, if any.
Voting. The holders of CC Common Stock are entitled to one vote for each
share in all matters voted upon by the stockholders of CC. The shares of CC
Common Stock have noncumulative voting rights; consequently, the holders of a
majority in interest of CC Common Stock can conceivably elect all of the
directors of CC and, in such event, the holders of the remaining shares voting
for election of directors would not be able to elect any person or persons to
the Board of Directors of CC.
Dividends. When and if dividends, payable as cash, stock or other property,
are declared by the Board of Directors of CC out of funds legally available
therefor, the holders of CC Common Stock are entitled to share equally, share
for share, in such dividends. The payment of dividends on CC Common Stock is
subject to applicable bank regulatory approval.
Preferred Stock
General. Under the CC Articles, the Board of Directors of CC is authorized,
without further stockholder action, to provide for the issuance of up to 200,000
shares of CC Preferred Stock, $100.00 par value per share, in one or more
series, with such designations or titles; dividend rates, special or relative
rights in the event of liquidation, distribution or sale of assets or
dissolution or winding up of CC; any sinking fund provisions; any redemption or
purchase account provision; any conversion provisions; and any voting rights
thereof, as shall be set forth as and when established by the Board of Directors
of CC.
As of (not available at this time), 1995, CC had not issued any shares of CC
Preferred Stock.
Upon consummation of the Merger, approximately 6,700,000 shares of CC will be
issued and outstanding, subject to certain adjustments described in "THE
MERGER - Terms of the Merger; Consideration to be Received by BWM Stockholders,"
and assuming no exercise of dissenters' rights.
BUSINESS OF BWM
General. BWM is an FDIC-insured, Massachusetts-chartered trust company,
headquartered in Springfield, Massachusetts. BWM was chartered in 1987.
BWM is primarily engaged in the business of attracting deposits from the
general public and originating commercial loans. BWM also makes loans secured
by first liens on residential real estate, mortgage loans on commercial real
estate and originates consumer loans, most of which are collateralized. BWM
maintains a portion of its assets in federal government and agency obligations,
various types of corporate securities and other authorized investments. BWM
provides traditional deposit services as well as money market deposit
instruments, demand deposits and NOW accounts. BWM has installed automated
teller machines (ATMs) in all its branch offices; the ATMs are part of the
Cirrus system, which operates nationally, and the Yankee 24 network with members
throughout New England in over 2,000 locations.
BWM obtained stockholder approval for the formation of a holding company.
Consummation of the Merger obviates the purpose for such a holding company.
For a further description of BWM and its business see its Annual Report on
Form F-2 incorporated by reference herein and delivered herewith.
Market Price of and Dividends on BWM Common Stock
There is no established trading market for BWM Common Stock. BWM is aware of
several transactions involving the sale of BWM Common Stock over the last two
fiscal years and the current fiscal year to date. However, as such sales have
occurred in privately negotiated transactions, BWM generally is not aware of the
sale price.
There were approximately (not available at this time) stockholders of record
of BWM Common Stock as of the Record Date.
There have not been any dividends declared by BWM.
SUPERVISION AND REGULATION
CC, CB, and BWM are subject to extensive regulation under federal and state
banking laws and regulations. The following discussion of certain of the
material elements of the regulatory framework applicable to banks and bank
holding companies is not intended to be complete and is qualified in its
entirety by the text of the relevant state and federal statutes and regulations.
A change in the applicable laws or regulations may have a material effect on the
business of CC, CB, and/or BWM.
Regulation of CC
General. As a bank holding company, CC is subject to supervision and
regulation by the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board") under the Bank Holding Company Act of 1956, as amended (the "BHC
Act"). Under the BHC Act, bank holding companies generally may not acquire
ownership or control of more than 5% of any class of voting shares or
substantially all of the assets of any company, including a bank, without the
prior approval of the Federal Reserve Board. In addition, bank holding
companies are generally prohibited under the BHC Act from engaging in
non-banking activities, subject to certain exceptions. As a bank holding
company, CC's activities and those of its non-bank subsidiaries are limited
generally to the business of banking and activities determined by the Federal
Reserve Board to be so closely related to banking as to be a proper incident
thereto. The Federal Reserve Board has authority to issue cease and desist
orders and assess civil money penalties against bank holding companies and their
non-bank subsidiaries, officers, directors and other institution-affiliated
parties and to remove officers, directors and other institution-affiliated
parties to terminate or prevent unsafe or unsound banking practices or
violations of laws or regulations.
Interstate Acquisitions. Under the BHC Act, a bank holding company may
acquire a bank in another state only if the law of the state in which the bank
to be acquired is located specifically authorizes such acquisition of an
in-state bank by an out-of-state bank holding company. (As described below
under "Recent Banking Legislation - Interstate Banking and Branching", the BHC
Act has recently been amended, effective September 29, 1995.) State legislation
enacted in recent years has substantially lessened prior legislative
restrictions on geographic expansion by bank holding companies from and into
Massachusetts and Vermont. For example, under nationwide interstate banking
legislation which became effective in 1990, bank holding companies whose
subsidiaries' banking operations are principally conducted in any state outside
Massachusetts or Vermont are now authorized to acquire Massachusetts or Vermont
banking organizations, provided that such companies' home states afford
Massachusetts or Vermont banking organizations reciprocal rights to acquire
banks in such states.
Dividends. The Federal Reserve Board has authority to prohibit bank holding
companies from paying dividends if such payment would be an unsafe or unsound
practice. The Federal Reserve Board has indicated generally that it may be an
unsound practice for bank holding companies to pay dividends unless the bank
holding company's net income over the preceding year is sufficient to fund the
dividends and the expected rate of earnings retention is consistent with the
organization's capital needs, asset quality, and overall financial condition.
CC's ability to pay dividends is dependent upon the flow of dividend income to
it from CB, which may be affected or limited by regulatory restrictions imposed
by federal or state bank regulatory agencies. See "- Regulation of CB and BWM -
Dividends."
Certain Transactions by Bank Holding Companies with Their Affiliates. There
are various legal restrictions on the extent to which bank holding companies,
such as CC, and their non-bank subsidiaries may borrow, obtain credit from or
otherwise engage in "covered transactions" with their insured depository
institution subsidiaries. Such borrowings and other covered transactions by an
insured depository institution subsidiary (and its subsidiaries) with its non-
depository institution affiliates are limited to the following amounts: (a) in
the case of any one such affiliate, the aggregate amount of covered transactions
of the insured depository institution and its subsidiaries cannot exceed 10% of
the capital stock and surplus of the insured depository institution; and (b) in
the case of all affiliates, the aggregate amount of covered transactions of the
insured depository institution and its subsidiaries cannot exceed 20% of the
capital stock and surplus of the insured depository institution. "Covered
transactions" are defined by statute for these purposes to include a loan or
extension of credit to an affiliate, a purchase of or investment in securities
issued by an affiliate, a purchase of assets from an affiliate unless exempted
by the Federal Reserve Board, the acceptance of securities issued by an
affiliate as collateral for a loan or extension of credit to any person or
company, or the issuance of a guarantee, acceptance or letter of credit on
behalf of an affiliate. Covered transactions are also subject to certain
collateral security requirements. Further, a bank holding company and its
subsidiaries are prohibited from engaging in certain tying arrangements in
connection with any extension of credit, lease or sale of property of any kind,
or furnishing of any service.
Holding Company Support of Subsidiary Banks. Under Federal Reserve Board
policy, CC is expected to act as a source of financial strength to its
subsidiary bank and to commit resources to support such subsidiary. This
support of its subsidiary bank may be required at times when, absent such
Federal Reserve Board policy, CC might not otherwise be inclined to provide it.
In addition, any capital loans by a bank holding company to any of its
subsidiary banks are subordinate in right of payment to deposits and certain
other indebtedness of such subsidiary banks. In the event of a bank holding
company's bankruptcy, any commitment by the bank holding company to a federal
bank regulatory agency to maintain capital of a subsidiary bank will be assumed
by the bankruptcy trustee and entitled to a priority of payment.
Liability of Commonly Controlled Depository Institutions. Under the Federal
Deposit Insurance Act, as amended ("FDI Act"), an FDIC-insured depository
institution, such as CB or BWM, can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC after August 9, 1989 in
connection with (i) the "default" of a commonly controlled FDIC-insured
depository institution, or (ii) any assistance provided by the FDIC to any
commonly controlled depository institution in "danger of default." For these
purposes, the term "default" is defined generally as the appointment of a
conservator or receiver and "in danger of default" is defined generally as the
existence of certain conditions indicating that a default is likely to occur
without Federal regulatory assistance.
Regulation of CB and BWM
General. As FDIC-insured state-chartered banks, CB and BWM are subject to
supervision of and regulation by the Commissioner of Banking, Insurance and
Securities of the State of Vermont, in connection with CB, and the Commissioner
of Banking of the Commonwealth of Massachusetts in connection with BWM
(collectively, the "Commissioners") and (for both banks) the FDIC. This
supervision and regulation is for the protection of depositors, the BIF (as
hereinafter defined), and consumers and is not for the protection of CC's and
BWM's stockholders. The prior approval of the FDIC and the Commissioners is
required for CB or BWM to establish or relocate an additional branch office,
assume deposits, or engage in any merger, consolidation or purchase of sale of
all or substantially all of the assets of any bank or savings association.
Examinations and Supervision. The FDIC and the Commissioners regularly
examine the operations of CB and BWM, including but not limited to their capital
adequacy, reserves, loans, investments, earnings, liquidity, compliance with
laws and regulations, record of performance under the Community Reinvestment Act
and management practices. In addition, CB and BWM are required to furnish
quarterly and annual reports of income and condition to the FDIC and periodic
reports to the Commissioners. The enforcement authority of the FDIC includes
the power to impose civil money penalties, terminate insurance coverage, remove
officers and directors and issue cease-and-desist orders to prevent unsafe or
unsound practices or violations of laws or regulations governing its business.
In addition, under recent federal banking legislation, the FDIC has authority to
impose additional restrictions and requirements with respect to banks that do
not satisfy applicable regulatory capital requirements. See "- Recent Banking
Legislation -Prompt Corrective Action" below.
Dividends. The principal source of CC's revenue is dividends from CB, its
bank subsidiary. Payment of dividends by CB and BWM are subject to certain
Vermont and Massachusetts banking law restrictions. Payment of dividends by CB
is subject to Vermont banking law restrictions which require that, except when
surplus and paid-in capital together amount to 10% or more of deposits and other
liabilities(not including surplus, paid-in capital, capital notes an debentures,
and funds held in a fiduciary capacity), at least one-tenth of its net profits
must be set aside annually and added to surplus. For a discussion of other
restrictions on payment of dividends by CB, see "Market Price of and Dividends
on CC Common Stock."
The FDIC has authority to prevent CB and BWM from paying dividends if such
payment would constitute an unsafe or unsound banking practice or reduce their
respective Bank's capital below safe and sound levels. In addition, recently
enacted federal legislation prohibits FDIC-insured depository institutions from
paying dividends or making capital distributions that would cause the
institution to fail to meet minimum capital requirements. See "- Recent Banking
Legislation - Prompt Corrective Action" below.
Affiliate Transactions. CB is subject to restrictions imposed by federal law
on extensions of credit to, purchases of assets from, and certain other
transactions with, affiliates, and on investments in stock or other securities
issued by affiliates. Such restrictions prevent CB from making loans to
affiliates unless the loans are secured by collateral in specified amounts and
have terms at least as favorable to the bank as the terms of comparable
transactions between the bank and non-affiliates. Further, federal and Vermont
laws significantly restrict extensions of credit by CC to directors, executive
officers and principal stockholders and related interests of such persons.
Deposit Insurance. CB's and BWM's deposits are insured by the Bank Insurance
Fund ("BIF") of the FDIC to the legal maximum of $100,000 for each insured
depositor. The Federal Deposit Insurance Act provides that the FDIC shall set
deposit insurance assessment rates on a semi-annual basis at a level sufficient
to increase the ratio of BIF reserves to BIF-insured deposits to at least 1.25%
over a 15-year period commencing in 1991. The FDIC has recently established a
framework of risk-based insurance assessments to accomplish this increase. See
"- Recent Banking Legislation - Risk-Based Deposit Insurance Assessments" below.
The BIF insurance assessments may be increased further in the future if
necessary to restore and maintain BIF reserves.
Federal Reserve Board Policies. The monetary policies and regulations of the
Federal Reserve Board have had a significant effect on the operating results of
banks in the past and are expected to continue to do so in the future. Federal
Reserve Board Policies affect the levels of bank earnings on loans and
investments and the levels of interest paid on bank deposits through the Federal
Reserve System's open-market operations in United States government securities,
regulation of the discount rate on bank borrowings from Federal Reserve Banks
and regulation of non-earning reserve requirements applicable to bank deposit
account balances.
Consumer Protection Regulation; Bank Secrecy Act. Other aspects of the
lending and deposit business of CB and BWM that are subject to regulation by the
FDIC and the Commissioners include disclosure requirements with respect to
interest, payment and other terms of consumer and residential mortgage loans and
disclosure of interest and fees and other terms of and the availability of funds
for withdrawal from consumer deposit accounts. In addition, CB and BWM are
subject to federal and state laws and regulations prohibiting certain forms of
discrimination in credit transactions, and imposing certain record keeping,
reporting and disclosure requirements with respect to residential mortgage loan
applications. In addition, CB and BWM are subject to federal laws establishing
certain record keeping, customer identification, and reporting requirements with
respect to certain large cash transactions, sales of travelers checks or other
monetary instruments and the international transportation of cash or monetary
instruments.
Capital Requirements
General. The FDIC has established guidelines with respect to the maintenance
of appropriate levels of capital by FDIC-insured banks. The Federal Reserve
Board has established substantially identical guidelines with respect to the
maintenance of appropriate levels of capital, on a consolidated basis, by bank
holding companies. If a banking organization's capital levels fall below the
minimum requirements established by such guidelines, a bank or bank holding
company will be expected to develop and implement a plan acceptable to the FDIC
or the Federal Reserve Board, respectively, to achieve adequate levels of
capital within a reasonable period, and may be denied approval to acquire or
establish additional banks or non-bank businesses, merger with other
institutions or open branch facilities until such capital levels are achieved.
Recently enacted Federal legislation requires federal bank regulators to take
"prompt corrective action" with respect to insured depository institutions that
fail to satisfy minimum capital requirements and imposes significant
restrictions on such institutions. See "- Recent Banking Legislation - Prompt
Corrective Action" below.
Leverage Capital Ratio. The regulations of the FDIC require FDIC-insured
banks to maintain a minimum "Leverage Capital Ratio" or "Tier 1 Capital" (as
defined in the Risk-Based Capital Guidelines discussed in the following
paragraphs) to Total Assets of 3.0%. The regulations of the FDIC state that
only banks with the highest federal bank regulatory examination rating will be
permitted to operate at or near such minimum level of capital. All other banks,
including BWM and CB, are expected to maintain an additional margin of capital,
equal to at least 1% to 2% of Total Assets, above the minimum ratio. Any bank
experiencing or anticipating significant growth is expected to maintain capital
well above the minimum levels. The Federal Reserve Board's guidelines impose
substantially similar leverage capital requirements on bank holding companies on
a consolidated basis.
Risk-Based Capital Requirements. The regulations of the FDIC also require
FDIC-insured banks to maintain minimum capital levels measured as a percentage
of such banks' risk-adjusted assets. A bank's capital for this purpose may
include two components - "Core" (Tier 1) Capital and "Supplementary" (Tier 2)
Capital. Core Capital consists primarily of common stockholders' equity, which
generally includes common stock, related surplus and retained earnings, certain
non-cumulative perpetual preferred stock and related surplus, and minority
interests in the equity accounts of consolidated subsidiaries, less intangible
assets, primarily goodwill. Supplementary Capital elements include, subject to
certain limitations, a portion of the allowance for losses on loans and leases,
perpetual preferred stock that does not qualify for inclusion in Tier 1 capital,
long-term preferred stock with an original maturity of at least 20 years and
related surplus, certain forms of perpetual debt and mandatory convertible
securities, and certain forms of subordinated debt and intermediate-term
preferred stock.
The risk-based capital rules of the FDIC and the Federal Reserve Board
assign a bank's balance sheet assets and the credit equivalent amounts of the
bank's off-balance sheet obligations to one of four risk categories, weighted at
0%, 20%, 50% or 100%, respectively. Applying these risk-weights to each
category of the bank's balance sheet assets and to credit the equivalent amounts
of the bank's off-balance sheet obligations and summing the totals results in
the amount of the bank's total Risk-Adjusted Assets for purposes of the
risk-based capital requirements. Risk-Adjusted Assets can either exceed or be
less than reported balance sheet assets, depending on the risk profile of the
banking organization. Risk-Adjusted Assets for institutions such as CB will
generally be less than reported balance sheet assets because its retail banking
activities include proportionally more residential mortgage loans with a lower
risk weighing and relatively smaller off-balance sheet obligations.
Effective as of December 31, 1992, the risk-based capital regulations require
all banks to maintain a minimum ratio of Total Capital to Risk-Adjusted Assets
of 8.0%, of which at least one-half (4.0%) must be Core (Tier 1) Capital. For
the purpose of calculating these ratios: (i) a banking organization's
Supplementary Capital eligible for inclusion in Total Capital is limited to no
more than 100% of Core Capital; and (ii) the aggregate amount of certain types
of Supplementary Capital eligible for inclusion in Total Capital is further
limited. For example, the regulations limit the portion of the allowance for
loan losses eligible for inclusion in Total Capital to 1.25% of Risk-Adjusted
Assets. The Federal Reserve Board has established substantially identical
risk-based capital requirements to be applied to bank holding companies on a
consolidated basis.
At December 31, 1993, CC's consolidated Total and Tier 1 Risk-Based Capital
Ratios were 12.41% and 11.05%, respectively, and its Leverage Capital Ratio was
8.13%. As of September 30, 1994, CC's consolidated Total and Tier 1 Risk-Based
Capital Ratios were 13.32% and 11.95%, respectively, and its Leverage Capital
Ratio was 8.83%. These ratios exceeded applicable regulatory requirements.
CC's consolidated Total and Tier 1 Risk-Based Capital Ratios at December 31,
1992 were 10.95% and 9.64%, respectively, and its Leverage Capital Ratio was
7.30%.
At December 31, 1993, BWM's Total and Tier 1 Risk-Based Capital Ratios were
11.36% and 9.72%, respectively, and its Leverage Capital Ratio was 7.76%. As of
September 30, 1994, BWM's Total and Tier 1 Risk-Based Capital Ratios were 11.44%
and 10.18%, respectively, and its Leverage Capital Ratio was 7.93%. These
ratios exceeded applicable regulatory requirements. BWM's consolidated Total
and Tier 1 Risk-Based Capital Ratios at December 31,1992 were 11.85% and 10.59%,
respectively, and its Leverage Capital Ratio was 7.86%.
Based on the above figures and accompanying discussion, both CC and BWM exceed
all regulatory capital requirements on an historical as well as on a pro forma
basis.
Recent Banking Legislation
General. On December 19, 1991, the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") was enacted. The FDICIA extensively revised
the regulatory and funding provisions of the FDI Act and made revisions to
several federal banking statutes. In addition, there has been certain other
recent banking legislation. Certain of these changes are summarized below.
Prompt Corrective Action. Among other things, FDICIA requires the federal
banking regulators to take "prompt corrective action" with respect to, and
imposes significant restrictions on, any bank that fails to satisfy its
applicable minimum capital requirements. FDICIA establishes five capital
categories consisting of "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized." Under applicable regulations, a bank that has a Total
Risk-Based Capital Ratio of 10.0% or greater, a Tier 1 Risk-Based Capital Ratio
of 6.0% or greater and a Leverage Capital Ratio of 5.0% or greater, and is not
subject to any written agreement, order, capital directive or prompt corrective
action directive to meet and maintain a specific capital level for any capital
measure is deemed to be "well capitalized." A bank that has a Total Risk-Based
Capital Ratio of 8.0% or greater, a Tier 1 Risk-Based Capital Ratio of 4.0% or
greater and a Leverage Capital Ratio of 4.0% or greater and does not meet the
definition of a well capitalized bank is considered to be "adequately
capitalized." A bank that has a Total Risk-Based Capital Ratio of less than
8.0% or has a Tier 1 Risk-Based Capital Ratio that is less than 4.0% or
generally a Leverage Capital Ratio of less than 4.0% is considered
"undercapitalized." A bank that has a Total Risk-Based Capital Ratio of less
than 6.0%, or a Tier 1 Risk-Based Capital Ratio that is less than 3.0% or a
Leverage Capital Ratio that is less than 3.0% is considered to be "significantly
undercapitalized," and a bank that has a ratio of tangible equity to total
assets equal to or less than 2% is deemed to be "critically undercapitalized."
A bank may be deemed to be in a capital category lower than is indicated by its
actual capital position if it is determined to be in an unsafe or unsound
condition or receives an unsatisfactory examination rating. At September 30,
1994, CB's and BWM's ratios of tangible equity to assets as calculated under the
prompt corrective action rule were 8.22% and 7.93%, respectively. FDICIA
generally prohibits a bank from making capital distributions (including payment
of dividends) or paying management fees to controlling stockholders or their
affiliates if, after such payment, the bank would be undercapitalized.
Under FDICIA and the applicable implementing regulations, an undercapitalized
bank will be (i) subject to increased monitoring by the FDIC; (ii) required to
submit to the FDIC an acceptable capital restoration plan within 45 days; (iii)
subject to strict asset growth limitations; and (iv) required to obtain prior
regulatory approval for certain acquisitions, transactions not in the ordinary
course of business, and entry into new lines of business. In addition to the
foregoing, the FDIC may issue a "prompt corrective action directive" to any
undercapitalized institution. Such a directive may require sale or
recapitalization of the bank, impose additional restrictions on transactions
between the bank and its affiliates, limit interest rates paid by the bank on
deposits, limit asset growth and other activities, require divestiture of the
subsidiaries, require replacement of directors and officers, and restrict
capital distributions by the bank's parent holding company.
In addition to the foregoing, a significantly undercapitalized institution may
not award bonuses or increases in compensation to its senior executive officers
until it has submitted an acceptable capital restoration plan and received
approval from the FDIC.
Not later than 90 days after an institution becomes critically
undercapitalized, the appropriate federal banking agency for the institution
must appoint a receiver or, with the concurrence of the FDIC, a conservator,
unless the agency, with the concurrence of the FDIC, determines that the
purposes of the prompt corrective action provisions would be better served by
another course of action. FDICIA requires that any alternative determination be
"documented" and reassessed on a periodic basis. Notwithstanding the foregoing,
a receiver must be appointed after 270 days unless the appropriate federal
banking agency and the FDIC certify that the institution is viable and not
expected to fail.
Risk-Based Deposit Insurance Assessments. Effective January 1, 1993, a
transitional risk-based structure was implemented by the FDIC pursuant to the
FDICIA and the average assessment rate paid by Savings Association Insurance
Fund-insured and BIF-insured institutions was increased. Under the rule
implementing the transitional system, the FDIC assigns an institution to one of
three capital categories consisting of (1) well capitalized, (2) adequately
capitalized, or (3) undercapitalized, and one of three supervisory categories.
An institution's assessment rate depends on the capital category and supervisory
category to which it is assigned. Under the transitional system, there are nine
assessment risk classifications (i.e., combinations of capital categories and
supervisory subgroups within each capital group) to which the differing
assessment rates are applied. Assessment rates will range from 0.23% of
domestic deposits for an institution in the highest category (i.e., well-
capitalized and healthy from a supervisory standpoint). The risk classification
to which an institution is assigned by the FDIC is confidential and may not be
disclosed.
On June 17, 1993, the FDIC adopted a final rule establishing a new risk-based
system that was implemented beginning with the semi-annual assessment period
commencing on January 1, 1994, as required under FDICIA. Except for limited
changes, the structure of the new risk-based system is substantially the same as
the structure of the transitional system it replaced. Under the FDIC rule
implementing the new risk-based system, an institution's deposit insurance
assessment rate will be determined by assigning the institution to a capital
category and a supervisory subgroup to determine which one of the nine risk
classification categories is applicable, in substantially the same manner as for
the transitional system discussed above. The FDIC is authorized to raise the
assessment rates in certain circumstances. If the FDIC determines to increase
the assessment rates for all institutions, institutions in all risk categories
could be affected. The FDIC has exercised this authority several times in the
past and may raise BIF insurance premiums again in the future. If such action
is taken by the FDIC, it could have an adverse effect on the earnings of CC and
BWM, the extent of which is not currently quantifiable. Commencing July 1, 1994,
the insurance assessment rate for CB was 0.23% and for BWM was 0.26%.
Brokered Deposits and Pass-Through Deposit Insurance Limitations. Under
FDICIA, a bank cannot accept brokered deposits unless it either (i) is "Well
Capitalized" or (ii) is "Adequately Capitalized" and has received a written
waiver from the FDIC. For this purpose, "Well Capitalized" and "Adequately
Capitalized" have the same definitions as in the Prompt Corrective Action
regulations. See "- Prompt Corrective Action" above. Banks that are not in the
"Well Capitalized" category are prohibited from offering rates of interest on
deposits that are more than 75 basis points above prevailing deposits. Pass-
through insurance coverage is not available for deposits of certain employee
benefits plans in banks that do not satisfy the requirements for acceptance of
brokered deposits, except that pass-through insurance coverage will be provided
for employee benefit plan deposits in institutions which at the time of
acceptance of the deposit meet all applicable regulatory requirements and send
written notice to their depositors that their funds are eligible for
pass-through deposit insurance. Although eligible to do so, CB does not accept
brokered deposits.
Conservatorship and Receivership Amendments. FDICIA authorizes the FDIC to
appoint itself conservator or receiver for a state-chartered bank under certain
circumstances and expands the grounds for appointment of a conservator or
receiver for an insured depository institution to include (i) consent to such
action by the board of directors of the institution; (ii) cessation of the
institution's status as an insured depository institution; (iii) the institution
is undercapitalized and has no reasonable prospect of becoming adequately
capitalized, or fails to become adequately capitalized when required to do so,
or fails to timely submit an acceptable capital plan, or materially fails to
implement an acceptable capital plan; and (iv) the institution is critically
undercapitalized or otherwise has substantially insufficient capital. FDICIA
provides that an institution's directors shall not be liable to its stockholders
or creditors for acquiescing in or consenting to the appointment of the FDIC as
receiver or conservator for, or as a supervisor in the acquisition of, the
institution.
Real Estate Lending Standards. FDICIA requires the federal bank regulatory
agencies to adopt uniform real estate lending standards. The FDIC recently
adopted implementing regulations which establish supervisory limitations on
Loan-to-Value ("LTV") ratios in real estate loans by FDIC-insured banks. The
regulations require FDIC-insured banks to establish LTV ratio limitations within
or below the prescribed uniform range of supervisory limits.
Standards for Safety and Soundness. FDICIA requires the federal bank
regulatory agencies to prescribe, by regulation, standards for all insured
depository institutions and depository institution holding companies relating
to: (i) internal controls, information systems and internal audit systems; (ii)
loan documentation; (iii) credit underwriting; (iv) interest rate risk exposure;
(v) asset growth; and (vi) compensation, fees and benefits. The compensation
standards would prohibit employment contracts, compensation or benefit
arrangements, stock option plans, fee arrangements or other compensatory
arrangements that would provide "excessive" compensation, fees or benefits, or
that could lead to material financial loss. In addition, the federal bank
regulatory agencies are required by FDICIA to prescribe standards specifying;
(i) maximum classified assets to capital ratios; (ii) minimum earnings
sufficient to absorb losses without impairing capital; and (iii) to the extent
feasible, a minimum ratio of market value to book value for publicly-traded
shares of depository institutions and depository institution holding companies.
Activities and Investments of Insured State Banks. FDIC provides that insured
state banks such as CB and BWM may not engage as a principal, directly or
through a subsidiary, in any activity that is not permissible for a national
bank unless the FDIC determines that the activity does not pose a significant
risk to the BIF, and the bank is in compliance with its applicable capital
standards. In addition, an insured state bank may not acquire or retain,
directly or through a subsidiary, any equity investment of a type, or in an
amount, that is not permissible for a national bank.
Subject to certain limited exceptions, the foregoing provisions of FDICIA
prohibits insured state banks such as CB and BWM or any subsidiary of such
insured state banks from retaining or acquiring equity investments. However,
under an exception in the statute, an insured state bank such as CB and BWM that
(i) is located in a state such as Vermont or Massachusetts which authorized, as
of September 30, 1991, state banks to invest in common or preferred stock listed
on a national securities exchange ("listed stock") or shares of an investment
company registered under the Investment Company Act of 1940("registered shares")
and (ii) during the period beginning September 30, 1990 and ending on November
26, 1991 made or maintained investments in listed stocks and registered shares,
may retain whatever listed stock or registered shares it lawfully acquired or
held prior to December 19, 1991 and may continue to acquire listed stock or
registered shares which may not exceed, taken together in the aggregate, 100% of
the bank's Tier 1 Capital. In order to acquire or retain any listed stock or
registered shares under this exception, the bank must file a one-time notice
with the FDIC containing specified information, and the FDIC must determine that
acquiring or retaining the listed stock or registered shares will not pose a
significant risk to BIF. Any such approval may be subject to whatever
conditions or restrictions the FDIC determines to be necessary or appropriate
and will terminate with respect to further acquisitions of listed stock or
registered shares if the bank or its holding company experiences a change in
control and in certain other circumstances. CB filed the one-time notice with
the FDIC and the FDIC did not object.
Insured state banks are required to divest any equity investments made
impermissible by FDICIA including any listed stock and registered shares for
which FDIC approval is not obtained, as quickly as prudently possible but in no
event later than December 19, 1996, and to submit a plan for such divestiture to
the FDIC.
Consumer Protection Provisions. FDICIA also includes provisions requiring
advance notice to regulators and customers for any proposed branch closing and
authorizing (subject to future appropriation of the necessary funds) reduced
insurance assessments for institutions offering "lifeline" banking accounts or
engaged in lending in distressed communities. FDICIA also includes provisions
requiring depository institutions to make additional and uniform disclosures to
depositors with respect to the rates of interest, fees and other terms
applicable to consumer deposit accounts.
Depositor Priority Statute. Effective August 10, 1993, the FDI Act was
amended to provide that, in the liquidation or other resolution by any receiver
of a bank insured by the FDIC, the claims of depositors have priority over the
general claims of other creditors. Hence, in the event of the liquidation or
other resolution of a banking subsidiary of CC, the general claims of CC as
creditor of such banking subsidiary would be subordinate to the claims of the
depositors of such banking subsidiary, even if the claims of CC were not by
their terms so subordinated. In addition, this statute may, in certain
circumstances, increase the costs to banks of obtaining funds through nondeposit
liabilities.
Interstate Banking and Branching. On September 29, 1994, the President of the
United States signed in to law the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994. Beginning September 29, 1995, adequately capitalized
bank holding companies may acquire control of banks in any state, although
states may limit the eligibility of banks to be acquired to those in existence
for a period of time but no longer than five years. No bank holding company may
acquire more than 10% of the nationwide insured deposits or more than 30% of
deposits in any state; however, states may waive the 30% limit. Beginning June
1, 1997, banks may merge across state lines and may establish new branches in
other states. The date relating to mergers may be accelerated by any state, and
mergers may be prohibited by any state. The provision relating to new branches
requires a state's specific approval. CC is unable to predict the ultimate
impact of this new interstate banking legislation on it or its competitors.
The United States Congress has periodically considered and adopted legislation
which has resulted in and could result in further regulation or deregulation of
both banks and other financial institutions. Such legislation could place CC,
CB or BWM in more direct competition with other financial institutions,
including mutual funds, securities brokerage firms and investment banking firms.
No assurance can be given as to whether any additional legislation will be
enacted or as to the effect of such legislation on the business of BWM or CB.
<PAGE>
PRO FORMA FINANCIAL DATA
The unaudited pro forma condensed consolidated balance sheets have been
prepared to reflect the Merger of BWM with and into CAB, a wholly-owned
subsidiary of CC, using the purchase method of accounting assuming the merger
had occurred on January 1, 1993. Under the purchase method of accounting, the
purchase price will be allocated to assets acquired and liabilities assumed
based on their estimated fair values at the Effective Time. Income of the
newly-consolidated companies will not include income (or loss) of BWM prior to
the Effective Time. The unaudited pro forma condensed statements of operations
present the results of operations of CC and BWM for the nine months ended
September 30, 1994 and for the year ended December 31, 1993, assuming the merger
had been effective on January 1, 1993. See "THE MERGER - Accounting Treatment."
The pro forma financial statements reflect the exchange of BWM shares of Common
Stock for CC Common Stock in connection with the Merger at the maximum of
57.3099 shares of CC for each share of BWM. This unaudited pro forma financial
data should be read in conjunction with the consolidated historical financial
statements of BWM and CC, including the respective notes thereto, which are
delivered with and/or incorporated by reference in this Proxy Statement and
Prospectus. See "INCORPORATION OF DOCUMENTS BY REFERENCE."
The pro forma financial data are for information purposes only and are not
necessarily indicative of the results of future operations of the merged entity
or the actual results that would have been achieved had the Merger been
consummated prior to the periods indicated. Moreover, the pro forma condensed
financial statements reflect preliminary pro forma adjustments made to combine
BWM with CC utilizing the purchase method of accounting. The actual adjustments
will be made as of the Effective Time of the Merger and may differ from those
reflected in the pro forma financial statements.
CHITTENDEN CORPORATION
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
Note 1.
To adjust assets and liabilities to their estimated fair values:
Loans $(1,060,000)
Deposits 356,000
Core deposit intangible 5,500,000
Note 2.
To reflect tax effects of transaction:
Tax benefit of buyout of employee stock options $ (61,000)
Tax effect of fair value adjustments 2,015,000
------------
$ 1,954,000
============
Note 3.
To accrue estimated professional and other costs associated with the merger of
$350,000.
Note 4.
To reflect issuance of stock and payment of cash to BWM:
Market value of 627,525 shares of CC Common Stock at effective
time (based on price per share of $21.653 for CC Common Stock
which is the average price for the twenty days ending five days
before September 30, 1994) $13,588,000
Total cash to be paid, including redemption of options and
warrants 12,087,000
-----------
$25,675,000
===========
Note 5.
Goodwill is calculated as follows:
Stockholders' equity of BWM at September 30, 1994 $16,204,000
Increase (decrease) to BWM's equity as a result of
estimated fair value adjustments:
Loans (1,060,000)
Deposits 356,000
Core deposit intangible 5,500,000
Tax effect of fair value adjustments (1,954,000)
----------
19,046,000
Unallocated purchase price (goodwill) 6,979,000
----------
Total purchase price (including merger costs) $26,025,000
===========
Note 6.
To accrete fair value adjustment for loans.
Note 7.
To amortize fair value adjustment for deposits.
Note 8.
To amortize intangibles:
Nine Months Ended Year Ended
September 30, 1994 December 31, 1993
------------------ -----------------
(in thousands)
Core deposit intangible (8 years) $515 $688
Goodwill (25 years) 209 279
---- ----
Total $724 $967
==== ====
Note 9.
To record tax impact of accretion and amortization of fair value adjustments.
Note 10.
To reflect elimination of nonrecurring cumulative effect of change in
accounting principle resulting from CC's adoption of SFAS No. 109, Accounting
for Income Taxes, during 1993.
Note 11.
Pursuant to the Merger Agreement, described elsewhere in this document, CC
will issue 627,525 shares of common stock in connection with the merger,
provided that the price of CC Common Stock at the Effective Time, as defined in
the Merger Agreement, is greater than $17.50 per share (minimum price) and less
than $25.50 per share (maximum price). The following table presents the pro
forma effect on selected financial data assuming these minimum and maximum per
share prices.
Minimum Maximum
------- -------
In thousands, except share amounts
Purchase Price $23,069 $28,089
Goodwill 4,373 9,393
Net Income
Year ended December 31, 1993 $12,291 $12,090
Nine months ended September 30, 1994 11,922 11,771
Earnings per share
Year ended December 31, 1993 $ 1.80 $ 1.77
Nine months ended September 30, 1994 1.70 1.68
EXPERTS
The consolidated financial statements and schedules of CC and subsidiaries as
of December 31, 1993 incorporated by reference in this Prospectus and elsewhere
in the Registration Statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said report.
The consolidated financial statements of CC and subsidiaries as of December
31, 1992, and for each of the years in the two-year period ended December 31,
1992, have been incorporated by reference herein and in the Registration
Statement in reliance on the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein and upon the
authority of said firm as experts in accounting and auditing.
The financial statements of BWM appearing in BWM's 1993 Annual Report to
stockholders incorporated by reference herein and in the Registration Statement
have been incorporated herein in reliance on the report of Coopers & Lybrand,
independent accountants, given on the authority of said firm as experts in
accounting and auditing. Representatives of Coopers & Lybrand L.L.P. are
expected to be present at the BWM Special Meeting, will have an opportunity to
make a statement if they wish to do so, and are expected to be available to
respond to the appropriate questions.
VALIDITY OF CC COMMON STOCK
The validity of the CC Common Stock offered in connection with the Merger will
be passed upon by F. Sheldon Prentice, Esq., Secretary of CC. Certain federal
income tax consequences of the Merger and other legal matters in connection with
the Merger will be passed upon by Piper & Marbury, New York, New York and
Baltimore, Maryland, special counsel to CC.
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") dated as of August
17, 1994, by and among Chittenden Corporation, a Vermont corporation (the
"Purchaser"), Bank of Western Massachusetts, a Massachusetts corporation (the
"Company") and Chittenden Acquisition Bank, a Massachusetts corporation to be
formed ("Newco").
W I T N E S S E T H:
WHEREAS, the Purchaser is a registered bank holding company under the Bank
Holding Company Act of 1956, as amended (the "Bank Holding Company Act").
WHEREAS, the Purchaser and the Company have reached an agreement to combine
their companies through a merger (the "Merger") of the Company into Newco, a
wholly-owned subsidiary of the Purchaser, in a transaction qualifying as a
purchase under applicable accounting rules and a tax-free reorganization under
Sections 368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code of 1986, as
amended (the "Code"). The Purchaser, the Company and Newco wish to enter into a
definitive agreement setting forth the terms and conditions of the Merger.
WHEREAS, the Purchaser and the Company desire to provide for certain
undertakings, conditions, representations, warranties and covenants in
connection with the transactions contemplated by this Agreement.
NOW THEREFORE, in consideration of the foregoing and of the covenants,
agreements, representations and warranties hereinafter contained, the Purchaser
and the Company hereby agree as follows:
I.
MERGER OF NEWCO AND THE COMPANY
Subject to the terms and conditions of this Agreement, the Plan of Merger
("Merger Agreement") attached as Exhibit A and the Stock Option Agreement
attached as Exhibit B, the Purchaser and the Company agree to effect the
following transactions at the Closing:
1.1 Conditions. The Purchaser and the Company will deliver to the other
appropriate evidence of the satisfaction of the conditions to their respective
obligations hereunder.
1.2 Merger. Upon the filing of the Merger Agreement with the Secretary of
the Commonwealth of Massachusetts on the date of the Closing (the "Effective
Date"), the Company will be merged with and into Newco pursuant to the
provisions and with the effect provided in the general corporation and banking
law of the Commonwealth of Massachusetts. Newco shall be the surviving
corporation in the Merger and shall continue the banking business authorized to
be conducted under Massachusetts law under the name of The Bank of Western
Massachusetts. Upon the consummation of the Merger, the surviving corporation
shall thenceforth be responsible and liable for all the liabilities,
obligations and penalties of each of the corporations so merged.
1.3 Status of Shares. As a result of the Merger, each share of the common
stock of Newco theretofore authorized (whether issued or unissued) shall remain
unchanged and shall be deemed to be shares of the common stock of Newco as the
surviving corporation. Accordingly, each of the shares of common stock of Newco
issued and outstanding on the date of the Closing shall continue to be and
remain issued and outstanding shares of common stock of Newco as the surviving
corporation without any action on the part of the holders of any such shares of
stock.
At the Effective Date and in consideration of the Merger, each share of the
Company's Class A stock, par value $0.25 per share, issued and outstanding
immediately prior to the Effective Date shall be cancelled in return for rights
to receive $826.88 in cash and 47.2808 shares of Purchaser Common Stock per
share subject to the following conditions:
(a) the Purchaser's Common Stock shall be Restricted and will become
vested at a rate of 20% per annum over a 5-year period after Closing; and
(b) the Holder shall continue employment through each subsequent
annual anniversary of the Closing; provided, however, in the event that the
Holder is terminated unilaterally by the Purchaser, dies or becomes disabled,
the Restricted Stock will become fully vested; provided further, in the event
that the Holder is terminated for cause (defined as deliberate dishonesty,
conviction of a crime involving moral turpitude or gross and willful failure to
perform a substantial portion of duties and responsibilities) any unvested
shares of Restricted Stock will become null and void; and provided further, in
the event of a change in control of the Purchaser as such event is defined in
the Purchaser's current "Change in Control" agreements with certain key
employees of the Purchaser, all shares of Restricted Stock will become fully
vested. In the interim, all shares of Restricted Stock will have full voting
and dividend rights.
1.4 Conversion of the Company Shares.
As a result of the Merger and without any action by the holders
thereof, each share of Company Common Stock issued and outstanding immediately
prior to the Merger (excluding shares held by the Company as treasury stock, if
any, which shares shall be cancelled and extinguished and excluding shares held
by dissenting stockholders), and all rights in respect thereof, shall be
converted into:
(i) $1,225.00 in cash (the "Per Share Cash Consideration")
subject to adjustment pursuant to Section 1.6; or
(ii) 57.3099 shares (the "Per Share Stock Consideration") of
fully paid and non-assessable Common Stock of the Purchaser, par value $1.00 per
share (the "Purchaser Common Stock"), subject to adjustment pursuant to Section
1.6, provided that the aggregate number of Purchaser Common Stock issued in the
transaction will equal 627,525 shares, subject to possible adjustment under
Section 1.5. The dollar amount expressed in clause (i) of the preceding
sentence and the number of shares expressed in (ii) of the preceding sentence
shall each sometimes hereafter be referred to as the"Per Share Consideration".
From and after the Closing, each certificate which theretofore represented
shares of Company Common Stock shall evidence ownership of shares of Purchaser
Common Stock on the basis hereinabove set forth, and the conversion shall be
complete and effective at the Closing without regard to the date or dates on
which outstanding certificates representing converted shares of Company Common
Stock may be surrendered for exchange for certificates representing shares of
Purchaser Common Stock.
1.5 Purchase Price and Consideration. The Company's stockholders shall
receive a combination of 627,525 shares and $10,974,836 in cash. Each holder of
shares of Company Common Stock will elect to receive 100% of the Per Share
Consideration in the form of either cash or Purchaser Common Stock, or make no
election. In the event that the holders of Company Common Stock elect less or
greater than the 627,525 shares of Purchaser Common Stock ("Stock Amount"),
shares of Purchaser Common Stock and cash will be allocated to achieve an
aggregate 55% stock and 45% cash combination which would translate to $551.25 in
cash and 31.5205 shares of stock, on a theoretical basis, for each share of the
Company's stock. The total consideration, including cashing-out of the
Company's options and warrants, equals $25,500,708.
To the extent that the average closing price of the Purchaser Common Stock
on the NASDAQ NMS for the twenty (20) consecutive trading days ending on the
fifth trading day prior to the date before receipt of the last regulatory
approval is greater than $25.50, the total consideration shall be fixed as if
such Purchaser Common Stock were equal to $25.50 per share and the Purchaser
shall reserve the right, subject to reasonable approval of the Company, to
adjust the amount of the Per Share Stock and/or Per Share Cash Consideration to
effectuate the purposes of such $25.50 per share price.
1.6 Election Procedures. An election form and other appropriate and
customary transmittal materials (which shall specify that delivery shall be
effected, and risk of loss and title to the certificates theretofore
representing shares of the Company Common Stock shall pass, only upon proper
delivery of such certificates to the Exchange Agent) in such form as the
Purchaser and the Company shall mutually agree ("Election Form") shall be mailed
thirty-five days prior to the anticipated Effective Date or on such other date
as the Purchaser and the Company shall mutually agree ("Mailing Date") to each
holder of record of the Company Common Stock as of five business days prior to
the Mailing Date ("Election Form Record Date").
Each Election Form shall permit the holder (or the beneficial owner through
appropriate and customary documentation and instructions) to elect to receive
only the Purchaser Common Stock with respect to such holder's Company Common
Stock ("Stock Election Shares") to elect to receive only cash with respect to
such holder's Company Common Stock ("Cash Election Shares") or to indicate that
such holder makes no election ("No Election Shares").
Holders of the Company Common Stock who duly elect to receive the Per Share
Stock Consideration or the Per Share Cash Consideration in the Merger may also
elect to have their share holdings divided into blocks of not less than 10
shares of the Company Common Stock with any remaining shares being added to one
of the designated blocks of 10 shares (such blocks being herein called in "Stock
Blocks") for purposes of the allocation procedures described below in this
Section 1.6. Such holders who do not make such election or who hold less than
10 shares of Company Common Stock will have all of their holding treated as a
single Stock Block for purposes of such allocation procedures.
Any Company Common Stock with respect to which the holder (or the
beneficial owner, as the case may be) shall not have submitted to the Exchange
Agent, an effective, properly completed Election Form on or before 5:00 p.m., on
the 20th day following the Mailing Date (or such other time and date as the
Purchaser and Company may mutually agree) (the "Election Deadline") shall also
be deemed to be "No Election Shares".
The Purchaser shall make available one or more Election Forms as may be
reasonably requested by all persons who become holders (or beneficial owners) of
the Company Common Stock between the Election Form Date and close of business on
the business day prior to the Election Deadline, and the Company shall provide
to the Exchange Agent all information reasonably necessary for it to perform as
specified herein.
Any such election shall have been properly made only if the Exchange Agent
shall have actually received a properly completed Election Form by the Election
Deadline. An Election Form shall be deemed properly completed only if
accompanied by one or more certificates (or customary affidavits and
indemnification regarding the loss or destruction of such certificates or the
guaranteed delivery of such certificates) representing all shares of the Company
Common Stock covered by such Election Form, together with duly executed
transmittal materials included in the Election Form. Any Election Form may be
revoked or changed by the person submitting such Election Form at or prior to
the Election Deadline. In the event an Election Form is revoked prior to the
Election Deadline, the shares of the Company Common Stock represented by such
Election Form shall become No Election Shares and the Purchaser shall cause the
certificates representing the Company Common Stock to be promptly returned
without charge to the Person submitting the Election Form upon written request
to that effect from the holder who submitted the Election Form. Subject to the
terms of this Agreement and of the Election Form, the Exchange Agent shall have
reasonable discretion to determine any election revocation or change has been
properly or timely made and to disregard immaterial defects in the Election
Forms, and any good faith decisions of the Purchaser regarding such matters
shall be binding and conclusive. Neither the Purchaser nor the Exchange Agent
shall be under any obligation to notify any person of any defect in an Election
Form.
Within fifteen calendar days after the Election Deadline, unless the
Effective Time has not yet occurred, in which case as soon thereafter as
practicable, the Purchaser shall cause the Exchange Agent to effect the
allocation among the holders of the Company Common Stock of rights to receive
the Purchaser Common Stock or cash in the Merger in accordance with the Election
Forms as follows:
(i) Stock Elections Equal to Stock Amount. If the number of shares
of the Purchaser Common Stock that would be issued upon conversion into the
Purchaser Common Stock of the Stock Election Shares is equal or nearly equal (as
determined by the Exchange Agent) to, but not less than, the Stock Amount, then
subparagraphs (ii) , (iii) and (iv) below shall not apply and all Stock Election
Shares shall be converted into the right to receive the Purchaser Common Stock
and all Cash Election Shares and No Election Shares shall be converted into the
right to receive cash; or
(ii) Stock Elections and No Elections Equal to Stock Amount. If the
number of shares of the Purchaser Common Stock that would be issued upon the
conversion into the Purchaser Common Stock of the Stock Election Shares and No
Election Shares is equal or nearly equal (as determined by the Exchange Agent)
to, but not less than, the Stock Amount, then subparagraphs (i) above and (iii)
and (iv) below shall not apply and all Cash Election Shares shall be converted
into the right to receive cash and all Stock Election Shares and No Election
Shares shall be converted into the right to receive the Purchaser Common Stock;
or
(iii) Stock Elections More Than Stock Amount. If the number of
shares of the Purchaser Common Stock that would be issued upon the conversion
into the Purchaser Common Stock of the Stock Election Shares is greater than the
Stock Amount, then;
(A) all Cash Election Shares and No Election Shares shall be
converted into the right to receive cash,
(B) the Exchange Agent will select, pro rata among the Company's
stockholders who have elected the Per Share Stock Consideration, a sufficient
number of Stock Blocks ("Designated Cash Shares") held by holders of Stock
Election Shares, so that the number of shares of the Purchaser Common Stock that
will be issued in the Merger equals as closely as practicable, but is not less
than, the Stock Amount, and any Designated Cash Shares will be converted into
the right to receive cash, provided that no particular holder of Stock Election
Shares shall be deemed to be a Cash Designee, nor shall any such holder's shares
be included within the Designated Cash Shares if such circumstance would prevent
the satisfaction of any of the conditions set forth in Section 1.4, and
(C) the Stock Election Shares that are not Designated Cash
Shares will be converted into the right to receive the Purchaser Common Stock;
or
(iv) Stock Elections Less Than Stock Amount. If the number of shares
of the Purchaser Common Stock that would be issued upon conversion in the Merger
of the Stock Election Shares is less than the Stock Amount, then:
(A) all Stock Election Shares shall be converted into the right
to receive the Company Common Stock,
(B) the Exchange Agent shall select, pro rata, first, from among
the holders of No Election Shares a sufficient number of such holders ("Stock
Designees") and then, if necessary, a sufficient number of Stock Blocks
("Designated Stock Shares") held by holders of Cash Election Shares, such that
the number of shares of the Purchaser Common Stock that will be issued in the
Merger equals as closely as practicable, but is not less than, the Stock Amount,
and all shares held by the Stock Designees and, if any, all Designated Stock
Shares, will be converted into the right to receive the Purchaser Common Stock,
provided that no particular holder of Cash Election Shares shall be deemed to be
a Stock Designee, nor shall any such holder's shares be included within the
Designated Stock Shares if such would prevent the satisfaction of any of the
conditions set forth in Section 1.4, and
(C) the Cash Election Shares that are not Designated Stock
Shares and the No Election Shares that are not held by Stock Designees shall be
converted into the right to receive cash.
The random selection process to be used by the Exchange Agent shall consist
of such processes as shall be determined by the Purchaser.
(v) Dissenting Shares and Fractional Shares. In any case in which
there are Dissenting Shares (as defined in Section 1.7) or cash paid in lieu of
fractional shares pursuant to Section 1.8, or both, the provisions of paragraphs
(i) through (iv) shall be applied in such a manner that, in each case, a number
of shares of Purchaser Common Stock shall be issued in the Merger that is not
less than the Stock Amount.
1.7 Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, shares of the Company's Common Stock which are issued and outstanding
immediately prior to the Closing and which are held by stockholders of the
Company who did not vote in favor of the Merger and who comply with all of the
relevant provisions of Sections 86 through 98 of the Massachusetts Business
Corporation Act ("MBCA") (the "Dissenting Shares") shall not be converted into
or be exchangeable for the right to receive the Per Share Consideration, unless
and until such holders shall have failed to perfect or shall have effectively
withdrawn or lost their dissenters' rights under the MBCA. If any such holder
so loses such rights, such shares shall thereupon be deemed converted into and
become exchangeable for the right to receive, as of the Closing, the Per Share
Consideration without any interest thereon and such shares shall be deemed No
Election Shares. If the holder of any such shares shall become entitled to
receive payment therefor pursuant to this Paragraph or applicable law, such
payment shall be made by the Purchaser. The Company shall give the Purchaser
(i) prompt notice of any Dissenting Shares, withdrawals of Dissenting Shares of
any other instruments served pursuant to Sections 86 through 98 of the MBCA
received by the Company, and (ii) the opportunity to direct all negotiations and
proceedings with respect to Dissenting Shares. The Company will not voluntarily
make any payment with respect to any Dissenting Shares and will not, except with
the prior written consent of the Purchaser, settle or offer to settle any
Dissenting Shares.
1.8 Fractional Shares. No fractional shares of Purchaser Common Stock
will be issued in connection with the Merger. As a mechanical device for
rounding fractional interests to whole shares, in any case where the conversion
ratio provided for in Section 1.4 indicates that any holder of Company Common
Stock would otherwise be entitled to delivery of a fractional share of Purchaser
Common Stock, such holder shall be entitled to receive a cash payment with
respect to such fraction of a share to which such holder otherwise would be
entitled. Such cash payment shall be equal to the product obtained by
multiplying the fraction of a share to which the holder thereof otherwise would
be entitled by $21.375.
1.9 Surrender of Certificates. On the date of the Closing, the Purchaser
will deliver to the exchange agent designated for the Merger (the "Exchange
Agent") (i) certificates representing the number of shares of Purchaser Common
Stock that will be required for delivery to the stockholders of the Company
pursuant to the Merger, (ii) the appropriate amount of cash to be held in trust
by the Exchange Agent and will take such further action as may be necessary in
order that certificates for shares of Purchaser Common Stock and any Per Share
Cash Consideration may be delivered to the stockholders of the Company. As
promptly as practicable after the Closing, each holder of an outstanding
certificate or certificates theretofore representing shares of Company Common
Stock shall surrender the same to the Exchange Agent and such holder shall be
entitled to receive in exchange therefore a certificate or certificates
representing the number of whole shares of Purchaser Common Stock into which the
shares of Company Common Stock were converted as a result of the Merger.
Dividends or other distributions payable after the Closing to holders of record
after such date in respect of such shares of Purchaser Common Stock resulting
from the exchange of Company Common Stock shall not be paid to holders thereof
until certificates are surrendered for exchange as aforesaid, but, upon
surrender, there shall be paid to the holders of Purchaser Common Stock issued
in exchange for Company Common Stock the amount of dividends or other
distributions which shall have become payable to the Purchaser's stockholders of
record after the date of the Closing, without interest.
1.10 Issuance of Shares in Another Name. If any certificate for shares of
Purchaser Common Stock is to be issued in a name other than the exact name in
which the certificate surrendered in exchange therefor is registered, it shall
be a condition of the issuance thereof that the certificate so surrendered shall
be properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange pay to the Exchange Agent any transfer or other
taxes required by reason thereof or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
1.11 Company Transfer Books Closed and Stock Delisted. On the date of the
Closing, the stock transfer books of the Company shall be deemed closed, and no
transfer of shares of the Company shall be made thereafter. The Company shall
notify the transfer agent and registrar for the shares of Company Common Stock,
at least ten (10) days before the anticipated date of the Closing, that no
transfer of shares will be made after that date. In anticipation of the date of
Closing, the Company shall do all such things necessary to cause trading in its
shares to be terminated simultaneously with the date of Closing.
1.12 Stock Options. On the date of the Closing, each outstanding option to
purchase the Common Stock of the Company will be converted to an amount of cash
equal to the difference between $1,225.00 and the applicable option price for a
total cash payment of $144,687. Currently, there are 550 options, at $1,000 per
share, and 37.5 options, at $666.67 per share, outstanding.
1.13 Stock Warrants. On the date of the Closing, each outstanding warrant
to purchase the Common Stock of the Company will be converted to an amount of
cash equal to the difference between $1,225.00 and the applicable warrant price
for a total cash payment of $967,496. Currently, there are 950 warrants, at
$1,000 per share, and 1,350 warrants, at $666.67 per share, outstanding.
1.14 Adjustments. If after the date of this Agreement and prior to the
date of the Closing the Purchaser shall declare a stock dividend upon, or
subdivide, split up, reclassify or combine Purchaser Common Stock, and the
record date for such action shall occur prior to the date of the Closing, then
upon the effectiveness of the Merger the number of shares of Purchaser Common
Stock to be delivered for each share of Company Common Stock shall be adjusted
so that each holder of shares of Company Common Stock shall be entitled to
received such number of shares of Purchaser Common Stock that it would own, or
be entitled to own, if the date of the Closing had occurred immediately prior to
the occurrence of the record date for such event.
1.15 Non-Financial Consideration.
It is understood between the parties that, consistent with the Purchaser's
current strategic plan, the Purchaser intends to keep the Company's Board of
Directors separate from the Purchaser's and to name, in its discretion, two
additional Directors to the Company, who may be employees of the Purchaser or
its subsidiary.
It is further understood that the Purchaser intends to continue the
Company's current employment policies and benefits, subject to the Purchaser's
discretion to revise such policies and benefits in a manner consistent with the
Purchaser's strategic plan in effect from time to time.
1.16 Lock-Up. On the date of this Agreement, the Company shall grant to
the Purchaser options for the purchase of 7,559 shares of the Company's Common
Stock at $800.00 per share ("Lock-up Options") upon the terms and conditions set
forth in the Stock Option Agreement attached as Exhibit B.
1.17 Closing. The closing (the "Closing") of the transactions contemplated
by this Agreement shall take place at the offices of the Company beginning at
10:00 a.m., or at such other time and place as may agreed upon by the Purchaser
and the Company, on such date, following three business days' notice to the
Company, as shall be agreed upon by all parties, which date shall not be later
than the 30th business day after (i) the last approval of required governmental
authorities is granted and any related waiting periods expire, (ii) the lifting,
discharge or dismissal of any stay of any such governmental approval or of any
injunction against the Merger and (iii) the day on which all conditions to the
consummation of the Merger have been fulfilled or waived in accordance with this
Agreement. In accordance with Section 10.1 of this Agreement, this Agreement
may be terminated at the election of either party if Closing does not occur on
or before June 30, 1995.
1.18 Additional Actions. If, at any time after the Closing, the Purchaser
or the Company shall consider or be advised that any further deeds, assignments
or assurances in law or any other acts are necessary or desirable to (i) vest,
perfect or confirm, of record or otherwise, in the Purchaser or the Company its
rights, title or interest in, to or under any of the rights, properties or
assets of Newco, or (ii) otherwise carry out the purposes of this Agreement,
Newco and its officers and directors shall be deemed to have granted to the
Purchaser and the Company an irrevocable power of attorney to execute and
deliver all such deeds, assignments or assurances in law or any other acts as
are necessary or desirable to (i) vest, perfect or confirm, of record or
otherwise, in the Purchaser or the Company its right, title or interest in, to
or under any of the rights, properties or assets of Newco or (ii) otherwise
carry out the purposes of this Agreement.
II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser as follows:
2.1 Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and has full corporate power and authority to
carry on its business as it is now being conducted and to own or hold under
lease the properties and assets it now owns or holds under lease. The Company
owns one subsidiary, BOWM Securities Corporation, a Massachusetts corporation
which was incorporated on May 12, 1994 and which corporation is not yet actively
engaged in any business. The Company is duly qualified to do business in all
jurisdictions where the character of its property or the nature of its
respective activities makes such qualification necessary and where the failure
to be so qualified would have a material adverse effect on the business or
financial condition of the Company.
2.2 Capitalization of the Company. The Company's entire authorized
capital stock consists of 50,000 shares of Common Stock, par value $66.67 per
share (the "Company Common Stock"), of which 18,440 shares are issued and
outstanding, and 1,500 shares of Class A Common Stock, par value $ 0.25 per
share (the "Class A Stock"), of which 979 shares are issued and outstanding.
All such issued and outstanding shares of Company Common Stock have been duly
and validly issued and are fully paid and non-assessable, free of any preemptive
rights. Schedule 2.2 lists Company Options, which schedule accurately sets
forth the exercise price and date of grant of each Company Option and the number
of shares of Company Common Stock which each Company Option represents.
Schedule 2.2 lists Company Warrants, which schedule accurately sets forth the
exercise price and date of grant of each Company Warrant and the number of
shares of Company Common Stock which each Company Warrant represents. Each
Company Warrant is valid and in full force and effect. Except as indicated
above, the Company is not a party to or bound by any options, warrants, calls,
contracts, commitments or rights of any character relating to any issued or
unissued capital stock or any other security issued or to be issued by it. None
of the shares of capital stock of the Company has been issued in violation of
the preemptive rights of any person.
2.3 Financial Statements: FDIC Documents; Corporate Records. The Company
has delivered to the Purchaser copies of the Company's audited financial
statements for the fiscal years ended December 31, 1991, 1992 and 1993 and the
Company's financial statements (unaudited) for the 6 months ended June 30
(collectively, the "Company Financial Statements"). The Company Financial
Statements are true and complete in all material respects, have been prepared in
accordance with generally accepted accounting principles applicable to financial
institutions, applied on a consistent basis throughout the period covered by
such statements (except as may be stated in the explanatory notes to such
statements and, in the case of unaudited statements, except for normal recurring
year-end adjustment, and present fairly the financial position, results of
operations, changes in stockholders' equity and cash flows of the Company at the
dates of such statements and for the periods covered thereby. The Company also
has delivered to the Purchaser copies of its Form F-2, Form F-4, proxy
statements and other periodic reports filed with the Federal Deposit Insurance
Corporation(the "FDIC")pursuant to the applicable FDIC regulations, in respect
of or during the three years and 6 months ended June 30, 1994, which are all the
material documents that the Company was required to file with the FDIC during
such period and all such reports were filed in a timely manner and complied in
all material respects with the applicable requirements of the FDIC and do not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading. The
minute books of the Company contain accurate records of all corporate actions of
its stockholders and Board of Directors (including committees of its Board of
Directors) in accordance with good business practices.
2.4 No Undisclosed Liabilities. Except as and to the extent reflected or
reserved against in the balance sheets included within the Company Financial
Statements referred to in Section 2.3 of this Agreement, at the date of such
statements, the Company had no material liabilities or obligations (whether
accrued, absolute or contingent).
2.5 Absence of Certain Changes, Events or Conditions. Since December 31,
1993, there has not been any change in the Company's financial position, results
of operations, assets, liabilities, net worth, business or prospects, other than
changes in the ordinary course of business which have not been materially
adverse. Since December 31, 1993 the Company has not experienced any event or
condition of any character (whether or not covered by insurance) which has
materially adversely affected or will or might so affect its properties,
businesses, prospects, financial positions, results of operations, or net worth.
2.6 Title to Properties; Absence of Liens and Encumbrances, Etc. The
Company has good and marketable title to all their properties and assets, real
and personal (including those reflected in the Company Financial Statements,
except as sold or otherwise disposed of in the ordinary course of business since
the date thereof), in each case free and clear of all liens, encumbrances,
charges, defaults or equitable interests, except (i) those reflected in the
Company Financial Statements or in the notes to such Company Financial
Statements, (ii) the lien of current taxes not yet due and payable, (iii)
pledges to secure deposits and other liens incurred in the ordinary course of
banking business and (iv) such imperfections of title, easements and
encumbrances, if any, as are not substantial in character, amount or extent, and
do not materially detract from the value, or interfere with the present or
anticipated business use, of the properties subject thereto or affected thereby,
or impair business operations. The Company has not received any notice of
violation of any applicable zoning laws, orders, regulations, or requirements
relating to its operations or its properties which has not been complied with,
nor any proposed changes in any such laws, order or regulations which might have
a material adverse effect on its business. The Company has no knowledge of any
threatened or impending condemnation of any properties of the Company by any
governmental authority. All leases pursuant to which the Company, as lessee,
leases real and personal property are valid and enforceable in accordance with
their respective terms.
2.7 Loans. Except as reflected on Schedule 2.7, to the best of the
Company's knowledge and upon reasonable belief, each loan reflected as an asset
in the Company Financial Statements, (i) is evidenced by notes, agreements or
other evidences of indebtedness which are true, genuine and what they purport to
be, (ii) to the extent secured, has been secured by valid liens and security
interests which have been perfected and (iii) is the legal, valid and binding
obligation of the obligor named therein, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent conveyance and other laws
of general applicability relating to or affecting creditors' rights and to
general equity principles. Except as reflected in Schedule 2.7, as of August
12, 1994, the Company is not a party to any loan, including any loan guaranty,
with any director, executive officer or 5% stockholder of the Company or any
person, corporation or enterprise controlling, controlled by or under common
control with any of the foregoing. All loans and extensions of credit which are
classified as Insider Transactions have been made by the Company in an arms-
length manner made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons and do not involve more than normal risk of collectability or
present other unfavorable features. Except as disclosed on Schedule 2.7, all
loans and participations sold by the Company have been sold without recourse.
The Company has disclosed to the Purchaser in writing prior to the date hereof
the amount of all loans, leases, and other extensions of credit that it has
classified internally as "Other Loans Specially Mentioned," "Special Mention,"
"Substandard," "Doubtful," "Loss," "Classified," "Criticized," "Credit Risk
Assets," "Watch List Assets," or words of similar import, and it shall promptly
after the end of each quarter after the date hereof and on the Closing inform
the Purchaser of the amount of each such classification.
2.8 Allowance for Loan Losses; Other Real Estate Owned. To the best of
the Company's knowledge and upon reasonable belief, the allowance for loan
losses reflected in the Company Financial Statements as of their respective
dates, is adequate under the requirements of generally accepted accounting
principles applicable to financial institutions and all regulatory requirements
applicable to financial institutions. The other real estate owned ("OREO") and
insubstance foreclosures included in any of the Company's non-performing assets
are carried net of reserves at the lower of cost or market value based on
current independent appraisals or current management appraisals.
2.9 Tax Matters.
(a) The Company has timely filed federal income tax returns for each
year through 1993 and has timely filed, or caused to be filed, all other
federal, state, local and foreign tax returns (including, without limitation,
estimated tax returns, withholding tax returns and FICA and FUTA returns)
required to be filed with respect to the Company. All taxes due in respect of
the periods covered by such tax returns have been paid or adequate reserves have
been established for the payment of such taxes as reflected in the Company
Financial Statements, and, as of the Closing, all taxes due in respect of any
subsequent periods ending on or prior to the Closing will have been paid or
adequate reserves will have been established as reflected in the Company
Financial Statements for the payment thereof. Except as reflected in Schedule
2.9, no audit examination or deficiency or refund litigation with respect to
such returns is pending. The Company will not have any material liability for
any such taxes in excess of the amounts so paid or reserves or accruals so
established as reflected in the Company Financial Statements.
(b) All federal, state and local (and, if applicable, foreign) tax
returns filed by the Company are complete and accurate in all material
respects. The Company is not delinquent in the payment of any tax, assessment
or governmental charge, and has not requested any extension of time within which
to file any tax returns in respect of any fiscal year or portion thereof which
have not been filed, except as reflected in Schedule 2.9. No deficiencies for
any tax, assessment or governmental charge have been proposed, asserted or
assessed (tentatively or otherwise) against the Company which have not been
settled and paid. There are currently no agreements in effect with respect to
the Company to extend the period of limitations for the assessment or collection
of any tax.
(c) The Company has timely filed all tax returns required to have been
filed under, and has timely complied in all respects with the requirements of,
Sections 1441-1446, 3406 and 6031-6060 of the Code and the regulations
thereunder and any comparable state, foreign and local laws.
(d) The federal income tax returns of the Company and the Subsidiaries
have been audited by the Internal Revenue Service (or are no longer subject to
audit) for all open years to and including December 31, 1992.
(e) There are no proposed additional taxes, interest or penalties with
respect to any year examined or not yet examined.
2.10 Litigation, Etc. Except as described on Schedule 2.10, there is no
litigation, proceeding or governmental investigation pending or, to the
knowledge of the Company, threatened or in prospect, against or relating to the
Company, its respective properties or businesses, or the transactions
contemplated by this Agreement. Except as disclosed on Schedule 2.10, there are
no actions, suits or proceedings instituted, pending or, to the knowledge of the
Company and each of its directors and executive officers, threatened against any
present or former director or officer of the Company that might give rise to a
claim for indemnification as contemplated by Section 7.11 hereof, and there is
no reasonable basis for any such action, suit or proceeding. Except as
disclosed on Schedule 2.10, the Company is not subject to or bound by any order
of any court, regulatory commission, board or administrative body entered in any
proceeding to which it is a party or of which it has knowledge.
2.11 Compliance with Laws. (a) The Company is in compliance in all
material respects with all statutes, regulations and ordinances applicable to
the conduct of its business, and except as disclosed on Schedule 2.11, the
Company has not received notification from any agency or department of federal,
state or local government (i) asserting a material violation of any such statute
or regulation, (ii) threatening to revoke any license, franchise, permit or
government authorization or (iii) restricting or in any way limiting its
operations. Except as disclosed in Schedule 2.11, the Company is not subject to
any regulatory or supervisory cease and desist order, agreement, directive,
memorandum of understanding or commitment, and it has not received any
communication requesting that it enter into any of the foregoing.
(b) The Company has all governmental licenses, permits, approvals and
other authorizations, and has made all filings and registrations, which are
necessary in order to enable it to own or lease its properties and assets and to
conduct its businesses as they are now being conducted. Schedule 2.11 fairly
and accurately summarizes or lists all material licenses, permits, approvals,
authorizations and regulatory matters relating to the business of the Company.
2.12 Labor Matters. No labor dispute, strike, work stoppage, employee
action or labor relations problem of any kind which has affected or may affect
the Company has occurred or currently is pending or, to the knowledge of the
Company, threatened. The Company is not the subject of any proceeding asserting
that it has committed an unfair labor practice or seeking to compel it to
bargain with any labor organization as to wages and conditions of employment,
nor is there any strike, other labor dispute or organizational effort involving
the Company pending or threatened.
2.13 Information for Proxy Statement. The information and data provided
and to be provided by the Company for use in the Registration Statement and
Joint Proxy Statement referred to in Article VIII, when such Registration
Statement and Joint Proxy Statement becomes effective and at the time of mailing
of such Registration Statement and Joint Proxy Statement to the respective
stockholders of the Purchaser and the Company, (i) shall comply in all material
respects with the applicable provisions of the Securities Act of 1933, as
amended (the "Securities Act") and the Exchange Act and (ii) will not contain
any untrue statement of a material fact and will not omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading.
2.14 No Conflict with Other Documents. Except as described in Schedule
2.14 and assuming satisfaction of the condition set forth in Section 9.1,
neither the execution and delivery of this Agreement nor the carrying out of the
transactions contemplated hereby will result in any violation, termination or
modification of, or be in conflict with, the Company's charter documents or by-
laws, any terms of any contract or other instrument to which the Company is a
party, or any judgement, decree or order applicable to the Company, or result in
the creation of any lien, charge or encumbrance upon any of the properties or
assets of the Company.
2.15 Authority. The execution, delivery and performance of this Agreement
by the Company have been duly authorized by its Board of Directors, and this
Agreement is a valid,legally binding and enforceable obligation of the Company.
Upon approval by the stockholders of the Company, the satisfaction of all other
conditions contained herein and the filing of the Merger Agreement with the
appropriate authorities, this Agreement will result in the valid, legally
binding and enforceable statutory merger of the Company and Newco. Under the
Company's charter documents and applicable law (a) the affirmative vote of the
holders of at least 12,170 shares (66 2/3) of the outstanding shares of Company
Common Stock is required and sufficient for the approval by the Company's
stockholders of the transactions contemplated by this Agreement and (b)
statutory appraisal rights will be available to the Company's stockholders in
connection with the Merger.
2.16 Contracts.
(a) Except as disclosed on Schedule 2.16, the Company is not a party
to, or is not bound by, any oral or written:
(i) "material contract" as such term is defined in Item
601(b)(10) of Regulation S-K promulgated by the SEC;
(ii) consulting agreement not terminable on 30 days' or less
notice involving the payment of more than $50,000.00 per annum, in the case of
any such agreement;
(iii) agreement with any officer or other key employee the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction of the nature contemplated by this
Agreement;
(iv) agreement with respect to any officer providing any term of
employment or compensation guarantee extending for a period longer than one year
or for a payment in excess of $50,000.00;
(v) agreement or plan, including any stock option plan, stock
appreciation rights plan, employee stock ownership plan, restricted stock plan
or stock purchase plan, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement;
(vi) agreement containing covenants that limit its ability to
compete in any line of business or with any person or entity, or that involve
any restriction on the geographic area in which, or method by which, it may
carry on its business (other than as may be required by law or any regulatory
agency);
(vii) agreement, contract or understanding, other than this
Agreement, regarding the capital stock of the Company or committing to dispose
of some or all of the stock or substantially all of the assets of the Company;
or
(viii) collective bargaining agreement, contract, or other
agreement or understanding with a labor union or labor organization.
(b) To the best of the Company's knowledge and upon reasonable
belief, each of the contracts, instruments and other documents described in
Schedule 2.16 is valid and in full force and effect, and a true and complete
copy thereof has been delivered to the Purchaser.
(c) The Company is not in default under any material agreement,
commitment, arrangement, lease, insurance policy or other instrument whether
entered into in the ordinary course of business or otherwise and whether written
or oral, and there has not occurred any event that, with the lapse of time and
giving of notice or both, would constitute such a default.
(d) Since December 31, 1993, the Company has not incurred or paid any
obligation or liability that would be material to the Company, except
obligations incurred or paid in connection with transactions in the ordinary
course of business consistent with past practices and except as disclosed on
Schedule 2.16. Except as disclosed on Schedule 2.16, from December 31, 1993 to
the date hereof, the Company has not taken any action that, if taken after the
date hereof, would breach any of the covenants contained in Article VI hereof.
(e) To the best of the Company's knowledge and upon reasonable
belief, except as disclosed on Schedule 2.16, the Company is not a party to any
transaction with any (i) person who has been an executive officer or a director
of the Company since January 1, 1989, (ii) any member of the immediate family
(as contemplated by Item 404(a) of the SEC's Regulation S-K) of any such person
or (iii) any "affiliate" or "associate" of any such persons or entities (as such
terms are defined in the rules and regulations promulgated under the Securities
Act), which transaction was made outside the ordinary course of business or on
terms that were less favorable to the Company than transactions made with
unaffiliated third parties.
2.17 Pension and Employee Benefit Plans.
(a) Except as disclosed on Schedule 2.17, there are no plans in
effect for pension, profit sharing, deferred compensation, severance pay,
bonuses, stock options, stock purchases, warrants or any other form of
retirement or deferred benefit, or for any health, accident or other welfare
plan, in which any employee of the Company is entitled to participate. The
Company previously has delivered to the Purchaser true and complete copies of
each of the plans listed or referred to on Schedule 2.17 (collectively the
"Plans"), all trust agreements, insurance contracts, investment management
agreements and other documents currently in effect with respect to the Plans,
and all summary plan descriptions currently in effect with respect to the
Plans. Each of the Plans is in full force and effect without amendment or
modification and has been operated in accordance with its terms. Through the
date of the Closing, there will be no material change in the operations of
the Plans or in the documents constituting or affecting the Plans. All
required governmental filings have been made with respect to the Plans.
There are no pending investigations, proceedings or other matters concerning
the Plans before the Internal Revenue Service (the "IRS"), the Department of
Labor or the Pension Benefit Guaranty Corporation. There are no pending or
threatened claims by or disputes with any participants in the Plans, other
than benefit claims by participants made in the normal course of operating
the Plans as to which no dispute exists. The Company has no knowledge of any
facts which could give rise to claims against the Plans or against any
fiduciary of any Plan other than benefit claims by participants expected in
the normal course of operating the Plans. Neither the Company nor, in the
best of the Company's knowledge, information and belief, any other fiduciary
of any Plan has given notice to its fiduciary liability insurer of any claims or
potential claims against it with respect to any Plan. True and correct
copies of the annual reports of the Plans filed with the Department of Labor
and the IRS for the 1991, 1992 and 1993 fiscal years, and all financial
statements of the Plans for the fiscal years ended December 31, 1991, 1992
and 1993 previously have been delivered to the Purchaser. No "prohibited
transaction" as defined in Section 406(a) and (b) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or as defined in Section
4975 of the Code, has occurred with respect to any Plan.
(b) Each of the Plans which is intended to qualify under Section 401
of the Code is designated on Schedule 2.17 as being a qualified plan (the Plans
so designated being hereinafter referred to as the "Qualified Plans"). Each
Qualified Plan is qualified under Section 401(a) of the Code and is the subject
of a currently effective determination letter from the IRS confirming such
qualification. True and correct copies of all determination letters from the
IRS with respect to the Qualified Plans which were issued after the effective
date of ERISA previously have been delivered to the Purchaser. True and correct
copies of the valuation reports prepared by the Company's independent
actuaries for the three most recent fiscal years of each Qualified Plan which
is a defined benefit plan previously have been delivered to the Purchaser.
With respect to each Qualified Plan, the Company has not incurred any
accumulated funding deficiency within the meaning of ERISA,has not obtained a
waiver of any minimum funding requirements imposed by ERISA or the Code in
respect of such Qualified Plan, and has not incurred any liability to the
Pension Benefit Guaranty Corporation in connection with any such Qualified Plan.
As of the date hereof,the value of the assets in each of the Qualified Plans
which is a defined benefit plan exceeds the present value of accrued benefits of
all participants in such Plan when such benefits are valued on a termination
basis using Pension Benefit Guaranty Corporation interest and other
assumptions. No "reportable event," as such term is defined in ERISA and in
regulations issued thereunder, has occurred with respect to the Qualified
Plans since the effective date of ERISA.
2.18 Insurance. Except as disclosed on Schedule 2.18, the Company
currently maintains insurance in amounts reasonably necessary for its operations
and similar in scope and coverage to that maintained by other entities similarly
situated. Except as disclosed on Schedule 2.18, the Company has not received
any notice of a premium increase or cancellation with respect to any of its
insurance policies or bonds, and within the last three years, the Company has
not been refused any insurance coverage sought or applied for, and the Company
has no reason to believe that existing insurance coverage cannot be renewed as
and when the same shall expire, upon terms and conditions as favorable as those
presently in effect, other than possible increases in premiums or unavailability
in coverage that have not resulted from any extraordinary loss experience of the
Company contemplated hereby.
2.19 Repurchase Agreements. With respect to all agreements pursuant to
which the Company has purchased securities subject to an agreement to resell, if
any, the Company has a valid, perfected first lien or security interest in the
government securities or other collateral securing the repurchase agreement,
and, as of the date hereof, the value of such collateral equals or exceeds the
amount of the debt secured thereby.
2.20 Deposit Insurance. The deposits of the Company are insured by the
Federal Deposit Insurance Corporation in accordance with the Federal Deposit
Insurance Act, as amended ("FDIA"), and the Company has paid all assessments and
filed all reports required by the FDIA.
2.21 Environmental Liability.
(a) (i) The Company, its Participation Facilities and its Loan
Properties (each as defined below) are, and have been, in substantial compliance
with all Environmental Laws (as defined below), except where non-compliance
would, either individually or in the aggregate, not have a material adverse
effect on the Company.
(ii) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or
threatened before any court, governmental agency or board or other forum against
the Company or any Participation Facility (x) for alleged noncompliance
(including by any predecessor) with, or liability under, any Environmental Law
or (y) relating to the release into the environment of any Hazardous Material <PAGE>
(as defined below) or oil, whether or not occurring at or on a site owned,
leased or operated by the Company or any Participation Facility;
(iii) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or
threatened before any court, governmental agency or board or other forum
relating to or against any Loan Property (or the Company in respect of such Loan
Property) (x) relating to alleged noncompliance (including by any predecessor)
with, or liability under, any Environmental Law or (y) relating to the release
into the environment of any Hazardous Material or oil, whether or not occurring
at or on a site owned, leased or operated by any Loan Property, except as to
such matters which, either individually or in the aggregate, would not have a
material adverse effect on the Company;
(iv) There is no reasonable basis for any suit, claim, action,
demand, executive or administrative order, directive or proceeding of a type
described in Section 2.21(a)(ii) or (iii).
(v) The properties currently or formerly owned or operated
(including, without limitation, in a fiduciary capacity) by the Company
(including, without limitation, soil, groundwater or surface water on, under or
adjacent to the properties, and buildings thereon) do not contain any Hazardous
Material other than as permitted under applicable Environmental Law, and except
in amounts which, either individually or in the aggregate, would not have a
material adverse effect on the Company (provided, however, that with respect to
properties formerly owned or operated by the Company, such representation is
limited to the period the Company owned or operated such properties);
(vi) The Company has not received any notice, demand letter,
executive or administrative order, directive or request for information from any
federal, state, local or foreign governmental entity or any third party
indicating that if may be in violation of, or liable under, any Environmental
Law;
(vii) There are no underground storage tanks on, in or under,
and no underground storage tanks have been closed or removed from, any
properties or Participation Facility which are or have been in the Company's
ownership;
(viii) During the period of (l) The Company's ownership or
operation (including without limitation in a fiduciary capacity) of any of its
current properties; (m) the Company's participation in the management of any
Participation Facility, or (n) the Company's holding of a security interest in a
Loan Property, there has been no release of Hazardous Material or oil in, on,
under or affecting such properties, except as permitted under applicable
Environmental Law and except for releases which, either individually or in the
aggregate, would not have a material adverse effect on the Company. Prior to
the period of (x) the Company's ownership or operation of any of its respective
current properties, (y) the Company's participation in the management of any
Participation Facility, or (z) the Company's holding of a security interest in a
Loan Property, there was no release of Hazardous Material or oil in, on, under
or affecting any such property, Participation Facility or Loan property, except
as permitted under applicable Environmental Law and except for releases which,
either individually or in the aggregate, would not have a material adverse
effect on the Company; and
(ix) The only Loan Properties or Participation Facilities in
which the Company or any Subsidiary participates in management are those
described in Schedule 2.21.
(b) The following definitions apply for purposes of this Section
2.21: (v) "Loan Property" means any property in which the Company holds a
security interest, and where required by the context, includes the owner or
operator of such property, but only with respect to such property; (w)
"Participation Facility" means any facility in which the Company participates in
the management (including all property held as trustee or in any other fiduciary
capacity) and, where required by the context, includes the owner or operator of
such property, but only with respect to such property; (x) "Environmental Law"
means (i) any federal, state or local law, statute, ordinance, rule, regulation,
code, license, permit, authorization, approval, consent, legal doctrine, order,
directive, executive or administrative order, judgement, decree, injunction,
requirement, or agreement with any governmental entity, (A) relating to the
protection, preservation or restoration of the environment (which includes,
without limitation, air, water, vapor, surface land, subsurface land, plant and
animal life or any other natural resource), or to human health and safety, or
(B) the exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or disposal
of Hazardous Materials, in each case as amended and as now in effect; (y)
"Environmental Law" includes, without limitation, the federal Comprehensive
Environmental Response Compensation and Liability Act of 1980, the Superfund
Amendments and Reauthorization Act, the Federal Water Pollution Control Act of
1972, the Federal Clean Air Act, the Federal Clean Water Act, the Federal
Resource Conservation and Recovery Act of 1976 (including the Hazardous and
Solid Waste Amendments thereto), the Federal Solid Waste Amendments thereto),
the Federal Solid Waste Disposal and the Federal Toxic Substances Control Act,
the Federal Insecticide, Fungicide and Rodenticide Act, the Federal Occupational
Safety and Health Act of 1970, the Federal Hazardous Materials Transportation
Act, or any so-called "Superfund" or "Superlien" law enacted by any state having
jurisdiction over any Loan Property or Participation Facility, each as amended
and as now or hereafter in effect, and (ii) any common law or equitable doctrine
(including, without limitation, injunctive relief and tort doctrines such as
negligence, nuisance, trespass and strict liability) that may impose liability
or obligations for injuries or damages due to, or threatened as a result of, the
presence of or exposure to any Hazardous Material; and (z) "Hazardous Material"
means any substance which is or could be detrimental to human health or safety
to the environment, currently or hereafter listed, defined, designated or
classified as hazardous, toxic, radioactive or dangerous, or otherwise
regulated, under any Environmental Law, whether by type or by quantity,
including any substance containing any such substance as a component. Hazardous
Material includes, without limitation, any toxic waste, pollutant, contaminant,
hazardous substance, toxic substance, hazardous waste, special waste, industrial
substance, oil or petroleum or any derivative or by-product thereof, radon,
radioactive material, asbestos, asbestos-containing material, urea formaldehyde
foam insulation, lead and polychlorinated biphenyl, any of which is regulated
by, or subject to regulation under, any Environmental Law.
2.22 No Pending Transactions. Except for the transactions contemplated by
this Agreement, the Company is not and will not become a party to or bound by
or the subject of any agreement, undertaking or commitment (i) to merge or
consolidate with, or acquire all or substantially all of the property and assets
of, any other corporation, entity or person or (ii) to sell, lease or exchange
all or substantially all of its property and assets to any other corporation,
entity or person.
2.23 Transactions with Affiliates. Except as disclosed on Schedule 2.24,
the Company is not a party to any transaction (other than the employment
agreements set forth in Schedule 2.16) with any (i) current or former officer or
director of the Company, or (ii) any parent, spouse, child, brother, sister or
other family relations of any such officer or director or (iii) any corporation
or partnership of which any such officer or director or any such family
relations is an officer, director, partner or greater than 5% stockholder (based
on percentage ownership of voting stock) or (iv) any "affiliate" or "associate"
of any such persons or entities (as such terms are defined in the rules and
regulations promulgated under the Securities Act), including, without
limitation, any transaction involving a contract, agreement or other arrangement
providing for the employment of, furnishing of materials, products or services
by, rental of real or personal property from, or otherwise requiring payments
to, any such person or entity.
2.24 Brokers and Finders. Neither the Company, nor any of their respective
officers, directors or employees, has employed any broker, finder or financial
advisor or incurred any liability for any fees or commissions (other than legal
and accounting fees) in connection with the transactions contemplated herein,
except for the Company's retention of Brown Brothers Harriman & Co. to perform
certain financial advisory services.
2.25 Agreements with Banking Authorities. Except as disclosed on Schedule
2.26, neither the Company nor any of its subsidiaries is a party to any
commitment, letter, written agreement, memorandum of understanding or order to
cease and desist with any federal or state governmental authority charged with
the supervision or regulation of banks or bank holding companies or engaged in
the insurance of bank deposits which in any manner restricts the conduct of its
business, or in any manner relates to its capital adequacy, credit policies,
management or overall safety and soundness or such entity's ability to perform
its obligations hereunder or consummate the transactions contemplated hereby.
2.26 Disclosure. No representation or warranty made by the Company in this
Agreement and no statement contained in a certificate, schedule, list or other
instrument or document specified in or delivered pursuant to this Agreement,
whether heretofore furnished to the Purchaser or hereafter required to be
furnished to the Purchaser, contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary to make
the statements contained herein or therein not misleading. This Agreement may
be signed by both parties before any schedule required under the Agreement is
supplied, in which event, such schedule shall be supplied as soon as practicable
thereafter.
III.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company as follows:
3.1 Organization and Standing. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Vermont and
has full corporate power and authority to carry on its business as it is now
being conducted and to own or hold under lease the properties and assets it now
owns or holds under lease. Copies of the entire charter and by-laws of the
Purchaser have been delivered to the Company, and such copies are complete and
correct and in full force and effect on the date of this Agreement. The
Purchaser is registered as a bank holding company under the Bank Holding Company
Act. The Purchaser is duly qualified to do business and is in good standing as
a foreign corporation in all jurisdictions where the character of its properties
or the nature of its activities makes such qualification necessary and where the
failure to be so qualified would have a material adverse effect on the business
or financial condition of the Purchaser and its subsidiaries on a consolidated
basis.
3.2 Newco.
(i) Newco will be a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Massachusetts. All
of the outstanding shares of capital stock of Newco will be validly issued,
fully paid and nonassessable and owned directly by the Purchaser free and clear
of any lien, charge or other encumbrance.
(ii) Newco will have the corporate power and authority to enter
into this Agreement and to carry out its obligations hereunder. The execution,
delivery and performance of this Agreement by Newco and the consummation of the
transactions contemplated hereby will be duly and validly authorized by all
necessary corporate actions (including without limitation stockholder action) in
respect thereof on the part of Newco. This Agreement will be a valid and
binding obligation of Newco, enforceable in accordance with its terms.
3.3 Capitalization. The Purchaser's entire authorized capital stock
consists of 200,000 shares of Preferred Stock, par value $100.00 per share, of
which no shares are issued and outstanding, and 30,000,000 shares of Common
Stock, par value $1.00 per share (the "Purchaser Common Stock"), of which
6,228,118 shares are outstanding, and 246,476 shares are held in the Purchaser's
treasury. All issued and outstanding shares of Purchaser Common Stock have been
duly and validly issued and are fully paid and non-assessable, free of any
preemptive rights. Schedule 3.3 lists Purchaser Options, which schedule
accurately sets forth the exercise price and date of grant of each Purchase
Option and the number of shares of Purchaser Common Stock which each Purchaser
Option represents. Each Purchaser Option is valid and in full force and
effect. Except as indicated above, the Purchaser is not a party to or bound
by any options, calls, warrants or subscriptions of any character relating to
any issued or unissued stock or any other equity security issued or to be
issued by it.
3.4 Financial Statements. The Purchaser has delivered to the Company
copies of the Purchaser's audited consolidated financial statements for the
fiscal years ended December 31, 1991, 1992 and 1993 and the Purchaser's
consolidated financial statements (unaudited) for the 6 months ended June 30,
1994 (the "Purchaser Financial Statements"). The Purchaser Financial Statements
are true and complete in all material respects, have been prepared in accordance
with generally accepted accounting principles applicable to financial
institutions applied on a consistent basis throughout the periods covered by
such statements (except as may be stated in the explanatory notes to such
statements and, in the case of unaudited statements, except for normal recurring
year-end adjustments), and present fairly the consolidated financial position,
consolidated results of operations, changes in stockholders' equity and cash
flows of the Purchaser at the dates of such statements and for the periods
covered thereby. The Purchaser also had delivered to the Company copies of its
Form 10-K's, Form 8-K's, Form 10-Q's, proxy statements and other periodic
reports filed with the SEC pursuant to the Exchange Act in respect of or during
the three years and 6 months ended June 30, 1994 which are the material
documents that the Purchaser was required to file with the SEC during such
period, and such reports were filed in a timely manner and complied in all
material respects with the applicable requirements of the Exchange Act and the
rules and regulations promulgated thereunder.
3.5 No Undisclosed Liabilities. Except as and to the extent reflected or
reserved against in the consolidated balance sheets included within the
Purchaser Financial Statements, at the dates of such statements, the Purchaser
and its consolidated subsidiaries had no material liabilities or obligations
(whether accrued, absolute or contingent).
3.6 Absence of Certain Changes, Events or Conditions. Since December 31,
1993, there has not been any change in the Purchaser's consolidated financial
position, consolidated results of operations, assets, liabilities, net worth or
business, other than changes in the ordinary course of business which have not
been materially adverse. Since December 31, 1993, the Purchaser has not
experienced any event or condition of any character (whether or not covered by
insurance) which has materially adversely affected or will so affect its
properties, business, financial position, results of operations, or net worth on
a consolidated basis.
3.7 Title to Properties; Absence of Liens and Encumbrances, Etc. The
Purchaser has good and marketable title to all their properties and assets, real
and personal (including those reflected in the Purchaser Financial Statements,
except as sold or otherwise disposed of in the ordinary course of business since
the date thereof), in each case free and clear of all liens, encumbrances,
charges, defaults or equitable interests, except (i) those reflected in the
Purchaser Financial Statements or in the notes to such Purchaser Financial
Statements, (ii) the lien of current taxes not yet due and payable, (iii)
pledges to secure deposits and other liens incurred in the ordinary course of
banking business and (iv) such imperfections of title, easements and
encumbrances, if any, as are not substantial in character, amount or extent, and
do not materially detract from the value, or interfere with the present or
anticipated business use, of the properties subject thereto or affected thereby,
or impair business operations. The Purchaser has not received any notice of
violation of any applicable zoning laws, orders, regulations, or requirements
relating to its operations or its properties which has not been complied with,
nor any proposed changes in any such laws, order or regulations which might have
a material adverse effect on its business. The Purchaser has no knowledge of
any threatened or impending condemnation of any properties of the Purchaser by
any governmental authority. All leases pursuant to which the Purchaser, as
lessee, leases real and personal property are valid and enforceable in
accordance with their respective terms.
3.8 Litigation, etc. Except as described in Schedule 3.8, there is no
litigation, proceeding or governmental investigation pending or, to the
knowledge of the Purchaser, threatened or in prospect against or relating to the
Purchaser or its consolidated subsidiaries, their respective properties or
businesses, or the transactions contemplated by this Agreement. Except as
disclosed on Schedule 3.8, neither the Purchaser nor any of its consolidated
subsidiaries is subject to or bound by any order of any court, regulatory
commission, board or administrative body entered in any proceeding to which it
is a party or of which it has knowledge.
3.9 Loans. To the best of the Purchaser's knowledge and upon reasonable
belief, each loan reflected as an asset in the Purchaser Financial Statements,
(i) is evidenced by notes, agreements or other evidences of indebtedness which
are true, genuine and what they purport to be, (ii) to the extent secured, has
been secured by valid liens and security interests which have been perfected and
(iii) is the legal, valid and binding obligation of the obligor named therein,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles. All loans and
extensions of credit which are classified as Insider Transactions have been made
by the Purchaser in an arms-length manner made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and do not involve more than normal
risk of collectability or present other unfavorable features.
3.10 Allowance for Loan Losses; Other Real Estate Owned. To the best of
the Purchaser's knowledge and upon reasonable belief, the allowance for loan
losses reflected in the Purchaser Financial Statements as of their respective
dates, is adequate under the requirements of generally accepted accounting
principles applicable to financial institutions and all regulatory requirements
applicable to financial institutions. The other real estate owned ("OREO") and
insubstance foreclosures included in any of the Company's non-performing assets
are carried net of reserves at the lower of cost or market value based on
current independent appraisals or current management appraisals.
3.11 Tax Matters.
(a) The Purchaser has timely filed federal income tax returns for each
year through 1993 and has timely filed, or caused to be filed, all other
federal, state, local and foreign tax returns (including, without limitation,
estimated tax returns, withholding tax returns and FICA and FUTA returns)
required to be filed with respect to the Purchaser. All taxes due in respect of
the periods covered by such tax returns have been paid or adequate reserves have
been established for the payment of such taxes as reflected in the Purchaser
Financial Statements, and, as of the Closing, all taxes due in respect of any
subsequent periods ending on or prior to the Closing will have been paid or
adequate reserves will have been established as reflected in the Purchaser
Financial Statements for the payment thereof. The Purchaser will not have any
material liability for any such taxes in excess of the amounts so paid or
reserves or accruals so established as reflected in the Purchaser Financial
Statements.
(b) All federal, state and local (and, if applicable, foreign) tax
returns filed by the Purchaser are complete and accurate in all material
respects. The Purchaser is not delinquent in the payment of any tax, assessment
or governmental charge, and has not requested any extension of time within which
to file any tax returns in respect of any fiscal year or portion thereof which
have not been filed. No deficiencies for any tax, assessment or governmental
charge have been proposed, asserted or assessed (tentatively or otherwise)
against the Purchaser which have not been settled and paid. There are currently
no agreements in effect with respect to the Purchaser to extend the period of
limitations for the assessment or collection of any tax.
(c) The Purchaser has timely filed all tax returns required to have
been filed under, and has timely complied in all respects with the requirements
of, Sections 1441-1446, 3406 and 6031-6060 of the Code and the regulations
thereunder and any comparable state, foreign and local laws.
(d) There are no proposed additional taxes, interest or penalties with
respect to any year examined or not yet examined.
3.12 Compliance. The Purchaser and its consolidated subsidiaries have all
licenses, permits, approvals and other authorizations, and have made all
necessary filings and registrations which are necessary in order to enable them
to conduct their businesses in all material respects. The Purchaser and its
consolidated subsidiaries are in compliance in all material respects with all
applicable laws, regulations and ordinances which are material to the business
of the Purchaser and its subsidiaries taken as a whole.
3.13 Labor Matters. No labor dispute, strike, work stoppage, employee
action or labor relations problem of any kind which has affected or may affect
the Purchaser has occurred or currently is pending or, to the knowledge of the
Purchaser, threatened. The Purchaser is not the subject of any proceeding
asserting that it has committed an unfair labor practice or seeking to compel it
to bargain with any labor organization as to wages and conditions of employment,
nor is there any strike, other labor dispute or organizational effort involving
the Purchaser pending or threatened.
3.14 Deposit Insurance. The deposits of the Purchaser are insured by the
Federal Deposit Insurance Corporation in accordance with the Federal Deposit
Insurance Act, as amended ("FDIA"), and the Purchaser has paid all assessments
and filed all reports required by the FDIA.
3.15 Environmental Liability.
The Purchaser is, and has been, in substantial compliance with all
Environmental Laws (as defined in Section 2.21), except where non-compliance
would, either individually or in the aggregate, not have a material adverse
effect on the Purchaser.
3.16 Disclosure. No representation or warranty made by the Purchaser in
this Agreement and no statement contained in a certificate, schedule, list or
other instrument or document specified in or delivered pursuant to this
Agreement, whether heretofore furnished to the Company or hereafter required to
be furnished to the Company, contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary to make
the statements contained herein or therein not misleading.
3.17 Information for Proxy Statement. The information and data provided
and to be provided by the Purchaser for use in the Registration Statement and
Joint Proxy Statement , when such Registration Statement and Joint Proxy
Statement becomes effective and at the time of mailing such Registration
Statement and Joint Proxy Statement to the respective stockholders of the
Purchaser and the Company, (i) shall comply in all material respects with the
applicable provisions of the Securities Act and the Exchange Act and (ii) will
not contain any untrue statement of a material fact and will not omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading.
3.18 No Conflict With Other Documents. Assuming satisfaction of the
conditions set forth in Section 9.8, neither the execution and delivery of this
Agreement nor the carrying out of the transactions contemplated hereby will
result in any violation, termination or modification of, or be in conflict with,
the Purchaser's charter or by-laws, any terms of any contract or other
instrument to which the Purchaser or any of its subsidiaries is a party, or any
material judgment, decree or order applicable to the Purchaser or any of its
subsidiaries, or result in the creation of any lien, charge or encumbrance upon
any of their properties or assets.
3.19 Authority. The execution, delivery and performance of this Agreement
by the Purchaser has been duly authorized by its Board of Directors, and this
Agreement is a valid, legally binding and enforceable obligation of the
Purchaser. Upon approval by the stockholders of the Purchaser, the satisfaction
of all other conditions herein and the filing of the Merger Agreement with all
appropriate authorities, this Agreement will result in the valid, legally
binding and enforceable statutory merger of the Company and Newco.
3.20 Validity of Common Stock. The shares of Purchaser Common Stock to be
issued or delivered by the Purchaser in connection with the Merger have been
duly authorized for issue and will, when issued and delivered as provided in
this Agreement, be duly and validly issued, fully paid and non-assessable.
3.21 Brokers and Finders. Neither the Purchaser nor any subsidiary
thereof, nor any of their respective officers, directors or employees, has
employed any broker, finder or financial advisor or incurred any liability for
any fees or commissions (other than legal and accounting fees) in connection
with the transactions contemplated herein, except for the Purchaser's retention
of M.A. Schapiro & Co., Inc. to perform certain financial advisory services.
IV.
CONDUCT OF BUSINESS PENDING THE MERGER
4.1 Conduct of the Company's Business Prior to the Merger. From the date
of this Agreement to the Closing, the Company shall (i) conduct its business in
the usual, regular and ordinary course consistent with past practice, (ii) use
its best efforts to maintain and preserve intact its business organization,
assets, leases, properties, employees and advantageous business relationships
and retain the services of its officers and key employees and (iii) take no
action which would materially or adversely affect or delay its ability to obtain
any necessary approvals, consents or waivers of any governmental authority
required for the transactions contemplated hereby or to perform its covenants <PAGE>
and agreements on a timely basis under this Agreement.
4.2. Forbearances. From the date of this Agreement to the Closing, the
Company shall not without the prior written approval of the Purchaser (and the
Company shall provide the Purchaser with prompt notice of any events referred to
in this Section 4-.2 occurring before the date hereof):
(a) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money (other than short-term
indebtedness incurred to refinance short-term indebtedness of the Company; it
being understood and agreed that incurrence of indebtedness in the ordinary
course of business shall include, without limitation, the creation of deposit
liabilities, purchases of federal funds, sales of certificates of deposit and
entering into repurchase agreements), assume, guarantee, endorse or otherwise as
an accommodation become responsible for the obligations of any other individual,
corporation or other entity, or make any loan or advance other than in the
ordinary course of business consistent with past practice;
(b) adjust, split, combine or reclassify any capital stock; make,
declare or pay any dividend or make any other distribution on, or directly or
indirectly redeem, repurchase or otherwise acquire, any shares of its capital
stock or any securities or obligations convertible into or exchangeable for any
shares of its capital stock, or grant any stock appreciation rights or grant any
individual, corporation or other entity any right to acquire any shares of its
capital stock, or issue any additional shares of capital stock, or any
securities or obligations convertible into or exchangeable for any shares of its
capital stock;
(c) sell, transfer, mortgage, encumber or otherwise dispose of any of
its properties or assets to any individual, corporation or other entity other
than a direct or indirect wholly owned Subsidiary, or cancel, release or assign
any indebtedness to any such person or any claims held by any such person,
except in the ordinary course of business consistent with past practices or
pursuant to contracts or agreements in force at the date of this Agreement;
(d) except for transactions in the ordinary course of business, make
any material investment either by purchase of stock or securities, contributions
to capital, property transfers, or purchases of any property or assets of any
other individual, corporation or other entity other than a wholly owned
Subsidiary thereof in excess of $100,000;
(e) except for transactions in the ordinary course of business
consistent with past practice, enter into or terminate any material contract or
agreement, or make any change in any of its material leases or contracts, other
than renewals of contracts and leases without material adverse changes of terms;
(f) increase in any manner the compensation or fringe benefits of any
of its employees or pay any pension or retirement allowance not required by any
existing plan or agreement to any such employees, or become a party to, amend or
commit itself to any pension, retirement, profit-sharing, stock option, stock
purchase, savings, bonus, deferred compensation, consulting, bonus or other
employee benefit, incentive or welfare contract, plan or agreement or employment
agreement with or for the benefit of any employee other than in the ordinary
course of business consistent with past practice or accelerate the vesting of <PAGE>
any stock options or other stock-based compensation;
(g) settle any claim, action or proceeding involving money damages,
except in the ordinary course of business consistent with past practice;
(h) change its lending, investment, asset liability management,
litigation, real estate valuation or other material banking policies in any
material respect except as may be required by appropriate regulators or changes
in applicable law and regulations.
(i) amend its charter or its by-laws;
(j) take any action that is reasonably likely to have a material
adverse effect on the financial condition, results of operations or business of
the Company.
(k) exercise any options or warrants between July 27, 1994 and the
Closing.
V.
REGULATORY APPROVALS
5.1 Mutual Cooperation. The Purchaser and the Company shall cooperate in
the preparation and submission of applications to the appropriate authorities
for approval of the Merger, including but not limited to the Federal Reserve
Board, Federal Deposit Insurance Corporation, Banking Commissioner of the
Commonwealth of Massachusetts and the Board of Banking Incorporations of the
Commonwealth of Massachusetts.
VI.
COVENANTS OF THE COMPANY
The Company covenants to the Purchaser that:
6.1. Best Efforts. The Company shall use best efforts in good faith to take
or cause to be taken all action necessary or desirable under this Agreement on
its part as promptly as practicable so as to permit the consummation of the
Merger and the transactions contemplated hereby as promptly as practicable and
to cooperate fully with the Purchaser to that end.
6.2. Registration Statement and Joint Proxy Statement. The Company will
cooperate with the Purchaser in the preparation of the Registration Statement
and Joint Proxy Statement with respect to the Purchaser Common Stock to be
issued in the Merger and the solicitation of proxies of the respective
stockholders of the Company and the Purchaser to seek stockholder approval for
the Merger and the transactions contemplated by this Agreement.
6.3 Information. The Company will keep the Purchaser advised of all
material developments relevant to its business and to consummation of the Merger
and the transactions contemplated herein. The Company will give to the Purchaser
and to the Purchaser's officers, accountants, counsel and other representatives
full access, during normal business hours throughout the period prior to the
Closing, to all the properties, books, contracts, commitments and records of the
Company. The Company will furnish to the Purchaser during such period all such
information concerning the Company and its business and properties as the
Purchaser may reasonably request. No information provided by the Company
pursuant to this Section 6. 3 shall affect or be deemed to modify any
representation or warranty made by, or the conditions to the obligations to
consummate the Merger, of the Company.
6.4 Confidentiality. The Company shall, and shall cause its respective
directors, officers, attorneys, agents or advisors to, maintain the
confidentiality of all information obtained from the Purchaser or any of its
subsidiaries pursuant to Section 7.6, which information is not otherwise
publicly disclosed by the Purchaser or any of its subsidiaries. This covenant
with respect to confidentiality shall survive any termination of this Agreement
pursuant to Article X hereof. In the event of termination of this Agreement, the
Company shall return to the Purchaser or destroy and certify the destruction of
all information previously furnished by the Purchaser to the Company in
connection with the transactions contemplated by this Agreement.
6.5. Meeting of Stockholders. The Company will duly call and convene a
meeting of its stockholders to act upon the transactions contemplated by this
Agreement as soon as practicable, but not later than May 31, 1995, and the Board
of Directors of the Company will, except to the extent legally required for the
discharge by it of its fiduciary duties as determined upon written advice of
counsel, recommend that the holders of the Company Common Stock vote in favor of
and approve the Merger and the transactions contemplated thereby. The Company
will solicit the proxies of its stockholders to vote on the transactions
contemplated by this Agreement and will use its best efforts to obtain any vote
of the Company's stockholders necessary for the approval and adoption of this
Agreement and the transactions contemplated hereby. Except as otherwise required
by law, the Company will not call and convene a meeting of its stockholders to
consider or vote on any matter inconsistent with the consummation of the
transactions contemplated by this Agreement.
6.6. Notice of Litigation. The Company will provide written notice to the
Purchaser of any litigation, proceeding or governmental investigation which
arises, or to the knowledge of the Company, is threatened or in prospect, which
is reasonably foreseen as exposing the Company to cost or liability in excess of
$25,000, after the date of this Agreement and prior to the Closing, against or
relating to the Company, its properties or businesses, or the transactions
contemplated by this Agreement, setting forth in such notice the facts and
circumstances currently available to the Company with respect to such
litigation, proceeding or investigation.
6.7. Press Releases. The Company will not, unless approved by the Purchaser
hereto in advance, issue any press release or written statement for general
circulation or other written public disclosure relating to the transactions
contemplated hereby, except as otherwise required by law, it being contemplated
that the Purchaser and the Company will issue a joint press release announcing
the Merger and the transactions contemplated by this Agreement.
6.8. Corporate Transactions. The Company shall not solicit or encourage
inquiries or proposals with respect to or, except to the extent required for the
discharge by the Board of Directors of the Company of their fiduciary duties
as determined upon written advice of counsel,furnish any information relating to
or participate in any negotiations or discussions concerning any acquisition or
purchase of all or a substantial portion of the assets or of a substantial
equity interest in, the Company or any merger, consolidation or business
combination with the Company other than as contemplated by this Agreement. The
Company shall notify the Purchaser immediately if any such inquiries or
proposals are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated with it; shall
immediately cease any negotiations or discussions existing at the date hereof
concerning the foregoing and require the return to it of any information
furnished by it to such party; and shall instruct its employees, officers,
directors, agents, advisors and affiliates to comply with the above.
6.9. Takeover Statutes. No "fair price," "moratorium," "control share
acquisition" or other form of antitakeover statute or regulation or any similar
provision of the Company's charter is applicable to the transactions
contemplated by this Agreement and, if any such statute, regulation or
provisions shall become applicable to the transactions contemplated by this
Agreement, the Company and the members of its Board of Directors shall grant
such approvals and take such actions as are necessary so that the transactions
contemplated hereby may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate or minimize the effects of
such statute or regulation or provision on the transactions contemplated hereby.
6.10. Preservation of Tax-Free Treatment. The Company shall not
intentionally take or cause to be taken any action, whether before or after the
Closing which would disqualify the Merger as a "reorganization" within the
meaning of Section 368 of the Code.
6.11 Amendment of Compensation Agreement. The Company shall have amended
its compensation agreements with the Company's Class A stockholders to provide,
among other things, that no shares of the Company's Class A Stock vest prior to
July 1, 1995.
VII.
COVENANTS OF THE PURCHASER
The Purchaser covenants to the Company that:
7.1. Best Efforts. The Purchaser shall use best efforts in good faith to
take or cause to be taken all action necessary or desirable under this Agreement
on its part as promptly as practicable so as to permit the consummation of the
Merger and the transactions contemplated hereby as promptly as practicable and
to cooperate fully with the Company to that end.
7.2. Registration Statement and Joint Proxy Statement. The Purchaser shall,
as promptly as practicable following the preparation of the Registration
Statement and Joint Proxy Statement, file such document with the SEC, and the
Purchaser shall use all reasonable efforts to have the Registration Statement
and Joint Proxy Statement declared effective by the SEC as promptly as
practicable and to maintain the effectiveness of such Registration Statement and
Joint Proxy Statement.
7.3. Stock Reservation. Between the date hereof and the date of the
Closing, the Purchaser will keep and reserve available a sufficient number of
shares of Purchaser Common Stock for issuance and delivery to the stockholders
of the Company as contemplated in this Agreement. The Purchaser will take all
action and use best efforts to have the Purchaser Common Stock to be delivered
hereunder listed on the NASDAQ NMS.
7.4. Blue Sky Laws. The Purchaser shall use its best efforts to obtain,
prior to the Closing, all necessary state securities laws or "blue sky" permits
and approvals required to carry out the transactions contemplated by this
Agreement, provided that the Purchaser shall not be required by virtue thereof
to submit to general jurisdiction in any state.
7.5. Information. The Purchaser will keep the Company advised of all
material developments relevant to its business and to consummation of the Merger
and the transactions contemplated herein. The Purchaser and its subsidiaries
will give to the Company and to the Company's officers, accountants, counsel and
other representatives full access, during normal business hours throughout the
period prior to the Closing, to all the properties, books, contracts,
commitments and records of the Purchaser and its subsidiaries. The Purchaser and
its subsidiaries will furnish to the Company during such period all such
information concerning the Purchaser and its subsidiaries and their business and
properties as the Company may reasonably request. No information provided by the
Purchaser or any of its subsidiaries pursuant to this Section 7.5 shall affect
or be deemed to modify any representation or warranty made by, or the conditions
to the obligations to consummate the Merger, of the Company.
7.6. Confidentiality. The Purchaser and each of its subsidiaries shall, and
shall cause their respective directors, officers, attorneys, agents or advisors
to, maintain the confidentiality of all information obtained from the Company or
any of the Subsidiaries pursuant to Section 6.3, which information is not
otherwise publicly disclosed by the Company of any of the Subsidiaries. This
covenant with respect to confidentiality shall survive any termination of this
Agreement pursuant to Article X. In the event of termination of this Agreement,
the Purchaser shall return to the Company or destroy and certify the destruction
of all information previously furnished by the Company to the Purchaser in
connection with the transactions contemplated by this Agreement.
7.7. Meeting of Stockholders. The Purchaser will duly call and convene a
meeting of its stockholders to act upon the transactions contemplated by this
Agreement as soon as practicable, but not later than May 31, 1995, and the Board
of Directors of the Purchaser will, except to the extent legally required for
the discharge by it of its fiduciary duties as determined upon written advice of
counsel, recommend that the holders of the Purchaser Common Stock vote in favor
of and approve the Merger and the transactions contemplated thereby. The
Purchaser will solicit the proxies of its stockholders to vote on the
transactions contemplated by this Agreement and will use its best efforts to
obtain any vote of the Purchaser's stockholders necessary for the approval and
adoption of this Agreement and the transactions contemplated hereby. Except as
otherwise required by law, the Purchaser will not call and convene a meeting of
its stockholders to consider or vote on any matter inconsistent with the
consummation of the transactions contemplated by this Agreement.
7.8. Notice of Litigation. The Purchaser will provide written notice to
the Company of any litigation, proceeding or governmental investigation which
arises, or to the knowledge of the Purchaser, is threatened or in prospect,
which is reasonably foreseen to exceed $25,000 in cost or liability after the
date of this Agreement and prior to the Closing, against or relating to the
Purchaser or any of its subsidiaries, their respective properties or businesses,
or the transactions contemplated by this Agreement, setting forth in such notice
the facts and circumstances currently available to the Purchaser with respect to
such litigation, proceeding or investigation.
7.9. Press Releases. The Purchaser will not, unless approved by the Company
hereto in advance, issue any press release or written statement for general
circulation or other written public disclosure relating to the transactions
contemplated hereby, except as otherwise required by law, it being contemplated
that the Purchaser and the Company will issue a joint press release announcing
the Merger and the transactions contemplated by this Agreement.
7.10. Employees. Any employee of the Company who has the benefit of a
written employment or severance agreement who shall be offered employment by the
Purchaser or any of its subsidiaries shall be deemed, as a condition to such
employment, to agree to the termination of such agreement from and after the
Closing.
7.11. Indemnification. From and after the Closing, the Purchaser shall
indemnify persons who served as directors and officers of the Company on or
before the Closing in accordance with and subject to the provisions of the
Purchaser's indemnification for its directors and officers. On or before the
Closing, the Purchaser may review all then pending, threatened and potential
actions, suits, proceedings and claims that may be the subject of
indemnification hereunder and may terminate this Agreement if in its reasonable
judgment its potential financial exposure exceeds $1,000,000 after available
insurance proceeds as to render inadvisable consummation of the transactions
contemplated hereby.
7.12 Covenants with Respect to Newco. Purchaser convenants and agrees that
at or prior to the Effective Time: (i) Purchaser will cause Newco to be a
banking corporation chartered under Massachusetts law for the purpose of
effecting the merger of the Company with and into Newco and Newco will be
validly existing and in good standing under Massachusetts law; (ii) Newco will
have full corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby, (iii) the Board of
Directors of Newco and Purchaser, as the sole shareholder of Newco will have
duly and validly approved and adopted this Agreement and the transactions
contemplated hereby, and no other corporate proceedings on the part of Newco
will be necessary to consummate the transactions so contemplated, and (iv) this
Agreement will have been duly and validly executed and delivered by Newco and
will constitute a valid and binding obligation of Newco enforceable in
accordance with its terms.
VIII.
CONDITIONS TO THE PURCHASER'S OBLIGATIONS
Unless waived by the Purchaser in writing in its sole discretion, all
obligations of the Purchaser under this Agreement are subject to the
fulfillment, prior to or at the Closing, of each of the following conditions:
8.1 Approval of Company Stockholders. The transactions contemplated by
this Agreement shall have been duly approved by the requisite affirmative vote
of the issued and outstanding shares of the capital stock of the Company; and
not more than 10% of the issued and outstanding shares of Company Common Stock
shall have been the subject of objection to the transactions hereunder and
demand for payment pursuant to statutory appraisal rights.
8.2 Regulatory Approval and Expiration of Waiting Periods. The Purchaser
and the Company shall have received all regulatory approvals required or deemed
necessary in connection with the Merger, this Agreement, and the transactions
contemplated hereby and thereby, all notice periods and waiting periods required
after the granting of any such approvals shall have passed and all conditions
contained in any such approval required to have been satisfied prior to
consummation of such transactions shall have been satisfied.
8.3 No Court Order, Decree or Injunction. Neither the Purchaser nor the
Company shall be subject to any order, decree or injunction of a court or agency
of competent jurisdiction which enjoins or prohibits the consummation of the
transactions contemplated by this Agreement or the Merger.
8.4 Representations, Warranties and Covenants. The representations and
warranties of the Company contained in this Agreement shall be true at and as of
the date of the Closing, shall be deemed made again at and as of such date and
be true as so made again; the Company shall have performed all obligations and
complied with all covenants required by this Agreement to be performed or
complied with by it prior to the Closing; and the Purchaser shall have received
from the Company a certificate or certificates in such reasonable detail as the
Purchaser may reasonably request, signed by the Chairman of the Board or
President of the Company and dated the date of the Closing, to the foregoing
effect.
8.5 Opinion of Counsel to the Company. The Company shall have delivered
to the Purchaser a favorable opinion of the Company's counsel, dated the date of
Closing, in form and substance satisfactory to the Purchaser and its counsel
with respect to the transactions contemplated hereby and by the Merger.
8.6 Accountants' Letter. The Purchaser shall have received letters from
KPMG Peat Marwick and Arthur Andersen related to the Purchaser and from Coopers
and Lybrand relating to the Company, dated the day of the mailing of the
Registration Statement and Joint Proxy Statement and reconfirmed as of the date
of the Closing, with respect to their independence as accountants and the
compliance as to form of the financial statements of the respective companies
contained in the Registration Statement and Joint Proxy Statement, each in form
and substance reasonably satisfactory to the Purchaser and customary in scope
and substance for "consent letters" delivered by independent public accountants
in transactions of the nature contemplated by this Agreement;
8.7 Approval of Purchaser Stockholders. The transactions contemplated by
this Agreement shall have been approved, if required, by the requisite
affirmative vote of the issued and outstanding shares of the capital stock of
the Purchaser.
8.8 Accuracy of Registration Statement and Joint Proxy Statement. On and
as of the dates of the respective meetings of the stockholders of the Purchaser
and the Company at which action is to be taken on the transactions contemplated
hereby, the Registration Statement and Joint Proxy Statement and prospectus
included therein shall contain no statement which, at the time and in light of
the circumstances under which it is made, is false or misleading with respect to
any material fact, or which omits to state any material fact necessary in order
to make the statements made therein not misleading.
8.9 Consents and Actions; Contracts. All requisite consents of any third
parties and other actions which the Company has covenanted to use its best
efforts to obtain and take shall have been obtained and completed.
8.10 Financial Advisor's Opinion. The Purchaser shall have received, for
inclusion in the Registration Statement and Joint Proxy Statement, an opinion of
M.A. Schapiro & Co., Inc., or another recognized firm of investment bankers
acceptable to the Purchaser, to the effect that the transactions hereunder are
fair to the stockholders of the Purchaser, and such opinion shall have been
reconfirmed at and as of the time of the Closing.
8.11 Effectiveness of Registration Statement. The Registration Statement
and Joint Proxy Statement shall have become effective, and no stop order
suspending its effectiveness shall have been issued and no proceedings for that
purpose shall have been instituted, pending or threatened.
8.12 Other Evidence. The Purchaser shall have received from the Company
such further certificates and documents evidencing due action in accordance with
this Agreement, including certified copies of proceedings of the board of
directors and stockholders of the Company, as the Purchaser shall reasonably
request.
8.13 No Material Adverse Condition. There shall not have been a material
adverse condition with respect to the Company from the date of this Agreement to
the Closing. For purposes of this Section, a "material adverse condition" is a
condition which either alone or when aggregated with other conditions has
resulted or, in the reasonable opinion of the Purchaser, would result in a
substantial loss or damage to the properties or assets of the Company whether or
not insured, that would materially affect or impair the ability of the Company
to conduct its business as presently conducted.
8.14 Price of Purchaser Common Stock. The average closing price of the
Purchaser Common Stock on the NASDAQ NMS for the twenty (20) consecutive trading
days ending on the fifth trading day prior to the date before receipt of the
last regulatory approval shall be at least $17.50 per share. The Purchaser may
waive this condition by delivering written notice to the Company not later than
the 10th business day before the Closing that expressly states that the Section
8.14 condition is waived and sets forth the adjusted number of shares that will
be issued in the Merger pursuant to Section 1.4(b).
8.15 Tax Matters. The Purchaser shall have received a favorable opinion of
Piper & Marbury in substance satisfactory to the Purchaser, to the effect that:
(a) the Merger will constitute a reorganization within the meaning of Sections
368 (a)(l)(A) and (a)(2)(D) and related sections of the Code; (b) no gain or
loss will be recognized by the Purchaser as a result of the Merger; and (c) to
such further effect, consistent with the foregoing, as may reasonably be
required.
IX.
CONDITIONS TO THE COMPANY'S OBLIGATIONS
Unless waived by the Company in writing in its sole discretion, all
obligations of the Company under this Agreement are subject to the fulfillment,
prior to or at the Closing, of each of the following conditions:
9.1 Approval of Purchaser Stockholders. The transactions contemplated by
this Agreement shall have been duly approved, if required, by the requisite
affirmative vote of the issued and outstanding shares of the capital stock of
the Purchaser.
9.2 Regulatory Approval and Expiration of Waiting Periods. The Purchaser
and the Company shall have received all regulatory approvals required or deemed
necessary in connection with the Merger, this Agreement, the Merger Agreement
and the transactions contemplated hereby and thereby, all notice periods and
waiting periods required after the granting of any such approvals shall have
passed and all conditions contained in any such approval required to have been
satisfied prior to consummation of such transactions shall have been satisfied.
9.3 No Court Order, Decree or Injunction. Neither the Purchaser nor the
Company shall be subject to any order, decree or injunction of a court or agency
of competent jurisdiction which enjoins or prohibits the consummation of the
transactions contemplated by this Agreement or the Merger.
9.4 Representations, Warranties and Covenants. The representations and
warranties of the Purchaser contained in Article III of this Agreement shall be
true at and as of the date of the Closing, shall be deemed made again at and as
of such date and be true as so made again; the Purchaser shall have performed
all obligations and complied with all covenants required by this Agreement to be
performed or complied with by it prior to the Closing; and the Company shall
have received from the Purchaser a certificate or certificates in such
reasonable detail as the Company may reasonably request, signed by the Chair of
the Board or President of the Purchaser and dated the date of the Closing, to
the foregoing effect.
9.5 Opinion of Counsel to the Company. The Purchaser shall have delivered
to the Company a favorable opinion of the Purchaser's counsel dated the date of
Closing, in form and substance satisfactory to the Company and its counsel with
respect to the transactions contemplated hereby and by the Merger.
9.6 Listing. All action shall have been taken by the Purchaser to have
the Purchaser Common Stock to be delivered hereunder listed on the NASDAQ NMS.
9.7 Accountants' Letter. The Company shall have received letters from
KPMG Peat Marwick and Arthur Andersen related to the Purchaser and from Coopers
and Lybrand relating to the Company, dated the day of the mailing of the
Registration Statement and Joint Proxy Statement and reconfirmed as of the date
of the Closing, with respect to their independence as accountants and the
compliance as to form of the financial statements of the respective companies
contained in the Registration Statement and Joint Proxy Statement, each in form
and substance reasonably satisfactory to the Company and customary in scope and
substance for "consent letters" delivered by independent public accountants in
transactions of the nature contemplated by this Agreement.
9.8 Approval of Company Stockholders. The transactions contemplated by
this Agreement shall have been approved by the requisite affirmative vote of the
issued and outstanding shares of the capital stock of the Company.
9.9 Accuracy of Registration Statement and Joint Proxy Statement. On and
as of the dates of the respective meetings of the stockholders of the
stockholders of the Purchaser and the Company at which action is to be taken on
the transactions contemplated hereby, the Registration Statement and Joint Proxy
Statement and prospectus included therein shall contain no statement which, at
the time and in light of the circumstances under which it is made, is false or
misleading with respect to any material fact, or which omits to state any
material fact necessary in order to make the statements made therein not
misleading.
9.10 Consents and Actions; Contracts. All requisite consents of any third
parties and other actions which the Purchaser has covenanted to use its best
efforts to obtain and take under Section 7.1 hereof shall have been obtained and
completed.
9.11 Tax Matters. The Company shall have received a favorable opinion of
Piper & Marbury in substance satisfactory to the Company, to the effect that:
(a) the Merger will constitute a reorganization within the meaning of Sections
368 (a)(l)(A) and (a)(2)(D) and related sections of the Code; (b) no gain or
loss will be recognized by the Company as a result of the Merger; (c) no loss
will be recognized by a stockholder of the Company upon the exchange of shares
of Company Common Stock for shares of Purchaser Common Stock and cash pursuant
to the Merger; (d) any gain realized by a stockholder of the Company upon the
exchange of shares of Company Common Stock for shares of Purchaser Common Stock
and cash pursuant to the Merger will be recognized to the extent of the lesser
of (i) the amount of gain realized or (ii) the aggregate amount of cash received
by the stockholder pursuant to the Merger (including payments in lieu of the
issuance of fractional shares and payments in respect of dissenters rights); (e)
the holding period with respect to shares of Purchaser Common Stock received for
shares of Company Common Stock will include the holding period of the shares of
Company Common Stock surrendered provided such Company shares were held as a
capital asset on the date of the exchange; and (f) to such further effect,
consistent with the foregoing, as may reasonably be required.
9.12. Price of Purchaser Common Stock. The average closing price of the
Purchaser Common Stock on the NASDAQ NMS for the twenty (20) consecutive trading
days ending on the fifth trading day prior to the date before receipt of the
last regulatory approval shall be at least $17.50 per share.
9.13. Financial Advisor's Opinion. The Company shall have received, for
inclusion in the Registration Statement and Joint Proxy Statement, an opinion of
a recognized firm of investment bankers acceptable to the Company, to the effect
that the transactions hereunder are fair to the stockholders of the Company, and
such opinion shall have been reconfirmed at and as of the time of the Closing.
9.14. Effectiveness of Registration Statement. The Registration
Statement and Joint Proxy Statement shall have become effective, and no stop
order suspending its effectiveness shall have been issued and no proceedings for
that purpose shall have been instituted, pending or threatened.
9.15. Other Evidence. The Company shall have received from the
Purchaser such further certificates and documents evidencing due action in
accordance with this Agreement, including certified copies of proceedings of the
board of directors and stockholders of the Purchaser, as the Company reasonably
shall request.
9.16. No Material Adverse Condition. There shall not have been a
material adverse condition with respect to the Purchaser or any of its
subsidiaries from the date of this Agreement to the Closing. For purposes of
this Section, a "material adverse condition" is a condition which either alone
or when aggregated with other conditions has resulted or, in the reasonable
opinion of the Company, would result in a substantial loss or damage to the
properties or assets of the Purchaser and its subsidiaries taken as a whole,
whether or not insured, that would materially affect or impair the ability of
the Purchaser and its subsidiaries to conduct their business as presently
conducted.
X.
TERMINATION, WAIVER AND AMENDMENT.
10.1. Termination. This Agreement, the Merger Agreement, the Stock
Option Agreement and the transactions contemplated hereby and thereby may be
terminated prior to the Closing, either before or after their approval by the
stockholders of the Purchaser or the Company provided however that no amendment
to the purchase provisions of this Agreement or the Stock Option Agreement may
be made after approval by the stockholders of the Company without additional
approval of such stockholders:
(i) by the mutual consent of the Purchaser and the Company if the
Board of Directors of each so determines by vote of a majority of the members of
its entire Board;
(ii) by the Purchaser or the Company, if its Board of Directors
so determines by vote of a majority of the members of its entire Board, in the
event of a material breach by the other of any representation, warranty,
covenant or agreement contained herein which is not cured within 30 days after
the date of written notice from the other party hereto;
(iii) by the Purchaser or the Company in writing, if the
applications for prior approval referred to in Article V hereof have been
denied, and the time period for appeals and requests for reconsideration has run
or the approvals contain any condition of the type referred to in Section 8.2;
(iv) by the Purchaser or the Company in writing, if the
Purchaser's or the Company's stockholders do not approve the transactions
contemplated herein at the annual or special meeting duly called for that
purpose as contemplated herein;
(v) by the Purchaser in writing,pursuant to Section 7.11 hereof;
(vi) by the Purchaser or the Company in writing, in the event it
discovers a material adverse condition with respect to the other party;
(vii) by the Purchaser or the Company in writing pursuant to
Section 10.2 hereof;
(viii) by the Purchaser or the Company in writing, if the Closing
has not occurred by the close of business on June 30, 1995; or
10.2. Due Diligence Review. Notwithstanding anything to the contrary
herein, it is understood that the Purchaser and the Company shall have completed
their respective on-site due diligence and investigation of each other within 30
days after the execution of this Agreement (provided that such time may be
extended by mutual agreement of the Purchaser and the Company). If (i) the
Purchaser's or the Company's investigations and reviews of each other discloses
matters which the Purchaser or the Company in good faith believes either (A) to
be inconsistent in any material and adverse respect with any of the
representations or warranties of each other, which relate to financial condition
or results of operations, to any supporting documentation concerning such
financial condition or results of operations or to the ability of the Company or
the Purchaser to consummate the transactions contemplated by this Agreement, or
(B) in the reasonable judgment of the Purchaser or the Company (x) to be of such
significance as to materially and adversely affect the condition of the Company
or the Purchaser or (y) to deviate materially and adversely from the respective
Financial Statements, (ii) the Purchaser or the Company notifies the other party
of such matters within 45 days of the date of this Agreement, and (iii) such
matters, in the reasonable judgment of the Purchaser or the Company, (A) are not
capable of being cured or (B) have not been cured within 30 days after written
notice thereof; then the Purchaser or the Company may terminate this Agreement
in respective sole discretion without any liability to the other party.
10.3. Effect of Termination. In the event this Agreement and the Merger
Agreement are terminated pursuant to Section 10.I hereof, this Agreement and the
Merger Agreement shall become void and have no effect, except that (i) the
provisions relating to confidentiality set forth in Sections 6.4 and 7.6 hereof
and the provisions relating to expenses set forth in Section 11.1 hereof and
(ii) a termination pursuant to Section 10.1 (ii) hereof shall not relieve the
breaching party from liability for an uncured willful breach of the covenant or
agreement giving rise to such termination.
10.4. Survival of Representations, Warranties and Covenants. All
representations, warranties and covenants in this Agreement, the Merger
Agreement or in any instrument delivered pursuant hereto or thereto shall expire
on, and be terminated and extinguished at, the Closing other than covenants that
by their terms are to survive or be performed after the Closing and no party
hereto shall be under any liability whatsoever with respect to any such
representation, certification or warranty, it being intended that the sole
remedy of any party for a breach of any such representation, certification or
warranty shall be to elect not to proceed with the Closing hereunder if such
breach has resulted in a condition to such party's obligations hereunder not
being satisfied; provided, however, that no such representations, warranties or
covenants shall be deemed to be terminated or extinguished so as to deprive the
Purchaser, Newco or the Company (or any director, officer or controlling person
thereof) of any defense in law or equity which otherwise would be available
against the claims of any person,including,without limitation, any stockholder
or former stockholder of either the Purchaser or the Company, the aforesaid
representations, warranties and covenants being material inducements to the
consummation by the Purchaser, Newco and the Company of the transactions
contemplated herein.
10.5. Waiver. Except with respect to any required stockholder or
regulatory approval, the Purchaser and the Company, respectively, by written
instrument signed by an executive officer of such party, may at any time
(whether before or after approval of this Agreement and the Merger Agreement by
the stockholders of the Purchaser and the Company) extend the time for the
performance of any of the obligations of or other acts of the other party, and
may waive (i) any inaccuracies of such parties in the representations or
warranties contained in this Agreement, the Merger Agreement or any document
delivered pursuant thereto, (ii) compliance with any of the covenants,
undertakings or agreements of such parties, or satisfaction of any of the
conditions precedent to its obligations, contained herein or in the Merger
Agreement or (iii) the performance by such parties of any of its obligations set
out herein or therein.
10.6. Amendment or Supplement. This Agreement and the Merger Agreement
may be amended or supplemented at any time by mutual agreement of the parties
hereto. Any such amendment or supplement must be in writing and approved by
their respective Boards of Directors.
XI.
MISCELLANEOUS
11.1. Expenses. (a) Each party to this Agreement shall pay all of its
expenses relating hereto, including fees and disbursements of its counsel,
accountants, investment bankers, and financial advisors, whether or not the
transactions hereunder are consummated. In connection with the foregoing, the
Purchaser and the Company represent and warrant that the total amount payable by
each of them to investment bankers, counsel and financial advisors in connection
with the transactions contemplated by this Agreement shall not exceed $175,000,
and that no broker's, finder's or similar fees are payable by it. Expenses of
printing this Agreement, the Registration Statement and Joint Proxy Statement
and any other documents used in the transactions contemplated hereunder and the
fee for registration under the Securities Act of the shares of Purchaser Common
Stock to be issued upon the conversion of shares of Company Common Stock shall
be divided equally between the Purchaser and the Company.
(b) Notwithstanding the provisions of (a) above, if this Agreement is
terminated by a party hereto because of a breach of a material representation,
warranty or covenant by the other party or discovery of a material adverse
condition with respect to the other party, then the breaching party or the party
with respect to which a material adverse condition was discovered shall promptly
pay its own expenses and fifty percent (50%) of the other party's expenses
incurred in connection with the transaction contemplated herein.
11.2. Entire Agreement. This Agreement (including the exhibits hereto
and the lists, schedules and documents delivered pursuant hereto, which are a
part hereof) is intended by the parties to and does constitute the entire
agreement of the parties with respect to the transactions contemplated by this
Agreement. The terms and conditions of this Agreement and the Merger Agreement
shall inure to the benefit of and be binding upon the parties hereto and thereto
and their respective successors. Nothing in this Agreement or the Merger
Agreement, expressed or implied, is intended to confer upon any party, other
than the parties hereto and thereto, and their respective successors, any
rights, remedies, obligations or liabilities.
11.3. No Assignment. No party hereto may assign any of its rights or
obligations under this Agreement to any other person without the written consent
of the other party hereto.
11.4. Notices. All notices, requests, demands and other communications
under or in connection with this Agreement shall be in writing, and, (a) if to
the Purchaser,shall be addressed to F.Sheldon Prentice,Senior Vice President,
General Counsel and Secretary, Chittenden Bank, Two Burlington Square,
Burlington, Vermont 05401, with a copy to E. Miles Prentice, III, Piper &
Marbury, 31 West 52nd Street, New York, New York 10019, and (b) if to the
Company, shall be addressed to The Bank of Western Massachusetts, 29 State
Street, Springfield, MA 01103, Attention: Mr. Timothy P. Crimmins, Jr. with a
copy to Frank P. Fitzgerald, Esq., Frank P.Fitzgerald, P.C., 95 State Street,
Springfield, MA 01103.
All such notices, requests, demands or communications shall be mailed
postage prepaid, certified mail, return receipt requested, or delivered
personally or sent by facsimile transmission or overnight express, and shall be
sufficient and effective when delivered to or received at the address so
specified. The Purchaser and the Company each may change the address at which it
is to receive notice by like written notice to the other.
11.5. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to constitute an original, but all of which
together shall constitute one and same instrument.
11.6. Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of Vermont except where
enforcement of this Agreement requires construction and interpretation under the
laws of the Commonwealth of Massachusetts.
11.7. Specific Performance. The parties hereby acknowledge and agree
that the failure of either party to fulfill any of its respective covenants and
agreements hereunder, including the failure to take all such actions as are
necessary on its part to cause the consummation of the Merger, will cause
irreparable injury to the Purchaser or the Company for which damages, even if
available, will not be an adequate remedy. Accordingly, the Company and the
Purchaser hereby consent to the issuance of injunctive relief by any court of
competent jurisdiction to compel performance of the Company's or the Purchaser's
obligations and to the granting by any such court of the remedy of the specific
performance by the Company or the Purchaser of their respective obligations
hereunder.
11.8. Headings. The paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, the Purchaser and the Company have caused this
Agreement to be duly executed by their respective Chairs of the Board or
Presidents, and their respective seals to be hereunto affixed and attested to by
their respective Secretaries or Assistant Secretaries, thereunto duly
authorized, as of the date first above written.
ATTEST:
By:
' Secretary
[Corporate Seal]
ATTEST:
By:
' Secretary
[Corporate Seal]
EXHIBIT A PLAN OF MERGER
MERGER OF BANK OF WESTERN MASSACHUSETTS
INTO
CHITTENDEN ACQUISITION BANK
ARTICLE 1
BANK OF WESTERN MASSACHUSETTS ("BWM") and CHITTENDEN CORPORATION "CNDN"),
have entered into an Agreement and Plan of Reorganization dated as of August
17, 1994 (the "Merger Agreement"), providing for the merger of BWM with and
into Chittenden Acquisition Bank ("CAB"),(the "Merger"). CAB shall be the
surviving entity and CAB shall continue as a wholly-owned subsidiary of CNDN.
The Merger shall take effect at the time and date (the "Effective Date") of
the filing of Articles of Merger with the Secretary of the Commonwealth of
Massachusetts. The Merger of BWM with and into CAB shall have all the effects
set forth in Sections 78(d)(3) and 156(b) of the Massachusetts Business
Corporation Act (the "MBCA"), with CAB being the surviving corporation and a
wholly-owned subsidiary of CNDN. By virtue of the Merger, the separate
existence of BWM shall cease, CAB, as the Surviving Corporation shall
continue to be governed by the laws of the Commonwealth of Massachusetts
shall continue the banking business authorized to be conducted under
Massachusetts law under the name of The Bank of Western Massachusetts, and
the separate corporate existence of CAB as a wholly-owned subsidiary of CNDN
with all its rights, privileges, immunities, powers and franchises shall
continue unaffected by the Merger.
ARTICLE 2
From and after the Effective Date, the Articles of Incorporation and
By-Laws of CAB shall be the Articles of Incorporation and By-Laws of BWM
(subject to such amendments as may subsequently be adopted pursuant to the
provisions thereof and of applicable law), and the Board of Directors and
Officers of BWM shall be the Board of Directors and Officers of the surviving
corporation (with the addition of two Directors to be named by CNDN) until
their successors have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the surviving
corporation's Articles of Incorporation and By-Laws. CAB shall do business
under the name of The Bank of Western Massachusetts.
ARTICLE 3
The manner and basis of exchanging and converting the shares of BWM and
CNDN is as follows:
(A) Outstanding CNDN Shares. The shares of the capital stock of CNDN
issued and outstanding immediately prior to the Effective Date shall continue
to be issued and outstanding from and after the Effective Date, shall not be
converted and shall otherwise be unchanged by the Merger.
(B) Outstanding BWM Common Stock. At the Effective Date and in
consideration of the Merger, each share of BWM Class A stock, par value $0.25
per share, issued and outstanding immediately prior to the Effective Date
shall be cancelled in return for rights to receive $826.88 in cash and
47.2808 shares of Purchaser Common Stock per share subject to the following
conditions:
(i) CNDN's Common Stock shall be "Restricted" and will become
vested at a rate of 20% per annum over a five-year period after the Effective
Date; and
(ii) the Holder shall continue employment through each subsequent
annual anniversary of the Closing; provided, however, in the event that the
Holder is terminated on unilaterally by the Purchaser, dies or becomes
disabled, the Restricted Stock will become fully vested; provided further, in
the event that the Holder is terminated for cause (defined as deliberate
dishonesty, conviction of a crime involving moral turpitude or gross and willful
failure to perform a substantial portion of duties and responsibilities) any
unvested shares of Restricted Stock will become null and void; and provided
further, in the event of a change in control of the Purchaser as such event
is defined in the Purchaser's current "Change in Control" agreements with
certain employees of the Purchaser, all shares of Restricted Stock will become
fully vested. In the interim, all shares of Restricted Stock will have full
voting and dividend rights.
Each share of BWM common stock, par value $66.67 per share (the "BWM
Common Stock"), issued and outstanding immediately prior to the Effective
Date (except for any Dissenting Shares, as defined in Paragraph (G) of this
Article 3), shall, on the Effective Date, by virtue of the Merger,
automatically and without any action on the part of the holder thereof, become
and be converted into the right to receive the Per Share Consideration which
shall consist of:
(i) $1,225.00 in cash subject to adjustment pursuant to Paragraph
(C) of this Article 3 (the "Cash Consideration"); or
(ii) 57.3099 shares of fully paid and non-assessable Common
Stock of CNDN, par value $1.00 per share (the "CNDN Common Stock") subject to
adjustment pursuant to Paragraph (C) of this Article 3 (the "Stock
Consideration").
As promptly as practicable after the Effective Date, CNDN shall cause the
paying agent to send to each holder of record of BWM Common Stock (excluding
the holders of any Dissenting Shares) transmittal materials for use in
exchanging BWM Common Stock certificates for the Per Share Consideration.
Upon surrender to the paying agent of such certificates, together with
such transmittal materials duly executed and completed in accordance with the
instructions thereto (or upon completion of reasonable procedures pertaining
to lost certificates), CNDN shall promptly cause to be paid to the persons
entitled thereto the Per Share Consideration to which such persons are
entitled, after giving effect to any required tax withholdings. No interest
shall accrue or be paid on the amount payable upon the surrender of any such
certificate. If payment is to be made to a person other than the registered
holder of the certificate surrendered, it shall be a condition of such
payment that the certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
payment shall pay any transfer or other taxes required by reason of the
payment to a person other than the registered holder of the certificate
surrendered or establish to the satisfaction of CNDN that such tax has been
paid or is not applicable. Neither the paying agent nor CNDN shall be liable
to any holder of certificates for shares of BWM Common Stock for any amount
paid to a public official pursuant to any applicable property, escheat or
similar law.
(C) Election Procedures. An election form and other appropriate and
customary transmittal materials (which shall specify that delivery shall be
effected, and risk of loss and title to the certificates theretofore
representing shares of the Company Common Stock shall pass, only upon proper
delivery of such certificates to the Exchange Agent) in such form as the
Purchaser and the Company shall mutually agree ("Election Form") shall be
mailed thirty-five days prior to the anticipated Effective Date or on such
other date as the Purchaser and the Company shall mutually agree ("Mailing
Date") to each holder of record of the Company Common Stock as of five
business days prior to the Mailing Date ("Election Form Record Date").
Each Election Form shall permit the holder (or the beneficial owner
through appropriate and customary documentation and instructions) to elect to re
ceive only the Purchaser Common Stock with respect to such holder's Company
Common Stock ("Stock Election Shares") to elect to receive only cash with
respect to such holder's Company Common Stock ("Cash Election Shares") or
to indicate that such holder makes no election ("No Election Shares").
Holders of the Company Common Stock who duly elect to receive the Per
Share Stock Consideration or the Per Share Cash Consideration in the Merger
may also elect to have their share holdings divided into blocks of not less
than 10 shares of the Company Common Stock with any remaining shares being
added to one of the designated blocks of 10 shares (such blocks being herein
called in "Stock Blocks") for purposes of the allocation procedures described
below in this Section C. Such holders who do not make such election or who
hold less than 10 shares of Company Common Stock will have all of their
holding treated as a single Stock Block for purposes of such allocation
procedures.
Any Company Common Stock with respect to which the holder (or the
beneficial owner, as the case may be) shall not have submitted to the
Exchange Agent, an effective, properly completed Election Form on or before
5:00 p.m., on the 20th day following the Mailing Date (or such other time and
date as the Purchaser and Company may mutually agree) (the "Election Deadline")
shall also be deemed to be "No Election Shares".
The Purchaser shall make available one or more Election Forms as may be
reasonably requested by all persons who become holders (or beneficial owners) of
the Company Common Stock between the Election Form Date and close of business
on the business day prior to the Election Deadline, and the Company shall
provide to the Exchange Agent all information reasonably necessary for it to
perform as specified herein.
Any such election shall have been properly made only if the Exchange
Agent shall have actually received a properly completed Election Form by the
Election Deadline. An Election Form shall be deemed properly completed only
if accompanied by one or more certificates (or customary affidavits and
indemnification regarding the loss or destruction of such certificates or the
guaranteed delivery of such certificates) representing all shares of the Company
Common Stock covered by such Election Form, together with duly executed
transmittal materials included in the Election Form. Any Election Form may
be revoked or changed by the person submitting such Election Form at or prior
to the Election Deadline. In the event an Election Form is revoked prior to
the Election Deadline, the shares of the Company Common Stock represented by
such Election Form shall become No Election Shares and the Purchaser shall
cause the certificates representing the Company Common Stock to be promptly
returned without charge to the Person submitting the Election Form upon
written request to that effect from the holder who submitted the Election
Form. Subject to the terms of this Agreement and of the Election Form, the
Exchange Agent shall have reasonable discretion to determine any election
revocation or change has been properly or timely made and to disregard
immaterial defects in the Election Forms, and any good faith decisions of the
Purchaser regarding such matters shall be binding and conclusive. Neither the
Purchaser nor the Exchange Agent shall be under any obligation to notify any
person of any defect in an Election Form.
Within fifteen calendar days after the Election Deadline, unless the
Effective Time has not yet occurred, in which case as soon thereafter as
practicable, the Purchaser shall cause the Exchange Agent to effect the
allocation among the holders of the Company Common Stock of rights to receive
the Purchaser Common Stock or cash in the Merger in accordance with the Election
Forms as follows:
(i) Stock Elections Equal to Stock Amount. If the number of shares
of the Purchaser Common Stock that would be issued upon conversion into the
Purchaser Common Stock of the Stock Election Shares is equal or nearly equal
(as determined by the Exchange Agent) to the, but not less than, Stock Amount
(as defined in Paragraph (I) of this Article), then subparagraphs (ii) ,
(iii) and (iv) below shall not apply and all Stock Election Shares shall be
converted into the right to receive the Purchaser Common Stock and all Cash
Election Shares and No Election Shares shall be converted into the right to
receive cash; or
(ii) Stock Elections and No Elections Equal to Stock Amount. If
the number of shares of the Purchaser Common Stock that would be issued upon
the conversion into the Purchaser Common Stock of the Stock Election Shares
and No Election Shares is equal or nearly equal (as determined by the
Exchange Agent) to, but not less than, the stock amount, then subparagraphs
(i) above and (iii) and (iv) below shall not apply and all Cash Election Shares
shall be converted into the right to receive cash and all Stock Election
Shares and No Election Shares shall be converted into the right to receive
the Purchaser Common Stock; or
(iii) Stock Elections More Than Stock Amount. If the number of
shares of the Purchaser Common Stock that would be issued upon the conversion
into the Purchaser Common Stock of the Stock Election Shares is greater than
the Stock Amount, then;
(A) all Cash Election Shares and No Election Shares shall be
converted into the right to receive cash,
(B) the Exchange Agent will select, pro rata among the
Company's stockholders who have elected the Per Share Stock Consideration, a
sufficient number of Stock Blocks ("Designated Cash Shares") held by holders
of Stock Election Shares, so that the number of shares of the Purchaser
Common Stock that will be issued in the Merger equals as closely as
practicable, but is not less than, the Stock Amount, and any Designated Cash
Shares will be converted into the right to receive cash, provided that no
particular holder of Stock Election Shares shall be deemed to be a Cash
Designee, nor shall any such holder's shares be included within the
Designated Cash Shares if such circumstance would prevent the satisfaction of
any of the conditions set forth in Section 1.4 of the Merger Agreement, and
(C) the Stock Election Shares that are not Designated Cash
Shares will be converted into the right to receive the Purchaser Common Stock;
or
(iv) Stock Elections Less Than Stock Amount. If the number of
shares of the Purchaser Common Stock that would be issued upon conversion in the
Merger of the Stock Election Shares is less than the Stock Amount, then:
(A) all Stock Election Shares shall be converted into the
right to receive the Company Common Stock,
(B) the Exchange Agent shall select, pro rata, first, from
among the holders of No Election Shares a sufficient number of such holders
("Stock Designees") and then, if necessary, a sufficient number of Stock
Blocks ("Designated Stock Shares") held by holders of Cash Election Shares,
such that the number of shares of the Purchaser Common Stock that will be
issued in the Merger equals as closely as practicable, but is not less than, the
Stock Amount, and all shares held by the Stock Designees and, if any, all
Designated Stock Shares, will be converted into the right to receive the
Purchaser Common Stock, provided that no particular holder of Cash Election
Shares shall be deemed to be a Stock Designee, nor shall any such holder's
shares be included within the Designated Stock Shares if such would prevent the
satisfaction of any of the conditions set forth in Section 1.4, and
(C) the Cash Election Shares that are not Designated Stock
Shares and the No Election Shares that are not held by Stock Designees shall
be converted into the right to receive cash.
The random selection process to be used by the Exchange Agent shall
consist of such processes as shall be determined by the Purchaser.
(v) Dissenting Shares and Fractional Shares. In any case in which there
are Dissenting Shares (as defined in Paragraph (H) of this Article) or cash
paid in lieu of fractional shares pursuant to Paragraph (F) of this Article, or
both, the provisions of paragraphs (i) through (iv) shall be applied in such
a manner that, in each case, a number of shares of Purchaser Common Stock
shall be issued in the Merger that is not less than the Stock Amount.
(D) Treasury Shares; Shares Owned by CNDN. Each share of BWM Common
Stock issued and held in the treasury of BWM or beneficially owned by CNDN on
the Effective Date shall be cancelled and retired, and no right to receive
the Per Share Consideration shall arise with respect thereto.
(E) Conversion of Shares. On and after the Effective Date, the shares of
BWM Common Stock shall become the sole property of CNDN, former holders of
certificates for shares of BWM Common Stock shall cease to have any rights as
stockholders of BWM, and the holders of such shares shall thereafter be entitled
only to the shares of CNDN Common Stock and right to receive cash into which
their shares of BWM Common Stock shall have been converted in the Merger,
subject to any rights under the Massachusetts Business Corporation Act. Until
certificates for BWM Common Stock are presented to the paying agent as
contemplated by Paragraph (B) of this Article 3, each such certificate shall
be deemed for all purposes to evidence ownership of the number of shares of CNDN
Common Stock and the right to receive cash into which such shares of BWM
Common Stock shall have been converted pursuant to the Merger. Unless and until
such outstanding certificates shall be surrendered, no dividend or other
distribution, if any, payable to holders of record of CNDN Common Stock shall be
paid to tsuch outstanding certificate there shall be paid to the record holder
thereof the amount, without interest thereon, of dividends and other
distributions, if any, which subsequent to the Effective Date have been declared
and become payable with respect to the number of shares of CNDN Common Stock
represented thereby.
(F) Fractional Shares. In lieu of the issuance of fractional shares of
CNDN Common Stock pursuant to Paragraph (B) of this Article 3, cash
adjustments, without interest, will be paid to the holders of BWM Common
Stock in respect of any fractional share that would otherwise be issuable and
the amount of such cash adjustment shall be equal to an amount in cash
determined by multiplying such holder's fractional interest by $21.375. For
purposes of determining whether, and in what amounts, a particular holder of
BWM Common Stock would be entitled to receive pursuant to this Paragraph (E),
shares of record held by one holder and represented by two or more
certificates shall be aggregated.
(G) Options and Warrants. On the Effective Date, each holder of a then
outstanding option (an "Option") or warrant ("Warrant") to purchase shares of
BWM Common Stock granted prior to the date hereof, whether or not vested and
exercisable on the Effective Date, shall receive in settlement thereof a cash
payment from CNDN in an amount equal to the difference, if any, between (i)
$1.225.00 and (ii) the per share exercise price of the respective Option or
Warrant, multiplied by the number of shares of BWM Common Stock covered by
such Option or Warrant (the "Option or Warrant Settlement Amount"); provided,
however, that with respect to any person subject to Section 16(a) of the
Securities Exchange Act of 1934, as amended (the"Exchange Act"), the Option or
Warrant Settlement Amount to be paid as soon as practicable after the first
date payment can be made without liability for such person under Section
16(b) of the Exchange Act. By virtue of the foregoing treatment, all such
Options and Warrants shall be cancelled and shall cease to exist as of the
Effective Date.
(H) Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, shares of BWM Common Stock which are issued and outstanding
immediately prior to the Effective Date and which are held by stockholders of
BWM who did not vote in favor of the Merger and who comply with all of the
relevant provisions of Sections 86 through 98 of the MBCA (the "Dissenting
Shares") shall not be converted into or be exchangeable for the right to
receive the Per Share Consideration, unless and until such holders shall have
failed to perfect or shall have effectively withdrawn or lost their
dissenters' rights under the MBCA. If any such holder so loses such rights,
such shares shall thereupon be deemed converted into and become exchangeable
for the right to receive, as of the Effective Date, the Per Share
Consideration without any interest thereon and such shares shall be deemed No
Election Shares. If the holder of any such shares shall become entitled to
receive payment therefor pursuant to this Paragraph (G) or applicable law,
such payment shall be made by CNDN. BWM shall give CNDN (i) prompt notice
of any Dissenting Shares, withdrawals of Dissenting Shares of any other
instruments served pursuant to Sections 86 through 98 of the MBCA received by
BWM, and (ii) the opportunity to direct all negotiations and proceedings with
respect to Dissenting Shares. BWM will not voluntarily make any payment with
respect to any Dissenting Shares and will not, except with the prior written
consent of CNDN, settle or offer to settle any Dissenting Shares.
(I) Purchase Price and Consideration. The Company's stockholders shall
receive a combination of 627,525 shares and $10,974,836 in cash. Each holder of
shares of Company Common Stock will elect to receive 100% of the per share
purchase price in the form of either cash or Purchaser Common Stock, or make
no election. In the event that the holder of Company Common Stock elect less or
greater than 581,237 shares of Purchaser Common Stock, shares of Purchaser
Common Stock and cash will be allocated to achieve an aggregate 55% stock and
45% cash combination which would translate to $551.25 in cash and 31.5205 shares
of stock, on a theoretical basis, for each share of the Company's stock. The
total consideration, including cashing-out of the Company's options and
warrants, equals $25,500,708.
(J) Closing of BWM Transfer Books. On the Effective Date, the Stock
transfer books of BWM will be closed and no transfers of shares of BWM
capital stock shall thereafter be made.
ARTICLE 4
(A) AMENDMENT AND TERMINATION.
(i) Termination. Notwithstanding the approval and adoption of this
Plan of Merger by the stockholders of MA, this Plan of Merger shall terminate
forthwith in the event that the Reorganization Agreement shall be terminated as
therein provided. In the event of the termination of this Plan of Merger as
provided above, this Plan of Merger shall forthwith become void and there
shall be no liability on the part of any of the parties hereto except as
otherwise provided in the Reorganization Agreement.
(ii) Amendment. This Plan of Merger shall not be amended except by
an instrument in writing signed on behalf of each of the parties hereto
pursuant to an amendment to the Reorganization Agreement approved in the
manner therein provided. If any such amendment to the Reorganization
Agreement is so approved, any amendment to this Plan of Merger required by such
amendment to the Reorganization Agreement shall be effect by the parties hereto
by action taken by their respective Boards of Directors or Executive Committees.
ARTICLE 5
(B) MISCELLANEOUS.
(i) Counterparts. This Plan of Merger shall be executed in one or more
counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to each of the other parties.
(ii) Governing Law. This Plan of Merger shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
Attest CHITTENDEN CORPORATION
___________________________ By:___________________________
Title:
Attest CHITTENDEN ACQUISITION BANK
__________________________ By:___________________________
Title:
Attest BANK OF WESTERN MASSACHUSETTS
__________________________ By:___________________________
Title:
APPENDIX B
OPINION OF BROWN BROTHERS HARRIMAN & CO.
August 9, 1994
The Board of Directors
The Bank of Western Massachusetts
29 State Street
Springfield, Massachusetts 01103-2092
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the stockholders of The Bank of Western Massachusetts ("BWM") of the
terms of a proposed merger (the "Merger") whereby BWM will be merged with and
into Chittenden Corporation ("CC"). The terms of the Merger are set forth in
the Agreement and Plan of Reorganization and Plan of Merger (the "Merger
Agreement") and the Stock Option Agreement dated August 17, 1994.
The terms of the Merger Agreement provides that each share of BWM common stock
other than shares held as treasury stock will be exchanged for $1,225.00 in cash
or 57.3099 shares of fully paid and non-assessable common stock provided that
the aggregate number of Purchaser Common Stock issued in the transaction will
equal 627,525 shares. In addition, on the date of the Closing, each
outstanding option and warrant to purchase Common Stock of BWM will be converted
to an amount of cash equal to the difference between $1,225.00 and the
applicable option/warrant price. The Merger Agreement further provides that if
the average of the closing bid prices for CC common stock for the 20 consecutive
trading days ending on the fifth trading day prior to the date before receipt of
the lasterminate the transaction.
Brown Brothers Harriman & Co., in its capacity as financial advisor, is
regularly engaged in the evaluation of businesses and their securities in
connection with mergers and acquisitions, equity and debt financings, and
valuations for estate, corporate, and other purposes. We have advised BWM in
its discussions and negotiations with CC and, through our participation in such
discussions and our advice to BWM, have assisted in the development of the terms
of the Merger Agreement.
In connection with our analysis of the proposed transaction, BWM and CC have
furnished us with information concerning the Merger Agreement and their
respective businesses and operations, and we have reviewed financial and
operating data provided to us by BWM and CC, as well as information contained in
documents filed with regulatory authorities or otherwise available from
published sources. We have reviewed the Merger Agreement and all related
agreements between BWM and CC, and supporting documentation. We have had
discussions with management personnel of BWM and CC with respect to the
foregoing. Our review also included consideration of the following:
1. financial and statistical information of BWM and CC, including
comparative per share data and the pro forma financial effects
of the combination;
2. the business, operations, and general prospects of BWM and CC
as discussed by their respective managements with us;
3. the reported share price ranges and dividend histories for the
equity securities of BWM and CC;
4. general financial and statistical comparative analyses of BWM
CC, with selected public companies in the same industry;
5. the terms and conditions of other business combinations in the
U.S. commercial banking industry which we deemed to be comparable
or otherwise relevant; and
6. such other financial studies, analyses and investigations as we
deemed necessary.
We have relied on the accuracy (without independent verification) of the
information furnished to us, or otherwise made available, by BWM and CC.
On the basis of the foregoing, as of the date hereof, we are of the opinion
that the financial terms of the exchange provided for by the Merger Agreement
are fair to the stockholders of BWM from a financial point of view.
Yours very truly,
BROWN BROTHERS HARRIMAN & CO.
APPENDIX D
EXHIBIT B STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of August 17, 1994, between Bank of
Western Massachusetts, a Massachusetts corporation (the "Company"), and
Chittenden Corporation, a Vermont corporation (the "Purchaser").
WHEREAS, the Purchaser and the Company have entered into an Agreement and
Plan of Reorganization of even date herewith (the "Merger Agreement"), which
agreement is being executed by the parties hereto simultaneously with this
Agreement; and
WHEREAS, as a condition to the Purchaser's entry into the Merger Agreement
and in consideration for such entry, the Company has agreed to grant the
Purchaser the Option (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. Grant of Option. On the terms and conditions contained in this
Agreement, the Company hereby grants to the Purchaser an unconditional,
irrevocable option (the "Option") to purchase up to 7,558 shares (the "Option
Shares") of the common stock, par value $66.67 per share (the "Common Shares"),
of the Company, representing 24.9 percent (24.9%) of the aggregate of the
issued and outstanding Common Shares (including converted Class A shares,
employee options, warrants and the Option Shares) as of the date hereof, at a
price of $800.00 per share (the "Option Price").
2. Exercise of Option. The Option may not be exercised or transferred
except upon and after the occurrence of any of the events set forth in this
paragraph 2. The Purchaser may exercise or transfer the Option, in whole or in
part, at any time or from time to time after (a) any person or group (as such
terms are defined in the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations thereunder), other than the
Purchaser or a wholly-owned subsidiary of the Purchaser, ("Other Party")
acquires after the date hereof beneficial ownership of or the right to
acquire such beneficial ownership or to vote at least 15 percent (15%) of the
then outstanding Common Shares, other than any person acquiring such
beneficial ownership by will or operation of law; or (b) there shall be
publicly announced any proposal by such a person or group relating to (i) any
merger, consolidation or acquisition of all or substantially all of the
assets of the Company or other business combination involving the Company
prior to the meeting of the Company stockholders contemplated by Section 6.5
of the Merger Agreement and the Company stockholders fail to adopt the Merger
Agreement at such meeting, or (ii) a change in the composition of 20 percent
(20%) or more of the Common Shares then outstanding. The Company shall
notify the Purchaser promptly in writing of the occurrence of any of the
events set forth in the preceding sentence, it being understood that the
giving of such notice by the Company shall not be a condition to the right of
the Purchaser to transfer or exercise the Option. The Company will not take
any action which would have the effect of preventing or disabling the Company
from delivering the Option Shares to the Purchaser upon exercise of the
Option or otherwise performing its obligations under this Agreement. In the
event the Purchaser wishes to exercise the Option, the Purchaser shall send a
written notice to the Company specifying the total number of Option Shares it
wishes to purchase and a place and date between one and ten business days
inclusive from the date such notice is given for the closing of such purchase
(a "Closing"), provided, however, that a Closing shall not occur prior
to the receipt of all necessary regulatory approvals therefor.
3. Payment and Delivery of Certificates. At any Closing hereunder the
Purchaser will either (i) make payment to the Company of the aggregate price
for the Option Shares so purchased by delivery of immediately available funds
and the Company will deliver to the Purchaser a stock certificate or
certificates representing the number of Option Shares so purchased,registered in
the name of the Purchaser or its designee in such denominations as were
specified by the Purchaser in its notice of exercise; or (ii) notify the
Company that the Purchaser will accept payment from the Other Party of the
difference between the Company's per share consideration pursuant to the
agreement with the Other Party and $800.00 per share. In connection with any
partial exercise of the Option, the Purchaser (or any direct or indirect
assignee or transferee of the Purchaser) shall be entitled to surrender this
Stock Option Agreement to the Company in exchange for two or more Stock
Option Agreements entitling the holders thereof to purchase in the aggregate
the same number of Common Shares as may be purchasable hereunder.
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser as follows:
A. Authority Relative to this Agreement. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by the Board of Directors of the
Company and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and
delivered by the Company.
B. Option Shares. the Company has taken all necessary corporate action
to authorize and reserve and permit it to issue, and at all times from the
date hereof through the termination of this Agreement in accordance with its
terms will have reserved for issuance upon the exercise of the Option, 7,558
Common Shares, all of which, upon issuance pursuant hereto, shall be duly
authorized, validly issued, fully paid, nonassessable, and shall be delivered
free and clear of all claims, liens, encumbrances and security interests and
not subject to any preemptive rights.
5. Registration Rights.
A. On or after the occurrence of an event permitting exercise of the
Option pursuant to paragraph 2 hereof, the Company shall, at the request of the
Purchaser (whether on its own behalf or on the behalf of any subsequent
holder of this Option (or part thereof) or any of the Option Shares issued
pursuant hereto), promptly prepare, file and keep current a registration
statement under the Securities Act of 1933 (the "Securities Act") governing
this Option and any shares issued and issuable pursuant to this Option and
shall use its best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition
of this Option and any Option Shares issued upon total or partial exercise of
this Option in accordance with any plan of disposition adopted by the
Purchaser, except that the Company shall not be required to maintain the
effectiveness of such registration statement for more than 90 days. The
Purchaser shall have the right to demand two such registrations. In
connection with each such registration, the Company shall use its best
efforts to cause to be delivered to the Purchaser (and any other holder whose
Option or Option Shares are the subject of such registration) such
certificates, opinions, accountants' letters and other documents as the
Purchaser (or such subsequent holder) shall reasonably request. All expenses
incurred by the Company in complying with the provisions of this paragraph 5,
including without limitation, all registration and filing fees, printing fees
and disbursements of counsel for the Company and blue sky fees and expenses
shall be paid by the Company, except that all underwriting discounts and
selling commissions applicable to the sales and all fees and disbursements
for counsel for the Purchaser shall be paid by the Purchaser and/or the
holder whose Option or Option Shares are the subject of such registration.
B. On or after the occurrence of any event permitting exercise of the
Option pursuant to paragraph 2 hereof, each time the Company shall determine to
proceed with the actual preparation and filing of a registration statement under
the Securities Act in connection with the proposed offer and sale for money
of any of its securities (other than in connection with a dividend
reinvestment, employee stock purchase, stock option or similar plan or a
registration statement on Form S-4) by it or any of its security holders, the
Company will give written notice of its determination to the Purchaser. Upon
the written request of the Purchaser given with 10 days after receipt of any
such notice from the Company, the Company will cause all securities which
the Purchaser shall request to be included in such registration statement
contemplated by this subparagraph B to be included in such registration
statement; provided, however, that nothing herein shall prevent the Company
from, at any time, abandoning or delaying any such registration; provided
further, however, that if the Company determines not to proceed with a
registration after the registration statement has been filed with the
Securities and Exchange Commission, the Company shall promptly complete the
registration for the benefit of the Purchaser if the Purchaser agrees to bear
all incremental expenses incurred by the Company as the result of such
registration after the Company has decided not to proceed. If any
registration pursuant to this subparagraph B shall be underwritten in whole or
in part, the Purchaser may require that any securities requested for
inclusion pursuant to this subparagraph B be included in the underwriting on
the same terms and conditions as the securities otherwise being sold through
underwriters.
6. Adjustment Upon Changes in Capitalization.
A. In the event that any additional Common Shares 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 subparagraph 6(B) of this Agreement),including, without
limitation, pursuant to stock option or other employee plans or as a result
of the exercise of conversion rights, the number of Common Shares subject to
the Option shall be increased so that, after such issuance, it equals 24.9%
of the number of Common Shares then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option.
B. In the event of any change in the Common Shares by reason of stock
dividend, split-up, merger, recapitalization, subdivision, conversion,
combination, exchange of shares or similar transaction, the type and number
of Option Shares, and the Option Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transaction, so the Purchaser shall receive upon exercise of the Option
the number and class of shares or other securities or property that the
Purchaser would have held immediately after such event if the Option had been
exercised immediately prior to such event, or the record date therefor, as
applicable. Whenever the number of Option Shares (or other securities)
purchasable upon exercise hereof is adjusted as provided in this subparagraph
6(B), the Option Price shall be adjusted by multiplying the Option Price by a
fraction, the numerator of which is equal to the number of Option Shares
prior to the Adjustment and the denominator of which is equal to the
number of Option Shares (or other securities) purchasable after the adjustment.
7. Filings and Consents. the Purchaser and the Company each will use
its best efforts to make all filings with, and to obtain consents of, all
third parties and governmental authorities necessary to the consummation of
the transactions contemplated by this Agreement. If the Other Party is
prevented from honoring any part of its obligation, the Purchaser reserves
the right to negotiate with the appropriate regulators to effect the maximum
consideration for the Option Shares.
8. Specific Performance. Each of the parties hereto acknowledges and
agrees that it would not have an adequate remedy at law and would be
irreparably harmed in the event that any of the provisions of this Agreement
were not performed by the other party hereto in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that each
of the parties hereto shall be entitled to injunctive relief to prevent
breaches of this Agreement and to specifically enforce the terms and
provisions hereof, in addition to any other remedy to which each of the
parties hereto may be entitled, at law or in equity.
9. Entire Agreement. This Agreement and the Merger Agreement
constitute the entire agreement between the parties with respect to the
subject matter hereof and supersede all other prior agreements and
understandings, both written and oral, among the parties or any of them
with respect to the subject matter hereof.
10. Assignment. At any time or from time to time upon or after the
occurrence of any event set forth in the second sentence of paragraph 2, the
Purchaser may sell, assign or otherwise transfer its rights and obligations
hereunder, in whole or in part, to any person or group of persons, subject
only to compliance with applicable law. In order to effectuate the foregoing,
the Purchaser (or any direct or indirect assignee or transferee of the
Purchaser) shall be entitled to surrender this Stock Option Agreement to the
Company in exchange for two or more Stock Option Agreements entitling the
holders thereof to purchase in the aggregate the same number of shares of
Common Stock as may be purchasable hereunder.
11. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
12. Notices. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when
delivered in person, by cable, telegram or telex, or by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties as follows):
If to the Purchaser:
Chittenden Corporation
Two Burlington Square
Burlington, the Purchaser 05401
Attention: Paul A. Perrault, President
With a copy to:
Chittenden Corporation
Two Burlington Square
Burlington, the Purchaser 05401
Attention: F. Sheldon Prentice, Secretary
If to the Company:
Bank of Western Massachusetts
29 State Street
Springfield, the Company 01103
Attention: Timothy P. Crimmins, Jr., President
With a copy to:
Bank of Western Massachusetts
29 State Street
Springfield, the Company 01103
Attention: Frank Fitzgerald, Esquire
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
13. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Vermont.
14. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
15. Parties in Interest. This Agreement shall be binding upon or inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person (other than
an assignee or transferee of the Purchaser pursuant to paragraph 10 hereof)
any rights or remedies of any nature whatsoever under or by reason of this
Agreement.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
17. Expenses. All costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party
incurring such expenses.
18. Termination. The Option granted hereby, to the extent not
previously exercised, shall terminate upon the earliest of (i) one year after
the occurrence of any event set forth in paragraph 2 hereof, (ii) immediately
after the Effective Time (as defined in the Merger Agreement) or (iii) the
termination of the Merger Agreement in accordance with the terms thereof
prior to the occurrence of any event set forth in paragraph 2 hereof
(other than as provided in subparagraph iv below).
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of
the day and year first above written.
CHITTENDEN CORPORATION
By: S/PAUL A. PERRAULT
President
BANK OF WESTERN MASSACHUSETTS
By:
Chairman of the Board
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
As permitted by the Vermont Business Corporation Law ("VBCL"), Article Six,
Section I of CC's Bylaws provides for indemnification of directors and officers
of CC as follows:
CC shall indemnify (A) its directors to the full extent provided by
the general laws of the State of Vermont now or hereafter in force,
including the advance of expenses under the procedures provided by
such laws; and (B) its officers and employees to the same extent it
shall indemnify its directors.
CC's Bylaws also contain indemnification procedures which implement
indemnification. The VBCL permits a corporation to indemnify its directors and
officers, among others, against judgements, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with any proceeding
to which they may be made a party by reason of their service in those or other
capacities, unless it is established that (a) the act or omission of the
director or officer was material to the matter giving rise to such proceeding
and (i) was committed in bad faith or (ii) was the result of active and
deliberate dishonestly, (b) the director or officer actually received an
improper personal benefit in money, property or services, or (c) in the case of
any criminal proceeding, the director or officer had reasonable cause to believe
that the action or omission was unlawful. CC also maintains directors and
officers liability insurance.
The VBCL permits the charter of a Vermont corporation to include a provision
limiting the liability of its directors and officers to the corporation and its
stockholders for money damages, except to the extent that (i) the person
actually received an improper benefit or profit in money, property or services
or (ii) a judgement or other final adjudication is entered in a proceeding based
on a finding that the person's action, or failure to act, was the result of
active and deliberate dishonesty and was material to the cause of action
adjudicated in the proceeding. CC's Articles do not contain a provision
providing for elimination of the liability of its directors or officers to CC
or its stockholders for money damages to the fullest extent permitted by Vermont
law.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits.
2.1 Agreement and Plan of Reorganization dated August 17, 1994 by and among
Chittenden Corporation, Chittenden Acquisition Bank and The Bank of
Western Massachusetts.*
2.2 Stock Option Agreement dated August 17, 1994 by and between Chittenden
Corporation and The Bank of Western Massachusetts.**
3.1 Articles of Incorporation of Chittenden Corporation.***
3.2 Bylaws of Chittenden Corporation.***
4 Form of Common Stock Certificate.***
5 Opinion and Consent of F. Sheldon Prentice, Esquire, regarding
liability.****
8 Opinion of Piper & Marbury regarding tax matters.****
10 Not Applicable
11 Statement regarding computation of per share earnings.****
12 Statement regarding computation of ratios.****
21 Subsidiaries of Chittenden Corporation.
23.1 Consent of Arthur Andersen LLP.****
23.2 Consent of KPMG Peat Marwick LLP.****
23.3 Consent of Coopers & Lybrand L.L.P.****
23.4 Consent of Piper & Marbury (included in Exhibit 8).****
24 Power of Attorney.
(b) Financial Statement Schedules. Not Applicable.
(c) Opinion of Financial Advisor.
Furnished as Appendix B to the Proxy Statement/Prospectus.
- ----------------------------------------
* Included as Appendix A to the Proxy Statement/Prospectus.
** Included as Appendix D to the Proxy Statement/Prospectus.
*** Previously filed with the Commission as exhibits to, and incorporated
herein by reference from, the registrant's Annual Report on Form 10-K for
fiscal year ended December 31, 1993 (File No.0-7974)
**** To be filed by amendment.
Item 22. Undertakings.
A. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11 or 13 of Form S-4, within one business day of receipt
of such request, and to send the incorporated documents by first class mail
or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration
statement through the date of responding to the request.
B. The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
C. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
D. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(2) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(3) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement.
(4) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(5) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(6) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
E. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
F. The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
G. The registrant undertakes that every prospectus: (i) that is filed pursuant
to paragraph (1) immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CHITTENDEN CORPORATION
EXHIBITS
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
EXHIBIT INDEX
Exhibit No. Description
(a) Exhibits.
2.1 Agreement and Plan of Reorganization dated August 17, 1994 by and among
Chittenden Corporation, Chittenden Acquisition Bank and The Bank of
Western Massachusetts.*
2.2 Stock Option Agreement dated August 17, 1994 by and between Chittenden
Corporation and The Bank of Western Massachusetts.**
3.1 Articles of Incorporation of Chittenden Corporation.***
3.2 Bylaws of Chittenden Corporation.***
4 Form of Common Stock Certificate.***
5 Opinion and Consent of F. Sheldon Prentice, Esquire regarding
legality.****
8 Opinion of Piper & Marbury regarding tax matters.****
10 Not Applicable.
11 Statement regarding computation of per share earnings.****
12 Statement regarding computation of ratios.****
21 Subsidiaries of Chittenden Corporation.
23.1 Consent of Arthur Andersen LLP.****
23.2 Consent of KPMG Peat Marwick LLP.****
23.3 Consent of Coopers & Lybrand L.L.P.****
23.4 Consent of Piper & Marbury (included in Exhibit 8).****
24 Power of Attorney.
(b) Financial Statement Schedules. Not Applicable.
(c) Opinion of Financial Advisor
Furnished as Appendix B to the Proxy Statement/Prospectus.
- ----------------------------------------
* Included as Appendix A to the Proxy Statement/Prospectus.
** Included as Appendix D to the Proxy Statement/Prospectus.
*** Previously filed with the Commission as exhibits to, and incorporated
herein by reference from, the registrant's Annual Report on Form 10-K for
fiscal year ended December 31, 1993 (File No.0-7974)
**** To be filed by amendment.
CHITTENDEN CORPORATION
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned Officers and Directors of
Chittenden Corporation, hereby constitute and appoint Paul A. Perrault and Nancy
Rowden Brock and each of them, the true and lawful agents and attorney-in-fact
of the undersigned with full power and authority in said agents and attorneys-
in-fact, and in any one or more of them, to sign for the undersigned and in
their respective names as Officers and as Directors of the Corporation a
Registration Statement of Form S-4, or other appropriate form, of the
Corporation to be filed with the Securities and Exchange Commission, Washington,
D.C., under the Securities Act of 1933, as amended, and any amendment or
amendments to such Registration Statement, relating to a proposed issue of
shares of Common Stock of the Corporation; hereby ratifying and confirming all
acts taken by such agents and attorneys-in-fact, or any one or more of them, as
herein authorized.
Dated: November 16, 1994
Name Title
s/ Paul A. Perrault President, Chief Executive Officer
Paul A. Perrault and Director
s/ Nancy Rowden Brock Treasurer and Chief Financial Officer
Nancy Rowden Brock
s/ Barbara W. Snelling Director and Chair of the Board
Barbara W. Snelling
s/ Frederic H. Bertrand Director
Frederic H. Bertrand
s/ David M. Boardman Director
David M. Boardman
s/ Paul J. Carrara Director
Paul J. Carrara
s/ Eugene P. Cenci Director
Eugene P. Cenci
s/ Robert E. Cummings, Jr. Director
Robert E. Cummings, Jr.
Marvin B. Gameroff Director
s/Philip A. Kolvoord Director
Philip A. Kolvoord
s/ James C. Pizzagalli Director
James C. Pizzagalli
s/ Pall D. Spera Director
Pall D. Spera
s/ Martel D. Wilson, Jr. Director
Martel D. Wilson, Jr.
EXHIBIT 21 OF ITEM 21
Subsidiaries of Chittenden Corporation
1. Chittenden Trust Company
2. Chittenden Acquisition Bank
HISTORICAL SELECTED FINANCIAL DATA
CHITTENDEN CORPORATION
Nine Months Years Ended
Ended Sept. 30, December 31,
1994 1993 1992
---- ---- ----
(In thousands, except share amounts)
Statements of Operations
Interest Income $ 61,801 $ 79,803 $ 86,984
Interest Expense 22,027 29,574 41,300
---------- ---------- ----------
Net Interest Income 39,774 50,229 45,684
Provision for possible loan losses 3,400 6,600 7,513
---------- ---------- ----------
Net interest income after provision
for possible loan losses 36,374 43,629 38,171
Noninterest income 17,035 24,308 21,073
Noninterest expense 36,543 51,097 49,582
---------- ---------- ----------
Income (loss) before provision
(benefit) for income taxes 16,866 16,840 9,662
Provision (benefit) for income
taxes 5,615 5,243 2,444
---------- ---------- ----------
Income (loss) before cumulative effect
of change in accounting principle 11,251 11,597 7,218
Cumulative effect of change in
accounting principle 0 (575) 0
---------- ---------- ----------
Net Income (loss) 11,251 11,022 7,218
Preferred stock dividends 0 0 0
---------- ---------- ----------
Net income (loss) applicable to
common stock $ 11,251 $ 11,022 $ 7,218
========== ========== ==========
Total assets at period-end $1,223,593 $1,231,003 $1,192,068
Long-term debt at period-end 0 0 59
Balance sheets-average daily balances:
Total assets $1,192,163 $1,172,809 $1,171,060
Loans, net of allowance 824,956 852,958 844,126
Investment securities and interest-
bearing cash equivalents 269,858 220,927 222,428
Total deposits 1,044,580 1,030,839 1,021,827
Long-term debt 0 7 2,034
Total stockholders' equity 100,618 92,813 83,520
Per common share:
Net income (loss) $ 1.77 $ 1.78 $ 1.17
Cash dividends declared 0.33 0.20 0.13
Book value 16.53 15.73 14.04
Weighted average common shares
outstanding 6,366,107 6,206,848 6,193,944
HISTORICAL SELECTED FINANCIAL DATA
CHITTENDEN CORPORATION
Years Ended December 31,
1991 1990 1989
---- ---- ----
(In thousands, except share amounts)
Statements of Operations
Interest Income $ 100,061 $ 106,182 $ 109,971
Interest Expense 57,972 63,410 64,004
---------- ---------- ----------
Net Interest Income 42,089 42,772 45,967
Provision for possible loan losses 8,843 12,189 10,830
Net interest income after provision
for possible loan losses 33,246 30,583 35,137
Noninterest income 18,442 16,529 17,424
Noninterest expense 45,847 50,378 46,601
---------- ---------- ----------
Income (loss) before provision
(benefit) for income taxes 5,841 (3,266) 5,960
Provision (benefit) for income
taxes 1,234 (2,219) 1,006
---------- ---------- ----------
Income (loss) before cumulative effect
of change in accounting principle 4,607 (1,047) 4,954
Cumulative effect of change in
accounting principle - - -
---------- ---------- ----------
Net income (loss) 4,607 (1,047) 4,954
Preferred stock dividends 0 0 15
---------- ---------- ----------
Net income (loss) applicable to
common stock $ 4,607 $ (1,047) $ 4,939
========== ========== ==========
Total assets at period-end $1,204,949 $1,136,988 $1,098,734
Long-term debt at period-end 2,473 2,473 7,732
Balance sheets-average daily balances:
Total assets $1,115,744 $1,094,984 $1,096,016
Loans, net of allowance 828,433 847,440 851,059
Investment securities and interest-
bearing cash equivalents 191,244 147,353 148,142
Total deposits 992,017 959,297 952,431
Long-term debt 2,473 6,368 9,992
Total stockholders' equity 74,476 74,338 78,621
Per common share:
Net income (loss) $ 0.74 $ (0.17) $ 0.79
Cash dividends declared 0.00 0.29 0.54
Book value 12.79 11.59 12.24
Weighted average common shares
outstanding 6,186,600 6,192,416 6,258,399
HISTORICAL SELECTED FINANCIAL DATA
CHITTENDEN CORPORATION (Cont'd.)
Nine Months Years Ended
Ended Sept. 30, December 31,
1994 1993 1992
---- ---- ----
Selected financial percentages:
Return on average total assets (1) 1.26% 0.94% 0.62%
Return on average common
stockholders' equity (1) 14.95 11.88 8.64
Interest rate spread 4.32 4.20 3.78
Net yield on earning assets 4.87 4.68 4.35
Net charge-offs as a percent
of average loans 0.38 0.47 0.64
Nonperforming asset ratio (2) 1.06 1.84 2.79
Allowance for possible loan losses as
a percent of period-end loans 2.20 2.22 1.87
Period-end leverage capital ratio 8.83 8.13 7.30
Period-end primary capital ratio NA NA NA
Risk-based capital ratios:
Tier I 11.95 11.05 9.64
Total 13.32 12.41 10.95
Average stockholders' equity to
average assets 8.44 7.91 7.13
Common stock dividend payout
ratio (3) 18.64 11.28 11.44
- ----------------------------------------
(1) Income used in the calculation is net income (loss) applicable to
common stock.
(2) The sum of nonperforming assets (nonaccrual loans, restructured
loans,and other real estate owned) divided by the sum of total loans
and other real estate owned.
(3) Common stock cash dividends declared divided by net income applicable
to common stock.
HISTORICAL SELECTED FINANCIAL DATA
CHITTENDEN CORPORATION (Cont'd.)
Years Ended December 31,
1991 1990 1989
---- ---- ----
Selected financial percentages:
Return on average total assets (1) 0.41% (0.10%) 0.45%
Return on average common
stockholders' equity (1) 6.19 (1.41) 6.28
Interest rate spread 3.41 3.53 3.72
Net yield on earning assets 4.22 4.44 4.74
Net charge-offs as a percent
of average loans 0.89 1.44 0.53
Nonperforming asset ratio (2) 3.75 3.42 3.70
Allowance for possible loan losses as
a percent of period-end loans 1.73 1.56 1.52
Period-end leverage capital ratio 6.86 NA NA
Period-end primary capital ratio NA 7.36 8.03
Risk-based capital ratios:
Tier I 8.53 7.88 NA
Total 10.04 9.36 NA
Average stockholders' equity to
average assets 6.68 6.79 7.17
Common stock dividend payout
ratio (3) 0.00 NA 68.98
- ----------------------------------------
(1) Income used in the calculation is net income (loss) applicable to
common stock.
(2) The sum of nonperforming assets (nonaccrual loans, restructured
loans,and other real estate owned) divided by the sum of total loans
and other real estate owned.
(3) Common stock cash dividends declared divided by net income applicable
to common stock.
HISTORICAL SELECTED FINANCIAL DATA
THE BANK OF WESTERN MASSACHUSETTS
Nine Months Years Ended
Ended Sept. 30, December 31,
1994 1993 1992
---- ---- ----
(In thousands, except share amounts)
Statements of Operations
Interest income $ 11,100 $ 12,361 $ 13,292
Interest expense 4,342 5,513 6,812
---------- ---------- ----------
Net Interest income 6,758 6,848 6,480
Provision for possible loan losses 1,050 960 1,330
---------- ---------- ----------
Net interest income after provision
for possible loan losses 5,708 5,888 5,150
Noninterest income 402 932 776
Noninterest expense 4,366 4,860 4,346
---------- ---------- ----------
Income (loss) before provision
(benefit) for income taxes 1,744 1,960 1,580
Provision (benefit) for income
taxes 689 758 645
---------- ---------- ----------
Income (loss) before cumulative effect
of change in accounting principle 1,055 1,202 935
Cumulative effect of change in
accounting principle 0 0 35
---------- ---------- ----------
Net income (loss) $ 1,055 $ 1,202 $ 970
========== ========== ==========
Total assets at period-end $ 214,184 $ 205,451 $ 187,516
Long-term debt at period-end 0 0 0
Balance sheets-average daily balances:
Total assets $ 205,004 $ 180,863 $ 179,217
Loans, net of allowance 150,092 137,950 135,393
Investment securities and interest-
bearing cash equivalents 41,462 31,442 32,458
Total deposits 183,956 162,081 162,473
Total stockholders' equity 16,989 15,405 14,333
Per common share:
Net income (loss) $ 57.21 $ 65.19 $ 52.63
Cash dividends declared 0.00 0.00 0.00
Book value 878.73 864.17 798.98
Weighted average common shares
outstanding 18,440 18,440 18,432
HISTORICAL SELECTED FINANCIAL DATA
THE BANK OF WESTERN MASSACHUSETTS
Years Ended December 31,
1991 1990 1989
---- ---- ----
(In thousands, except share amounts)
Statements of Operations
Interest income $ 14,842 $ 14,219 $ 9,823
Interest expense 9,045 9,345 6,205
---------- ---------- ----------
Net Interest income 5,797 4,874 3,618
Provision for possible loan losses 3,500 1,267 411
---------- ---------- ----------
Net interest income after provision
for possible loan losses 2,297 3,607 3,207
Noninterest income 497 157 57
Noninterest expense 3,995 3,465 2,223
---------- ---------- ----------
Income (loss) before provision
(benefit) for income taxes (1,201) 299 1,041
Provision (benefit) for income
taxes (409) 93 431
---------- ---------- ----------
Income (loss) before cumulative effect
of change in accounting principle (792) 206 610
Cumulative effect of change in
accounting principle 0 0 0
---------- ---------- ----------
Net income (loss) $ (792) $ 206 $ 610
========== ========== ==========
Total assets at period-end $ 182,799 $ 149,964 $ 118,418
Long-term debt at period-end 0 0 0
Balance sheets-average daily balances:
Total assets $ 164,104 $ 137,038 $ 89,823
Loans, net of allowance 133,181 115,450 71,151
Investment securities and interest-
bearing cash equivalents 21,020 10,049 6,617
Total deposits 147,839 120,513 75,369
Total stockholders' equity 14,179 14,436 12,146
Per common share:
Net income (loss) $ (43.14) $ 11.20 $ 35.56
Cash dividends declared 0.00 0.00 0.00
Book value 745.35 788.49 777.00
Weighted average common shares
outstanding 18,365 18,364 17,169
HISTORICAL SELECTED FINANCIAL DATA
THE BANK OF WESTERN MASSACHUSETTS (Cont'd.)
Nine Months Years Ended
Ended Sept. 30, December 31,
1994 1993 1992
---- ---- ----
Selected financial percentages:
Return on average total assets (1) 0.69% 0.66% 0.54%
Return on average common
stockholders' equity (1) 8.52 7.80 6.77
Interest rate spread 4.26 3.44 3.24
Net yield on earning assets 4.72 3.96 3.79
Net charge-offs as a percent
of average loans 0.50 0.70 0.80
Nonperforming asset ratio (2) 2.26 2.85 3.40
Allowance for possible loan losses as
a percent of period-end loans 2.17 2.30 2.37
Period-end leverage capital ratio 7.93 7.76 7.86
Period-end primary capital ratio NA NA NA
Risk-based capital ratios:
Tier I 10.18 9.72 10.59
Total 11.44 11.36 11.85
Average stockholders' equity to
average assets 8.08 8.52 8.00
- ----------------------------------------
(1) Income used in the calculation is net income (loss) applicable to
common stock.
(2) The sum of nonperforming assets (nonaccrual loans, restructured
loans,and other real estate owned) divided by the sum of total loans
and other real estate owned.
HISTORICAL SELECTED FINANCIAL DATA
THE BANK OF WESTERN MASSACHUSETTS (Cont'd.)
Years Ended December 31,
1991 1990 1989
---- ---- ----
Selected financial percentages:
Return on average total assets (1) (0.48%) 0.15% 0.68%
Return on average common
stockholders' equity (1) (5.59) 1.43 5.02
Interest rate spread 2.82 2.66 2.66
Net yield on earning assets 3.68 3.74 4.23
Net charge-offs as a percent
of average loans 1.50 0.50 0.00
Nonperforming asset ratio (2) 3.21 1.10 0.23
Allowance for possible loan losses as
a percent of period-end loans 2.20 1.20 0.92
Period-end leverage capital ratio 7.49 NA NA
Period-end primary capital ratio NA 10.59 12.84
Risk-based capital ratios:
Tier I 9.66 NA NA
Total 10.92 NA NA
Average stockholders' equity to
average assets 8.64 10.53 13.52
- ----------------------------------------
(1) Income used in the calculation is net income (loss) applicable to
common stock.
(2) The sum of nonperforming assets (nonaccrual loans, restructured
loans,and other real estate owned) divided by the sum of total loans
and other real estate owned.
UNAUDITED PRO FORMA SELECTED FINANCIAL DATA
CC AND BWM
Nine Months Ended September 30, 1994
Historical
CC BWM Pro Forma
---- ---- ------------
(In thousands, except share amounts)
Consolidated Statements of Operations
Interest income $ 61,801 $ 11,100 $ 73,077
Interest expense 22,027 4,342 26,466
---------- ---------- ----------
Net Interest income $ 39,774 $ 6,758 $ 46,611
Provision for possible loan losses 3,400 1,050 4,450
---------- ---------- ----------
Net interest income after provision
for possible loan losses 36,374 5,708 42,161
Noninterest income 17,035 402 17,437
Noninterest expense 36,543 4,366 41,633
---------- ---------- ----------
Income before income taxes 16,866 1,744 17,965
Income tax expense 5,615 689 6,121
---------- ---------- ----------
Income before cumulative effect
of change in accounting principle 11,251 1,055 11,844
Cumulative effect of change in
accounting principle 0 0 0
---------- ---------- ----------
Net income $ 11,251 $ 1,055 $ 11,844
========== ========== ==========
Per common share:
Net income $ 1.77 $ 1.69
Book value 16.53 16.99
Weighted average common and
common equivalent shares
outstanding 6,366,107 6,993,632
Consolidated Balance Sheet
(at September 30, 1994)
Total assets $1,223,593 $ 214,184 $1,437,108
Investment securities available for sale 217,995 36,029 254,024
Investment securities held for
investment 10,223 0 10,223
Loans (net of unearned income and
allowance for possible loan losses) 849,175 160,427 1,008,542
Deposits 1,039,728 185,755 1,225,127
Stockholders' Equity 103,081 16,204 116,669
UNAUDITED PRO FORMA SELECTED FINANCIAL DATA
CC AND BWM
Year Ended December 31, 1993
Historical
CC BWM Pro Forma
---- ---- ------------
(In thousands, except share amounts)
Consolidated Statements of Operations
Interest income $ 79,803 $ 12,361 $ 92,456
Interest expense 29,574 5,513 35,265
---------- ---------- ----------
Net Interest income $ 50,229 $ 6,848 $ 57,191
Provision for possible loan losses 6,600 960 7,560
---------- ---------- ----------
Net interest income after provision
for possible loan losses 43,629 5,888 49,631
Noninterest income 24,308 932 25,240
Noninterest expense 51,097 4,860 56,924
---------- ---------- ----------
Income before income taxes 16,840 1,960 17,947
Income tax expense 5,243 758 5,760
---------- ---------- ----------
Income before cumulative effect
of change in accounting principle 11,597 1,202 12,187
Cumulative effect of change in
accounting principle (575) 0 0
---------- ---------- ----------
Net income $ 11,022 $ 1,202 $ 12,187
========== ========== ==========
Per common share:
Net income $ 1.78 $ 1.78
Book value 15.73
Weighted average common and
common equivalent shares
outstanding 6,206,848 6,834,373
Consolidated Balance Sheet
(at September 30, 1994)
Total assets
Investment securities available for sale
Investment securities held for
investment
Loans (net of unearned income and
allowance for possible loan losses)
Deposits
Stockholders' Equity
CHITTENDEN CORPORATION - BANK OF WESTERN MASSACHUSETTS
PRO FORMA CONDENSED BALANCE SHEETS
September 30, 1994
(Dollars in Thousands)
(Unaudited)
CC BWM
(Historical) (Historical)
----------- -----------
ASSETS
Cash and Cash Equivalents $ 98,492 $ 11,146
Investment Securities Available for Sale 217,995 36,029
Investment Securities Held for Investment 10,223 0
Loans 868,264 163,992
Allowance for Loan Losses (19,089) (3,565)
----------- -----------
Net Loans 849,175 160,427
Premises and equipment 16,433 1,501
Intangibles 0 0
Accrued Interest Receivable 9,318 1,523
Other Real Estate Owned 1,125 794
Other Assets 20,832 2,764
----------- -----------
Total Assets $ 1,223,593 $ 214,184
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Total Deposits $ 1,039,728 $ 185,755
Short-Term Borrowings 61,133 11,340
Other Liabilities 19,651 885
----------- -----------
Total Liabilities 1,120,512 197,980
Stockholders' Equity:
Common Stock-Par Value 6,480 1,230
Surplus 51,479 12,210
Retained Earnings 52,250 3,551
Security Valuation Allowance,
Net of Taxes (4,111) (787)
Treasury Stock, at Cost (2,901) 0
Unearned Portion of Employee
Restricted Stock (116) 0
----------- -----------
Total Stockholders' Equity 103,081 16,204
----------- -----------
Total Liabilities and Stockholders' Equity $ 1,223,593 $ 214,184
=========== ===========
CHITTENDEN CORPORATION - BANK OF WESTERN MASSACHUSETTS
PRO FORMA CONDENSED BALANCE SHEETS
September 30, 1994
(Dollars in Thousands)
(Unaudited)
Pro Forma
Adjustments Pro Forma
----------- -----------
DR(CR)
ASSETS
Cash and Cash Equivalents $ (12,087) (4) $ 97,551
Investment Securities Available for Sale 254,024
Investment Securities Held for Investment 10,223
Loans (1,060) (1) 1,031,196
Allowance for Loan Losses (22,654)
----------- -----------
Net Loans (1,060) 1,008,542
Premises and equipment 17,934
Intangibles 12,479 (1)(5) 12,479
Accrued Interest Receivable 10,841
Other Real Estate Owned 1,919
Other Assets 23,596
----------- -----------
Total Assets $ (668) $ 1,437,109
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Total Deposits $ 356 (1) $ 1,225,127
Short-Term Borrowings 72,473
Other Liabilities (2,304) (2)(3) 22,840
----------- -----------
Total Liabilities (1,948) 1,320,440
Stockholders' Equity:
Common Stock-Par Value 1,230 (5)
(628) (4) 7,108
Surplus 12,210 (5)
(12,960) (4) 64,439
Retained Earnings 3,551 (5) 52,250
Security Valuation Allowance,
Net of Taxes (787) (5) (4,111)
Treasury Stock, at Cost 0 (2,901)
Unearned Portion of Employee
Restricted Stock 0 (116)
----------- -----------
Total Stockholders' Equity 2,616 116,669
----------- -----------
Total Liabilities and Stockholders' Equity $ 668 $ 1,437,109
=========== ===========
CHITTENDEN CORPORATION
PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1993
(Dollars in Thousands, except share data)
(Unaudited)
CC BWM
(Historical) (Historical)
----------- -----------
Interest Income:
Interest and Fees on Loans $ 69,979 $ 10,792
Interest and Dividends on Securities 9,557 1,458
Other 267 111
----------- -----------
Total Interest Income 79,803 12,361
Interest Expense:
Deposits 27,870 5,446
Other 1,704 67
----------- -----------
Total Interest Expense 29,574 5,513
----------- -----------
Net Interest Income 50,229 6,848
Provision for Possible Loan Losses 6,600 960
----------- -----------
Net Interest Income After Provision
for Possible Loan Losses 43,629 5,888
Noninterest Income 24,308 932
Noninterest Expenses 51,097 4,860
----------- -----------
Income before Income Taxes 16,840 1,960
Provision for Income Taxes 5,243 758
----------- -----------
Income before Cumulative Effect of Change
in Accounting Principle 11,597 1,202
Cumulative Effect of Change in Accounting
Principle (575) 0
----------- -----------
Net Income $ 11,022 $ 1,202
=========== ===========
Weighted Average Common Shares Outstanding 6,206,848
Earnings Per Share
Before Cumulative Effect of Change
in Accounting Principle $ 1.87
Cumulative Effect of Change in Accounting
Principle (0.09)
-----------
Fully Diluted $ 1.78
Primary $ 1.78
CHITTENDEN CORPORATION
PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1993
(Dollars in Thousands, except share data)
(Unaudited)
Pro Forma
Adjustments Pro Forma
----------- -----------
DR(CR)
Interest Income:
Interest and Fees on Loans $ (292) (6) $ 81,063
Interest and Dividends on Securities 11,015
Other 0 378
----------- -----------
Total Interest Income $ (292) $ 92,456
Interest Expense:
Deposits 178 (7) 33,494
Other 1,771
----------- -----------
Total Interest Expense 178 35,265
----------- -----------
Net Interest Income (114) 57,191
Provision for Possible Loan Losses 7,560
----------- -----------
Net Interest Income After Provision
for Possible Loan Losses (114) 49,631
Noninterest Income 25,240
Noninterest Expenses 967 (8) 56,924
----------- -----------
Income before Income Taxes 853 17,947
Provision for Income Taxes (241) (9) 5,760
----------- -----------
Income before Cumulative Effect of Change
in Accounting Principle 612 12,187
Cumulative Effect of Change in Accounting
Principle (575) (10) 0
----------- -----------
Net Income $ 37 $ 12,187
=========== ===========
Weighted Average Common Shares Outstanding 627,525 6,834,373
Earnings Per Share
Before Cumulative Effect of Change
in Accounting Principle
Cumulative Effect of Change in Accounting
Principle
Fully Diluted $ 1.78
Primary $ 1.78
CHITTENDEN CORPORATION
PRO FORMA CONDENSED STATEMENTS OF INCOME
For the Nine Months Ended September 30, 1994
(Dollars in Thousands, except share data)
(Unaudited)
CC BWM
(Historical) (Historical)
----------- -----------
Interest Income:
Interest and Fees on Loans $ 51,616 $ 9,441
Interest and Dividends on Securities 9,597 1,659
Other 588 0
----------- -----------
Total Interest Income 61,801 11,100
Interest Expense:
Deposits 20,647 4,178
Other 1,380 164
----------- -----------
Total Interest Expense 22,027 4,342
----------- -----------
Net Interest Income 39,774 6,758
Provision for Possible Loan Losses 3,400 1,050
----------- -----------
Net Interest Income After Provision
for Possible Loan Losses 36,374 5,708
Noninterest Income 17,035 402
Noninterest Expenses 36,543 4,366
----------- -----------
Income before Income Taxes 16,866 1,744
Provision for Income Taxes 5,615 689
----------- -----------
Net Income $ 11,251 $ 1,055
=========== ===========
Weighted Average Common Shares Outstanding 6,366,107
Earnings Per Share
Fully Diluted $ 1.77
Primary $ 1.77
CHITTENDEN CORPORATION
PRO FORMA CONDENSED STATEMENTS OF INCOME
For the Nine Months Ended September 30, 1994
(Dollars in Thousands, except share data)
(Unaudited)
Pro Forma
Adjustments Pro Forma
----------- -----------
DR(CR)
Interest Income:
Interest and Fees on Loans $ (176) (6) $ 61,233
Interest and Dividends on Securities 11,256
Other 588
----------- -----------
Total Interest Income (176) 73,077
Interest Expense:
Deposits 97 (7) 24,922
Other 1,544
----------- -----------
Total Interest Expense 97 26,466
----------- -----------
Net Interest Income (79) 46,611
Provision for Possible Loan Losses 4,450
----------- -----------
Net Interest Income After Provision
for Possible Loan Losses (79) 42,161
Noninterest Income 17,437
Noninterest Expenses 724 (8) 41,633
----------- -----------
Income before Income Taxes 645 17,965
Provision for Income Taxes (183) (9) 6,121
----------- -----------
Net Income $ 462 $ 11,844
=========== ===========
Weighted Average Common Shares Outstanding 627,525 6,993,632
Earnings Per Share
Fully Diluted $ 1.69
Primary $ 1.69
