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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 30, 1996
UST Corp.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Massachusetts 0-9623 04-2436093
(State or other jurisdiction (Commission File No.) (IRS Employer Identification No.)
of incorporation)
</TABLE>
40 Court Street
Boston, Massachusetts 02108
(Address of principal executive offices) (Zip Code)
(617) 726-7000
(Registrant's telephone number, including area code)
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<PAGE>
ITEM 5. OTHER EVENTS.
On August 30, 1996, UST Corp. (the "Company") executed an Affiliation
Agreement and Plan of Reorganization (the "Agreement") with Walden Bancorp,
Inc. ("Walden"), pursuant to which the Company will acquire Walden. Walden is
a $1 billion bank holding company for two community banks, Braintree Savings
Bank and The Co-operative Bank of Concord (together, the "Banks"), which
specialize in meeting consumer and small business banking needs in their local
markets with a total of 17 branch offices in Middlesex, Norfolk and Plymouth
counties. The transaction is expected to close during the first quarter of
1997. While the Company will first acquire Walden thereby making the Banks
subsidiaries of the Company, the Company anticipates merging the Banks into
its principal banking subsidiary, USTrust, in 1997.
The transaction is structured as a tax-free exchange of 1.9 shares of the
Company's common stock for each share of Walden's common stock. At the
Company's closing stock price of $16.25 on August 29, 1996, the transaction
would be valued at approximately $161 million, and Walden shareholders would
receive a value of $30.875 in the Company's common stock for each share of
Walden common stock. The purchase price represents a multiple of 1.69 times
stated book value of Walden, and 1.96 times tangible book value of Walden at
June 30, 1996. The Company expects to record a one-time pre-tax charge of
approximately $13.5 million of acquisition related costs in connection with
this transaction. The transaction, which is structured to qualify for
pooling-of-interests accounting treatment, is subject to the approval of the
shareholders of the Company and Walden as well as to the receipt of federal and
state regulatory banking approvals. If the Company's average stock price during
a period prior to closing is less than $13.81 per share and the Company's stock
price has declined by more than 15 percent relative to a certain bank stock
index, with one exception Walden can terminate the agreement.
The assets to be acquired by the Company include the physical
premises of (or the leases with respect to) the seventeen branch offices used
by the Banks to conduct their banking activities. The Company will also acquire
substantially all of the personalty in these branches. These locations will
continue to be used as branch offices by the Company.
<PAGE>
Simultaneously with the execution of the Agreement on August 30, 1996,
the Company entered into a Stock Option Agreement (the "Stock Option
Agreement") with Walden pursuant to which Walden has granted to the Company
an option to purchase, under certain circumstances, up to 1,016,868 shares of
Walden Common Stock for $20.50 per share.
Copies of the Agreement, the Company's press release and presentation to
analysts are listed herein as Exhibits 2, 99.1 and 99.2, respectively and
incorporated herein by reference. The Stock Option Agreement is included as
Exhibit C to the Agreement.
The preceeding description of the Agreement and the Stock Option
Agreement is qualified in its entirety by the reference to the copies of each
attached hereto and incorporated herein.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) and (b) Financial statements including pro forma financial
information will be provided within 60 days of the consummation of the proposed
transaction. At the current time, it is impracticable to provide this
information.
(c) Exhibits
1. Affiliation Agreement and Plan of Reorganization, dated as of
August 30, 1996, between UST Corp. and Walden Bancorp, Inc. (UST Agrees to
furnish to the Commission the omitted schedules upon request.)
2. UST Corp.'s Press Release dated August 30, 1996 related to the
acquisition by UST Corp. of Walden Bancorp, Inc.
3. UST Corp.'s Presentation to Analysts dated August 30, 1996,
related to the acquisition by UST Corp. of Walden Bancorp, Inc.
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities and Exchange Act of 1934,
the Company has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
UST Corp.
/s/ James K. Hunt
James K. Hunt
Executive Vice President, Chief
Financial Officer and Treasurer
/s/ Eric R. Fischer
Eric R. Fischer
Executive Vice President, General
Counsel and Clerk
Dated: September 11, 1996
_____________________________________________________________________________
AFFILIATION AGREEMENT AND
PLAN OF REORGANIZATION
DATED AS OF AUGUST 30, 1996
BETWEEN
UST CORP.
AND
WALDEN BANCORP, INC.
_____________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS .............................. 1
ARTICLE II THE MERGER ............................... 8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
THE BUYER ............................. 8
Section 3.01 Corporate Organization ................... 8
Section 3.02 Capitalization ........................... 9
Section 3.03 Authority; No Violation .................. 11
Section 3.04 Consents and Approvals ................... 12
Section 3.05 Financial Statements ..................... 13
Section 3.06 Absence of Undisclosed Liabilities ....... 14
Section 3.07 Broker's Fees ............................ 14
Section 3.08 Absence of Certain Changes or Events ..... 14
Section 3.09 Legal Proceedings ........................ 14
Section 3.10 Reports .................................. 15
Section 3.11 Buyer Common Stock ....................... 15
Section 3.12 Ownership of Seller Common Stock ......... 15
Section 3.13 Taxes and Tax Returns .................... 16
Section 3.14 Employees ................................ 17
Section 3.15 Agreements with Banking Authorities ...... 18
Section 3.16 Compliance with Applicable Law ........... 18
Section 3.17 Capitalization ........................... 18
Section 3.18 CRA Rating ............................... 19
Section 3.19 Buyer Information ........................ 19
Section 3.20 Disclosure ............................... 19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
THE SELLER ............................ 19
Section 4.01 Corporate Organization ................... 19
Section 4.02 Capitalization ........................... 20
Section 4.03 Authority; No Violation .................. 22
Section 4.04 Consents and Approvals ................... 24
Section 4.05 Financial Statements ..................... 24
Section 4.06 Absence of Undisclosed Liabilities ....... 25
Section 4.07 Broker's Fees ............................ 25
Section 4.08 Absence of Certain Changes or Events ..... 25
<PAGE>
Section 4.09 Legal Proceedings ........................ 26
Section 4.10 Taxes and Tax Returns .................... 26
Section 4.11 Employees ................................ 27
Section 4.12 Agreements with Banking Authorities ...... 29
Section 4.13 Material Agreements ...................... 29
Section 4.14 Ownership of Property .................... 29
Section 4.15 Reports .................................. 31
Section 4.16 Compliance with Applicable Law ........... 31
Section 4.17 Environmental Matters .................... 32
Section 4.18 Chapters 110D and 110F Not Applicable .... 34
Section 4.19 Ownership of Buyer Common Stock .......... 34
Section 4.20 Insurance ................................ 35
Section 4.21 Labor .................................... 35
Section 4.22 Material Interests of Certain Persons .... 35
Section 4.23 Absence of Registration Obligations ...... 35
Section 4.24 Loans .................................... 35
Section 4.25 Capitalization ........................... 36
Section 4.26 CRA Rating ............................... 36
Section 4.27 Seller Information ....................... 37
Section 4.28 Disclosure ............................... 37
ARTICLE V COVENANTS OF THE PARTIES ................. 37
Section 5.01 Conduct of the Business of Seller ........ 37
Section.5.02 Access to Properties and Records;
Confidentiality ........................ 42
Section 5.03 No Solicitation .......................... 45
Section 5.04 Regulatory Matters; Consents ............. 45
Section 5.05 Approval of Stockholders ................. 47
Section 5.06 Agreements of Affiliates; Publication of
Combined Financial Results .............. 47
Section 5.07 Further Assurances ....................... 48
Section 5.08 Public Announcements ..................... 49
Section 5.09 Post-Closing Governance .................. 49
Section 5.10 Merger Subsidiary ........................ 49
Section 5.11 Tax-Free Reorganization Treatment;
Accounting ........................ 50
Section 5.12 Stock Listing ............................ 50
Section 5.13 Employment and Benefit Matters ........... 50
Section 5.14 Accountants' Letters ..................... 51
Section 5.15 Directors' and Officers' Indemnification and
Insurance ............................. 51
Section 5.16 Conversion of Seller Stock Options ....... 52
Section 5.17 Maintenance of Records ................... 52
Section 5.18 Leases ................................... 52
<PAGE>
Section 5.19 Dividends ................................ 52
Section 5.20 Notice of Change ......................... 53
Section 5.21 Changes in Accounting .................... 53
Section 5.22 SEC Filings .............................. 53
Section 5.23 Covenants of Buyer ....................... 54
Section 5.24 Regulatory Reports ....................... 54
Section 5.25 Registration of Shares ................... 54
Section 5.26 Environmental Remediation ................ 54
Section 5.27 Bank Mergers ............................. 54
ARTICLE VI CLOSING CONDITIONS ............................ 55
Section 6.01 Conditions to Each Party's Obligations
Under This Agreement ................... 55
Section 6.02 Conditions to the Obligations of the Buyer
Under This Agreement ................... 56
Section 6.03 Conditions to the Obligations of the
Seller Under This Agreement ............ 58
ARTICLE VII CLOSING .................................. 60
Section 7.01 Time and Place ........................... 60
Section 7.02 Deliveries at the Closing ................ 60
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER.......... 60
Section 8.01 Termination .............................. 60
Section 8.02 Effect of Termination .................... 63
Section 8.03 Amendment, Extension and Waiver .......... 63
ARTICLE IX MISCELLANEOUS ............................ 64
Section 9.01 Expenses ................................. 64
Section 9.02 Survival ................................. 64
Section 9.03 Notices .................................. 65
Section 9.04 Parties in Interest ...................... 66
Section 9.05 Complete Agreement ....................... 66
Section 9.06 Counterparts ............................. 66
Section 9.07 Governing Law ............................ 66
Section 9.08 Captions ................................. 67
Section 9.09 Effect of Investigations ................. 67
Section 9.10 Severability ............................. 67
Section 9.11 Specific Enforceability .................. 67
<PAGE>
EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A Agreement and Plan of Merger
Exhibt B-1 Buyer Affiliates Agreement
Exhibit B-2 Seller Affiliates Agreement
Exhibit C Seller Option Agreement
Exhibit D Stockholder Agreement
Exhibit E List of Index Companies with Weighted Averages
SCHEDULES
Buyer Disclosure Schedule
Seller Disclosure Schedule
<PAGE>
AFFILIATION AGREEMENT AND PLAN OF REORGANIZATION
AFFILIATION AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement"), dated
as of August 30, 1996, between UST CORP., a Massachusetts corporation (the
"Buyer"), and WALDEN BANCORP, INC., a Massachusetts corporation (the "Seller").
The Boards of Directors of the Buyer and the Seller deem it advisable and
in the best interests of their respective stockholders to consummate, and have
approved, the business combination transactions provided for herein.
In consideration of the mutual covenants, representations, warranties and
agreements contained herein and in consideration of the Seller Option Agreement
(as hereinafter defined), pursuant to which the Seller has on this day granted
the Seller Option (as hereinafter defined) and in consideration of the
execution and delivery of the Stockholder Agreement to the Buyer, the parties
agree as follows:
ARTICLE I
DEFINITIONS
Except as otherwise provided herein or as otherwise clearly required by
the context, the following terms shall have the respective meanings indicated
when used in this Agreement:
"AMEX" shall mean the American Stock Exchange.
"Acquisition Transaction" shall have the meaning ascribed thereto in
Section 5.03 hereof.
"Agreement" shall mean this Affiliation Agreement and Plan of
Reorganization by and between the Buyer and the Seller.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"Buyer" shall have the meaning ascribed thereto in the introductory
paragraph hereof.
"Buyer Affiliates" shall have the meaning ascribed thereto in Section
5.06(b) hereof.
<PAGE>
"Buyer Affiliates Agreement" shall mean the form of written agreement to
be executed and delivered to the Seller prior to the Effective Time by the
Buyer Affiliates, substantially in the form attached hereto as Exhibit B-1.
"Buyer Balance Sheet" shall have the meaning ascribed thereto in Section
3.05 hereof.
"Buyer Common Stock" shall have the meaning ascribed thereto in Section
3.02(a) hereof.
"Buyer Companies" shall have the meaning ascribed thereto in Section
3.13(a) hereof.
"Buyer Disclosure Schedule" shall have the meaning ascribed thereto in
Section 3.01(b) hereof.
"Buyer Pension Plans" shall have the meaning ascribed thereto in Section
3.14(a) hereof.
"Buyer Preferred Stock" shall have the meaning ascribed thereto in Section
3.02(a) hereof.
"Buyer Reports" shall have the meaning ascribed thereto in Section 3.10
hereof.
"Buyer Rights Agreement" shall mean that certain Rights Agreement which
was adopted by the Buyer on September 19, 1995.
"Closing" shall mean the consummation of the Merger.
"Closing Date" shall mean the time and date specified pursuant to Section
7.01 hereof as the time and date on which the parties hereto shall consummate
the Merger.
"CMPs" has the meaning ascribed to such term in Section 4.16 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Companies" shall have the meaning ascribed thereto in Section 4.10(a)
hereof.
"Confidential Information" shall have the meaning ascribed thereto in
Section 5.02(b) hereof.
<PAGE>
"Confidentiality Agreement" shall mean that certain letter agreement
between the Buyer and the Seller dated August 7, 1996.
"Consents" shall have the meaning ascribed thereto in Section 6.01(b)
hereof.
"Disclosure Schedules" shall mean the Buyer Disclosure Schedule and the
Seller Disclosure Schedule, considered together.
"D&O Insurance" shall have the meaning ascribed thereto in Section 5.15
hereof.
"DOJ" shall mean the United States Department of Justice.
"Effective Time" shall mean the date and time at which the Merger has
become effective pursuant to the applicable laws of The Commonwealth of
Massachusetts.
"EPA" shall mean the United States Environmental Protection Agency.
"Equity Investment" shall have the meaning set forth for such term as of
the date hereof in the FDIC's rules and regulations regarding activities and
investments of insured state banks at 12 C.F.R. ss.362.2(k).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall have the meaning ascribed thereto in Section 3.05
hereof.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Federal Reserve Board" shall mean the Board of Governors of the Federal
Reserve System or the Federal Reserve Bank of Boston, as applicable.
"Filed Tax Returns" shall mean, with respect to the Buyer Companies or the
Seller Companies, all Tax Returns that were required to be filed by any member
of such group of Companies on or prior to the date hereof.
<PAGE>
"GAAP" shall mean generally accepted accounting principles and practices
in effect from time to time within the United States applied consistently
throughout the period involved.
"Hazardous Material" shall have the meaning ascribed to such term in
Section 4.17(i) hereof.
"Injunction" shall have the meaning ascribed thereto in Section 6.01(d)
hereof.
"Joint Proxy Statement" shall have the meaning ascribed thereto in Section
5.04(a) hereof.
"IRS" shall mean the United States Internal Revenue Service.
"Loan Property" shall have the meaning ascribed thereto in Section 4.17(i)
hereof.
"MBCL" shall mean the Massachusetts Business Corporation Law.
"Massachusetts Board" shall have the meaning ascribed thereto in Section
3.04 hereof.
"Material Adverse Effect" shall mean, with respect to any Person, a
material adverse effect on the business, results of operations or financial
condition of such Person taken as a whole; provided that "Material Adverse
Effect" shall not be deemed to include the impact of (a) changes in laws and
regulations or interpretations thereof by courts or governmental authorities
(including changes in insurance deposit assessment rates and special
assessments with respect thereto), (b) changes in GAAP or regulatory accounting
principles generally applicable to financial institutions and their holding
companies, (c) actions and omissions of a party (or any of its Subsidiaries)
taken with the prior written consent of the other party, (d) changes in
economic conditions (including changes in the level of interest rates)
generally affecting financial institutions, and (e) the direct effects of
compliance with this Agreement on the operating performance of the parties
including expenses incurred by the parties hereto in consummating the
transactions contemplated by this Agreement and the expenses associated with
the termination of the Seller Benefit Plans as and to the extent contemplated
herein.
"Merger" shall have the meaning ascribed thereto in Article II hereof.
<PAGE>
"Merger Subsidiary" shall mean that certain business corporation that has
been or shall be organized as a wholly-owned subsidiary of the Buyer under the
laws of The Commonwealth of Massachusetts for the purpose of merging with and
into the Seller pursuant to the terms of the Plan of Merger.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ" shall mean the National Association of Securities Dealers
Automated Quotation system.
"NYSE" shall mean the New York Stock Exchange.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Participation Facility" shall have the meaning ascribed to such term in
Section 4.17(i) hereof.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other legal entity,
or any governmental agency or political subdivision thereof.
"Plan of Merger" shall mean that certain Agreement and Plan of Merger to
be entered into by and among the Buyer, the Seller and the Merger Subsidiary at
or prior to the Effective Time, substantially in the form attached hereto as
Exhibit A.
"Public Announcement" shall mean a written press release, public
announcement or public information disclosure by the Seller or the Buyer or any
of their subsidiaries relating to the Merger or the other transactions
contemplated hereby.
"Records" means all records and original documents in the Seller's
possession which pertain to and are utilized by the Seller or any of its
Significant Subsidiaries to administer, reflect, monitor, evidence or record
information respecting its business and operations, including but not limited
to all records and documents relating to (a) corporate, regulatory, supervisory
and litigation matters, (b) tax planning and payment of taxes, (c) personnel
and employment matters, and (d) the business or conduct of the business of the
Seller or any of its Significant Subsidiaries.
"Representative(s)" shall have the meaning ascribed thereto in Section
5.02(b) hereof.
<PAGE>
"Requisite Regulatory Approvals" shall have the meaning ascribed thereto
in Section 6.01(b) hereof.
"SEC" shall have the meaning ascribed thereto in Section 3.04 hereof.
"S-4" shall have the meaning ascribed thereto in Section 5.04(a) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Seller" shall have the meaning ascribed thereto in the preamble to this
Agreement and, in addition, shall mean throughout this Agreement, unless the
context contemplates otherwise, the Seller and each of its subsidiaries,
considered separately and on a consolidated basis.
"Seller Affiliates" shall have the meaning ascribed thereto in Section
5.06(a) hereof.
"Seller Affiliates Agreement" shall mean the form of written agreement to
be executed and delivered to the Buyer prior to the Effective Time by the
Seller Affiliates, substantially in the form attached hereto as Exhibit B-2.
"Seller Balance Sheet" shall have the meaning ascribed thereto in Section
4.05 hereof.
"Seller Benefit Plans" shall have the meaning ascribed thereto in Section
4.11(a) hereof.
"Seller Common Stock" shall have the meaning ascribed thereto in Section
4.02(a) hereof.
"Seller Companies" shall have the meaning ascribed thereto in Section
4.10(a) hereof.
"Seller Disclosure Schedule" shall have the meaning ascribed thereto in
Section 4.01(a) hereof.
"Seller Option" shall mean the option granted to the Buyer pursuant to the
Seller Option Agreement.
"Seller Option Agreement" shall mean that certain Stock Option Agreement
of even date herewith by and between the Seller and the Buyer in the form
attached hereto as Exhibit C.
<PAGE>
"Seller Other Plans" shall have the meaning ascribed thereto in Section
4.11(a) hereof.
"Seller Pension Plans" shall have the meaning ascribed thereto in Section
4.11(a) hereof.
"Seller Reports" shall have the meaning ascribed thereto in Section 4.15
hereof.
"Stockholder Agreement" shall mean that certain Stockholder Agreement
dated as of the date hereof between the Buyer and Mr. Bradbury substantially in
the form attached hereto as Exhibit D.
"Significant Subsidiary" shall mean, when used with reference to a party,
any "significant subsidiary" of such party as such term is defined in
Regulation S-X of the SEC, and with respect to the Seller, the term
"Significant Subsidiary" shall also include Walden Financial Corporation,
Builders Collaborative, Inc., Walden Securities Corporation, Inc., Braintree
Savings Corporation, Bra-Prop Corporation and Braintree Securities Corporation.
"subsidiaries" shall mean, when used with reference to a party, any
corporation or other organization, whether incorporated or unincorporated, of
which such party or any other subsidiary of such party is a general partner
(excluding partnerships the general partnership interests of which held by such
party or any subsidiary of such party do not have a majority of the voting
interests in such partnership) or, with respect to such corporation or other
organization, at least a majority of the securities or other interests having
by their terms ordinary voting power to elect a majority of the board of
directors or others performing similar functions is directly or indirectly
owned or controlled by such party or by any one or more of its subsidiaries, or
by such party and one or more of its subsidiaries.
"Tax" means any federal, state, local or foreign income, gross receipts,
franchise, estimated, alternative minimum, add-on minimum, sales, use,
transfer, registration, value added, excise, natural resources, severance,
stamp, occupation, premium, windfall profit, environmental, customs, duties,
real property, personal property, capital stock, intangibles, social security,
unemployment, disability, payroll, license, employee or other tax or levy, of
any kind whatsoever, including any interest, penalties or additions to tax in
respect of the foregoing.
"Tax Return" means any return, declaration, report, claim for refund,
information return or other document (including any related or supporting
<PAGE>
estimates, elections, schedules, statements or information) filed or required
to be filed in connection with the determination, assessment or collection of
any Tax or the administration of any laws, regulations or administrative
requirements relating to any Tax.
"Termination Date" shall have the meaning ascribed thereto in Section
8.01(b) hereof.
"Transaction Documents" shall mean this Agreement, the Confidentiality
Agreement, the Plan of Merger, the Seller Option Agreement, the Shareholders
Agreement, and each other agreement, document or instrument executed in
connection herewith or therewith.
"Transferred Employee" shall have the meaning ascribed thereto in Section
5.13(a) hereof.
"Trust Account Shares" shall have the meaning ascribed thereto in Section
3.12 hereof.
ARTICLE II
THE MERGER
Subject to the terms and conditions of this Agreement and the Plan of
Merger, the Merger Subsidiary will merge with and into the Seller (the
"Merger"), with the Seller being the surviving corporation, pursuant to the
provisions of, and with the effect provided in, the MBCL. The Plan of Merger
provides for the terms and conditions of the Merger, including but not limited
to the conversion and exchange of Seller Common Stock for Buyer Common Stock,
all of which are incorporated herein and made a part of this Agreement by
reference whether or not the Plan of Merger is executed on or subsequent to the
date hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller as follows:
3.01 Corporate Organization.
(a) The Buyer is a corporation duly organized, validly existing and
in good standing under the laws of The Commonwealth of Massachusetts. The
Buyer has all requisite corporate power and authority to own, lease or
operate all of its properties and assets and to carry on its business as
it is now being conducted. The Buyer is duly licensed or qualified to do
<PAGE>
business in each jurisdiction in which the nature of the business
conducted by it or the character or location of the properties and assets
owned, leased or operated by it makes such licensing or qualification
necessary, except where the failure to be so licensed or qualified would
not result in, with respect to the Buyer, a Material Adverse Effect. The
Buyer is a bank holding company registered with the Federal Reserve Board
under the BHCA.
(b) Except as set forth in Section 3.01 of the disclosure schedule
which is being delivered to the Seller together herewith (the "Buyer
Disclosure Schedule"), the Buyer has no subsidiaries and no Equity
Investments (other than its investments in such subsidiaries).
(c) Each Significant Subsidiary of the Buyer is duly organized,
validly existing and in corporate good standing under the laws of the
jurisdiction of its incorporation. Each Significant Subsidiary of the
Buyer has all requisite corporate power and authority to own, lease or
operate all of its properties and assets and to carry on its business as
it is now being conducted. Each Significant Subsidiary is duly licensed
or qualified to do business in each jurisdiction in which the nature of
the business conducted by it or the character or location of the
properties and assets owned, leased, or operated by it makes such
licensing or qualification necessary, except where the failure to be so
licensed or qualified would neither individually nor in the aggregate
result in any Material Adverse Effect on the Buyer or such Significant
Subsidiary.
3.02 Capitalization.
(a) The authorized capital stock of the Buyer consists of 30,000,000
shares of common stock, par value $0.625 per share ("Buyer Common
Stock"), and 4,000,000 shares of preferred stock, par value $1.00 per
share ("Buyer Preferred Stock"). As of the close of business on July 31,
1996, there were 17,901,990 shares of Buyer Common Stock and no shares of
Buyer Preferred Stock issued and outstanding. In addition, as of the
close of business on July 31, 1996, there were 1,367,440 shares of Buyer
Common Stock reserved for issuance upon exercise of outstanding stock
options. All issued and outstanding shares of Buyer Common Stock and
Buyer Preferred Stock have been duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive rights, with no
<PAGE>
personal liability attaching to the ownership thereof. Except for rights
issuable in accordance with the Buyer Rights Agreement upon the issuance
of Buyer Common Stock as permitted under this Agreement or as referred to
in this Section 3.02 or reflected in Section 3.02(a) of the Buyer
Disclosure Schedule, the Buyer does not have and is not bound by any
outstanding subscriptions, options, warrants, calls, commitments, rights
agreements or agreements of any character calling for the Buyer to issue,
deliver or sell, or cause to be issued, delivered or sold any shares of
Buyer Common Stock or Buyer Preferred Stock or any other equity security
of the Buyer or any subsidiary of the Buyer or any securities convertible
into, exchangeable for or representing the right to subscribe for,
purchase or otherwise receive any shares of Buyer Common Stock or Buyer
Preferred Stock or any other equity security of the Buyer or any
subsidiary of the Buyer or obligating the Buyer to grant, extend or enter
into any such subscriptions, options, warrants, calls, commitments,
rights agreements or agreements. As of the date hereof there are no
outstanding contractual obligations of the Buyer to repurchase, redeem or
otherwise acquire any shares of capital stock of the Buyer or any
subsidiary of the Buyer.
(b) Section 3.02(b) of the Buyer Disclosure Schedule lists each of
the Significant Subsidiaries of the Buyer on the date of this Agreement
and indicates for each such subsidiary as of such date: (i) the
percentage and type of equity securities owned or controlled by the
Buyer; (ii) the jurisdiction of incorporation; and (iii) if the
subsidiary is a depository institution, whether it is a member of the
Federal Reserve System. Each of the subsidiaries of the Buyer that is a
depository institution is an "insured depository institution" as defined
in the FDIA and applicable regulations thereunder, and the deposits of
each such depository institution are insured by the Bank Insurance Fund
of the FDIC in accordance with the FDIA, and each such depository
institution has paid all assessments and filed all reports required by
the FDIA. As of the date hereof, no proceedings for the revocation or
termination of such deposit insurance are pending or, to the knowledge of
the Buyer, threatened. No subsidiary of the Buyer has or is bound by any
outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for a subsidiary of the Buyer to
issue deliver or sell, or cause to be issued, delivered or sold any
equity security of the Buyer or of any subsidiary of the Buyer or any
securities convertible into, exchangeable for or representing the right
to subscribe for, purchase or otherwise receive any such equity security
<PAGE>
or obligating a subsidiary of the Buyer to grant, extend or enter into
any such subscriptions, options, warrants, calls, commitments or
agreements. As of the date hereof, there are no outstanding contractual
obligations of any subsidiary of the Buyer to repurchase, redeem or
otherwise acquire any shares of capital stock of the Buyer or any
subsidiary of the Buyer. Except as may be provided under applicable law
in the case of any subsidiary of the Buyer that is a bank, all of the
shares of capital stock of each of the subsidiaries of the Buyer held by
the Buyer are fully paid and nonassessable and, except for directors'
qualifying shares, are owned by the Buyer free and clear of any claim,
lien, encumbrance or agreement with respect thereto.
3.03 Authority; No Violation.
(a) The Buyer has all requisite corporate power and authority to
execute and deliver the Transaction Documents to which it is a party and
to consummate the transactions contemplated thereby. The Merger
Subsidiary has or will have prior to the Closing Date all requisite
corporate power and authority to execute and deliver the Plan of Merger
and to consummate the transactions contemplated thereby. The execution
and delivery of this Agreement and the other Transaction Documents to
which the Buyer is a party and the consummation of the transactions
contemplated hereby and thereby have been duly and validly approved by
the Board of Directors of the Buyer. The execution and delivery of the
Plan of Merger and the consummation of the transactions contemplated
thereby have been or will be prior to the Closing Date duly and validly
approved by the Buyer, as sole stockholder of the Merger Subsidiary, and
by the Board of Directors of the Merger Subsidiary. The Board of
Directors of the Buyer has directed that this Agreement and the Plan of
Merger and the transactions contemplated hereby and thereby be submitted
to the stockholders of the Buyer for approval at a meeting of such
stockholders, and except for the adoption of this Agreement and the Plan
of Merger by the Buyer's stockholders, no other corporate proceedings on
the part of the Buyer are necessary to consummate any of the transactions
so contemplated by the Transaction Documents. This Agreement and the
Seller Option Agreement have been, and the Plan of Merger and the other
Transaction Documents to be executed by the Buyer will be, duly and
validly executed and delivered by the Buyer and (assuming due
authorization, execution and delivery by the Seller) constitute (or, in
the case of the Plan of Merger or such other Transaction Documents, will
constitute at Closing) the valid and binding obligations of the Buyer,
<PAGE>
enforceable against the Buyer in accordance with their respective terms,
except that enforcement thereof may be limited by the receivership,
conservatorship and supervisory powers of bank regulatory agencies
generally as well as bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting enforcement of creditors' rights
generally and except that enforcement thereof may be subject to general
principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law) and the availability of equitable
remedies.
(b) Neither the execution and delivery of any of the Transaction
Documents by the Buyer nor the consummation by the Buyer of the
transactions contemplated thereby, nor compliance by the Buyer with any
of the terms or provisions thereof, will (i) assuming that the consents
and approvals referred to in Section 3.04 hereof are duly obtained,
violate any statute, code, ordinance, rule, regulation, judgment, order,
writ, decree or injunction applicable to the Buyer or any of its
subsidiaries or any of their respective properties or assets, or (ii)
violate, conflict with, result in a breach of any provisions of,
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of,
accelerate the performance required by, or result in a right of
termination or acceleration or the creation of any lien, security
interest, charge or other encumbrance upon any of the respective
properties or assets of the Buyer or any of its subsidiaries under, any
of the terms, conditions or provisions of (A) the Articles of
Organization or other charter document of like nature or By-Laws of the
Buyer, or such subsidiary, as the case may be, or (B) any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which the Buyer or any of its subsidiaries is
a party as issuer, guarantor or obligor, or by which they or any of their
respective properties or assets may be bound or affected, except, in the
case of clause (ii)(B) above, for such violations, conflicts, breaches or
defaults which either individually or in the aggregate will not result,
with respect to the Buyer or any Significant Subsidiary of the Buyer, in
a Material Adverse Effect.
3.04 Consents and Approvals. Except for consents, waivers or approvals of,
or filings or registrations with, the Federal Reserve Board, the Board of Bank
Incorporation of The Commonwealth of Massachusetts (the "Massachusetts Board"),
the Securities and Exchange Commission (the "SEC"), the Secretary of State of
The Commonwealth of Massachusetts, NASDAQ, certain state "Blue Sky" or
securities commissioners, the DOJ and the stockholders of the Seller, no
<PAGE>
consents, waivers or approvals of or filings or registrations with any public
body or authority are necessary, and no consents or approvals of any third
parties (which term does not include the Board of Directors of the Buyer or the
Merger Subsidiary) are necessary, in connection with (a) the execution and
delivery by the Buyer of the Transaction Documents to which it is a party, (b)
the execution and delivery by the Merger Subsidiary of the Plan of Merger, or
(c) the consummation by the Buyer or the Merger Subsidiary, as the case may be,
of the transactions contemplated by the Transaction Documents. The affirmative
vote of holders of a majority of the outstanding shares of Buyer Common Stock
who are present and voting at a meeting called for such purpose is the only
vote of the holders of any class or series of capital stock or other securities
of the Buyer necessary to approve of the Transaction Documents and the
transactions contemplated thereby. Other than as publicly disclosed, the Buyer
has no knowledge of any fact or circumstance relating to the Buyer or its
subsidiaries that is reasonably likely to materially impede or delay receipt of
any Consents of regulatory or governmental authorities or result in the
imposition of a restriction or condition of the type referenced in Section
6.02(g) herein.
3.05 Financial Statements. The Buyer has made available to the Seller
copies of (a) the consolidated balance sheets of the Buyer and its subsidiaries
as of December 31 for the fiscal years 1993 through 1995, inclusive, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the fiscal years 1993 through 1995, inclusive, as reported in
the Annual Reports of the Buyer on Form 10-K for each of the three (3) fiscal
years ended December 31, 1993 through December 31, 1995 which were filed with
the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), in each case accompanied by the audit report of Arthur Andersen LLP,
independent accountants for the Buyer, and (b) the unaudited consolidated
balance sheets of the Buyer and its subsidiaries as of June 30, 1996 and June
30, 1995, the related unaudited consolidated statements of income and changes
in stockholders' equity for the six (6) months ended June 30, 1996 and June 30,
1995 and the related unaudited consolidated statements of cash flows for the
six (6) months ended June 30, 1996 and June 30, 1995, all as reported in the
Buyer's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 filed
with the SEC under the Exchange Act. The December 31, 1995 consolidated balance
sheet (the "Buyer Balance Sheet") of the Buyer (including the related notes,
where applicable) and the other financial statements referred to herein
(including the related notes, where applicable) fairly present, and the
financial statements to be included in any reports or statements (including
<PAGE>
reports on Forms 10-Q and 10-K) to be filed by the Buyer with the SEC after the
date hereof will fairly present, the consolidated financial position and
results of the consolidated operations and cash flows and changes in
stockholders' equity of the Buyer and its subsidiaries for the respective
fiscal periods or as of the respective dates therein set forth; and each of
such statements (including the related notes, where applicable) has been and
will be prepared in accordance with GAAP consistently applied during the
periods involved, except as otherwise set forth in the notes thereto (subject,
in the case of unaudited interim statements, to normal year-end adjustments).
The books and records of the Buyer and its subsidiaries have been, and are
being, maintained in accordance with GAAP and applicable legal and regulatory
requirements.
3.06 Absence of Undisclosed Liabilities. None of the Buyer or any of its
subsidiaries has any obligation or liability (contingent or otherwise) that is
material on a consolidated basis to the Buyer, or that when combined with all
similar obligations or liabilities would be material on a consolidated basis to
the Buyer or any of its Significant Subsidiaries, except as disclosed or
reflected in the Buyer Balance Sheet or any of the other financial statements
of the Buyer described in Section 3.05 above.
3.07 Broker's Fees. Neither the Buyer nor any of its officers, directors,
employees or agents has employed any broker, finder or financial advisor or
incurred any liability for any fees or commissions in connection with any of
the transactions contemplated by this Agreement, except for the fees incurred
in connection with the engagement of Fox-Pitt, Kelton Inc. and for legal,
accounting and other professional fees payable in connection with the Merger.
The Buyer will be responsible for the payment of all such fees.
3.08 Absence of Certain Changes or Events. Except as disclosed in the
Buyer's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 or in
any Current Reports of the Buyer on Form 8-K filed prior to the date of this
Agreement, since December 31, 1995, the Buyer and its subsidiaries have not
incurred any material liability, except in the ordinary course of their
business consistent with their past practices, nor has there been any change in
the business, assets, financial condition or results of operations of the Buyer
or any of its subsidiaries which has had, or is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on the Buyer or any
Significant Subsidiary of the Buyer.
3.09 Legal Proceedings. There is no suit, action or proceeding pending or,
to the best knowledge of the Buyer, threatened, against the Buyer or any
<PAGE>
subsidiary of the Buyer or challenging the validity or propriety of the
transactions contemplated by this Agreement or the Plan of Merger, as to which
there is a reasonable possibility of an adverse determination and which, if
adversely determined, would, individually or in the aggregate, have a Material
Adverse Effect on the Buyer or any Significant Subsidiary of the Buyer or
otherwise materially adversely affect the Buyer's ability to perform its
obligations under this Agreement, nor is there any judgment, decree,
injunction, rule or order of any legal or administrative body or arbitrator
outstanding against the Buyer or any subsidiary of the Buyer having, or which
insofar as reasonably can be foreseen, in the future could have, any such
effect.
3.10 Reports. Since January 1, 1993, the Buyer and its subsidiaries have
filed, and subsequent to the date hereof will file, all reports, registrations
and statements, together with any amendments required to be made with respect
thereto, that were and are required to be filed with (a) the SEC, including,
but not limited to, Forms 10-K, Forms 10-Q, Forms 8-K and proxy statements (and
all such reports, registrations and statements have been or will be delivered
by the Buyer to the Seller), (b) the Federal Reserve Board, (c) the FDIC, and
(d) any applicable state securities or banking authorities (except, in the case
of state securities authorities, no such representation is made as to filings
which are not material) (all such reports and statements are collectively
referred to herein as the "Buyer Reports"). As of their respective dates, the
Buyer Reports complied and, with respect to filings made after the date of this
Agreement, will at the date of filing comply, in all material respects with all
of the statutes, rules and regulations enforced or promulgated by the
regulatory authority with which they were filed and did not contain and, with
respect to filings made after the date of this Agreement, will not at the date
of filing contain, any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
3.11 Buyer Common Stock. Buyer Common Stock to be issued pursuant to the
Plan of Merger is duly authorized and, when issued at the Effective Time, will
be validly issued, fully paid and nonassessable and not subject to preemptive
rights, with no personal liability attaching thereto.
3.12 Ownership of Seller Common Stock. Neither the Buyer nor, to its best
knowledge, any of its affiliates or associates (as such terms are defined under
the Exchange Act) (a) beneficially own, directly or indirectly, or (b) are
parties to any agreement, arrangement or understanding for the purpose of
<PAGE>
acquiring, holding, voting or disposing of, in each case, shares of capital
stock of the Seller, which in the aggregate represent five percent (5%) or more
of the outstanding shares of capital stock of the Seller entitled to vote
generally in the election of directors (other than shares in trust accounts,
managed accounts and the like that are beneficially owned by third parties (any
such shares, "Trust Account Shares")).
3.13 Taxes and Tax Returns.
(a) Except where the failure to do so would not have a Material
Adverse Effect, the Buyer and each of its subsidiaries (referred to for
purposes of this Section 3.13, collectively, as the "Buyer Companies")
have, since December 31 1989, timely filed in correct form all Filed
Tax Returns.
(b) The Buyer Companies have paid all Taxes shown as being due on the
Filed Tax Returns.
(c) No assessment that has not been settled or otherwise resolved has
been made with respect to Taxes not shown on the Filed Tax Returns, other
than such additional Taxes as are being contested in good faith and which
if determined adversely to the Buyer Companies would not have a Material
Adverse Effect. No deficiency in Taxes or other proposed adjustment that
has not been settled or otherwise resolved has been asserted in writing
by any taxing authority against any of the Buyer Companies, which if
determined adversely to the Buyer Companies would have a Material Adverse
Effect. No material Tax Return of any of the Buyer Companies is now under
examination by any applicable taxing authority. There are no material
liens for Taxes (other than current Taxes not yet due and payable) on any
of the assets of any Buyer Company.
(d) Adequate provision has been made on the Buyer Balance Sheet for all
Taxes of the Buyer Companies in respect of all periods through the date
hereof.
(e) Except with respect to intra-Buyer Company agreements made or
required under the federal consolidated tax return regulations, none of
the Buyer Companies is a party to or bound by any Tax indemnification, Tax
allocation or Tax sharing agreement with any person or entity or has any
current or potential contractual obligation to indemnify any other person
or entity with respect to Taxes.
<PAGE>
(f) None of the Buyer Companies has filed or been included in a
combined, consolidated or unitary income Tax Return (including any
consolidated federal income Tax Return) other than one of which one of
the Buyer Companies was the parent.
(g) None of the Buyer Companies has made any payments, is obligated to
make any payments, or is a party to any agreement that could obligate it
to make any payments that will not be deductible under Code Section 280G.
3.14 Employees.
(a) The current value of the assets of each of the "employee pension
benefit plans", as such term is defined in Section 3 of ERISA, which is
maintained or contributed to by the Buyer (each a "Buyer Pension Plan"),
and which is subject to Title IV of ERISA, exceeds that plan's "Benefit
Liabilities" as that term is defined in Section 4001(a)(16) of ERISA, when
determined under actuarial factors that would apply if that plan
terminated in accordance with all applicable legal requirements.
(b) To the best knowledge of the Buyer, each of the Buyer Pension
Plans and each of the "employee welfare benefit plans" (the "Buyer Benefit
Plans"), as such term is defined in Section 3 of ERISA, which is
maintained or contributed to by the Buyer, has been administered in
compliance with its terms in all material respects and is in compliance in
all material respects with the applicable provisions of ERISA (including,
but not limited to, the funding and prohibited transactions provisions
thereof), the Code and other applicable laws, except to the extent that
non-compliance would not have a Material Adverse Effect on the Buyer,
taken as a whole.
(c) To the best knowledge of the Buyer, there has been no reportable
event within the meaning of Section 4043(b) of ERISA or any waived funding
deficiency within the meaning of Section 412(d)(3) (or any predecessor
section) of the Code with respect to any Buyer Pension Plan.
(d) To the best knowledge of the Buyer, each of the Buyer Pension
Plans which is intended to be a qualified plan within the meaning of
Section 401(a) of the Code is so qualified, and the Buyer is not aware of
any fact or circumstance which would adversely affect the qualified status
of any such plan.
<PAGE>
3.15 Agreements with Banking Authorities. Neither the Buyer nor any of its
subsidiaries is a party to any commitment, letter (other than letters addressed
to regulated depository institutions generally), written agreement, memorandum
of understanding or order to cease and desist with any federal or state
governmental entity charged with the supervision or regulation of banks or bank
holding companies or engaged in the insurance of bank deposits which restricts
materially the conduct of its business, or in any manner relates to its capital
adequacy, credit policies, management or overall safety and soundness or such
entity's ability to perform its obligations hereunder, and neither the Buyer
nor any of its subsidiaries has received written notification from any such
federal or state governmental entity that any such Person may be requested to
enter into, or otherwise be subject to, any such commitment, letter, written
agreement, memorandum of understanding or cease and desist order.
3.16 Compliance with Applicable Law. Each of the Buyer and each
Significant Subsidiary thereof holds all licenses, franchises, permits and
authorizations necessary for the lawful conduct of its business, and each of
the Buyer and each Significant Subsidiary thereof has complied with and is not
in violation of or default in any respect under any, applicable law, statute,
order, rule, regulation or policy of, or agreement with, any federal, state or
local governmental agency or authority relating to the Buyer or such
Significant Subsidiary (other than where such default or noncompliance will not
result in, or create the possibility of resulting in, a material limitation on
the conduct of the business of the Buyer, will not cause, or create the
possibility of causing, the Buyer or any Significant Subsidiary thereof to
incur any financial penalty in excess of $20,000 (including but not limited to
any civil money penalty or other monetary sanction under Section 8(i)(2) of the
FDIA, 12 U.S.C. ss.1818(i)(2), or under any applicable state law ("CMPs")), and
will not otherwise result, or create the possibility of resulting in any
Material Adverse Effect on the Buyer or any Significant Subsidiary of the
Buyer), and neither the Buyer nor any Significant Subsidiary of the Buyer has
received any notice of any violation of any such law, statute, order, rule,
regulation, policy or agreement, or the commencement of any proceeding in
connection with any such violation (including but not limited to any hearing or
investigation relating to the imposition or contemplated imposition of CMPs),
and does not know of any violation of, any such law, statute, order, rule,
regulation, policy or agreement which would have such a result.
3.17 Capitalization. As of the date hereof, without giving effect to the
transactions contemplated hereby, the subsidiaries of the Buyer which are
<PAGE>
"insured depository institutions" (a) are "well capitalized", as defined in the
FDIA, and (b) meet all capital requirements, standards and ratios required by
each state or federal bank regulator with jurisdiction over such Persons. No
such regulator has indicated that it will condition any of the regulatory
approvals upon an increase in any such Person's capital or compliance with any
special capital requirement, standard or ratio.
3.18 CRA Rating. Each subsidiary of the Buyer which is an "insured
depository institution" was rated "Satisfactory" or better following its most
recent Community Reinvestment Act examination by the regulatory agency
responsible for its supervision. Neither the Buyer nor any of such subsidiaries
has received any notice of and none of such Persons has any knowledge of any
planned or threatened objection by any community group to the transactions
contemplated hereby.
3.19 Buyer Information. The information relating to the Buyer and its
subsidiaries to be contained in the Joint Proxy Statement and the S-4, as
described in Section 5.04 hereof, and any other documents filed with the SEC or
any regulatory agency in connection herewith, to the extent such information is
provided in writing by the Buyer, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make such
information not misleading.
3.20 Disclosure. No representation or warranty contained in this
Agreement, and no statement contained in any certificate, list or other
writing, including but not necessarily limited to the Buyer Disclosure
Schedule, furnished to the Seller pursuant to the provisions hereof, to the
best knowledge of the Buyer, contains or will contain any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements herein or therein not misleading. To the best knowledge of the
Buyer, all information material to the Merger and the transactions contemplated
by this Agreement, or which is necessary to make the representations and
warranties herein contained not misleading, has been disclosed in writing to
the Seller.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Buyer as follows:
4.01 Corporate Organization.
(a) The Seller is a corporation duly organized, validly existing and
in good standing under the laws of The Commonwealth of Massachusetts. The
<PAGE>
Seller has all requisite corporate power and authority to own, lease or
operate all of its properties and assets and to carry on its business as
it is now being conducted. The Seller is duly licensed or qualified to do
business in each jurisdiction in which the nature of the business
conducted by it or the character or location of the properties and assets
owned, leased or operated by it makes such licensing or qualification
necessary, except where the failure to be so licensed or qualified would
not result in, with respect to the Seller, any Material Adverse Effect.
The Seller is a bank holding company registered with the Federal Reserve
Board under the BHCA.
(b) Except as set forth in Section 4.01 of the disclosure schedule
delivered to the Buyer together herewith (the "Seller Disclosure
Schedule"), the Seller has no subsidiaries and no Equity Investments
(other than its investments in such subsidiaries).
(c) Each Significant Subsidiary of the Seller is duly organized,
validly existing and in corporate good standing under the laws of the
jurisdiction of its incorporation. Each Significant Subsidiary of the
Seller has all requisite corporate power and authority to own, lease or
operate all of its properties and assets and to carry on its business as
it is now being conducted. Each Significant Subsidiary is duly licensed
or qualified to do business in each jurisdiction in which the nature of
the business conducted by it or the character or location of the
properties and assets owned, leased or operated by it makes such licensing
or qualification necessary, except where the failure to be so licensed or
qualified would, neither individually nor in the aggregate, result in any
Material Adverse Effect on the Seller or such Significant Subsidiary.
(d) The minute books of the Seller contain complete and accurate
records of all meetings and other corporate actions authorized at such
meetings held or taken since January 1, 1993 to date of its stockholders
and Board of Directors.
4.02 Capitalization.
(a) The authorized capital stock of the Seller consists of 10,000,000
shares of common stock, par value $1.00 per share ("Seller Common Stock").
As of the close of business on August 28, 1996, there were 5,109,892
shares of Seller Common Stock issued and outstanding. In addition, as of
the close of business on August 28, 1996, there were 468,934 shares of
Seller Common Stock reserved for issuance upon the exercise of outstanding
<PAGE>
stock options and incentive plans and 219,006 shares of Seller Common
Stock reserved for issuance under the 1993 Employee Stock Purchase Plan.
All issued and outstanding shares of Seller Common Stock have been duly
authorized and validly issued and are fully paid, nonassessable and free
of preemptive rights, with no personal liability attaching to the
ownership thereof. Except as referred to in this Section 4.02, the Seller
does not have and is not bound by any outstanding subscriptions, options,
warrants, calls, commitments, rights agreements or agreements of any
character calling for the Seller to issue, deliver or sell, or cause to be
issued, delivered or sold any shares of Seller Common Stock or any other
equity security of the Seller or any subsidiary of the Seller or any
securities convertible into, exchangeable for or representing the right to
subscribe for, purchase or otherwise receive any shares of Seller Common
Stock or any other equity security of the Seller or any subsidiary of the
Seller or obligating the Seller to grant, extend or enter into any such
subscriptions, options, warrants, calls, commitments, rights agreements or
agreements. As of the date hereof, there are no outstanding contractual
obligations of the Seller to repurchase, redeem or otherwise acquire any
shares of capital stock of the Seller or any subsidiary of the Seller. In
addition, Section 4.02(a) of the Seller Disclosure Schedule sets forth, as
of the date hereof, the number of shares of Seller Common Stock subject to
outstanding stock options, the various dates on which such options were
granted, the various exercise prices for such options, the number of
shares for which such options are presently vested and the vesting
schedule for the remaining balance of shares for which such options are
not presently vested.
(b) Section 4.02(b) of the Seller Disclosure Schedule lists each of
the Significant Subsidiaries of the Seller as of the date of this
Agreement and indicates for each such subsidiary as of such date: (i) the
percentage and type of equity securities owned or controlled by the Seller;
(ii) the jurisdiction of incorporation; and (iii) if the subsidiary is a
depository institution, whether it is a member of the Federal Reserve
System. Each of the subsidiaries of the Seller that is a depository
institution is an "insured depository institution" as defined in the FDIA
and applicable regulations thereunder, and the deposits of each such
depository institution are insured by the Bank Insurance Fund of the FDIC
in accordance with the FDIA. Further, The Share Insurance Fund of the
Co-operative Central Bank insures deposits of The Co-operative Bank of
Concord, and the Deposit Insurance Fund of the Mutual Savings Central Fund,
Inc. of Massachusetts insures the deposits of The Braintree Savings Bank
<PAGE>
in each case in excess of the FDIC's insurance limits. Each such
depository institution has paid all assessments and filed all reports
required by the FDIA, the Deposit Insurance Fund and the Share Insurance
Fund. As of the date hereof no proceedings for the revocation or
termination of such deposit insurance are pending or to the knowledge of
the Seller, threatened. No subsidiary of the Seller has or is bound by any
outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for a subsidiary of the Seller to
issue, deliver or sell, or cause to be issued, delivered or sold, any
equity security of the Seller or of any subsidiary of the Seller or any
securities convertible into, exchangeable for or representing the right to
subscribe for, purchase or otherwise receive any such equity security or
obligating a subsidiary of the Seller to grant, extend or enter into any
such subscriptions, options, warrants, calls, commitments or agreements.
As of the date hereof, there are no outstanding contractual obligations of
any subsidiary of the Seller to repurchase, redeem or otherwise acquire
any shares of capital stock of the Seller or any subsidiary of the Seller.
Except as may be provided under applicable law in the case of any
subsidiary of the Seller that is a bank, all of the shares of capital
stock of each of the subsidiaries held by the Seller are fully paid and
nonassessable and, except for directors' qualifying shares, are owned by
the Seller free and clear of any claim, lien, encumbrance or agreement
with respect thereto.
4.03 Authority; No Violation.
(a) The Seller has full corporate power and authority to execute and
deliver the Transaction Documents to which it is a party and to consummate
the transactions contemplated thereby. The execution and delivery of this
Agreement and the other Transaction Documents to which the Seller is a
party and the consummation of the transactions contemplated hereby and
thereby have been duly and validly approved by the Board of Directors of
the Seller. The Board of Directors of the Seller has directed that this
Agreement and the Plan of Merger and the transactions contemplated hereby
and thereby be submitted to the stockholders of the Seller for approval at
a meeting of such stockholders and, except for the adoption of this
Agreement and the Plan of Merger by its stockholders, no other corporate
proceedings on the part of the Seller are necessary to consummate any of
the transactions so contemplated by the Transaction Documents. This
Agreement and the Seller Option Agreement have been, and the Plan of
Merger and the other Transaction Documents to be executed by the Seller
will be, prior to the Closing Date, duly and validly executed and
delivered by the Seller and (assuming due authorization, execution and
delivery by the Buyer and, with respect to the Plan of Merger, the Merger
Subsidiary) constitute (or, in the case of the Plan of Merger or such
other Transaction Documents, will constitute at Closing) the valid and
binding obligations of the Seller, enforceable against the Seller in
accordance with their respective terms, except that enforcement thereof
may be limited by the receivership, conservatorship and supervisory powers
of bank regulatory agencies generally as well as bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting enforcement of
creditors' rights generally and except that enforcement thereof may be
subject to general principles of equity (regardless of whether enforcement
is considered in a proceeding in equity or at law) and the availability of
equitable remedies.
<PAGE>
(b) Neither the execution and delivery of any of the Transaction
Documents by the Seller, nor the consummation by the Seller of the
transactions contemplated thereby, nor compliance by the Seller with any
of the terms or provisions thereof, will (i) assuming that the consents
and approvals referred to in Section 4.04 are duly obtained, violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree
or injunction applicable to the Seller or any of its subsidiaries or any
of their respective properties or assets, or (ii) violate, conflict with,
result in a breach of any provisions of, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default)
under, result in the termination of, accelerate the performance required
by, or result in a right of termination or acceleration or the creation
of any lien, security interest, charge or other encumbrance upon any of
the respective properties or assets of the Seller or any of its
subsidiaries under, any of the terms, conditions or provisions of (A) the
Articles of Organization or other charter document of like nature or
By-Laws of the Seller or such subsidiary, as the case may be, or (B) any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement
or other instrument or obligation to which the Seller or any of its
subsidiaries is a party as issuer, guarantor or obligor, or by which they
or any of their respective properties or assets may be bound or affected,
except, in the case of clause (ii)(B) above, for such violations,
conflicts, breaches or defaults which either individually or in the
<PAGE>
aggregate will not result, with respect to the Seller or any Significant
Subsidiary of the Seller, in any Material Adverse Effect.
4.04 Consents and Approvals. Except for consents, waivers or approvals of,
or filings or registrations with, the Federal Reserve Board, the Massachusetts
Board, the SEC, the Secretary of State of The Commonwealth of Massachusetts,
NASDAQ, certain state "Blue Sky" or securities commissioners, the DOJ and the
stockholders of the Seller, no consents, waivers or approvals of or filings or
registrations with any public body or authority are necessary, and no consents
or approvals of any third parties (which term does not include the Board of
Directors of the Seller or any subsidiary of the Seller) are necessary, in
connection with (a) the execution and delivery by the Seller of the Transaction
Documents to which it is a party or (b) the consummation by the Seller of the
transactions contemplated by such agreements. The affirmative vote of holders
of two-thirds of the outstanding shares of Seller Common Stock is the only vote
of the holders of any class or series of capital stock or other securities of
the Seller necessary to approve of the Transaction Documents and the
transactions contemplated thereby.
4.05 Financial Statements. The Seller has made available to the Buyer
copies of (a) the consolidated balance sheets of the Seller and its
subsidiaries as of December 31, 1995 and the consolidated balance sheets of
each of The Braintree Savings Bank and The Co-operative Bank of Concord for the
fiscal years 1993 through 1995, inclusive, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for
the fiscal years 1993 through 1995, inclusive, as reported in the Seller's
Annual Reports on Form 10-K or such Significant Subsidiaries' Annual Reports on
Form F-2 for each of the three (3) fiscal years ended December 31, 1993 through
December 31, 1995 which were filed with the SEC or the FDIC (as applicable)
under the Exchange Act, in each case accompanied by the audit report of Arthur
Andersen LLP or such other independent accountants for such Significant
Subsidiaries, and (b) the unaudited consolidated balance sheets of the Seller
and its subsidiaries as of June 30, 1996 and June 30, 1995, the related
unaudited consolidated statements of operations and changes in stockholders'
equity for the six (6) months ended June 30, 1996 and June 30, 1995 and the
related unaudited consolidated statements of cash flows for the six (6) months
ended June 30, 1996 and June 30, 1995, all as reported in the Seller's
Quarterly Report on Form 10-Q for the six (6) months ended June 30, 1996 filed
with the SEC under the Exchange Act. The December 31, 1995 consolidated balance
sheet (the "Seller Balance Sheet") of the Seller (including the related notes,
where applicable) and the other financial statements referred to herein
<PAGE>
(including the related notes, where applicable) fairly present, and the
financial statements to be included in any reports or statements (including
reports on Forms 10-Q and 10-K) to be filed by the Seller with the SEC after
the date hereof will fairly present, the consolidated financial position and
results of the consolidated operations and cash flows and changes in
shareholders' equity of the Seller and its subsidiaries for the respective
fiscal periods or as of the respective dates therein set forth; and each of
such statements (including the related notes, where applicable) has been and
will be prepared in accordance with GAAP consistently applied during the
periods involved, except as otherwise set forth in the notes thereto (subject,
in the case of unaudited interim statements, to normal year-end adjustments).
The books and records of the Seller and its subsidiaries have been, and are
being, maintained in accordance with GAAP and applicable legal and regulatory
requirements.
4.06 Absence of Undisclosed Liabilities. None of the Seller or any of its
subsidiaries has any obligation or liability (contingent or otherwise) that is
material on a consolidated basis to the Seller, or that when combined with all
similar obligations or liabilities would be material on a consolidated basis to
the Seller or any of its Significant Subsidiaries, except as disclosed or
reflected in the Seller Balance Sheet or any of the other financial statements
described in Section 4.05 above.
4.07 Broker's Fees. Neither the Seller nor any of its officers, directors,
employees or agents has employed any broker, finder or financial advisor or
incurred any liability for any fees or commissions in connection with any of
the transactions contemplated by this Agreement, except for the fees incurred
in connection with the engagement of PaineWebber and except for legal,
accounting and other professional fees payable in connection with the Merger.
The Seller will be responsible for the payment of all such fees.
4.08 Absence of Certain Changes or Events. Except as disclosed in the
Seller's Quarterly Report on Form 10-Q for the six (6) months ended June 30,
1996 or in any Current Reports of the Seller on Form 8-K filed prior to the
date of this Agreement, since December 31, 1995, the Seller and its
subsidiaries have not incurred any material liability, except in the ordinary
course of their business consistent with their past practices, nor has there
been any change in the business, assets, financial condition or results of
operations of the Seller or any of its subsidiaries which has had, or is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on the Seller or any Significant Subsidiary of the Seller.
<PAGE>
4.09 Legal Proceedings. There is no suit, action or proceeding pending or,
to the best knowledge of the Seller, threatened, against the Seller or any
subsidiary of the Seller or challenging the validity or propriety of the
transactions contemplated by this Agreement or the Plan of Merger, as to which
there is a reasonable possibility of an adverse determination and which, if
adversely determined, would, individually or in the aggregate, have a Material
Adverse Effect on the Seller or any Significant Subsidiary of the Seller or
otherwise materially adversely affect the Seller's ability to perform its
obligations under this Agreement, nor is there any judgment, decree,
injunction, rule or order of any legal or administrative body or arbitrator
outstanding against the Seller or any subsidiary of the Seller having, or which
insofar as reasonably can be foreseen, in the future could have, any such
effect.
4.10 Taxes and Tax Returns.
(a) Except where the failure to do so would not have a Material
Adverse Effect, the Seller and each of its subsidiaries (referred to for
purposes of this Section 4.10, collectively, as the "Seller Companies")
have, since December 31, 1989, timely filed in correct form all Filed Tax
Returns.
(b) The Seller Companies have paid all Taxes shown as being due on
the Filed Tax Returns.
(c) No assessment that has not been settled or otherwise resolved has
been made with respect to Taxes not shown on the Filed Tax Returns, other
than such additional Taxes as are being contested in good faith and which
if determined adversely to the Seller Companies would not have a Material
Adverse Effect. No deficiency in Taxes or other proposed adjustment that
has not been settled or otherwise resolved has been asserted in writing by
any taxing authority against any of the Seller Companies, which if
determined adversely to the Seller Companies would have a Material Adverse
Effect. No material Tax Return of any of the Seller Companies is now under
examination by any applicable taxing authority. There are no material
liens for Taxes (other than current Taxes not yet due and payable) on any
of the assets of any Seller Company.
(d) Adequate provision has been made on the Seller Balance Sheet for
all Taxes of the Seller Companies in respect of all periods through the
date hereof.
<PAGE>
(e) Except with respect to intra-Seller Company agreements made or
required under the federal consolidated tax return regulations, none of
the Seller Companies is a party to or bound by any Tax indemnification,
Tax allocation or Tax sharing agreement with any person or entity or has
any current or potential contractual obligation to indemnify any other
person or entity with respect to Taxes.
(f) None of the Seller Companies has filed or been included in a
combined, consolidated or unitary income Tax Return (including any
consolidated federal income Tax Return) other than one of which one of the
Seller Companies was the parent.
(g) None of the Seller Companies has made any payments, is obligated
to make any payments, or is a party to any agreement that could obligate
it to make any payments that will not be deductible under Code
Section 280G.
4.11 Employees.
(a) Except as set forth in Section 4.11(a) of the Seller Disclosure
Schedule, neither the Seller nor any of its subsidiaries maintains or
contributes to any "employee pension benefit plan", as such term is
defined in Section 3 of ERISA (the "Seller Pension Plans"), "employee
welfare benefit plan", as such term is defined in Section 3 of ERISA (the
"Seller Benefit Plans"), stock option plan, stock purchase plan, deferred
compensation plan, other employee benefit plan for employees of the
Seller or any subsidiary thereof, or any other plan, program or
arrangement of the same or similar nature that provides benefits to
non-employee directors of the Seller or any subsidiary thereof
(collectively, the "Seller Other Plans").
(b) The Seller shall have delivered to the Buyer within five (5)
business days after the delivery of the Seller Disclosure Schedule a
complete and accurate copy of each of the following with respect to each
of the Seller Pension Plans, the Seller Benefit Plans and the Seller
Other Plans: (i) plan document; (ii) trust agreement or insurance
contract, if any; (iii) most recent IRS determination letter, if any;
(iv) most recent actuarial report, if any; and (v) most recent annual
report on Form 5500.
(c) The value of the assets of each of the Seller Pension Plans
subject to Title IV of ERISA will exceed as of the Effective Time that
plan's "Benefit Liabilities" as that term is defined in Section 4001(a)
(16) of ERISA, when determined under actuarial factors that would apply
<PAGE>
if that plan terminated in accordance with all applicable legal
requirements and, as of the date hereof, none of such plans are
underfunded by any material amounts.
(d) To the best knowledge of the Seller, each of the Seller Pension
Plans and each of the Seller Benefit Plans has been administered in
compliance with its terms in all material respects and is in compliance
in all material respects with the applicable provisions of ERISA
(including, but not limited to, the funding and prohibited transactions
provisions thereof), the Code and other applicable laws, except to the
extent that non-compliance would not have a Material Adverse Effect on
the Seller, taken as a whole.
(e) To the best knowledge of the Seller, there has been no reportable
event within the meaning of Section 4043(b) of ERISA or any waived funding
deficiency within the meaning of Section 412(d)(3) (or any predecessor
section) of the Code with respect to any Seller Pension Plan.
(f) The Seller and its subsidiaries have made or provided for all
contributions to the Seller Pension Plans required thereunder.
(g) Other than the contributions to the defined benefit plans
maintained by the Co-operative Banks Employees Retirement Association
and/or the Savings Banks Employees Retirement Association, neither the
Seller nor any of its subsidiaries contributes or has contributed to any
multiple employer pension plan or to any "Multiemployer Plan," as such
term is defined in Section 3(37) of ERISA.
(h) To the best knowledge of the Seller, each of the Seller Pension
Plans which is intended to be a qualified plan within the meaning of
Section 401(a) of the Code is so qualified, and the Seller is not aware
of any fact or circumstance which would adversely affect the qualified
status of any such plan.
(i) Except as set forth in Section 4.11(i) of the Seller Disclosure
Schedule, neither the Seller nor any of its subsidiaries is party to or
maintains any contract or other arrangement with any employee or group of
employees, providing severance payments, stock or stock-equivalent
payments or ost-employment benefits of any kind or providing that any
otherwise disclosed plan program or arrangement will irrevocably continue,
with respect to any or all of its participants, for any period of time.
<PAGE>
4.12 Agreements with Banking Authorities. Neither the Seller nor any of
its subsidiaries is a party to any commitment, letter (other than letters
addressed to regulated depository institutions generally), written agreement,
memorandum of understanding or order to cease and desist with any federal or
state governmental entity charged with the supervision or regulation of banks
or bank holding companies or engaged in the insurance of bank deposits which
restricts materially the conduct of its business, or in any manner relates to
its capital adequacy, credit policies, management or overall safety and
soundness or such entity's ability to perform its obligations hereunder, and
neither the Seller nor any of its subsidiaries has received written
notification from any such federal or state governmental entity that any such
Person may be requested to enter into, or otherwise be subject to, any such
commitment, letter, written agreement, memorandum of understanding or cease and
desist order.
4.13 Material Agreements. Except as set forth in any of the Seller
Disclosure Schedules or the index of exhibits in the Seller's Annual Report on
Form 10-K for the year ended December 31, 1995, as of the date of this
Agreement, except for this Agreement and the other Transaction Documents,
neither the Seller nor any of its subsidiaries is a party to or is bound by (a)
any agreement, arrangement, or commitment that is material to the financial
condition, results of operations or business of the Seller or any Significant
Subsidiary of the Seller, except those entered into in the ordinary course of
business; (b) any written (or oral, if material) agreement, arrangement, or
commitment relating to the employment of any person or the election or
retention in office or severance of any present or former director or officer
of the Seller or any of its subsidiaries; (c) any contract, agreement, or
understanding with any labor union; (d) any agreement by and among the Seller,
its subsidiaries and/or any Affiliate thereof; or (e) any contract or agreement
or amendment thereto that would be required to be filed as an Exhibit to a Form
10-K filed by the Seller as of the date hereof that has not been filed as an
Exhibit to the Form 10-K filed by it for 1995.
4.14 Ownership of Property. Section 4.14 of the Seller Disclosure Schedule
sets forth a true and complete list of all real property owned, leased or
operated by the Seller or its subsidiaries (including all of the branches of
the Seller's two subsidiary banks and all of the Seller's properties acquired
by foreclosure proceedings in the ordinary course of business but excluding any
specific listing of any real property carried at nominal value, for which only
a generic description will be included on such schedule) as of the date hereof.
The Seller directly or indirectly through its subsidiaries has good and
marketable title to all assets and properties, whether real or personal,
<PAGE>
tangible or intangible, including, without limitation, the capital stock of its
subsidiaries and all other assets and properties reflected in its consolidated
balance sheet as of June 30, 1996, or acquired subsequent thereto subject to no
encumbrances, liens, mortgages, security interests or pledges, except (a) those
items that secure liabilities that are reflected in said balance sheet or the
notes thereto or incurred in the ordinary course of business after the date of
such balance sheet and not otherwise prohibited by the terms hereof, (b)
dispositions for adequate consideration in the ordinary course of business or
as expressly permitted by the terms hereof, (c) statutory liens for amounts not
yet delinquent or which are being contested in good faith, (d) those items that
secure public or statutory obligations or any discount with, borrowing from, or
other obligations to, any Federal Reserve Bank or Federal Home Loan Bank,
inter-bank credit facilities, or any transaction by a subsidiary acting in a
fiduciary capacity, and (e) such encumbrances, liens, mortgages, security
interests, and pledges that are not material in character, amount or extent.
Neither the Seller nor any of its subsidiaries has received any notice of
violation of any applicable zoning or environmental regulation, ordinance or
other law, order, regulation, or requirement relating to its properties, except
as set forth in Section 4.14 of the Seller Disclosure Schedule. The Seller and
its subsidiaries as lessees have the right under valid and existing leases to
occupy, use, possess and control all property leased by the Seller and its
subsidiaries as presently occupied, used, possessed and controlled by the
Seller and its subsidiaries. Neither the Seller nor any of its subsidiaries is
in default, and there has not occurred any event that with the lapse of time or
giving of notice or both would constitute a default, under any leases pursuant
to which the Seller or any of its subsidiaries leases any real property, except
for such defaults which, individually or in the aggregate, would not result in
the forfeiture of the use or occupancy of the property covered by any such
lease or would not result in a material liability to the Seller or any
Significant Subsidiary of the Seller which is not reflected on the consolidated
balance sheet of the Seller dated as of June 30, 1996. All such leases
constitute legal, valid and binding obligations of the Seller or its
subsidiaries and, to the knowledge of the Seller, the other party thereto,
enforceable by the Seller or such subsidiary in accordance with their
respective terms, except that enforcement thereof may be limited by the
receivership, conservatorship and supervisory powers of bank regulatory
agencies generally as well as bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting enforcement of creditors' rights
generally and except that enforcement thereof may be subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law) and the availability of equitable remedies.
Section 4.14 of the Seller Disclosure Schedule sets forth the expiration date
<PAGE>
and renewal terms of each such lease. Neither the Seller nor any of its
subsidiaries has received notice of, or made a claim with respect to, any
breach or default under any leases pursuant to which the Seller or any of its
subsidiaries lease any real property.
4.15 Reports. Since January 1, 1993, the Seller and its subsidiaries have
filed, and subsequent to the date hereof will file, all reports, registrations
and statements, together with any amendments required to be made with respect
thereto, that were and are required to be filed with (a) the SEC, including,
but not limited to, Forms 10-K, Forms 10-Q, Forms 8-K and proxy statements (and
all such reports, registrations and statements have been or will be delivered
by the Seller to the Buyer), (b) the Federal Reserve Board, (c) the FDIC, and
(d) any applicable state securities or banking authorities (except, in the case
of state securities authorities, no such representation is made as to filings
which are not material) (all such reports and statements are collectively
referred to herein as the "Seller Reports"). As of their respective dates, the
Seller Reports complied and, with respect to filings made after the date of
this Agreement, will at the date of filing comply, in all material respects
with all of the statutes, rules and regulations enforced or promulgated by the
regulatory authority with which they were filed and did not contain and, with
respect to filings made after the date of this Agreement, will not at the date
of filing contain, any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
4.16 Compliance with Applicable Law. Each of the Seller and each
Significant Subsidiary thereof holds all licenses, franchises, permits and
authorizations necessary for the lawful conduct of its business, and each of
the Seller and each Significant Subsidiary thereof has complied with and is not
in violation of or default in any respect under any, applicable law, statute,
order, rule, regulation or policy of, or agreement with, any federal, state or
local governmental agency or authority relating to the Seller or such
Significant Subsidiary (other than where such default or noncompliance will not
result in, or create the possibility of resulting in, a material limitation on
the conduct of the business of the Seller, will not cause, or create the
possibility of causing, the Seller or any Significant Subsidiary thereof to
incur any financial penalty in excess of $20,000 (including but not limited to
any civil money penalty or other monetary sanction under Section 8(i)(2) of the
FDIA, 12 U.S.C. ss.1818(i)(2), or under any applicable state law ("CMPs")), and
will not otherwise result, or create the possibility of resulting in any
<PAGE>
Material Adverse Effect on the Seller or any Significant Subsidiary of the
Seller), and neither the Seller nor any Significant Subsidiary of the Seller
has received any notice of any violation of any such law, statute, order, rule,
regulation, policy or agreement, or the commencement of any proceeding in
connection with any such violation (including but not limited to any hearing or
investigation relating to the imposition or contemplated imposition of CMPs),
and does not know of any violation of, any such law, statute, order, rule,
regulation, policy or agreement which would have such a result.
4.17 Environmental Matters.
(a) Except as set forth in Section 4.17(a) of the Seller Disclosure
Schedule, the Seller, each of its Significant Subsidiaries and the
Participation Facilities (as such term is hereinafter defined) are and
have been in material compliance with all applicable laws, rules,
regulations, standards and requirements of the EPA and of state and local
agencies with jurisdiction over pollution or protection of the
environment.
(b) Except as set forth in Section 4.17(b) of the Seller Disclosure
Schedule, there is no suit, claim, action or proceeding now pending or,
to the best knowledge of the Seller, threatened, before any court,
governmental agency or board or other forum in which the Seller, any of
its Significant Subsidiaries or any Participation Facility has been or,
with respect to threatened proceedings, may be, named as a defendant (i)
for alleged noncompliance (including by any predecessor), with any
environmental law, rule or regulation or (ii) relating to the release
into the environment of any Hazardous Material (as hereinafter defined)
whether or not occurring at or on a site owned, leased or operated by the
Seller, any of its Significant Subsidiaries or any Participation
Facility.
(c) Except as set forth in Section 4.17(c) of the Seller Disclosure
Schedule, to the best knowledge of the Seller, there is no suit, claim,
action or proceeding pending, or threatened, before any court,
governmental agency or board or other forum in which any Loan Property
has been or, with respect to threatened proceedings, may be, named as a
defendant or involved (i) for alleged noncompliance (including by any
predecessor) with any environmental law, rule or regulation or (ii)
relating to the release into the environment of any Hazardous Material
whether or not occurring at or on a site owned, leased, operated or
involving a Loan Property.
<PAGE>
(d) Except as set forth in Sections 4.17(a), (b) and (c) of the
Seller Disclosure Schedule, to the best knowledge of the Seller's
management, there is no reasonable basis for any suit, claim, action or
proceeding as described in subsection (b) or (c) of this Section 4.17.
(e) Except as set forth in Section 4.17(e) of the Seller Disclosure
Schedule, during and, to the best knowledge of the Seller, prior to the
period of (i) the ownership or operation by the Seller or any of its
Significant Subsidiaries of any of their current properties, or (ii) the
participation by the Seller or any of its Significant Subsidiaries in the
management of any Participation Facility, there has been no release of
Hazardous Material in, on, under or affecting such properties, that would
subject the Seller or such Significant Subsidiary to any liability which
would result in a Material Adverse Effect with respect to the Seller or
such Significant Subsidiary. Except as set forth in Section 4.17(e) of
the Seller Disclosure Schedule, to the best knowledge of the Seller, none
of the branch offices of any subsidiary or any other real property owned,
operated or leased by the Seller was at any time the site of any gas
station, manufacturing plant or industrial business or activity or was at
any time a site on which any Hazardous Material, was stored, produced or
otherwise located.
(f) The Seller and its Significant Subsidiaries have asked for
representations from borrowers and/or have conducted due diligence with
respect to each of the Loan Properties in a manner consistent with
industry practice at the time the loan was granted for secured loan
transactions of the size and type of the loan for which such Loan
Property was granted as security, and in the course thereof, or
subsequent thereto, nothing has come to the attention of the Seller or
any of its Significant Subsidiaries which could be reasonably likely to
prevent the Seller or such Significant Subsidiary from exercising its
right to foreclose on its security interest therein.
(g) None of the disclosures set forth in Section 4.17 of the Seller
Disclosure Schedule is reasonably likely to result in the closure of any
of the branch offices of any of the Significant Subsidiaries of the
Seller or in a Material Adverse Effect with respect to the Seller or any
Significant Subsidiary.
<PAGE>
(h) The transactions contemplated herein are not subject to the
provisions of any applicable environmental restrictive transfer law.
(i) The following definitions apply for purposes of this Section
4.17: (i) "Loan Property" means any property in which the Seller or any
of its Significant Subsidiaries holds a security interest, and, where
required by the context, said term means the owner or operator of such
property; (ii) "Participation Facility" means any facility in which the
Seller or any of its Significant Subsidiaries participates in the
management and, where required by the context, said term means the owner
or operator of such property; (iii) "Hazardous Material" means any
pollutant, contaminant, hazardous material, hazardous waste, or hazardous
substance as defined under the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. ss.9601 et seq., or the
Resource Conservation and Recovery Act, 42 U.S.C. ss.ss.6901 et seq., the
Clear Water Act, 33 U.S.C. ss.1321, et seq., or any other federal, state
or local law relating to safety, health, or environmental protection or
any regulations promulgated under any of the foregoing, and specifically
includes oil and any other petroleum derived products, asbestos,
polychlorinated biphenyls (PCB's) and, with respect to any residential
property, lead paint and radon.
4.18 Chapters 110D and 110F Not Applicable. The provisions of Chapters
110D and 110F of the Massachusetts General Laws will not, prior to the
termination of this Agreement, assuming the accuracy of the representations
contained in Section 3.12 hereof (without giving effect to the knowledge
qualification thereof), apply to this Agreement or any of the other Transaction
Documents or any of the transactions contemplated hereby or thereby.
4.19 Ownership of Buyer Common Stock. As of the date hereof, neither the
Seller nor, to its best knowledge, any of its affiliates or associates (as such
terms are defined under the Exchange Act), (a) beneficially own, directly or
indirectly, or (b) are parties to any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of, in each case,
shares of capital stock of the Buyer, which in the aggregate represent five
percent (5%) or more of the outstanding shares of capital stock of the Buyer
entitled to vote generally in the election of directors (other than Trust
Account Shares).
<PAGE>
4.20 Insurance. The Seller and each of its subsidiaries is presently
insured, and since January 1, 1996 has been insured, for reasonable amounts
against such risks as companies engaged in a similar business in a similar
location would, in accordance with good business practice, customarily be
insured. The Seller has made available to the Buyer copies of policies relating
to insurance maintained by the Seller or its subsidiaries with respect to their
properties and the conduct of their respective businesses.
4.21 Labor. No work stoppage involving the Seller or any of its
subsidiaries is pending or, to the best knowledge of the Seller's management,
threatened. Neither the Seller nor any of its subsidiaries is involved in, or,
to the best knowledge of the Seller's management, threatened with or affected
by, any dispute, arbitration, lawsuit or administrative proceeding relating to
labor or employment matters which might reasonably be expected to result in a
Material Adverse Effect with respect to the Seller or any of its Significant
Subsidiaries. No employees of the Seller or any of its subsidiaries are
represented by any labor union, and, to the best knowledge of the Seller's
management, no labor union is attempting to organize employees of the Seller or
any of its subsidiaries.
4.22 Material Interests of Certain Persons. Except as disclosed in Section
4.22 of the Seller Disclosure Schedule, no officer or director of the Seller,
or any "associate" (as such term is defined in Rule 14a-1 under the Exchange
Act) of any such officer or director, has any material interest in any material
contract or property (real or personal), tangible or intangible, used in or
pertaining to the business of the Seller or any of its subsidiaries.
4.23 Absence of Registration Obligations. Neither the Seller nor any of
its subsidiaries is under any obligation, contingent or otherwise, by reason of
any agreement to register any of its securities under the Securities Act which
will survive the Merger.
4.24 Loans. All currently outstanding loans of, or current extensions of
credit by, the Seller or any of its Significant Subsidiaries (individually, a
"Loan," and collectively, the "Loans") were solicited, originated and currently
exist in material compliance with all applicable requirements of federal and
state law and regulations promulgated thereunder and applicable loan policies
of the Person extending the same, except for such changes to the circumstances
of the obligor thereunder or the collateral occurring subsequent to the
origination thereof and over which the Seller or such subsidiary had no
control. The Loans are adequately documented and, to the best knowledge of the
Seller, each note evidencing a Loan or loan or credit agreement or security
<PAGE>
instrument related to the Loans constitutes a valid, legal and binding
obligation of the obligor thereunder, enforceable in accordance with the terms
thereof, except where the failure thereof, individually or in the aggregate,
would not have a Material Adverse Effect with respect to the Seller or any of
its Significant Subsidiaries. There are no oral modifications or amendments or
additional agreements related to the Loans that are not reflected in the
records of the Seller or such subsidiary, and no claims of defense as to the
enforcement of any Loan has been asserted and the Seller is aware of no acts or
omissions which would give rise to any claim or right of rescission, set-off,
counterclaim or defense, except where such would not have, either individually
or in the aggregate, a Material Adverse Effect with respect to the Seller or
any of its Significant Subsidiaries. The Seller and its Significant
Subsidiaries currently maintain, and shall continue to maintain, an allowance
for loan losses allocable to the Loans which is adequate to provide for all
known and reasonably estimable losses, net of any recoveries relating to such
extensions of credit previously charged off, on the Loans, such allowance for
loan losses complying in all material respects with all applicable loan loss
reserve requirements established in accordance with GAAP and by any
governmental authorities having jurisdiction with respect to the Seller or any
such subsidiary. Except as set forth in Section 4.24 of the Seller Disclosure
Schedule, none of the Loans are presently serviced by third parties and, other
than pursuant to obligations in accordance with sales contracts entered into in
the ordinary course of business and consistent with past practice, there is no
obligation which could result in any Loan becoming subject to any third party
servicing.
4.25 Capitalization. As of the date hereof, without giving effect to the
transactions contemplated hereby, the subsidiaries of the Seller which are
"insured depository institutions" (a) are "well capitalized", as defined in the
FDIA, and (b) meet all capital requirements, standards and ratios required by
each state or federal bank regulator with jurisdiction over such Persons. No
such regulator has indicated that it will condition any of the regulatory
approvals upon an increase in any such Person's capital or compliance with any
special capital requirement, standard or ratio.
4.26 CRA Rating. Each subsidiary of the Seller which is an "insured
depository institution" was rated "Satisfactory" or better following its most
recent Community Reinvestment Act examination by the regulatory agency
responsible for its supervision. Neither the Seller nor any of such
subsidiaries has received any notice of and none of such Persons has any
knowledge of any planned or threatened objection by any community group to the
transactions contemplated hereby.
<PAGE>
4.27 Seller Information. The information relating to the Seller and its
subsidiaries to be contained in the Joint Proxy Statement as described in
Section 5.04 hereof, and any other documents filed with the SEC or any
regulatory agency in connection herewith, to the extent such information is
provided in writing by the Seller, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make such
information not misleading.
4.28 Disclosure. No representation or warranty contained in this
Agreement, and no statement contained in any certificate, list or other
writing, including but not necessarily limited to the Seller Disclosure
Schedule, furnished to the Buyer pursuant to the provisions hereof, to the best
knowledge of the Seller, contains or will contain any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements herein or therein not misleading. To the best knowledge of the
Seller, all information material to the Merger and the transactions
contemplated by this Agreement, or which is necessary to make the
representations and warranties herein contained not misleading, has been
disclosed in writing to the Buyer.
ARTICLE V
COVENANTS OF THE PARTIES
5.01 Conduct of the Business of Seller. During the period from the date of
this Agreement to the earlier of the Effective Time or the date of termination
of this Agreement, the Seller:
(a) shall, and shall cause each of its subsidiaries to, conduct its
business and engage in transactions only in the ordinary and usual course
of business consistent with past practices, which shall mean (i)
conducting its banking and other business in the ordinary and usual course,
(ii) refraining from any of the activities described in Section 5.01(b)
below, (iii) not entering into any material transactions except in the
ordinary and usual course of business consistent with past practices and
(iv) complying with the following covenants:
(A) maintaining its corporate existence and good standing, except
where any failure to maintain such good standing does not or would not
have a Material Adverse Effect on the Seller or any of its Significant
Subsidiaries;
(B) using all reasonable efforts to maintain and keep its properties
in as good repair and condition in all material respects as they presently
<PAGE>
exist, except for ordinary wear and tear and damage due to casualty;
(C) using all reasonable efforts to maintain in full force and effect
insurance generally comparable in amount and in scope of coverage to that
now maintained by it;
(D) complying with and performing in all material respects its
obligations and duties (y) under contracts, leases and documents relating
to or affecting its assets, properties and business and (z) imposed upon
it by all federal, state and local laws and all rules, regulations and
orders imposed by federal, state or local governmental authorities,
judicial orders, judgments, decrees and similar determinations; and
(E) using all reasonable efforts to preserve its business
organization intact and the goodwill of those having business
relationships with the Seller or any of the Seller's subsidiaries, to
keep available the services of its officers and employees as a group and
to maintain satisfactory relationships with borrowers, depositors, other
customers and others having business relationships with it;
(b) shall not and shall not permit any of its subsidiaries to,
without the prior written consent of the Buyer:
(i) engage or participate in any material transaction or incur
or sustain any material obligation or liability except in the
ordinary, regular and usual course of its businesses consistent with
past practices;
(ii) offer an interest rate with respect to any deposit that would
constitute such deposit a "brokered deposit" under 12 C.F.R.
Section 337.6(a)(l)(ii);
(iii) except in the ordinary, regular and usual course of business
consistent with past practices, sell, lease, transfer, assign,
encumber or otherwise dispose of or enter into any contract,
agreement or understanding to lease, transfer, assign, encumber or
dispose of any of its assets; provided that the Seller and its
subsidiaries may (A) sell the four automobiles more specifically
described in Section 5.01(b)(iii) of the Seller Disclosure Schedule
to the employees currently using the same in the performance of their
<PAGE>
duties with the Seller and/or such subsidiaries at a purchase price
equal to the depreciated value thereof reflected on the Seller's or
such subsidiary's books and records and as otherwise described in
said Section of the Seller Disclosure Schedule and (B) acquire and
dispose of loans and investment securities in the ordinary course of
business consistent with past practice;
(iv) file any application to open, close or relocate any branch
office;
(v) open, close, relocate, or give any notice (written or verbal)
to customers or governmental authorities or agencies to open, close
or relocate the operations of any branch office; or
(vi) waive any material right, whether in equity or at law, that it
has with respect to any asset except in the ordinary, regular and
usual course of business consistent with past practice;
(c) shall, at the Buyer's request and expense, use its best efforts to
cooperate with the Buyer with respect to preparation for the combination
and integration as of the Effective Time of the businesses, systems and
operations of the Buyer and the Seller, and shall confer on a regular and
frequent basis with one or more representatives of the Buyer to report on
operational and related matters;
(d) shall not declare or pay any dividends on or make any other
distributions in respect of Seller Common Stock, except for regular
quarterly cash dividends on Seller Common Stock at a rate not in excess of
the Seller's current dividend rate and subject to the terms of
Section 5.19 hereof;
(e) shall not adopt or amend (other than amendments required by
applicable law or amendments that reduce amounts payable by it or its
subsidiaries) in any material respect any Seller Pension Plan, any Seller
Benefit Plan or any Seller Other Plan or enter (or permit any of its
subsidiaries to enter) into any employment, retention, severance or
similar contract with any person (including, without limitation, contracts
with management which might require that payments be made upon the
consummation of the transactions contemplated hereby) or amend any such
existing agreements, plans or contracts to increase any amounts payable
thereunder or benefits provided thereunder, or grant or permit any
increase in compensation to its or its subsidiaries' employees as a class
<PAGE>
or pay any bonus except (i) as previously determined and consistent with
the terms of the Seller's short term incentive plans, the Seller may pay
bonuses to its employees under and in accordance with the provisions of
such short term incentive plans, provided that such bonuses do not exceed
the amount set forth in Section 5.01(e)(i) of the Seller Disclosure
Schedule, and (ii) as otherwise set forth in Section 5.01(e)(ii) of the
Seller Disclosure Schedule provided that with respect to this clause (ii)
such bonuses and increases are made in the ordinary course of business in
accordance with past practice;
(f) except as permitted in Section 5.01(b)(iii), shall not, with
respect to itself or any of its subsidiaries, authorize, recommend,
propose or announce an intention to authorize, recommend or propose, or
enter into an agreement with respect to, any merger, consolidation,
purchase and assumption transaction or business combination (other than
the Merger), any acquisition of a material amount of assets or securities
or assumption of liabilities (including deposit liabilities), any
disposition of a material amount of assets or securities, or any release
or relinquishment of any material contract rights;
(g) shall not propose or adopt amendments to its or any of its
subsidiaries' articles of organization or By-Laws;
(h) shall not issue, deliver or sell any shares (whether original
issuance or from treasury shares) of its capital stock or securities
convertible into or exercisable for shares of its capital stock (or permit
any of its subsidiaries to issue, deliver or sell any shares of such
subsidiaries' capital stock or securities convertible into or exercisable
for shares of such subsidiaries' capital stock), except for the sale of up
to 6,200 shares of Seller Common Stock pursuant to the Seller's 1993
Employee Stock Purchase Plan and except upon exercise or fulfillment of
rights or options issued or existing pursuant to employee benefit plans,
programs or arrangements, dividend reinvestment plans, or the terms of
convertible securities, all to the extent outstanding or in existence on
the date hereof, and except upon exercise of the Seller Option, as
applicable, or effect any stock split, reverse stock split,
recapitalization, reclassification or similar transaction or otherwise
change its equity capitalization as it existed on June 30, 1996;
<PAGE>
(i) shall not grant, confer or award any options, warrants, conversion
rights or other rights, not existing on the date hereof, to acquire any
shares of its capital stock;
(j) shall not purchase, redeem or otherwise acquire, or permit any of
its subsidiaries to purchase, redeem or otherwise acquire, any shares of
its capital stock or any securities convertible into or exercisable for
any shares of its capital stock, except in a fiduciary capacity;
(k) shall not impose, or suffer the imposition, on any share of
capital stock held by it or by any of its subsidiaries of any material
lien, charge, or encumbrance, or permit any such lien, charge, or
encumbrance to exist;
(l) shall not incur, or permit any of its subsidiaries to incur, any
additional debt obligation or other obligation for borrowed money, or to
guaranty any additional debt obligation or other obligation for borrowed
money, except in the ordinary course of business consistent with past
practices, which shall include but not necessarily be limited to creation
of deposit liabilities, Federal Home Loan Bank advances, purchases of
federal funds, sales of certificates of deposit and entry into repurchase
agreements or other similar arrangements commonly employed by banks;
(m) shall not incur or commit to any capital expenditures or any
obligations or liabilities in connection therewith, other than capital
expenditures and such related obligations or liabilities incurred or
committed to in the ordinary and usual course of business consistent with
past practices, and, in all cases, the Seller agrees to consult with the
Buyer with respect to capital expenditures that individually exceed
$75,000 or cumulatively exceed $300,000;
(n) shall use all reasonable efforts to improve its business, results
of operations, financial condition and prospects;
(o) shall not, except as expressly contemplated hereby, enter into any
contract with any Affiliate;
(p) shall not, except for transactions in the ordinary course of
business consistent with past practice, enter into or terminate any
material contract or agreement, or make any changes in any of its material
leases or contracts, other than renewals of contracts for less than a two
<PAGE>
(2) year period and, subject to the provisions of Section 5.18 hereof,
leases without material adverse change of terms;
(q) shall not, other than in prior consultation with the other party
to this Agreement or except in the ordinary course of business and
consistent with past practice, restructure or materially change its
investment securities portfolio or its "gap position" through purchases,
sales or otherwise, or the manner in which the portfolio is classified or
reported;
(r) shall not agree, in writing or otherwise, to take any of the
foregoing actions or any action which would make any of its
representations or warranties contained herein untrue or incorrect in
any material respect.
5.02 Access to Properties and Records; Confidentiality.
(a) The Seller shall permit the Buyer reasonable access to its
properties and those of its subsidiaries, and shall disclose and make
available to the Buyer all Records, including all books, papers and
records relating to the assets, stock ownership, properties, operations,
obligations and liabilities of the Seller and its subsidiaries, including,
but not limited to, all books of account (including the general ledger),
tax records, minute books of directors and stockholders meetings,
organizational documents, By-Laws, material contracts and agreements,
filings with any regulatory authority, accountants' work papers (to the
extent consent from such accountants is obtained), litigation files, plans
affecting employees, and any other business activities or prospects in
which the Buyer may reasonably have an interest in light of the
transactions contemplated hereby. The Seller shall make arrangements with
each third party provider of services to the Seller to permit the Buyer
reasonable access to all of the Seller's Records held by each such third
party. The Buyer shall permit the Seller reasonable access to such
properties and records of the Buyer and/or its subsidiaries in which the
Seller may reasonably have an interest in light of the transactions
contemplated hereby. Neither the Buyer nor the Seller nor any of their
respective subsidiaries shall be required to provide access to or to
disclose information where such access or disclosure would violate or
prejudice the rights of any customer, would jeopardize the attorney-client
privilege of the institution in possession or control of such information,
or would contravene any law, rule, regulation, order, judgment, decree or
<PAGE>
binding agreement or, in the event of any litigation or threatened
litigation between the parties over the terms of this Agreement where
access to information may be adverse to the interests of such party. The
parties will use all reasonable efforts to make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of
the preceding sentence apply.
(b) All Confidential Information furnished by each party hereto to the
other, or to any of its affiliates, directors, officers, employees,
representatives or agents (such persons being collectively referred to
herein as "Representatives"), shall be treated as the sole property of the
party furnishing the information until consummation of the transactions
contemplated hereby, and, if such transactions shall not occur, the party
receiving the information, or any of its affiliates or Representatives, as
the case may be, shall return to the party which furnished such
information all documents or other materials containing, reflecting or
referring to such information, shall keep confidential all such
information for the period hereinafter referred to, and shall not directly
or indirectly at any time use such information for any competitive or
other commercial purpose; provided, however, that the Buyer and its
affiliates shall be permitted to retain and share with their regulators,
examiners and auditors (who need to know such information and are informed
of the confidential nature thereof and directed to treat such information
confidentially) such materials, files and information relating to or
constituting the Buyer's or any of its affiliate's or Representatives'
work product, presentations or evaluation materials as the Buyer deems
reasonably necessary or advisable in connection with auditing or
examination purposes. The obligation to keep such information confidential
shall continue for two (2) years from the date this Agreement is
terminated. In the event that either party or its affiliates or
Representatives are requested or required in the context of a litigation,
governmental, judicial or regulatory investigation or other similar
proceeding (by oral questions, interrogatories, requests for information
or documents, subpoenas, civil investigative demands or similar process)
to disclose any Confidential Information, the party or its affiliate
or its Representative so requested or required will directly or through
the party of such affiliate or Representative, if practicable and legally
permitted, prior to providing such information, and as promptly as
practicable after receiving such request, provide the other party with
<PAGE>
notice of each such request or requirement so that the other party may
seek an appropriate protective order or other remedy or, if appropriate,
waive compliance with the provisions of this Agreement. If, in the absence
of a protective order or the receipt of a waiver hereunder, the party or
affiliate or Representative so requested or required is, in the written
opinion of its counsel, legally required to disclose Confidential
Information to any tribunal, governmental or regulatory authority, or
similar body, the party or affiliate or Representative so required may
disclose that portion of the Confidential Information which it is advised
in writing by such counsel it is legally required to so disclose to
such tribunal or authority or similar body without liability to the other
party hereto for such disclosure. The parties and their affiliates and
Representatives will exercise reasonable efforts to obtain assurance that
confidential treatment will be accorded the information so disclosed.
As used in this Section 5.02(b), "Confidential Information" means all
data, reports, interpretations, forecasts and records (whether in written form,
electronically stored or otherwise) containing or otherwise reflecting
information concerning the disclosing party or its affiliates which is not
available to the general public and which the disclosing party or any affiliate
or any of their respective Representatives provides or has previously provided
to the receiving party or to the receiving party's affiliates or
Representatives at any time in connection with the transactions contemplated by
this Agreement, including but not limited to any information obtained by
meeting with Representatives of the disclosing party or its affiliates,
together with summaries, analyses, extracts, compilations, studies, personal
notes or other documents or records, whether prepared by the receiving party or
others, which contain or otherwise reflect such information. Notwithstanding
the foregoing, the following information will not constitute "Confidential
Information": (i) information that is or becomes generally available to the
public other than as a result of a disclosure by the receiving party or any
affiliate or Representative of the receiving party, (ii) information that was
previously known to the receiving party or its affiliates or Representatives on
a nonconfidential basis prior to its disclosure by the disclosing party, its
affiliates or Representatives, (iii) information that became or becomes
available to the receiving party or any affiliate or Representative thereof on
a nonconfidential basis from a source other than the disclosing party or any
affiliate or Representatives of the disclosing party, provided that such source
is not known by the disclosing party or its affiliates or Representatives to be
subject to any confidentiality agreement or other legal restriction on
disclosing such information and (iv) information that has been independently
acquired or developed by the receiving party or its affiliates or
Representatives without violating the obligation's of this Section 5.02(b).
<PAGE>
5.03 No Solicitation. Unless and until this Agreement shall have been
properly terminated by either party pursuant to Section 8.01 hereof, neither
the Seller nor any of its subsidiaries shall (and the Seller and each of its
subsidiaries shall use its best efforts to cause its Representatives,
including, but not limited to, investment bankers, attorneys and accountants,
not to), directly or indirectly, encourage, solicit, initiate or participate in
any discussions or negotiations with, or, subject to the fiduciary obligations
of the Seller's Board of Directors (as determined in good faith in consultation
with outside counsel), provide any information to, any corporation,
partnership, person or other entity or group (other than the Buyer and its
affiliates or Representatives) concerning any merger, tender offer, sale of
substantial assets, sale of shares of capital stock or debt securities or
similar transaction involving the Seller or any of its subsidiaries (an
"Acquisition Transaction"), provided that in accordance with the fiduciary
obligations of the Seller's Board of Directors, the Seller may participate in
discussions in the event that the Seller did not solicit or initiate such
discussions with respect to Acquisition Transactions. Notwithstanding the
foregoing, nothing contained in this Section 5.03 shall prohibit the Seller or
its Board of Directors from taking and disclosing to the Seller's stockholders
a position with respect to a tender offer by a third party pursuant to Rules
14d-9 and 14e-2(a) promulgated under the Exchange Act or from making such
disclosure to the Seller's stockholders which, in the judgment of the Board of
Directors determined in good faith in consultation with outside counsel, may be
required under applicable law. The Seller will immediately communicate to the
Buyer the terms of any proposal, discussion, negotiation or inquiry relating to
an Acquisition Transaction and the identity of the party making such proposal
or inquiry which it may receive in respect of any such transaction (which shall
mean that any such communication shall be delivered no less promptly than by
telephone within 24 hours of the Seller's receipt of any such proposal or
inquiry) or its receipt of any request for information from the Federal Reserve
Board, the DOJ, or any other governmental agency or authority with respect to a
proposed Acquisition Transaction.
5.04 Regulatory Matters; Consents.
(a) The Buyer and the Seller shall cooperate in the prompt
preparation and filing with the SEC of a joint proxy statement in
definitive form relating to the meetings of the Buyer's and the Seller's
stockholders to be held in connection with this Agreement and the
transactions contemplated hereby (the "Joint Proxy Statement") and the
Buyer shall promptly prepare and file with the SEC a registration
statement on Form S-4 (the "S-4") in which the Joint Proxy Statement will
<PAGE>
be included as a prospectus. Each of the Buyer and the Seller shall use
all reasonable efforts to have the S-4 declared effective under the
Securities Act as promptly as practicable after such filing, and the
Buyer and the Seller shall thereafter mail the Joint Proxy Statement to
their respective stockholders. The Buyer shall also use all reasonable
efforts to obtain all necessary state securities law or "Blue Sky"
permits and approvals required to carry out the transactions contemplated
by this Agreement, and the Buyer and the Seller shall each furnish to the
other all information concerning itself and the holders of its Common
Stock as may be reasonably requested in connection with any such action.
(b) The Seller and the Buyer shall have the right to review in
advance, and to the extent practicable each will consult the other on,
in each case subject to applicable laws relating to the exchange of
information, all the information relating to the Seller or the Buyer, as
the case may be, and any of their respective subsidiaries, which appear
in any filing made with, or written materials submitted to, any third
party or any government regulatory body, department, agency or authority
in connection with the transactions contemplated by this Agreement. In
exercising the foregoing right, each of the parties hereto shall act
reasonably and as promptly as practicable. The parties hereto agree that
they will consult with each other with respect to the obtaining of all
permits, consents, approvals and authorizations of all third parties and
government regulatory bodies, departments, agencies or authorities
necessary or advisable to consummate the transactions contemplated by
this Agreement, and each party will keep the other apprised of the status
of matters relating to completion of the transactions contemplated herein.
(c) The Buyer and the Seller shall, upon request, furnish each other
with all information concerning themselves, their subsidiaries, directors,
officers and stockholders and such other matters as may be reasonably
necessary or advisable in connection with the Joint Proxy Statement, the
S-4 or any other statement, filing, notice or application made by or on
behalf of the Buyer, the Seller or any of their respective subsidiaries
to any governmental regulatory body, department, agency or authority in
connection with the Merger and the other transactions contemplated by
this Agreement.
<PAGE>
(d) The Seller and the Buyer shall promptly advise each other upon
receiving any communication from any government regulatory body,
department, agency or authority whose consent or approval is required for
consummation of the transactions contemplated by this Agreement which
causes such party to believe that there is a reasonable likelihood that
such requisite approval will not be obtained or that the receipt of such
approval will be materially delayed.
(e) Each of the Seller and the Buyer will cooperate with the other and
use all reasonable efforts to prepare all necessary documentation, to
obtain all necessary permits, consents, approvals and authorizations of
all third parties and governmental bodies necessary to consummate the
transactions contemplated by this Agreement.
(f) The Buyer shall prepare and file as soon as practicable and the
Seller shall cooperate in the preparation and, where appropriate, filing
of, applications requesting the Consents (as contemplated in
Section 6.01(b) herein), from all required governmental or regulatory
authorities or agencies. The Buyer shall provide the Seller and its
counsel with copies of such applications for comment prior to the filing
thereof. The parties shall immediately upon receipt deliver to each other
copies of all filings, correspondence and orders to and from such
governmental or regulatory authorities or agencies transmitted or received
in connection with the transactions contemplated hereby.
5.05 Approval of Stockholders. Each party hereto will (a) as promptly as
practicable, take all steps necessary to duly call, give notice of, convene and
hold a meeting of its stockholders for the purpose of approving this Agreement
and the Merger, and for such other purposes as may be necessary or desirable,
(b) recommend to its stockholders the approval of the aforementioned matters to
be submitted by it to its stockholders (subject to compliance with their
fiduciary duties as determined in good faith in consultation with outside
counsel), and (c) cooperate and consult with the other with respect to each of
the foregoing matters.
5.06 Agreements of Affiliates; Publication of Combined Financial Results.
(a) The Seller shall identify in a letter to the Buyer, after consultation with
counsel, all Persons who, at the time of the meeting of its stockholders
referred to in Section 5.05 hereof, it believes may be deemed to be
"affiliates" of the Seller, as that term is defined for purposes of paragraphs
<PAGE>
(c) and (d) of Rule 145 under the Securities Act and SEC accounting Rules 130
and 135 (the "Seller Affiliates"). The Seller shall use all reasonable efforts
to cause each Person who is identified as a Seller Affiliate in the letter
referred to above to deliver to the Buyer at least forty (40) days prior to the
Effective Time an executed copy of the Seller Affiliates Agreement. Prior to
the Effective Time, the Seller shall amend and supplement such letter and use
all reasonable efforts to cause each additional person who is identified as a
Seller Affiliate to execute a copy of the Seller Affiliates Agreement. Within
thirty (30) days after the end of the first fiscal quarter of the Buyer ending
at least thirty (30) days after the Effective Time, the Buyer will publish
results including at least thirty (30) days of combined operations of the Buyer
and the Seller as referred to in the Seller Affiliates Letter.
(b) The Buyer shall identify in a letter to the Seller, after consultation
with counsel, all Persons who, at the time of the meeting of its stockholders
referred to in Section 5.05 hereof, it believes may be deemed to be
"affiliates" of the Buyer, as that term is defined for purposes of SEC
accounting Rules 130 and 135 (the "Buyer Affiliates"). The Buyer shall use all
reasonable efforts to cause each Person who is identified as a Buyer Affiliate
in the letter referred to above to deliver to the Seller at least forty (40)
days prior to the Effective Time an executed copy of the Buyer Affiliates
Agreement. Prior to the Effective Time, the Buyer shall amend and supplement
such letter and use all reasonable efforts to cause each additional person who
is identified as a Buyer Affiliate to execute a copy of the Buyer Affiliates
Agreement.
(c) The Buyer shall use its best efforts to publish, no later than thirty
(30) days after the end of the first month after the Effective Time in which
there are at least thirty (30) days of post-Merger combined operations (which
month may be the month in which the Effective Time occurs), combined sales and
net income figures as contemplated by and in accordance with the terms of SEC
Accounting Series Release No. 135.
5.07 Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable efforts to,
as promptly as practicable, take, or cause to be taken, all action and to do,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement or to vest the Buyer with full title to all
properties, assets, rights, approvals, immunities and franchises of the Seller.
In case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement or to vest the Buyer with
<PAGE>
full title to all properties, assets, rights, approvals, immunities and
franchises of the Seller, the proper officers and directors of each party to
this Agreement shall take all such necessary action.
5.08 Public Announcements. From the date of this Agreement to the Closing
Date, neither of the parties hereto shall make or send a Public Announcement
unless the other party shall have first been afforded reasonable opportunity to
review and comment on the text of such Public Announcement prior to the
delivery of the same; provided, however, that nothing in this Section shall
prohibit any party hereto from making any Public Announcement which its legal
counsel deems necessary under law, if it makes a good faith effort to obtain
the other party's comment to the text of the Public Announcement before making
it public.
5.09 Post-Closing Governance. From and after the Effective Time, the Board
of Directors of the Buyer shall be expanded by three members and Mr. Bradbury
and two additional individuals selected by the Seller and approved of by the
Buyer in its reasonable business judgment prior to the Effective Time, shall be
appointed as directors of the Buyer. The directors selected by the Seller to
serve as directors of the Buyer shall be divided equally among the three
classes of directors of the Seller, with Mr. Bradbury to be appointed to the
class of directors whose term comes up for reelection in the year 2000. Mr.
Bradbury shall be entitled to serve as a member of the Steering Committee of
the Buyer for so long as he serves as a director of the Buyer. At the Effective
Time, subject to the rights of the Buyer as the sole stockholder of the Seller,
the Board of Directors of the Seller shall consist of those persons comprising
the Board of Directors of the Merger Sub prior to the Effective Time each to
hold office in accordance with the articles of organization and By-Laws of the
Seller as from time to time in effect. Further, at the Effective Time the Board
of Directors of the Subsidiaries of the Seller which are depository
institutions shall consist of those directors of such subsidiaries which the
Buyer has selected to serve as directors of such subsidiaries and such
additional persons as shall be designated by the Buyer prior to the Effective
Time. In the event that the subsidiary banks of the Seller are merged with and
into the subsidiary banks of the Buyer, then Mr. Bradbury and those directors
of the Buyer who were selected by the Seller pursuant to the first sentence of
this Section 5.09 shall become directors of the surviving subsidiary bank(s).
5.10 Merger Subsidiary. The Buyer has caused or will cause the Merger
Subsidiary to be organized under the laws of The Commonwealth of Massachusetts.
The authorized capital stock of the Merger Subsidiary consists or will consist
of one hundred (100) shares of common stock, $0.01 par value per share, all of
<PAGE>
which shares shall be directly owned by the Buyer. The Buyer, as the sole
stockholder of the Merger Subsidiary, will vote all outstanding shares of
capital stock of the Merger Subsidiary in favor of the Plan of Merger and the
Merger and will not vote to modify or rescind, or otherwise permit the
modification or rescission of, such vote prior to a termination of this
Agreement in accordance with Section 8.01 hereof.
5.11 Tax-Free Reorganization Treatment; Accounting. (a) Neither the Buyer
nor the Seller shall intentionally take or cause to be taken any action,
whether before or after the Effective Time, which would disqualify the Merger
as a "reorganization" within the meaning of Section 368(a) of the Code;
provided, however, that nothing herein shall limit the ability of the Buyer to
exercise its rights under the Seller Option Agreement.
(b) Neither the Buyer nor the Seller shall intentionally take or cause to
be taken any action, whether before or after the Effective Time, which would
prevent the Merger from qualifying for pooling of interests accounting
treatment.
5.12 Stock Listing. Buyer shall use all reasonable efforts to cause the
shares of Buyer Common Stock to be issued in connection with the Merger to be
approved for listing on the NASDAQ, subject to official notice of issuance, as
of or prior to the Effective Time.
5.13 Employment and Benefit Matters.
(a) Service Credit. In the event that any employee of the Seller or
its affiliates is transferred to the Buyer or any affiliate of the Buyer
and becomes a participant in an employee benefit plan, program or
arrangement maintained by or contributed to by the Buyer or its affiliates
(any such employee, a "Transferred Employee"), the Buyer shall cause such
plan, program or arrangement to treat the prior service of such
Transferred Employee with the Seller or its affiliates as service rendered
to the Buyer or its affiliate, as the case may be, for purposes of
eligibility to participate, vesting and eligibility for special benefits
under such plan, program or arrangement of the Buyer, but not for purposes
of benefit accrual. The Buyer agrees to provide the Transferred Employees
with the types and levels of employee benefits maintained by the Buyer
for similarly situated employees of the Buyer.
(b) Severance Obligations. For a period of one (1) year after the
Closing Date, the Buyer will provide Transferred Employees with a
<PAGE>
severance plan with provisions which are at least as favorable in the
aggregate to any terminating Transferred Employee as the severance plan
currently maintained by the Seller for such employee. Any employee of the
Seller or its affiliates who is not a Transferred Employee whose position
is terminated on or prior to the Effective Time shall be entitled to
severance benefits in accordance with the severance plan currently
maintained by the Seller for such employee.
(c) Terminated Plans. The Buyer shall have no obligation to any
Transferred Employee under the Seller's 1993 Employee Stock Purchase Plan
or the Seller's Deferred Compensation Plan, each of which shall be
terminated by the Seller prior to the Effective Time.
(d) Severance Agreements. As of the Effective Time, the existing
severance agreements between the Seller and each of Messrs. Bradbury,
Cushing and Gilles and Ms. Bergemann shall each be terminated and the
Buyer and the Seller agree that each such person shall, subject to the
provisions thereof, each be entitled to the payment and benefits
determined pursuant to Section 1(a) of their respective severance
agreements, such payments to be made no later than the Effective Time.
5.14 Accountants' Letters. Each of the Buyer and the Seller shall use all
reasonable efforts to cause to be delivered to the other letters from its
respective independent public accountants, respectively dated as of the date on
which the S-4 (or last amendment thereto) shall become effective and dated as
of the Closing Date, relating to the transactions contemplated by this
Agreement, and addressed to the other party, in form and substance which is
reasonably satisfactory to the party receiving such letters and customary in
transactions of the nature contemplated hereby.
5.15 Directors' and Officers' Indemnification and Insurance. (a) After
the Effective Time, the Buyer shall honor the indemnification provisions for
officers and directors currently set forth in the Articles of Organization (or
charter or other organizational documents) and By-Laws of the Seller and its
subsidiaries with respect to acts and omissions taken prior to the Effective
Time by such officers and directors, but only to the extent permitted by
federal and Massachusetts law and regulations.
(b) The Buyer shall maintain the Seller's (including its subsidiaries')
existing directors' and officers' liability insurance (the "D&O Insurance")
covering persons who are currently covered by the Seller's D&O Insurance for a
<PAGE>
period of six (6) years after the Effective Time on terms no less favorable
than those in effect on the date hereof; provided, however, that the Buyer may
substitute therefor policies providing at least comparable coverage and
containing terms and conditions no less favorable than those in effect on the
date hereof.
5.16 Conversion of Seller Stock Options. At the Effective Time, all
rights with respect to Seller Common Stock pursuant to stock options granted by
the Seller under any currently existing stock option plans of the Seller shall
be converted into corresponding rights to purchase shares of Buyer Common Stock
in accordance with the applicable provisions of the Plan of Merger.
5.17 Maintenance of Records. Through the Effective Time, each of the Buyer
and the Seller will maintain the Records in the same manner and with the same
care that the Records have been maintained prior to the execution of this
Agreement. The Buyer may, at its own expense, make such copies of and excerpts
from the Records as it may deem desirable. All Records, whether held by the
Buyer or the Seller, shall be maintained for such periods as are required by
law, unless the parties shall, applicable law permitting, agree in writing to a
different period. From and after the Effective Time, the Buyer shall be solely
responsible for continuing maintenance of such Records.
5.18 Leases. The Seller shall use all reasonable efforts to renew or
extend on a month-to-month basis or for such term as requested by the Buyer,
any lease of a branch office of any subsidiary, other lease of real property or
lease relating to furniture, fixtures or equipment that is currently in effect
but that would otherwise expire on or prior to the Effective Time. The Seller
shall not cancel, terminate or take other action that is likely to result in
any cancellation or termination of any such lease without prior written notice
to the Buyer.
5.19 Dividends. After the date of this Agreement, each of the Seller and
the Buyer shall coordinate with the other the declaration of any dividends in
respect of Seller Common Stock and Buyer Common Stock and the record dates and
payment dates relating thereto, it being the intention of the parties hereto
that holders of Seller Common Stock or Buyer Common Stock shall not receive two
dividends, or fail to receive one dividend, for any single calendar quarter
with respect to their shares of Seller Common Stock and/or Buyer Common Stock
and any share of Buyer Common Stock any such holder received in exchange
therefor in the Merger.
<PAGE>
5.20 Notice of Change. Each of the parties hereto shall, subject to any
restrictions under applicable law or regulation, promptly notify the other of
any emergency or other change in the normal course of its or its subsidiaries'
businesses or in the operation of its or its subsidiaries' properties and of
any governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated) if such emergency, change,
complaint, investigation or hearing would be material to the business, results
of operations, financial condition or prospects of such Person on a
consolidated basis or any of its Significant Subsidiaries considered
independently. Further, each party agrees to give written notice promptly to
the other party upon becoming aware of the occurrence or impending occurrence
of any event or circumstance relating to it or any of its subsidiaries which
(i) is reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on it or (ii) would cause or constitute a material breach of any
of its representations, warranties, or covenants contained herein, and to use
its reasonable efforts to prevent or promptly to remedy the same.
5.21 Changes in Accounting. Between the date hereof and the Closing Date,
neither of the parties hereto shall change its methods of accounting as in
effect at December 31, 1995, except as may be required by changes in GAAP or
regulatory accounting requirements, as concurred in by such party's independent
auditors, nor shall they change their respective fiscal years.
5.22 SEC Filings. Each of the parties hereto shall file all reports,
applications and other documents required to be filed by it with the SEC or any
other governmental entity between the date of this Agreement and the Effective
Time and shall make available to the other copies of all such reports promptly
after the same are filed. If financial statements are contained in any such
reports filed with the SEC, such financial statements will fairly present the
consolidated financial position of the entity filing such statements as of the
dates indicated and the consolidated results of operations, changes in
shareholders' equity, and cash flows for the periods then ended in accordance
with GAAP (subject in the case of interim financial statements to normal
recurring year-end adjustments that are not material). As of their respective
dates, such reports filed with the SEC will comply in all material respects
with applicable securities laws and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
<PAGE>
5.23 Covenants of Buyer. From the date of this Agreement until the earlier
of the Effective Time or the date of termination of this Agreement, the Buyer
covenants and agrees that it shall take no action which would (a) materially
adversely affect the ability of any party to obtain any Consents required for
consummation of the transactions contemplated hereby without the imposition of
a condition or restriction of the type referred to in Section 6.02(g) of this
Agreement, (b) materially adversely affect the ability of any party to perform
its covenants and agreements under this Agreement, or (c) result in the Buyer
entering into an agreement with respect to an acquisition proposed with a third
party which would result in the Merger not being consummated.
5.24 Regulatory Reports. Each party and its subsidiaries shall file all
reports required to be filed by it with regulatory authorities between the date
of this Agreement and the Effective Time and, to the extent permitted by law,
shall deliver to the other party copies of all such reports promptly after the
same are filed.
5.25 Registration of Shares. On or prior to the Effective Time, the Buyer
shall file a registration statement on Form S-3 or Form S-8, as the case may be
(or any successor or other appropriate form), with respect to the shares of
Buyer Common Stock subject to the stock options of the Seller to be assumed by
the Buyer pursuant to Section 2.04 of the Plan of Merger and the Buyer shall
use its reasonable efforts to maintain the effectiveness of such registration
statement (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such options remain outstanding.
5.26 Environmental Remediation. With respect to 97 Lowell Road, Concord,
Massachusetts, the Seller will (a) cause the removal of the underground storage
tank that was found to be leaking in 1996, (b) cause a "tightness test" to be
performed upon the other underground storage tank(s) on the premises, and if
any such tanks fail the tightness test, remove such tanks in accordance with
applicable law, (c) test the area surrounding the tanks for the presence of
contaminants and (d) in the event that contamination is found to be present,
the Seller shall effect such remediation as the Buyer shall request in writing.
5.27 Bank Mergers. At the written request of the Buyer, the Seller shall
take and shall cause its bank subsidiaries to take all necessary actions to
effectuate mergers of each of its subsidiary banks with a subsidiary bank of
the Buyer as soon as practicable after the Effective Time and in accordance
with the requirements of all applicable laws and regulations.
<PAGE>
ARTICLE VI
CLOSING CONDITIONS
6.01 Conditions to Each Party's Obligations Under This Agreement. The
respective obligations of each party under this Agreement shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions,
none of which may be waived:
(a) Stockholders' Approval. This Agreement and the Plan of Merger and
the transactions contemplated hereby and thereby shall have been approved
by the affirmative vote of the holders of at least two-thirds of the
outstanding shares of Seller Common Stock and at least a majority of
those shares of Buyer Common Stock present and voting at a meeting of
such stockholders, in each case in accordance with applicable law.
(b) Governmental Consents. All authorizations, consents, orders or
approvals of, or declarations or filings with, and all expirations of
waiting periods imposed by, any governmental or regulatory authority or
agency (all of the foregoing being referred to as "Consents") which are
necessary for the consummation of the Merger, other than Consents the
failure of which to obtain would neither make it impossible to consummate
the Merger nor result in a Material Adverse Effect on the Buyer (on a
consolidated basis with the Seller) after the Merger, shall have been
filed, occurred or been obtained (all such authorizations, orders,
declarations, approvals, filings and consents and the lapse of all such
waiting periods being referred to as the "Requisite Regulatory Approvals")
and all such Requisite Regulatory Approvals shall be in full force and
effect. In addition, the Buyer shall have received all state securities
or blue sky permits and other authorizations necessary to issue Buyer
Common Stock pursuant to the Merger in accordance with all applicable
state securities or blue sky laws.
(c) S-4. The S-4 shall have become effective under the Securities Act
and shall not be subject to a stop order or a threatened stop order.
(d) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the Merger shall be in effect.
<PAGE>
(e) Accounting Treatment. Each of the parties shall have received a
letter from Arthur Andersen, LLP, dated the date of the Closing,
substantially to the effect that on the basis of a review of this
Agreement and the transactions contemplated hereby, in such accountants'
opinion, Accounting Principles Board Opinion No. 16 provides that the
Merger may be accounted for as a pooling of interests.
6.02 Conditions to the Obligations of the Buyer Under This Agreement. The
obligations of the Buyer under this Agreement shall be further subject to the
satisfaction or waiver by the Buyer, at or prior to the Effective Time, of the
following conditions:
(a) Absence of Material Adverse Changes. There shall not have
occurred any change in the business, assets, financial condition, or
results of operations of the Seller or any of its subsidiaries which has
had, or is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on the Seller taken as a whole, or any of the
Seller's banking subsidiaries taken on an individual basis.
(b) Representations and Warranties; Performance of Obligations. (i)
The obligations of the Seller required to be performed by it at or prior
to the Closing pursuant to the terms of this Agreement shall have been
duly performed and complied with in all material respects and (ii) the
representations and warranties of the Seller contained in this Agreement
shall be true and correct in all material respects as of the date of this
Agreement and as of the Effective Time as though made at and as of the
Effective Time (except as otherwise specifically contemplated by this
Agreement and except as to any representation or warranty which
specifically relates to an earlier date); provided, however, that for
purposes of determining the satisfaction of the conditions contained in
clause (ii) of this paragraph (b), no effect shall be given to any
exception in such representations and warranties relating to materiality
or the existence of a Material Adverse Effect and, provided further,
however, that for purposes of clause (ii) of this paragraph (b), such
representations and warranties shall be deemed to be true and correct in
all material respects unless the failure or failures of such
representations and warranties to be so true and correct, in the
aggregate, represents a material adverse change from the business, assets,
financial condition or results of operations of the Seller taken as a
whole, or any of the Seller's banking subsidiaries taken on an individual
<PAGE>
basis, as represented herein. The Buyer shall have received a certificate
to the foregoing effect signed by the chairman or president and the chief
financial officer or chief accounting officer of the Seller.
(c) Third-Party Approvals. Any and all permits, consents, waivers,
clearances, approvals and authorizations of all non-governmental and
non-regulatory third parties which are necessary in connection with the
consummation of the transactions contemplated by this Agreement and are
required to be received or obtained by the Seller, shall have been
obtained by the Seller, other than permits, consents, waivers, clearances,
approvals and authorizations the failure of which to obtain would neither
make it impossible to consummate the Merger nor result in any Material
Adverse Effect with respect to the Buyer (on a consolidated basis with
the Seller).
(d) Tax Opinion. The Buyer shall have received an opinion, dated the
date of the Closing from its counsel, Bingham, Dana & Gould LLP or other
counsel acceptable to the Buyer and the Seller, substantially to the
effect that, on the basis of facts and representations set forth therein,
or set forth in writing elsewhere and referred to therein, for federal
income tax purposes the Merger constitutes a reorganization as described
in Section 368(a) of the Code and addressing such other substantial
federal income tax effects of the Merger as the Buyer may reasonably
require and which are customary in transactions of a like character. In
rendering any such opinion, such counsel may rely, to the extent they deem
necessary or appropriate, upon opinions of other counsel and upon
representations of an officer or officers of the Seller and the Buyer or
any of their affiliates.
(e) Seller Affiliates Agreements. The Seller shall have delivered to
the Buyer the letter pertaining to the Seller Affiliates, as contemplated
under Section 5.06 above, and each of the executed Seller Affiliates
Agreements that have been received by the Seller as of the Effective Time.
(f) Termination of Certain Benefit Plans. The Seller shall have
terminated the Seller's 1993 Employee Stock Purchase Plan and the Seller's
Deferred Compensation Plan.
(g) Burdensome Condition. There shall not be any action taken by any
federal or state governmental agency or authority which, in connection
with the granting of any Consent or Requisite Regulatory Approval
necessary to consummate the Merger or otherwise, imposes any condition or
<PAGE>
restriction upon the Buyer, any subsidiary of the Buyer or the Seller
after the Merger (including, without limitation, requirements relating to
the disposition of assets or limitations on interest rates), which would
so materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement as to render inadvisable in
the reasonable judgment of the Buyer the consummation of the Merger.
6.03 Conditions to the Obligations of the Seller Under This Agreement. The
obligations of the Seller under this Agreement shall be further subject to the
satisfaction or waiver by the Seller, at or prior to the Effective Time, of the
following conditions:
(a) Absence of Material Adverse Changes. There shall not have
occurred any change in the business, assets, financial condition or
results of operations of the Buyer or any of its subsidiaries which has
had, or is reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on the Buyer taken as a whole with its
subsidiaries, or on any of the Buyer's banking subsidiaries on an
individual basis.
(b) Representations and Warranties; Performance of Obligations. (i)
The obligations of the Buyer required to be performed by it at or prior
to the Closing pursuant to the terms of this Agreement shall have been
duly performed and complied with in all material respects and (ii) the
representations and warranties of the Buyer contained in this Agreement
shall be true and correct in all material respects as of the date of this
Agreement and as of the Effective Time as though made at and as of the
Effective Time (except as otherwise specifically contemplated by this
Agreement and except as to any representation or warranty which
specifically relates to an earlier date); provided, however, that for
purposes of determining the satisfaction of the conditions contained in
clause (ii) of this paragraph (b), no effect shall be given to any
exception in such representations and warranties relating to materiality
or the existence of a Material Adverse Effect and, provided further,
however, that for purposes of clause (ii) of this paragraph (b), such
representations and warranties shall be deemed to be true and correct in
all material respects unless the failure or failures of such
representations and warranties to be so true and correct, in the
aggregate, represents a material adverse change from the business, assets,
financial condition or results of operations of the Buyer taken as a
<PAGE>
whole, or any of the Buyer's banking subsidiaries taken on an individual
basis, as represented herein. The Seller shall have received a
certificate to the foregoing effect signed by the chairman or president
and the chief financial officer or chief accounting officer of the Buyer.
(c) Third-Party Approvals. Any and all permits, consents, waivers,
clearances, approvals and authorizations of all non-governmental and
non-regulatory third parties which are necessary in connection with the
consummation of the transactions contemplated by this Agreement and are
required to be received or obtained by the Buyer, shall have been
obtained by the Buyer, other than permits, consents, waivers, clearances,
approvals and authorizations the failure of which to obtain would neither
make it impossible to consummate the Merger nor result in a Material
Adverse Effect on the Buyer (on a consolidated basis with the Seller)
after the Merger.
(d) Tax Opinion. The Seller shall have received an opinion, dated the
dates of the Proxy Statement and the Closing from its tax advisor Arthur
Andersen LLP or other tax advisor acceptable to the Buyer and the Seller,
substantially to the effect that, on the basis of facts and
representations set forth therein, or set forth in writing elsewhere and
referred to therein, for federal income tax purposes the Merger
constitutes a reorganization as described in Section 368(a) of the Code
and that no gain or loss will be recognized by the stockholders of the
Seller upon the receipt, pursuant to this Agreement, of Buyer Common
Stock solely in exchange for Seller Common Stock (it being understood
that such opinion will not extend to cash received in lieu of fractional
share interests or cash received by dissenters, if any) and in respect
of such other substantial federal income tax effects of the Merger as
the Seller may reasonably require and which are customary in transactions
of a like character. In rendering any such opinion, such advisor may
rely, to the extent they deem necessary or appropriate, upon opinions of
other advisors and upon representations of an officer or officers of the
Seller and the Buyer or any of their affiliates.
(e) Buyer Affiliates Agreements. The Buyer shall have delivered to the
Seller the letter pertaining to the Buyer Affiliates, as contemplated
under Section 5.06 above, and each of the executed Buyer Affiliates
Agreements that have been received by the Buyer as of the Effective Time.
<PAGE>
(f) NASDAQ Listing. The shares of Buyer Common Stock issuable to
Seller's stockholders pursuant to this Agreement and the Plan of Merger
shall have been authorized for listing on the NASDAQ upon official notice
of issuance.
(g) Exchange Agent Certification. The Exchange Agent (as defined in
the Plan of Merger) shall have delivered to the Seller a certificate,
dated as of the Effective Time, to the effect that the Exchange Agent has
received from the Buyer appropriate instructions and authorization for
the Exchange Agent to issue a sufficient number of shares of Buyer Common
Stock in exchange for all outstanding shares of Seller Common Stock and
has deposited with the Exchange Agent sufficient funds to pay a
reasonable estimate of the cash payments necessary to pay for fractional
share interests.
ARTICLE VII
CLOSING
7.01 Time and Place. Subject to the provisions of Articles VI and VIII
hereof, the Closing of the transactions contemplated hereby shall take place at
the Boston, Massachusetts offices of Bingham, Dana & Gould LLP at 10:00 A.M.,
local time, on the first business day after the date on which all of the
conditions contained in Article VI are satisfied or waived; or at such other
place, at such other time, or on such other date as the Seller and the Buyer
may mutually agree upon for the Closing to take place; provided, that the
Closing shall in no event take place prior to January 10, 1997.
7.02 Deliveries at the Closing. Subject to the provisions of Articles VI
and VIII hereof, at the Closing there shall be delivered to the Seller and the
Buyer, the opinions, certificates, and other documents and instruments required
to be delivered under Article VI hereof.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of this Agreement and the
Plan of Merger and the transactions contemplated hereby and thereby by the
Seller's stockholders:
<PAGE>
(a) by mutual written consent of the Seller and the Buyer
authorized by their respective Boards of Directors;
(b) by the Seller or the Buyer if the Effective Time shall not have
occurred on or prior to June 30, 1997 (the "Termination Date") or such
later date as shall have been agreed to in writing by the Buyer and the
Seller;
(c) by the Buyer or the Seller if any governmental or regulatory
authority or agency, or court of competent jurisdiction, shall have
issued a final permanent order or Injunction enjoining, denying approval
of, or otherwise prohibiting the consummation of the Merger and the time
for appeal or petition for reconsideration of such order or Injunction
shall have expired without such appeal or petition being granted; or
(d) by the Buyer or the Seller (provided that the terminating party
is not then in material breach of any representation, warranty or
covenant or other agreement contained herein or in the Seller Option
Agreement) if the approval of such Person's stockholders specified in
Section 5.05 shall not have been obtained by reason of the failure to
obtain the required vote at a duly held meeting of such stockholders or
at any adjournment thereof; or
(e) by the Board of Directors of the Buyer or the Board of Directors
of the Seller (provided that the terminating party is not then in
material breach of any representation, warranty, covenant or other
agreement contained herein pursuant to the standard set forth in Section
6.02(b) or 6.03(b), as may be applicable or in the Seller Option
Agreement), in the event of a material breach by the other party of any
representation, warranty, covenant or other agreement contained herein
pursuant to the standard set forth in Section 6.02(b) or 6.03(b), as may
be applicable or in the Seller Option Agreement which breach is not cured
after forty-five (45) days written notice thereof is given to the party
committing such breach; or
(f) by the Seller, by action of its Board of Directors, whether
before or after approval of the Merger by the stockholders of the Seller,
by giving written notice of such election to the Buyer in the event that
both of the following conditions are satisfied:
(i) the average per share last sale prices of Buyer Common
Stock as reported on NASDAQ over the ten (10) consecutive trading
<PAGE>
day period immediately preceding the date of the last Requisite
Regulatory Approval to be received, in this case without regard to
any waiting period attached to the effectiveness thereof (such
period being hereinafter referred to as the "Determination Period",
and the price so obtained being referred to as, the "Closing Price")
is less than $13.81; and
(ii) the number obtained by dividing the Closing Price by 16.25
is less than the number obtained by subtracting (A) 0.15 from (B)
the quotient obtained by dividing the Final Index Price (as defined
below) by the Initial Index Price (as defined below).
For the purposes hereof the following terms shall have the following
meanings:
"Final Index Price" shall mean the Weighted Average of the average
of the closing prices of the Index Companies as reported on the NYSE,
NASDAQ or AMEX for the Determination Period.
"Index Companies" shall mean the companies listed on Exhibit E
hereto.
"Initial Index Price" shall mean the Weighted Average of the closing
prices of the Index Companies as reported on the NYSE, NASDAQ or AMEX on
the trading day immediately preceding execution of this Agreement.
"Weighted Average" shall mean the average determined by giving the
average of the closing prices for each of the Index Companies the
corresponding weight listed on Exhibit E hereto.
If the Buyer or any company listed on Exhibit E declares a stock dividend
or effects a reclassification, recapitalization, split-up, combination,
or subdivision of its common stock between the trading day immediately
preceding execution of this Agreement and the date of the last Requisite
Regulatory Approval to be received (without regard to any waiting period
attached to the effectiveness thereof), the closing prices for such
common stock shall be appropriately adjusted for the purposes of the
definitions above so as to be comparable to the price on the date
immediately preceding execution of this Agreement. There shall be
excluded from the list of companies on Exhibit E any company as to which
there is pending at any time during the Determination Period any publicly
<PAGE>
announced proposal for such company to be acquired by another company in
exchange for its stock.
Notwithstanding the foregoing, during the ten (10) business day period
commencing with the Buyer's receipt of the Seller's notice of termination
pursuant to this Section 8.01(f), the Buyer shall have the option to
increase the consideration to be received by the holders of Seller Common
Stock under the Plan of Merger by adjusting the Conversion Number
(hereinafter, as such term is defined in the Plan of Merger) to equal a
number (calculated to the nearest one-thousandth) obtained by dividing
(x) $26.24 by (y) the Closing Price. If the Buyer so elects within such
ten-day period, it shall give prompt written notice to the Seller of such
election and the revised Conversion Number, whereupon no termination
shall have occurred pursuant to this Section 8.01(f) and the Agreement
shall remain in effect in accordance with its terms (except as the
Conversion Number shall have been so modified).
(g) By the Board of Directors of either party (provided that the
terminating party is not then in breach of any representation or
warranty, covenant or other agreement contained in this Agreement or in
the Seller Option Agreement) in the event that any of the conditions
precedent to the obligations of such party to consummate the Merger
cannot be satisfied or fulfilled by the date specified in Section 8.01(b)
of this Agreement.
8.02 Effect of Termination. In the event of termination of this Agreement
by either the Seller or the Buyer as provided above, this Agreement shall
forthwith become null and void (other than Sections 5.02(b) and 9.01 hereof,
which shall remain in full force and effect) and there shall be no further
liability on the part of the Seller or the Buyer or their respective officers
or directors to the other, except (i) any liability of the Seller and the Buyer
under said Sections 5.02(b) and 9.01, (ii) that the Seller Option Agreement
shall be governed by its own terms as to termination, (iii) the Confidentiality
Agreement shall survive in accordance with its terms and (iv) in the event of a
willful breach of any representation, warranty, covenant or agreement contained
in this Agreement, in which case, the breaching party shall remain liable for
any and all damages, costs and expenses, including all reasonable attorneys'
fees, sustained or incurred by the non-breaching party as a result thereof or
in connection therewith or with the enforcement of its rights hereunder.
8.03 Amendment, Extension and Waiver. Subject to applicable law and as
may be authorized by their respective Boards of Directors, at any time prior to
<PAGE>
the consummation of the transactions contemplated by this Agreement or
termination of this Agreement in accordance with the provisions of Section 8.01
hereof, whether before or after approval thereof by the stockholders of the
Seller, the Buyer and the Seller may, (a) amend this Agreement, (b) extend the
time for the performance of any of the obligations or other acts of any other
party hereto, (c) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto, or (d) waive
compliance with any of the agreements or conditions contained in Articles V and
VI (other than Section 6.01) hereof; provided, however, that after any approval
of the transactions contemplated by this Agreement by the Seller's or the
Buyer's stockholders, there may not be, without further approval of such
stockholders, any amendment, extension or waiver of this Agreement which
reduces the amount or changes the form of the consideration to be delivered to
the stockholders of the Seller hereunder other than as contemplated by this
Agreement. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto. Any agreement on the part of a
party hereto to any extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party, but such waiver or
failure to insist on strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
ARTICLE IX
MISCELLANEOUS
9.01 Expenses. Except as may otherwise be agreed to hereunder or in other
writing by the parties, all legal and other costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs and expenses; provided, however, that
all such costs and expenses incurred in connection with the printing and
mailing of the S-4 and the Proxy Statement shall be borne equally by the Buyer
and the Seller.
9.02 Survival. None of the representations, warranties, covenants and
agreements of the Seller or the Buyer shall survive after the Effective Time,
except for the agreements and covenants contained or referred to in Article II,
Section 5.02(b), the last sentence of Section 5.07, and Sections 5.09, 5.11,
5.13 and 5.15 hereof, and the agreements of the "affiliates" of the Seller
delivered pursuant to Section 5.06, which agreements and covenants shall
survive the Effective Time.
<PAGE>
9.03 Notices. All notices or other communications hereunder shall be in
writing and shall be deemed given if delivered personally or mailed by prepaid
registered or certified mail (return receipt requested) or by telecopy, cable,
telegram or telex addressed as follows:
(a) If to the Seller, to:
Walden Bancorp, Inc.
125 Nagog Park
Acton, Massachusetts 01720
Attention: Mr. David E. Bradbury
Chairman of the Board,
President and Chief Executive
Officer
Facsimile No.: (508) 635-5052
with a required copy to:
Housely, Kantarian & Bronstein, P.C.
1220 19th Street, N.W.
Suite 700
Washington, D.C. 20036
Attention: Harry K. Kantarian, Esq.
Facsimile No.: (202) 822-0140
(b) If to the Buyer, to:
UST Corp.
40 Court Street
Boston, Massachusetts 02108
Attention: Mr. Neal F. Finnegan
President and
Chief Executive Officer
Facsimile No.: (617) 726-7320
with required copies to:
UST Corp.
40 Court Street
Boston, Massachusetts 02108
Attention: Eric R. Fischer, Esq.
Facsimile No.: (617) 726-7320
<PAGE>
and
Bingham, Dana & Gould LLP
150 Federal Street
Boston, Massachusetts 02110
Attention: Neal J. Curtin, Esq.
.....and
Maria M. Park, Esq.
Facsimile No.: (617) 951-8736
or such other address as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given as of the date
so mailed.
9.04 Parties in Interest. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party hereto
without the prior written consent of the other parties, and that nothing in
this Agreement is intended to confer, expressly or by implication, upon any
other person any rights or remedies under or by reason of this Agreement except
as reflected in Sections 5.09, 5.13(d) and 5.15.
9.05 Complete Agreement. This Agreement, including the documents and
other writings referred to herein or delivered pursuant hereto, including the
Confidentiality Agreement, the Plan of Merger and the other Transaction
Documents, contains the entire agreement and understanding of the parties with
respect to its subject matter. Except as set forth in the Transaction Documents
or in the Disclosure Schedules, there are no restrictions, agreements,
promises, warranties, covenants or undertakings between the parties other than
those expressly set forth herein or therein. This Agreement supersedes all
prior agreements (other than the Confidentiality Agreement) and understandings
between the parties, both written and oral, with respect to its subject matter.
9.06 Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and each of which shall be
deemed to be an original and shall become effective when a counterpart has been
signed by each of the parties and delivered to each of the other parties.
9.07 Governing Law. This Agreement shall be governed by the laws of The
Commonwealth of Massachusetts, without giving effect to the principles of
conflicts of laws thereof.
<PAGE>
9.08 Captions. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
9.09 Effect of Investigations. No investigation by the parties hereto
made heretofore or hereafter, whether pursuant to this Agreement or otherwise
shall affect the representations and warranties of the parties which are
contained herein and each such representation and warranty shall survive such
investigation, subject, however, to Section 9.02 hereof.
9.10 Severability. In the event that any one or more provisions of this
Agreement shall for any reason be held invalid, illegal or unenforceable in any
respect, by any court of competent jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement and
the parties shall use their best efforts to substitute a valid, legal and
enforceable provision which, insofar as practicable, implements the purposes
and intents of this Agreement.
9.11 Specific Enforceability. The parties recognize and hereby
acknowledge that it is impossible to measure in money the damages that would
result to a party by reason of the failure of either of the parties to perform
any of the obligations imposed on it by this Agreement. Accordingly, if any
party should institute an action or proceeding seeking specific enforcement of
the provisions hereof, each party against which such action or proceeding is
brought hereby waives the claim or defense that the party instituting such
action or proceeding has an adequate remedy at law and hereby agrees not to
assert in any such action or proceeding the claim or defense that such a remedy
at law exists.
<PAGE>
IN WITNESS WHEREOF, the Seller and the Buyer have caused this Agreement
to be executed as a sealed instrument by their duly authorized officers as of
the day and year first above written.
UST CORP.
By: /s/ Neal F. Finnegan
Name: Neal F. Finnegan
Title: President and CEO
WALDEN BANCORP, INC.
By: /s/ David E. Bradbury
Name: David E. Bradbury
Title: Chairman, President
and CEO
<PAGE>
Omitted Schedules
(1) Buyer Disclosure Schedules
(2) Seller Disclosure Schedules
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 30, 1996 (this "Plan of
Merger") by and among UST CORP., a Massachusetts corporation (the "Buyer"),
WALDEN BANCORP, INC., a Massachusetts corporation (the "Seller"), and MOSAIC
CORP., a Massachusetts corporation and a wholly-owned subsidiary of the Buyer
(the "Merger Subsidiary"). The Seller and the Merger Subsidiary are hereinafter
sometimes collectively referred to as the "Constituent Corporations".
This Plan of Merger is being entered into pursuant to an Affiliation
Agreement and Plan of Reorganization, dated as of August 30, 1996 (as amended
and in effect from time to time, the "Agreement"), between the Buyer and the
Seller.
All capitalized terms used herein without definition are used with the
meanings ascribed thereto in the Agreement.
In consideration of the premises, and the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.01 Surviving Corporation. In accordance with the provisions of this
Plan of Merger and the Massachusetts Business Corporation Law ("MBCL"), at the
Effective Time (as hereinafter defined), the Merger Subsidiary shall be merged
with and into the Seller (the "Merger"), and the separate corporate existence
of the Merger Subsidiary shall cease. The Seller shall be the surviving
corporation in the Merger (hereinafter sometimes referred to as the "Surviving
Corporation") and shall continue its corporate existence under the laws of the
Commonwealth of Massachusetts. The name of the Surviving Corporation shall be
Mosaic Corp., unless such name is changed at the request of the Buyer.
1.02 Purposes of Surviving Corporation. As of the Effective Time, the
purposes of the Surviving Corporation shall be as stated in the Articles of
Organization of the Merger Subsidiary immediately prior to the Effective Time.
1.03 Authorized Capital Stock of Surviving Corporation. As of the
Effective Time, the Surviving Corporation shall be authorized to issue that
<PAGE>
number of shares of $0.01 par value voting common stock which the Merger
Subsidiary is authorized to issue immediately prior to the Effective Time.
1.04 Description of Classes of Stock. As of the Effective Time, each
class or series of capital stock of the Surviving Corporation shall have the
same preferences, voting powers, qualifications, special or relative rights or
privileges as such class or series of capital stock of the Merger Subsidiary
possessed immediately prior to the Effective Time.
1.05 Effect of the Merger.
(a) Upon the Effective Time, all of the estate, property, rights,
privileges, powers and franchises of the Constituent Corporations and all
of their property, real, personal and mixed, and all the debts due on
whatever account to any of them, as well as all stock subscriptions and
other choses in action belonging to any of them, shall be transferred to
and vested in the Surviving Corporation, without further act or deed, and
all claims, demands, property and other interest shall be the property of
the Surviving Corporation, and the title to all real estate vested in any
of the Constituent Corporations shall not revert or be in any way
impaired by reason of the Merger, but shall be vested in the Surviving
Corporation.
(b) Upon the Effective Time, the rights of creditors of any
Constituent Corporation shall not in any manner be impaired, nor shall
any liability or obligation, including taxes due or to become due, or any
claim or demand in any cause existing against such corporation, or any
stockholder, director, or officer thereof, be released or impaired by the
Merger, but the Surviving Corporation shall be deemed to have assumed,
and shall be liable for, all liabilities and obligations of each of the
Constituent Corporations in the same manner and to the same extent as if
the Surviving Corporation had itself incurred such liabilities or
obligations. The stockholders, directors, and officers of the Constituent
Corporations shall continue to be subject to all liabilities, claims and
demands existing against them as such at or before the Merger. No action
or proceeding then pending before any court or tribunal of the
Commonwealth of Massachusetts or otherwise in which any Constituent
Corporation is a party, or in which any such stockholder, director, or
officer is a party, shall abate or be discontinued by reason of the
Merger, but any such action or proceeding may be prosecuted to final
<PAGE>
judgment as though no merger had taken place, or the Surviving
Corporation may be substituted as a party in place of any Constituent
Corporation by the court in which such action or proceeding is pending.
1.06 Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of the Merger Subsidiary acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger or to
otherwise carry out this Plan of Merger, the officers and directors of the
Surviving Corporation shall and will be authorized to execute and deliver, in
the name and on behalf of the Constituent Corporations or otherwise, all such
deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf of the Constituent Corporations or otherwise, all such other
actions and things as may be necessary or desirable to vest, perfect or confirm
any and all right, title and interest in, to and under such rights, properties
or assets in the Surviving Corporation or to otherwise carry out this Plan of
Merger.
1.07 Articles of Organization. At the Effective Time, the Articles of
Organization of the Merger Subsidiary as in effect at the Effective Time, shall
be by amendment effected by the Plan of Merger, the Articles of Organization of
the Surviving Corporation and the By-Laws of the Merger Subsidiary, as in
effect at the Effective Time, shall be the By-Laws of the Surviving Corporation
and, subject to the rights of the Buyer as the sole stockholder, shall
thereafter continue to be its Articles of Organization and By-Laws until
amended as provided therein or by law.
1.08 Directors and Officers. At the Effective Time, the Board of
Directors of the Surviving Corporation shall consist of those persons
comprising the Board of Directors of the Merger Subsidiary prior to the
Effective Time, each to hold office in accordance with the Articles of
Organization and By-Laws of the Surviving Corporation. The officers of the
Merger Subsidiary immediately prior to the Effective Time shall be the officers
of the Surviving Corporation from and, subject to the rights of the Buyer as
the sole stockholder, after the Effective Time each to hold office in
accordance with the Articles of Organization and By-Laws of the Surviving
Corporation.
<PAGE>
1.09 Effective Time; Conditions. If all of the conditions precedent set
forth in Article VI of the Agreement have been satisfied or waived, and this
Plan of Merger is not terminated under Section 3.01 hereof, Articles of Merger
with respect to the Merger shall be prepared by the Merger Subsidiary and the
Seller and filed and recorded pursuant to Section 78(d) of the MBCL (the
"Articles of Merger"). The Merger shall become effective at, and the Effective
Time shall be, the date and time specified in the Articles of Merger which
shall be not later than thirty (30) days after the filing of the Articles of
Merger (such date and time is herein referred to as the "Effective Time").
ARTICLE II
CONVERSION OF SHARES
2.01 Effect on Outstanding Shares.
(a) Merger Subsidiary Common Stock. By virtue of the Merger,
automatically and without any action on the part of the holder thereof,
each share of common stock of the Merger Subsidiary, par value $0.01 per
share ("Merger Subsidiary Common Stock"), issued and outstanding
immediately prior to the Effective Time, shall become and be converted
into 1.00 share of common stock of the Surviving Corporation, par value
$0.01 per share ("Surviving Corporation Common Stock"). Each certificate
which immediately prior to the Effective Time represented outstanding
shares of Merger Subsidiary Common Stock shall on and after the Effective
Time be deemed for all purposes to represent the number of shares of
Surviving Corporation Common Stock into which the shares of Merger
Subsidiary Common Stock represented by such certificate shall have been
converted pursuant to this Section 2.01(a).
(b) Seller Common Stock. (i) By virtue of the Merger, automatically
and without any action on the part of the holder thereof, each share of
common stock of the Seller, par value $1.00 per share ("Seller Common
Stock"), issued and outstanding immediately prior to the Effective Time
(other than any such shares held directly or indirectly by the Buyer,
except in a fiduciary capacity, and any such shares held as treasury
stock by the Seller) shall become and be converted into 1.9 shares of the
common stock of the Buyer, par value $0.625 per share ("Buyer Common
Stock"), together with that number of Buyer rights issued pursuant to the
Buyer Rights Agreement associated therewith; provided, however, that in
<PAGE>
the event that the Buyer has exercised its option to deliver additional
shares of its Common Stock pursuant to the last paragraph of Section
8.01(f) of the Agreement, Seller's Common Stock shall be converted into
such number of shares of the Common Stock of the Buyer, par value $0.625
per share, as provided in said Section of the Agreement. The number of
shares of Buyer Common Stock into which each share of Seller Common Stock
shall be converted is hereinafter called the "Conversion Number."
(ii) As of the Effective Time, each share of Seller Common Stock
held either directly or indirectly by the Buyer (other than in a
fiduciary capacity) or as treasury stock of the Seller shall be
cancelled, retired and cease to exist, and no payment shall be made with
respect thereto. Each certificate which immediately prior to the
Effective Time represented outstanding shares of Seller Common Stock
shall on and after the Effective Time be deemed for all purposes to
represent the number of shares of Buyer Common Stock into which the
shares of Seller Common Stock represented by such certificate shall have
been converted pursuant to this Section 2.01(b).
(c) Shares of Dissenting Holders. No conversion under Section
2.01(b) hereof shall be made with respect to the shares of Seller Common
Stock held by a Dissenting Holder (as such term is defined below);
provided, however, that each share of Seller Common Stock outstanding
immediately prior to the Effective Time and held by a Dissenting Holder
who shall, after the Effective Time, withdraw his demand for appraisal or
lose his right of appraisal, in either case pursuant to the applicable
provisions of the MBCL, shall be deemed to be converted, as of the
Effective Time, into shares of Buyer Common Stock as specified in Section
2.01(b) hereof. The term "Dissenting Holder" shall mean a holder of
Seller Common Stock who has demanded appraisal rights in compliance with
the applicable provisions of the MBCL concerning the right of such holder
to dissent from the Merger and demand appraisal of such holder's shares
of Seller Common Stock.
(d) Dissenter's Rights. Any Dissenting Holder (i) who files with the
Seller a written objection to the Merger before the taking of the vote to
approve this Plan of Merger by the shareholders of the Seller and who
states in such objection that he intends to demand payment for his shares
if the Merger is concluded and (ii) whose shares are not voted in favor
of the Merger shall be entitled to demand payment for his shares of
<PAGE>
Seller Common Stock and an appraisal of the value thereof, in accordance
with the provisions of Sections 86 through 98 of the MBCL.
2.02 Anti-Dilution. In the event that, subsequent to the date of this
Plan of Merger but prior to the Effective Time, the outstanding shares of Buyer
Common Stock or Seller Common Stock shall have been increased, decreased,
changed into or exchanged for a different number or kind of shares or
securities through reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split, or other like changes in the
Buyer's or the Seller's capitalization, other than pursuant to the Agreement,
as the case may be (a "Recapitalization"), then an appropriate and
proportionate adjustment shall be made to the Conversion Number so that each
holder of Seller Common Stock shall receive under Section 2.01(b) hereof the
number of shares of Buyer Common Stock (except for fractional shares) that such
holder would have held immediately following the Recapitalization if the Merger
had occurred immediately prior to the Recapitalization or the record date
therefor, as applicable. For purposes of this Section 2.02, in no event shall
the issuance of shares or securities by the Buyer in connection with the Buyer
acquiring directly or indirectly the stock or assets of any corporation, bank
or other entity be deemed to be a "Recapitalization".
2.03 Procedures.
(a) Certificates which represent shares of Seller Common Stock that
are outstanding immediately prior to the Effective Time (a "Certificate")
and are converted into shares of Buyer Common Stock pursuant to this
Article II shall, after the Effective Time, be deemed to represent shares
of Buyer Common Stock into which such shares have been converted and
shall be exchangeable by the holders thereof in the manner provided in
the transmittal materials described below for new certificates
representing the shares of Buyer Common Stock into which such shares have
been converted.
(b) As promptly as practicable after the Effective Time, the
Exchange Agent shall send to each holder of record of shares of Seller
Common Stock outstanding at the Effective Time transmittal materials
(which shall be reviewed with the Seller's counsel prior to the Effective
Time) for use in exchanging the Certificates for such shares for
certificates for shares of Buyer Common Stock into which such shares of
Seller Common Stock have been converted pursuant to this Article II. Upon
surrender of a Certificate, together with a duly executed letter of
transmittal and any other required documents, the holder of such
Certificate shall be entitled to receive, in exchange therefor, a
<PAGE>
certificate for the number of shares of Buyer Common Stock to which such
holder is entitled pursuant to Section 2.01(b) hereof, and such
Certificate shall forthwith be cancelled. No dividend or other
distribution payable after the Effective Time with respect to Buyer
Common Stock shall be paid to the holder of any unsurrendered Certificate
until the holder thereof surrenders such Certificate, at which time such
holder shall receive all dividends and distributions, without interest
thereon, previously payable but withheld from such holder pursuant
hereto. After the Effective Time, there shall be no transfers on the
stock transfer books of the Seller of shares of Seller Common Stock which
were issued and outstanding at the Effective Time and converted pursuant
to the provisions of this Article II. If, after the Effective Time,
Certificates are presented for transfer to the Seller, they shall be
cancelled and exchanged for the shares of Buyer Common Stock deliverable
in respect thereof as determined in accordance with the provisions and
procedures set forth in this Article II.
(c) In lieu of the issuance of fractional shares of Buyer Common
Stock pursuant to Sections 2.01(b) of this Plan of Merger, cash
adjustments, without interest, will be paid to the holders of Seller
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 the "Average Price" of a share of Buyer Common Stock (rounded
up to the nearest cent). The "Closing Price" of a share of Buyer Common
Stock shall be the average of the last sale prices thereof as reported on
the National Association of Securities Dealers Automated Quotation system
over the ten (10) consecutive trading day period immediately preceding
the date on which the last Requisite Regulatory Approval is received
(without regard to any waiting period attached to the effectiveness
thereof). For purposes of determining whether, and in what amounts, a
particular holder of Seller Common Stock would be entitled to receive
cash adjustments under this Section 2.03(c), shares of record held by
such holder and represented by two or more Certificates shall be
aggregated.
(d) After the Effective Time, holders of certificates of the Seller
Common Stock (or its corporate predecessors in interest, including the
Co-operative Bank of Concord or the Braintree Savings Bank) shall cease
to be, and shall have no rights as, stockholders of the Seller, other
than (i) to receive shares of Buyer Common Stock into which such shares
have been converted and, if applicable, fractional share payments
<PAGE>
pursuant to the provisions hereof and (ii) the rights afforded to any
Dissenting Holder (as defined in Section 2.01(c)) under applicable
provisions of the MBCL.
(e) Notwithstanding the foregoing, neither the Buyer nor the Seller
nor any other person shall be liable to any former holder of shares of
Seller Common Stock for any shares or any dividends or distributions with
respect thereto properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(f) In the event any Certificate shall have been lost, stolen or
destroyed, upon receipt of appropriate evidence as to such loss, theft or
destruction and to the ownership of such Certificate by the person
claiming such Certificate to be lost, stolen or destroyed, and the
receipt by the Buyer of appropriate and customary indemnification, the
Buyer will issue in exchange for such lost, stolen or destroyed
Certificate shares of Buyer Common Stock and the fractional share
payment, if any, deliverable in respect thereof as determined in
accordance with this Article II.
(g) If any certificate representing shares of Buyer Common Stock is
to be issued in a name other than that 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 (or accompanied by an appropriate instrument of
transfer) and otherwise in proper form for transfer (including, but not
limited to, that the signature of the transferor shall be properly
guaranteed by a commercial bank, trust company, member firm of the NASD
or other eligible guarantor institution), and that the person requesting
such exchange shall pay to the Exchange Agent (as such term is defined in
Section 4.01 hereof) in advance any transfer or other taxes required by
reason of the issuance of a certificate representing shares of Buyer
Common Stock in any name other than that of the registered holder of the
Certificate surrendered, or required for any other reason, or shall
establish to the satisfaction of the Exchange Agent that such tax has
been paid or is not payable.
2.04 Conversion of Options. Each stock option (other than the Seller
Option) issued by the Seller to a third party, whether or not currently
exercisable, which entitles such third party to purchase Seller Common Stock,
and which is outstanding and unexercised immediately prior to the Effective
<PAGE>
Time, shall be converted into an option to purchase shares of Buyer Common
Stock, and the Buyer shall assume each such option in accordance with the terms
of the Seller stock option plan under which it was granted and the stock option
or other agreement by which it is evidenced, with the following terms:
(a) The number of shares of Buyer Common Stock shall be equal to the
product of the number of shares of Seller Common Stock previously subject
thereto and the Conversion Number, rounded down to the nearest whole
share; and
(b) The exercise price per share of Buyer Common Stock shall be
equal to the exercise price per share of Seller Common Stock previously
subject thereto divided by the Conversion Number, rounded up to the
nearest cent; and
(c) The duration and other terms of such Stock Option shall be
unchanged except that all references to the Seller shall be deemed to be
references to the Buyer; and
(d) The Buyer shall assume the option as contemplated by
Section 424(a) of the Code; and
(e) With respect to any stock option on Seller's Common Stock which
is an incentive stock option within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, the Buyer shall take such
actions (other than delaying the date the options on Buyer Common Stock
become exercisable beyond the date on which such options would otherwise
become exercisable pursuant to the relevant Seller Stock Plan) as may be
necessary or appropriate to cause such option, upon being converted to an
option on Buyer Common Stock, to remain such an incentive stock option.
ARTICLE III
AMENDMENT AND TERMINATION
3.01 Termination. Notwithstanding the approval and adoption of this Plan
of Merger by the stockholders of the Seller, the Buyer and the Merger
Subsidiary, this Plan of Merger shall terminate forthwith in the event that the
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 null and void and there shall be no liability on the part of
any of the parties hereto except as otherwise provided in the Agreement.
<PAGE>
3.02 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 Agreement approved in the manner therein provided. If
any such amendment to the Agreement is so approved, any amendment to this Plan
of Merger required by such amendment to the Agreement shall be effected by the
parties hereto by action taken by their respective Boards of Directors.
ARTICLE IV
MISCELLANEOUS
4.01 Exchange Agent. Prior to the Effective Time, the Buyer shall appoint
United States Trust Company, Boston, Massachusetts as exchange agent for the
purpose of exchanging certificates representing shares of Buyer Common Stock
for Certificates representing shares of Seller Common Stock (the "Exchange
Agent"), and the Buyer shall issue and deliver to the Exchange Agent
certificates representing shares of Buyer Common Stock and shall pay to the
Exchange Agent such amounts of cash as shall be required to be delivered to
holders of shares of Seller Common Stock in lieu of fractional shares of Buyer
Common Stock, pursuant to Article II of this Plan of Merger.
4.02 Counterparts. This Plan of Merger may 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.
4.03 Governing Law. This Plan of Merger shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts,
without giving effect to the principles of conflicts of laws thereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Plan of Merger to
be duly executed and delivered as a sealed instrument as of the date first
above written.
UST CORP.
By:______________________________________
President
By:______________________________________
Treasurer
WALDEN BANCORP, INC.
By:______________________________________
President
By:______________________________________
Treasurer
MOSAIC CORP.
By:______________________________________
President
By:______________________________________
Treasurer
<PAGE>
EXHIBIT B-1
FORM OF BUYER AFFILIATE LETTER ADDRESSED TO SELLER
[Date]
Walden Bancorp, Inc.
125 Nagog Park
P.O. Box 2100
Acton, Massachusetts 01720-6100
Ladies and Gentlemen:
I have been advised that as of the date hereof I may be deemed to be an
"affiliate" of UST CORP., a Massachusetts corporation ("Buyer"), as the term
"affiliate" is used in and for purposes of Accounting Series Releases 130 and
135, as amended, of the Securities and Exchange Commission (the "Commission").
I have been further advised that pursuant to the terms of the Affiliation
Agreement and Plan of Reorganization and Agreement and Plan of Merger dated as
of August 30, 1996 (together, the "Merger Agreement"), between Buyer, MOSAIC
CORP., a wholly owned subsidiary of Buyer and a Massachusetts corporation
("Merger Subsidiary"), and WALDEN BANCORP, INC., a Massachusetts corporation
(the "Seller"), Merger Subsidiary will be merged with and into Seller.
I represent to and covenant with Buyer that from the date that is thirty
(30) days prior to the Effective Time (as defined in the Merger Agreement) I
will not sell, transfer or otherwise dispose of, or reduce the risk of
ownership with respect to, shares of Buyer Common Stock (as defined in the
Merger Agreement) held by me until after such time as results covering at least
thirty (30) days of combined operations of Buyer and Seller have been published
by Buyer, in the form of a quarterly earnings report, an effective registration
statement filed with the Commission, a report to the Commission on Form 10-K,
10-Q, or 8-K, or any other public filing or announcement which includes the
results of at least 30 days of combined operations.
Very truly yours,
By:________________________________
Name:
Accepted this ____ day of
_____________, 1996, by
WALDEN BANCORP, INC.
By:__________________________________
Name:
Title:
<PAGE>
EXHIBIT B-2
FORM OF SELLER AFFILIATE LETTER ADDRESSED TO BUYER
[Date]
UST Corp.
40 Court Street
Boston, Massachusetts 02108
Ladies and Gentlemen:
I have been advised that as of the date hereof I may be deemed to be an
"affiliate" of WALDEN BANCORP, INC., a Massachusetts corporation ("Seller"), as
the term "affiliate" is (i) defined for purposes of paragraphs (c) and (d) of
Rule 145 of the Rules and Regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act"), and/or (ii) used in and for purposes of
Accounting Series Releases 130 and 135, as amended, of the Commission. I have
been further advised that pursuant to the terms of the Affiliation Agreement
and Plan of Reorganization and Agreement and Plan of Merger dated as of August
30, 1996 (together, the "Merger Agreement"), between UST CORP., a Massachusetts
corporation ("Buyer"), MOSAIC CORP., a wholly owned subsidiary of Buyer and a
Massachusetts corporation ("Merger Subsidiary"), and Seller, Merger Subsidiary
will be merged with and into Seller (the "Merger"), and that as a result of the
Merger, I may receive shares of Buyer Common Stock (as defined in the Merger
Agreement) in exchange for shares of Seller Common Stock (as defined in the
Merger Agreement), owned by me.
I represent, warrant and covenant to Buyer that in the event I receive
any Buyer Common Stock pursuant to the Merger:
A. I shall not make any sale, transfer or other
disposition of the Buyer Common Stock in violation of
the Act or the Rules and Regulations.
B. I have carefully read this letter and the Agreement and discussed
its requirements and other applicable limitations upon my ability to
sell, transfer or otherwise dispose of Buyer Common Stock to the extent I
believed necessary, with my counsel or counsel for Seller.
C. I have been advised that the issuance of Buyer Common Stock to me
pursuant to the Merger has been or will be registered with the Commission
under the Act on a Registration Statement on Form S-4. However, I have
also been advised that, because, at the time the Merger is or was
submitted for a vote of the stockholders of Buyer, I may be deemed to be
or to have been an affiliate of Seller and the distribution by me of the
Buyer Common Stock will not have been registered under the Act. I agree
that I will not sell, transfer or otherwise dispose of Buyer Common Stock
issued to me in the Merger unless (i) such sale, transfer or other
disposition has been registered under the Act, (ii) such sale, transfer
or other disposition is made in conformity with the volume and other
limitations of Rule 145 promulgated by the Commission under the Act, or
<PAGE>
(iii) in the opinion of counsel reasonably acceptable to Buyer, such
sale, transfer or other disposition is otherwise exempt from registration
under the Act.
D. I understand that Buyer is under no obligation to register the
sale, transfer or other disposition of the Buyer Common Stock by me or on
my behalf under the Act or to take any other action necessary in order to
make compliance with an exemption from such registration available.
E. I also understand that stop transfer instructions will be given
to Buyer's transfer agents with respect to the Buyer Common Stock and
that there will be placed on the certificates for the Buyer Common Stock
issued to me, or any substitutions therefor, a legend stating in
substance:
"The securities represented by this certificate have been
issued in a transaction to which Rule 145 promulgated under the
Securities Act of 1933 applies and may be sold or otherwise
transferred only in compliance with the requirements of Rule 145 or
pursuant to a registration statement under said act or an exemption
from such registration."
F. I also understand that unless the transfer by me of my Buyer
Common Stock has been registered under the Act or is a sale made in
conformity with the provisions of Rule 145, Buyer reserves the right to
put the following legend on the certificates issued to my transferee:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 and were acquired from a
person who received such shares in a transaction to which Rule 145
promulgated under the Securities Act of 1933 applies. The shares
have been acquired by the holder not with a view to, or for resale
in connection with, any distribution thereof within the meaning of
Securities Act of 1933 and may not be sold, pledged or otherwise
transferred except in accordance with an exemption from the
registration requirements of the Securities Act of 1933."
It is understood and agreed that this letter agreement shall terminate
and be of no further force and effect and the legends set forth in E or F, as
the case may be, above shall be removed by delivery of substitute certificates
without such legend, and the related stop transfer of restrictions shall be
lifted forthwith, if (i) any such shares of Buyer Common Stock shall have been
registered under the Securities Act for sale, transfer or other disposition by
me or on my behalf and are sold, transferred or otherwise disposed of, or (ii)
any such shares of Buyer Common Stock are sold in accordance with the
provisions of paragraphs (c), (e), (f) and (g) of Rule 144 promulgated under
the Securities Act, or (iii) I am not at the time an affiliate of Buyer and
have been the beneficial owner of the Buyer Common Stock for at least two years
(or such other period as may be prescribed by the Securities Act and the rules
and regulations promulgated thereunder), and Buyer has filed with the
Commission all of the reports it is required to file under the Securities
Exchange Act of 1934, as amended, during the preceding twelve months, or (iv) I
am not and have not been for at least three months an affiliate of Buyer and
<PAGE>
have been the beneficial owner of the Buyer Common Stock for at least three
years (or such period as may be prescribed by the Securities Act and the rules
and regulations promulgated thereunder), or (v) Buyer shall have received a
letter from the staff of the Commission, or an opinion of counsel reasonably
acceptable to Buyer, to the effect that the stock transfer restrictions and the
legend are not required.
I further represent to and covenant with Buyer that from the date that is
thirty (30) days prior to the Effective Time (as defined in the Merger
Agreement) I will not sell, transfer or otherwise dispose of, or reduce the
risk of ownership with respect to, shares of Seller Common Stock held by me and
that I will not sell, transfer or otherwise dispose of, or reduce the risk of
ownership with respect to, any shares of Buyer Common Stock received by me in
the Merger or other shares of Buyer Common Stock until after such time as
results covering at least thirty (30) days of combined operations of Buyer and
Seller have been published by Buyer, in the form of a quarterly earnings
report, an effective registration statement filed with the Commission, a report
to the Commission on Form 10-K, 10-Q, or 8-K, or any other public filing or
announcement which includes the results of at least 30 days of combined
operations.
Very truly yours,
By:_______________________________
Name:
Accepted this ____ day of
_____________, 1996, by
UST CORP.
By:_________________________________
Name:
Title:
<PAGE>
EXHIBIT C
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of August 30, 1996, between WALDEN
BANCORP, INC., a Massachusetts corporation (the "Issuer") and UST CORP., a
Massachusetts corporation (the "Grantee").
WHEREAS, the Grantee and the Issuer are entering into an Affiliation
Agreement and Plan of Reorganization of even date herewith (as amended and in
effect from time to time, the "Acquisition Agreement"), which agreement is
being executed by the parties thereto simultaneously with this Agreement; and
WHEREAS, as a condition to the Grantee's entry into the Acquisition
Agreement and in consideration for such entry, the Issuer has agreed to grant
the Grantee the Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Acquisition Agreement, the
parties hereto agree as follows:
1. (a)..The Issuer hereby grants to the Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to 1,016,868 fully paid and nonassessable shares (the "Option Shares") of
common stock, no par value, of the Issuer ("Common Stock") at a price of $20.50
per share (the "Option Price"). The number of shares of Common Stock that may
be received upon the exercise of the Option and the Option Price are subject to
adjustment as herein set forth provided that in no event shall the number of
shares for which this Option is exercisable exceed 19.9% of the Issuer's issued
and outstanding shares of Common Stock (without giving effect to any shares of
Common Stock issued pursuant to the Option) less the number of shares
previously issued pursuant to exercise of the Option.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to exercise of the Option pursuant to this Agreement or as
contemplated by Section 5(a) of this Agreement), including, without limitation,
pursuant to stock option or other employee plans or as a result of the exercise
of conversion rights, the number of shares of Common Stock subject to the
Option shall be increased so that, after such issuance, it equals 19.9% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing
<PAGE>
contained in this Section 1(b) or elsewhere in this Agreement shall be deemed
to authorize the Issuer or the Grantee to breach any provision of the
Acquisition Agreement.
2. (a)..The Holder (as such term is defined in paragraph (c) below) may
exercise the Option, in whole or part, if, but only if, both an Initial
Triggering Event (as defined in paragraph (e) below) and a Subsequent
Triggering Event (as defined in paragraph (f) below) shall have occurred prior
to the occurrence of an Exercise Termination Event (as defined in paragraph (b)
below), provided that the Holder shall have sent the written notice of such
exercise (as provided in paragraph (h) of this Section 2) within thirty (30)
days following such Subsequent Triggering Event and prior to the Exercise
Termination Event.
(b) The term "Exercise Termination Event" shall mean the earliest of (i)
the Effective Time of the Merger, (ii) any termination of the Acquisition
Agreement in accordance with the provisions thereof if such termination occurs
prior to the occurrence of an Initial Triggering Event, and (iii) in the event
of any termination of the Acquisition Agreement in accordance with the
provisions thereof after the occurrence of an Initial Triggering Event, the
passage of twelve (12) months after such termination. Notwithstanding the
termination of the Option, the Grantee shall be entitled to purchase those
Option Shares with respect to which it has exercised the Option in whole or in
part prior to the termination of the Option.
(c) The term "Holder" shall mean the holder or holders
of the Option.
(d) The term "Schedule 13G Investor" shall mean any person holding voting
securities of the Issuer eligible to report the beneficial ownership of such
securities on Schedule 13G pursuant to the provisions of Rule 13d-1 under the
Exchange Act.
(e) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) The Issuer or any subsidiary of the Issuer, without having
received the Grantee's prior written consent, shall have entered into an
agreement to engage in an Acquisition Transaction with any Person (the
term "person" for purposes of this Agreement having the meaning assigned
thereto in Sections 3(a)(9) and 13(d)(3) of the Exchange Act and the
rules and regulations thereunder), other than the Grantee or any
subsidiary of the Grantee, or, without the consent of the Grantee, the
Board of Directors of the Issuer shall have approved an Acquisition
Transaction or recommended that the shareholders of the Issuer approve or
<PAGE>
accept any Acquisition Transaction other than as contemplated by the
Acquisition Agreement. For purposes of this Agreement, the term
"Acquisition Transaction" shall mean (A) a merger or consolidation, or
any similar transaction, with the Issuer or any Significant Subsidiary of
the Issuer, or any subsidiary of the Issuer which, after such
transaction, would be a Significant Subsidiary of the Issuer, (B) a
purchase, lease or other acquisition of all or substantially all of the
assets of the Issuer or any Significant Subsidiary of the Issuer or (C) a
purchase or other acquisition (including by way of merger, consolidation,
share exchange or otherwise) of securities representing ten percent (10%)
or more of the voting power of the Issuer or any Significant Subsidiary
of the Issuer;
(ii) The stockholders of the Issuer shall not have approved the
Acquisition Agreement at the meeting of such stockholders held for the
purpose of voting on the Acquisition Agreement, such meeting shall not
have been held or shall have been canceled prior to the termination of
the Acquisition Agreement, or the Issuer's Board of Directors shall have
withdrawn or modified in a manner adverse to the Grantee the
recommendation of the Issuer's Board of Directors with respect to the
Acquisition Agreement, in each case after; (A), any Person, other than
the Grantee or any subsidiary of the Grantee or the Issuer in a fiduciary
capacity, and other than a Schedule 13G Investor, shall have acquired
beneficial ownership (as hereinafter defined) or the right to acquire
beneficial ownership of ten percent (10%) or more of the outstanding
shares of Common Stock if such Person owned beneficially less than ten
percent (10%) of the outstanding shares of Common Stock on the date of
this Agreement, or any Person shall have acquired beneficial ownership of
an additional three percent (3%) of the outstanding shares of Common
Stock if such Person owned beneficially ten percent (10%) or more of the
outstanding shares of Common Stock on the date of this Agreement (the
term "beneficial ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the Exchange Act, and in the
rules and regulations thereunder); (B), any Person, other than the
Grantee or any subsidiary of the Grantee, shall have made a bona-fide
proposal to the Issuer or its shareholders to engage in an Acquisition
Transaction by public announcement or written communication that shall be
or become the subject of public disclosure; or (C), any Person other than
the Grantee or any Subsidiary of the Grantee, other than in connection
with a transaction to which the Grantee has given its prior written
consent, shall have filed an application or notice with the Federal
Reserve Board or other federal or state bank regulatory authority, which
<PAGE>
application or notice has been accepted for processing, for approval to
engage in an Acquisition Transaction;
(iii)After any Person other than the Grantee or any subsidiary of
the Grantee has made a proposal to the Issuer or its shareholders to
engage in an Acquisition Transaction, the Issuer shall have breached any
covenant or obligation contained in the Acquisition Agreement and such
breach (A) would entitle the Grantee to terminate the Acquisition
Agreement and (B) shall not have been remedied prior to the Notice Date
(as defined in paragraph (h) below); or
(iv) Any person (other than Grantee or any Subsidiary of Grantee)
shall have commenced (as such term is defined in Rule 14d-2 under the
Exchange Act) or shall have filed a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect
to, a tender offer or exchange offer to purchase any shares of Issuer
Common Stock such that, upon consummation of such offer, such person
would own or control 25% or more of the then outstanding shares of Issuer
Common Stock (such an offer being referred to herein as a "Tender Offer"
or an "Exchange Offer," respectively).
(f) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any Person (other than a Schedule 13G
Investor) of beneficial ownership of twenty-five percent (25%) or more of
the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
subparagraph (i) of paragraph (e) of this Section 2, except that the
percentage referenced in clause (C) thereof shall be twenty-five percent
(25%) in lieu of ten percent (10%).
(g) The Issuer shall notify the Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event
(together, a "Triggering Event"), it being understood that the giving of such
notice by the Issuer shall not be a condition to the right of the Holder to
exercise the Option.
(h) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to the Issuer a written notice (the date of which being
herein referred to as the "Notice Date") specifying (i) the total number of
shares of Common Stock it will purchase pursuant to such exercise, and (ii) a
place and date not earlier than three (3) business days nor later than
forty-five (45) business days from the Notice Date for the closing of such
<PAGE>
purchase (the "Closing"); provided that if prior notification to or approval of
the Federal Reserve Board or any other regulatory agency is required in
connection with such purchase, the Holder shall promptly file the required
notice or application for approval and shall expeditiously process the same and
the period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which any required notification periods have expired
or been terminated or such approvals have been obtained and any requisite
waiting period or periods shall have passed. The term "business day" for
purposes of this Agreement means any day, excluding Saturdays, Sundays and any
other day that is a legal holiday in the Commonwealth of Massachusetts or a day
on which banking institutions in the Commonwealth of Massachusetts are
authorized by law or executive order to close.
(i) At the Closing, the Holder shall pay to the Issuer the aggregate
purchase price for the shares of Common Stock purchased pursuant to the
exercise of the Option in immediately available funds by a wire transfer to a
bank account designated by the Issuer, provided that failure or refusal of the
Issuer to designate such a bank account shall not preclude the Holder from
exercising the Option.
(j) At such Closing, simultaneously with the delivery of immediately
available funds as provided in paragraph (i) above, the Issuer shall deliver to
the Holder a certificate or certificates representing the number of shares of
Common Stock purchased by the Holder and, if the Option should be exercised in
part only, a new Option evidencing the rights of the Holder thereof to purchase
the balance of the shares purchasable hereunder, and the Holder shall deliver
to the Issuer a copy of this Agreement and a letter agreeing that the Holder
will not offer to sell or otherwise dispose of such shares in violation of
applicable law or the provisions of this Agreement.
(k) Certificates for the Common Stock delivered at a Closing hereunder
may (in the sole discretion of the Issuer) be endorsed with a restrictive
legend that shall read substantially as follows:
"THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTION PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF
AUGUST 30, 1996, A COPY OF WHICH AGREEMENT WILL BE PROVIDED TO THE HOLDER
HEREOF WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST
THEREFOR."
<PAGE>
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if the shares have been sold
or transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such legend. In addition,
such certificates shall bear any other legend as may be required by law.
(l) Upon the giving by the Holder to the Issuer of the written notice of
exercise of the Option provided for under paragraph (h) above, the tender of
the applicable purchase price in immediately available funds and the tender of
a copy of this Agreement to the Issuer, such Holder shall be deemed to be the
holder of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Issuer shall then be
closed or that certificates representing such shares of Common Stock shall not
then be actually delivered to the Holder. The Issuer shall pay all expenses,
and any and all United States federal, state and local taxes and other charges
that may be payable in connection with the preparation, issue and delivery of
stock certificates under this Section 2 in the name of the Holder or its
assignee, transferee or designee.
3. The Issuer agrees (a) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without requiring the Issuer's
stockholders to approve an increase in the number of authorized shares of
Common Stock after giving effect to all other options, warrants, convertible
securities and other rights to purchase Common Stock, (b) that it will not, by
charter amendment or through reorganization, consolidation, merger, dissolution
or sale of assets, or by any other voluntary act, avoid or seek to avoid the
observance or performance of any of the covenants, stipulations or conditions
to be observed or performed hereunder by the Issuer, (c) promptly to take all
action as may from time to time be required (including without limitation
cooperating fully with any Holders in preparing any applications or notices
required under the Bank Holding Company Act of 1956, as amended, or the Change
in Bank Control Act of 1978, as amended, or any state banking law), in order to
permit such Holders to exercise the Option and the Issuer duly and effectively
to issue shares of Common Stock pursuant hereto, and (d) promptly to take all
action provided herein to protect the rights of any Holders against dilution.
4. This Agreement (and the Option granted hereby) is exchangeable,
without expense, at the option of each Holder, upon presentation and surrender
of this Agreement at the principal office of the Issuer, for other Agreements
providing for Options of different denominations entitling the Holder thereof
to purchase, on the same terms and subject to the same conditions as are set
<PAGE>
forth herein, in the aggregate the same number of shares of Common Stock
purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any Stock Option Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by the
Issuer of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, the Issuer will execute and
deliver a new Agreement of like tenor and date. Any such new Agreement executed
and delivered shall constitute for all purposes and under all circumstances a
contractual obligation on the part of the Issuer, whether or not this Agreement
so lost, stolen, destroyed or mutilated shall at any time be enforceable by
anyone.
5. In addition to the adjustment in the number of Option Shares pursuant
to Section 1 of this Agreement, the number of Option Shares shall be subject to
adjustment from time to time as provided in this Section 5.
(a) (i) In the event of any change in the shares of Common Stock by
reason of stock dividend, split up, merger, recapitalization,
subdivision, conversion, combination, exchange of shares or similar
transaction, the type and number of Option Shares, and the Option Price
therefor, shall be adjusted appropriately, and proper provision shall be
made in the agreements governing such transaction, so that the Grantee
shall receive upon exercise of the Option the number and class of shares
or other securities or property that the Grantee would have held
immediately after such event if the Option had been exercised immediately
prior to such event, or the record date therefor, as applicable.
(ii) The Issuer may make such increases in the number of Option
Shares, in addition to those required under subparagraph (a)(i) above, as
shall be determined by its Board of Directors to be advisable in order to
avoid taxation, so far as practicable, of any dividend of stock or stock
rights or any event treated as such for federal income tax purposes to
the recipients.
(b) Whenever the number of Option Shares (or other securities)
purchasable upon exercise hereof is adjusted as provided in this Section 5, the
Option Price shall be adjusted by multiplying the Option Price by a fraction,
the numerator of which is equal to the number of Option Shares prior to the
adjustment and the denominator of which is equal to the number of Option Shares
(or other securities) purchasable after the adjustment.
<PAGE>
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within thirty (30) days of such Subsequent Triggering Event (whether
on the Grantor's own behalf or on the behalf of any subsequent Holder of this
Option (or part thereof) or any of the shares of Common Stock issued pursuant
hereto), promptly prepare, file and keep current, with respect to the Option
and the Option Shares, a "shelf" registration statement under Rule 415 of the
Securities Act or any successor provision, and Issuer shall use its best
efforts to qualify such shares under any applicable state securities laws.
Issuer will use its best efforts to cause such registration statement first to
become effective and then to remain effective for such period not in excess of
180 days from the day such registration statement first becomes effective or
such shorter time as may be reasonably necessary to effect sales or other
dispositions of Option Shares. Grantee shall have the right to demand two such
registrations. Any registration statement prepared and filed under this Section
6, and any sales covered thereby, shall be at Issuer's expense, except for
underwriting discounts or commissions, broker's fees and expenses and the fees
and disbursements of Grantee's counsel related thereto. The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
the Option or Option Shares as provided above, Issuer is in registration with
respect to an underwritten public offering of shares of Common Stock, and if in
the good faith judgment of the managing underwriter or managing underwriters,
or, if none, the sole underwriter or underwriters, of such offering, the
inclusion of the Option or Option Shares would interfere with the successful
marketing of the shares represented by the Option the number of Option Shares
otherwise to be covered in the registration statement contemplated hereby may
be reduced; provided, however, that if such reduction occurs, the Issuer shall
file a registration statement for the balance as promptly as practical and no
reduction shall thereafter occur. Each such Holder shall provide all
information reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder. If requested by any such Holder in connection
with such registration, Issuer shall become a party to any underwriting
agreement relating to the sale of such shares, but only to the extent of
obligating itself in respect of representations, warranties, indemnities and
other agreements customarily included in such underwriting agreements for the
Issuer.
7. (a) Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, (i) at the request of any Holder,
delivered within thirty (30) days following such occurrence (or such later
period as provided in Section 10), the Issuer shall repurchase the Option from
the Holder at a price (the "Option Repurchase Price") equal to the amount by
which (A) the market/offer price (as defined below) exceeds (B) the Option
<PAGE>
Price, multiplied by the number of shares for which this Option may then be
exercised, plus, to the extent not previously reimbursed, the Grantee's
reasonable out-of-pocket expenses incurred in connection with the transactions
contemplated by, and the enforcement of the Grantee's rights under, the
Acquisition Agreement, including without limitation legal, accounting and
investment banking fees (the "Grantee's Out-of-Pocket Expenses"), and (ii) at
the request of any owner of Option Shares from time to time (the "Owner"),
delivered within thirty (30) days following such occurrence (or such later
period as provided in Section 10), the Issuer shall repurchase such number of
the Option Shares from such Owner as the Owner shall designate at a price per
share ("Option Share Repurchase Price") equal to the greater of (A) the
market/offer price and (B) the average exercise price per share paid by the
Owner for the Option Shares so designated, plus, to the extent not previously
reimbursed, the Grantee's Out-of-Pocket Expenses. The term "market/offer price"
shall mean the highest of (w) the price per share of the Common Stock at which
a tender offer or exchange offer therefor has been made, (x) the price per
share of the Common Stock to be paid by any Person, other than the Grantee or a
subsidiary of the Grantee, pursuant to an agreement with the Issuer, (y) the
highest closing price for shares of Common Stock within the six (6) month
period immediately preceding the required repurchase of Options or Option
Shares, as the case may be, or (z) in the event of a sale of all or
substantially all of the Issuer's assets, the sum of the price paid in such
sale for such assets and the current market value of the remaining assets of
the Issuer as determined by a nationally recognized investment banking firm
selected by a majority in the interest of the Holders or the Owners, as the
case may be, and reasonably acceptable to the Issuer, divided by the number of
shares of Common Stock of the Issuer outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking firm selected
by a majority in interest of the Holders or the Owners, as the case may be, and
reasonably acceptable to the Issuer.
(b) Each Holder and Owner, as the case may be, may exercise its right to
require the Issuer to repurchase the Option and any Option Shares pursuant to
this Section 7 by surrendering for such purpose to the Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that such Holder
or Owner elects to require the Issuer to repurchase this Option and/or Option
Shares in accordance with the provisions of this Section 7. As promptly as
practicable, and in any event within ten (10) business days after the surrender
of the Option and/or certificates representing Option Shares and the receipt of
such notice or notices relating thereto, the Issuer shall deliver or cause to
be delivered to each Holder the Option Repurchase Price and/or to each Owner
the Option Share Repurchase Price therefor or the portion thereof that the
<PAGE>
Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that the Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, or as a result of a
written agreement or other binding obligation with a governmental or regulatory
body or agency, from repurchasing the Option and/or the Option Shares in full,
the Issuer shall immediately so notify each Holder and/or each Owner and
thereafter deliver or cause to be delivered, from time to time, to such Holder
and/or Owner, as appropriate, the portion of the Option Repurchase Price and
the Option Share Repurchase Price, respectively, that it is no longer
prohibited from delivering, within ten (10) business days after the date on
which the Issuer is no longer so prohibited; provided, however, that if the
Issuer at any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to
any Holder and/or Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in part or in full (and the Issuer
hereby undertakes to use its best efforts to receive all required regulatory
and legal approvals and to file any required notices as promptly as practicable
in order to accomplish such repurchase), such Holder or Owner may revoke its
notice of repurchase of the Option or the Option Shares either in whole or to
the extent of the prohibition, whereupon the Issuer shall promptly (i) deliver
to such Holder and/or Owner, as appropriate, that portion of the Option
Purchase Price or the Option Share Repurchase Price that the Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to
such Holder, a new Stock Option Agreement evidencing the right of such Holder
to purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Stock Option
Agreement was exercisable at the time of delivery of the notice of repurchase
by a fraction, the numerator of which is the Option Repurchase Price less the
portion thereof theretofore delivered to the Holder and the denominator of
which is the Option Repurchase Price, or (B) to such Owner, a certificate for
the Option Shares it is then so prohibited from repurchasing.
8. (a) In the event that prior to an Exercise Termination Event, the
Issuer shall enter into an agreement (i) to consolidate with or merge into any
Person, other than the Grantee or one of the Grantee's subsidiaries, and the
Issuer shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any Person, other than the Grantee or
one of its subsidiaries, to merge into the Issuer and the Issuer shall be the
continuing or surviving corporation, but, in connection with such merger, the
then outstanding shares of Common Stock shall be changed into or exchanged for
<PAGE>
stock or other securities of any other Person or cash or any other property, or
the then outstanding shares of Common Stock shall, after such merger, represent
less than fifty percent (50%) of the outstanding shares and share equivalents
of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any Person, other than the Grantee or one of
the Grantee's subsidiaries, then, and in each such case, the agreement
governing such transaction shall make proper provision so that the Option shall
upon the consummation of any such transaction and upon the terms and conditions
set forth herein, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of the Holder, of either (A) the
Acquiring Corporation (as defined in paragraph (b) below) or (B) any Person
that controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) The term "Acquiring Corporation" shall mean (A) the continuing or
surviving corporation of a consolidation or merger with the Issuer (if
other than the Issuer), (B) the Issuer in a merger in which the Issuer is
the continuing or surviving Person, and (C) the transferee of all or
substantially all of the Issuer's assets.
(ii) The term "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(iii) The term "Assigned Value" shall mean the "market/offer price", as
defined in paragraph (a) of Section 7 hereof.
(iv) The term "Average Price" shall mean the average closing price of
a share of the Substitute Common Stock for the one (1) year period
immediately preceding the consolidation, merger or sale in question, but
in no event higher than the closing price of the shares of the Substitute
Common Stock on the day preceding such consolidation, merger or sale,
provided that if the Issuer is the issuer of the Substitute Option, the
Average Price shall be computed with respect to a share of common stock
issued by the Person merging into the Issuer or by any company which
controls such Person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall, to the extent legally permissible,
be as similar as possible to, and in no event less advantageous to the Holder
than, the terms of the Option. The issuer of the Substitute Option shall also
enter into an agreement with the then Holder or Holders of the Substitute
<PAGE>
Option in substantially the same form as this Agreement, which shall be
applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares
of the Substitute Common Stock as is equal to (i) the product of (A) the
Assigned Value and (B) the number of shares of Common Stock for which the
Option is then exercisable, divided by (ii) the Average Price. The exercise
price of the Substitute Option per share of the Substitute Common Stock shall
then be equal to the Option Price multiplied by a fraction in which the
numerator is the number of Option Shares and the denominator is the number of
shares of the Substitute Common Stock for which the Substitute Option is
exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of the Substitute Common Stock outstanding prior to exercise of the
Substitute Option (without giving effect to any shares of Substitute Common
Stock issued pursuant to the Substitute Option) less the number of shares
previously issued pursuant to the Substitute Option. In the event that the
Substitute Option would be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise but for this paragraph
(e), the issuer of the Substitute Option (the "Substitute Option Issuer") shall
make a cash payment to the Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this paragraph (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this paragraph (e). The difference in value shall be determined
by a nationally recognized investment banking firm selected by a majority in
interest of the Holders or the Owners, as the case may be.
(f) The Issuer shall not enter into any transaction described in
paragraph (a) of this Section 8 unless the Acquiring Corporation and any Person
that controls the Acquiring Corporation shall have assumed in writing all the
obligations of the Issuer hereunder.
9. (a) At the written request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase Price")
equal to the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied
by the number of shares of the Substitute Common Stock for which the Substitute
Option may then be exercised, plus to the extent not previously reimbursed, the
Grantee's Out-of-Pocket Expenses, and at the request of each owner (the
"Substitute Share Owner") of shares of the Substitute Common Stock (the
<PAGE>
"Substitute Shares"), the Substitute Option Issuer shall repurchase the
Substitute Shares at a price per share (the "Substitute Share Repurchase
Price") equal to the greater of (A) the Highest Closing Price and (B) the
average exercise price per share paid by the Substitute Share Owner for the
Substitute Shares so designated, plus, to the extent not previously reimbursed,
the Grantee's Out-of-Pocket Expenses. The term "Highest Closing Price" shall
mean the highest closing price for shares of the Substitute Common Stock within
the six (6) month period immediately preceding the date the Substitute Option
Holder gives notice of the required repurchase of the Substitute Option or the
Substitute Share Owner gives notice of the required repurchase of the
Substitute Shares, as applicable.
(b) Each Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective right to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant
to this Section 9 by surrendering for such purpose to the Substitute Option
Issuer, at its principal office, the agreement for such Substitute Option (or,
in the absence of such an agreement, a copy of this Agreement) and certificates
for Substitute Shares accompanied by a written notice or notices stating that
such Substitute Option Holder or Substitute Share Owner elects to require the
Substitute Option Issuer to repurchase the Substitute Option and/or the
Substitute Shares in accordance with the provisions of this Section 9. As
promptly as practicable, and in any event within five (5) business days after
the surrender of the Substitute Option and/or the certificates representing
Substitute Shares and the receipt of such notice or notices relating thereto,
the Substitute Option Issuer shall deliver or cause to be delivered to the
Substitute Option Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price therefor, or the
portion(s) thereof which the Substitute Option Issuer is not then prohibited
under applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, or
as a result of a written agreement or other binding obligation with a
governmental or regulatory body or agency, from repurchasing the Substitute
Option and/or the Substitute Shares in full, the Substitute Option Issuer shall
immediately so notify each Substitute Option Holder and/or the Substitute Share
Owner and thereafter deliver or cause to be delivered, from time to time, to
the Substitute Option Holder and/or Substitute Share Owner, as appropriate,
that portion of the Substitute Option Repurchase Price and the Substitute Share
Repurchase Price, respectively, which it is no longer prohibited from
delivering, within five (5) business days after the date on which the
<PAGE>
Substitute Option Issuer is no longer so prohibited, provided, however, that if
the Substitute Option Issuer is, at any time after delivery of a notice of
repurchase pursuant to paragraph (b) of this Section 9 prohibited under
applicable law or regulation, or as a consequence of administrative policy, or
as a result of a written agreement or other binding obligation with a
governmental or regulatory body or agency, from delivering to the Substitute
Option Holder and/or the Substitute Share Owner, as appropriate, the Substitute
Option Repurchase Price and the Substitute Share Repurchase Price,
respectively, in part or in full (and the Substitute Option Issuer shall use
its best efforts to receive all required regulatory and legal approvals as
promptly as practicable in order to accomplish such repurchase), the Substitute
Option Holder or Substitute Share Owner may revoke its notice of repurchase of
the Substitute Option or the Substitute Shares either in whole or to the extent
of the prohibition, whereupon the Substitute Option Issuer shall promptly (i)
deliver to the Substitute Option Holder or Substitute Share Owner, as
appropriate, that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Option Shares it is then so prohibited
from repurchasing.
10. The thirty (30) day period for exercise of certain rights under
Sections 2, 6, 7 and 12 hereof shall be extended in each such case: (i) to the
extent necessary to obtain all regulatory approvals for the exercise of such
rights and for the expiration of all statutory waiting periods; and (ii) to the
extent necessary to avoid liability under Section 16(b) of the Exchange Act by
reason of such exercise, provided that notice of intent to exercise such rights
shall be given to the Issuer within the requisite thirty (30) day period and
the Grantee and the Holders shall use their best efforts to promptly obtain all
requisite approvals and cause the expiration of all requisite waiting periods.
11. The Issuer hereby represents and warrants to the
Grantee as follows:
(a) The Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
<PAGE>
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Issuer and no other corporate proceedings on the part
of the Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by the Issuer. This Agreement is the valid and legally binding
obligation of the Issuer, enforceable against the Issuer in accordance with its
respective terms, except that enforcement thereof may be limited by the
receivership, conservatorship and supervisory powers of bank regulatory
agencies generally as well as bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting enforcement of creditors rights
generally and except that enforcement thereof may be subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law) and the availability of equitable remedies.
(b) The Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof
through the termination of this Agreement in accordance with its terms will
have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common Stock at
any time and from time to time issuable hereunder, and all such shares, upon
issuance pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrances and security interests and not subject to any preemptive rights.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other Person, whether by operation of law or otherwise, without the express
written consent of the other party, except that in the event a Subsequent
Triggering Event shall have occurred prior to an Exercise Termination Event,
the Grantee may, subject to the right of first refusal set forth in Section 13,
assign, transfer or sell in whole or in part its rights and obligations
hereunder within thirty (30) days following such Subsequent Triggering Event
(or such later period as provided in Section 10); provided, however, that in
the event the Grantee sells, assigns or transfers all or a portion of the
Option to other Holders as permitted by this Agreement, the Grantee may
exercise its rights hereunder on behalf of itself and such Holders.
13. If at any time after the occurrence of a Subsequent Triggering Event
and, with respect to shares of Common Stock or other securities acquired by the
Grantee pursuant to an exercise of the Option, prior to the expiration of
<PAGE>
twenty-four (24) months after the expiration of the Option pursuant to Section
2(b), the Grantee shall desire to sell, assign, transfer or otherwise dispose
of the Option, in whole or in part, or all or any of the shares of Common Stock
or other securities acquired by the Grantee pursuant to the Option, the Grantee
shall give the Issuer written notice of the proposed transaction (an "Offeror's
Notice"), identifying the proposed transferee, accompanied by a copy of a
binding offer to purchase the Option or such shares or other securities signed
by such transferee and setting forth the terms of the proposed transaction. An
Offeror's Notice shall be deemed an offer by the Grantee to the Issuer, which
may be accepted within ten (10) business days of the receipt of such Offeror's
Notice, on the same terms and conditions and at the same price at which the
Grantee is proposing to transfer the Option or such shares or other securities
to such transferee. The purchase of the Option or such shares or other
securities by the Issuer shall be settled within five (5) business days of the
date of the acceptance of the offer and the purchase price shall be paid to the
Grantee in immediately available funds, provided that, if prior notification to
or approval, consent or waiver of the Federal Reserve Board or any other
regulatory authority is required in connection with such purchase, the Issuer
shall promptly file the required notice or application for approval, consent or
waiver and shall expeditiously process the same (and the Grantee shall
cooperate with the Issuer in the filing of any such notice or application and
the obtaining of any such approval) and the period of time that otherwise would
run pursuant to this sentence shall run instead from the date on which, as the
case may be, (a) the required notification period has expired or been
terminated or (b) such approval has been obtained and, in either event, any
requisite waiting period shall have passed. In the event of the failure or
refusal of the Issuer to purchase the Option or the shares or other securities,
as the case may be, covered by an Offeror's Notice or if the Federal Reserve
Board or any other regulatory authority disapproves the Issuer's proposed
purchase of the Option or such shares or other securities, the Grantee may,
within sixty (60) days following the date of the Offeror's Notice (subject to
any necessary extension for regulatory notification, approval, or waiting
periods), sell all, but not less than all, of the portion of the Option (which
may be one hundred percent (100%)) or such shares or other securities, as the
case may be, proposed to be transferred to the proposed transferee identified
in the Offeror's Notice at no less than the price specified and on terms no
more favorable to the proposed transferee than those set forth in the Offeror's
Notice. The requirements of this Section 13 shall not apply to (i) any
disposition of the Option or any shares of Common Stock or other securities by
a Person to whom the Grantee has assigned its rights under the Option with the
prior written consent of the Issuer, (ii) any sale by means of a public
offering in which steps are taken to reasonably ensure that no purchaser will
acquire securities representing more than five percent (5%) of the outstanding
<PAGE>
shares of Common Stock of the Issuer or (iii) any transfer to a direct or
indirect wholly-owned subsidiary of the Grantee which agrees in writing to be
bound by the terms hereof.
14. Each of the Grantee and the Issuer will use all reasonable efforts to
make all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including without limitation applying to the
Federal Reserve Board under the Bank Holding Company Act of 1956, as amended,
for approval to acquire the shares issuable hereunder.
15. Notwithstanding anything to the contrary herein, in the event that
the Holder or the Owner or any Related Person thereof (as hereinafter defined)
is a Person making an offer or proposal to engage in an Acquisition Transaction
(other than the transaction contemplated by the Acquisition Agreement), then
(a) in the case of a Holder or any Related Person thereof, the Option held by
it shall immediately terminate and be of no further force or effect, and (b) in
the case of an Owner or any Related Person thereof, the Option Shares held by
it shall be immediately repurchasable by the Issuer at the Option Price. For
purposes of this Agreement, a "Related Person" of a Holder or Owner means any
Affiliate (as defined in Rule 12b-2 of the rules and regulations under the
Exchange Act) of the Holder or the Owner and any Person that is required to
file a Schedule 13D with the Holder or the Owner with respect to shares of
Common Stock or options to acquire the Common Stock.
16. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
17. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Holder is not permitted to acquire, or the Issuer is
not permitted to repurchase pursuant to Section 7, the full number of shares of
Common Stock provided in Section 1(a) hereof (as adjusted pursuant to Sections
1(b) or 5 hereof), it is the express intention of the Issuer to allow the
Holder to acquire or to require the Issuer to repurchase such lesser number of
shares as may be permissible, without any amendment or modification hereof.
<PAGE>
18. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in Person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Acquisition Agreement.
19. This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws
thereof.
20. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
21. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
22. Except as otherwise expressly provided herein, this Agreement
contains the entire agreement between the parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereof, written or oral. The terms and conditions
of this Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended to confer upon any party, other than
the parties hereto, and their respective successors and permitted assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
23. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Acquisition Agreement.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed as a sealed instrument on its behalf by its officers thereunder duly
authorized, all as of the day and year first above written.
WALDEN BANCORP, INC.
By:____________________________
Name:
Title:
UST CORP.
By:____________________________
Name:
Title:
<PAGE>
EXHIBIT D
August 30, 1996
Neal F. Finnegan, President
and Chief Executive Officer
UST Corp.
40 Court Street
Boston, Massachusetts 02108
Dear Neal:
The undersigned (the "Stockholder") owns and has sole voting power with
respect to the number of shares of the common stock, par value $1.00 per share
(the "Shares"), of Walden Bancorp, Inc., a Massachusetts corporation (the
"Seller"), indicated opposite the Stockholder's name on Schedule 1 attached
hereto.
Simultaneously with the execution of this letter agreement, UST Corp.
(the "Buyer") and the Seller are entering into an Affiliation Agreement and
Plan of Reorganization (as amended and in effect from time to time, the
"Acquisition Agreement") providing, among other things, for the indirect
acquisition of the Seller by the Buyer (the "Acquisition").
In consideration of, and as a condition to, the Buyer's entering into the
Acquisition Agreement the Stockholder and the Buyer agree as follows:
1. The Stockholder, while this letter agreement is in effect, shall vote
or cause to be voted all of the Shares, as well as any other shares of common
stock of Seller of which the Stockholder acquires beneficial ownership and sole
voting power, whether pursuant to the exercise of stock options or otherwise,
as long as such shares are owned by the Stockholder as of the record date for
the special meeting of the Seller's stockholders to be called and held
following the date hereof, for the approval of the Acquisition Agreement and
the Acquisition and shall vote or cause to be voted all such shares, at such
special meeting or any other meeting of the Seller's stockholders following the
date hereof, against the approval of any other agreement providing for a
merger, acquisition, consolidation, sale of a material amount of assets or
other business combination of the Seller or any of its subsidiaries with any
person or entity other than the Buyer, or any subsidiary of the Buyer.
2. The agreements contained herein are intended to relate to restrictions
on voting and to continue only for such time as may reasonably be necessary to
obtain all necessary approvals, including shareholder approval and all
necessary governmental approvals, of the Acquisition and all other transactions
contemplated by the Acquisition Agreement.
<PAGE>
3. Notwithstanding anything herein to the contrary, the agreements
contained herein shall remain in full force and effect until the earlier of (a)
the consummation of the Acquisition or (b) the termination of the Acquisition
Agreement in accordance with Article VIII thereof.
4. The Stockholder has signed this letter agreement intending to be bound
thereby. The Stockholder expressly agrees that this letter agreement shall be
specifically enforceable in any court of competent jurisdiction in accordance
with its terms against the Stockholder. All of the covenants and agreements
contained in this letter agreement shall be binding upon, and inure to the
benefit of, the respective parties and their permitted successors, assigns,
heirs, executors, administrators and other legal representatives, as the case
may be.
5. This letter agreement may be executed in one or more counterparts,
each of which will be deemed an original but all of which together shall
constitute one and the same instrument.
6. This letter agreement is deemed to be signed as a sealed instrument
and is to be governed by the laws of the Commonwealth of Massachusetts, without
giving effect to the principles of conflicts of laws thereof. If any provision
hereof is deemed unenforceable, the enforceability of the other provisions
hereof shall not be affected.
If the foregoing accurately reflects your understanding of the subject
matter intended to be contained herein, please confirm our agreement by signing
this letter where indicated below.
Very truly yours,
David E. Bradbury
AGREED TO AND ACCEPTED AS OF
THE DATE FIRST ABOVE WRITTEN
UST CORP.
By:_____________________________________
Name: Neal F. Finnegan
Title: President and Chief Executive Officer
<PAGE>
Schedule 1
Number of Shares
Name of Stockholder Owned with Sole Voting Power
David E. Bradbury 85,474
<PAGE>
EXHIBIT E
Weighting Index
Westamerica Bancorporation 5.88
Imperial Bancorp 4.93
Riggs National Corporation 5.72
First Midwest Bancorp Inc. 4.75
Whitney Holding Corp. 6.61
Citizens Bancorp (Maryland) 5.62
Magna Group Inc. 8.39
CCB Financial Corporation 9.90
Hubco Inc. 3.45
Northfork Bancorporation 9.26
Trustco Bank Corp. NY 5.11
Cullen/Frost Bankers Inc. 7.93
Banknorth Group Inc. 3.43
Associated Banc Corp. 8.72
People's Heritage Financial Group 6.85
Chittenden Corporation 3.45
----
100.00%
[LOGO]
N E W S R E L E A S E
For: Immediate Release
Contact: Sheila Celata (617) 726-7120
UST CORP. TO ACQUIRE WALDEN BANCORP, INC.
BOSTON, Massachusetts -- August 30, 1996 -- UST Corp. (NASDAQ: USTB) and
Walden Bancorp, Inc. (NASDAQ: WLDN) jointly announced today that the
Corporations have signed a definitive agreement under which UST will acquire
Walden.
The acquisition will result in UST becoming a $3.8 billion bank holding
company with 65 branches in the greater Boston area, after giving effect to
UST's pending acquisition of twenty Boston area branches from BankBoston, and
the recently announced sale of UST's Connecticut banking subsidiary, UST
Bank/Connecticut. Walden conducts business through two subsidiary banks, The
Bank of Braintree and The Co-operative Bank of Concord. These two banks have a
combined total of 17 branches located in the eastern Massachusetts counties of
Middlesex, Norfolk and Plymouth. While UST will first acquire Walden and the
banks will become subsidiaries of UST, UST anticipates that it will merge these
banks into its principal banking subsidiary, USTrust during 1997.
"This acquisition continues UST's expansion in the attractive markets of
Middlesex, Norfolk and Plymouth counties. The improved coverage substantially
enhances our market share, strengthens our geographic presence in eastern
Massachusetts, and enables USTrust to offer a stronger banking alternative to
an even larger number of local businesses and consumers," stated Neal F.
Finnegan, President and Chief Executive Officer of UST. "This acquisition of a
significant consumer and community oriented business will complement UST's
traditional strength as a commercial lender. The combination of the two
organizations will strengthen UST's position in having the third largest branch
network in metropolitan Boston. In addition, it will allow us to improve our
leverage and efficiency as we will be able to expand our customer base without
incurring proportionate increases in operating expenses. In fact, we expect the
transaction to be accretive to our earnings."
"We believe that our shareholders will greatly benefit from the proposed
transaction," stated David E. Bradbury, Chairman of the Board, President and
Chief Executive Officer of Walden. "In addition, our customers will benefit as
well as they will have access to the varied products and services of UST, along
with a much larger branch network. The pending acquisition of the BankBoston
branches represents a perfect fit with Walden's offices, and it is not
anticipated that any branches will be closed."
The transaction, which will be accounted for as a pooling of interests, is
expected to close during the first quarter of 1997, and is structured as a
tax-free exchange of 1.9 shares of UST common stock for each share of Walden
common stock. At UST's closing stock price of $16.25 on August 29, 1996, the
transaction would be valued at approximately $161 million, and Walden
shareholders would receive a value of $30.875 in UST common stock for each
share of Walden common stock. The purchase price represents a multiple of 1.69
times stated book value of Walden, and 1.96 times tangible book value of Walden
at June 30, 1996. The Company expects to record a one-time pre-tax charge of
approximately $13.5 million of acquisition related costs in connection with the
transaction.
<PAGE>
The agreement is subject to the approval of the shareholders of UST and Walden
as well as federal and state bank regulatory authorities. In connection with
the merger agreement, Walden has granted UST an option to purchase
approximately 19.9% of its common stock exercisable upon the occurrence of
certain events.
UST is a $2 billion, Boston-based bank holding company which provides a broad
range of financial services to individuals and small and medium sized companies
in New England. In June 1996, UST announced an agreement with BankBoston to
acquire a total of twenty BayBank and Bank of Boston branches, with
approximately $860 million in deposits and approximately $510 million of
commercial, residential and other loans.
Walden Bancorp is a $1 billion bank holding company for two community banks
which specialize in meeting consumer and small business banking needs in their
local markets with a total of 17 branch offices in Middlesex, Norfolk and
Plymouth counties.
UST Corp.
__________________________
BUILDING A STRONGER AND
MORE ATTRACTIVE FRANCHISE
__________________________
A FURTHER ASSEMBLY OF THE METROPOLITAN FRANCHISE
THROUGH THE ACQUISITION OF WALDEN
BANCORP, WITH $1 BILLION IN ASSETS, 17 DESIRABLE
BRANCH LOCATIONS AND AN ATTRACTIVE BALANCE
SHEET MIX AND RISK PROFILE
August 30, 1996
UST Corp.
<PAGE>
Walden Bancorp - Company Profit
- - A $1 billion bank holding company which operates 17 banking offices
through two subsidiary banks with offices in three Eastern Massachusetts
Counties: Middlesex (8), Norfolk (7) and Plymouth (2)
- - Financial Highlights:
Total Assets $1,051.7 MM Equity Capital $97.30 MM
Total Loans $636.3 MM Total Shares 5,109.9 MM
Total Deposits $768.2 MM Fully Diluted Shares 5,210.0 MM
- - Loan and Deposit Data:
Residential Mortgage $361.9 57% Demand and NOW $156.8 20%
Commercial Mortgage $172.8 27% Regular Savings $191.8 25%
Commercial Loans $69.7 11% Money Market $96.3 13%
Other Loans $31.9 5% Time Deposits $323.3 42%
- - Formed in 1995 through the combination of The Co-operative Bank of
Concord and Braintree Savings Bank
- - Above average ratios:
Equity/assets 9.25% Return on Assets 1.14%
Tangible equity/assets 7.96% Return of Equity 12.45%
Net Interest Margin 4.09% Efficiency Ratio 56.36%
UST Corp.
<PAGE>
A More Attractive USTB Franchise
- - Continued in-market Metropolitan expansion
- - Fills-in Route 2 Corridor; extends South Shore/Route 3 Presence
- - Strong market demographics (Middlesex, Norfolk and Plymouth
Counties)
- - Improved leverage and efficiency (WLDN efficiency ratio 56%
versus USTB @68%)
- - Attractive Balance Sheet mix and risk profile
- - Accretive to earnings after attaining save level of 21%
- - Opportunity to exceed 35% saves on a prospective basis
- - Adds to equity capital; accretive to book value
- - Improved float; market cap increases to $450 million
- - 3 Directorships to be filled with Nominees from WLDN
UST Corp.
<PAGE>
Transaction Summary
Terms: Fixed exchange ratio: 1.9 shares USTB per share of
WLDN
No collars
19.9% Stock Option in place
Walkaway provision - 15% absolute decline and 15%
relative decline to bank index
Accounting/Tax: Pooling of interests; Tax-free exchange
Due Diligence: Completed
Approvals: Shareholders of each corporation
Federal Reserve
Commissioner of Banks
Targeted Closing: First Quarter, 1997
Board Composition: 20 USTB, 3 WLDN
New Branches (17): Arlington, Braintree, Concord, Groton, Hanover,
Lexington, Littleton, Maynard, Quincy, North Quincy,
Norwell & Randolph
UST Corp.
<PAGE>
Transaction Pricing
Purchase Price per Share: $30.88 (USTB @ $16.25 X 1.9 shares)
Price to Market: 1.50 X
Price to Book: 1.69 X
Price to Tangible Book: 1.96 X
Price to Analyst 1996 EPS: 14.0 X
Price to Analyst 1997 EPS: 13.1 X
WLDN Fully Diluted Shares: 5.2 MM
Fixed Exchange Ratio: 1.9
New Shares Issued: 9.88 MM
Indicated Deal Value: $161 MM
UST Corp.
<PAGE>
Stronger Metropolitan Franchise
Branch Pro
(In thousands) (1) USTB (2) Purchase (3) WLDN Forma
-------- ------------ ---- -----
Total Assets 1,925,796 860,000 1,051,743 3,837,539
Total Loans 1,278,507 501,000 636,261 2,415,768
Total Deposits 1,416,268 860,000 768,229 3,044,497
Total Capital 181,545 0 97,255 278,800
Total Branches 28 20 17 65
Branch Locations: Middlesex - 8 Middlesex - 10 Middlesex - 8 Middlesex - 26
Norfolk - 8 Norfolk - 5 Norfolk - 7 Norfolk - 20
Suffolk - 8 Suffolk - 5 Suffolk - 0 Suffolk - 13
Essex - 4 Essex - 0 Essex - 0 Essex - 4
Plymouth - 0 Plymouth - 0 Plymouth - 2 Plymouth - 2
(1) Financial data as of June 30, 1996
(2) USTB balance reflect pro forma sale of UST Bank/Connecticut
announced on August 16, 1996
(3) Purchase of 20 BayBank and Bank of Boston Branches announced
on June 18, 1996
UST Corp
<PAGE>
Balanced Loan and Deposit Mix
Branch Pro
(In thousands) (1) USTB (2) Purchase (3) WLDN Forma Percent
------------------ -------- --------- ---- ----- -------
LOAN DATA:
Commercial and Industrial 627,370 127,500 69,695 824,565 45%
Industrial real estat 202,467 172,778 375,245 16%
Residential mortgage 71,405 382,500 361,876 815,781 34%
Home equity 76,386 23,661 100,047 4%
Indirect auto 228,701 0 228,701 9%
Other 8,251 71,429 3%
63,178
--------- ------- ------ --------- ----
Total loans 1,269,507 510,000 636,261 2,415,768 100%
DEPOSIT DATA:
Demand and NOW 466,490 378,400 156,800 1,001,690 33%
Regular savings 231,655 189,200 191,782 612,637 20%
Money Market 193,902 154,800 96,317 445,019 15%
Time 524,221 137,600 323,330 985,151 32%
--------- ------- ------- --------- ---
Total deposits 1,416,268 860,000 768,229 3,044,497 100%
(1) Financial data as of June 30, 1996
(2) USTB balances reflect pro forma sale of UST Bank/Connecticut
announced on August 16, 1996
(3) Purchase of 20 BayBanks and Bank of Boston Branches announced
on June 18, 1996
UST Corp.
<PAGE>
Accretive Expectations
1997 FULLY
ANALYST DILUTED PRO FORMA WITH SAVES AT
ESTIMATES SHARES 25% 30% 35%
--------- -------- -------- ------- -------
USTB $1.60 18,160 29,056 29,056 29,056
WLDN $2.35 5,210 12,244 12,244 12,244
------ ------ ------
PRO FORMA, BEFORE SAVES 41,300 41,300 41,300
WLDN NONINTEREST EXPENSE
at $26 MM TIMES SAVE RATE 6,500 7,800 9,100
RELATED TAXES @ 40% -2,600 -3,120 -3,640
------- ------- -------
ESTIMATED PRO FORMA WITH SAVES 45,200 45,980 46,760
====== ====== ======
PRO FORMA SHARES (F/D) 28,100 28,100 28,100
EARNINGS PER SHARES:
USTB, BEFORE TRANSACTION $1.60 $1.60 $1.60
PRO FORMA, BEFORE SAVES $1.47 $1.47 $1.47
PRO FORMA, WITH SAVES $1.61 $1.64 $1.66
UST Corp.
<PAGE>
One-Time Charges and Future Saves
(In thousands)
One-Time Restructuring Future Saves
Employment Agreements $6,000 Personnel $5,300
Facilities and equipment 2,700 Marketing, supplies,
professional, insurance,
miscellaneous 2,000
Redundant staff functions Occupancy & equipment 1,000
severance benefits 1,300
$8,300
Signage, supplies, etc. 1,000
Other 2,500
Total $13,500
UST Corp.
<PAGE>
Supplemental Specifics
- - Definitive Agreement approved by both Boards of Directors
- - Acquiring entity will be UST Corp. under the Bank Holding
Company Act
- - Authorized capital is sufficient to accomplish transaction;
would seek additional authorization
- - Subsidiary Banks (Concord and Braintree) will be operated separately
pending completion of the BKB/BBNK branch purchase, and will be
subsequently merged with and into USTrust
- - No anticipated branch closings; additive to existing franchise
- - One-time charges for change-in control buy-out of senior
management
- - Arthur Andersen, LLP serves as common Auditor to both companies
- - Fox-Pitt, Kelton Inc. serves as USTB investment advisors
- - PaineWebber serves as WLDN investment advisors
UST Corp.
