<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 7, 1998
REGISTRATION NO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
UST CORP.
(Exact name of registrant as specified in its charter)
------------------------------
<TABLE>
<S> <C>
MASSACHUSETTS 04-2436093
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
6711
(Primary Standard Industrial Classification Code Number)
------------------------------
40 COURT STREET, BOSTON, MASSACHUSETTS 02108, (617) 726-7000
(Address, including ZIP code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
<TABLE>
<S> <C>
JAMES K. HUNT ERIC R. FISCHER, ESQ.
EXECUTIVE VICE PRESIDENT, EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER AND TREASURER GENERAL COUNSEL AND CLERK
UST CORP. UST CORP.
40 Court Street 40 Court Street
Boston, Massachusetts 02108 Boston, Massachusetts 02108
(617) 726-7055 (617) 726-7377
</TABLE>
(Names, addresses, including ZIP codes, and telephone numbers, including area
codes, of agents for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement and all other conditions to the merger of Affiliated Community
Bancorp, Inc. into a subsidiary of the Registrant have been satisfied or waived
as described in the enclosed Joint Proxy Statement-Prospectus.
------------------------
If the securities being registered on this Form are to be offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box / /.
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED (1) PER SHARE (1) OFFERING PRICE (1) FEE(2)
<S> <C> <C> <C> <C>
Common Stock, par value $0.625 per share 9,500,000 27.875 $264,812,500 $79,000
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457(c) based on the average of the high and low prices of the Common
Stock on May 4, 1998, as reported on the NASDAQ National Market System.
(2) In accordance with Rule 457(b), the registration fee paid herewith has been
reduced by $48,700.00, which is the amount of the fee previously paid in
connection with the Joint Proxy Statement filed with the Commission on
Schedule 14A on February 9, 1998.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[LOGO]
May 11, 1998
To the Common Stockholders of UST CORP.:
We are pleased to invite you to attend a Special Meeting of Stockholders
(the "UST Meeting") of UST Corp. ("UST"), which will be held on Wednesday, June
10, 1998, at 9:00 a.m. in the Auditorium located on the 12th Floor of UST's
principal offices at 40 Court Street, Boston, Massachusetts 02108.
At the UST Meeting, you will be asked to consider and vote upon a proposal
to approve and adopt an Affiliation Agreement and Plan of Reorganization (the
"Affiliation Agreement"), dated as of December 15, 1997, among UST, Affiliated
Community Bancorp, Inc. ("AFCB") and UST's wholly-owned subsidiary, Mosaic Corp.
("Mosaic"), as well as the transactions contemplated thereby, including
specifically the issuance of UST common stock to persons who were stockholders
of AFCB immediately prior to the merger, pursuant to which AFCB will be merged
(the "Affiliation") with and into Mosaic.
As a result of the Affiliation, AFCB's corporate existence will cease.
Mosaic will be the surviving corporation of the Affiliation and will remain a
wholly-owned subsidiary of UST, and the subsidiaries of AFCB will become direct
and indirect subsidiaries of UST and Mosaic. As described in the accompanying
Joint Proxy Statement-Prospectus, from and after the effective time of the
Affiliation, the Board of Directors of UST (the "UST Board") will be expanded by
five members (or such lesser number as may be agreed to by UST and AFCB) and
Timothy J. Hansberry, the President and Chief Executive Officer of AFCB, and
four persons chosen by AFCB and approved by UST prior to the effective time of
the Affiliation will become directors of UST. After the Effective Time, Neal F.
Finnegan, currently President and Chief Executive Officer of UST and USTrust,
will serve as President and Chief Executive Officer of UST and Chairman and
Chief Executive Officer of USTrust, and Timothy J. Hansberry will serve as Vice
Chairman and Chief Operating Officer of UST and President and Chief Operating
Officer of USTrust. A copy of the Affiliation Agreement is attached to the
accompanying Joint Proxy Statement-Prospectus as APPENDIX A.
At the effective time of the Affiliation, each share of AFCB common stock,
par value $0.01 per share ("AFCB Common Stock"), will be converted into 1.41
shares of UST common stock, par value $0.625 per share ("UST Common Stock").
Fox-Pitt, Kelton, Inc., UST's financial advisor, has advised the UST Board that,
in its opinion, the conversion number of 1.41 is fair, from a financial point of
view, to UST.
Enclosed are a Notice of Special Meeting of Stockholders and a Joint Proxy
Statement-Prospectus which describes the Affiliation and the background thereof.
You are urged to read all of these materials carefully. The UST Board has fixed
the close of business on May 7, 1998 as the record date for the UST Meeting.
Accordingly, only common stockholders of record on that date will be entitled to
notice of, and to vote at, the UST Meeting. The affirmative vote of the holders
of a majority of the shares of UST Common Stock present in person, or
represented by proxy, at the UST Meeting and entitled to vote and voting is
necessary to approve and adopt the Affiliation Agreement and the transactions
contemplated thereby.
THE BOARD OF DIRECTORS OF UST HAS UNANIMOUSLY APPROVED THE AFFILIATION
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE AFFILIATION,
AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE IN FAVOR OF APPROVING AND
ADOPTING THE AFFILIATION AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE AFFILIATION.
At the UST Meeting, you will also be asked to consider and vote upon a
proposal to amend UST's Restated Articles of Organization (the "UST Articles")
to increase the number of authorized shares of UST Common Stock from 45,000,000
to 75,000,000.
<PAGE>
The UST Board recommends that stockholders vote FOR the proposed amendment
to the UST Articles. Stockholder approval of the amendment to the UST Articles
to increase the number of authorized shares requires the affirmative vote of the
holders of at least a majority of the outstanding shares of UST Common Stock.
While stockholder approval of the Affiliation is a condition to, and
required for, the consummation of the Affiliation, no other matter being
considered at the UST Meeting must be approved by stockholders in order to
consummate the Affiliation.
If you plan to attend the meeting, please bring a form of personal
identification with you and, if you are acting as proxy for another, please
bring written confirmation from the record owner that you are acting as proxy.
Whether or not you expect to attend the meeting, please sign and date the
enclosed form of proxy and return it promptly in the accompanying envelope to
ensure that your shares will be represented. If you attend the meeting, you may
withdraw any proxy previously given and vote your shares in person.
As President and Chief Executive Officer of UST, my foremost responsibility
is to manage UST to maximize shareholder value. I strongly support the
Affiliation as an important contribution to that objective, and ask for your
support as well.
Cordially,
[LOGO]
NEAL F. FINNEGAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
2
<PAGE>
[LOGO]
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
JUNE 10, 1998
To the Common Stockholders of UST CORP.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of UST Corp.
("UST") will be held in the Auditorium located on the 12th Floor of UST's
principal offices at 40 Court Street, Boston, Massachusetts 02108, on Wednesday,
June 10, 1998, at 9:00 a.m. (the "UST Meeting"), for the purpose of considering
and voting upon the following matters:
1. A proposal to approve and adopt the Affiliation Agreement and Plan
of Reorganization, dated as of December 15, 1997 (the "Affiliation
Agreement"), by and among UST Corp. ("UST"), Mosaic Corp. ("Mosaic"), a
wholly-owned subsidiary of UST, and Affiliated Community Bancorp, Inc.
("AFCB"), and the transactions contemplated thereby, including the merger of
AFCB with and into Mosaic and the issuance of UST Common Stock to persons
who were stockholders of AFCB immediately prior to the merger, upon the
terms and subject to the conditions set forth therein, as more fully
described in the accompanying Joint Proxy Statement-Prospectus. A copy of
the Affiliation Agreement is attached as APPENDIX A to the Joint Proxy
Statement-Prospectus.
2. To authorize an amendment of UST's Restated Articles of Organization
to increase the number of authorized shares of UST's common stock ("UST
Common Stock") from 45,000,000 shares, par value $0.625 per share, to
75,000,000 shares, par value $0.625 per share.
3. Such other business as may properly be brought before the meeting or
any adjournment or postponement thereof.
Stockholder approval of the Affiliation Agreement and the transactions
contemplated thereby requires the affirmative vote of the holders of at least a
majority of the shares of UST Common Stock present, in person or by proxy,
entitled to vote, and voting at the UST Meeting. Stockholder approval of the
increase in the number of authorized shares requires the affirmative vote of the
holders of at least a majority of the outstanding shares of UST Common Stock.
While stockholder approval of the Affiliation Agreement is a condition to,
and required for, consummation of the Affiliation, no other matter being
considered at the UST Meeting must be approved by stockholders in order for the
Affiliation to be consummated.
In the event there are not sufficient votes to approve any one or more of
the foregoing proposals at the time of the UST Meeting, the meeting may be
adjourned by a majority of the votes present in order to permit further
solicitation of proxies.
Only common stockholders of record at the close of business on May 7, 1998
are entitled to notice of, and to vote at, the UST Meeting and any and all
adjournments or postponements thereof.
<PAGE>
It is important that your shares be represented at the UST Meeting
regardless of the number of shares you may hold. Please complete, sign and date
the enclosed form of proxy and return it promptly in the enclosed envelope which
requires no postage if mailed within the United States.
By Order of the Board of Directors
[LOGO]
ERIC R. FISCHER,
CLERK
Boston, Massachusetts
May 11, 1998
2
<PAGE>
[LOGO]
May 11, 1998
Dear Fellow Shareholders:
We invite you to attend a Special Meeting of Stockholders of Affiliated
Community Bancorp, Inc. ("AFCB") to be held at the Sheraton Lexington Inn, 727
Marrett Road, Route 2A, Lexington, Massachusetts, on Wednesday, June 10, 1998,
at 9:30 a.m.
At our special stockholder meeting, AFCB stockholders will be asked to
approve an Affiliation Agreement and Plan of Reorganization among AFCB, UST
Corp. ("UST") and Mosaic Corp. ("Mosaic"), a wholly-owned subsidiary of UST
Corp., pursuant to which AFCB will merge with and into Mosaic (the
"Affiliation") and each outstanding share of AFCB Common Stock will be converted
into 1.41 shares of UST Common Stock. Based on the last reported sale price of
UST Common Stock on May 4, 1998, the value of 1.41 shares of UST Common Stock as
of that date would have been approximately $39.30375. The actual value of the
UST Common Stock to be received by AFCB stockholders will depend on the market
price of UST Common Stock when the Affiliation is consummated. Terms and
conditions of the Affiliation are described in the accompanying Joint Proxy
Statement-Prospectus, which we urge you to read carefully.
AFCB retained PaineWebber Incorporated to serve as AFCB's financial advisor
in connection with our negotiation of the terms of the Affiliation with UST.
PaineWebber Incorporated has advised your Board of Directors that in its opinion
the consideration to be received by AFCB stockholders in the Affiliation is fair
to such stockholders from a financial point of view.
YOUR BOARD OF DIRECTORS BELIEVES THAT THE PROPOSED AFFILIATION IS IN THE
BEST INTERESTS OF AFCB STOCKHOLDERS. ACCORDINGLY, THE BOARD UNANIMOUSLY
RECOMMENDS THAT YOU VOTE TO APPROVE THE AFFILIATION.
A proxy card is enclosed. Please sign, date and mail the proxy card promptly
in the return envelope provided. Because stockholder approval of the Affiliation
requires the affirmative vote of the holders of at least a majority of the
outstanding shares of AFCB Common Stock, it is important that you return the
proxy card, whether or not you plan to attend our special stockholder meeting,
so that your shares of AFCB Common Stock can be voted.
Sincerely,
[LOGO]
TIMOTHY J. HANSBERRY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
- --------------------------------------------------------------------------------
[LOGO]
<PAGE>
[LOGO]
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
JUNE 10, 1998
A Special Meeting of Stockholders (the "Meeting") of Affiliated Community
Bancorp, Inc. ("AFCB") will be held at the Sheraton Lexington Inn, 727 Marrett
Road, Route 2A, Lexington, Massachusetts, on Wednesday, June 10, 1998, at 9:30
a.m.
A Proxy Card and a Joint Proxy Statement-Prospectus are enclosed.
The purpose of the Meeting is to consider and act upon:
1. A proposal to approve and adopt the Affiliation Agreement and Plan
of Reorganization dated as of December 15, 1997 (the "Affiliation
Agreement"), among AFCB, UST Corp. ("UST"), and Mosaic Corp. ("Mosaic"), a
wholly-owned subsidiary of UST, and the transactions contemplated thereby,
pursuant to which AFCB will merge with and into Mosaic, and each outstanding
share of AFCB Common Stock will be converted into 1.41 shares of UST Common
Stock, upon the terms and subject to the conditions set forth therein, as
described in the accompanying Joint Proxy Statement-Prospectus. A copy of
the Affiliation Agreement is attached as Appendix A to the accompanying
Joint Proxy Statement-Prospectus.
2. Such other matters as may properly come before the Meeting or any
adjournments or postponements thereof.
The Board of Directors is not aware of any other business presently planned
to come before the Meeting.
Stockholder approval of the Affiliation Agreement and the transactions
contemplated thereby requires the affirmative vote of the holders of at least a
majority of the outstanding shares of AFCB Common Stock. In the event there are
not sufficient votes to approve the Affiliation Agreement and the transactions
contemplated thereby at the time of the Meeting, the Meeting may be adjourned by
the affirmative vote of a majority of the shares of AFCB Common Stock present at
the Meeting in order to permit further solicitation of proxies by AFCB.
Any action may be taken on any matter properly brought before the Meeting on
the date specified above, or on any date or dates to which, by original or later
adjournment, the Meeting may be adjourned. Stockholders of record at the close
of business on May 7, 1998 are the stockholders entitled to notice of, and to
vote at, the Meeting and any adjournments or postponements thereof.
It is important that your shares be represented at the Meeting regardless of
the number of shares you may hold. Please complete, sign and date the enclosed
form of proxy and return it promptly in the enclosed envelope which requires no
postage if mailed within the United States. If you attend the Meeting, you may
revoke your proxy and vote at the Meeting in person.
QUENTIN J. GREELEY
CLERK
Waltham, Massachusetts
May 11, 1998
- --------------------------------------------------------------------------------
[LOGO]
<PAGE>
NOTICE OF APPRAISAL RIGHTS
If the Affiliation Agreement is approved by the stockholders at the Meeting and
the Affiliation is consummated, any stockholder (1) who files with AFCB before
the taking of the vote on the approval of the Affiliation Agreement written
objection to the proposed Affiliation stating that he or she intends to demand
payment for his or her shares if the Affiliation is consummated and (2) whose
shares are not voted in favor of such action has or may have the right to demand
in writing from AFCB (or its successor as it exists after the Affiliation),
within twenty days after the date of mailing to him or her of notice in writing
that the Affiliation has been consummated, payment for his or her shares and an
appraisal of the value thereof. AFCB, including its successor following the
Affiliation, and any such stockholder shall in such cases have the rights and
duties and shall follow the procedure set forth in sections 85 to 98, inclusive,
of Chapter 156B of the General Laws of Massachusetts, copies of which are
attached as Appendix F to the accompanying Joint Proxy Statement-Prospectus. See
"THE AFFILIATION--Rights of Dissenting Stockholders" in the Joint Proxy
Statement-Prospectus for more information regarding appraisal rights.
2
<PAGE>
<TABLE>
<S> <C>
UST Corp. Affiliated Community Bancorp,
40 Court Street Inc.
Boston, Massachusetts 02108 716 Main Street
Waltham, Massachusetts 02154
</TABLE>
JOINT PROXY STATEMENT-PROSPECTUS
---------------------
[LOGO]
SPECIAL MEETING OF STOCKHOLDERS
UST CORP.
[LOGO]
SPECIAL MEETING OF STOCKHOLDERS
AFFILIATED COMMUNITY BANCORP, INC.
---------------------
JUNE 10, 1998
This Joint Proxy Statement-Prospectus is being furnished to stockholders of
UST Corp. ("UST") in connection with the solicitation of proxies by the Board of
Directors of UST (the "UST Board") to be used at the Special Meeting of
Stockholders of UST to be held on Wednesday, June 10, 1998, at 9:00 a.m. in the
Auditorium located on the 12th Floor of UST's principal offices at 40 Court
Street, Boston, Massachusetts 02108, and at any adjournments or postponements
thereof (the "UST Meeting"). At the UST Meeting, the holders of the common stock
of UST, par value $0.625 per share (the "UST Common Stock"), will consider and
vote upon a proposal to approve and adopt an Affiliation Agreement and Plan of
Reorganization, dated as of December 15, 1997 (the "Affiliation Agreement"), by
and among UST, Mosaic Corp. ("Mosaic"), a Massachusetts corporation and a
wholly-owned subsidiary of UST, and Affiliated Community Bancorp, Inc. ("AFCB"),
and the transactions contemplated thereby. Pursuant to the terms of the
Affiliation Agreement, AFCB will be merged with and into Mosaic (the
"Affiliation"), with Mosaic being the surviving corporation and the separate
corporate existence of AFCB will cease. Additionally, the subsidiaries of AFCB
will become direct and indirect subsidiaries of UST and Mosaic. See "THE UST
MEETING --Date, Time and Place" and " --Purposes of the Meeting."
This Joint Proxy Statement-Prospectus is also being furnished to
stockholders of AFCB in connection with the solicitation of proxies by the Board
of Directors of AFCB (the "AFCB Board") to be used at the Special Meeting of
Stockholders of AFCB to be held on Wednesday, June 10, 1998, at 9:30 a.m. at the
Sheraton Lexington Inn, 727 Marrett Road, Route 2A, Lexington, Massachusetts,
and at any adjournments or postponements thereof (the "AFCB Meeting"). At the
AFCB Meeting, the holders of the common stock of AFCB, par value $0.01 per share
(the "AFCB Common Stock"), will consider and vote upon a
COVER CONTINUED ON NEXT PAGE
------------------------
THE SHARES OF UST COMMON STOCK AND THE SHARES OF AFCB COMMON STOCK ARE NOT
SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR NON-BANK
SUBSIDIARY OF UST OR AFCB AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER FEDERAL OR STATE GOVERNMENT
AGENCY.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT- PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS JOINT PROXY STATEMENT-PROSPECTUS IS MAY 11, 1998.
<PAGE>
CONTINUED FROM COVER
proposal to approve and adopt the Affiliation Agreement and the transactions
contemplated thereby. See "THE AFCB MEETING--Date, Time and Place" and
"--Purposes of the Meeting."
The Affiliation Agreement is attached hereto as Appendix A and is
incorporated herein by reference.
This Joint Proxy Statement-Prospectus is also being furnished to the holders
of UST Common Stock to approve a proposal to amend UST's Restated Articles of
Organization (the "UST Articles") to increase the number of authorized shares of
UST Common Stock from 45,000,000 to 75,000,000. Information with respect to this
proposal and additional matters to be considered at the UST Meeting is being
furnished separately to the stockholders of UST in this Joint Proxy
Statement-Prospectus. See "THE UST MEETING--Purposes of the Meeting," and "THE
UST MEETING--ADDITIONAL MATTERS."
Upon consummation of the Affiliation, each share of AFCB Common Stock issued
and outstanding immediately prior to the effective time of the Affiliation
(other than certain shares held in AFCB's treasury or held by UST, except in a
fiduciary capacity or for debts previously contracted, or AFCB or any subsidiary
thereof and shares held by dissenting stockholders who have duly perfected their
rights of appraisal (the "Dissenting Shares")), will be converted into 1.41
shares of UST Common Stock (the "Conversion Number"). Assuming that the number
of shares of AFCB Common Stock remains unchanged from May 4, 1998, UST would
issue 9,323,659 shares of UST Common Stock to acquire 6,612,524 shares of AFCB
Common Stock. Under such circumstances, former AFCB stockholders will hold
approximately 23.78% of the outstanding shares of UST Common Stock immediately
following the effective time of the Affiliation. As described in detail in this
Joint Proxy Statement-Prospectus, the Conversion Number is subject to upward
adjustment in the event that the market price of UST Common Stock is less than
$24.06 and the price of UST Common Stock has declined more than 15% relative to
a certain bank stock index. Therefore, while AFCB stockholders will know the
minimum number of shares of UST Common Stock they will receive in the
Affiliation (i.e., 1.41 shares per share of AFCB Common Stock), they may not
know at the time of the AFCB Meeting the exact number of shares of UST Common
Stock they will receive upon consummation of the Affiliation. See "THE
AFFILIATION--Conversion of Shares." The transaction is subject to various
conditions, including approval by the respective stockholders of UST and AFCB,
and approval by applicable regulatory authorities. See "THE
AFFILIATION--Regulatory Approvals Required for the Affiliation" and
"--Conditions to the Consummation of the Affiliation."
UST Common Stock is quoted on, and transactions in UST Common Stock are
effected through, the National Association of Securities Dealers Automated
Quotation system ("NASDAQ") National Market. The last reported sale price of UST
Common Stock on May 4, 1998, was $27.875.
This Joint Proxy Statement-Prospectus does not cover any resales of UST
Common Stock received by affiliates of AFCB upon consummation of the
Affiliation, and no person is authorized to make use of this Joint Proxy
Statement-Prospectus in connection with any such resale. See "THE
AFFILIATION--Resales by Affiliates."
All information concerning UST contained in this Joint Proxy
Statement-Prospectus has been furnished by UST, and all information concerning
AFCB has been furnished by AFCB. UST has represented and warranted to AFCB, and
AFCB has represented and warranted to UST, that the particular information so
furnished does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make such information not misleading. See
"EXPERTS" with respect to the financial statements of UST and AFCB. For a more
complete description of the terms of the Affiliation and the Affiliation
Agreement, see generally "THE AFFILIATION."
UST has filed a Registration Statement on Form S-4 (together with its
exhibits, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with the Securities and Exchange Commission (the
"Commission") covering 9,500,000 shares of UST Common Stock, representing shares
to be issued in connection with the Affiliation. This Joint Proxy
Statement-Prospectus also constitutes the Prospectus of UST filed as a part of
such Registration Statement.
2
<PAGE>
CONTINUED FROM COVER
This Joint Proxy Statement-Prospectus and the accompanying form of proxy are
first being mailed to stockholders of UST and AFCB on or about May 11, 1998.
THE ABOVE MATTERS ARE DISCUSSED IN DETAIL IN THIS JOINT PROXY
STATEMENT-PROSPECTUS. THE PROPOSED AFFILIATION IS A COMPLEX TRANSACTION.
STOCKHOLDERS ARE STRONGLY URGED TO CAREFULLY READ AND CONSIDER THIS JOINT PROXY
STATEMENT-PROSPECTUS IN ITS ENTIRETY.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
AVAILABLE INFORMATION...................................................................................... 1
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION................................................. 1
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.......................................................... 2
SUMMARY.................................................................................................... 4
The Companies............................................................................................ 4
UST.................................................................................................... 4
Mosaic................................................................................................. 4
AFCB................................................................................................... 4
The Affiliation.......................................................................................... 4
Conversion Number........................................................................................ 5
Effective Time of the Affiliation; Closing Date.......................................................... 5
Date, Time and Place of the UST Meeting and the AFCB Meeting............................................. 5
Purpose of the UST Meeting and the AFCB Meeting.......................................................... 5
The UST Meeting........................................................................................ 5
The AFCB Meeting....................................................................................... 6
Vote Required at the UST Meeting and the AFCB Meeting.................................................... 6
UST.................................................................................................... 6
AFCB................................................................................................... 6
Recommendations of the Boards of Directors and Reasons for the Affiliation............................... 7
Opinions of Financial Advisors........................................................................... 7
Regulatory Approvals..................................................................................... 7
Employee Matters......................................................................................... 8
Interests of Certain Persons in the Affiliation; Indemnification and Insurance........................... 8
Management and Operations after the Affiliation.......................................................... 8
The Subsidiary Banks; Establishment of Regional Organization............................................. 9
Federal Income Tax Consequences.......................................................................... 9
Accounting Treatment..................................................................................... 9
The Stock Option Agreement............................................................................... 10
Rights of Dissenting Stockholders........................................................................ 10
Comparative Rights of Stockholders....................................................................... 10
Conditions to the Consummation of the Affiliation........................................................ 11
Conduct of Business Pending the Affiliation.............................................................. 11
Termination of the Affiliation Agreement................................................................. 11
Market and Market Prices................................................................................. 11
UST CORP. SELECTED FINANCIAL DATA.......................................................................... 13
AFFILIATED COMMUNITY BANCORP, INC. SELECTED FINANCIAL DATA................................................. 14
UST CORP. AND AFFILIATED COMMUNITY BANCORP, INC. PRO FORMA CONDENSED COMBINED SELECTED FINANCIAL DATA...... 15
CAPITALIZATION............................................................................................. 16
COMPARATIVE PER SHARE DATA (Unaudited)..................................................................... 17
THE UST MEETING............................................................................................ 18
Date, Time and Place..................................................................................... 18
Purposes of the Meeting.................................................................................. 18
Record Date; Quorum...................................................................................... 18
Proxies; Voting and Revocation........................................................................... 18
Vote Required to Approve the Affiliation and Other Matters............................................... 19
Ownership of UST Common Stock by Officers and Directors.................................................. 19
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
THE AFCB MEETING........................................................................................... 20
Date, Time and Place..................................................................................... 20
Purposes of the Meeting.................................................................................. 20
Record Date; Quorum...................................................................................... 20
Proxies; Voting and Revocation........................................................................... 20
Vote Required to Approve the Affiliation................................................................. 21
Ownership of AFCB Common Stock by Officers and Directors................................................. 21
INFORMATION ABOUT UST...................................................................................... 22
Recent Developments...................................................................................... 22
General................................................................................................ 22
Recent Operating Results............................................................................... 22
Firestone Acquisition.................................................................................. 22
Somerset Transaction................................................................................... 23
INFORMATION ABOUT AFCB..................................................................................... 24
Recent Developments...................................................................................... 24
Recent Operating Results............................................................................... 24
Stock Repurchase Program............................................................................... 24
THE AFFILIATION............................................................................................ 25
General.................................................................................................. 25
Background of the Affiliation............................................................................ 25
UST.................................................................................................... 25
AFCB................................................................................................... 27
Recommendation of the UST Board; Reasons for the Affiliation............................................. 29
Recommendation of the AFCB Board; Reasons for the Affiliation............................................ 30
Opinion of Financial Advisor to UST...................................................................... 31
Opinion of Financial Advisor to AFCB..................................................................... 34
Effective Time of the Affiliation; Closing Date.......................................................... 40
Terms of the Affiliation................................................................................. 40
Regulatory Approvals Required for the Affiliation........................................................ 42
Federal Reserve........................................................................................ 42
Massachusetts Approval................................................................................. 44
Employee Matters......................................................................................... 45
General................................................................................................ 45
AFCB ESOPs............................................................................................. 46
AFCB Stock Options..................................................................................... 46
Interests of Certain Persons in the Affiliation.......................................................... 46
Management and Operations after the Affiliation.......................................................... 47
UST.................................................................................................... 47
Mosaic................................................................................................. 47
USTrust................................................................................................ 48
AFCB Banks............................................................................................. 48
The Subsidiary Banks; Establishment of Regional Organization............................................. 48
Federal Income Tax Consequences.......................................................................... 48
General................................................................................................ 48
Effect of the Affiliation.............................................................................. 49
Backup Withholding..................................................................................... 50
Accounting Treatment..................................................................................... 50
Indemnification and Insurance............................................................................ 50
Rights of Dissenting Stockholders........................................................................ 51
NASDAQ Listing........................................................................................... 52
</TABLE>
ii
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<TABLE>
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<S> <C>
Resales by Affiliates.................................................................................... 52
Conversion of Shares; Exchange of Certificates........................................................... 53
Conversion of Shares of AFCB Common Stock.............................................................. 53
Manner of Exchanging AFCB Certificates for UST Certificates............................................ 54
Lost Certificates...................................................................................... 54
Distributions with Respect to Unexchanged AFCB Certificates............................................ 54
Post Effective Time.................................................................................... 54
Conditions to the Consummation of the Affiliation........................................................ 55
Conditions to Each Party's Obligations................................................................. 55
Conditions to UST's Obligations........................................................................ 55
Conditions to AFCB's Obligations....................................................................... 56
Conduct of Business Pending the Affiliation.............................................................. 56
No Solicitation.......................................................................................... 59
Waiver and Amendment..................................................................................... 59
Waiver................................................................................................. 59
Amendment.............................................................................................. 59
Expenses................................................................................................. 59
Termination of the Affiliation Agreement................................................................. 60
CERTAIN RELATED TRANSACTIONS............................................................................... 61
Stock Option Agreement................................................................................... 61
General................................................................................................ 61
Grant of Option........................................................................................ 61
Triggering Events; Exercise of Option.................................................................. 61
Repurchase of Option................................................................................... 62
Conversion of Option................................................................................... 63
Assignment of Option................................................................................... 63
Additional Provisions.................................................................................. 63
Voting Agreements........................................................................................ 63
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION........................................................ 65
Unaudited Pro Forma Condensed Combining Balance Sheet.................................................... 66
Unaudited Pro Forma Condensed Combined Statements of Income.............................................. 67
Notes to Unaudited Pro Forma Condensed Financial Information............................................. 71
DESCRIPTION OF UST CAPITAL STOCK........................................................................... 73
General.................................................................................................. 73
Common Stock............................................................................................. 73
Dividend Rights........................................................................................ 73
Voting Rights.......................................................................................... 73
Preemptive Rights...................................................................................... 73
Liquidation Rights..................................................................................... 73
Assessments............................................................................................ 73
Transfer Agent and Registrar........................................................................... 73
Stockholder Rights Agreement........................................................................... 73
Preferred Stock.......................................................................................... 74
General................................................................................................ 74
Dividend and Liquidation Rights........................................................................ 74
Determinations to be Made by the UST Board............................................................. 74
Series A Junior Participating Preferred Stock.......................................................... 74
COMPARATIVE RIGHTS OF STOCKHOLDERS......................................................................... 76
General.................................................................................................. 76
Size and Classification of the Board of Directors........................................................ 76
</TABLE>
iii
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<TABLE>
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PAGE
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<S> <C>
Removal of Directors..................................................................................... 76
UST.................................................................................................... 76
AFCB................................................................................................... 76
Stockholder Nominations.................................................................................. 76
UST...................................................................................................... 76
AFCB................................................................................................... 76
Interested Transactions.................................................................................. 77
UST.................................................................................................... 77
AFCB................................................................................................... 77
Meetings of Stockholders................................................................................. 77
UST.................................................................................................... 77
AFCB................................................................................................... 77
Stockholder Action Without A Meeting..................................................................... 77
UST.................................................................................................... 77
AFCB................................................................................................... 77
Amendment of By-laws..................................................................................... 78
UST.................................................................................................... 78
AFCB................................................................................................... 78
Required Vote for Certain Business Combinations.......................................................... 78
UST.................................................................................................... 78
AFCB................................................................................................... 78
Stockholder Rights Plan.................................................................................. 78
UST.................................................................................................... 78
AFCB................................................................................................... 78
State Anti-takeover Statutes............................................................................. 78
MARKET PRICES AND DIVIDENDS................................................................................ 80
EXPERTS.................................................................................................... 80
LEGAL OPINIONS............................................................................................. 81
MANAGEMENT AND ADDITIONAL INFORMATION...................................................................... 81
SOLICITATION OF PROXIES.................................................................................... 81
THE UST MEETING--ADDITIONAL MATTERS; INCREASE IN NUMBER OF AUTHORIZED SHARES OF UST COMMON STOCK........... 82
PROPOSALS OF UST STOCKHOLDERS.............................................................................. 83
APPENDIX A--AFFILIATION AGREEMENT AND PLAN OF REORGANIZATION
APPENDIX B--STOCK OPTION AGREEMENT
APPENDIX C--SHAREHOLDER LETTER AGREEMENT
APPENDIX D--OPINION OF FINANCIAL ADVISOR TO UST
APPENDIX E--OPINION OF FINANCIAL ADVISOR TO AFCB
APPENDIX F--TEXT OF SECTIONS 85 TO 98 OF THE MASSACHUSETTS BUSINESS CORPORATION LAW
</TABLE>
iv
<PAGE>
AVAILABLE INFORMATION
UST and AFCB are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith file reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by UST and AFCB can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the Commission's
regional offices at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, and 7 World Trade Center, Suite 1300, New York,
New York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549 at prescribed rates.
This Joint Proxy Statement-Prospectus does not contain all of the
information set forth in the Registration Statement on Form S-4 (the
"Registration Statement") (and exhibits thereto) which UST has filed with the
Commission under the Securities Act of 1933, as amended (the "Securities Act"),
and to which reference is hereby made. The Registration Statement (and exhibits
thereto) may be inspected at the public reference facilities of the Commission
at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and copies thereof
may be obtained from the Commission at prescribed rates.
The Commission also maintains an internet site (http://www.sec.gov) that
contains information regarding UST's and AFCB's electronic filings with the
Commission. Before 1996, the principal subsidiaries of AFCB, The Federal Savings
Bank (through its then parent holding company, Main Street Community Bancorp,
Inc.) and Lexington Savings Bank, were each independently subject to the
informational requirements of the Exchange Act and, in accordance therewith,
filed reports, proxy statements and other information with the Commission and
the Federal Deposit Insurance Corporation ("FDIC"), respectively. Such
information with respect to Lexington Savings Bank can be inspected at the
public reference facilities maintained by the FDIC at the Registration and
Disclosure Section, Federal Deposit Insurance Corporation, 1776 F Street, N.W.,
6th Floor, Washington, D.C. 20006 (telephone requests for such information or
copies of documents may be directed to (202) 898-8920).
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING INFORMATION
This Joint Proxy Statement-Prospectus contains or incorporates by reference
certain forward-looking statements regarding UST's future plans, operations and
prospects, which involve risks and uncertainties including, without limitation,
certain statements under "INFORMATION ABOUT UST--Recent Developments--Somerset
Transaction," "THE AFFILIATION--Opinion of Financial Advisor to UST", "--
Opinion of Financial Advisor to AFCB", UNAUDITED PRO FORMA CONDENSED FINANCIAL
INFORMATION" and "NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION."
These forward-looking statements are inherently uncertain, and actual results
may differ from UST expectations. Risk factors that could affect current and
future performance include but are not limited to the following: (i) adverse
changes in asset quality and the resulting credit risk-related losses and
expenses; (ii) adverse changes in the economy of the New England region, UST's
primary market, which could further accentuate credit-related losses and
expenses; (iii) adverse changes in the local real estate market that can also
negatively affect credit risk, as most of UST's loans are concentrated in
Eastern Massachusetts and a substantial portion of these loans have real estate
as primary and secondary collateral; (iv) the consequences of continued bank
acquisitions and mergers in UST's market, resulting in fewer but much larger and
financially stronger competitors which could increase competition for financial
services to UST's detriment; (v) fluctuations in market rates and prices, which
can negatively affect UST's net interest margin, asset valuations and expense
expectations; and (vi) changes in the regulatory requirements of federal and
state agencies applicable to bank holding companies and banks, such as UST and
its subsidiaries, which could have a materially adverse effect on UST's future
operating results.
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INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are hereby incorporated by reference in this Joint Proxy
Statement-Prospectus the following documents and information heretofore filed
with the Commission, which documents are not presented herein or delivered
herewith:
<TABLE>
<CAPTION>
UST FILINGS PERIOD
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Annual Report on Form 10-K.............................. Year ended December 31, 1997, as amended by Form 10-K/A,
filed on April 10, 1998
Items 10-13 of UST's Definitive Proxy Statement to UST's
stockholders for the 1998 Annual Meeting of UST
stockholders.......................................... Filed on April 8, 1998
Current Reports on Form 8-K............................. Filed on April 24, 1998, as amended by Form
8-K/A, filed on April 28, 1998
The description of UST Common Stock contained in its
Registration Statement on Form 8-A, including any
amendment or report filed for the purpose of updating
such description...................................... Not applicable
The Rights Agreement governing the terms of UST's
shareholder rights plan filed as Exhibit 4.1 to its
Registration Statement on Form 8-A.................... Not applicable
<CAPTION>
AFCB FILINGS PERIOD
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Annual Report on Form 10-K.............................. Year ended December 31, 1997
The description of AFCB Common Stock contained in its
Registration Statement on Form 8-A, including any
amendment or report filed for the purpose of updating
such description...................................... Not applicable
<CAPTION>
SOMERSET SAVINGS BANK FDIC FILINGS PERIOD
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Annual Report on Form 10-K.............................. Year ended December 31, 1997 (filed as Exhibit 99.1 to
UST's Current Report on Form 8-K, filed on April 24,
1998, as amended)
</TABLE>
All documents subsequently filed by UST or AFCB pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the date of the UST Meeting and
the AFCB Meeting shall be deemed to be incorporated by reference into this Joint
Proxy Statement-Prospectus and to be a part hereof from the date of filing of
such documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Joint Proxy Statement-Prospectus to the extent that a
statement contained herein, or in any subsequently filed document which also is
or is deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Joint Proxy
Statement-Prospectus.
UST AND AFCB WILL PROVIDE UPON REQUEST AND WITHOUT CHARGE TO EACH PERSON TO
WHOM THIS JOINT PROXY STATEMENT-PROSPECTUS IS DELIVERED, A COPY OF ANY OR ALL OF
THE FOREGOING DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER THAN EXHIBITS TO
SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED THEREIN BY REFERENCE).
WRITTEN REQUESTS FOR DOCUMENTS RELATING TO UST SHOULD BE DIRECTED TO ERIC R.
FISCHER, EXECUTIVE
2
<PAGE>
VICE PRESIDENT, GENERAL COUNSEL AND CLERK, UST CORP., 40 COURT STREET, BOSTON,
MASSACHUSETTS 02108. TELEPHONE REQUESTS MAY BE DIRECTED TO MR. FISCHER AT (617)
726-7377. WRITTEN REQUESTS FOR DOCUMENTS RELATING TO AFCB SHOULD BE DIRECTED TO
QUENTIN J. GREELEY, EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND CLERK,
AFFILIATED COMMUNITY BANCORP, INC., 716 MAIN STREET, WALTHAM, MASSACHUSETTS
02154. TELEPHONE REQUESTS MAY BE DIRECTED TO MR. GREELEY AT (781) 894-6810. IN
ORDER TO ENSURE TIMELY DELIVERY OF ANY OF THE DOCUMENTS, REQUESTS SHOULD BE MADE
BY JUNE 3, 1998.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS JOINT PROXY STATEMENT-PROSPECTUS OR
INCORPORATED BY REFERENCE HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY UST OR
AFCB. THIS JOINT PROXY STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO PURCHASE THE UST COMMON STOCK OFFERED BY THIS
JOINT PROXY STATEMENT-PROSPECTUS, NOR DOES IT CONSTITUTE THE SOLICITATION OF A
PROXY, WITHIN ANY JURISDICTION TO OR FROM ANY PERSON TO OR FROM WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION OF AN OFFER, OR PROXY SOLICITATION,
WITHIN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS JOINT PROXY
STATEMENT-PROSPECTUS NOR THE DISTRIBUTION OF SECURITIES HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF UST OR AFCB SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN OR
IN THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THE DATES THEREOF.
3
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS NOT INTENDED TO BE COMPLETE AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO MORE DETAILED INFORMATION CONTAINED ELSEWHERE IN THIS
JOINT PROXY STATEMENT-PROSPECTUS OR INCORPORATED BY REFERENCE IN THIS JOINT
PROXY STATEMENT-PROSPECTUS, OR IN THE ACCOMPANYING APPENDICES AND THE DOCUMENTS
REFERRED TO HEREIN. CAPITALIZED TERMS WHICH ARE USED AND NOT DEFINED IN THIS
JOINT PROXY STATEMENT-PROSPECTUS HAVE THE MEANING SET FORTH IN THE AFFILIATION
AGREEMENT.
THE COMPANIES
UST. UST is a registered bank holding company, organized as a Massachusetts
business corporation in 1967, that, through its subsidiaries is engaged in
providing financial services to individuals and small-and medium-sized companies
as well as trust and money management services to individuals, corporations and
other organizations. As of the close of business on December 31, 1997, UST's
total assets were approximately $3.8 billion and USTrust, the lead banking
subsidiary of UST had over $3.8 billion or 99% of UST's consolidated assets. See
"INFORMATION ABOUT UST." For a discussion of UST's recent developments,
including the completion of UST's acquisition of Firestone Financial Corp.
("Firestone") in October 1997, and UST's pending acquisition of Somerset Savings
Bank ("Somerset"), a Massachusetts stock savings bank, see "INFORMATION ABOUT
UST--Recent Developments."
The executive office of UST is located at 40 Court Street, Boston,
Massachusetts 02108 (Telephone (617) 726-7000).
MOSAIC. Mosaic is a wholly-owned Massachusetts corporate subsidiary of UST
which was organized in 1996 in connection with the acquisition by UST of Walden
Bancorp, Inc. Mosaic is the direct owner of all of the outstanding shares of
capital stock of USTrust. Except with respect to its ownership of the shares of
capital stock of USTrust, Mosaic owns no other property and conducts no
business.
AFCB. AFCB, a registered bank holding company, is a community-oriented
banking company with total assets as of the close of business on December 31,
1997 of $1.2 billion, headquartered in Waltham, Massachusetts. AFCB and its
banking subsidiaries, The Federal Savings Bank, Lexington Savings Bank and
Middlesex Bank & Trust Company, provide various financial products and services,
including retail and commercial banking services, residential mortgage
origination and servicing, small business lending, commercial real estate
lending and consumer lending, to businesses and individuals through a network of
thirteen banking offices located in Middlesex County. See "INFORMATION ABOUT
AFCB."
The executive office of AFCB is located at 716 Main Street, Waltham,
Massachusetts 02154 (Telephone (781) 894-6810).
THE AFFILIATION
The Affiliation Agreement provides for the merger (the "Affiliation") of
AFCB with and into Mosaic, with Mosaic as the surviving corporation of the
Affiliation and continuing as a wholly-owned subsidiary of UST. Except in the
limited circumstance described under "THE AFFILIATION--Terms of the
Affiliation," upon the consummation of the Affiliation, each outstanding share
of AFCB common stock, par value $0.01 per share ("AFCB Common Stock"), will be
converted into 1.41 shares (the "Conversion Number") of UST common stock, par
value $0.625 per share ("UST Common Stock"), together with a corresponding
number of preferred stock purchase rights associated therewith under the UST
Rights Agreement, dated as of September 19, 1995 (the "UST Rights Agreement"),
provided that (i) no shares of AFCB Common Stock which are held directly or
indirectly by UST will be converted unless held by UST in a fiduciary capacity
or for debts previously contracted, and (ii) any shares of AFCB Common Stock
held as treasury shares by AFCB, and any Dissenting Shares, will not be so
converted.
No fractional shares of UST Common Stock will be issued in the Affiliation.
In lieu thereof, each holder of AFCB Common Stock who otherwise would have been
entitled to a fractional share of UST
4
<PAGE>
Common Stock will receive cash in an amount determined by multiplying such
holder's fractional interest by the Closing Price.
CONVERSION NUMBER
The Conversion Number is the product of arms' length negotiations between
the respective managements of AFCB and UST. In negotiating the Conversion
Number, management of UST had the benefit of advice from its financial advisor,
the investment banking firm of Fox-Pitt, Kelton, Inc. ("Fox-Pitt, Kelton") and
management of AFCB had the benefit of advice from its financial advisor, the
investment banking firm of PaineWebber Incorporated ("PaineWebber"). See "THE
AFFILIATION--Opinion of Financial Advisor to UST" and "--Opinion of Financial
Advisor to AFCB."
Assuming that the number of outstanding shares of AFCB Common Stock remains
unchanged from May 4, 1998, and UST Common Stock continues to trade at $24.06 or
above, UST would issue 9,323,659 shares of UST Common Stock to acquire 6,612,524
shares of AFCB Common Stock. Under such circumstances, immediately after the
Effective Time, former AFCB stockholders will hold approximately 23.78% of the
outstanding shares of UST Common Stock. Based on a $27.875 last reported sale
price for UST Common Stock as of May 4, 1998, the Affiliation would be valued at
approximately $265 million.
As set forth in the Affiliation Agreement, if the average per share last
reported sale price of UST Common Stock as reported on the National Association
of Securities Dealers Automated Quotation System ("NASDAQ") National Market over
the 10 consecutive trading day period immediately preceding the date of the
receipt of the last Requisite Regulatory Approval (as defined below) (the
"Closing Price") is less than $24.06 and the price of UST Common Stock has
declined more than 15% relative to a certain bank stock index, the AFCB Board
may give written notice of its intention to terminate the Affiliation Agreement.
However, in the event that AFCB notifies UST of its intention to exercise its
termination right pursuant to the foregoing sentence, UST may choose, as
provided in the Affiliation Agreement, to increase the consideration to be paid
to AFCB stockholders by increasing the Conversion Number pursuant to the formula
set forth in the Affiliation Agreement, in which case the Affiliation Agreement
will remain in full force and effect. See "THE AFFILIATION--Termination of the
Affiliation Agreement."
EFFECTIVE TIME OF THE AFFILIATION; CLOSING DATE
The "Effective Time" of the Affiliation will be the date and time at which
the Affiliation Agreement becomes effective, as set forth in the Articles of
Merger to be filed with the Office of the Secretary of The Commonwealth of
Massachusetts. The Effective Time will occur on the first business day after the
date on which all conditions contained in Article VI of the Affiliation
Agreement are satisfied or waived, or at such other date as the parties may
agree upon. UST and AFCB have targeted the second or third quarter of 1998 for
completion of the Affiliation. If the Affiliation is not consummated on or
before August 31, 1998, the Affiliation Agreement may be terminated by either
UST or AFCB.
DATE, TIME AND PLACE OF THE UST MEETING AND THE AFCB MEETING
The UST Meeting will be held on Wednesday, June 10, 1998 at 9:00 a.m., in
the Auditorium located on the 12th Floor of UST's principal offices at 40 Court
Street, Boston, Massachusetts 02108.
The AFCB Meeting will be held on Wednesday, June 10, 1998 at 9:30 a.m., at
the Sheraton Lexington Inn, 727 Marrett Road, Route 2A, Lexington,
Massachusetts.
PURPOSE OF THE UST MEETING AND THE AFCB MEETING
THE UST MEETING. The UST Meeting will be held for the purposes of
considering and voting upon proposals to (i) approve and adopt the Affiliation
Agreement and the transactions contemplated thereby, (ii) amend the UST Articles
to increase the number of authorized shares of UST Common Stock from
5
<PAGE>
45,000,000 to 75,000,000, and (iii) to conduct any other business that may
properly come before such meeting or any adjournments or postponements thereof.
See "THE UST MEETING--Purposes of the Meeting."
THE AFCB MEETING. The AFCB Meeting will be held for the purpose of
considering and voting upon a proposal to approve and adopt the Affiliation
Agreement and the transactions contemplated thereby, and to conduct any other
business that may properly come before such meeting or any adjournments or
postponements thereof. See "THE AFCB MEETING--Purposes of the Meeting."
VOTE REQUIRED AT THE UST MEETING AND THE AFCB MEETING
The UST Board and the AFCB Board have fixed the close of business on May 7,
1998 as the record date (the "Record Date") for the determination of
stockholders entitled to notice of, and to vote at, the UST Meeting and the AFCB
Meeting, respectively. Only the holders of record of the outstanding shares of
UST Common Stock and AFCB Common Stock on the Record Date will be entitled to
notice of, and to vote at, the UST Meeting and AFCB Meeting, respectively. See
"THE UST MEETING--Record Date" and "THE AFCB MEETING--Record Date."
UST. The affirmative vote of the holders of at least a majority of the
shares of UST Common Stock present in person, or represented by proxy, entitled
to vote and voting at the UST Meeting is required to approve and adopt the
Affiliation Agreement and each of the transactions contemplated thereby. The
affirmative vote of the holders of at least a majority of the shares of UST
Common Stock issued, outstanding and entitled to vote at the UST Meeting is
required to amend the UST Articles with respect to the increase in the number of
authorized shares of UST Common Stock.
Approval of the Affiliation Agreement by the requisite vote of the holders
of UST Common Stock is a condition to, and required for, consummation of the
Affiliation. No other matter being considered at the UST Meeting must be
approved by holders of UST Common Stock in order to consummate the Affiliation.
See "THE UST MEETING--Vote Required to Approve the Affiliation and Other
Matters; Abstentions and Non-Votes" and "--Ownership of UST Common Stock by
Officers and Directors."
As of the Record Date, 29,878,628 shares of UST Common Stock were
outstanding and entitled to vote, of which approximately 4,484,010 shares, or
approximately 15% were held by directors and executive officers of UST, its
subsidiaries and their respective affiliates. It is expected that each such
director, officer and affiliate thereof of UST will vote the UST Common Stock
beneficially owned by him or her for approval of the Affiliation Agreement and
the consummation of the transactions contemplated thereby. See "THE UST
MEETING--Ownership of UST Common Stock by Officers and Directors."
AFCB. The affirmative vote of the holders of at least a majority of the
outstanding shares of AFCB Common Stock is required to approve and adopt the
Affiliation Agreement and the transactions contemplated thereby. Approval of the
Affiliation Agreement by the requisite vote of the holders of AFCB Common Stock
is a condition to, and required for, the consummation for the Affiliation. See
"THE AFCB MEETING--Vote Required to Approve the Affiliation; Abstentions and
Non-Votes."
As of the Record Date, 6,612,524 shares of AFCB Common Stock were
outstanding and entitled to vote, of which approximately 142,295 shares, or
approximately 2.2% were beneficially owned by directors and executive officers
of AFCB. In connection with the execution of the Affiliation Agreement, each of
the directors and executive officers of AFCB and certain of the executive
officers of AFCB's subsidiaries agreed by separate letter (the "Voting
Agreements") to UST dated December 15, 1997, to vote or cause to be voted all of
the shares of AFCB Common Stock that he beneficially owns, and with respect to
which he exercises sole voting power as of the Record Date, in favor of the
approval of the Affiliation Agreement and the Affiliation. Execution of the
Voting Agreements was a condition to UST entering into the Affiliation Agreement
and no compensation was paid to any person in consideration for executing the
6
<PAGE>
Voting Agreements. See "CERTAIN RELATED TRANSACTIONS--Voting Agreements and "THE
AFCB MEETING--Ownership of AFCB Common Stock by Officers and Directors."
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS AND REASONS FOR THE AFFILIATION
The UST Board and the AFCB Board each believe that the terms of the
Affiliation Agreement, including the Conversion Number, and the transactions
contemplated thereby are fair and in the best interests of UST and its
stockholders and AFCB and its stockholders, respectively, and unanimously
recommends that their respective shareholders vote in favor of the proposal to
approve the Affiliation Agreement. See "THE AFFILIATION--Recommendation of the
UST Board; Reasons for the Affiliation" and "--Recommendation of AFCB Board;
Reasons for the Affiliation."
OPINIONS OF FINANCIAL ADVISORS
Fox-Pitt, Kelton, UST's financial advisor, has rendered its written opinion,
as of December 15, 1997, and as of the date of this Joint Proxy
Statement-Prospectus, to the UST Board that, as of such dates, the Conversion
Number is fair, from a financial point of view, to UST.
PaineWebber, AFCB's financial advisor, has rendered its written opinion, as
of December 12, 1997, and as of the date of this Joint Proxy
Statement-Prospectus, to the AFCB Board that, as of such dates, the proposed
consideration to be received by the holders of AFCB Common Stock is fair, from a
financial point of view, to such holders of AFCB Common Stock.
The opinions of Fox-Pitt, Kelton and PaineWebber, which are attached hereto
as APPENDICES D and E, respectively, describe assumptions made, matters
considered and limits of the reviews undertaken by Fox-Pitt, Kelton and
PaineWebber in rendering their respective opinions, and should be read in their
entirety. For further description of the opinions of Fox-Pitt, Kelton and
PaineWebber, see "THE AFFILIATION-- Opinion of Financial Advisor to UST,"
"--Opinion of Financial Advisor to AFCB," and APPENDICES D and E to this Joint
Proxy Statement-Prospectus.
REGULATORY APPROVALS
Consummation of the Affiliation requires, and the obligations of UST and
AFCB under the Affiliation Agreement are conditioned upon, the receipt of the
approval of the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), the Board of Bank Incorporation of The Commonwealth of
Massachusetts (the "Massachusetts BBI") and such other regulatory authorities as
may be required under applicable law. The Affiliation may not be consummated
until thirty days after receipt of the Federal Reserve Board approval (or
fifteen days in certain circumstances described more fully under "THE
AFFILIATION--Regulatory Approvals Required for the Affiliation"), during which
time the United States Department of Justice (the "DOJ") may challenge the
Affiliation on antitrust grounds.
Applications requesting such approvals have been or will be filed with the
Federal Reserve Board and the Massachusetts BBI. The parties' objective is to
obtain the approvals of the Federal Reserve Board and the Massachusetts BBI
during the first half of 1998, although no assurance can be given that any of
such approvals will be granted, and if granted, no assurance can be given that
the receipt of such approvals will occur within this time frame if at all or
that such approvals would not be conditioned in a manner which would so
materially adversely impact the economic or business benefits of the Affiliation
as to render it inadvisable in the reasonable judgment of UST, to consummate the
Affiliation.
Within six months after the Effective Time, UST expects that it will apply
to the applicable bank regulatory agencies to merge the AFCB bank subsidiaries
with and into USTrust. Regulatory approvals of such a bank level merger are not
required for the approval of the Affiliation. See "THE AFFILIATION-- Regulatory
Approvals Required for the Affiliation" and "--Conditions to the Consummation of
the Affiliation."
7
<PAGE>
EMPLOYEE MATTERS
The Affiliation Agreement obligates UST to honor, in accordance with their
terms and subject to certain limitations, AFCB's executive severance agreements,
change of control agreements and special termination agreements, which have
previously been disclosed to UST and, for a limited period of time after the
Effective Time, all employee benefit plans of AFCB and its subsidiaries in
effect as of the Effective Time, which have previously been disclosed to UST.
Ultimately, those employees of AFCB or any of its subsidiaries who are employed
by UST or any of UST's subsidiaries following the Effective Time will become
participants in UST employee benefit plans, programs and arrangements. In
connection therewith, UST has agreed to grant such employees credit for their
length of service with AFCB or AFCB's subsidiaries for purposes of eligibility
to participate, vesting and other appropriate benefits, but not for purposes of
benefit accrual attributable to any period prior to the Effective Time. UST also
has agreed to provide all such former AFCB employees with (i) the types of
employee benefits maintained by UST for similarly situated UST employees and
(ii) for a period of one year, a severance plan that is at least as favorable as
the plan currently maintained by AFCB. Employees of AFCB or any of its
subsidiaries who do not continue in the employment of UST or any of its
subsidiaries following the Effective Time will receive all of the severance
benefits provided for under the applicable severance plan or agreement
maintained for the employee by AFCB. See "THE AFFILIATION--Employee Matters" and
"--Interests of Certain Persons in the Affiliation."
Officers, directors and employees of AFCB with outstanding stock options
under AFCB stock option plans will have their options converted into options to
purchase shares of UST Common Stock in accordance with the provisions of the
Affiliation Agreement. See "THE AFFILIATION-- Terms of the Affiliation."
INTERESTS OF CERTAIN PERSONS IN THE AFFILIATION; INDEMNIFICATION AND INSURANCE
Certain members of AFCB's management and the AFCB Board may be deemed to
have certain interests in the Affiliation above and beyond their interests as
stockholders. Certain officers and directors of AFCB, including Timothy J.
Hansberry, John G. Fallon and Quentin J. Greeley, will become officers or
directors of UST or USTrust after the Affiliation. Other executive officers of
AFCB and its subsidiaries may receive severance payments according to their
existing severance and change of control agreements with AFCB. The total amount
of all severance payments which might be paid under all of AFCB's existing
severance and change of control agreements, assuming that the officers who are
party to such agreements become entitled to receive payments thereunder in
accordance with their respective terms, would be approximately $3.7 million in
the aggregate. UST has agreed to honor, after the Effective Time, the
indemnification policies of AFCB applicable to the officers and directors of
AFCB with respect to acts or omissions taken prior to the Effective Time. See
"THE AFFILIATION--Management and Operations after the Affiliation" and
"--Interests of Certain Persons in the Affiliation."
UST has also agreed to maintain for six years after the Effective Time,
AFCB's existing directors' and officers' liability insurance (or substitute
policies that are at least as favorable as those provided by AFCB) covering
persons who are presently covered by AFCB's corresponding insurance plan. See
"THE AFFILIATION--Indemnification and Insurance."
MANAGEMENT AND OPERATIONS AFTER THE AFFILIATION
From and after the Effective Time, the UST Board will be expanded by five
members. Timothy J. Hansberry, presently the President and Chief Executive
Officer of AFCB, and four other individuals selected by AFCB and approved by UST
will be elected as directors of UST. One of the individuals selected by AFCB and
approved by UST to be appointed as a director of UST will also be appointed to
the Executive Committee of the UST Board and a second individual will be
appointed to the Audit Committee
8
<PAGE>
of the UST Board. At the first meeting of the Board of Directors of USTrust
after the Effective Time, Mr. Hansberry will become a director of USTrust.
After the Effective Time, Neal F. Finnegan, currently President and Chief
Executive Officer of UST and USTrust, will serve as President and Chief
Executive Officer of UST and Chairman and Chief Executive Officer of USTrust and
Timothy J. Hansberry will serve as Vice Chairman and Chief Operating Officer of
UST and President and Chief Operating Officer of USTrust. Additionally, John G.
Fallon will serve as an Executive Vice President of UST and Quentin J. Greeley
will serve as Senior Vice President & Associate General Counsel of USTrust. UST
or USTrust, as applicable, will offer to execute and deliver an executive
employment agreement with each such officer on the Closing Date. At the
Effective Time, the directors and officers of the subsidiaries of AFCB which are
depository institutions (the "AFCB Banks") will consist of those directors and
officers of such subsidiaries which UST has selected to serve as directors and
officers of such subsidiaries and/or such additional persons as may be
designated by UST prior to the Effective Time.
THE SUBSIDIARY BANKS; ESTABLISHMENT OF REGIONAL ORGANIZATION
It is currently anticipated that within six months after the Effective Time,
UST will cause the AFCB Banks, other than Middlesex Bank & Trust Company
("Middlesex"), to be merged with and into USTrust. As permitted by the
Affiliation Agreement, AFCB has entered into a definitive agreement to sell all
of the capital stock of Middlesex to an individual buyer, William R. Berkley,
for an aggregate purchase price of $8.24 million. It is currently anticipated
that the sale of Middlesex to Mr. Berkley would occur, subject to regulatory
approval, on the same date on which the Affiliation becomes effective or shortly
thereafter. If such sale occurs, it will not have a material effect on AFCB.
In the Affiliation Agreement, UST has agreed to cause USTrust to use its
best efforts to create a regional community banking organization within USTrust.
Such regional organization, which will be implemented as soon after the
Effective Time as is reasonably practicable, will include the establishment of
geographic regions headed by regional presidents who will have line
responsibility for both small business and consumer business lines within their
assigned geographic region and who will report to Mr. Hansberry as President and
Chief Operating Officer of USTrust.
FEDERAL INCOME TAX CONSEQUENCES
Consummation of the Affiliation is conditioned upon the delivery of opinions
of counsel to UST and AFCB substantially to the effect that, among other things,
if consummated in accordance with the Affiliation Agreement, the Affiliation
will constitute a reorganization within the meaning of Section 368 of the Code.
If the Affiliation constitutes such a reorganization, for federal income tax
purposes: (a) no gain or loss will be recognized by UST, Mosaic or AFCB as a
result of the Affiliation; (b) no gain or loss will be recognized by the
stockholders of AFCB upon their receipt of UST Common Stock on conversion of
their AFCB Common Stock, except in respect of cash received in lieu of
fractional shares; (c) the tax basis of the shares of UST Common Stock received
by the stockholders of AFCB will be the same as the tax basis of their converted
AFCB Common Stock, adjusted to reflect the Conversion Number and decreased by
the tax basis allocated to any such fractional share interests; (d) the holding
period of the UST Common Stock held by AFCB stockholders will generally include
the holding period of their converted AFCB Common Stock; and (e) gain or loss
will be recognized by the stockholders of AFCB who dissent from the Affiliation
and become entitled to receive cash in redemption of their AFCB Common Stock.
BECAUSE CERTAIN TAX CONSEQUENCES MAY VARY DEPENDING UPON THE PARTICULAR
CIRCUMSTANCES OF EACH AFCB STOCKHOLDER, EACH STOCKHOLDER SHOULD CONSULT HIS OR
HER PERSONAL TAX ADVISOR AS TO THE TAX CONSEQUENCES OF THE AFFILIATION TO HIM OR
HER UNDER FEDERAL, STATE, LOCAL OR OTHER APPLICABLE LAW. See "THE
AFFILIATION--Federal Income Tax Consequences."
9
<PAGE>
ACCOUNTING TREATMENT
The Affiliation, if completed as proposed, will qualify as a
pooling-of-interests for accounting purposes. The Affiliation Agreement
provides, as a condition to each party's obligation to consummate the
Affiliation, that both UST and AFCB will each have received a letter from Arthur
Andersen LLP, dated the Closing Date, to the effect that the Affiliation
qualifies for pooling-of-interests accounting treatment under generally accepted
accounting principles. See "THE AFFILIATION--Accounting Treatment."
THE STOCK OPTION AGREEMENT
As a condition precedent to UST's entering into the Affiliation Agreement,
and in consideration therefor (without other consideration or monetary payment),
UST and AFCB entered into a Stock Option Agreement on December 15, 1997 (the
"Stock Option Agreement"). The Stock Option Agreement is intended to protect
UST's interest under the Affiliation Agreement upon the occurrence of certain
events which may create the potential for a third party to acquire or obtain
control of AFCB. The Stock Option Agreement may discourage competing offers to
acquire AFCB by third parties other than UST or a subsidiary of UST and increase
the likelihood that the Affiliation will be consummated in accordance with the
terms of the Affiliation Agreement. See "CERTAIN RELATED TRANSACTIONS--Stock
Option Agreement." A copy of the Stock Option Agreement is attached hereto as
APPENDIX B.
Pursuant to the Stock Option Agreement, AFCB granted UST an option (the
"Option") to purchase, under certain circumstances and subject to adjustment, up
to 19.9% of the issued and outstanding fully paid and nonassessable shares of
AFCB Common Stock at a price of $32.937 per share. The Option is exercisable
upon the occurrence of certain events that create the potential for a third
party to acquire or obtain control of AFCB. If the Option becomes exercisable in
accordance with its terms, UST or any permitted transferee of UST can require
AFCB to repurchase, for a formula price, the Option, in lieu of exercising the
Option, or any shares of AFCB Common Stock purchased by UST or any such
permitted transferee of UST upon exercise of the Option. To the best knowledge
of UST and AFCB, no event which would permit exercise of the Option has occurred
as of the date hereof. See "CERTAIN RELATED TRANSACTIONS--Stock Option
Agreement."
RIGHTS OF DISSENTING STOCKHOLDERS
Under the Massachusetts General Laws, including in particular the
Massachusetts Business Corporation Law ("MBCL"), any AFCB stockholder (i) who
files with AFCB an objection to the Affiliation in writing before the approval
of the Affiliation by the stockholders of AFCB and who states in such objection
that such stockholder intends to demand payment for his or her shares if the
Affiliation is concluded and (ii) whose shares are not voted in favor of the
Affiliation, shall be entitled to demand payment for his or her shares of AFCB
Common Stock and an appraisal of the value thereof, in accordance with the
provisions of Sections 85 through 98 of Chapter 156B of the MBCL. UST
stockholders are not entitled to appraisal rights under the MBCL in connection
with, or as a result of, the Affiliation. See "THE AFFILIATION--Rights of
Dissenting Stockholders" and the relevant sections of the MBCL attached hereto
as APPENDIX F.
COMPARATIVE RIGHTS OF STOCKHOLDERS
The rights of holders of shares of UST Common Stock and AFCB Common Stock
currently are each governed by the Massachusetts General Laws, including in
particular the MBCL, the Articles of Organization of UST (the "UST Articles")
and By-laws of UST and the Articles of Organization of AFCB (the "AFCB
Articles") and By-laws of AFCB, respectively. At the Effective Time of the
Affiliation, AFCB stockholders who do not exercise and perfect their statutory
dissenters' rights will become UST stockholders, and their rights will be
governed by the MBCL, the UST Articles and the By-laws of UST. See
10
<PAGE>
"COMPARATIVE RIGHTS OF STOCKHOLDERS," for a discussion of differences in the
rights of the holders of AFCB Common Stock and UST Common Stock.
CONDITIONS TO THE CONSUMMATION OF THE AFFILIATION
The respective obligations of UST and AFCB to consummate the Affiliation are
subject to satisfaction of (i) a number of conditions, none of which may be
waived, including the receipt of the stockholders' approvals solicited hereby,
receipt of necessary regulatory approvals, receipt of letters from Arthur
Andersen LLP, to the effect that, for financial reporting purposes, the
Affiliation qualifies for pooling-of-interests accounting treatment under
generally accepted accounting principles if consummated in accordance with the
Affiliation Agreement, and (ii) other customary closing conditions, all of which
may be waived, including receipt of opinions of counsel regarding the federal
income tax consequences of the Affiliation.
CONDUCT OF BUSINESS PENDING THE AFFILIATION
UST and AFCB have each agreed to, and will cause their respective
subsidiaries to, undertake or refrain from undertaking certain actions pending
the Affiliation. In addition, UST and AFCB have agreed to cooperate or
coordinate with each other with respect to the taking of certain actions by
either or both of them pending the Affiliation. AFCB has also agreed to conduct
its business in the ordinary and usual course of business consistent with past
practice and to use all reasonable efforts to preserve its goodwill and its
business relationships including its relationships with its depositors. In the
Affiliation Agreement, UST has agreed to permit AFCB to sell the issued and
outstanding shares of capital stock of Middlesex owned by it for an aggregate
purchase price of not less than $8 million and AFCB has entered into a
definitive agreement to effect such a sale. See "THE AFFILIATION--The Subsidiary
Banks; Establishment of Regional Organization." For a full discussion of the
provisions of the Affiliation Agreement relating to the conduct of business of
UST and AFCB pending the Affiliation, see "THE AFFILIATION-- Conduct of Business
Pending the Affiliation."
TERMINATION OF THE AFFILIATION AGREEMENT
The Affiliation Agreement may be terminated and the Affiliation abandoned at
any time prior to the Effective Time by mutual consent of AFCB and UST, by
either AFCB or UST (i) if the Effective Time has not occurred on or prior to
August 31, 1998, (ii) if any application for regulatory approval has been denied
and such denial has become final and unappeasable, (iii) if the stockholders of
UST or AFCB fail to approve the Affiliation at the UST Meeting or the AFCB
Meeting, respectively, (iv) in the event of a material breach by the other party
of any representation, warranty, covenant or other agreement contained in the
Affiliation Agreement or Stock Option Agreement which is not cured within 30
days' written notice to the breaching party, provided that the terminating party
is not then in material breach of any representation, warranty, covenant or
other agreement contained in the Affiliation Agreement or Stock Option Agreement
or (v) if any condition necessary for consummation of the Affiliation cannot be
satisfied by August 31, 1998. Additionally, AFCB can terminate the Affiliation
Agreement if the Closing Price (as defined in "THE AFFILIATION--Termination of
the Affiliation Agreement") is less than $24.06 and the price of UST Common
Stock has declined more than 15% relative to a certain bank stock index, subject
to the right of UST to increase the consideration to be paid to AFCB
stockholders by increasing the Conversion Number pursuant to the formula set
forth in the Affiliation Agreement, in which case the Affiliation Agreement will
remain in full force and effect.
MARKET AND MARKET PRICES
Transactions with respect to UST Common Stock and AFCB Common Stock are
quoted on NASDAQ. The Affiliation Agreement provides, as a condition to AFCB's
obligations to consummate the Affiliation, that the shares of UST Common Stock
issuable in connection with the Affiliation shall have
11
<PAGE>
been authorized for listing on NASDAQ upon official notice of issuance. See "THE
AFFILIATION-- Conditions to the Consummation of the Affiliation." The
information set forth in the table below presents: (a) the last reported sale
prices for UST Common Stock and AFCB Common Stock on NASDAQ on December 12,
1997, the business day immediately preceding the public announcement of the
Affiliation, and May 4, 1998; and (b) the AFCB Common Stock equivalent per share
price as of December 12, 1997, and May 4, 1998, the last practicable date prior
to the mailing of this Joint Proxy Statement-Prospectus, calculated by
multiplying the closing price of UST Common Stock on NASDAQ on such dates by the
Conversion Number:
<TABLE>
<CAPTION>
AFCB
UST AFCB EQUIVALENT
COMMON COMMON PER
PRICE PER SHARE AT STOCK STOCK SHARE PRICE
- ------------------------------------------------------------------------------ ---------- --------- -----------
<S> <C> <C> <C>
December 12, 1997............................................................. $ 28.3125 $ 32.625 $ 39.92
May 4, 1998................................................................... $ 27.875 $ 38.25 $ 39.30
</TABLE>
No assurance can be given as to what the market price of UST Common Stock
will be if and when the Affiliation is consummated or when the shares of UST
Common Stock are actually issued in the Affiliation.
12
<PAGE>
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
UST CORP.
SELECTED FINANCIAL DATA
The following table sets forth certain selected condensed historical
financial data of UST. The table is based on and should be read in conjunction
with UST's historical financial statements and notes thereto incorporated by
reference in this Proxy Statement-Prospectus. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1997(B) 1996(C) 1995 1994 1993(D)
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
RESULTS OF OPERATIONS:
Interest income..................................... $ 285,213 $ 243,213 $ 229,217 $ 201,194 $ 205,359
Interest expense.................................... 110,008 102,127 90,632 68,698 74,844
--------- --------- --------- --------- ----------
Net interest income................................. 175,205 141,086 138,585 132,496 130,515
Provision for possible loan losses.................. 900 (17,300) 14,395 25,674 71,757
--------- --------- --------- --------- ----------
Net interest income after provision for possible
loan losses....................................... 174,305 158,386 124,190 106,822 58,758
Noninterest income.................................. 38,023 39,941 36,517 36,888 45,173
Noninterest expense................................. 157,082 124,669 118,121 118,705 117,952
--------- --------- --------- --------- ----------
Income (loss) before income taxes................... 55,246 73,658 42,586 25,005 (14,021)
Income tax provision (benefit)...................... 22,853 28,381 15,533 7,732 (8,893)
--------- --------- --------- --------- ----------
Net income (loss)................................... $ 32,393 $ 45,277 $ 27,053 $ 17,273 $ (5,128)
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
PER SHARE DATA: (f)
Basic earnings (loss) per share..................... $ 1.09 $ 1.56 $ 0.94 $ 0.61 $ (0.20)
Diluted earnings (loss) per share................... 1.08 1.53 0.92 0.60 (0.20)
Cash dividends declared............................. 0.42 0.32 0.11 0.05 0.01
Basic weighted average shares....................... 29,616 29,015 28,734 28,293 26,125
Diluted weighted average shares..................... 30,104 29,576 29,417 29,009 26,125
END OF PERIOD BALANCES:
Total assets........................................ $3,838,258 $3,781,055 $3,074,517 $2,850,717 $2,948,866
Loans receivable, net............................... 2,835,982 2,535,246 2,001,203 1,972,786 1,923,388
Reserve for possible loan losses.................... 52,230 51,984 69,982 76,743 76,517
Deposits............................................ 2,978,215 2,856,157 2,283,233 2,255,484 2,333,189
Funds borrowed (a).................................. 470,651 548,911 459,726 346,727 356,093
Stockholders' investment............................ 340,126 309,021 278,393 222,704 234,634
Shares used for book value calculation.............. 29,889 29,442 29,171 28,686 28,292
Book value per share................................ $ 11.38 $ 10.50 $ 9.54 $ 7.76 $ 8.29
CONSOLIDATED RATIOS:
Net income (loss) to average assets................. 0.88% 1.43% 0.94% 0.61% (0.17%)
Net income (loss) to average stockholders'
investment........................................ 10.37% 15.60% 10.67% 7.58% (2.30%)
Average stockholders' investment to average total
assets............................................ 8.5% 9.1% 8.8% 8.0% 7.6%
Reserve for possible loan losses to period end
loans............................................. 1.8% 2.1% 3.5% 3.9% 4.0%
Dividend payout ratio (e)........................... 38.9% 20.9% 12.0% 8.3% not
meaningful
</TABLE>
- ------------------------
(a) Includes federal funds purchased, repurchase agreements, short-term and
other borrowings.
(b) Includes $4.4 million for certain nondeductible merger related expenses and
a pre-tax charge of $11.8 million for restructuring costs.
(c) Includes a $6.8 million credit from the sale of a banking subsidiary; a
credit of $18.6 million recorded through the provision for possible loan
losses; a $5.9 million charge for expenses incurred in connection with the
pruchase of 20 branches; and, a one-time charge of $3.0 million to reflect
an assessment on certain deposits insured by the SAIF.
(d) Includes a one-time credit of $2.7 million reflecting the cumulative effect
of a change in the method of accounting for income taxes.
(e) The dividend payout ratio is determined by dividing cash dividends declared
by Diluted earnings per share.
(f) Earnings per share are computed in accordance with SFAS No. 128, which
requires a dual presentation of Basic and Diluted earnings per share as
adjusted for common stock equivalents consisting primarily of outstanding
dilutive stock options.
13
<PAGE>
AFFILIATED COMMUNITY BANCORP, INC.
SELECTED FINANCIAL DATA
The following table sets forth certain selected condensed historical
consolidated financial data of AFCB. The table is based on and should be read in
conjunction with AFCB's historical financial statements and notes thereto
incorporated by reference in this Proxy Statement-Prospectus. See "INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Interest income....................................... $ 81,511 $ 71,341 $ 60,996 $ 47,371 $ 41,159
Interest expense...................................... 46,012 40,064 33,224 22,892 19,951
--------- --------- --------- --------- ---------
Net interest income................................... 35,499 31,277 27,772 24,479 21,208
Provision for possible loan losses.................... 1,000 605 325 550 1,099
--------- --------- --------- --------- ---------
Net interest income after provision for possible loan
losses.............................................. 34,499 30,672 27,447 23,929 20,109
Noninterest income.................................... 2,298 1,638 1,693 1,348 1,691
Noninterest expense................................... 17,926 18,966(b) 18,234(b) 15,445 13,589
--------- --------- --------- --------- ---------
Income (loss) before income taxes..................... 18,871 13,344 10,906 9,832 8,211
Income tax provision (benefit)........................ 7,015 4,821 5,199 2,806 2,789
--------- --------- --------- --------- ---------
Net income (loss)..................................... $ 11,856 $ 8,523 $ 5,707 $ 7,026 $ 5,422
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
PER SHARE DATA (c):
Basic earnings per share............................ $ 1.86 $ 1.35 $ 0.88 $ 1.08 $ 0.84
Diluted earnings per share.......................... 1.78 1.32 0.86 1.06 0.83
Cash dividends per share............................ 0.51 0.41 0.26 0.28 N/A(e)
Basic weighted average shares outstanding........... 6,369 6,299 6,519 6,492 6,432
Diluted weighted average shares outstanding......... 6,659 6,461 6,659 6,628 6,521
END OF PERIOD BALANCES:
Total assets........................................ $1,155,408 $1,032,213 $ 878,480 $ 793,596 $ 692,860
Loans receivable, net............................... 715,657 653,556 543,877 474,574 408,721
Allowance for possible loan losses.................. 8,641 7,759 7,127 6,996 6,603
Deposits............................................ 729,096 652,509 583,832 532,270 524,883
Funds borrowed (a).................................. 302,199 269,292 187,514 161,021 62,964
Equity investment................................... 113,053 101,402 99,290 93,286 89,443
Shares used in book value calculation............... 6,419 6,322 6,536 6,506 6,480
Book value per share................................ $ 17.61 $ 16.04 $ 15.19 $ 14.34 $ 13.80
CONSOLIDATED RATIOS:
Net income (loss) to average assets................. 1.09% 0.88% 0.69% 0.97% 0.91%
Net income (loss) to average stockholders'
investment........................................ 11.14% 8.70% 5.90% 7.68% 8.82%
Average equity to average total assets.............. 9.8% 10.2% 11.7% 12.6% 10.3%
Allowance for possible loan losses to period end
loans............................................. 1.2% 1.2% 1.3% 1.5% 1.6%
Dividend payout ratio (d)........................... 28.7% 31.1% 30.2% 26.4% N/A(e)
</TABLE>
- ------------------------
(a) Includes federal funds purchased, repurchase agreements, short-term and
other borrowings.
(b) Includes nonrecurring charge of $2,121 in 1996 in connection with the SAIF
recapitalization, and nonrecurring charges of $1,989 in 1995 for
nonrecurring merger costs in connection with the formation of AFCB.
(c) Earnings per share are computed in accordance with SFAS No. 128, which
requires a dual presentation of Basic and Diluted earnings per share as
adjusted for common stock equivalents consisting primarily of outstanding
dilutive stock options.
(d) The dividend payout ratio is determined by dividing cash dividends per share
by diluted earnings per share.
(e) The Federal Savings Bank ("TFSB") converted from mutual to stock form, in
conjunction with which Main Street Community Bancorp, Inc. became the
publicly owned holding company of TSFB, on December 28, 1993.
14
<PAGE>
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
UST CORP.
AFFILIATED COMMUNITY BANCORP, INC.
PRO FORMA CONDENSED COMBINED SELECTED FINANCIAL DATA
The following table sets forth certain unaudited combined condensed
financial information from the Unaudited Condensed Pro Forma Combined Statements
of Income for the three years ended December 31, 1997, 1996 and 1995, and the
Unaudited Pro Forma Condensed Combining Balance Sheet at December 31, 1997. The
UST and AFCB combined results of operations gives effect to UST's proposed
acquisition of AFCB as a pooling of interests, as if such transaction had been
completed as of the beginning of each of the periods. The data set forth below
does not include financial information with respect to Somerset. The summary
unaudited financial information should be read in conjunction with the Pro Forma
Financial Information and related notes thereto presented elsewhere in this
Proxy Statement-Prospectus and the consolidated financial statements and related
notes incorporated by reference (see "INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE" and "UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION".
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1997(B) 1996 1995
------------ ---------- ----------
<S> <C> <C> <C>
(DOLLARS AND SHARES IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
RESULTS OF OPERATIONS:
Interest income............................................................ $ 366,724 $ 314,554 $ 290,213
Interest expense........................................................... 156,020 142,191 123,856
------------ ---------- ----------
Net interest income........................................................ 210,704 172,363 166,357
Provision for possible loan losses......................................... 1,900 (16,695) 14,720
------------ ---------- ----------
Net interest income after provision
for possible loan losses................................................... 208,804 189,058 151,637
Noninterest income......................................................... 40,321 41,579 38,210
Noninterest expense........................................................ 175,008 143,635 136,355
------------ ---------- ----------
Income before taxes........................................................ 74,117 87,002 53,492
Income tax provision....................................................... 29,868 33,202 20,732
------------ ---------- ----------
Net income................................................................. $ 44,249 $ 53,800 $ 32,760
------------ ---------- ----------
------------ ---------- ----------
PER SHARE DATA:
Basic earnings per share............................................... $ 1.15 $ 1.42 $ 0.86
Diluted earnings per share............................................. 1.12 1.39 0.84
Cash dividends declared................................................ 0.42 0.32 0.11
Basic weighted average shares.......................................... 38,596 37,897 37,925
Diluted weighted average shares........................................ 39,494 38,686 38,806
DECEMBER 31, 1997 PRO FORMA BALANCES:
Total assets (b)....................................................... $ 4,993,306
Loans receivable....................................................... 3,547,684
Reserve for possible loan losses....................................... 60,871
Deposits............................................................... 3,707,311
Funds Borrowed (a)..................................................... 772,850
Stockholders' investment (b)........................................... 444,479
Shares used for book value calculation................................. 38,940
Book value per share (b)............................................... $ 11.41
</TABLE>
- ------------------------
(a) Includes federal funds purchased, repurchase agreements, short-term and
other borrowings.
(b) The effect of an estimated $12.0 million pre-tax charge to be taken in
connection with the proposed acquisition has not been reflected in the above
results of operation since it is nonrecurring, nor do the pro forma results
of operation give effect to any anticipated cost savings to be realized in
connection with the acquisition.This charge is, however, reflected in the
December 31, 1997 balances of total assets, Stockholders' investment and
book value per share, net of related taxes.
15
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of UST as of December 31,
1997, and the capitalization of UST adjusted to give effect to the proposed
acquisition of AFCB and the pending acquisition of Somerset. See "INFORMATION
ABOUT UST--Recent Developments " for a description of the pending acquisition of
Somerset. This information should be read in conjunction with the consolidated
historical financial statements and notes thereto of UST, Somerset and AFCB
which are incorporated by reference in this Proxy Statement--Prospectus, and the
Unaudited Pro Forma Condensed Combining Balance Sheet, including the notes
thereto, appearing elsewhere in this Proxy Statement--Prospectus. See
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE" and "UNAUDITED PRO FORMA
CONDENSED FINANCIAL INFORMATION."
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
UST AND UST AND
UST AFCB AFCB SOMERSET AFCB
HISTORICAL ADJUSTMENTS COMBINED ADJUSTMENTS COMBINED
---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Deposits................................ $2,978,215 $ 729,096(a) $3,707,311 $455,886(b) $4,163,197
Short-term borrowings................... 421,313 235,180(a) 656,493 32,929(b) 689,422
Other borrowings........................ 49,338 67,019(a) 116,357 10,447(b) 126,804
---------- ----------- ---------- ----------- ----------
Total deposits and borrowings........... $3,448,866 $ 1,031,295 $4,480,161 $499,262 $4,979,423
---------- ----------- ---------- ----------- ----------
---------- ----------- ---------- ----------- ----------
Stockholders' Investment:
Preferred stock $1 par value;
Authorized--4,000,000 shares;
Outstanding--None...................
Common stock $.625 par value;
Authorized-- 45,000,000 shares;
Shares issued or to be outstanding.. $ 18,601 $ 5,731(a) $ 24,332 $ 1,978(b) $ 26,310
Additional paid-in capital.............. 117,236 50,360(a)
(9,066)(a) 158,530 18,652(b)
14,681(b) 191,863
Retained earnings....................... 66,128(a) 566(b)
201,355 (8,700)(a) 258,783 (5,300)(b) 254,049
Unrealized gain on securities
available-for-sale, net of tax........ 2,245 919(a) 3,164 3,164
Deferred compensation and other......... 689 (1,019)(a) (330) (330)
---------- ----------- ---------- ----------- ----------
Total stockholders' investment.......... $ 340,126 $ 104,353 $ 444,479 $ 30,577 $ 475,056
---------- ----------- ---------- ----------- ----------
---------- ----------- ---------- ----------- ----------
</TABLE>
- ------------------------
(a) Reflects the combination of AFCB deposits, borrowings and stockholders'
investment with UST and the issuance of 1.41 shares of UST Common Stock in
exchange for, and in cancellation of, each outstanding share of AFCB Common
Stock, net of AFCB treasury stock which is to be retired upon consummation
of the transaction through a charge to Additional paid-in capital. The
difference between the par value of the Common Stock to be issued and the
par value of the AFCB Common Stock to be acquired has also been charged to
Additional paid-in capital. Also reflected is a one-time after-tax charge of
$8.7 million for related merger, acquisition and restructuring charges.
(b) Reflects the combination of Somerset deposits, borrowings and stockholders'
investment with UST and the issuance of 0.19 shares of UST Common Stock in
exchange for, and the cancellation of, each outstanding share of Somerset
common stock. The difference between the par value of the Common Stock to be
issued and the par value of the Somerset Common Stock to be acquired has
been credited to Additional paid-in capital. Also reflected is a one-time
after-tax charge of $5.3 million for related merger, acquisition and
restructuring charges.
16
<PAGE>
COMPARATIVE PER SHARE DATA
(UNAUDITED)
The following table shows unaudited comparative per share data for UST and
AFCB and for UST, AFCB and Somerset using the pooling of interests method of
accounting. The information should be read in conjunction with the consolidated
historical financial statements and notes thereto of UST, AFCB and Somerset
which are incorporated by reference in this Proxy Statement--Prospectus, and the
unaudited pro forma condensed financial information, including notes thereto,
which appear elsewhere in this Proxy Statement--Prospectus. The pro forma data
is presented for comparative purposes only and is not necessarily indicative of
the combined financial position or results of operations which would have been
realized had the Affiliation been consummated during the periods or as of the
dates for which the pro forma data is presented. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE" and "UNAUDITED PRO FORMA FINANCIAL INFORMATION."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1997 1996 1995
--------- --------- ---------
PER SHARE OF UST COMMON STOCK:
Income from continuing operations:
Historical:
Basic earnings per share............................................................ $ 1.09 $ 1.56 $ 0.94
Diluted earnings per share.......................................................... 1.08 1.53 0.92
Pro forma UST and AFCB:
Basic earnings per share............................................................ 1.15 1.42 0.86
Diluted earnings per share.......................................................... 1.12 1.39 0.84
Pro forma UST, AFCB and Somerset:
Basic earnings per share............................................................ 1.20 1.38 0.82
Diluted earnings per share.......................................................... 1.18 1.35 0.81
Cash dividends declared(a):
Historical............................................................................ 0.42 0.32 0.11
Book Value (as of period end):
Historical............................................................................ 11.38
Pro forma UST and AFCB................................................................ 11.41
Pro Forma UST, AFCB and Somerset...................................................... 11.28
Shares used for book value calculation (in thousands)
Historical............................................................................ 29,889
Pro forma UST and AFCB................................................................ 38,940
Pro forma UST, AFCB and Somerset...................................................... 42,105
PER SHARE OF AFCB COMMON STOCK(B):
Income (loss) from continuing operations:
Historical:
Basic earnings per share............................................................ 1.86 1.35 0.88
Diluted earnings per share.......................................................... 1.78 1.32 0.86
Equivalent pro forma UST and AFCB:
Basic earnings per share............................................................ 1.62 2.00 1.21
Diluted earnings per share.......................................................... 1.58 1.96 1.18
Equivalent pro forma UST, AFCB and Somerset:
Basic earnings per share............................................................ 1.69 1.95 1.16
Diluted earnings per share.......................................................... 1.66 1.90 1.14
Cash dividends declared:
Historical............................................................................ 0.51 0.41 0.26
Equivalent pro forma UST and AFCB..................................................... 0.59 0.45 0.17
Equivalent pro forma UST, AFCB and Somerset........................................... 0.59 0.45 0.17
Book value (as of period end):
Historical............................................................................ 17.61
Equivalent pro forma UST and AFCB..................................................... 16.09
Equivalent pro forma UST, AFCB and Somerset........................................... 15.91
</TABLE>
- ------------------------
(a) Pro Forma UST and AFCB combined and Pro Forma UST, AFCB and Somerset
combined cash dividends declared would be the same as Historical, as UST is
the surviving entity.
(b) The equivalent pro forma per share amounts reflected above for AFCB are
determined by multiplying the corresponding pro forma amounts per share of
UST Common Stock, by the exchange ratio of 1.41 shares of UST Common Stock
in exchange for each share of AFCB Common Stock.
17
<PAGE>
THE UST MEETING
DATE, TIME AND PLACE
This Joint Proxy Statement-Prospectus is being furnished to holders of UST
Common Stock in connection with the solicitation of proxies by the Board of
Directors of UST (the "UST Board") for use at the UST Meeting. The UST Meeting
is scheduled to be held on Wednesday, June 10, 1998 at 9:00 a.m., in the
Auditorium located on the 12th Floor of UST's principal offices at 40 Court
Street, Boston, Massachusetts 02108.
PURPOSES OF THE MEETING
The UST Meeting will be held for the purposes of considering and voting upon
proposals to (i) approve and adopt the Affiliation Agreement and the
transactions contemplated thereby, (ii) approve the amendment to the UST
Articles to increase the number of authorized shares of UST Common Stock from
45,000000 to 75,000,000, and (iii) transact such other business as may properly
come before such meeting, or any adjournments or postponements thereof. The
management of UST knows of no other matters at this time to be brought before
the UST Meeting. For additional information with respect to the amendment of the
UST Articles, see "UST MEETING--ADDITIONAL MATTERS" which is included in this
Joint Proxy Statement-Prospectus.
THE UST BOARD UNANIMOUSLY RECOMMENDS THAT UST STOCKHOLDERS VOTE FOR APPROVAL
AND ADOPTION OF THE AFFILIATION AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY AND FOR THE PROPOSED AMENDMENT TO THE UST ARTICLES.
RECORD DATE; QUORUM
The UST Board has fixed the close of business on May 7, 1998, as the record
date for the UST Meeting (the "Record Date"). Only the holders of outstanding
shares of UST Common Stock on the Record Date are entitled to notice of, and to
vote at, the UST Meeting. As of the Record Date, there were issued and
outstanding 29,878,628 shares of UST Common Stock entitled to vote. The
presence, in person or by proxy, of a majority in interest of all shares of UST
Common Stock issued, outstanding and entitled to vote as of the Record Date is
necessary to constitute a quorum at the UST Meeting. Abstentions and broker
non-votes are included in the determination of the number of shares of UST
Common Stock present and voting. (A "broker non-vote" occurs when a registered
broker holding a customer's shares in the name of the broker has not received
voting instructions on a matter from the customer and is barred by stock
exchange rules from exercising discretionary authority to vote on the matter,
which the broker indicates on the proxy.)
PROXIES; VOTING AND REVOCATION
Each common stockholder is entitled to one vote, in person or by proxy, for
each share of UST Common Stock held of record in his or her name at the close of
business on the Record Date. Shares of UST Common Stock represented by a
properly-executed proxy received prior to the vote at the UST Meeting and not
revoked will be voted as directed in the proxy. If a properly-executed proxy is
submitted and no direction is indicated, the proxy will be voted FOR the
approval and adoption of the Affiliation Agreement and the transactions
contemplated thereby; FOR the amendment to the UST Articles; and in such manner
as management's proxyholders shall decide in accordance with their best judgment
on such other matters as may properly come before the UST Meeting.
Any stockholder giving a proxy prior to the UST Meeting has the right to
revoke it prior to its exercise by (i) filing with Eric R. Fischer, Esq.,
Executive Vice President, General Counsel and Clerk of UST, 40 Court Street,
Boston, Massachusetts 02108, at or before the taking of the vote at the UST
Meeting, a written notice of revocation bearing a later date than the proxy,
(ii) duly executing a proxy bearing a later
18
<PAGE>
date and delivering it to the Clerk of UST before the taking of the vote at the
UST Meeting, or (iii) attending the UST Meeting and voting in person. Any
stockholder of record attending the UST Meeting may vote in person whether or
not a proxy has been previously given, but the mere presence of a stockholder at
the UST Meeting will not constitute revocation of a previously given proxy. In
addition, stockholders whose shares of UST Common Stock are not registered in
their own name will need additional documentation from the record holder of such
shares to vote personally at the UST Meeting. See also "SOLICITATION OF
PROXIES."
VOTE REQUIRED TO APPROVE THE AFFILIATION AND OTHER MATTERS
The affirmative vote of the holders of at least a majority of the shares of
UST Common Stock present in person, or represented by proxy, entitled to vote
and voting at the UST Meeting is required to approve and adopt the Affiliation
Agreement and the transactions contemplated thereby. Abstentions will have the
effect of votes against the approval of the Affiliation Agreement and the
transactions contemplated thereby, while broker non-votes will be disregarded
(i.e., they will not be considered shares voting on this proposal). The
affirmative vote of the holders of at least a majority of the shares of UST
Common Stock issued, outstanding and entitled to vote at the UST Meeting is
required to amend the UST Articles with respect to the increase in the number of
authorized shares of UST Common Stock. With respect to the proposal to amend the
UST Articles, both abstentions and broker non-votes will have the effect of
votes against this proposal.
Approval of the Affiliation Agreement and the transactions contemplated
thereby by the requisite vote of the holders of UST Common Stock is a condition
to, and required for, the consummation of the Affiliation. No other matter being
considered at the UST Meeting must be approved by the holders of UST Common
Stock in order for the Affiliation to be consummated.
In the event that there are not sufficient votes to approve the Affiliation
Agreement and the transactions contemplated thereby, at the time of the UST
Meeting, the persons present or named as proxies by a stockholder may propose
and vote for one or more adjournments of the UST Meeting to permit further
solicitation of proxies. A proxy that withholds discretionary authority or that
is voted against the Affiliation Agreement will not be voted in favor of any
adjournment or postponement of the UST Meeting. The UST Meeting may be adjourned
by the affirmative vote of a majority of the shares present.
In the event that the required vote for approval by the stockholders of UST
is not obtained, the Affiliation Agreement may be terminated by either AFCB or
UST, provided that the terminating party is not then in material breach of the
Affiliation Agreement or Stock Option Agreement. If the Affiliation Agreement is
terminated because of the failure to obtain the requisite stockholder approval,
the Affiliation Agreement will become null and void and there will be no
liability on the part of AFCB or UST or their respective officers or directors
to the other, except as specifically provided in the Affiliation Agreement
attached as APPENDIX A to this Joint Proxy Statement-Prospectus or as may be
required by law. See "THE AFFILIATION--Termination of the Affiliation
Agreement."
OWNERSHIP OF UST COMMON STOCK BY OFFICERS AND DIRECTORS
As of the Record Date, 29,878,628 shares of UST Common Stock were
outstanding and entitled to vote, of which shares, representing approximately
15% of the shares issued and outstanding, were beneficially owned by directors
and officers of UST and their respective affiliates. It is expected that each
such director, officer and affiliate thereof will vote in favor of the
Affiliation Agreement and the transactions contemplated thereby. It has not come
to UST's attention that any such officer or affiliate thereof will vote
otherwise than for approval of the Affiliation Agreement and the transactions
contemplated thereby.
19
<PAGE>
THE AFCB MEETING
DATE, TIME AND PLACE
This Joint Proxy Statement-Prospectus is being furnished to holders of AFCB
Common Stock in connection with the solicitation of proxies by the Board of
Directors of AFCB for use at the AFCB Meeting. The AFCB Meeting is scheduled to
be held on Wednesday, June 10, 1998 at 9:30 a.m. at the Sheraton Lexington Inn,
727 Marrett Road, Route 2A, Lexington, Massachusetts.
PURPOSES OF THE MEETING
The AFCB Meeting will be held for the purposes of considering and voting
upon (i) a proposal to approve and adopt the Affiliation Agreement and the
transactions contemplated thereby and (ii) such other matters as may properly
come before such meeting, or any adjournments or postponements thereof. The
management of AFCB knows of no other matters at this time to be brought before
the AFCB Meeting.
THE AFCB BOARD UNANIMOUSLY RECOMMENDS THAT AFCB STOCKHOLDERS VOTE FOR
APPROVAL AND ADOPTION OF THE AFFILIATION AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY.
RECORD DATE; QUORUM
The AFCB Board has fixed the close of business on May 7, 1998, as the record
date (the "Record Date") for the AFCB Meeting. Only the holders of outstanding
shares of AFCB Common Stock on the Record Date are entitled to notice of, and to
vote at, the AFCB Meeting. As of the Record Date, there were issued and
outstanding 6,612,524 shares of AFCB Common Stock entitled to vote. The
presence, in person or by proxy, of a majority in interest of all shares of AFCB
Common Stock issued, outstanding and entitled to vote as of the Record Date is
necessary to constitute a quorum at the AFCB Meeting. Abstentions and broker
non-votes will be treated as shares present or represented at the AFCB Meeting
for quorum purposes. (A "broker non-vote" occurs when a registered broker
holding a customer's shares in the name of the broker has not received voting
instructions on a matter from the customer and is barred from exercising
discretionary authority to vote on the matter, which the broker indicates on the
proxy.)
PROXIES; VOTING AND REVOCATION
Each stockholder is entitled to one vote, in person or by proxy, for each
share of AFCB Common Stock held of record in his or her name at the close of
business on the Record Date. Shares of AFCB Common Stock represented by a
properly-executed proxy received prior to the vote at the AFCB Meeting and not
revoked will be voted as directed in the proxy. If a properly-executed proxy is
submitted and no direction is indicated, the proxy will be voted FOR the
approval and adoption of the Affiliation Agreement and the transactions
contemplated thereby, and in such manner as management's proxyholders shall
decide on such other matters as may properly come before the AFCB Meeting.
Any stockholder giving a proxy prior to the AFCB Meeting has the right to
revoke it prior to its exercise by (i) filing with Quentin J. Greeley, Executive
Vice President, General Counsel and Clerk of AFCB, 716 Main Street, Waltham,
Massachusetts 02154, at or before the taking of the vote at the AFCB Meeting, a
written notice of revocation bearing a later date than the proxy, (ii) duly
executing a proxy bearing a later date and delivering it to the Clerk of AFCB
before the taking of the vote at the AFCB Meeting, or (iii) attending the AFCB
Meeting and voting in person. Any stockholder of record attending the AFCB
Meeting may vote in person whether or not a proxy has been previously given, but
the mere presence of a stockholder at the AFCB Meeting will not constitute
revocation of a previously given proxy. In addition, stockholders whose shares
of AFCB Common Stock are not registered in their own name will need additional
documentation from the record holder of such shares to vote personally at the
AFCB Meeting. See also "SOLICITATION OF PROXIES."
20
<PAGE>
VOTE REQUIRED TO APPROVE THE AFFILIATION
The affirmative vote of the holders of at least a majority of the
outstanding shares of AFCB Common Stock entitled to vote at the AFCB Meeting is
required to approve and adopt the Affiliation Agreement and the transactions
contemplated thereby. Abstentions and broker non-votes will have the effect of
votes against the approval of the Affiliation Agreement and the transactions
contemplated thereby.
In the event that there are not sufficient votes to approve the Affiliation
Agreement and the transactions contemplated thereby, at the time of the AFCB
Meeting, the persons present or named as proxies by a stockholder may propose
and vote for one or more adjournments of the AFCB Meeting to permit further
solicitation of proxies. A proxy that withholds discretionary authority or that
is voted against the Affiliation Agreement will not be voted in favor of any
adjournment or postponement of the AFCB Meeting. The AFCB Meeting may be
adjourned by the affirmative vote of a majority of the shares present.
In the event that the required vote for approval by the stockholders of AFCB
is not obtained, the Affiliation Agreement may be terminated by either AFCB or
UST, provided that the terminating party is not then in material breach of the
Affiliation Agreement or Stock Option Agreement. If the Affiliation Agreement is
terminated because of the failure to obtain the requisite stockholder approval,
the Affiliation Agreement will become null and void and there will be no
liability on the part of AFCB or UST or their respective officers or directors
to the other, except as specifically provided in the Affiliation Agreement
attached as APPENDIX A to this Joint Proxy Statement-Prospectus or as may be
required by law. See "THE AFFILIATION--Termination of the Affiliation
Agreement."
OWNERSHIP OF AFCB COMMON STOCK BY OFFICERS AND DIRECTORS
As of the Record Date, 6,612,524 shares of AFCB Common Stock were
outstanding and entitled to vote, of which approximately 142,295 shares,
representing 2.2% of the shares issued and outstanding, were beneficially owned
by directors and executive officers of AFCB. In connection with the Affiliation
Agreement, each of the directors and executive officers of AFCB and certain of
the executive officers of AFCB's subsidiaries agreed by separate letter (the
"Voting Agreement") to UST to vote all of the shares of AFCB Common Stock
beneficially owned by such person, and with respect to which such person
exercises sole voting power as of the Record Date, in favor of the approval of
the Affiliation Agreement and the Affiliation, and against the approval of any
other agreement providing for a merger, acquisition, consolidation, sale of a
material amount of assets or other business combination involving AFCB or any of
its subsidiaries with any person or entity other than UST or any subsidiary of
UST. See "CERTAIN RELATED TRANSACTIONS--Voting Agreements."
21
<PAGE>
INFORMATION ABOUT UST
UST, a bank holding company registered with the Federal Reserve Board, was
organized as a Massachusetts business corporation in 1967. UST is also subject
to examination by the Massachusetts BBI. As of December 31, 1996, UST's banking
subsidiaries were USTrust and United States Trust Company ("USTC"), each
headquartered in Boston. USTrust and USTC are sometimes hereinafter collectively
referred to as the "Subsidiary Banks." Subsequently, on January 3, 1997, UST
acquired Walden Bancorp, Inc. of Acton, Massachusetts ("Walden"), and its
subsidiary banks, The Co-operative Bank of Concord ("Concord"), headquartered in
Concord, and The Braintree Savings Bank ("Braintree") headquartered in
Braintree. During the second quarter of 1997, Concord and Braintree, former
subsidiaries of Walden, were merged with and into USTrust, the principal banking
subsidiary of UST Corp. UST's acquisition of Walden is discussed in further
detail in Note 1 to UST's "Consolidated Financial Statements" included in UST's
Annual Report on Form 10-K for the year ended December 31, 1997 which is
incorporated herein by reference. See "INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE." Each of UST's Subsidiary Banks is chartered under Massachusetts law
and is subject to examination by the Massachusetts Commissioner of Banks
("Massachusetts Commissioner") and the FDIC. All of the capital stock of the
Subsidiary Banks is owned directly or indirectly by UST.
In addition, UST owns directly or indirectly, through its banking
subsidiaries, all of the outstanding stock of four active non-banking
subsidiaries, all Massachusetts corporations: UST Leasing Corporation, UST
Capital Corp., UST Realty Trust Inc. and UST Auto Lease Corp., as well as eight
subsidiaries which hold foreclosed real estate and four subsidiaries which are
passive holders of securities permissible for banks.
On October 15, 1997, UST acquired Firestone, an $85 million small business
equipment finance company located in Newton, Massachusetts. UST's acquisition of
Firestone is discussed in further detail below under the caption "Recent
Developments--Firestone Acquisition."
UST engages in one line of business, that of providing financial services
through its banking and non-banking subsidiaries. A broad range of financial
services is provided principally to individuals and small-and medium-sized
companies in New England including those located in low- and moderate-income
neighborhoods within UST's defined Community Reinvestment Act assessment area.
In addition, an important component of UST's financial services is the provision
of trust and money management services to professionals, corporate executives,
nonprofit organizations, labor unions, foundations, mutual funds and owners of
closely-held businesses most of whom are located in the New England region.
RECENT DEVELOPMENTS
RECENT OPERATING RESULTS. For the quarter ended March 31, 1998, UST
reported net income of $12.9 million compared with net income of $904 thousand
for the quarter ended March 31, 1997. First quarter 1997 results include a
nonrecurring charge of $2.9 million for certain nondeductible merger-related
expenses and a pre-tax charge of $11.8 million for restructuring charges
associated with the acquisition of Walden Bancorp, Inc. Diluted earnings per
share were $0.42 for the quarter ended March 31, 1998 versus $0.03 per share for
the first quarter of 1997. Basic earnings per share, before the dilutive effect
of stock options, were $0.43 per share in 1998 compared with $0.03 per share for
the first quarter of 1997. Total assets at March 31, 1998 were $3.835 billion
compared with $3.838 billion at December 31, 1997.
FIRESTONE ACQUISITION
On August 12, 1997, UST announced the execution of a definitive agreement to
acquire Firestone. The transaction, which was consummated on October 15, 1997,
was accounted for as a pooling-of-interests and was structured as a tax-free
exchange of 1,180,000 shares of UST Common Stock for each of the 2,000,000
outstanding closely held shares of Firestone common stock. UST Common Stock
exchanged for Firestone common stock was not registered prior to the
effectiveness of the transaction. On December 24, 1997, UST filed with the
Commission a Registration Statement on Form S-3 regarding the registration of
22
<PAGE>
the 1,180,000 shares of UST Common Stock issued in the Firestone transaction. On
January 21, 1998, the Commission declared the Form S-3 effective. UST and
Firestone recorded a one-time, pre-tax charge of approximately $1 million in the
aggregate for acquisition-related costs in connection with the transaction.
Firestone has one subsidiary, Firestone Financial Canada Ltd., a Canadian
entity, which offers similar business equipment financing service to small
business entities in Canada. In December 1997, UST contributed all of the
capital stock of Firestone to USTrust. Additional financial information about
Firestone is contained in UST's Annual Report on Form 10-K for the year ended
December 31, 1997, which is incorporated herein by reference. See "INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE."
SOMERSET TRANSACTION
On December 9, 1997, UST executed an Affiliation Agreement and Plan of
Reorganization (the "Somerset Agreement") with Somerset, pursuant to which
Somerset will be merged with and into USTrust. Somerset is a Massachusetts
savings bank which serves the consumer and small business banking needs of its
customers through its five branch offices located in the Massachusetts
communities of Somerville and Burlington. The Somerset transaction, which is
structured to qualify as a pooling-of-interests for accounting purposes, is
subject to the approval of the shareholders of Somerset as well as to the
receipt of federal and state regulatory banking approvals. Subject to the
foregoing conditions, the Somerset transaction is expected to close during the
second or third quarter of 1998.
The Somerset transaction is structured as a tax-free exchange of 0.19 shares
of UST Common Stock for each share of Somerset's common stock. At UST's closing
stock price of $29.625 on December 9, 1997, the Somerset transaction would be
valued at approximately $93.7 million, and Somerset shareholders would receive a
value of $5.63 in UST Common Stock for each share of Somerset common stock. The
purchase price represents a multiple of 2.3 times stated book value of Somerset
at September 30, 1997. UST expects to record a one-time pre-tax charge of
approximately $7.5 million of acquisition-related costs in connection with the
Somerset transaction.
Immediately after execution of the Somerset Agreement on December 9, 1997,
UST entered into a Stock Option Agreement (the "Somerset Stock Option
Agreement") with Somerset, pursuant to which Somerset has granted to UST the
option to purchase, under certain circumstances, 2,777,000 shares of Somerset
common stock at an exercise price of $4.875 per share and has also agreed to pay
UST certain additional consideration related to the option.
For the quarter ended March 31, 1998, Somerset reported net income of $2.7
million compared with net income of $986 thousand for the first quarter of 1997.
Basic and diluted earnings per share for the quarter ended March 31, 1998 were
$0.16, compared with basic and diluted earnings per share of $0.06 for the first
quarter of 1997. Total assets at March 31, 1998 were $533.0 million compared
with $539.7 million at December 31, 1997.
Following consummation of the Somerset transaction, James F. Drew, a current
director of Somerset, will become a director of UST, and Nicholas P. Salerno, a
current director of Somerset, will become a director of USTrust. Additionally,
pursuant to the terms of an Employment Agreement, dated as of December 9, 1997,
Thomas J. Kelly, currently President and Chief Executive Officer of Somerset,
will become an Executive Vice President of USTrust after the consummation of the
Somerset transaction.
On February 6, 1998, UST filed a Registration Statement on Form S-4 under
the Securities Act with the Commission regarding the registration of up to
3,300,000 shares of UST Common Stock to be issued to holders of Somerset common
stock in connection with the merger of Somerset with and into USTrust.
Additional financial information about Somerset is contained in Somerset's
Annual Report on Form 10-K for the year ended December 31, 1997, which was filed
as Exhibit 99.1 to UST's Current Report on Form 8-K, filed on April 24, 1998,
which is incorporated herein by reference. See "INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE."
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For more information about UST, reference is made to the UST Annual Report
on Form 10-K for the year ended December 31, 1997, which is incorporated herein
by reference. See "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE."
INFORMATION ABOUT AFCB
AFCB, a banking holding company registered with the Federal Reserve Board,
was organized as a Massachusetts business corporation in 1995 for the purpose of
serving as the holding company of The Federal Savings Bank, a federally
chartered stock savings bank ("Federal"), and Lexington Savings Bank, a
Massachusetts chartered savings bank ("Lexington"), in connection with the
affiliation of Federal and Lexington. In May 1997, AFCB provided the funds
necessary to capitalize Middlesex Bank & Trust Company ("Middlesex"), a
Massachusetts bank and trust company, then in organization. Following its
capitalization by AFCB, Middlesex commenced business on June 2, 1997 as a
wholly-owned subsidiary of AFCB. Middlesex, Lexington and Federal are
hereinafter collectively referred to as the "AFCB Banks." The AFCB Banks offer a
variety of commercial and retail banking products and services and conduct other
businesses permissible for Massachusetts banks. The AFCB Banks' lending
operations focus on commercial and small business lending, commercial real
estate loans, residential construction loans, residential first mortgages, home
equity lines of credit and consumer loans.
The AFCB Banks operate 13 branches in Massachusetts and their deposits are
insured by the FDIC. As of December 31, 1997, AFCB had total consolidated assets
of $1.2 billion, total deposits of $729 million and total stockholders' equity
of $113 million.
The AFCB Banks' business activities are concentrated in Middlesex County.
All retail banking activity is conducted through the banking offices. Lending
operations, particularly loan originations, are conducted from the retail
offices and at the point of sale. None of the AFCB Banks nor any of their
subsidiaries conduct business on a national or international basis.
RECENT DEVELOPMENTS
RECENT OPERATING RESULTS For the quarter ended March 31, 1998, AFCB
reported net income of $3.2 million compared with net income of $2.9 million for
the first quarter of 1997. Basic earnings per share for the quarter ended March
31, 1998 were $0.50, compared with basic earnings per share of $0.46 for the
first quarter of 1997. Diluted earnings per share for the first quarter of 1998
were $0.47 per share, compared with $0.45 per share for the comparable period of
1997. Total consolidated assets at March 31, 1998 were $1.141 billion compared
with $1.155 billion at December 31, 1997.
STOCK REPURCHASE PROGRAM
In October 1997, AFCB approved a stock repurchase program pursuant to which
up to 300,000 shares of AFCB Common Stock were authorized to be re-purchased by
AFCB. No shares of AFCB Common Stock have in fact been purchased and, in
connection with the Affiliation, AFCB has terminated the repurchase program
effective December 15, 1997.
MIDDLESEX SALE
On May 1, 1998, as permitted under the Affiliation Agreement, AFCB entered
into a definitive agreement to sell all of the capital stock of Middlexex owned
by AFCB to William R. Berkley for $8.24 million. See "THE AFFILIATION--The
Subsidiary Banks; Establishment of Regional Organization."
For more information about AFCB, reference is made to the AFCB Annual Report
on Form 10-K for the year ended December 31, 1997, which is incorporated herein
by reference. See "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE."
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THE AFFILIATION
(PROXY ITEM 1)
GENERAL
Each of the UST Board and the AFCB Board has unanimously approved the
Affiliation Agreement and believes that the terms of the Affiliation are fair
and in the best interests of the respective parties and their respective
stockholders, and each unanimously recommends that its respective stockholders
vote to approve and adopt the Affiliation Agreement and the consummation of the
transactions contemplated thereby.
This section of the Joint Proxy Statement-Prospectus describes certain
aspects of the proposed Affiliation, including the principal provisions of the
Affiliation Agreement. The following description of the Affiliation does not
purport to be complete and is qualified in its entirety by reference to the
Affiliation Agreement and the Stock Option Agreement which are attached as
Appendix A, and B, respectively, to this Joint Proxy Statement-Prospectus and
are incorporated herein by reference. All stockholders of UST and AFCB are urged
to read the Affiliation Agreement and the Stock Option Agreement in their
entirety.
BACKGROUND OF THE AFFILIATION
UST. Since early 1996, a major focus of UST's executive management has been
the development and implementation of an "assembly strategy" of growth whereby
UST would, through a program of strategic acquisitions, establish and strengthen
UST's position generally in the Boston banking market and particularly in
specific identified segments of Eastern Massachusetts. As the consolidation in
the Boston banking market intensified in 1996 and 1997, UST was able to grow its
existing franchise at a rapid rate, reaching customers in many markets for the
first time, while also increasing the value to UST's stockholders of the UST
franchise. More recently, executive management, together with certain key
outside directors of UST, and assisted by outside financial advisors, has
focused its acquisition program on institutions within the Route 495 belt of
Middlesex County.
The implementation of UST's "assembly strategy" began in June 1996, when UST
entered into an agreement to purchase 20 branch offices located in the greater
Boston area from The First National Bank of Boston and BayBank, N.A. These
branches located in Boston and the surrounding cities and towns added to UST's
existing branch base. Through the acquisition of these branches, which was
completed in the winter of 1996-1997, UST assumed $744 million in deposits and
repurchase agreements and acquired $508 million in loans and $8 million in
premises and equipment.
In January 1997, UST established a significant presence in several
communities south and west of Boston where it did not previously have any
offices through its acquisition of Walden Bancorp, Inc. and its two banking
subsidiaries, The Co-operative Bank of Concord and The Braintree Savings Bank.
Walden, a $1 billion bank holding company, had 17 branch offices throughout
Massachusetts.
Prior to the branch acquisition and the Walden acquisition, UST had
twenty-eight branch offices. By virtue of the branch and Walden acquisitions,
UST's franchise increased to sixty-five branches. UST spent much of the first
half of 1997 integrating its operations after doubling in size through these
acquisitions. As a larger $3.7 billion bank holding company, UST began to
identify other acquisition candidates with which a combination with UST would,
in the opinion of management of UST, continue the building process begun in
1996. After identifying these potential companies, Mr. Finnegan, President and
Chief Executive Officer of UST, initiated preliminary conversations with a
number of them. Of particular importance to UST were acquisition targets which
would complement UST's existing franchise in the towns surrounding
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Boston. Included among the companies which UST was looking at was AFCB, which,
like Walden, had two subsidiary banks of similar size with offices in Lexington,
Waltham and several other towns within UST's assembly strategy market. During
the course of 1996-1997, Mr. Finnegan and Mr. Hansberry, President and Chief
Executive Officer of AFCB, had general sporadic conversations in which Mr.
Finnegan expressed UST's interest in the possibility of a combination with AFCB.
Mr. Finnegan and Mr. Hansberry had been acquainted for several years. Mr.
Finnegan and Mr. Hansberry met in October 1997 to discuss their institutions'
banking approaches and the Massachusetts banking environment. Mr. Hansberry had
indicated that an affiliation of AFCB with UST was not consistent with AFCB's
then-current business plan. On behalf of UST, Mr. Finnegan continued to pursue
possible acquisitions and combinations with other institutions consistent with
UST's strategy.
On October 30, 1997, Mr. Hansberry contacted Mr. Finnegan to determine if
UST were still interested in a possible affiliation with AFCB. Mr. Finnegan
indicated that UST was still interested in such an affiliation and the two
parties conducted informal conversations over the next few weeks, addressing
numerous issues, including the form of consideration, the type of transaction
and a variety of post-affiliation, corporate governance and employee-related
issues. A number of meetings and conversations between Mr. Finnegan and Mr.
Hansberry followed through the first half of November.
Simultaneously with the preliminary conversations between Mr. Finnegan and
Mr. Hansberry, UST became more significantly involved in negotiations with
Somerset Savings Bank, a Massachusetts stock savings bank ("Somerset") with a
total of five branches in the large Massachusetts cities of Somerville and
Burlington. Consistent with UST's assembly strategy, the acquisition of Somerset
offered UST an opportunity to expand its presence in Burlington and Somerville,
cities in which UST did not have a significant presence but which fit with UST's
Middlesex County strategy. Due diligence and negotiations with Somerset began in
earnest in September 1997 and intensified by the middle of November 1997. A
number of meetings took place between Mr. Finnegan and the principals of
Somerset, as well as substantive conversations and meetings between the
financial and legal advisors to each of UST and Somerset in the last two weeks
of November. Due diligence was completed and proposed transaction documentation
was prepared.
In late November 1997, Mr. Finnegan and Mr. Hansberry agreed that UST and
AFCB should conduct reciprocal preliminary due diligence investigations.
Preliminary due diligence was conducted throughout the week of December 1, 1997
at the offices of UST's and AFCB's accountants, Arthur Andersen LLP.
Representatives of, and advisors to, UST and AFCB met on December 5, 1997 and
reviewed many of the substantive elements of the due diligence investigation.
In light of the fact that UST's negotiations with Somerset had intensified
and UST had a strong desire to complete and announce the Somerset transaction as
soon as possible, UST determined that it would be best to concentrate its
efforts on completing its negotiations with Somerset during the one-week period
immediately prior to December 9, 1997. While due diligence pertaining to the
Affiliation was undertaken and some preliminary discussions took place during
this period, UST's principal attention during this period was on completing its
negotiations with Somerset. On the evening of December 9, 1997, following
meetings of the UST Board and the Somerset Board of Directors, UST and Somerset
executed a definitive agreement providing for UST's acquisition of Somerset.
Upon completion of the Somerset negotiations, management of UST, together
with its legal counsel and financial advisors, met with representatives of AFCB,
its legal counsel and financial advisors on December 10, 1997. Discussions
between Mr. Finnegan and Mr. Hansberry continued during the period of December
10 through December 13. At those meetings and in those conversations, issues
relating to the price of the affiliation and other financially-related terms and
characteristics were discussed directly between Mr. Finnegan and Mr. Hansberry.
Similar conversations were conducted through the financial advisors of each of
UST and AFCB. Based on their previous meetings, conversations and independent
analysis of the possibilities, in a telephone conversation on December 11, 1997,
the parties discussed a
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stock-for-stock conversion number and a walk-away privilege that AFCB could
assert if the price of UST Common Stock declined beyond a certain measurable
amount to be determined from UST's then current trading price and relative to an
index of peers of UST and AFCB to be agreed upon. During the period from
December 10 through December 13, 1997, the parties and their counsel and other
representatives negotiated the terms of the definitive agreement, substantially
all of the material aspects of which were completed by December 12, 1997. UST
learned that, following the close of business on December 12, the AFCB Board of
Directors had authorized management of AFCB to proceed with the Affiliation and
to execute definitive agreements with UST.
On Sunday, December 14, 1997, a special meeting of the UST Board was
convened. All members of the UST Board were present in person or by telephonic
means. Executive management made detailed presentations to the UST Board
outlining the terms of a proposed transaction with AFCB and describing its
potential effects on UST. At the meeting, the financial advisor of UST,
Fox-Pitt, Kelton, presented a detailed analysis of the financial effects of the
proposed transaction and delivered its opinion that the Conversion Number, from
a financial point of view, is fair to UST. At the meeting, the UST Board
conducted a thorough review of the results of UST's due diligence review of
AFCB, compared, with the assistance of UST's legal and financial advisors, the
proposed transaction to similar recent transactions and assessed the conformity
of the proposed transaction with UST's acquisition strategy. After lengthy
discussion, the UST Board unanimously voted to approve the proposed transaction
and the execution of definitive transaction documents with such changes as
determined by management of UST. The parties executed the definitive Affiliation
Agreement, dated December 15, 1997.
AFCB. Since AFCB's inception in 1995, as part of its ongoing efforts to
expand and strengthen its community banking franchise and enhance long-term
shareholder value, AFCB's management and Board of Directors have considered a
variety of strategic alternatives, including remaining independent, acquiring
other community banking institutions and entering into a strategic merger or
affiliation with a similarly sized or larger banking organization.
During 1996 management actively sought out and held exploratory discussions
with numerous acquisition candidates. One such prospective target was Middlesex
Bank and Trust Company ("Middlesex"), a Massachusetts trust company in
organization that sought to establish independent operations in Newton,
Massachusetts, which was a market area into which AFCB was considering expanding
its franchise. AFCB and Middlesex entered into a definitive agreement in
December 1996, pursuant to which AFCB agreed to provide the necessary
capitalization to Middlesex in consideration for acquiring 100% ownership of
Middlesex. AFCB's capitalization and accompanying acquisition of Middlesex was
completed on May 20, 1997 and Middlesex opened for business on June 2, 1997.
In April 1997, an out-of-state regional banking organization contacted AFCB
to express a high level of interest in discussing the possibility of its
acquiring ownership of AFCB. Given AFCB's strong earnings momentum and
continuing growth, AFCB's Board of Directors determined that this proposal was
not consistent with AFCB's long-term strategic plan at this time.
Throughout 1997, AFCB's management continued to engage in periodic
exploratory discussions with various acquisition candidates. None of these
discussions progressed beyond a preliminary stage, and AFCB entered into no
other agreements or understandings concerning any transaction during this
period.
At both a regular and a special meeting of the AFCB Board of Directors held
in October 1997, extensive general discussions were held regarding various
strategic alternatives, including the possibility of a strategic transaction
involving the out-of-state regional banking organization which had previously
contacted AFCB in April and the possibility of AFCB's acquiring a smaller
Massachusetts bank that was located in a market area in which AFCB was not then
operating. During the month of October 1997, AFCB senior management held several
meetings with senior management of both the out-of-state regional banking
organization as well as the smaller Massachusetts bank to discuss the
possibilities of a business
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combination involving AFCB and each of these respective institutions.
Discussions with the out-of-state regional banking organization were terminated
in late October 1997 at its initiative due to a change in its strategic
situation. Throughout October and November 1997, AFCB continued its discussions
with the smaller Massachusetts bank. These discussions were subsequently
terminated by AFCB in early December as a result of its decision at such time to
pursue serious discussions with UST regarding the possibility of a strategic
transaction between UST and AFCB.
In October 1997, Mr. Finnegan contacted Mr. Hansberry to arrange an informal
meeting to discuss the banking environment in general. At a meeting between Mr.
Hansberry and Mr. Finnegan held on October 22, the parties discussed the general
Massachusetts banking environment, the differing operational approaches of UST
and AFCB and the industry trend toward further consolidation. No specific
framework for any possible affiliation between UST and AFCB was discussed by
Messrs. Finnegan and Hansberry at that meeting and no further discussions were
scheduled at that time.
On October 30, 1997, Mr. Hansberry contacted Mr. Finnegan to arrange a
further meeting as a follow-up to their October 22 discussions. At a meeting
held on November 7, Messrs. Hansberry and Finnegan discussed the possibility of
a transaction between UST and AFCB with emphasis on strategic issues, including
regional market management and the potential structure for a regional framework
for operations following any such affiliation between AFCB and UST. Several
additional meetings and conversations occurred between Mr. Finnegan and Mr.
Hansberry through November and early December 1997. At a special meeting of the
AFCB Board of Directors held on November 11, 1997, several strategic
alternatives, including a possible transaction with UST, were considered in
depth. At a further special meeting of the AFCB Board of Directors held on
November 24, Mr. Hansberry made a full presentation of the potential terms of a
possible strategic transaction between UST and AFCB as they had been then
discussed to date between the parties. Mr. Hansberry recommended at that time
that AFCB take the necessary additional steps, including the commencement of due
diligence, to determine whether it would be appropriate for UST and AFCB to
enter into a definitive merger agreement. The AFCB Board of Directors
unanimously authorized management at that time to proceed on such basis with
UST. Following this Board meeting, AFCB contacted PaineWebber Incorporated for
the purpose of retaining PaineWebber to serve as AFCB's financial advisor in
connection with the proposed transaction with UST. On November 26, 1997, Messrs.
Hansberry and Finnegan, together with their respective chief financial officers,
met to discuss further the material aspects of a proposed transaction, including
the form of consideration to be paid by UST and a range of potential exchange
ratios in an all stock transaction, but no final agreement was reached by the
parties with respect to any such exchange ratio at that time. In addition, the
parties executed and delivered a confidentiality agreement at that time for the
purpose of undertaking reciprocal due diligence investigations of one another.
Additional in-depth due diligence by both parties continued during the week
of December 1, 1997. Representatives of UST and AFCB, together with the parties'
respective counsel and financial advisors, met on Friday, December 5, 1997, at
which time the results of the parties' respective due diligence investigations
were discussed. UST's counsel also distributed initial drafts of the Affiliation
Agreement, the Stock Option Agreement and related documents on this date.
At a lengthy special meeting of the AFCB Board of Directors held on December
8, 1997, Mr. Finnegan met the AFCB Board members and discussed his background,
his views regarding the future prospects for the combined company and other
matters pertaining to the proposed transaction. At this meeting, representatives
of PaineWebber delivered a preliminary report of their financial analysis
concerning UST and the proposed transaction and AFCB management delivered
preliminary reports on their financial and legal due diligence investigations of
UST.
On Wednesday, December 10, 1997, the parties and their advisors met to
negotiate the terms of the Affiliation Agreement, the Stock Option Agreement and
related documents. During December 10 and 11, the parties and their financial
advisors discussed in detail the proposed exchange ratio of 1.41 shares of
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UST common stock for each share of AFCB common stock, and negotiated the related
termination rights that would be exercisable by AFCB under the Affiliation
Agreement if the market price of UST's stock declined prior to closing. In
addition, AFCB and its financial advisor conducted further due diligence with
UST relating to the Somerset transaction.
On Friday, December 12, 1997, a lengthy special meeting of the AFCB Board of
Directors was held to consider further the proposed transaction with UST. At
this meeting, PaineWebber presented a financial analysis of UST and the proposed
transaction and delivered their written opinion that the consideration to be
received by the shareholders of AFCB in the Affiliation is fair to such
shareholders from a financial point of view. In addition, Arthur Andersen LLP
reported to the AFCB Board with respect to additional financial aspects of the
proposed transaction and the results of their due diligence investigation of
UST. Following the presentations of PaineWebber and Arthur Andersen, AFCB's
counsel, Sullivan & Worcester LLP, reviewed the terms of the Affiliation
Agreement, Stock Option Agreement and related documentation and answered
directors' questions regarding the terms of the Affiliation as set forth in such
agreements and related documents. Upon completion of its extensive deliberations
on December 12, 1997, the AFCB Board unanimously approved and adopted the terms
of the Affiliation Agreement, the Stock Option Agreement and the transactions
contemplated thereby and authorized management to proceed with the Affiliation
and to execute a definitive agreement with UST.
On Sunday, December 14, 1997, a special meeting of the UST Board of
Directors was held, at which the UST Board unanimously approved and adopted the
Affiliation Agreement, the Stock Option Agreement and the transactions
contemplated thereby.
The parties executed and delivered the Affiliation Agreement and the Stock
Option Agreement, as authorized by their respective Boards of Directors, prior
to the commencement of business on Monday, December 15, 1997. On this date,
AFCB's directors and executive officers and certain executive officers of AFCB's
subsidiaries also executed and delivered to UST their individual Voting
Agreements as required under the terms of the Affiliation Agreement.
RECOMMENDATION OF THE UST BOARD; REASONS FOR THE AFFILIATION
The terms of the Affiliation Agreement, including the Conversion Number,
were the result of arms' length negotiations between UST and AFCB. The UST Board
determined that strategic combination with AFCB on the terms negotiated with
AFCB is fair and in the best interests of UST and its stockholders as it is
expected to be value-accretive to UST by continuing UST's expansion of its
metropolitan franchise by adding additional branches in Middlesex County. In
addition, the transaction is expected to improve profitability through the
realization of up to $5 million in pre-tax operating efficiencies, a portion of
which will be realized immediately following consummation of the Affiliation
while other synergies will be realized following the merger of the AFCB Banks
with and into USTrust, which is anticipated to occur during 1998. The UST Board
also concluded that substantial benefits to UST's other constituencies,
including its employees and the communities it serves, as well as its
stockholders, would result from the enhanced strength and diversity of the
combined company.
In reaching its determination to enter into the Affiliation Agreement, the
UST Board considered the following material positive factors: (i) the UST
Board's familiarity with and review of UST's business, operations, financial
condition, earnings and prospects; (ii) the UST Board's review, based in part on
a presentation by UST management regarding its due diligence of AFCB, of AFCB's
business, operations, earnings and financial condition on an historical,
prospective and pro forma basis, and the enhanced opportunities for growth that
the Affiliation makes possible; (iii) a variety of factors affecting and
relating to the overall strategic focus of UST, including, without limitation,
opportunities for growth in deposits, assets and earnings, and opportunities
available to UST in the market areas where AFCB conducts business; (iv) the
current and prospective economic environment facing financial institutions,
including
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UST; (v) the terms of the Affiliation Agreement, the Stock Option Agreement and
the other documents executed in connection with the Affiliation; and (vi) the
anticipated cost savings and efficiencies available from the Affiliation,
including savings from possible branch consolidations and a reduction of
expenses related to data processing, marketing, audit, operations, legal,
insurance, directors' and other duplicate costs. The material negative factors
considered by the UST Board in proceeding with the Affiliation, were the
necessity of allocating sufficient resources toward the integration of the AFCB
Banks and Somerset with and into USTrust and the fact that UST's adoption of a
regional organization represented a change in UST's current structure and method
of doing business. See "--The Subsidiary Banks; Establishment of Regional
Organization." The UST Board did not assign any specific or relative weight to
any of these various positive or negative factors in its consideration.
THE UST BOARD UNANIMOUSLY RECOMMENDS THAT THE AFFILIATION AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY BE APPROVED BY THE STOCKHOLDERS OF UST.
RECOMMENDATION OF THE AFCB BOARD; REASONS FOR THE AFFILIATION
The AFCB Board considered the Affiliation and the terms of the Affiliation
Agreement, including the consideration to be received by AFCB's stockholders in
the Affiliation, in light of a variety of economic, financial, legal, social and
market factors and concluded that the Affiliation is in the best interests of
AFCB, its stockholders and AFCB's other constituencies, including the customers,
employees and communities it serves. The terms of the Affiliation Agreement are
the result of arms' length negotiations between AFCB and UST, as well as
consultations between AFCB and its financial advisor and legal counsel. The
material positive factors considered by the AFCB Board were the historical
operating results, current financial condition, business and management and
future financial and other prospects of AFCB and UST and the advice of
PaineWebber as to the fairness to AFCB's stockholders, from a financial point of
view, of the consideration to be received by them in the Affiliation. Also
considered were the relative size and geographic market areas of AFCB and UST,
the employment policies of UST, UST's demonstrated commitment to meeting the
banking needs of the members of the communities it serves, UST's product mix and
customer philosophy, and UST's agreement to restructure its retail and small
business operations into a regional community banking organization. The AFCB
Board believes that the Affiliation will afford AFCB's stockholders the benefit
of UST's larger market capitalization and the more liquid market for UST Common
Stock and will offer enhanced opportunities for the resulting subsidiary banks
of UST to meet the banking needs of customers and other members of the
communities currently served by the AFCB Banks. During the negotiation process
with UST and at various AFCB Board Meetings prior to December 15, 1997, the AFCB
Board and senior management of AFCB also considered negative factors involved in
proceeding with the Affiliation. The material negative factors were that the
Affiliation would result in an obvious loss of legal autonomy and represented a
change from AFCB's regional organization structure which emphasized local
autonomy for the AFCB Banks and that the announcement of the Affiliation might
have an adverse effect on AFCB's franchise, because its competitors could be
expected to solicit AFCB's customers and employees to terminate their
relationships with the AFCB Banks. AFCB regarded UST's willingness to establish
an internal regional organization structure after consummation of the
Affiliation as partially mitigating these factors. See "--The Subsidiary Banks;
Establishment of Regional Organization." The AFCB Board did not assign any
specific or relative weight to any of the various positive or negative factors
considered in its deliberation pertaining to the Affiliation.
THE AFCB BOARD UNANIMOUSLY RECOMMENDS THAT THE AFFILIATION AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY BE APPROVED BY THE STOCKHOLDERS OF AFCB.
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OPINION OF FINANCIAL ADVISOR TO UST
Fox-Pitt, Kelton has acted as financial advisor to UST in connection with
the Affiliation. In connection with such engagement, at the December 14, 1997
meeting of the UST Board, Fox-Pitt, Kelton delivered its oral and written
opinion to the UST Board, to the effect that, based upon and subject to various
considerations set forth in such opinion, as of December 14, 1997, the
Conversion Number was fair, from a financial point of view, to UST. Fox-Pitt,
Kelton subsequently confirmed its December 14, 1997 opinion by delivery to the
UST Board of a written opinion dated the date of this Joint Proxy Statement-
Prospectus that is substantially identical to the December 14, 1997 opinion. No
limitations were imposed by the UST Board upon Fox-Pitt, Kelton with respect to
investigations made or the procedures followed by Fox-Pitt, Kelton in rendering
its opinion. Fox-Pitt, Kelton opined solely as to the fairness of the Conversion
Number, rather than to any adjustments to the Conversion Number that might be
made by UST in response to any optional notification of termination that could
be delivered by AFCB under certain cicumstances in accordance with the terms of
the Affiliation Agreement.
The full text of the written opinion by Fox-Pitt, Kelton, dated the date of
this Joint Proxy Statement-Prospectus, which sets forth the assumptions made,
matters considered and limits on the review taken, is attached as Appendix D to
this Joint Proxy Statement-Prospectus. UST stockholders are urged to read this
opinion carefully and in its entirety. Fox-Pitt, Kelton's opinions are directed
only to the fairness of the Conversion Number to UST from a financial point of
view, have been provided to the UST Board in connection with its evaluation of
the Affiliation and do not constitute a recommendation to any UST stockholder as
to how such stockholder should vote. The summary of the opinions of Fox-Pitt,
Kelton set forth in this Joint Proxy Statement-Prospectus is qualified in its
entirety by reference to the full text of such opinions.
In arriving at its opinions, Fox-Pitt, Kelton, among other things, (i)
reviewed and analyzed certain publicly available financial statements for UST
and AFCB, (ii) analyzed certain internal financial statements, including
financial projections and other financial and operating data prepared by the
managements of UST and AFCB, (iii) discussed the past, present and future
operations, financial condition and prospects of UST and AFCB with senior
executives of the respective companies, (iv) reviewed the reported prices and
trading activity of UST Common Stock and AFCB Common Stock, (v) compared the
financial performance and condition of UST and AFCB with that of certain other
comparable publicly traded companies, (vi) reviewed and discussed with senior
executives of UST and AFCB the strategic objectives of the Affiliation and
certain other benefits of the Affiliation to UST, (vii) reviewed the financial
terms, to the extent publicly available, of certain merger and acquisition
transactions comparable, in whole or in part, to the Affiliation, (viii)
reviewed the Affiliation Agreement draft dated as of December 13, 1997, and (ix)
performed such other analyses and investigations as Fox-Pitt, Kelton deemed
appropriate.
In rendering its opinion, Fox-Pitt, Kelton assumed and relied upon, without
independent verification, the accuracy and completeness of all of the financial
and other information reviewed by Fox-Pitt, Kelton for the purposes of providing
its opinions, and did not assume any responsibility for independent verification
of such information. Fox-Pitt, Kelton did not assume any responsibility for
independent verification of the assets and liabilities of UST or AFCB nor did it
assume any responsibility for reviewing loan files or visiting branch locations.
With respect to financial projections, Fox-Pitt, Kelton assumed that they were
reasonably prepared by the respective managements of UST and AFCB on bases
reflecting the best currently available estimates and judgments of the future
financial performance of UST and AFCB, including projected cost savings from the
Affiliation. Fox-Pitt, Kelton expresses no view as to such projections or the
assumptions on which they were based. Fox-Pitt, Kelton's opinion dated December
14, 1997, and its opinion dated the date of this Joint Proxy
Statement-Prospectus are based upon economic, market and other conditions as
they existed and could be evaluated on December 13, 1997, and May 11, 1998,
respectively.
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The forecasts or projections furnished to Fox-Pitt, Kelton for each of UST
and AFCB and estimates of synergies resulting from the Affiliation were prepared
by the respective managements of each company. As a matter of policy, neither
UST nor AFCB publicly discloses internal management forecasts, projections or
estimates of the type furnished to Fox-Pitt, Kelton in connection with its
analysis of the Affiliation, and such forecasts, projections and estimates were
not prepared with a view towards public disclosure. These forecasts, projections
and estimates were based on numerous variables and assumptions which are
inherently uncertain and which may not be within the control of management,
including, without limitation, factors related to the integration of UST and
AFCB and general economic, regulatory and competitive conditions. Accordingly,
actual results could vary materially from those set forth in such forecasts,
projections and estimates. SEE "CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION."
The following is a summary of the material analyses presented by Fox-Pitt,
Kelton to the UST Board at its meeting held on December 14, 1997, in connection
with the delivery of Fox-Pitt, Kelton's December 14, 1997 opinion to the UST
Board.
COMPARABLE PUBLIC COMPANY ANALYSIS. Fox-Pitt, Kelton reviewed certain
financial and stock market performance data of eleven publicly traded thrift
institutions headquartered in The Commonwealth of Massachusetts and with assets
greater than $500 million (the "AFCB Peer Companies"). For the purposes of its
analysis, the following companies comprised the AFCB Peer Companies: SIS
Bancorp, Inc., Andover Bancorp, Inc., First Essex Bancorp, Inc., Medford
Bancorp, Inc., FirstFed America Bancorp, Inc., MASSBANK Corp., People's
Bancshares, Inc., MetroWest Bank, Somerset Savings Bank, Sandwich Bancorp, Inc.
and Abington Bancorp, Inc. Fox-Pitt, Kelton analyzed the relative performance
and value of AFCB by comparing certain publicly available financial data of AFCB
with the AFCB Peer Companies, including ratios of loans to deposits and equity
to assets, and multiples of market price to earnings per share as of the last
twelve months, market price to estimated earnings per share in 1997, and market
price to book value. This analysis yielded the following medians for the AFCB
Peer Companies and AFCB, respectively: (i) Loans to deposits ratios of 92.8% and
100.7%; (ii) Equity to assets ratios of 7.5% and 9.8%, (iii) Market price to
earnings multiples for the last twelve months of 16.8x and 18.8x; (iv) Market
price to estimated earnings per share in 1997 of 16.0x and 18.5x; and (v) Market
price to book value multiples of 195.6% and 188.8%.
Fox-Pitt, Kelton performed a similar analysis with respect to UST. Fox-Pitt,
Kelton reviewed and compared certain financial, operating and stock market
performance data of UST with eight publicly traded bank holding companies with
assets between $2.5 billion and $5 billion and headquartered in Connecticut,
Delaware, the District of Columbia, Maine, Maryland, Massachusetts, New
Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont (the
"UST Peer Companies"). For the purposes of its analysis, the following companies
comprised the UST Peer Companies: Fulton Financial Corporation, Commerce
Bancorp, Inc., Provident Bankshares Corporation, Susquehenna Bancshares, Inc.,
HUBCO, Inc., BankNorth Group, Inc., First Commonwealth Financial Corporation,
and The Trust Company of New Jersey. Fox-Pitt, Kelton analyzed the relative
performance and value of UST by comparing certain publicly available financial
data of UST with the UST Peer Companies, including ratios of loans to deposits
and equity to assets, and multiples of market price to earnings per share as of
the last twelve months, market price to estimated earnings per share in 1997,
and market price to book value. This analysis yielded the following medians for
the UST Peer Companies and UST, respectively: (i) Loans to deposits ratios of
87.2% and 92.1%; (ii) Equity to assets ratios of 7.7% and 8.5%, (iii) Market
price to earnings multiples for the last twelve months of 19.5x and 27.8x; (iv)
Market price to estimated earnings per share in 1997 of 19.1x and 20.1x; and (v)
Market price to book value multiples of 258.0% and 258.1%.
COMPARABLE TRANSACTIONS ANALYSIS. Fox-Pitt, Kelton reviewed the
consideration paid or proposed to be paid in other transactions since January
1997 involving thrift institutions. Specifically, Fox-Pitt, Kelton analyzed (i)
eight transactions in which the seller was headquartered in Connecticut,
Massachusetts,
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Maine, New Hampshire, Rhode Island and Vermont with assets greater than $300
million (the "New England Transactions"), and (ii) nineteen transactions (other
than the New England Transactions) in which the seller was headquartered
anywhere in the United States with assets between $500 million and $5 billion
(the "Nationwide Transactions"). The ratios provided below assume a UST Common
Stock price of $28.31 (the reported price per share of UST Common Stock on
December 12, 1997), use the reported price per share of the seller's common
stock six days prior to announcement of the applicable transaction, and with
respect to AFCB, use publicly available information as of September 30, 1997. In
reviewing the comparable transactions, Fox-Pitt, Kelton examined the multiples
paid relative to previous twelve-month earnings, book value, tangible book value
and core deposits. This analysis yielded the following medians for the
Nationwide Transactions, medians for the New England Transactions, and the
Affiliation, respectively: (i) Price to earnings multiples of 23.1x, 20.1x and
22.9x; (ii) Price to book value ratios of 199%, 208.5% and 235.2%; (iii) Price
to tangible book value ratios of 206.5%, 218.6% and 236.5%; (iv) Tangible book
value premium to core deposits ratios of 15.7%, 14.9% and 27.3%; and (v) Premium
over seller common stock price ratios of 26.2%, 31.8% and 26.7%.
STOCK TRADING HISTORY. Fox-Pitt, Kelton reviewed the performance of the
weekly stock prices and trading volumes of the UST Common Stock and AFCB Common
Stock during the period from January 1996 through the first week of December
1997. Fox-Pitt, Kelton compared the per share stock price and trading volume of
UST Common Stock to the S&P Industrials (the "S&P 400") and to the UST Peer
Companies and compared the per share market price and trading volume of AFCB
Common Stock to the S&P 400 and to the AFCB Peer Companies.
PRO FORMA PER SHARE ANALYSIS. Fox-Pitt, Kelton analyzed certain pro forma
effects resulting from the Affiliation, based on the assumptions described above
as well as discussions with the managements of both UST and AFCB, estimates
provided by research analysts, estimated annual cost savings of 30% of AFCB's
estimated non-interest expense base and an estimated tax rate of 40%. This
analysis showed an accretion of 0.15% in 1998 earnings per share of UST Common
Stock, an accretion of 1.76% in the December 31, 1997 book value per share of
UST Common Stock, and an increase in dividends of $0.10 per share per AFCB
Common Stock. No transaction costs were taken into account in this analysis.
DIVIDEND DISCOUNT ANALYSIS. Fox-Pitt, Kelton performed a dividend discount
analysis to determine a range of present values per share of AFCB Common Stock
assuming AFCB continued to operate as a stand-alone entity. The range was
determined by adding (i) the present value of the estimated future dividend
stream that AFCB could generate over the period beginning December 31, 1997, and
ending on December 31, 2002, and (ii) the present value of the terminal value of
AFCB Common Stock on December 31, 2002. To determine a projected dividend
stream, Fox-Pitt, Kelton assumed (i) an increase in assets of 10.8% in 1998 and
10.5% each year from 1999 through 2002; (ii) a growth in earnings per share of
9.63% in 1998 and 9.5% each year from 1999 through 2002; and (iii) a dividend
payout ratio of 35.28% in 1998 and 35.5% each year from 1999 through 2002.
The terminal values are based upon a range of price-to-earnings and
price-to-book value multiples consistent with the range of price-to-earnings and
price-to-book value multiples at which similarly-sized thrift institutions
headquartered in New England have been sold in 1997 (19x to 21x previous twelve
month earnings per share and 2.1x to 2.3x book value per share) and a range of
discount rates (12% to 16%). Applying the foregoing multiples, discount rates
and assumptions, Fox-Pitt, Kelton determined that the fully diluted value per
AFCB Common Stock ranged from approximately $27.89 to $36.18 based on the
price-to-earnings multiple assumptions and $27.11 to $34.86 based on the
price-to-book value multiple assumptions.
In arriving at its opinions, Fox-Pitt, Kelton performed a variety of
financial analyses, the material portions of which are summarized above. The
summary set forth above does not purport to be a complete description of the
analyses performed by Fox-Pitt, Kelton or of Fox-Pitt, Kelton's presentation to
the UST
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Board. The preparation of a fairness opinion is a complex analytical process
involving various determinations as to the most appropriate and relevant methods
of financial analyses and the application of those methods to the particular
circumstances and, therefore, such an opinion is not necessarily susceptible to
partial analysis or summary description. In arriving at its opinions, Fox-Pitt,
Kelton did not attribute any particular weight to any analysis or factor
considered by it, but rather made qualitative judgments as to the significance
and relevance of each analysis and factor. Accordingly, Fox-Pitt, Kelton
believes that its analyses must be considered as a whole and that selecting
portions of such analyses and the factors considered by it, without considering
all such analyses and factors, could create an incomplete view of the process
underlying its analyses set forth in its opinion. With regard to the comparable
public company analysis and the comparable transactions analysis summarized
above, Fox-Pitt, Kelton selected comparable public companies on the basis of
various factors; however no public company or transactions utilized as a
comparison is identical to UST, AFCB or the Affiliation. Accordingly, an
analysis of the foregoing is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the comparable companies and other factors that could affect
the acquisition or public trading value of the comparable companies and
transactions to which UST, AFCB and the Affiliation are being compared.
Fox-Pitt, Kelton's opinions do not imply any conclusion as to the likely
trading range for the UST Common Stock following consummation of the
Affiliation, and do not address UST's underlying business decision to effect the
Affiliation. In performing its analyses, Fox-Pitt, Kelton made numerous
assumptions with respect to industry performance, general business, economic,
market and financial conditions and other matters, many of which are beyond the
control of UST and AFCB. Any estimates contained in such analyses are not
necessarily indicative of actual past or future results or values, which may be
significantly more or less than such estimates. Actual values will depend upon
several factors, including changes in interest rates, dividend rates, market
conditions, general economic conditions and other factors that generally
influence the price of securities. SEE "CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING INFORMATION."
Fox-Pitt, Kelton is an internationally recognized investment banking firm
and was selected by UST based on Fox-Pitt, Kelton's experience and expertise.
Fox-Pitt, Kelton regularly engages in evaluation of bank and bank holding
company securities in connection with acquisitions, negotiated underwritings,
secondary distributions of listed and unlisted securities, private placements
and valuations for various other purposes. In the ordinary course of its
business, Fox-Pitt, Kelton may effect transactions, for its own account or for
the account of customers, and hold at any time a long or short position in
securities of UST or AFCB.
Pursuant to a letter agreement dated December 4, 1997 and a subsequent
amendment dated December 15, 1997 between UST and Fox-Pitt, Kelton, Fox-Pitt,
Kelton agreed to act as financial advisor to UST in connection with the
Affiliation. UST paid Fox-Pitt, Kelton $550,000 upon the execution of the
Affiliation Agreement. UST has also agreed to pay Fox-Pitt, Kelton, a
transaction fee of 0.67% of the aggregate consideration paid or payable by UST
upon consummation of the Affiliation, which is estimated to be approximately
$1,807,773 based upon the closing price of UST Common Stock of $27.5625 at May
6, 1998. The $550,000 due upon execution of the Affiliation Agreement is fully
creditable against the transaction fee of 0.67% of the aggregate consideration.
UST has agreed to reimburse Fox-Pitt, Kelton for its reasonable out-of-pocket
expenses, including travel, outside legal fees and related charges, and to
indemnify Fox-Pitt, Kelton and related persons against certain liabilities,
including certain liabilities under the federal securities laws, from and
arising out of or based upon Fox-Pitt, Kelton's engagement on its behalf.
OPINION OF FINANCIAL ADVISOR TO AFCB
Pursuant to an engagement letter dated November 28, 1997, AFCB retained the
investment banking firm of PaineWebber Incorporated ("PaineWebber") to act as
financial advisor to AFCB. At the meeting
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of the AFCB Board on December 12, 1997, PaineWebber delivered its written
opinion stating that, on and as of the date of such opinion and based upon and
subject to the assumptions described in such opinion, the consideration to be
paid to holders of AFCB Common Stock in connection with the Affiliation was fair
to such shareholders from a financial point of view. In arriving at its opinion,
PaineWebber made its determination as to the fairness from a financial point of
view of the consideration to be paid to holders of AFCB Common Stock in
connection with the Affiliation in light of the financial and comparative
analyses described below. PaineWebber opined solely as to the fairness of such
consideration based upon the Conversion Number and did not opine as to any
adjustment to such consideration that might be made by UST in response to any
optional notification of termination that could be delivered by AFCB under
certain circumstances in accordance with the terms of the Affiliation Agreement.
In connection with the preparation and mailing of this Joint Proxy
Statement-Prospectus, PaineWebber delivered an updated opinion dated May 11,
1998 a copy of which is included herein as APPENDIX E and which is incorporated
by reference herein (the "Opinion"). The Opinion is substantially identical to
the opinion delivered to the AFCB Board on December 12, 1997, and is based on
financial and comparative analyses substantially identical to those described
below, except that the December 12, 1997 opinion did not include any detailed
analysis, except as described herein, taking into account UST's announcement of
the signing of a definitive agreement to acquire Somerset on December 10, 1997.
Holders of AFCB Common Stock are urged to read the Opinion in its entirety for a
description of factors considered and assumptions made by PaineWebber in
rendering the Opinion.
The Opinion does not address the relative merits of the Affiliation and any
other transactions or business strategies discussed by the AFCB Board as
alternatives to the Affiliation or the decision of the AFCB Board to proceed
with the Affiliation. No opinion is expressed as to the price at which the
securities to be issued in the Affiliation to the shareholders of AFCB may trade
at any time. In rendering the Opinion, PaineWebber has not been engaged to act
as agent or fiduciary of AFCB's equity holders or any other third party.
In arriving at the Opinion, PaineWebber has among other things:
(1) Reviewed AFCB's audited Annual Reports, Forms 10-K, Forms 10-Q and
related financial information for the three fiscal years ended December 31,
1997, and related unaudited financial information for the three months ended
March 31, 1998;
(2) Reviewed UST's audited Annual Reports, Forms 10-K and related
financial information for the five fiscal years ended December 31, 1997, and
related unaudited financial information for the three months ended March 31,
1998;
(3) Reviewed audited Annual Reports, Forms F-2 and related financial
information for the three fiscal years ended December 31, 1997, in each case
for Somerset;
(4) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets and prospects of AFCB
and UST furnished to Paine Webber by AFCB and UST;
(5) Conducted discussions with members of senior management of AFCB
concerning businesses and prospects of AFCB;
(6) Conducted discussions with members of senior management of UST
concerning the business and prospects of UST and Somerset;
(7) Reviewed the historical market prices and trading activity for the
shares of AFCB Common Stock and the shares of UST Common Stock and compared
them with those of certain publicly traded companies which Paine Webber
deemed to be relevant;
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(8) Compared the results of operations of AFCB and UST with those of
certain companies which Paine Webber deemed to be relevant;
(9) Compared the proposed financial terms of the Affiliation with the
financial terms of certain other mergers and acquisitions which Paine Webber
deemed to be relevant;
(10) Reviewed the Affiliation Agreement and Plan of Reorganization and
the related Stock Option Agreement, each dated December 15, 1997, relating
to the Affiliation;
(11) Reviewed such other financial studies and analyses and performed
such other investigations and taken into account such other matters as
PaineWebber deemed necessary, including PaineWebber's assessment of general
economic, market and monetary conditions.
As set forth in its opinion, PaineWebber relied upon the accuracy and
completeness of all information supplied or otherwise made available by AFCB,
UST and Somerset and PaineWebber did not assume any responsibility to
independently verify such information or undertake an independent appraisal of
the assets of AFCB, or UST, or Somerset. PaineWebber did not conduct a physical
inspection of the properties and facilities of AFCB, UST, or Somerset did not
conduct a review of the loan files or AFCB, UST or Somerset and did not make or
obtain any evaluation or appraisal of the assets or liabilities of AFCB, UST or
Somerset. PaineWebber relied upon the accuracy of AFCB and UST's earnings
projections and possible cost savings projections as a result of the
Affiliation, and PaineWebber did not assume any responsibility to independently
verify assumptions underlying such projections. The projections confidentially
furnished to PaineWebber were prepared by the respective managements of AFCB and
UST, and PaineWebber has assumed that they were reasonably prepared and reflect
good faith estimates and judgments of the managements of AFCB and UST,
respectively, as to the future performance of AFCB and UST. No substantive
financial forecasts were provided to PaineWebber with respect to Somerset. AFCB
and UST do not publicly disclose internal management projections of the type
provided to PaineWebber in connection with its review of the Affiliation. Such
projections were not prepared with a view toward public disclosure. The
projections were based on numerous variables and assumptions which are
inherently uncertain, including without limitation, factors related to future
economic and competitive conditions, the future financial condition and results
of operations of AFCB and UST and the future cost savings associated with the
Affiliation. Accordingly, actual results could vary significantly from those
reflected in such projections. SEE "CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING INFORMATION." The Opinion is necessarily based upon market,
economic, and other conditions as they existed on, and can be evaluated as of
the date thereof. The Opinion is directed to the AFCB Board and does not
constitute a recommendation to any holder of AFCB Common Stock or UST Common
Stock as to how such shareholders should vote on the Affiliation.
The preparation of a fairness opinion involves various determinations as to
the most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances and, therefore,
such an opinion is not readily susceptible to summary description. Furthermore,
in arriving at its fairness opinion, PaineWebber did not attribute any
particular weight to any analysis or factor considered by it, but rather made
qualitative judgments as to the significance and relevance of each analysis and
factor. Accordingly, PaineWebber believes that its analyses must be considered
as a whole and that considering any portions of such analyses and of factors
considered, without considering all analyses and factors, could create a
misleading or incomplete view of the process underlying its fairness opinion. In
its analyses, PaineWebber made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond the control of AFCB and UST. Any estimates contained in these
analyses are not necessarily indicative of actual values or predictive of future
results or value, which may be significantly more or less favorable than as set
forth therein. In addition, analyses relating to the value of businesses do not
purport to be appraisals or to reflect the prices at which businesses actually
may be sold.
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The following paragraphs summarize the material financial analyses performed
by PaineWebber in arriving at its opinion dated December 12, 1997, as to the
fairness, from a financial point of view, of the consideration to be paid to the
holders of AFCB Common Stock in connection with the Affiliation. PaineWebber
presented these analyses to the AFCB Board on December 12, 1997 and updated
these analyses in connection with the rendering of the Opinion included herein.
The following summary does not purport to be a complete description of the
analyses performed by PaineWebber in this regard.
SELECTED COMPARABLE COMPANY TRADING ANALYSIS: AFCB. Using publicly
available information, PaineWebber compared certain ratios of the financial
performance of AFCB to the stock market price of AFCB at December 10, 1997 with
such ratios for the following selected New England thrifts with assets between
$500 million to $2 billion deemed relevant by PaineWebber ("Comparable Group
I"): Abington Bancorp Inc., American Bank of Connecticut, Andover Bancorp Inc.,
BostonFed Bancorp Inc., Dime Financial Corp., First Essex Bancorp Inc., First
Federal of East Hartford, FirstFed America Bancorp Inc., MASSBANK Corp.,
Mechanics Savings Bank, Medford Savings Bank, MetroWest Bank, Norwich Financial
Corp., NSS Bancorp Inc., People's Bancshares Inc., Sandwich Bancorp Inc., and
SIS Bancorp Inc. (for all of which September 30, 1997 financial data was used).
Such comparisons included market price-to-book value ratios (a median of 173.8%
for Comparable Group I and 164.2% for AFCB); market price-to-tangible book value
ratios (a median of 183.1% for Comparable Group I and 165.1% for AFCB); market
price to LTM fully diluted earnings per share (a median of 15.2x for Comparable
Group I and 16.3x for AFCB); market price-to-estimated 1997 fully diluted
earnings per share (a median of 15.1x for Comparable Group I and 18.5x for
AFCB); and market price-to-estimated 1998 fully diluted earnings per share (a
median of 13.9x for Comparable Group I and 16.9x for AFCB). The 1997 and 1998
fully diluted earnings per share were (i) estimates provided by the management
of AFCB, in the case of AFCB and (ii) median published earnings estimates
provided by First Call, as of December 10, 1997, in the case of each of the
thrifts in Comparable Group I.
In connection with this analysis, and as previously discussed, management of
AFCB confidentially provided PaineWebber with information with regard to its
projected future earnings. Because of the inherent differences between the
operations of AFCB and the selected companies included in Comparable Group I,
PaineWebber believes that a purely quantitative comparable company analysis
would not be particularly meaningful in the context of the Affiliation.
PaineWebber believes that an appropriate use of comparable company analysis in
this instance would involve qualitative judgments concerning differences between
the financial and operating characteristics of AFCB and the selected companies
included in Comparable Group I which would affect the public trading values of
AFCB and the selected companies included in Comparable Group I. These
qualitative judgments made by PaineWebber in connection with its opinion
included PaineWebber's views as to business conditions and prospects in the
various markets in which these selected companies operate and the business
mixes, sources of revenue, risk profiles and prospects for these selected
companies.
SELECTED COMPARABLE COMPANY TRADING ANALYSIS: UST. Using publicly available
information, PaineWebber compared certain ratios of the financial performance of
UST to the stock market price of UST at December 10, 1997 with such ratios for
the following selected New England and MidAtlantic banks with assets between
$2.5 billion and $7.5 billion deemed relevant by PaineWebber ("Comparable Group
II"): Banknorth Group Inc., Commerce Bancorp Inc., FirstBank Puerto Rico, First
Commonwealth Financial Corporation, Fulton Financial Corp., HUBCO Inc., Keystone
Financial Inc., Mercantile Bankshares Corp., North Fork Bancorp., Provident
Bankshares Corp., Riggs National Corp., Susquehanna Bancshares Inc., Trust Co.
of New Jersey, U.S. Trust Corp., Valley National Bancorp, and Wilmington Trust
Corp. (for all of which September 30, 1997 financial data was used). Such
comparisons included, among others, market price-to book value ratios (a median
of 281% for Comparable Group II and 250% for UST); market price-to-tangible book
value ratios (a median of 294% for Comparable Group II and 308% for UST); market
price-to-LTM fully diluted earnings per share (a median of 19.8x for Comparable
Group II and 26.9x for UST); market price-to-estimated 1997 fully diluted
earnings per share (a median of 18.8x
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for Comparable Group II and 19.6x for UST); and market price-to-estimated 1998
fully diluted earnings per share (a median of 16.9x for Comparable Group II and
16.6x for UST). The 1997 and 1998 fully diluted earnings per share were (i)
estimates provided by the Management of UST, in the case of UST, and (ii) median
published earnings estimates provided by First Call, as of December 10, 1997, in
the case of each of the banks in Comparable Group II.
In connection with this analysis and as previously discussed, management of
UST confidentially provided PaineWebber with information with regard to its
projected future earnings. Because of the inherent differences between the
operations of UST and the selected companies included in Comparable Group II,
PaineWebber believes that a purely quantitative comparable company analysis
would not be particularly meaningful in the context of the Affiliation.
PaineWebber believes that an appropriate use of comparable company analysis in
this instance would involve qualitative judgments concerning differences between
the financial and operating characteristics of UST and the selected companies
included in Comparable Group II which would affect the public trading values of
UST and the selected companies included in Comparable Group II. These
qualitative judgements made by PaineWebber in connection with its opinion
included PaineWebber's views as to business conditions and prospects in the
various markets in which these selected companies operate and the business
mixes, sources of revenue, risk profiles and prospects for these selected
companies.
SELECTED COMPARABLE TRANSACTION ANALYSIS. Using publicly available
information, PaineWebber reviewed certain terms and financial characteristics of
selected New England thrift merger and acquisition transactions which
PaineWebber deemed to be relevant (the "Comparable Transaction Group"). Among
other financial characteristics of these transactions, PaineWebber reviewed (i)
offer price per share to market value prior to announcement, (ii) offer price
per share to book value per share and tangible book value per share multiples,
(iii) offer price per share to LTM fully diluted earnings per share multiples
and (iv) core deposit premiums. The Comparable Transactions Group consisted of
the following transactions (identified by buyer/seller): UST Corp./ Somerset
Savings Bank; Peoples Heritage Financial Group/CFX Corporation; Webster
Financial Corp./Eagle Financial Corp.; CFX Corporation/Community Bankshares,
Inc.; Vermont Financial Services Corporation/Eastern Bancorp, Inc.; Citizens
Financial Group, Inc./ Grove Bank; Webster Financial Corp./DS Bancor, Inc.; UST
Corp./Walden Bancorp, Inc.; First Union Corp./ Center Financial Corp.; Citizens
Financial Group Inc./Farmers & Mechanics Bank and Peoples Heritage Financial
Group/Family Bancorp. The median values for these transactions for the
transaction value-to-book value per share, transaction value-to-tangible book
value per share, transaction value-to LTM earnings per share, core deposit
premium ratios and the transaction value-to-market price one day prior to
announcement were 169%, 178%, 15.91x, 7.14% and 127% respectively, compared with
224%, 226%, 22.3x, 26.3% and 119% (based on AFCB's common stock price at
December 10, 1997) for the Affiliation, based on an exchange ratio of 1.41
shares of UST Common Stock for each share of AFCB Common Stock and a UST stock
price of $27.50 at December 10, 1997.
In the case of the Comparable Transaction Group, PaineWebber believes that a
purely quantitative comparable transaction analysis would not be particularly
meaningful in the context of the Affiliation, because the reasons for and
circumstances surrounding each of the transactions analyzed were so diverse and
because of the inherent differences between the operations of UST, AFCB, and the
selected companies included in the Comparable Transactions Group. PaineWebber
believes that an appropriate use of a comparable transaction analysis in this
instance would involve qualitative judgments concerning differences between the
characteristics of these transactions and the Affiliation which would affect the
acquisition value of the acquired companies and AFCB. These qualitative
judgements made by PaineWebber in connection with its opinion included:
PaineWebber's views as to the universe of potential buyers in each of these
transactions, their potential level of interest in an acquisition of these
companies and the ability of the acquirors to implement cost savings; business
conditions and prospects in various markets in which these acquired companies
operate; and the business mixes, sources of revenue, risk profiles and prospects
for these acquired companies.
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DISCOUNTED CASH FLOW ANALYSIS. PaineWebber performed an analysis to
calculate a range of present values per share of AFCB Common Stock assuming AFCB
continued to operate on a stand-alone basis. The range was calculated by adding,
for each of the annual periods from 1998 through 2002 (i) the present value of
the estimated cumulative dividends through the end of each such annual period
and (ii) the present value of the estimated stock price at each such period-end.
To calculate these present values, PaineWebber formulated three scenarios: (i) a
5% growth scenario, (ii) a 10% growth scenario, and (iii) 15% growth scenario.
Under all scenarios, AFCB's 1998 fully diluted earnings per share were estimated
to be $1.92 with an annual dividend of $0.62 per share for 1998. PaineWebber
assumed that earnings and dividends in the years 1999 through 2002 would grow
annually at 5%, 10% and 15%, respectively under the three scenarios. For
comparison purposes, multiples of 16 and 20 times the earnings per share were
applied in order to estimate the value of the stock at the end of each of the
years 1998 through 2002. Based on earnings multiples applied to the projected
fully diluted earnings per share in the respective years, PaineWebber calculated
trading and control valuations for AFCB at the end of such years. PaineWebber
then calculated the present value of the implied future stock prices and the
cumulative projected dividend streams using a 15% discount rate. Applying the
forementioned discount rate, growth rates and multiples of earnings, PaineWebber
calculated the fully diluted per share value of AFCB Common Stock to range from
approximately $20.27 to $24.91 per share under the 5% growth scenario, $24.24 to
$29.83 under the 10% growth scenario and $28.79 to $35.47 under the 15% growth
scenario.
PRO FORMA AFFILIATION ANALYSIS. PaineWebber estimated the impact of the
proposed Affiliation on UST's projected fully diluted estimated earnings per
share for 1998, book and tangible book value per share and pro forma dividends
per share. In connection with this analysis and as previously discussed,
management of AFCB and UST confidentially provided PaineWebber with information
with regard to projected future earnings. Based on such information, and the
terms of the proposed Affiliation, PaineWebber concluded that, for UST, the
Affiliation could have a dilutive effect (before taking into account various
cost savings which could be accomplished upon consolidation of AFCB's and UST's
operations) on estimated fully diluted earnings per share in 1998 of
approximately 5.0%, and, based on financial information at September 30, 1997,
would have an accretive effect to both UST's book value per share of
approximately 1.0% and tangible book value per share of approximately 5.6%.
PaineWebber concluded that for AFCB, the Affiliation would have a dilutive
effect to both AFCB's book value per share of approximately 3.3% and tangible
book value per share of approximately 15.0%, based on financial information at
September 30, 1997. PaineWebber also concluded that the proposed Affiliation
would have an accretive effect on AFCB's estimated 1998 earnings per share by
approximately 18.6% (before taking into account various cost savings which could
be accomplished upon consolidation of AFCB and UST's operations) and on AFCB's
dividend per share by approximately 12.8%, based on the current dividend rates
for AFCB and UST. PaineWebber's analysis of the pro forma effect of the
Affiliation on such per share information for AFCB was based on a comparison of
such current information for AFCB versus such pro forma per share information
for UST multiplied by the Conversion Number. PaineWebber calculated that the
proposed Affiliation would become accretive to UST's 1998 earnings per share if
pre-tax cost savings of greater than approximately $6.1 million could be
achieved. In the above analysis PaineWebber assumed that the Somerset
transaction had been completed based on the terms publicly disclosed on December
10, 1997. PaineWebber also analyzed the Affiliation assuming that the Somerset
transaction had not been completed and determined that the Somerset transaction
had a negligible effect on UST's book value, tangible book value and projected
1998 fully diluted earnings per share.
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PaineWebber is an internationally recognized investment banking firm and, as
part of its investment banking activities, PaineWebber is regularly engaged in
the valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. The AFCB Board selected PaineWebber
because of its expertise, its reputation and its familiarity with AFCB and the
thrift and banking industries in general.
PaineWebber has acted as financial advisor to AFCB in connection with the
Affiliation. As compensation for its services in connection with the
Affiliation, AFCB has agreed to pay PaineWebber a fee of two-thirds of one
percent of the final transaction value, but not less than $1,500,000, payable on
the basis of $50,000 at the time the engagement letter was signed, $100,000 at
the time the Affiliation Agreement was signed and the remaining balance upon
consummation of the Affiliation. The total fee payable to PaineWebber is
estimated to be approximately $1,807,773 based upon the closing price of UST
Common Stock of $27.5625 at May 6, 1998. In addition, AFCB has agreed to
reimburse PaineWebber for reasonable out-of-pocket expenses incurred in
connection with the Affiliation and to indemnify PaineWebber against certain
liabilities, including liabilities that may arise under the federal securities
law.
In the ordinary course of its business, PaineWebber actively trades in the
securities of AFCB for its own account and for the accounts of others and,
accordingly, may at any time hold a long or short position in such securities.
EFFECTIVE TIME OF THE AFFILIATION; CLOSING DATE
As soon as practicable after satisfaction or waiver of all conditions to the
Affiliation under the Affiliation Agreement, UST, Mosaic and AFCB will cause
Articles of Merger complying with the requirements of the MBCL to be filed with
the Secretary of The Commonwealth of Massachusetts. The date and time as of
which the Articles of Merger become effective, as set forth in the Articles of
Merger, will be the "Effective Time." The Effective Time will occur on the first
business day after the date on which all conditions contained in Article VI of
the Affiliation Agreement are satisfied or waived or at such other date as the
parties may agree upon. UST and AFCB anticipate that the Affiliation will be
completed in the second or third quarter of 1998. The consummation of the
Affiliation could be delayed, however, as a result of delays in obtaining the
necessary regulatory and stockholder approvals. There can be no assurances given
that such approvals will be obtained or that the Affiliation will be completed
at any time. If the Affiliation has not been consummated on or before August 31,
1998, the Affiliation Agreement may be terminated by either UST or AFCB. See
"THE AFFILIATION--Regulatory Approvals," "--Conditions to the Consummation of
the Affiliation," and "--Termination of the Affiliation Agreement."
TERMS OF THE AFFILIATION
The Affiliation Agreement provides for the merger of AFCB with and into
Mosaic, with Mosaic as the surviving corporation and continuing as a
wholly-owned subsidiary of UST. Upon the consummation of the Affiliation, each
outstanding share of AFCB Common Stock will be converted into 1.41 shares of UST
Common Stock (the "Conversion Number"), and a corresponding amount of preferred
stock purchase rights under the UST Rights Agreement, dated as of September 19,
1995 (the "UST Rights Agreement"), provided that (i) no shares of AFCB Common
Stock which are held directly or indirectly by UST will be converted unless held
by UST in a fiduciary capacity or for debts previously contracted, and (ii) any
shares of AFCB Common Stock held as treasury shares by AFCB and any Dissenting
Shares will not be so converted. Where a holder of AFCB Common Stock has shares
of record represented by two or more certificates, the certificates will be
aggregated.
In addition, if the Closing Price (as such term is defined in "THE
AFFILIATION--Termination of the Affiliation Agreement") is less than $24.06 per
share and the price of UST Common Stock has declined more than 15% relative to a
certain bank stock index, the AFCB Board may notify UST in writing of its
intention to terminate the Affiliation Agreement. However, in the event that
AFCB notifies UST of its
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intention to exercise its termination rights pursuant to the foregoing sentence,
UST may in the time period prescribed in the Affiliation Agreement, choose to
increase the consideration to be paid to AFCB stockholders by adjusting the
Conversion Number to equal a number (calculated to the nearest one-thousandth)
obtained by dividing (x) $33.92 by (y) the Closing Price, in which case the
Affiliation Agreement will remain in full force and effect. In the event that
UST exercises its rights to increase the Conversion Number, holders of AFCB
Common Stock will receive more than 1.41 shares of UST Common Stock for each
share of AFCB Common Stock to compensate for a decrease in the value of UST
Common Stock.
Assuming that the Affiliation is approved by the stockholders of UST at the
UST Meeting, the UST Board may elect to consummate the Affiliation by increasing
the consideration to be paid to AFCB stockholders by adjusting the Conversion
Number without resoliciting UST stockholders. In such a situation, in
considering whether to proceed without the resolicitation of UST stockholders,
the UST Board will take into account, consistent with its fiduciary duties, all
relevant facts and circumstances that exist at such time, including, without
limitation, the advice of its financial advisors and legal counsel. The
Fox-Pitt, Kelton fairness opinion included as APPENDIX D to this Joint Proxy
Statement-Prospectus specifically states that the opinion does not relate to any
adjustments which may be made to the Conversion Number by UST in response to the
optional notification of termination by AFCB in accordance with the terms of the
Affiliation Agreement. Consequently, if UST did elect to increase the
consideration to be paid to the AFCB stockholders by adjusting the Conversion
Number, the UST Board could not under such circumstances rely on Fox-Pitt,
Kelton's opinion unless it sought and received Fox-Pitt Kelton's consent.
Stockholder approval of the Affiliation Agreement and each of the transactions
contemplated thereby confers upon the UST Board the power, consistent with its
fiduciary duties, to elect to consummate the Affiliation by electing to increase
the consideration to be paid to the AFCB stockholders by adjusting the
Conversion Number. Therefore, UST could elect to proceed with the Affiliation
without resoliciting either UST stockholders or obtaining an updated fairness
opinion if the UST Board determined that such action was consistent with its
fiduciary duties.
Alternatively, assuming that the Affiliation is approved by the stockholders
of AFCB at the AFCB Meeting, the AFCB Board may elect to consummate the
Affiliation without resoliciting AFCB stockholders even if the Closing Price is
less than $24.06 per share and the price of UST Common Stock has declined more
than 15% relative to a certain bank stock index and UST does not elect to
increase the consideration to be paid to the AFCB stockholders by adjusting the
Conversion Number as set forth above. Under such circumstances, as a result of
the Conversion Number, the calculated value of the shares of UST Common Stock
that would be received by AFCB stockholders would be less than $33.92 per share.
In such a situation, in considering whether to consummate the Affiliation
without the resolicitation of AFCB's stockholders, the AFCB Board will take into
account, consistent with its fiduciary duties, all relevant facts and
circumstances that exist at such time, including, without limitation, the advice
of its financial advisors and legal counsel. The PaineWebber fairness opinion
included as Appendix E to this Joint Proxy Statement-Prospectus has been
delivered and speaks as of the date of this Joint Proxy Statement-Prospectus.
The opinion does not address any adjustment that may be made to the Conversion
Number under the terms of the Affiliation Agreement. Consequently, if a decline
in the price of UST Common Stock as set forth above were to occur and UST did
not elect to increase the consideration to be paid to the AFCB stockholders by
adjusting the Conversion Number, the AFCB Board could not under such
circumstances rely on PaineWebber's opinion unless it sought and received
PaineWebber's consent. Stockholder approval of the Affiliation Agreement and
each of the transactions contemplated thereby confers upon the AFCB Board the
power, consistent with its fiduciary duties, to elect to consummate the
Affiliation notwithstanding that the Closing Price is less than $24.06 per share
and the price of UST Common Stock has declined more than 15% relative to a
certain bank stock index and UST does not elect to increase the consideration to
be paid to the AFCB stockholders by adjusting the Conversion Number. Therefore,
AFCB could elect to proceed with the Affiliation without resoliciting AFCB
stockholders or obtaining an updated fairness opinion if the AFCB Board
determined that such action was consistent with
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its fiduciary duties. For a full discussion of UST and AFCB's termination
rights, see "THE AFFILIATION--Termination of the Affiliation Agreement."
Each outstanding share of AFCB Common Stock owned by UST and its
subsidiaries (other than in a fiduciary capacity or for debts previously
contracted) or by AFCB as treasury stock will be cancelled and retired at the
Effective Time and cease to exist, and no payment will be made with respect
thereto.
Shares of AFCB Common Stock held by a stockholder who has demanded appraisal
rights in compliance with the provisions of the MBCL will not be converted into
UST Common Stock at the Effective Time (see "THE AFFILIATION--Rights of
Dissenting Stockholders"). If, however, the stockholder subsequently withdraws
his or her demand for appraisal or loses his or her right of appraisal, the
stockholder's shares will be deemed to be so converted as of the Effective Time.
In addition, at the Effective Time, all stock options with respect to AFCB
Common Stock granted by AFCB or its affiliates under any stock option plan,
which are outstanding at such time, whether or not then exercisable, will become
fully exercisable in accordance with their terms and will be converted into and
will become stock options with respect to UST Common Stock. The rights to UST
Common Stock to be received by holders of AFCB stock options upon consummation
of the Affiliation will be identical to the rights such optionees had under the
AFCB stock option plans which covered such stock options immediately prior to
the Effective Time, except that the number of shares of UST Common Stock subject
to such options and the exercise price per share of such options will be
determined in accordance with the Conversion Number. The number of shares of UST
Common Stock subject to each such stock option will be equal to the product of
the number of shares of AFCB Common Stock previously subject thereto and the
Conversion Number, rounded down to the nearest whole share. The exercise price
per share of UST Common Stock shall be equal to the exercise price per share of
AFCB Common Stock previously subject thereto divided by the Conversion Number,
rounded up to the nearest cent. See "THE AFFILIATION-- Employee Matters."
The Affiliation Agreement provides that, in the event that UST changes the
number of shares of UST Common Stock issued and outstanding between December 15,
1997 and the Effective Time as a result of a stock split, stock dividend,
recapitalization, reclassification or other similar transaction, the Conversion
Number will be adjusted proportionately.
No fractional shares of UST Common Stock will be issued in the Affiliation.
The Affiliation Agreement provides that each holder of shares of AFCB Common
Stock exchanged pursuant to the Affiliation, who would otherwise have been
entitled to receive a fraction of a share of UST Common Stock (after taking into
account all certificates delivered by such holder) will receive, in lieu
thereof, cash (without interest) in an amount determined by multiplying such
holder's fractional interest by the Closing Price.
Shares of UST capital stock (including UST Common Stock) issued and
outstanding immediately prior to the Effective Time will remain issued and
outstanding immediately after the Affiliation.
REGULATORY APPROVALS REQUIRED FOR THE AFFILIATION
FEDERAL RESERVE. The Affiliation is subject to the approval of the Federal
Reserve Board under the Bank Holding Company Act of 1956, as amended (the "BHC
Act"). Assuming Federal Reserve Board Approval is granted, the Affiliation may
not be consummated until thirty (30) days after such approval (or 15 days if the
Affiliation does not result in any material anti-competitive effect), during
which time the DOJ may challenge the Affiliation on antitrust grounds and seek
divestiture of certain assets and liabilities. UST anticipates that the
Affiliation will have no material anti-competitive effect and that pursuant to
the BHC Act, and established procedures of the Federal Reserve Board, the
post-approval waiting period for the Affiliation will be reduced to fifteen (15)
calendar days.
The Federal Reserve Board is prohibited from approving any proposed
acquisition, merger, or consolidation under the BHC Act (a) which would result
in a monopoly or which would be in furtherance
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of any combination or conspiracy to monopolize or to attempt to monopolize the
business of banking in any part of the United States, or (b) the effect of which
in any section of the United States may be substantially to lessen competition,
or to tend to create a monopoly, or result in a restraint of trade, unless the
Federal Reserve Board finds that the anti-competitive effects of the transaction
are clearly outweighed in the public interest by the probable effect of the
transaction in meeting the convenience and needs of the communities to be
served.
In making its determination with respect to the Affiliation, the Federal
Reserve Board will take into consideration the financial and managerial
resources and future prospects of the existing and proposed institutions and the
convenience and needs of the communities served. As part of, or in addition to,
consideration of the above factors, it is anticipated that the Federal Reserve
Board will consider the financial condition of UST and AFCB, current and
projected economic conditions in the New England region and the overall capital
and safety and soundness standards of UST and AFCB as compared to those
established by the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") and the regulations promulgated thereunder.
In addition, under the Community Reinvestment Act of 1977, as amended (the
"CRA"), the Federal Reserve Board must take into account the record of
performance of each of UST and AFCB in meeting the credit needs of the entire
community, including low- and moderate-income neighborhoods, served by each of
such institutions. Furthermore, the BHC Act and Federal Reserve Board
regulations require publication of notice of, and the opportunity for public
comment on, the application submitted by UST for approval of the Affiliation and
the BHC Act provides that the Federal Reserve Board may permit interested
parties to intervene in the proceedings and to hold a public hearing in
connection therewith if the Federal Reserve Board determines that such a hearing
would be appropriate. Any such intervention by third parties could prolong the
period during which the application is subject to review by the Federal Reserve
Board.
As noted above, the Affiliation may not be consummated until the thirtieth
day after Federal Reserve Board approval, during which time the DOJ has
jurisdiction to challenge the Affiliation on antitrust grounds. With the
approval of the Federal Reserve Board and the DOJ, the waiting period may be
reduced to no less than fifteen days. The commencement of an antitrust action by
the DOJ would suspend the effectiveness of Federal Reserve Board approval of the
Affiliation unless a court specifically orders otherwise. In reviewing the
Affiliation, the DOJ could analyze the Affiliation's effect on competition
differently than the Federal Reserve Board, and thus it is possible that the DOJ
could reach a different conclusion than the Federal Reserve Board regarding the
Affiliation's competitive effects. Failure of the DOJ to object to the
Affiliation may not prevent the filing of antitrust actions or actions on other
grounds by private persons or state attorneys general.
In general, the Federal Reserve Board and the DOJ will examine the impact of
the Affiliation on competition in various product and geographic markets,
including competition for deposits and loans, especially loans to small and
middle market businesses.
The bank regulatory agencies, including the Federal Reserve Board, have over
the course of the last year issued various policy pronouncements regarding the
so-called Year 2000 problem, which concerns the inability of information
systems, primarily computer software programs, to recognize properly and process
date-sensitive information as the Year 2000 approaches. In light of the
importance of the Year 2000 problem, UST and AFCB have assembled project teams
of senior officers and, in the case of UST, outside consultants to assess the
impact of the Year 2000 problem on their information systems and those of their
customers, vendors and borrowers. Most recently, the bank regulatory agencies
have issued additional guidance under which they are assessing and will assess
Year 2000 readiness. The failure of a financial institution, such as UST or
AFCB, to take appropriate steps to address deficiencies in their Year 2000
process may form the basis for delay or denial of an application or other
regulatory request. In particular, the Federal Reserve Board has indicated that
institutions with less than satisfactory Year 2000 readiness may not use the
expedited application procedures for bank and nonbank acquisitions.
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UST concluded in early 1998 that sufficient progress against planning
objectives had not been achieved with respect to its Year 2000 readiness. UST
has devoted additional resources to the project, including but not limited to,
retaining the services of Arthur Andersen LLP and certain outside advisors and
programmers to augment UST's efforts in addressing its Year 2000 compliance, and
is currently accelerating its efforts at achieving milestones in its project
plan and is adding such additional milestones, assessments and documentation
procedures as are necessary to ensure timely Year 2000 readiness. UST currently
believes that it will be able to modify or replace any affected system in time
to minimize any detrimental effects on UST's operations. In addition, UST
intends to take those steps needed to assure that the application of the
resources necessary to address any conversion issues involving the pending
acquisitions of Somerset and AFCB will not negatively impact UST's Year 2000
readiness. For a more complete discussion of UST's and AFCB's Year 2000
readiness efforts, see UST's and AFCB's respective Annual Reports on Form 10-K
for the year ended December 31, 1997, which are incorporated herein by
reference. See "INCORPORATION OF CERTAIN INFORMATION BY REFERENCE."
The right of UST to exercise the Option under the Stock Option Agreement
also is subject to the prior approval of the Federal Reserve Board, to the
extent that the exercise of the Option would result in UST owning more than 5%
of the outstanding shares of AFCB Common Stock. In considering whether to
approve the exercise by UST of its rights under the Option, including its right
to purchase more than 5% of the outstanding shares of AFCB Common Stock, the
Federal Reserve Board would in general apply the same statutory criteria as it
would apply to its consideration of whether to approve the Affiliation and would
ordinarily require UST to enter into certain standard "passivity" commitments in
connection with any exercise of the Option by UST. The Stock Option Agreement
also provides that at the request of the holder of the Option, under certain
circumstances, AFCB will repurchase the Option (and any shares acquired pursuant
to the option beneficially owned by such holder) for cash. Such repurchase may
be subject to the prior approval of the Federal Reserve Board. In considering
whether to approve such repurchase, the Federal Reserve Board would be concerned
principally with the effect of the repurchase on the capital adequacy of AFCB.
For further information on the Stock Option Agreement, see "CERTAIN RELATED
TRANSACTIONS--Stock Option Agreement."
MASSACHUSETTS APPROVAL. The Affiliation is also subject to the approval of
the Massachusetts BBI under Sections 2 and 4 of Chapter 167A of the
Massachusetts General Laws. The statute requires that the Massachusetts BBI find
that the Affiliation would not unreasonably affect competition among banking
institutions and that it would promote public convenience and advantage. In
making such a determination, the Massachusetts BBI would consider, but would not
be limited to, a showing of net new benefits including initial capital
investments, job creation plans, consumer and business services and commitments
to maintain and open branch offices within a bank's statutorily-delineated local
community. In addition, the statute mandates that the Massachusetts BBI cannot
approve the Affiliation until it has received notice from the Massachusetts
Housing Partnership Fund (the "MHPF") that arrangements satisfactory to the MHPF
have been made for UST to pledge an amount of assets as required under the
statute to be available for call by the MHPF for a period of 10 years following
the consummation of the Affiliation for purposes of funding various affordable
housing programs, or other similar arrangements have been accepted by the MHPF.
Under the statute, UST also will be required to maintain, for a period of two
years following the consummation of the Affiliation, the asset base of AFCB's
subsidiary banks at a level equal to or greater than the total assets of such
banks on the date of consummation of the Affiliation; provided, however, that
the Massachusetts Commissioner may waive such asset retention requirement if, in
his judgment, economic conditions warrant such waiver. UST currently intends to
request that the Massachusetts Commissioner grant such waiver. The statute also
mandates that the Massachusetts BBI cannot approve the Affiliation until it has
received written assurance from UST that a resident or residents of The
Commonwealth of Massachusetts will occupy a position of an executive officer in
AFCB's subsidiary banks for so long as UST controls such subsidiary banks. In
addition, the Massachusetts BBI may not approve any proposed acquisition or
merger if such acquisition or merger would result in a bank holding company
holding or controlling in excess of 28% of the total deposits, exclusive of
foreign deposits, of all state and
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Federally chartered banks in Massachusetts and all Massachusetts branches
existing by authority of a foreign country; provided, however, that the
Massachusetts Commissioner may waive such maximum deposit requirement if, in his
judgment, economic conditions warrant such waiver. The parties do not expect
that approval of the Affiliation by the Massachusetts BBI will require that the
Massachusetts Commissioner waive such maximum deposit limitation.
UST and AFCB have filed or will file all applications necessary to receive
the requisite approvals of the Federal Reserve Board and the Massachusetts BBI.
The Affiliation will not proceed in the absence of all requisite regulatory
approvals. There can be no assurance that either the Federal Reserve Board or
the Massachusetts BBI will approve the Affiliation. If such approvals are
received, there can be no assurance as to the timing of such approvals, that
such approvals will not be conditioned in a manner so as to render inadvisable
in the reasonable judgment of UST the consummation of the Affiliation, or that
no action will be brought challenging such approvals. Additionally, there can be
no assurance that implementation of UST's and AFCB's current Year 2000 readiness
programs will not delay the receipt of such approvals. Other than as described
above, UST and AFCB are not aware of any other governmental approvals or actions
that are required prior to the parties' consummation of the Affiliation. It is
presently contemplated that, if any such additional governmental approvals or
actions were required, such approvals or actions would be sought. There can be
no assurance, however, that any such additional approvals or actions could be
obtained or, if obtained, would not be conditioned in a manner so as to render
it inadvisable, in the reasonable judgment of UST, to consummate the
Affiliation.
UST expects to merge the AFCB Banks with and into USTrust within six months
after the Effective Time. Receipt of approvals from the FDIC and from the
Massachusetts Commissioner will be required at that time in order to consummate
the merger of the banks. Such approvals, however, are not required for the
consummation of the Affiliation.
EMPLOYEE MATTERS
GENERAL
In the Affiliation Agreement, UST has agreed to provide those employees of
AFCB and its subsidiaries who remain employed with UST or its subsidiaries after
the Effective Time with the types and levels of employee benefits maintained by
UST for similarly situated employees of UST or its subsidiaries. Additionally,
effective the first day of the first full calendar quarter after the Effective
Time, UST has agreed to permit such former AFCB employees to participate in
UST's employee benefit plans, including group hospitalization, medical, life and
disability insurance plans, defined benefit pension plan, thrift plan, severance
plan and similar plans, on the same terms and conditions as applicable to
comparable employees of UST and its subsidiaries, giving AFCB employees full
credit for all "years of service," as that term is defined in Section 411(a)(5)
of the Code, with AFCB (to the extent AFCB gave effect) as if such service was
with UST, for purposes of eligibility, vesting and other appropriate benefits,
including applicability of minimum waiting periods for participation and
calculation of benefits under vacation, severance and all other plans (including
the waiver of pre-existing conditions, restrictions, exclusions or limitations),
but not for benefit accrual purposes under the UST defined benefit pension plan
attributable to any period prior to the Effective Time. Prior to their
enrollment in UST's employee benefit plans following the Effective Time as
described above, those employees of AFCB and its subsidiaries who remain
employed with UST or its subsidiaries after the Effective Time will continue to
be covered by all of the AFCB employee benefit plans which are in effect at the
Effective Time and have been previously disclosed to UST by AFCB.
UST has also agreed to honor in accordance with their terms all individual
employment, termination, severance, change in control, post-employment and other
compensation agreements and plans existing prior to the execution of the
Affiliation Agreement, which are between AFCB or any of its subsidiaries and any
current or former director, officer or employee of AFCB or any of its
subsidiaries and which have been previously disclosed to UST by AFCB.
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UST has also agreed in the Affiliation Agreement that, for a period of one
year following the Effective Time, UST will provide those employees of AFCB or
any of its subsidiaries who become employees of UST or any of its subsidiaries
with a severance plan with provisions that are at least as favorable in the
aggregate as the severance plan currently maintained by AFCB for such employees.
Any employee of AFCB or its subsidiaries who does not become an employee of UST
or any of its subsidiaries is entitled to severance benefits under the severance
plan or other agreement currently maintained by AFCB for such employee. Under
AFCB's Change of Control Severance Policy, any employee terminated after a
change of control of AFCB is entitled to receive three weeks of base salary for
every year of service to AFCB, with a minimum payment equal to four weeks and a
maximum payment equal to twelve months.
AFCB ESOPS
In the Affiliation Agreement, UST and AFCB also agree that they will use all
reasonable efforts, subject to all applicable laws and requirements to ensure
accounting treatment of the Affiliation as a pooling-of-interests, to ensure
that any net benefits that may be payable or otherwise distributed to employees
of AFCB after the Effective Time from or by either of the Employee Stock
Ownership Plans currently maintained by Lexington and Federal ("AFCB ESOPs"),
upon termination of the AFCB ESOPs as permitted by the Affiliation Agreement,
whether realized in the form of shares of UST Common Stock or any other form of
compensation, will be paid or otherwise distributed only to persons who are
employees of either Lexington or Federal on January 1, 1998 and on the Closing
Date.
AFCB STOCK OPTIONS
All rights with respect to AFCB Common Stock pursuant to stock options
granted by AFCB under any stock option plans of AFCB will be converted into
corresponding rights to purchase shares of UST Common Stock. The rights to UST
Common Stock to be received by holders of AFCB stock options upon consummation
of the Affiliation will be identical to the rights such optionees had under the
AFCB stock option plans which covered such stock options, including that all
such stock options will become fully exercisable upon the Effective Time, except
that (i) all references to AFCB will be deemed to be references to UST and (ii)
the number of shares of UST Common Stock subject to such options and the
exercise price of such options will be adjusted to reflect the Conversion
Number. The number of shares of UST Common Stock subject to such stock options
will be equal to the product of (x) the number of shares of AFCB Common Stock
previously subject thereto and (y) the Conversion Number, rounded down to the
nearest whole share. The exercise price per share of UST Common Stock shall be
equal to (x) the exercise price per share of AFCB Common Stock previously
subject thereto divided by (y) the Conversion Number, rounded up to the nearest
cent. UST has agreed to file a registration statement on Form S-3 or Form S-8,
as the case may be, with respect to the shares of UST Common Stock subject to
the AFCB stock options to be assumed by UST. UST will use all reasonable efforts
to maintain the effectiveness of such registration statement for so long as such
options remain outstanding. Under the Affiliation Agreement, after December 15,
1997, no further stock options may be granted by AFCB without the prior consent
of UST.
For a description of the effect of the Affiliation on certain other employee
benefits provided by AFCB, see "THE AFFILIATION--Interests of Certain Persons in
the Affiliation."
INTERESTS OF CERTAIN PERSONS IN THE AFFILIATION
Certain members of the AFCB Board and executive officers of AFCB and its
subsidiaries may be deemed to have certain interests in the Affiliation that are
in addition to their interests as stockholders of AFCB. As discussed in
"--Management and Operations After the Affiliation," certain executive officers
of AFCB and the AFCB Banks will becomes executive officers and directors of UST
and/or USTrust after the Effective Time.
AFCB and the AFCB Banks have entered into special termination agreements
with seventeen officers of AFCB and/or the AFCB Banks, including Messrs.
Hansberry, Fallon and Greeley, which provide for the
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payment of certain severance benefits to such officers if such officer's
employment with AFCB is terminated (other than for cause) or if such officer
terminates his or her employment under certain circumstances, in either case
after a change of control of AFCB. The effect of these agreements may be to make
it more likely that the officers party thereto will remain employed for a
certain period of time (the "Protected Period") following the Affiliation. The
Protected Period afforded each of these officers is three years. These
agreements provide that if an officer is terminated without cause or chooses to
terminate his or her employment following a change or diminution in such
officer's responsibilities or duties or a reduction in such officer's annual
compensation, in either case at any time during the Protected Period, he or she
will receive a lump sum payment which may vary from one to three times a
specified base amount depending upon the individual. In addition, AFCB has
entered into severance agreements with Mr. Hansberry and two other executive
officers of the AFCB Banks, pursuant to which the executive may receive salary
continuation for a period of 12 or 18 months, depending on the specific
agreement, if such executive is terminated at any time without cause, provided
however, that such executive may not receive payments under both his severance
agreement and his special termination agreement. It is currently anticipated
that UST and certain of such officers, including Messrs. Hansberry, Fallon and
Greeley, may agree to enter into new employment, termination or severance
agreements which would, after the Effective Time, replace such special
termination and/or severance agreements. To the extent new agreements are not
executed, UST has agreed to honor all such existing termination and severance
arrangements. The total amount of all severance payments which might be paid
under all of AFCB's existing severance and change of control agreements,
assuming that the officers who are party to such agreements become entitled to
receive payment thereunder in accordance with their respective terms, would be
approximately $3.7 million in the aggregate.
UST has agreed to maintain AFCB's directors' and officers' liability
insurance for a period of six years (or substitute a comparable policy), and to
honor, after the Effective Time, to the extent permissible under federal and
Massachusetts law and regulation, the indemnification provisions set forth in
the Articles of Incorporation and By-laws of AFCB and its subsidiaries with
respect to acts or omissions taken prior to the Effective Time. See "THE
AFFILIATION-- Indemnification and Insurance."
Officers, directors and employees with outstanding stock options under stock
option plans of AFCB will be entitled to have their options converted into
options with respect to UST Common Stock. For a description of such conversion,
see "THE AFFILIATION--Employee Matters."
MANAGEMENT AND OPERATIONS AFTER THE AFFILIATION
UST. From and after the Effective Time, the UST Board will be expanded by
five members (or such lesser number as may be agreed to by UST and AFCB), and
Mr. Hansberry and four other individuals selected by AFCB and approved by UST
will be appointed as directors of UST. One of the individuals selected by AFCB
and approved by UST to be appointed as a director of UST will also be appointed
to the Executive Committee of the UST Board and a second individual will be
appointed to the Audit Committee of the UST Board. Directors of UST who are not
otherwise full time officers or employees of UST or any of its subsidiaries are
paid a fee of $250 for each meeting of the UST Board they attend, plus an annual
stipend of $15,000.
After the Effective Time, Mr. Finnegan will serve as President and Chief
Executive Officer of UST and Mr. Hansberry will serve as Vice Chairman and Chief
Operating Officer of UST. Additionally, Mr. Fallon will serve as an Executive
Vice President of UST.
MOSAIC. At the Effective Time, AFCB will be merged with and into Mosaic. As
a result of the Affiliation, the separate corporate existence of AFCB will cease
and Mosaic will be the surviving corporation, continuing its existence as a
Massachusetts corporation and wholly-owned subsidiary of UST. By virtue of the
Affiliation, Mosaic will also become the direct owner of all of the shares of
capital stock of the AFCB Banks. The officers and directors of Mosaic upon the
Effective Time will consist of those persons who were officers and directors of
Mosaic immediately prior to the Effective Time, each to hold office in
accordance with the Articles of Organization and By-laws of Mosaic.
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USTRUST. At the first board meeting after the Effective Time, Mr. Hansberry
will become a director of USTrust. After the Effective Time, Mr. Finnegan will
continue to serve as Chairman and Chief Executive Officer of USTrust.
Additionally, at the Effective Time, Mr. Hansberry will become President and
Chief Operating Officer of USTrust and Mr. Greeley will become Senior Vice
President and Associate General Counsel of USTrust. At the Effective Time,
except as set forth above, the officers of USTrust shall consist of those
persons who were officers of USTrust immediately prior to the Effective Time,
subject to the rights of Mosaic as the sole stockholder of USTrust, each to hold
office in accordance with the Articles of Organization and By-laws of USTrust.
See "THE AFFILIATION--The Subsidiary Banks; Establishment of Regional
Organization" for additional information with respect to the operations of
USTrust after the Effective Time.
Additional information about Messrs. Finnegan, Hansberry, Fallon and Greeley
and the other known individuals who will serve as the directors and executive
officers of UST and USTrust following the Affiliation is contained in UST's and
AFCB's Annual Reports on Form 10-K, for the year ended December 31, 1996, which
are incorporated herein by reference. See "AVAILABLE INFORMATION" and
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE."
AFCB BANKS. At the Effective Time, the Board of Directors and executive
officers of the AFCB Banks will consist of those directors and executive
officers whom UST has selected to serve as directors and executive officers of
the AFCB Banks and such additional persons as are designated by UST prior to the
Effective Time. As set forth in "THE AFFILIATION--The Subsidiary Banks;
Establishment of Regional Organization," UST currently anticipates that within
six months after the Effective Time, the AFCB Banks will be merged with and into
USTrust, with USTrust as the surviving bank.
THE SUBSIDIARY BANKS; ESTABLISHMENT OF REGIONAL ORGANIZATION
It is currently anticipated that within six months after the Effective Time,
UST will cause the AFCB Banks, other than Middlesex, to be merged with and into
USTrust, with USTrust as the surviving bank and continuing its legal existence
as an indirect subsidiary of UST. As permitted under the Affiliation Agreement,
AFCB has entered into a definitive agreement to sell all of the capital stock of
Middlesex to an individual buyer, William R. Berkley, for an aggregate purchase
price of $8.24 million. It is currently anticipated that the sale of Middlesex
to Mr. Berkley would occur, subject to regulatory approval, on the same date on
which the Affiliation becomes effective or shortly thereafter. The consummation
of the Affiliation is a condition to the sale of Middlesex to Mr. Berkley. This
sale of the capital stock of Middlesex would not have a material effect on AFCB.
If such disposition of Middlesex does not occur for any reason and the
Affiliation is nonetheless completed, Middlesex will become a direct and
indirect bank subsidiary of UST and Mosaic pursuant to the Affiliation. Although
not required to consummate the Affiliation, the merger of the AFCB Banks,
including Middlesex, if it is not otherwise sold, into USTrust will require the
prior approval of the FDIC and the Massachusetts Commissioner and prior notice
to the Office of Thrift Supervision.
Notwithstanding the merger of the AFCB Banks with and into USTrust, in the
Affiliation Agreement, UST has agreed to cause USTrust to use its best efforts
to create a regional community banking organization within USTrust. Such
regional organization, which will be implemented as soon after the Effective
Time as is reasonably practicable, will include the establishment of geographic
regions headed by regional presidents who will have line responsibility for both
small business and consumer business lines within their assigned geographic
region and who will report to Mr. Hansberry as President and Chief Operating
Officer of USTrust.
FEDERAL INCOME TAX CONSEQUENCES
GENERAL. The following is a summary description of the federal income tax
consequences of the Affiliation. This summary is based upon the opinions of
UST's and AFCB's respective tax counsel. It is not
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a complete description of all possible tax consequences of the Affiliation and,
in particular, may not address federal income tax considerations that may affect
the treatment of a stockholder which, at the Effective Time, already owns some
UST Common Stock, is not a U.S. person, is a tax-exempt entity or an individual
who acquired AFCB Common Stock pursuant to an employee stock option or otherwise
as compensation, or exercises some form of control over AFCB. In addition, no
information is provided herein with respect to the tax consequences of the
Affiliation under applicable foreign, state or local laws. Consequently, each
AFCB stockholder is advised to consult a tax advisor as to the specific tax
consequences of the transaction to that stockholder. The following discussion is
based on the Code, Treasury regulations and applicable judicial precedent as in
effect on the date of this Joint Proxy Statement-Prospectus, and there can be no
assurances that future legislation, regulations, administrative rulings or court
decisions will not adversely affect the accuracy of the statements contained
herein. The following discussion gives no consideration of the particular facts
or circumstances of any holder of AFCB Common Stock and assumes that the AFCB
Common Stock held by each holder thereof is held as a capital asset.
EFFECT OF THE AFFILIATION. Neither UST nor AFCB has requested or will
receive an advance ruling from the Internal Revenue Service as to the tax
consequences of the Affiliation. Consummation of the Affiliation is conditioned
on the delivery of tax opinions from Bingham Dana LLP, counsel to UST, and from
Sullivan & Worcester LLP, counsel to AFCB, substantially to the effect that, on
the basis of facts, representations and assumptions set forth in such opinions
which are consistent with the state of facts existing at the Effective Time, the
Affiliation will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368 of the Code. In rendering such opinions, such
counsels may rely upon certificates of officers of UST, Mosaic and AFCB and
their affiliates as to certain factual and other matters.
If the Affiliation constitutes such a reorganization: (i) no gain or loss
will be recognized by UST, AFCB or Mosaic as a result of the Affiliation; (ii)
no gain or loss will be recognized by stockholders of AFCB on account of their
receipt of UST Common Stock in exchange for their AFCB Common Stock as a result
of the Affiliation; (iii) a holder of AFCB Common Stock who receives cash
proceeds in lieu of fractional shares in UST Common Stock will be treated as if
the fractional shares were distributed as part of the exchange and then were
redeemed by UST; (iv) the tax consequences of the assumed redemption occurring
in connection with the payment of cash in lieu of fractional shares, and of the
redemption of AFCB Common Stock from holders of AFCB Common Stock who perfect
their statutory dissenters' rights, will be determined in accordance with
Section 302 of the Code but should generally give rise to capital gain or loss;
(v) the tax basis of the UST Common Stock received by stockholders who exchange
AFCB Common Stock for UST Common Stock in the Affiliation will be the same as
the tax basis of the AFCB Common Stock surrendered in exchange therefor (reduced
by any amount allocable to a fractional share interest for which cash is
received); and (vi) the holding period of the UST Common Stock in the hands of
the AFCB stockholders will include the holding period of the AFCB Common Stock
exchanged therefor. With respect to item (iv), note that if any such dissenting
AFCB stockholder actually or constructively owns UST Common Stock immediately
after the Affiliation (including, for example, as a result of constructively
owning shares of AFCB Common Stock that are exchanged for UST Common Stock in
the Affiliation), that dissenting stockholder may, in certain circumstances, be
required to treat the cash received as dividend income. Whether the receipt of
cash by such a dissenting stockholder will be treated as dividend income depends
upon the dissenting stockholder's particular circumstances; for this reason,
dissenting AFCB stockholders are urged to consult their tax advisors regarding
the tax treatment of any payments they may receive as a result of the exercise
of their dissenters rights.
As noted above, it is a condition to the consummation of the Affiliation
that UST receive an opinion from its counsel, Bingham Dana LLP, and that AFCB
receive an opinion from its counsel, Sullivan & Worcester LLP, each
substantially to the effect that, among other things, assuming it was
consummated in accordance with the Affiliation Agreement, the Affiliation
constitutes a reorganization under Section 368 of the Code. If either or both
such opinions cannot be delivered because the Affiliation is not a
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reorganization under the Code in the opinion of the respective counsel, the
Affiliation may not be consummated. If, however, the parties waive this
condition and the Affiliation is consummated but not treated as a reorganization
within the meaning of Section 368 of the Code, no gain or loss will be
recognized by UST, but AFCB would be deemed to have disposed of its assets in a
taxable transaction (with any tax liability resulting from such deemed
disposition assumed by Mosaic as a result of AFCB's merger with and into Mosaic)
and exchanges of AFCB Common Stock, whether for cash or for UST Common Stock
pursuant to the Affiliation, would be taxable transactions. In that event, each
exchanging holder of AFCB Common Stock would recognize capital gain or loss
equal to the difference between such holder's adjusted basis in the AFCB Common
Stock exchanged and the amount of cash (if any) plus the fair market value of
UST Common Stock (if any) received by such holder in the Affiliation. In the
event that AFCB waives such condition, AFCB (but not UST) would resolicit the
approval of its stockholders before it proceeded with the Affiliation.
Any capital gain or loss recognized in connection with the Affiliation as
described above will be taxable as long-term capital gain if the AFCB
stockholder's holding period for his or her AFCB Common Stock exceeds one year
at the Effective Time. In the case of noncorporate taxpayers, any such long-term
capital gain would be taxable at a maximum federal income tax rate of 28%, or
20% if the taxpayer's holding period exceeds 18 months at the Effective Time.
BACKUP WITHHOLDING. In order to avoid "backup withholding" of federal
income tax on payments of cash to a holder who exchanges his or her AFCB Common
Stock, or a portion of his or her AFCB Common Stock, for cash, a holder must,
unless an exception applies under the applicable law and regulations, provide
the payor of such cash with such holder's correct taxpayer identification number
("TIN") on a Form W-9 and certify under penalties of perjury that such number is
correct and that such holder is not subject to backup withholding. If the
correct TIN and certifications are not provided, a $50 penalty may be imposed on
a holder by the Internal Revenue Service and the cash payments received by a
holder may be subject to backup withholding tax at a rate of 31%.
ACCOUNTING TREATMENT
Consummation of the Affiliation is conditioned upon the Affiliation being
accounted for as a pooling-of-interests and the receipt by each of UST and AFCB
of a letter to such effect from Arthur Andersen LLP. Under the
pooling-of-interests method of accounting, the recorded amounts of the assets
and liabilities of UST and AFCB will be carried forward at their previously
recorded amounts and no goodwill will be created. Revenues and expenses will be
retroactively presented as if UST and AFCB were combined for the entire fiscal
period in which the Affiliation occurs and for all periods prior to the
Affiliation at previously recorded amounts.
In order for the Affiliation to qualify for pooling-of-interests accounting
treatment, substantially all of the outstanding AFCB Common Stock must be
exchanged for UST Common Stock with substantially similar terms. UST and AFCB
have agreed that neither party will intentionally take or cause to be taken any
action that would prevent the Affiliation from qualifying for
pooling-of-interests accounting treatment. See "THE AFFILIATION--Conditions of
the Affiliation."
For information concerning certain conditions to be imposed in connection
with the consummation of the Affiliation with respect to the exchange of AFCB
Common Stock for UST Common Stock by Affiliates (as defined below) of AFCB and
certain restrictions to be imposed on the transferability of the UST Common
Stock to be received by those Affiliates, in order, among other things, to
assure the availability of pooling-of-interests accounting treatment, see "THE
AFFILIATION--Resales by Affiliates."
INDEMNIFICATION AND INSURANCE
Under the Affiliation Agreement, after the Effective Time, UST has agreed to
honor the indemnification provisions for officers and directors currently set
forth in the AFCB Articles or By-laws (or charter or
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other organizational documents of any of AFCB's subsidiaries) with respect to
acts and omissions taken by such officers and directors prior to the Effective
Time, but only to the extent permitted by federal and Massachusetts law and
regulation.
UST has also agreed, pursuant to the Affiliation Agreement, to maintain
AFCB's (including its subsidiaries') existing directors' and officers' liability
insurance for a period of six years after the Effective Time on terms no less
favorable than those in effect on December 15, 1997. AFCB has agreed that UST
may substitute policies providing at least comparable coverage and containing
terms and conditions no less favorable than those in effect on December 15,
1997.
RIGHTS OF DISSENTING STOCKHOLDERS
If the Affiliation becomes effective, a stockholder of AFCB who does not
vote in favor of the Affiliation and who follows the procedures prescribed under
Massachusetts law may require AFCB (or Mosaic as its successor after the
Effective Time) to pay the fair value, determined as provided under applicable
statute, for the Dissenting Shares held by such stockholder. The following is a
summary of certain features of the relevant Massachusetts law, the provisions of
which are set forth in full in Appendix F annexed hereto. IN ORDER TO EXERCISE
SUCH STATUTORY APPRAISAL RIGHTS, STRICT ADHERENCE TO THE STATUTORY PROVISIONS IS
REQUIRED, AND EACH STOCKHOLDER WHO MAY DESIRE TO EXERCISE SUCH RIGHTS SHOULD
CAREFULLY REVIEW AND ADHERE TO SUCH PROVISIONS.
A dissenting stockholder of AFCB who desires to pursue the appraisal rights
available must adhere to the following procedures: (1) file a written objection
to the Affiliation with AFCB before the taking of the stockholders' vote on the
Affiliation, stating the intention of such stockholder to demand payment for
shares owned by such stockholder if the Affiliation is approved and consummated;
(2) refrain from voting shares owned by such stockholder in favor of the
Affiliation; and (3) within twenty days of the date of mailing of a notice by
AFCB (or Mosaic as its successor after the Effective Time) to objecting
stockholders that the Affiliation has become effective, make written demand to
AFCB (or Mosaic as its successor after the Effective Time) for payment for said
stockholder's shares. Such written objection should be delivered to AFCB, 716
Main Street, Waltham, Massachusetts 02154, Attn.: Quentin J. Greeley, Executive
Vice President, General Counsel and Clerk, and such written demand should be
delivered to Mosaic Corp. (as successor to AFCB after the Effective Time), c/o
UST, 40 Court Street, Boston, Massachusetts 02108, Attn.: Eric R. Fischer,
Executive Vice President, General Counsel and Clerk. It is recommended that such
objection and such demand be sent by registered or certified mail, return
receipt requested.
A dissenting stockholder, who files the required written objection with AFCB
prior to the stockholder vote, need not vote against the Affiliation, but a vote
in favor of the Affiliation will constitute a waiver of such stockholder's
statutory appraisal rights. Stockholders should note that returning a properly
signed proxy card that does not indicate a vote or an abstention on approval of
the Affiliation Agreement will constitute a vote in favor of the Affiliation
Agreement. A vote against the Affiliation does not, alone, constitute a written
objection. Pursuant to the applicable statutory provisions, notice that the
Affiliation has become effective will be sent to each objecting stockholder of
AFCB within ten days after the date on which the Affiliation becomes effective.
The value of the AFCB Common Stock will be determined initially by AFCB (or
Mosaic as its successor after the Effective Time) and the dissenting
stockholder. If, during the period of thirty days after the expiration of the
period during which the foregoing demand for payment may be made, AFCB (or
Mosaic as its successor after the Effective Time) and the stockholder fail to
agree on an appraisal value, either of them may file a bill in equity in the
Superior Court of Middlesex County, Massachusetts, asking that the court
determine the matter in issue. The bill in equity must be filed within four
months after the date of expiration of the foregoing thirty-day period. After a
hearing, the court shall enter a decree determining the fair value of the AFCB
Common Stock and shall order AFCB (or Mosaic as its successor after the
Effective Time) to make payment of such value, with interest, if any, to the
stockholders entitled
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to said payment, upon transfer by them to AFCB (or Mosaic as its successor after
the Effective Time) of the certificate or certificates representing the AFCB
Common Stock held by said stockholders.
For appraisal proceeding purposes, value is determined as of the day before
the approval of the Affiliation by stockholders, excluding any element of value
arising from the expectation or accomplishment of the Affiliation.
Under Massachusetts statutory law, procedures relating to dissenters' rights
are stated to be the exclusive remedy available to a stockholder objecting to
the Affiliation, except where the objection is based on the contention that the
Affiliation will be or is illegal or fraudulent as to said stockholder. However,
under Massachusetts case law, dissenting stockholders may not be limited to the
statutory remedy of judicial appraisal where violations of fiduciary duty are
found.
The law pertaining to the statutory appraisal remedy also contains
provisions regarding costs, dividends on dissenting shares, rights under
dissenting shares prior to purchase, discontinuance of dissenters' rights, and
certain miscellaneous matters. See Appendix F.
NASDAQ LISTING
The Affiliation Agreement provides for the filing of, and UST has filed or
will file, a listing application with NASDAQ covering the shares of UST Common
Stock issuable pursuant to the Affiliation. The obligation of AFCB to effect the
Affiliation is subject to the condition that such shares of UST Common Stock be
authorized for listing on NASDAQ effective upon official notice of issuance.
RESALES BY AFFILIATES
Shares of UST Common Stock to be issued to stockholders of AFCB in
connection with the Affiliation will be registered with the Commission under the
Securities Act. Thus, all shares of UST Common Stock to be received by holders
of AFCB Common Stock upon consummation of the Affiliation will be freely
transferable by those stockholders of AFCB not deemed to be "Affiliates" of UST
or AFCB. Under the Securities Act, "Affiliates" generally are defined as persons
(often considered to include, but not necessarily limited to, executive
officers, directors and ten-percent stockholders) who control, are controlled
by, or are under common control with (i) UST or AFCB at the time of the AFCB
Meeting or (ii) UST at or after the Effective Time.
Rule 145 promulgated by the Commission under the Securities Act restricts
the sale of UST Common Stock received in the Affiliation by former Affiliates of
AFCB and certain of their family members and related interests. Generally
speaking, during the one year following the Effective Time, Affiliates of AFCB,
may publicly resell the UST Common Stock received by them in the Affiliation
provided that such sales comply with Rule 145 limitations as to the amount of
UST Common Stock sold in any three-month period and as to the manner of sale.
After the one-year period, such former Affiliates of AFCB who are not Affiliates
of UST may resell their shares without any restriction. Persons who are
Affiliates of UST prior to the Effective Time generally will remain subject to
limitations and restrictions under Commission Rule 144 with respect to shares
they may receive in connection with the Affiliation (and any other shares of UST
Common Stock they may own), so long as they continue to be Affiliates. The
ability of Affiliates to resell shares of UST Common Stock received in the
Affiliation under Rule 145 as summarized herein will be subject to UST's having
satisfied its Exchange Act reporting requirements for specified periods prior to
the time of sale.
Affiliates of AFCB also will be permitted to resell UST Common Stock
received in the Affiliation without any restrictions provided that such sales
are made pursuant to an effective registration statement filed with the
Commission under the Securities Act or by means of another available exemption
from the Securities Act registration requirements. This Joint Proxy
Statement-Prospectus may not be used to
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effectuate any resales of UST Common Stock received by persons who may be deemed
to be Affiliates of UST or AFCB.
UST and AFCB have agreed to use all reasonable efforts to cause each person
who may be deemed to be an Affiliate (which term shall mean any person so
defined for purposes of qualifying the Affiliation for pooling-of-interests
accounting treatment under the Commission's Accounting Series Releases 130 and
135, and which term shall also mean when used with respect to AFCB, any person
so defined in accordance with Rule 145) of such party to execute and deliver to
the other party, a letter, in the case of UST Affiliates, substantially in the
form attached to the Affiliation Agreement as Exhibit C-1 (the "UST Affiliates
Letter"), and in the case of AFCB, substantially in the form attached to the
Affiliation Agreement as Exhibit C-2 (the "AFCB Affiliates Letter," and
generally, an "Affiliates Letter").
Commission guidelines with respect to the qualification of the Affiliation
for pooling-of-interests accounting treatment limit sales of shares of the
acquiring and acquired company by Affiliates of either company in a business
combination. Commission guidelines indicate further that the
pooling-of-interests method of accounting generally will not be challenged on
the basis of sales by Affiliates of the acquiring or acquired company if they do
not dispose of any of the shares of the corporation they own or shares of a
corporation they receive in connection with a merger during the period beginning
thirty days before the merger and ending when financial results ("Post-Merger
Financial Results") covering at least thirty days of post-merger operations of
the combined entity have been published. In the UST Affiliates Letter,
Affiliates of UST have agreed not to sell, transfer or otherwise dispose of, or
reduce the risk of ownership with respect to shares of, UST Common Stock held by
the Affiliate in violation of these guidelines. In the AFCB Affiliates Letter,
Affiliates of AFCB have agreed not to sell, transfer or otherwise dispose of, or
reduce the risk of ownership with respect to any shares of, AFCB Common Stock
held by the Affiliate, or any shares of UST Common Stock received by the
Affiliate in the Affiliation or otherwise held by the Affiliate in violation of
these guidelines.
The AFCB Affiliates Letter further provides that an Affiliate of AFCB will
not sell, assign, transfer, or otherwise dispose of any shares of UST Common
Stock obtained as a result of the Affiliation, except in compliance with the
Securities Act and the rules and regulations of the Commission thereunder. AFCB
certificates surrendered for exchange by any person who is an Affiliate of AFCB
for purposes of Rule 145(c) will not be exchanged for certificates representing
shares of UST Common Stock until UST has received an executed Affiliates Letter
from such person. Prior to publication of Post-Merger Financial Results, UST
will not transfer on its books any shares of UST Common Stock received by an
Affiliate pursuant to the Affiliation. The stock certificates representing UST
Common Stock issued to Affiliates of AFCB in the Affiliation will bear a legend
summarizing the applicable Rule 145 restrictions.
UST has agreed in the Affiliation Agreement to publish, not later than
thirty days after the end of the first fiscal quarter ending at least thirty
days after the Effective Time, Post-Merger Financial Results as contemplated by
and in accordance with the terms of the Commission's Accounting Series Release
No. 135.
CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES
CONVERSION OF SHARES OF AFCB COMMON STOCK. By virtue of the Affiliation,
automatically and without any action on the part of any holder thereof: (a) each
then-outstanding share of AFCB Common Stock not owned by UST directly or
indirectly (except for any such shares of AFCB Common Stock held by UST in a
fiduciary capacity or for debts previously contracted), and other than those
shares of AFCB Common Stock held in the treasury of AFCB and Dissenting Shares,
will be converted into 1.41 shares of UST Common Stock and each holder will also
receive preferred stock purchase rights associated therewith pursuant to the UST
Rights Agreement (See "THE AFFILIATION--Terms of the Affiliation" and
"DESCRIPTION OF UST CAPITAL STOCK--Stockholder Rights Agreement"); (b) each
then-outstanding share of AFCB Common Stock owned by UST or any subsidiary of
UST (except for any such
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shares of AFCB Common Stock held by UST or its subsidiaries in a fiduciary
capacity or for debts previously contracted) will be cancelled, retired and
cease to exist; and (c) each share of AFCB Common Stock issued and held in
AFCB's treasury will be cancelled and cease to exist. No conversion or payment
will be made with respect to the cancellation of shares referred to in clauses
(b) and (c) above. For a discussion of the treatment of Dissenting Shares, see
"THE AFFILIATION--Rights of Dissenting Stockholders." Under certain
circumstances, UST may choose to adjust the Conversion Number to be greater than
1.41 in order to prevent the termination of the Affiliation Agreement by AFCB.
See "THE AFFILIATION--Termination of the Affiliation Agreement."
MANNER OF EXCHANGING AFCB CERTIFICATES FOR UST CERTIFICATES. UST has
appointed USTC (the "Exchange Agent"), to effect the exchange of certificates in
connection with the Affiliation. Promptly after the Effective Time, UST will
send to each holder of record (other than UST or its subsidiaries for shares of
AFCB Common Stock it holds other than in a fiduciary capacity or for debts
previously contracted and holders of shares of AFCB Common Stock who have
perfected their rights of appraisal) of a AFCB certificate which immediately
prior to the Effective Time represented outstanding shares of AFCB Common Stock
(a "AFCB Certificate"), a letter of transmittal and instructions for its use in
effecting such surrender of the AFCB Certificates in exchange for certificates
representing shares of UST Common Stock. Upon surrender of a AFCB Certificate
for exchange and cancellation to the Exchange Agent, together with a duly
executed letter of transmittal and any other required documents, the holder of
such AFCB Certificate will be entitled to receive, in exchange therefor, a
certificate representing the number of shares of UST Common Stock to which such
AFCB Certificate holder is entitled upon consummation of the Affiliation and a
check representing cash in lieu of any fractional share thereof, and the AFCB
Certificate so surrendered will forthwith be cancelled.
AFCB CERTIFICATES SHOULD NOT BE RETURNED WITH THE ENCLOSED PROXY AND SHOULD
NOT BE FORWARDED TO THE EXCHANGE AGENT UNTIL THE AFCB STOCKHOLDER HAS RECEIVED A
TRANSMITTAL LETTER.
If any certificate for shares of UST Common Stock or a check representing
cash in lieu of any fractional share thereof is to be issued in a name other
than that in which a AFCB Certificate surrendered for exchange is registered,
the AFCB Certificate so surrendered shall be properly endorsed (or accompanied
by an appropriate instrument of transfer) and otherwise in proper form for
transfer, and the person requesting such exchange shall pay to the Exchange
Agent in advance any transfer or other taxes by reason of the issuance of a
certificate representing shares of UST Common Stock in any name other than that
of the registered holder of the AFCB Certificate surrendered, or which are
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.
LOST CERTIFICATES. In the event that any AFCB Certificate is lost, stolen
or destroyed, upon receipt by UST of appropriate evidence as to such loss, theft
or destruction and as to the ownership of the AFCB Certificate, and the receipt
by UST of appropriate and customary indemnification, UST will issue shares of
UST Common Stock and the fractional share payment, if any, in exchange for the
lost, stolen or destroyed AFCB Certificate.
DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED AFCB CERTIFICATES. No dividend or
other distribution payable after the Effective Time on UST Common Stock will be
paid to the holder of any AFCB Certificates until such holder surrenders such
AFCB Certificates for exchange as instructed. Subject to any applicable law,
upon surrender of any AFCB Certificate, such holder will receive (a) a
certificate representing the shares of UST Common Stock into which the former
shares of AFCB Common Stock represented by such certificate have been converted,
(b) any withheld dividends or other distributions (without interest) and (c) any
withheld cash payments (without interest) for any fractional share to which such
stockholder is entitled.
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POST EFFECTIVE TIME. After the Effective Time, there will be no transfers
on the transfer books of AFCB of the shares of AFCB Common Stock which were
outstanding immediately at the Effective Time. If, after the Effective Time,
AFCB Certificates representing such shares are presented for transfer to AFCB,
they will be cancelled and exchanged for certificates representing shares of UST
Common Stock pursuant to the terms of the Affiliation Agreement. After the
Effective Time, holders of AFCB Certificates (or certificates of AFCB's
corporate predecessors in interest, which have been converted into AFCB
Certificates) will cease to be and have no rights as stockholders of such
entities except to receive shares of UST Common Stock or cash in lieu of
fractional shares of AFCB Common Stock converted or rights afforded dissenting
stockholders.
CONDITIONS TO THE CONSUMMATION OF THE AFFILIATION
CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligations of each
of UST and AFCB to effect the Affiliation are subject to the fulfillment of the
following conditions, none of which may be waived by the parties:
(a) the Affiliation Agreement and the transactions contemplated thereby
shall have been approved by the requisite affirmative votes of the holders
of UST Common Stock and AFCB Common Stock entitled to vote thereon;
(b) 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 which are necessary
for the consummation of the Affiliation, shall have been filed, occurred or
been obtained (all such authorizations, orders, declaration, 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;
(c) the Registration Statement shall have become effective under the
Securities Act and shall not be subject to a stop order or a threatened stop
order;
(d) no temporary restraining order, preliminary or permanent injunction
or other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Affiliation
shall be in effect; and
(e) UST and AFCB shall have each received a letter from Arthur Andersen
LLP, addressed to each of them, to the effect that the Affiliation will
qualify for pooling-of-interests accounting treatment.
CONDITIONS TO UST'S OBLIGATIONS. The obligation of UST to effect the
Affiliation also is subject to the satisfaction of additional conditions,
including, but not limited to, the following conditions, any of which may be
waived by UST:
(a) no material adverse change shall have occurred in the business,
assets, financial condition or results of operations of AFCB and its
subsidiaries taken as a whole;
(b) UST shall have received assurance that AFCB's representations and
warranties are true in all material respects as of the Effective Time and
all of AFCB's pre-closing obligations have been complied with in all
material respects;
(c) all required approvals of non-governmental third parties necessary
in connection with the consummation of the Affiliation and required to be
received by AFCB have been received;
(d) Bingham Dana LLP shall have delivered to UST an opinion that the
Affiliation will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368 of the Code;
(e) AFCB shall have delivered to UST each of the AFCB Affiliates Letters
executed by Affiliates of AFCB; and
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(f) there shall not have been 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
Affiliation, imposes any condition or restriction upon UST or any of its
subsidiaries, or AFCB, after the Affiliation (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 the Affiliation
Agreement, as to render inadvisable in the reasonable judgment of UST the
consummation of the Affiliation.
CONDITIONS TO AFCB'S OBLIGATIONS. The obligations of AFCB to effect the
Affiliation also are subject to the satisfaction of certain additional
conditions, including, but not limited to, the following conditions, any of
which may be waived by AFCB:
(a) no material adverse change shall have occurred in the business,
assets, financial condition, results of operations of UST and its
subsidiaries taken as a whole;
(b) AFCB shall have received assurance that UST's representations and
warranties are true in all material respects as of the Effective Time and
all of UST's pre-closing obligations have been complied with in all material
respects;
(c) all required approvals of non-governmental third parties necessary
in connection with the consummation of the Affiliation that are required to
be received by UST have been received;
(d) Sullivan & Worcester LLP shall have delivered to AFCB an opinion to
the effect that the Affiliation will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368 of the Code
and no gain or loss will be recognized by the stockholders of AFCB upon the
receipt, pursuant to the Affiliation Agreement, of UST Common Stock in
exchange for AFCB Common Stock (such opinion will not extend to cash
received in lieu of fractional share interests or cash received by
dissenting stockholders, if any);
(e) UST shall have delivered to AFCB each of the UST Affiliates Letters
executed by Affiliates of UST;
(f) the shares of UST Common Stock issuable to AFCB stockholders
pursuant to the Affiliation Agreement shall have been authorized for listing
on NASDAQ upon official notice of issuance; and
(g) the Exchange Agent shall have delivered a certificate to AFCB to the
effect that UST (i) has given the Exchange Agent instructions and
authorization to issue a sufficient number of shares of UST Common Stock in
exchange for all outstanding shares of AFCB Common Stock and (ii) has
deposited sufficient funds with the Exchange Agent to pay a reasonable
estimate of the cash payments necessary to pay for fractional share
interests.
CONDUCT OF BUSINESS PENDING THE AFFILIATION
Pursuant to the Affiliation Agreement, AFCB has agreed that, until the
earlier of the Effective Time or the termination of the Affiliation Agreement,
AFCB:
(a) shall, and shall cause each of its subsidiaries to, except as
specifically permitted pursuant to the Affiliation Agreement or as otherwise
specifically disclosed therein, conduct its business and engage in
transactions only in the ordinary and usual course of business consistent
with past practices;
(b) shall not, and shall not permit any of its subsidiaries, without the
prior written consent of UST, to (i) except as otherwise disclosed in the
Affiliation Agreement, engage in any material transaction or incur or
sustain any material obligation or liability except in the ordinary, regular
and usual course of business consistent with past practices, (ii) offer an
interest rate on any deposit such that such deposit would be deemed a
"brokered deposit," other than in the ordinary course of business consistent
with past practices, (iii) except in the ordinary course of business
consistent with
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past practices (except for the sale of all of the shares of Middlesex, as
more fully set forth in the Affiliation Agreement), sell, lease, transfer,
assign, encumber or otherwise dispose of any assets, (iv) except as
otherwise disclosed in the Affiliation Agreement, file any application or
give any notice to customers or governmental authorities or agencies to
open, close or relocate any branch or open, close, relocate or terminate the
operations of any branch, or (v) waive any material right, whether in equity
or at law, it has with respect to any asset except in the ordinary, regular
and usual course of business consistent with past practice;
(c) shall, at UST's request and expense, use all reasonable efforts to
cooperate with UST with respect to the preparation for the combination and
integration of the businesses, systems and operations of AFCB and UST;
(d) shall not pay or declare any dividends or make other distributions
in respect of the AFCB Common Stock except for regular quarterly cash
dividends at a rate not in excess of AFCB's current dividend rate and
subject to certain other provisions of the Affiliation Agreement;
(e) shall not adopt or amend in any material respect any pension,
benefit or other plans or enter into any employment, retention, severance or
similar contracts or amend such contracts or plans to increase the amount
payable or benefits provided thereunder, or pay any bonuses to it or its
subsidiaries' employees except as provided for in the Affiliation Agreement
and in the ordinary course of business consistent with past practices;
(f) except as set forth in the Affiliation Agreement, shall not with
respect to itself and its subsidiaries, authorize, recommend, propose or
enter into an agreement with respect to any merger, consolidation, purchase
and assumption transaction or business combination (other than the
Affiliation), any acquisition of a material amount of assets or securities
or assumption of 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 its subsidiaries'
Articles of Organization or By-laws;
(h) shall not, and shall not permit its subsidiaries to, issue, deliver
or sell shares of its or their capital stock or securities convertible into
its or their capital stock (except upon the exercise or fulfillment of
rights or options issued or existing pursuant to employee benefit plans or
any other equity compensation programs or arrangements, as more fully set
out in the Affiliation Agreement), and except upon exercise of the Option,
or effect any stock split, reclassification or similar transaction or
otherwise change its capitalization as it existed on September 30, 1997;
(i) shall not grant, confer or award any options or rights, not existing
on December 15, 1997, to acquire any of its capital stock;
(j) shall not, and shall not permit its subsidiaries to, purchase,
redeem or otherwise acquire any shares of its capital stock or any
securities convertible into or exercisable for shares of its capital stock,
except in a fiduciary capacity;
(k) shall not impose or permit to exist any material lien, charge or
encumbrance on any capital stock held by it or any of its subsidiaries;
(l) shall not, and shall not permit its subsidiaries to, incur any
additional debt obligations or other obligations for borrowed money, or to
guarantee the same, other than in the ordinary course of business consistent
with past practices;
(m) except as otherwise disclosed in the Affiliation Agreement, shall
not incur or commit to any capital expenditures or any obligations or
liabilities in connection therewith, other than in the ordinary
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and usual course of business consistent with past practices and, in all
cases, shall consult with UST with respect to capital expenditures that
individually exceed $75,000 or cumulatively exceed $300,000;
(n) shall, subject to any restrictions under applicable law or
regulation, promptly notify UST of any emergency or other change in the
normal course of its business and of any governmental complaints,
investigations or hearings if such emergency, change, complaint,
investigation or hearing would be material to the business, results of
operations or financial condition of AFCB;
(o) shall not make any loan or extend any credit on other than the
terms, conditions and standards offered by AFCB in the ordinary course of
business consistent with past practice, other than in connection with any
loan workouts in accordance with applicable law and consistent with prudent
banking practices;
(p) shall file all reports, applications and other documents required to
be filed by it with the Commission, the FRB, the Office of Thrift
Supervision, the FDIC or any other governmental entity, between December 15,
1997 and the Effective Time, and shall make available to UST copies of all
such reports;
(q) shall not, except as expressly contemplated by the Affiliation
Agreement, enter into any contract with any Affiliate;
(r) shall not, except for transactions in the ordinary course of
business consistent with past practices, enter into or terminate any
material contract or alter any material leases or contracts, except as
provided in the Affiliation Agreement;
(s) shall not, except in the ordinary course of business and consistent
with past practice, materially change its investment securities portfolio or
its "gap position" without prior consultation with UST; and
(t) 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 made in the Affiliation Agreement untrue or incorrect in any
material respect.
AFCB has agreed to consult with UST before renewing or extending any
material lease of AFCB or any subsidiary of real property or material lease
relating to furniture, fixtures or equipment that is currently in effect but
would otherwise expire on or prior to the Effective Time. AFCB has further
agreed not to cancel, terminate or take any other action this is likely to
result in any cancellation or termination of any such lease without prior
written notice to UST.
UST and AFCB have agreed to cooperate and use all reasonable efforts to
prepare all necessary documentation and file all applications, notices,
petitions and filings, and to obtain and to cooperate in obtaining permits,
consents, approvals and authorizations of all third parties and governmental
entities necessary or advisable to consummate the transactions contemplated by
the Affiliation Agreement and to comply with the terms and conditions of all
such permits, consents, approvals and authorizations.
UST and AFCB have further agreed (i) not to change their respective methods
of accounting, as in effect at December 31, 1996, except as allowed in the
Affiliation Agreement; (ii) to advise the other promptly of any change or event
having a Material Adverse Effect (as defined in the Affiliation Agreement) on it
or that it believes would or would be reasonably likely to cause or constitute a
material breach of any of its representations, warranties or covenants contained
in the Affiliation Agreement; and (iii) to coordinate with each other the
declaration of any dividends in respect of UST Common Stock and AFCB Common
Stock and the record dates and payment dates relating thereto, it being their
intention that holders of UST Common Stock or AFCB Common Stock will not receive
two dividends, or fail to receive one dividend, for any single calendar quarter
with respect to their shares of UST Common Stock and/or AFCB Common Stock and
any shares of UST Common Stock any such holder receives pursuant to the
Affiliation.
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UST has also agreed to advise AFCB, during the period from the date of the
Affiliation Agreement to the earlier of the Effective Time or the date of
termination of the Affiliation Agreement, of any proposed material transaction
involving UST's acquisition of, or by, or merger with, another banking or
financial services organization.
From the date of the Affiliation Agreement until the earlier of the
Effective Time or the date of termination of the Affiliation Agreement, UST has
agreed that it will take no action which would (a) materially adversely affect
the ability of any party to obtain any governmental or regulatory consents
required for consummation of the transactions contemplated by the Affiliation
Agreement without the imposition of a burdensome condition or restriction or (b)
materially adversely affect the ability of any party to perform its covenants
and agreements under the Affiliation Agreement.
NO SOLICITATION
AFCB has specifically agreed that it will not and its subsidiaries will not,
prior to the termination of the Affiliation Agreement, directly or indirectly,
solicit, encourage, initiate or participate in any discussion or negotiations
with (subject to the fiduciary obligations of the AFCB Board as determined in
good faith in consultation with outside counsel), or provide any information to,
any corporation, partnership, person or other entity (other than UST and its
affiliates) concerning any merger, tender offer, sale of substantial assets
(other than as permitted under the Affiliation Agreement), or sales of stock or
securities involving AFCB or its subsidiaries (an "Other Acquisition
Transaction"). In the exercise of the AFCB Board's fiduciary obligations, AFCB
may participate in discussions with respect to an Other Acquisition Transaction
provided that AFCB does not solicit or initiate such discussions.
Notwithstanding the foregoing, AFCB is not prohibited from taking and disclosing
to 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 stockholders which may be required under applicable
law. AFCB has agreed to immediately communicate to UST the identity of the
parties and terms of any proposal, discussion or inquiry relating to a possible
Other Acquisition Transaction.
WAIVER AND AMENDMENT
WAIVER. UST and AFCB, with the authorization of their respective Boards of
Directors, may, by written notice to the other party (a) extend the time for the
performance of any of the obligations or other acts required of the other party
contained in the Affiliation Agreement, (b) waive any inaccuracies in the
representations and warranties of the other party contained in the Affiliation
Agreement or in any document delivered pursuant to the Affiliation Agreement, or
(c) waive compliance by the other party of any of its agreements or obligations
under certain sections of the Affiliation Agreement; provided that any extension
or waiver which reduces the amount or changes the form of the consideration to
be delivered to AFCB stockholders may not be made after AFCB stockholders have
approved the Affiliation Agreement unless stockholder approval for the amendment
is obtained.
AMENDMENT. Subject to the applicable provisions of the Massachusetts
General Laws and as may be authorized by their respective Boards of Directors,
the Affiliation Agreement may be amended upon the written agreement of AFCB and
UST at any time; provided that any amendment which reduces the amount or changes
the form of the consideration to be delivered to the AFCB stockholders may not
be made after the stockholders of AFCB have approved the Affiliation Agreement
unless stockholder approval for the amendment is obtained.
EXPENSES
The Affiliation Agreement provides that AFCB and UST will each pay its own
expenses in connection with the Affiliation, including fees and expenses of its
own financial consultants, accountants and counsel.
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The expense(s) associated with printing and distribution of the Registration
Statement and this Joint Proxy Statement-Prospectus will be shared equally by
AFCB and UST.
TERMINATION OF THE AFFILIATION AGREEMENT
The Affiliation Agreement may be terminated at any time prior to the
Effective Time, whether before or after the approval by UST and AFCB
stockholders of the Affiliation Agreement and the transactions contemplated
thereby, under the following circumstances:
(a) by the mutual written consent of UST and AFCB authorized by their
respective Boards of Directors;
(b) by either UST or AFCB if (i) the Effective Time shall not have
occurred on or prior to August 31, 1998, or such later date as shall have
been agreed to by the parties, (ii) any governmental or regulatory authority
or agency or court shall have enjoined, denied approval of, or otherwise
prohibited the consummation of the Affiliation, and such order or injunction
is final and unappealable, or (iii) if any stockholder approval required for
the consummation of the Affiliation has not been obtained by reason of the
failure to obtain the required vote at a duly held meeting of stockholders
or any adjournment thereof (provided the terminating party is not otherwise
in material breach of any representation, warranty, covenant, or other
agreement contained therein or in the Stock Option Agreement);
(c) by either the UST or AFCB Board (i) if the other party has
materially breached any representation, warranty, covenant or other
agreement contained in the Affiliation Agreement or the Stock Option
Agreement and such breach is not cured within 30 days after written notice
thereof is given to the breaching party, or (ii) in the event that any of
the conditions precedent to the obligations of the terminating party to
consummate the Affiliation cannot be satisfied or fulfilled by August 31,
1998 (in either case, provided the terminating party is not otherwise in
material breach, as determined by the Affiliation Agreement, of any
representation, warranty, covenant, or other agreement obtained therein or
in the Stock Option Agreement); or
(d) by written notice of the AFCB Board if both (i) the average of the
per share last reported sale price of UST Common Stock as reported on NASDAQ
for the ten consecutive trading day period (the "Determination Period")
immediately preceding the date of receipt of the last Requisite Regulatory
Approval (the "Closing Price") is less than $24.06 and (ii) the number
obtained by dividing the Closing Price by $28.31 is less than the number
obtained by subtracting (A) 0.15 from (B) the quotient obtained by dividing
(x) the weighted average of the closing prices of the common stock of the 15
comparable bank holding companies and 15 thrift institutions listed in the
Affiliation Agreement for the same Determination Period by (y) the weighted
average of the closing prices of the common stock of the same bank holding
companies and thrift institutions on December 12, 1997.
Notwithstanding the foregoing, during the ten (10) business day period
commencing with UST's receipt of AFCB's notice of termination pursuant to the
termination provision set forth in paragraph (d) above, UST shall have the
option to increase the consideration to be received by the holders of AFCB
Common Stock under the Affiliation Agreement by adjusting the Conversion Number
to equal the number (calculated to the nearest one-thousandth) obtained by
dividing (x) $33.92 by (y) the Closing Price. If UST so elects within the
ten-day period, it must give prompt written notice to AFCB of such election and
the revised Conversion Number, and no termination will have occurred pursuant to
the provision set forth in paragraph (d) above and the Affiliation Agreement
will remain in effect in accordance with its terms (except as the Conversion
Number will have been so modified).
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CERTAIN RELATED TRANSACTIONS
STOCK OPTION AGREEMENT
GENERAL. As a condition to UST's entering into the Affiliation Agreement
and in consideration therefor (without other consideration or monetary payment),
AFCB entered into the Stock Option Agreement, pursuant to which AFCB granted to
UST the Option on December 15, 1997. The Stock Option Agreement is intended to
protect UST's interests under the Affiliation Agreement upon the occurrence of
certain events which may create the potential for a third party to acquire or
obtain control of AFCB. The Stock Option Agreement may increase the likelihood
that the Affiliation will be consummated by making it more difficult and more
expensive for another party to obtain control of or acquire AFCB. Consequently,
certain aspects of the Stock Option Agreement may have the effect of
discouraging persons who might now or prior to the Effective Time be interested
in acquiring all of, or a significant interest in, AFCB from considering or
proposing such an acquisition, even if such persons were prepared to pay
consideration to AFCB's stockholders which had a higher current market price
than the shares of UST Common Stock to be received for each share of AFCB Common
Stock pursuant to the Affiliation Agreement. The Stock Option Agreement is
attached hereto as APPENDIX B.
GRANT OF OPTION. The Option entitles UST to purchase up to 19.9% of the
issued and outstanding and fully paid and non-assessable shares of AFCB Common
Stock (the "Option Shares"), or 1,300,078 shares as of December 15, 1997,
without giving effect to any shares subject to or issued pursuant to the Option,
at a price of $32.937 per share (the "Option Price"). The aggregate purchase
price for the original number of Option Shares at the original Option Price is
$42,820,669.
TRIGGERING EVENTS; EXERCISE OF OPTION. The Stock Option Agreement provides
that UST may exercise the Option, in whole or in part, if both an Initial
Triggering Event (as defined below) and a Subsequent Triggering Event (as
defined below) shall have occurred prior to the occurrence of an Exercise
Termination Event (as defined below); provided that UST shall have sent to AFCB
written notice of such exercise within 30 days following such Subsequent
Triggering Event and prior to the Exercise Termination Event.
For purposes of the Stock Option Agreement:
(a) The term "Initial Triggering Event" means any of the following
events or transactions occurring after December 15, 1997:
(i) AFCB or any subsidiary of AFCB, without having received UST's
prior written consent, shall have entered into an agreement to engage in
an Acquisition Transaction (as defined below) with any person other than
UST or any subsidiary of UST;
(ii) without the consent of UST, the Board of Directors of AFCB
shall have approved an Acquisition Transaction or recommended that the
shareholders of AFCB approve or accept any Acquisition Transaction other
than as contemplated by the Affiliation Agreement;
(iii) any person, other than UST or any subsidiary of UST or AFCB in
a fiduciary capacity, and other than a Schedule 13G Investor, shall have
acquired beneficial ownership or the right to acquire beneficial
ownership of ten percent (10%) or more of the outstanding shares of AFCB
Common Stock if such person owned beneficially less than ten percent
(10%) of the outstanding shares of AFCB Common Stock on December 15,
1997, or any person shall have acquired beneficial ownership of an
additional three percent (3%) of the outstanding shares of AFCB Common
Stock if such person owned beneficially ten percent (10%) or more of the
outstanding shares of AFCB Common Stock on December 15, 1997;
(iv) the stockholders of AFCB shall not have approved the
Affiliation Agreement at the meeting of such stockholders held for the
purpose of voting on the Affiliation Agreement, such meeting shall not
have been held or shall have been cancelled prior to the termination of
the
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Affiliation Agreement, or AFCB's Board of Directors shall have withdrawn
or modified in a manner adverse to UST the recommendation of AFCB's Board
of Directors with respect to the Affiliation Agreement, in each case
after: (A) any person, other than UST or any subsidiary of UST, shall
have made a bona-fide proposal to AFCB 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 (B) any person other than UST or any subsidiary of UST, other than in
connection with a transaction to which UST 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
application or notice has been accepted for processing, for approval to
engage in an Acquisition Transaction;
(v) after any person other than UST or any subsidiary of UST has
made a proposal to AFCB or its shareholders to engage in an Acquisition
Transaction, AFCB shall have breached any covenant or obligation
contained in the Affiliation Agreement and such breach (A) would entitle
UST to terminate the Affiliation Agreement and (B) shall not have been
remedied prior to the date of UST's notice to AFCB of the exercise of the
Option; or
(vi) any person (other than UST or any subsidiary of UST) 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 with respect to, a tender offer or exchange offer to purchase any
shares of AFCB Common Stock such that, upon consummation of such offer,
such person would own or control 50% or more of the then outstanding
shares of AFCB Common Stock.
(b) The term "Subsequent Triggering Event" means either of the following
events or transactions occurring after December 15, 1997: (i) the
acquisition by any person, other than a Schedule 13G Investor, of beneficial
ownership of 20% or more of the then outstanding shares of AFCB Common
Stock; or (ii) the occurrence of the Initial Triggering Event described
above in clause (a)(i), except that the percentage referred to in subclause
(C) of the definition of "Acquisition Transaction" set forth below shall be
20%.
For purposes of the Stock Option Agreement, the term "Acquisition
Transaction" means (A) a merger or consolidation, or any similar transaction,
with AFCB or any Significant Subsidiary (as such term is defined in the
Affiliation Agreement) of AFCB or any subsidiary of AFCB which, after such
transaction, would be a Significant Subsidiary, (B) a purchase, lease or other
acquisition of all or substantially all of the assets of AFCB or any of its
Significant Subsidiaries, or (C) a purchase or other acquisition of securities
representing 10% or more of the voting power of AFCB or any of its Significant
Subsidiaries.
For purposes of the Stock Option Agreement, the term "Exercise Termination
Event" shall mean the earliest of: (i) the Effective Time; (ii) termination of
the Affiliation Agreement if such termination occurs prior to an Initial
Triggering Event; or (iii) twelve months after termination of the Affiliation
Agreement if such termination follows an Initial Triggering Event.
As of the date of this Joint Proxy Statement-Prospectus, to the knowledge of
UST and AFCB, no Initial Triggering Event or Subsequent Triggering Event has
occurred.
REPURCHASE OF OPTION. Upon the occurrence of a Subsequent Triggering Event
that occurs prior to the occurrence of an Exercise Termination Event, (a) at the
request of UST or any subsequent holder of the Option (each, a "Holder"),
delivered within 30 days of the Subsequent Triggering Event, AFCB shall
repurchase the Option from UST or such holder at a price (the "Option Repurchase
Price") equal to the amount by which (i) the market/offer price (as defined
below) exceeds (ii) the Option Price, multiplied by the number of shares for
which the Option may then be exercised, and (b) at the request of any owner of
Option Shares (the "Owner"), delivered within 30 days of the Subsequent
Triggering Event, AFCB shall repurchase such number of Option Shares from such
Owner as the Owner shall designate at a price (the "Option Share Repurchase
Price") equal to the greater of (i) the market/offer price and (ii) the average
62
<PAGE>
exercise price per share paid by the Owner for the Option Shares so designated.
The repurchase of an Option by AFCB pursuant to the terms of the Stock Option
Agreement may be subject to prior approval of certain regulatory authorities.
See "THE AFFILIATION--Regulatory Approvals Required for the Affiliation."
The term "market/offer price" means the highest of (i) the price per share
of AFCB Common Stock at which a tender offer or exchange offer therefor has been
made, (ii) the price per share of AFCB Common Stock to be paid by any third
party pursuant to an agreement with AFCB, (iii) the highest sale price for
shares of AFCB Common Stock within the six-month period immediately preceding
the date of the required repurchase of the Options or Option Shares, as the case
may be, or (iv) in the event of a sale of all or substantially all of AFCB's
assets, the sum of the price paid in such sale for such assets and the current
market value of the remaining assets of AFCB 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, divided by the number of shares of
AFCB Common Stock outstanding at the time of such sale. In determining the
market/offer price, the value of consideration other than cash will be
determined by a nationally recognized investment banking firm selected by the
Holder or the Owner, as the case may be, and reasonably acceptable to AFCB.
CONVERSION OF OPTION. In the event that prior to an Exercise Termination
Event, AFCB enters into any agreement (a) to consolidate with or merge into any
person, other than UST or one of its subsidiaries, such that AFCB is not the
surviving corporation, (b) to permit any person, other than UST or one of its
subsidiaries, to merge into AFCB and AFCB is the surviving corporation, but in
connection with such merger, the outstanding shares of AFCB Common Stock are
changed into or exchanged for stock or other securities of any other person or
cash or any other property, or the outstanding shares of AFCB Common Stock after
such merger shall represent less than 50% of the outstanding shares and share
equivalents of the merged corporation, or (c) to sell or otherwise transfer all
or substantially all of its assets to any person, other than UST or any of its
subsidiaries, then, and in each such case, the agreement governing such
transaction must provide that, upon consummation of the transaction, the Option
will be converted into or exchanged for, at the election of UST, an option (the
"Substitute Option") to purchase securities of either the acquiring person or
any person that controls the acquiring person. At the request of the holder of
the Substitute Option, the issuer of the Substitute Option shall repurchase it
at a price, and subject to such other terms and conditions, as set forth in the
Stock Option Agreement.
ASSIGNMENT OF OPTION. Neither UST nor AFCB may assign any of its rights or
obligations under the Stock Option Agreement or the Option to any other person
without the express written consent of the other party, except that in the event
a Subsequent Triggering Event occurs prior to an Exercise Termination Event, UST
may assign with or without AFCB's consent but subject to AFCB's right of first
refusal as set forth in the Stock Option Agreement, in whole or in part, its
rights and obligations under the Stock Option Agreement or the Option within 30
days following such Subsequent Triggering Event.
ADDITIONAL PROVISIONS. Certain rights and obligations of UST and AFCB under
the Stock Option Agreement are subject to receipt of required regulatory
approvals. As noted above, the approval of the Federal Reserve Board is required
for the acquisition by UST of more than 5% of the outstanding shares of AFCB
Common Stock. Accordingly, UST has included in its application with the Federal
Reserve Board a request for approval of the exercise of its rights under the
Option, including its right to purchase more than 5% of the outstanding shares
of AFCB Common Stock. See "THE AFFILIATION--Regulatory Approvals Required for
the Affiliation."
VOTING AGREEMENTS
As a condition to UST entering into the Affiliation Agreement, the directors
and executive officers of AFCB and certain executive officers of the AFCB Banks,
owning as of the Record Date in the aggregate
63
<PAGE>
123,606 shares (not including currently exercisable options to acquire 136,726
additional shares), representing 1.87% of the issued and outstanding shares of
AFCB Common Stock as of such date, have agreed pursuant to the Voting
Agreements, to vote or cause to be voted at the AFCB Meeting all shares owned by
each such person and with respect to which such person exercises sole voting
power as of the Record Date for approval of the Affiliation, and vote or cause
to be voted such shares against approval of any other agreement for a merger,
acquisition, consolidation, material asset sale, or other business combination
of AFCB with any other party other than UST or any of its affiliates.
The Voting Agreements will remain in force until the earlier of the
consummation of the Affiliation or the termination of the Affiliation Agreement
in accordance with its terms.
64
<PAGE>
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
UNAUDITED PRO FORMA FINANCIAL INFORMATION
UST CORP.
AFFILIATED COMMUNITY BANCORP, INC.
SOMERSET SAVINGS BANK
UNAUDITED HISTORICAL AND PRO FORMA CONDENSED BALANCE SHEET
DECEMBER 31, 1997
The following Unaudited Pro Forma Condensed Combining Balance Sheet presents the
combined financial position of UST and AFCB as of December 31, 1997, assuming
the acquisition had occurred as of December 31, 1997. The Unaudited Pro Forma
Condensed Combining Balance Sheet also gives effect to the pending acquisition
of Somerset pursuant to an agreement entered into on December 9, 1997. See
"INFORMATION ABOUT UST--Recent Developments" for a description of the Somerset
transaction.
The accompanying pro forma information is based on historical balance sheet
data of UST, AFCB and Somerset as of December 31, 1997, giving effect to the
acquisitions of AFCB and Somerset under the pooling of interests method of
accounting.
The Unaudited Pro Forma Condensed Combining Balance Sheet should be read in
conjunction with the Unaudited Pro Forma Condensed Combined Statements of Income
appearing elsewhere in this Proxy Statement-Prospectus and the Notes to
Unaudited Pro Forma Condensed Financial Information and historical financial
statements and notes thereto of UST, Somerset and AFCB which are incorporated by
reference in this Joint Proxy Statement-Prospectus, including but not limited
to, the financial information of UST, Somerset and AFCB contained in their
respective Annual Reports or form 10-K for the year ended December 31, 1997. See
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE." The Unaudited Pro Forma
Condensed Combining Balance Sheet is presented for informational purposes only
and is not necessarily indicative of the combined financial position that would
have occurred if the proposed mergers of UST, AFCB and Somerset had been
consummated on December 31, 1997 or at the beginning of the periods indicated or
which may be obtained in the future. For information regarding the uncertainty
of assumptions, estimates and expectations reflected herein, see "CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS."
65
<PAGE>
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
UST CORP.
AFFILIATED COMMUNITY BANCORP, INC.
SOMERSET SAVINGS BANK
UNAUDITED PRO FORMA CONDENSED COMBINING BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL PRO PRO FORMA PRO UST, AFCB
-------------------- FORMA UST AND AFCB HISTORICAL FORMA AND SOMERSET
UST AFCB ADJUSTMENTS COMBINED SOMERSET ADJUSTMENTS COMBINED
--------- --------- ------------- -------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
ASSETS
Cash, due from banks and interest
bearing deposits............... $ 95,702 $ 16,911 $ 112,613 $ 7,908 $ 120,521
Excess funds sold................ 67,851 10,344 78,195 2,805 81,000
Securities
Available-for-sale........... 722,432 221,272 943,704 943,704
Held to maturity............. 172,623 172,623 89,143 261,766
Loans, net of reserve for
possible loan losses........... 2,783,752 703,061 3,486,813 412,177 3,898,990
Premises, furniture and
equipment...................... 64,407 8,747 73,154 12,538 85,692
Intangible assets, net........... 57,807 57,807 57,807
Other real estate owned.......... 1,334 1 1,335 5,711 7,046
Other assets..................... 44,973 22,089 67,062 9,390 76,452
--------- --------- -------------- ----------- ------------
Total assets............... $3,838,258 $1,155,048 $4,993,306 $ 539,672 $5,532,978
--------- --------- -------------- ----------- ------------
--------- --------- -------------- ----------- ------------
LIABILITIES AND STOCK-HOLDERS' INVESTMENT
Deposits:
Noninterest bearing.............. $ 708,399 $ 48,120 $ 756,519 $ 25,407 $ 781,926
Interest bearing:
NOW accounts................. 43,116 60,781 103,897 24,396 128,293
Regular savings.............. 660,641 120,921 781,562 70,156 851,718
Money market................. 675,087 72,571 747,658 50,803 798,461
Time deposits................ 890,972 426,703 1,317,675 285,124 1,602,799
--------- --------- -------------- ----------- ------------
Total deposits............. 2,978,215 729,096 3,707,311 455,886 4,163,197
Short-term borrowings.......... 421,313 235,180 656,493 32,929 689,422
Other borrowings............... 49,338 67,019 116,357 10,447 126,804
Other liabilities.............. 49,266 $ 10,700 $ 8,700(1) 68,666 4,533 $ 5,300(1) 78,499
--------- --------- ------------- -------------- ----------- ----------- ------------
Total liabilities.......... 3,498,132 1,041,995 8,700 4,548,827 503,795 5,300 5,057,922
Stockholders' investment:
Common Stock
UST.......................... 18,601 5,731(2) 24,332 1,978(2) 26,310
AFCB......................... 67 (67)(2)
Somerset..................... 16,659 (16,659)(2)
Additional paid-in capital 117,236 50,360 (9,066)(2) 158,530 18,652 14,681(2) 191,863
Retained earnings (deficit)...... 201,355 66,128 (8,700)(1) 258,783 566 (5,300)(1) 254,049
Unrealized gain on securities
held as available-for-sale..... 2,245 919 3,164 3,164
Treasury stock, at cost.......... (3,402) 3,402(2)
Deferred compensation and
other.......................... 689 (1,019) (330) (330)
--------- --------- ------------- -------------- ----------- ----------- ------------
Total stockholders'
investment............... 340,126 113,053 (8,700) 444,479 35,877 (5,300) 475,056
--------- --------- ------------- -------------- ----------- ----------- ------------
Total liabilities and
stock-holders'
investment............... $3,838,258 $1,155,048 $ $4,993,306 $ 539,672 $ $5,532,978
--------- --------- ------------- -------------- ----------- ----------- ------------
--------- --------- ------------- -------------- ----------- ----------- ------------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Financial Information.
66
<PAGE>
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
UST CORP.
AFFILIATED COMMUNITY BANCORP, INC.
SOMERSET SAVINGS BANK
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
The following Unaudited Pro Forma Condensed Combined Statements of Income
give effect to UST's proposed acquisition of AFCB by combining the results of
operations of UST for each of the three years ended December 31, 1997 and AFCB
for each of the three years ended December 31, 1997 on a pooling of interests
basis, assuming the acquisitions had occurred as of the beginning of each fiscal
period. Basic and Diluted earnings per share and weighted average shares
outstanding are based on the exchange ratio of 1.41 shares of UST Common Stock
for each share of AFCB Common Stock as specified in the Affiliation Agreement.
The Unaudited Pro Forma Condensed Combined Statements of Income also give effect
to the pending acquisition of Somerset pursuant to an agreement entered into on
December 9, 1997. See "INFORMATION ABOUT UST - Recent Developments" for a
description of the Somerset transaction. The Unaudited Pro Forma Condensed
Combined Statements of Income should be read in conjunction with the Unaudited
Pro Forma Condensed Combining Balance Sheet and Notes to Unaudited Pro Forma
Condensed Financial Information appearing elsewhere in this Joint Proxy
Statement-Prospectus and the historical financial statements and notes thereto
of UST, AFCB and Somerset which are incorporated by reference in this Joint
Proxy Statement-Prospectus. See "INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE."
67
<PAGE>
UST CORP.
AFFILIATED COMMUNITY BANCORP, INC.
SOMERSET SAVINGS BANK
PRO FORMA COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------------------------------
PRO FORMA
PRO FORMA UST, AFCB
UST AND AND
HISTORICAL HISTORICAL AFCB HISTORICAL SOMERSET
UST AFCB COMBINED SOMERSET COMBINED
--------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Interest income:
Interest and fees on loans and leases.... $ 234,972 $ 56,479 $ 291,451 $ 35,857 $ 327,308
Interest and dividends on securities..... 45,466 24,794 70,260 5,976 76,236
Interest on excess funds and other....... 4,775 238 5,013 178 5,191
--------- ----------- ----------- ----------- -----------
Total interest income.................. 285,213 81,511 366,724 42,011 408,735
--------- ----------- ----------- ----------- -----------
Interest expense:
Interest on deposits..................... 82,666 28,533 111,199 20,588 131,787
Interest on borrowed funds............... 27,342 17,479 44,821 1,597 46,418
--------- ----------- ----------- ----------- -----------
Total interest expense................. 110,008 46,012 156,020 22,185 178,205
--------- ----------- ----------- ----------- -----------
Net interest income...................... 175,205 35,499 210,704 19,826 230,530
Provision for possible loan losses......... 900 1,000 1,900 1,200 3,100
--------- ----------- ----------- ----------- -----------
Net interest income after provision for
possible loan losses................... 174,305 34,499 208,804 18,626 227,430
--------- ----------- ----------- ----------- -----------
Noninterest income:
Asset management fees.................... 13,093 13,093 13,093
Fees and charges......................... 15,055 1,544 16,599 636 17,235
Securities gains (losses), net........... (1,491) 250 (1,241) (1,241)
Gain on sale of assets................... 1,804 347 2,151 34 2,185
Other.................................... 9,562 157 9,719 683 10,402
--------- ----------- ----------- ----------- -----------
Total noninterest income............... 38,023 2,298 40,321 1,353 41,674
--------- ----------- ----------- ----------- -----------
Noninterest expense:
Salary and employee benefits............. 73,579 10,726 84,305 7,178 91,483
Occupancy and equipment.................. 20,537 2,337 22,874 1,586 24,460
Restructuring charges.................... 11,751 11,751 11,751
Service bureau and data processing
fees................................... 5,536 1,062 6,598 545 7,143
Professional fees........................ 5,385 481 5,866 549 6,415
Acquisition and merger-related
expenses............................... 4,418 4,418 4,418
Deposit insurance assessment............. 1,053 265 1,318 798 2,116
Forecloase asset and workout expense..... 709 (183) 526 1,948 2,474
Other.................................... 34,114 3,238 37,352 2,632 39,984
--------- ----------- ----------- ----------- -----------
Total noninterest expense.............. 157,082 17,926 175,008 15,236 190,244
--------- ----------- ----------- ----------- -----------
Income before taxes........................ 55,246 18,871 74,117 4,743 78,860
Income tax expense (benefit)............. 22,853 7,015 29,868 (1,224) 28,644
--------- ----------- ----------- ----------- -----------
Net income................................. $ 32,393 $ 11,856 $ 44,249 $ 5,967 $ 50,216
--------- ----------- ----------- ----------- -----------
--------- ----------- ----------- ----------- -----------
Per share data:
Basic earnings per share................. $ 1.09 $ 1.86 $ 1.15 $ 0.36 $ 1.20
Diluted earnings per share............... $ 1.08 $ 1.78 $ 1.12 $ 0.35 $ 1.18
Basic weighted average shares............ 29,616 6,369 38,596 16,652 41,760
Diluted weighted average shares.......... 30,104 6,659 39,494 16,927 42,710
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Financial Information.
68
<PAGE>
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
UST CORP.
AFFILIATED COMMUNITY BANCORP, INC.
SOMERSET SAVINGS BANK
PRO FORMA COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------------------
PRO FORMA
PRO FORMA UST, AFCB
UST AND AND
HISTORICAL HISTORICAL AFCB HISTORICAL SOMERSET
UST AFCB COMBINED SOMERSET COMBINED
--------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Interest income:
Interest and fees on loans and leases.... $ 187,802 $ 48,661 $ 236,463 $ 35,521 $ 271,984
Interest and dividends on securities..... 53,188 22,415 75,603 5,034 80,637
Interest on excess funds and other....... 2,223 265 2,488 303 2,791
--------- ----------- ----------- ----------- -----------
Total interest income.................. 243,213 71,341 314,554 40,858 355,412
--------- ----------- ----------- ----------- -----------
Interest expense:
Interest on deposits..................... 71,684 25,775 97,459 20,202 117,661
Interest on borrowed funds............... 30,443 14,289 44,732 2,126 46,858
--------- ----------- ----------- ----------- -----------
Total interest expense................. 102,127 40,064 142,191 22,328 164,519
--------- ----------- ----------- ----------- -----------
Net interest income...................... 141,086 31,277 172,363 18,530 190,893
Provision for possible loan losses......... (17,300) 605 (16,695) 1,200 (15,495)
--------- ----------- ----------- ----------- -----------
Net interest income after pro-vision for
possible loan losses................... 158,386 30,672 189,058 17,330 206,388
--------- ----------- ----------- ----------- -----------
Noninterest income:
Asset management fees.................... 12,947 12,947 12,947
Fees and charges......................... 11,020 1,540 12,560 587 13,147
Securities gains (losses), net........... 1,179 (47) 1,132 1,132
Gain on sale of bank subsidiary.......... 6,806 6,806 6,806
Gain on sale of assets................... 2 76 78 43 121
Other.................................... 7,987 69 8,056 427 8,483
--------- ----------- ----------- ----------- -----------
Total noninterest income............... 39,941 1,638 41,579 1,057 42,636
--------- ----------- ----------- ----------- -----------
Noninterest expense:
Salary and employee benefits............. 64,579 9,054 73,633 6,869 80,502
Occupancy and equipment.................. 16,141 2,086 18,227 1,536 19,763
Service bureau and data processing
fees................................... 3,121 835 3,956 521 4,477
Professional fees........................ 5,497 702 6,199 810 7,009
Acquisition and merger related
expenses............................... 5,933 5,933 5,933
Deposit insurance assessment............. 3,959 2,860 6,819 1,040 7,859
Foreclosed asset and workout expenses.... 1,687 129 1,816 2,728 4,544
Other.................................... 23,752 3,300 27,052 2,510 29,562
--------- ----------- ----------- ----------- -----------
Total noninterest expense.............. 124,669 18,966 143,635 16,014 159,649
--------- ----------- ----------- ----------- -----------
Income before taxes........................ 73,658 13,344 87,002 2,373 89,375
Income tax expense (benefit)............. 28,381 4,821 33,202 (440) 32,762
--------- ----------- ----------- ----------- -----------
Net income................................. $ 45,277 $ 8,523 $ 53,800 $ 2,813 $ 56,613
--------- ----------- ----------- ----------- -----------
--------- ----------- ----------- ----------- -----------
Per share data:
Basic earnings per share................. $ 1.56 $ 1.35 $ 1.42 $ 0.17 $ 1.38
Diluted earnings per share............... $ 1.53 $ 1.32 $ 1.39 $ 0.17 $ 1.35
Basic Weighted average shares............ 29,015 6,299 37,897 16,652 41,061
Diluted wieghted average shares.......... 29,576 6,461 38,686 16,713 41,861
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Financial Information.
69
<PAGE>
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
UST CORP.
AFFILIATED COMMUNITY BANCORP, INC.
SOMERSET SAVINGS BANK
PRO FORMA COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
--------------------------------------------------------------
PRO FORMA
PRO FORMA UST, AFCB
UST AND AND
HISTORICAL HISTORICAL AFCB HISTORICAL SOMERSET
UST AFCB COMBINED SOMERSET COMBINED
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Interest income:
Interest and fees on loans and leases............... $ 182,775 $ 41,924 $ 224,699 $ 36,350 $ 261,049
Interest and dividends on securities................ 42,503 18,598 61,101 3,844 64,945
Interest on excess funds and other.................. 3,939 474 4,413 242 4,655
---------- ----------- ----------- ----------- -----------
Total interest income............................. 229,217 60,996 290,213 40,436 330,649
---------- ----------- ----------- ----------- -----------
Interest expense:
Interest on deposits................................ 69,402 22,878 92,280 18,932 111,212
Interest on borrowed funds.......................... 21,230 10,346 31,576 3,841 35,417
---------- ----------- ----------- ----------- -----------
Total interest expense............................ 90,632 33,224 123,856 22,773 146,629
---------- ----------- ----------- ----------- -----------
Net interest income................................. 138,585 27,772 166,357 17,663 184,020
Provision for possible loan losses.................... 14,395 325 14,720 1,200 15,920
---------- ----------- ----------- ----------- -----------
Net interest income after provision for possible
loan losses....................................... 124,190 27,447 151,637 16,463 168,100
---------- ----------- ----------- ----------- -----------
Noninterest income:
Asset management fees............................... 13,581 13,581 13,581
Fees and charges.................................... 11,278 1,553 12,831 587 13,418
Securities gains (losses), net...................... 2,395 33 2,428 2,428
Gain on sale of assets.............................. 157 16 173 54 227
Other............................................... 9,106 91 9,197 415 9,612
---------- ----------- ----------- ----------- -----------
Total noninterest income.......................... 36,517 1,693 38,210 1,056 39,266
---------- ----------- ----------- ----------- -----------
Noninterest expense:
Salary and employee benefits........................ 59,820 8,770 68,590 6,476 75,066
Occupancy and equipment............................. 15,758 1,994 17,752 1,535 19,287
Service bureau and data processing fees............. 3,208 792 4,000 447 4,447
Professional fees................................... 4,587 786 5,373 662 6,035
Acquisition and merger related expenses............. 2,409 1,989 4,398 4,398
Deposit insurance assessment........................ 4,051 1,006 5,057 1,189 6,246
Foreclosed asset and workout expenses............... 5,972 (107) 5,865 4,641 10,506
Other............................................... 22,316 3,004 25,320 2,491 27,811
---------- ----------- ----------- ----------- -----------
Total noninterest expense......................... 118,121 18,234 136,355 17,441 153,796
---------- ----------- ----------- ----------- -----------
Income before taxes................................... 42,586 10,906 53,492 78 53,570
Income tax expense (benefit)........................ 15,533 5,199 20,732 (1,000) 19,732
---------- ----------- ----------- ----------- -----------
Net income............................................ $ 27,053 $ 5,707 $ 32,760 $ 1,078 $ 33,838
---------- ----------- ----------- ----------- -----------
---------- ----------- ----------- ----------- -----------
Per share data:
Basic earnings per share............................ $ 0.94 $ 0.88 $ 0.86 $ 0.06 $ 0.82
Diluted earnings per share.......................... $ 0.92 $ 0.86 $ 0.84 $ 0.06 $ 0.81
Basic weighted average shares....................... 28,734 6,519 37,925 16,652 41,089
Diluted weighted average shares..................... 29,417 6,659 38,806 16,669 41,973
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Financial Information.
70
<PAGE>
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
NOTES TO UNAUDITED PRO FORMA
CONDENSED FINANCIAL INFORMATION
NOTE 1:
It is contemplated that the pending acquisitions will be accounted for as
poolings of interests. Accordingly, pro forma financial information assumes that
the transactions were consummated as of the beginning of each of the periods
indicated herein. Certain reclassifications have been made to the accounts of
AFCB and Somerset in the accompanying Unaudited Pro Forma Condensed Combining
Balance Sheet and Unaudited Pro Forma Condensed Combined Statements of Income to
conform to UST presentation. Pro forma results from continuing operations do not
reflect nonrecurring items of income and expense resulting directly from the
proposed mergers.
The effect of an estimated one-time charge of $8.7 million ($12.0 million
pre-tax), to be taken by UST in connection with the AFCB acquisition has been
reflected in the accompanying Unaudited Pro Forma Condensed Combining Balance
Sheet as a reduction in retained earnings and an increase in other liabilities,
net of a 40% tax benefit of $3.3 million, after excluding $3.8 million of
nondeductible expense.
The effect of an estimated one-time charge of $5.3 million ($7.5 million
pre-tax), to be taken by UST in connection with the Somerset acquisition has
been reflected in the accompanying Unaudited Pro Forma Condensed Combining
Balance Sheet as a reduction in retained earnings and an increase in other
liabilities, net of a 40% tax benefit of $2.2 million, after excluding $2.1
million of nondeductible expense.
These charges have not been reflected in the Unaudited Pro Forma Condensed
Combined Statements of Income since they are nonrecurring. The pro forma
financial information does not give effect to any cost savings in connection
with the pending acquisitions.
NOTE 2:
AFCB
The 9,170,141 shares of UST Common Stock to be issued pursuant to the
acquisition of AFCB is based upon 6,503,646 net AFCB shares outstanding as of
December 31, 1997, and the exchange ratio of 1.41 shares of UST Common Stock for
each share of AFCB Common Stock. The excess of the par value of the UST Common
Stock to be issued over the par value of the AFCB Common Stock to be acquired
has been charged to Additional paid-in-capital. The Stockholders' investment
accounts of AFCB reflect the retirement of AFCB Treasury Stock ($3.4 million)
upon consummation of the AFCB acquisition through a charge to Additional paid-in
capital.
SOMERSET
The pro forma Stockholders' investment accounts of UST and AFCB have been
adjusted in the accompanying Unaudited Pro Forma Condensed Combining Balance
Sheet to reflect the issuance of shares of UST Common Stock in exchange for all
of the outstanding shares of Somerset Common Stock. The 3,165,278 shares of UST
Common Stock to be issued pursuant to the acquisition of Somerset is based upon
16,659,356 Somerset shares outstanding as of December 31, 1997, and the exchange
ratio of 0.19 shares of UST Common Stock for each share of Somerset Common Stock
as specified in the Affiliation Agreement. The excess of the par value of the
Common Stock of Somerset to be acquired over the par value of the UST Common
Stock to be issued has been credited to Additional paid-in-capital.
NOTE 3:
UST classifies its investments in debt and equity securities as "Securities
Available for Sale" in accordance with the provisions of Statement of Financial
Accounting Standards No. 115, "Accounting for
71
<PAGE>
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
NOTES TO UNAUDITED PRO FORMA
CONDENSED FINANCIAL INFORMATION
NOTE 3: (CONTINUED)
Certain Investments in Debt and Equity Securities." Accordingly, such securities
are carried at fair value, with unrealized gains and losses, net of tax,
reported as a separate component of Stockholders' investment. It is anticipated
that, in order to maintain UST's existing interest rate risk position, the
securities in the AFCB and Somerset portfolios which are designated as
Held-to-Maturity, and are carried at cost adjusted for the amortization of
premium and accretion of discount, will be redesignated as Available-for-Sale
upon consummation of the acquisitions. At December 31, 1997, the
Available-for-Sale designation would add approximately $826 thousand and $160
thousand, respectively, to the Stockholders' investment accounts of AFCB and
Somerset. The effect of the fair-value adjustments have not been reflected in
the accompanying Unaudited Pro Forma Condensed Combining Balance Sheet since the
actual amount of any unrealized gains or losses at consummation is subject to
market conditions and other factors and may vary significantly from the balance
reported at December 31, 1997.
NOTE 4:
Pro forma earnings per share amounts in the accompanying Unaudited Pro Forma
Condensed Combined Statements of Income are based on the weighted average number
of Basic and Diluted common shares of the constituent companies during each
period as adjusted for the exchange ratios specified in the respective
Affiliation Agreements.
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DESCRIPTION OF UST CAPITAL STOCK
GENERAL
The Company is authorized by its Articles of Organization to issue
45,000,000 shares of UST Common Stock and 4,000,000 shares of preferred stock
(the "Preferred Stock"). As of the Record Date, there were outstanding
29,878,628 shares of UST Common Stock and no shares of Preferred Stock.
COMMON STOCK
DIVIDEND RIGHTS. The ability of UST and its bank subsidiaries to pay
dividends is subject to certain limitations imposed by statutes of The
Commonwealth of Massachusetts and certain restrictions imposed by regulatory
authorities. Generally, with respect to the bank subsidiaries, the payment of
dividends is limited by statute to the amount of retained earnings, after
deducting losses and statutorily defined bad debts in excess of established
allowances for loan losses.
VOTING RIGHTS. Holders of UST Common Stock are entitled to one vote for
each share on all matters voted upon by stockholders. Shares of UST Common Stock
have non-cumulative voting rights, which means that the holders of more than 50%
of the shares voting in an election of directors can elect 100% of the directors
being elected if they choose to do so.
PREEMPTIVE RIGHTS. Authorized shares of UST Common Stock may be issued at
any time, and from time to time, in such amounts and for such consideration as
may be fixed by the UST Board. No holder of UST Common Stock has any preemptive
or preferential right to purchase or to subscribe for any shares of capital
stock or other securities which may be issued by UST.
LIQUIDATION RIGHTS. In the event of any liquidation, dissolution or
winding-up of UST whether voluntary or involuntary, the holders of UST Common
Stock are entitled to share, on a share for share basis, in any of the assets of
UST legally available for distribution to such shareholders after the payment of
all debts and other liabilities of UST and any preferential amounts attributable
to any Preferred Stock that may then be outstanding.
ASSESSMENTS. Outstanding shares of UST Common Stock are, and the shares of
UST Common Stock being registered hereby will be, fully paid and non-assessable.
TRANSFER AGENT AND REGISTRAR. UST's wholly-owned subsidiary, United States
Trust Company, 30 Court Street, Boston, Massachusetts 02108, serves as transfer
agent and registrar for UST Common Stock.
STOCKHOLDER RIGHTS AGREEMENT. On September 19, 1995, the UST Board adopted
the UST Rights Agreement providing for a dividend of one preferred share
purchase right for each outstanding share of UST Common Stock (the "Rights").
The dividend was distributed on October 6, 1995, to stockholders of record on
that date. Holders of shares of UST Common Stock issued subsequent to that date
receive the Rights with their shares. The Rights trade automatically with shares
of UST Common Stock and become exercisable only under certain circumstances as
described below. The Rights are designed to protect the interests of UST and its
stockholders against coercive third-party takeover tactics. The purpose of the
Rights is to encourage potential acquirers to negotiate with the UST Board prior
to attempting a takeover and to provide the UST Board with leverage in
negotiating on behalf of all stockholders the terms of any proposed takeover.
The Rights may have certain anti-takeover effects. The Rights should not,
however, interfere with any merger or other business combination approved by the
UST Board.
The Rights will become exercisable only if a person or group (i) acquires
15% or more of the outstanding shares of UST Common Stock, (ii) announces a
tender offer that would result in ownership of 15% or more of the outstanding
UST Common Stock, or (iii) is declared to be an "Adverse Person" by the UST
Board. An "Adverse Person" includes any person or group who owns at least 10% of
the outstanding shares of UST Common Stock and attempts an action that would
adversely impact UST. Each right would
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entitle a stockholder to buy 1/100th of a share of UST's Series A Junior
Participating Preferred Stock. See "DESCRIPTION OF UST CAPITAL STOCK--Preferred
Stock."
Once a person or group has acquired 15% or more of the outstanding shares of
UST Common Stock or is declared an "Adverse Person" by the UST Board, each Right
may entitle its holder (other than the acquiring person or adverse person) to
purchase, at an exercise price of $40 per share, shares of UST Common Stock (or
of any company that acquires UST) at a price equal to 50% of their current
market price. Under certain circumstances, the Continuing Directors (as defined
in the Stockholder Rights Agreement) may exchange the Rights for UST Common
Stock (or equivalent securities) on a one-for-one-basis.
Until declaration of a Person as an Adverse Person, or ten days after public
announcement that any person or group has acquired 15% or more of the
outstanding shares of UST Common Stock, the Rights are redeemable at the option
of the UST Board in certain cases with the concurrence of the Continuing
Directors. Thereafter, they may be redeemed by the Continuing Directors in
connection with certain acquisitions not involving any acquiring person or
Adverse Person or in certain circumstances following a disposition of shares by
the acquiring person or Adverse Person. The redemption price is $0.001 per
Right. The Rights will expire on October 6, 2005, unless redeemed prior to that
date.
The foregoing description of the Rights does not purport to be complete and
is qualified in its entirety by the description of the Rights contained in the
UST Rights Agreement, dated as of June 28, 1990, between UST and USTC, as Rights
Agent, which is incorporated herein by reference to Exhibit 1 to UST's
Registration Statement on Form 8-A dated September 26, 1995.
PREFERRED STOCK
GENERAL. The Preferred Stock is of a serial or "blank check" nature. Under
Chapter 156B of the Massachusetts General Laws, after stockholder authorization
of such a class of preferred stock, one or more series of preferred stock may be
established and designated by action of the UST Board with varying rights,
preferences and limitations and without further stockholder action. The UST
Board may also fix the number of shares of the series. Series are established by
the filing with the Secretary of The Commonwealth of Massachusetts of a
certificate which is made in part of the filing company's Articles of
Organization and which sets forth the rights, preferences and limitations of the
respective series.
DIVIDEND AND LIQUIDATION RIGHTS. Each series of the Preferred Stock, when
issued, would have preference over the UST Common Stock with respect to the
payment of all dividends and distribution of assets in the event of liquidation
or dissolution of UST, and may have other preferences.
DETERMINATIONS TO BE MADE BY THE UST BOARD. The determinations for each
series of Preferred Stock which would be made by the UST Board include (1) the
number of shares to constitute such series, (2) the dividend rate or rates (or
the manner of determining the same) on the shares of such series, (3) whether
dividends shall be cumulative, (4) whether the shares of the series shall be
redeemable and the terms thereof, (5) whether the shares of the series shall be
convertible into other securities of UST, including the Common Stock, and the
terms and conditions thereof, (6) the special relative rights of holders of
shares of the series in the event of liquidation, distribution or sale of
assets, dissolution or winding-up of UST, (7) the terms of voting rights, if
any, of shares of the series, (8) the title or designation of the series and (9)
such other rights and privileges and any qualifications, limitations or
restrictions of such rights or privileges of such series as may be permitted by
applicable law. As noted above, before any series would be issued, a certificate
setting forth the terms thereof would be authorized by the UST Board and filed
pursuant to the MBCL but no further stockholder action would be required for the
issuance of such authorized shares.
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK. In connection with the UST
Rights Agreement, the UST Board established a series of Preferred Stock, par
value $1.00 per share, designated as Series A Junior
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Participating Preferred Stock ("Series A"). The number of shares constituting
Series A is 300,000. A certificate was filed with the Secretary of The
Commonwealth of Massachusetts on September 29, 1995 setting forth the
determinations discussed above. Holders of Series A Preferred Stock are entitled
to receive, in preference to the holders of UST Common Stock, quarterly
dividends payable in cash on the first of March, June, September and December in
each year after the first issuance of a share or a fraction
of a share of Series A Preferred Stock, in an amount per share equal to the
greater of (a) $1 or (b) subject to adjustment, 100 times the aggregate per
share amount of all cash dividends, and 100 times the aggregate per share amount
(payable in kind) of all non-cash dividends, other than a dividend payable in
UST Common Stock. Series A Preferred Stock dividends are cumulative but do not
bear interest. Shares of Series A Preferred Stock are not redeemable. Each share
of Series A Preferred Stock entitles the holder thereof to 100 votes on all
matters submitted to a vote of the UST stockholders and no other special voting
rights. Upon any liquidation, dissolution or winding up, holders of Series A
Preferred Stock are entitled to priority over the holders of share of UST Common
Stock or other junior ranking stock. No such shares of Series A Preferred Stock
are issued or outstanding, however, each holder of UST Common Stock was granted
the right to purchase Series A Preferred Stock upon the happening of certain
events, such as a hostile takeover attempt of UST, as described in the UST
Rights Agreement. See "DESCRIPTION OF UST CAPITAL STOCK--Stockholder Rights
Plan."
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COMPARATIVE RIGHTS OF STOCKHOLDERS
GENERAL
Upon consummation of the transactions contemplated in the Affiliation
Agreement, the stockholders of AFCB who do not perfect and exercise their
statutory dissenters' rights will become stockholders of UST. Since both UST and
AFCB are Massachusetts corporations, AFCB stockholders who receive UST Common
Stock will continue to be subject to the privileges and restrictions set forth
in the MBCL. In addition, the rights of such stockholders as stockholders of UST
will be governed by the Articles and By-laws of UST, which differ in certain
respects from AFCB's Articles and By-laws. This summary contains a list of the
material differences between the rights of UST stockholders and AFCB
stockholders but is not meant to be relied upon as an exhaustive list or a
detailed description of the provisions discussed. This summary is qualified in
its entirety by reference to the Massachusetts General Laws, the MBCL, the UST
Rights Agreement and the Articles and By-laws of each of UST and AFCB. See
"AVAILABLE INFORMATION."
SIZE AND CLASSIFICATION OF THE BOARD OF DIRECTORS
Consistent with the MBCL, each of the UST Board and the AFCB Board is
divided into three classes and the directors of each class are elected by the
stockholders to serve staggered three-year terms. The UST By-laws provide that
the UST Board be composed of not less than three directors. Neither the UST
By-laws nor the AFCB By-laws limit the maximum number of directors who may serve
on either the UST Board or the AFCB Board, respectively. Presently there are
twenty directors on the UST Board and six directors on the AFCB Board.
REMOVAL OF DIRECTORS
UST. Under the UST By-laws, except as otherwise provided by Massachusetts
law, a director may be removed from office: (a) with or without cause by a vote
of a majority of the stockholders entitled to vote in the election of directors,
provided that directors elected by a particular class of stockholders may be
removed only by the vote of the holders of a majority of the shares of such
class, or (b) for cause by vote of a majority of the directors then in office.
AFCB. Members of the AFCB Board may be removed by the affirmative vote of
two-thirds of the holders of the shares outstanding and entitled to vote in the
election of AFCB Directors, only for cause. "Cause" is defined as: (i)
conviction of a felony, (ii) declaration of unsound mind by order of court,
(iii) gross dereliction of duty, (iv) commission of an act involving moral
turpitude, or (v) commission of an action which constitutes intentional
misconduct or knowing violation of law if such action in either event results
both in an improper substantial personal benefit and a material injury to AFCB.
STOCKHOLDER NOMINATIONS
UST. The UST Articles and the UST By-laws do not set forth procedures
regarding stockholder nominations of individuals for election to the UST Board.
AFCB. The AFCB By-laws set forth procedures that must be followed for
stockholders to nominate individuals for election to the AFCB Board at annual
stockholders' meetings. Nominations by stockholders entitled to vote generally
in the election of directors must be made in writing, delivered or mailed to the
Clerk of AFCB at the principal executive offices of AFCB not less than 60 days
nor more than 120 days prior to the anniversary date of the immediately
preceding annual meeting of stockholders. Each such notice must include, with
respect to each nominee, (i) the name, age, business address and residence
address of each nominee proposed in the notice, (ii) the principal occupation or
employment of each such nominee, (iii) the class and number of shares of stock
of AFCB beneficially owned by each nominee, and
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(iv) the consent of each nominee to serve as director if elected, and with
respect to each stockholder making any such nomination, (i) the name and address
of the stockholder and of any beneficial owners of the shares registered in the
name of such stockholder and the name and address of any other stockholders
known by such stockholder to be supporting such nominee(s), (ii) the class and
number of shares held of record, beneficially owned or represented by proxy by
such stockholder and by any other stockholders known by such stockholder to be
supporting such nominee(s), and (iii) a description of all arrangements or
understandings between such stockholder and each nominee and any other person(s)
(naming such person(s)) pursuant to which such nomination(s) are to be made by
such stockholder.
INTERESTED TRANSACTIONS
UST. None of the MBCL, UST Articles or the UST By-laws has a general
provision governing interested transactions. Therefore, transactions between UST
and any of its directors, officers or security holders or between UST and any
entity in which any director, officer or security holder of UST is financially
interested is governed by the decisional law set down by the Massachusetts
Courts. Interested transactions are not per se voidable but may be challenged on
the grounds that such a transaction was not entered into in good faith or was
unfair to the corporation. In determining good faith and fairness, courts will
consider whether a full and honest disclosure of all relevant circumstances of
the transaction had been disclosed as well as whether approval of the
disinterested directors and stockholders had been obtained. The determination of
good faith and fairness is particular to the facts and circumstances of each
case.
AFCB. Under the AFCB Articles, unless entered into in bad faith, no
contract or transaction between AFCB, and any of its directors, officers or
security holders, or between AFCB and any entity in which a director, officer or
security holder is in any way interested will be void or voidable solely because
of this relationship, or solely because of the presence of the interested party
at the meeting authorizing the transaction or contract, or solely because of his
or their participation in the authorization of the transaction or contract or
vote at the meeting for authorization.
MEETINGS OF STOCKHOLDERS
UST. The UST By-laws provide that special meetings of stockholders may be
called by the President or by the UST Board or, upon written application of one
or more stockholders who hold at least 10% of the capital stock entitled to vote
at the meeting, by the Clerk, or in the case of the death, absence, incapacity
or refusal of the Clerk, by any other officer.
AFCB. The AFCB By-laws provide that special meetings of stockholders may be
called at any time by the AFCB Board, the President or the Chairman of the
Board, or upon written application of one or more stockholders who hold at least
66 2/3% in interest of the capital stock entitled to vote at such meeting or
such lesser percentage, if any (but not less than 40%), as shall be determined
to be the maximum percentage which AFCB is permitted by applicable law to
establish for the call of such meeting, by the Clerk, or in the case of death,
absence, incapacity or refusal of the Clerk, by any other officer.
STOCKHOLDER ACTION WITHOUT A MEETING
UST. As authorized by the MBCL, the UST By-laws provide that any action to
be taken by UST stockholders may be taken without a meeting if all stockholders
entitled to vote on the matter consent to the action by a writing filed with the
records of the meetings of the stockholders.
AFCB. The AFCB Articles specifically deny the power of stockholders to
consent in writing, without a meeting, to the taking of any action required to
be taken or which may be taken at any annual or special meeting of the
stockholders of AFCB.
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AMENDMENT OF BY-LAWS
UST. The UST By-laws may at any time be amended by a majority vote of the
stockholders, provided that notice of the substance of the proposed amendment is
stated in the notice of the meeting.
AFCB. Unlike the UST Articles, the AFCB By-laws specifically authorize the
AFCB Board to amend or repeal the AFCB By-laws by a vote of two-thirds of the
directors then in office, except with respect to any provisions thereof which by
law, the AFCB Articles or the AFCB By-laws require action by the stockholders.
No By-law of AFCB may be amended or repealed by the AFCB stockholders except by
a vote of the holders of not less than 80% in interest of the capital stock of
AFCB entitled to vote thereon at the meeting of stockholders at which such
amendment or repeal is considered; provided, however, that if such amendment or
repeal has been previously approved by vote of two-thirds of the members of the
Board of Directors then in office, such amendment or repeal shall only require
the affirmative vote of the holders of a majority in interest of the capital
stock entitled to vote thereon at the meeting of stockholders at which such
amendment or repeal is considered.
REQUIRED VOTE FOR CERTAIN BUSINESS COMBINATIONS
UST. The MBCL provides that an agreement of merger or consolidation, or a
sale, lease or exchange of all or substantially all of the property and assets
of a corporation must be approved by the holders of two-thirds of the shares of
each class of stock outstanding and entitled to vote thereon, unless a
corporation's articles of organization designate a lower percentage (but not
less than a majority). The UST Articles and the UST By-laws do not contain
provisions that require a specific lower or higher stockholder vote for such
transactions.
AFCB. In addition to the affirmative vote required by the MBCL, the AFCB
Articles provide that the corporation may, by an affirmative vote of the holders
of a majority of AFCB Common Stock, authorize a consolidation or merger, or a
sale, lease or exchange of all or substantially all of its assets, PROVIDED that
the transaction has previously been approved by a vote of two-thirds of the
Board of Directors then in office.
STOCKHOLDER RIGHTS PLAN
UST. UST has distributed to each holder of UST Common Stock one Right per
each outstanding share of UST Common Stock. In addition, a Right is distributed
with each newly issued share of UST Common Stock. Holders of AFCB Common Stock
will receive one Right with each share of UST Common Stock upon the conversion
of their shares of AFCB Common Stock at the Effective Time. Each Right entitles
the holder thereof to purchase one share of preferred stock in the event of
certain transactions involving UST. See "DESCRIPTION OF UST CAPITAL
STOCK--Common Stock--Stockholder Rights Plan."
AFCB. AFCB has no stockholder rights plan.
STATE ANTI-TAKEOVER STATUTES
The Massachusetts General Laws prohibit corporations from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person becomes an
interested stockholder, unless: (a) the interested stockholder obtains the
approval of the board of directors prior to becoming an interested stockholder,
or (b) the interested stockholder acquires 90% of the outstanding voting stock
of the corporation (excluding shares held by certain affiliates of the
corporation) at the time that he becomes an interested Stockholder, or (c) the
business combination is approved by both the board of directors and two-thirds
of the outstanding voting stock of the
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corporation (excluding shares held by the interested stockholder). An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or at any time with the prior three years did own) 5% or more
of a corporation's voting stock. A "business combination" includes mergers,
stock and asset sales and other transactions resulting in a financial benefit to
the stockholders. The business combinations statute does not apply to the
Affiliation Agreement, the Stock Option Agreement or any of the transactions
contemplated by such agreements, because the UST Board and the AFCB Board each
had approved the Affiliation Agreement and the Stock Option Agreement prior to
their execution.
The Massachusetts General Laws include a statute concerning "control share
acquisitions," which limits the voting rights of shares held by persons who have
acquired a certain percentage of the voting power of a corporation. Under the
Massachusetts statute, shares acquired in a control share acquisition retain the
same voting rights as all other shares of the same class or series but only to
the extent authorized by a vote of the majority of all shares entitled to vote
for the election of directors (such acquired shares not being entitled to vote).
In accordance with the statute, each of UST and AFCB has elected, by inclusion
of an affirmative provision in its By-laws, to "opt out" of the applicability of
the statute to any control share acquisition affecting UST or AFCB, as the case
may be.
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MARKET PRICES AND DIVIDENDS
GENERAL. Transactions with respect to UST Common Stock and AFCB Common
Stock are quoted on the NASDAQ National Market under the Symbols "USTC" and
"AFCB" respectively. The following tables set forth the high and low sales
prices for each of UST Common Stock and AFCB Common Stock as quoted by NASDAQ
and dividends paid for the periods indicated.
<TABLE>
<CAPTION>
UST AFCB
--------------------------------- ---------------------------------
DIVIDEND DIVIDEND
LOW HIGH PAID LOW HIGH PAID
--------- --------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
1995
First Quarter............................................... 9.75 11.375 -- N/A N/A --
Second Quarter.............................................. 10.50 13.50 -- N/A N/A --
Third Quarter............................................... 13.25 15.00 -- N/A N/A --
Fourth Quarter.............................................. 12.75 15.50 0.05 12.90 14.20 0.10
1996
First Quarter............................................... 13.00 15.125 0.06 12.80 14.40 0.10
Second Quarter.............................................. 12.75 15.125 0.07 12.80 14.30 0.10
Third Quarter............................................... 14.25 -- 0.08 13.10 18.00 0.10
Fourth Quarter.............................................. 16.75 20.625 0.08 16.00 18.70 0.12
1997
First Quarter............................................... 18.125 21.9375 0.08 16.90 22.20 0.12
Second Quarter.............................................. 18.625 23.250 0.10 18.80 25.00 0.12
Third Quarter............................................... 20.9375 26.125 0.10 23.25 30.25 0.12
Fourth Quarter.............................................. 24.25 29.625 0.12 25.88 38.63 0.15
</TABLE>
EXPERTS
The consolidated financial statements of UST appearing in UST's Annual
Report on Form 10-K for the year ended December 31, 1997, have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included therein and incorporated herein by
reference in reliance upon the authority of said firm as experts in accounting
and auditing in giving said report.
The consolidated financial statements of AFCB appearing in AFCB's Annual
Report on Form 10-K for the year ended December 31, 1997, have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, are included therein and incorporated herein by
reference in reliance upon the authority of said firm as experts in accounting
and auditing in giving said report.
The consolidated financial statements of Somerset Savings Bank appearing in
Somerset's Annual Report on Form 10-K for the year ended December 31, 1997,
which was filed as Exhibit 99.1 to UST's Current Report on Form 8-K, dated April
24, 1998, have been audited by Wolf & Company, P.C., independent public
accountants, as indicated in their report with respect thereto, are included
therein and incorporated herein by reference in reliance upon the authority of
said firm as experts in accounting and auditing in giving such report.
The report of KPMG Peat Marwick LLP with respect to the consolidated
financial statements of the Federal Savings Bank as of December 31, 1995
included in AFCB's Annual Report on Form 10-K for the year ended December 31,
1997, is included therein and incorporated herein by reference in reliance upon
the authority of said firm as experts in accounting and auditing in giving said
report.
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LEGAL OPINIONS
The validity of the UST Common Stock offered hereby will be passed upon for
UST by Eric R. Fischer, General Counsel. As of April 1, 1998, Mr. Fischer had a
direct or indirect interest in 38,004 shares of UST Common Stock and had options
to purchase an additional 55,800 shares, all of which options were immediately
exercisable.
The Affiliation Agreement provides as a condition to UST and AFCB's
obligation to consummate the Affiliation that UST receive a tax opinion from its
counsel, Bingham Dana LLP, and AFCB receive a tax opinion from its counsel,
Sullivan & Worcester LLP, substantially to the effect that, among other things,
the Affiliation will be treated as a reorganization as described in Section 368
of the Code. See "THE AFFILIATION--Certain Federal Income Tax Consequences."
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to the executive compensation, various benefit
plans (including stock option plans), voting securities and the principal
holders thereof, certain relationships and related transactions and other
related matters as to UST and AFCB is incorporated by reference or set forth in
UST's Annual Report on Form 10-K for the year ended December 31, 1997 and AFCB's
Annual Report on Form 10-K for the year ended December 31, 1997, each of which
is incorporated herein by reference. See "INCORPORATION OF CERTAIN INFORMATION
BY REFERENCE." Stockholders of UST or AFCB desiring copies of such documents may
contact UST or AFCB, as the case may be, at its address or phone number
indicated under "INCORPORATION OF CERTAIN INFORMATION BY REFERENCE." For certain
information regarding the directors and certain executive officers of AFCB after
the effective time of the Affiliation, see "THE AFFILIATION--Management and
Operations After the Affiliation," "--Interests of Certain Persons in the
Affiliation" and "--Employee Matters."
SOLICITATION OF PROXIES
AFCB and UST will each bear their own expenses incurred in connection with
the solicitation of proxies from holders of UST Common Stock and AFCB Common
Stock, including the cost of reimbursing brokerage houses and other custodians,
nominees or fiduciaries who hold record ownership for third parties for their
expenses incurred in forwarding proxies and proxy statements to the beneficial
owners of UST Common Stock and AFCB Common Stock; however, pursuant to the
Affiliation Agreement, the expense of printing and distributing the Registration
Statement and this Joint Proxy Statement-Prospectus will be shared equally by
AFCB and UST. In addition to solicitation of proxies by mail, proxies may also
be solicited by telephone or personal interview by certain directors, officers
and regular employees of UST and AFCB and its subsidiaries, who will not receive
additional compensation therefor. UST has retained Morrow & Co. to assist in the
distribution and solicitation of proxies, at a fee of approximately $6,000 plus
reasonable out of pocket expenses. AFCB has retained Morrow & Co. to assist in
the distribution and solicitation of proxies, at a fee of approximately $6,500,
plus reasonable out-of-pocket expenses.
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THE UST MEETING--ADDITIONAL MATTERS
INCREASE IN NUMBER OF AUTHORIZED SHARES
OF UST COMMON STOCK
(Proxy Item 2)
The UST Board has adopted a vote recommending that stockholders amend the
UST Articles to increase the authorized shares of UST Common Stock from
45,000,000 shares to 75,000,000.
On May 7, 1998, the number of shares of UST Common Stock issued or reserved
for issuance totaled approximately 31,850,000. UST expects to issue
approximately 9,323,659 shares of UST Common Stock to holders of AFCB Common
Stock in the Affiliation and approximately 3,185,417 shares of UST Common Stock
in UST's acquisition of Somerset. Thus, out of the 45,000,000 shares currently
authorized, UST would have only approximately 640,924 shares of UST Common Stock
available for future issuance following the completion of the Affiliation and
the acquisition of Somerset.
The increase in authorized shares, in the opinion of the UST Board, is
desirable to provide UST with the ability to meet future business needs and
opportunities, including the ability to exercise, if it is deemed appropriate to
do so, its option to increase the consideration to be received by the holders of
AFCB Common Stock in the Affiliation by adjusting the Conversion Number in order
to prevent a termination of the Affiliation Agreement by AFCB in the event that
the value of UST Common Stock declines in an amount greater than the formula set
forth in the Affiliation Agreement. The increased number of authorized shares
will be available for issuance from time to time, without further action or
authorization by the stockholders (except as required under applicable law or by
an applicable national stock exchange or market), in connection with potential
investment opportunities, acquisitions of other companies or for other corporate
purposes as determined by the UST Board. These other purposes might include
raising additional capital funds through offerings of shares of UST Common
Stock, the issuance of shares of UST Common Stock in connection with the
declaration of stock dividends, and the issuance of shares in connection with
employee benefit plans and incentive compensation plans of UST and its
subsidiaries.
If such additional authorized shares are issued to persons other than
existing stockholders, the percentage interest of existing stockholders in UST
will be reduced. Although the existence or issuance of authorized but unissued
shares of UST capital stock could, under certain circumstances, have an anti-
takeover effect, UST has no present intention of issuing such shares for
anti-takeover purposes.
If the amendment is approved, as soon as practicable after the UST Meeting,
UST will file with the Office of the Secretary of The Commonwealth of
Massachusetts, Articles of Amendment to the UST Articles reflecting the increase
in authorized shares.
Approval of this proposal requires the affirmative vote of the holders of at
least a majority of the outstanding shares of UST Common Stock.
THE UST BOARD RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO AMEND THE UST
ARTICLES TO PROVIDE FOR AN INCREASE IN THE NUMBER OF AUTHORIZED SHARES OF UST
COMMON STOCK.
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PROPOSALS OF UST STOCKHOLDERS
Any stockholder of UST desiring to submit proposals pursuant to Rule 14a-8
under the Exchange Act for action at the 1999 Annual Meeting of UST, must have
delivered such proposal to the main office of UST no later than December 16,
1998, for it to be included in UST's proxy statement and form of proxy relating
to that meeting. Stockholders submitting a proposal must meet the requirements
specified in Rule 14a-8 under the Exchange Act.
By Order of the Board of Directors
ERIC R. FISCHER,
EXECUTIVE VICE PRESIDENT,
GENERAL COUNSEL AND CLERK
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APPENDIX A
AFFILIATION AGREEMENT AND PLAN OF REORGANIZATION
AFFILIATION AGREEMENT AND PLAN OF REORGANIZATION (the "AGREEMENT"), dated as
of December 15, 1997, by and among UST CORP., a Massachusetts corporation (the
"BUYER"), MOSAIC CORP., a Massachusetts corporation and wholly owned subsidiary
of the Buyer ("MERGER SUBSIDIARY") and AFFILIATED COMMUNITY BANCORP, INC., a
Massachusetts corporation (the "SELLER").
WHEREAS, the Boards of Directors of the Buyer, the Merger Subsidiary and the
Seller have determined that it is in the best interests of their respective
stockholders, customers, employees and other constituencies, as well as the
communities they serve, to consummate, and have approved, the business
combination transactions provided for herein, in which the Seller will, subject
to the terms and conditions set forth herein, merge (the "MERGER") with and into
the Merger Subsidiary, with the Merger Subsidiary as the surviving corporation
of the Merger; and
WHEREAS, as a condition and inducement to the Buyer to enter into, and after
the execution of, this Agreement, the Buyer and the Seller are entering into the
Seller Option Agreement (the "SELLER OPTION AGREEMENT"), attached hereto as
Exhibit A, pursuant to which the Seller has granted an option to purchase shares
of its common stock (the "SELLER OPTION") to the Buyer; and
WHEREAS, as a condition to, and after the execution of, this Agreement, the
Buyer and certain of the officers and directors of the Seller, are entering into
the Stockholders Agreements; and
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the Merger and to prescribe certain conditions to
the Merger;
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, 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:
"ACQUISITION TRANSACTION" shall have the meaning ascribed thereto in Section
5.03 hereof.
"AFFILIATE" shall mean, with respect to any Person, any other Person
controlling, controlled by or under common control with such Person. As used in
this definition, "CONTROL" (including, with its correlative meanings,
"CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means the possession, directly
or indirectly, of power to direct or cause the direction of the management and
policies of a Person whether through the ownership of voting securities, by
contract or otherwise.
"AGREEMENT" shall mean this Affiliation Agreement and Plan of Reorganization
by and between the Buyer and the Seller.
"AMEX" shall mean the American Stock Exchange.
"ASSOCIATE" shall have the meaning ascribed thereto in Rule 14a-1 under the
Securities Exchange of 1934, as amended.
"AVERAGE PRICE" shall have the meaning ascribed thereto in Section 2.09(f)
hereof.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"BUYER" shall have the meaning ascribed thereto in the preamble hereto.
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"BUYER AFFILIATES" shall have the meaning ascribed thereto in Section
5.06(b) hereof.
"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 C-1.
"BUYER BALANCE SHEET" shall have the meaning ascribed thereto in Section
3.06 hereof.
"BUYER BANK" shall mean USTrust, a Massachusetts bank and trust company and
indirect wholly-owned subsidiary of the Buyer.
"BUYER BANK COMMON STOCK" shall mean the shares of common stock of the Buyer
Bank, par value $47.50 per share.
"BUYER COMMON STOCK" shall have the meaning ascribed thereto in Section
2.06(b) hereof.
"BUYER DISCLOSURE SCHEDULE" shall mean the disclosure schedule related to
the Buyer delivered to the Seller together herewith.
"BUYER PREFERRED STOCK" shall have the meaning ascribed thereto in Section
3.03(a) hereof.
"BUYER REPORTS" shall have the meaning ascribed thereto in Section 3.11
hereof.
"BUYER RIGHTS AGREEMENT" shall mean that certain Rights Agreement which was
adopted by the Buyer on September 19, 1995, as amended.
"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.
"CLOSING PRICE" shall have the meaning ascribed thereto in Section 8.01(e)
hereof.
"CMPS" shall have the meaning ascribed thereto in Section 3.15 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.
"CONFIDENTIALITY AGREEMENT" shall mean that certain Mutual Agreement of
Confidentiality between the Buyer and the Seller dated November 26, 1997.
"CONSENTS" shall have the meaning ascribed thereto in Section 6.01(b)
hereof.
"CONVERSION NUMBER" shall have the meaning ascribed thereto in Section
2.06(b) hereof.
"DEPOSIT INSURANCE FUND" shall have the meaning ascribed thereto in Section
4.02(b) hereof.
"DETERMINATION PERIOD" shall have the meaning ascribed thereto in Section
8.01(e) hereof.
"DISCLOSURE SCHEDULES" shall mean the Buyer Disclosure Schedule and the
Seller Disclosure Schedule, considered together.
"DOJ" shall mean the United States Department of Justice.
"DPC SHARES" shall have the meaning ascribed thereto in Section 3.13 hereof.
"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.
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"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.Section362.2(k).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" shall have the meaning ascribed thereto in Section 3.06
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 have the meaning ascribed thereto in Section
4.10(a) hereof.
"FINAL INDEX PRICE" shall have the meaning ascribed thereto in Section
8.01(e) hereof.
"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.
"GOVERNMENTAL AUTHORITY" shall mean any United States federal, state or
local governmental commission, board or other regulatory authority or agency,
including courts and other judicial bodies.
"HAZARDOUS MATERIAL" shall have the meaning ascribed thereto in Section
4.17(i) hereof.
"HOLA" shall have the meaning ascribed thereto in Section 4.01(a) hereof.
"INCENTIVE STOCK OPTION" shall mean a stock option which is intended to be
an "incentive stock option" within the meaning of Section 422 of the Code.
"INDEX COMPANIES" shall have the meaning ascribed thereto in Section 8.01(e)
hereof.
"INJUNCTION" shall have the meaning ascribed thereto in Section 6.01(d)
hereof.
"INITIAL INDEX PRICE" shall have the meaning ascribed thereto in Section
8.01(e) hereof.
"IRS" shall mean the United States Internal Revenue Service.
"JOINT PROXY STATEMENT" shall have the meaning ascribed thereto in Section
5.04(a) hereof.
"LOAN PROPERTY" shall have the meaning ascribed thereto in Section 4.17(i)
hereof.
"MBBI" shall mean the Massachusetts Board of Bank Incorporation.
"MBCL" shall mean the Massachusetts Business Corporation Law.
"MGL" shall mean the Massachusetts General Laws.
"MASSACHUSETTS COMMISSIONER" shall have the meaning ascribed thereto in
Section 3.05 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, HOWEVER, that "Material Adverse Effect"
shall not be deemed to include the impact of (a) changes in laws and regulations
or interpretations thereof by Governmental Authorities generally applicable to
depository institutions and their holding companies (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 the Seller taken with the prior written consent of the Buyer,
and (d) 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.
"MERGER" shall have the meaning ascribed thereto in the recitals hereto.
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"MERGER SUBSIDIARY" shall have the meaning ascribed thereto in the preamble
to this Agreement.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ" shall mean the National Market System of the National Association
of Securities Dealers Automated Quotation System.
"NEWCO" shall have the meaning set forth in Section 2.11 hereof.
"NYSE" shall mean the New York Stock Exchange.
"OTS" shall mean the Office of the Thrift Supervision.
"PARTICIPATION FACILITY" shall have the meaning ascribed thereto in Section
4.17(i) hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"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.
"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
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 subsidiaries.
"REPRESENTATIVE(S)" shall have the meaning ascribed thereto in Section
5.02(b) hereof.
"REQUISITE REGULATORY APPROVALS" shall have the meaning ascribed thereto in
Section 6.01(b) hereof.
"SEC" shall have the meaning ascribed thereto in Section 3.05 hereof.
"S-4" shall have the meaning ascribed thereto in Section 5.03(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.
"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 C-2.
"SELLER BALANCE SHEET" shall have the meaning ascribed thereto in Section
4.05 hereof.
"SELLER BANK & TRUST COMPANY" shall have the meaning ascribed thereto in
Section 5.18 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
2.06(b) hereof.
"SELLER DISCLOSURE SCHEDULE" shall mean the disclosure schedule relating to
the Seller delivered to Buyer together herewith.
"SELLER EMPLOYEES" shall have the meaning ascribed thereto in Section 5.12
hereto.
"SELLER ESOPS" shall have the meaning ascribed thereto in Section 5.25
hereto
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"SELLER OPTION" shall have the meaning ascribed thereto in the recitals
hereto.
"SELLER OPTION AGREEMENT" shall have the meaning ascribed thereto in the
recitals hereto.
"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 PREFERRED STOCK" shall have the meaning ascribed thereto in Section
4.02(a) hereof.
"SELLER REPORTS" shall have the meaning ascribed thereto in Section 4.15
hereof.
"SELLER STOCK OPTION PLANS" shall have the meaning ascribed thereto in
Section 2.10 hereof.
"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, shall mean those subsidiaries of
the Seller which are "insured depository institutions"; PROVIDED, HOWEVER, that
with respect to the Seller Bank & Trust Company, all representations and
warranties made by the Seller in Article IV hereof with respect to the Seller
Bank & Trust Company shall relate only to matters and events which have occurred
since May 20, 1997.
"STOCKHOLDERS AGREEMENTS" shall mean those certain Stockholder Agreements
dated as of the date hereof respectively between the Buyer and members of the
Seller's board of directors and executive management and substantially in the
form attached hereto as EXHIBIT B.
"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.
"SURVIVING CORP." shall have the meaning ascribed thereto in Section 2.01
hereof.
"TAX" shall mean 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" shall mean any return, declaration, report, claim for refund,
information return or other document (including any related or supporting
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 Seller Option Agreement and the Stockholders Agreements.
"TRANSFERRED SELLER EMPLOYEES" shall have the meaning ascribed thereto in
Section 5.12 hereto.
"TRUST ACCOUNT SHARES" shall have the meaning ascribed thereto in Section
3.13 hereof.
"WEIGHTED AVERAGE" shall have the meaning ascribed thereto in Section
8.01(e) hereof.
"YEAR 2000 PROBLEM" shall have the meaning ascribed thereto in Section 3.20
hereof.
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ARTICLE II
THE MERGER
2.01 THE MERGER. Subject to the terms and conditions of this Agreement, in
accordance with the MBCL, at the Effective Time, the Seller shall merge with and
into the Merger Subsidiary, and the separate corporate existence of the Seller
shall cease. The Merger Subsidiary shall be the surviving corporation in the
Merger (hereinafter sometimes referred to as the "SURVIVING CORP."), shall
continue its corporate existence under the laws of The Commonwealth of
Massachusetts and remain a wholly-owned subsidiary of the Buyer.
2.02 EFFECT OF THE MERGER.
(a) Upon the Effective Time, all of the estate, property, rights,
privileges, powers and franchises of each of the Seller and the Merger
Subsidiary 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 Corp., without further act or
deed, and all claims, demands, property and other interest shall be the
property of the Surviving Corp., and the title to all real estate vested in
each of the Seller or Merger Subsidiary shall not revert or be in any way
impaired by reason of the Merger, but shall be vested in the Surviving Corp.
(b) Upon the Effective Time, the rights of creditors of each of the
Seller and the Merger Subsidiary 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 Corp. shall be deemed to have assumed, and shall
be liable for, all liabilities and obligations of each of the Seller and the
Merger Subsidiary in the same manner and to the same extent as if the
Surviving Corp. had itself incurred such liabilities or obligations. The
stockholders, directors, and officers of each of the Seller and the Merger
Subsidiary 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 either the Seller and the Merger
Subsidiary 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 judgment as
though no merger had taken place, or the Surviving Corp. may be substituted
as a party in place of either the Seller and the Merger Subsidiary by the
court in which such action or proceeding is pending.
2.03 ADDITIONAL ACTIONS. If, at any time after the Effective Time, the
Surviving Corp. 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
Corp. its right, title or interest in, to or under any of the rights, properties
or assets of the Seller acquired or to be acquired by the Surviving Corp. as a
result of, or in connection with, the Merger, the officers and directors of the
Surviving Corp. shall and will be authorized to execute and deliver, in the name
and on behalf of either the Seller or the Merger Subsidiary or otherwise, all
such deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf of either the Seller or the Merger Subsidiary 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 Corp. or to otherwise carry out
this Agreement.
2.04 ARTICLES OF ORGANIZATION AND BY-LAWS. At the Effective Time, the
Articles of Organization of the Merger Subsidiary shall be the Articles of
Organization of the Surviving Corp. and the By-Laws of the Merger Subsidiary
shall be the By-Laws of the Surviving Corp. 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.
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2.05 EFFECTIVE TIME; CONDITIONS. The Merger shall become effective as set
forth in the articles of merger which shall be submitted for filing to the
Secretary of the Commonwealth pursuant to Section 78(d) of the MBCL (the
"ARTICLES OF MERGER"). The term "Effective Time" shall be, the date and time
specified in the Articles of Merger.
2.06 EFFECT ON OUTSTANDING SHARES.
(a) MERGER SUBSIDIARY COMMON STOCK. Each of the 100 shares of common
stock of the Merger Subsidiary, par value $1.00 per share ("MERGER
SUBSIDIARY COMMON STOCK") issued and outstanding immediately prior to the
Effective Time shall remain issued and outstanding after the Merger as
shares of the Surviving Corp., which shall thereafter constitute all of the
issued and outstanding shares of the Surviving Corp.
(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 $0.01 per share (the "SELLER COMMON STOCK"),
issued and outstanding immediately prior to the Effective Time (other than
any such shares held by a Dissenting Holder or held directly or indirectly
by the Buyer, except Trust Account Shares and DPC Shares, and any such
shares held as treasury stock by the Seller) shall become and be converted
into 1.41 shares of Buyer Common Stock together with that number of Buyer
Rights associated therewith; PROVIDED, HOWEVER, that in the event that the
Buyer has exercised its option to deliver additional shares of Buyer Common
Stock pursuant to the last paragraph of Section 8.01(e) hereof, the Seller
Common Stock shall be converted into such number of shares of the Buyer
Common Stock, as provided in Section 8.01(e). 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;" and
(ii) As of the Effective Time, each share of Seller Common Stock held
either directly or indirectly by the Buyer or the Buyer Bank (other than
Trust Account Shares and DPC Shares) or as treasury stock of the Seller
shall be canceled, 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 2.06(b).
(c) SHARES OF DISSENTING HOLDERS. No conversion under Section 2.06(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 2.06(b) hereof. The term
"DISSENTING HOLDER" shall mean a holder of the 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 Agreement 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 Seller Common
Stock and an appraisal of the value thereof, in accordance with the
provisions of Sections 86 through 98 of the MBCL.
2.07 ANTI-DILUTION. In the event that, subsequent to the date of this
Agreement but prior to the Effective Time, the outstanding shares of Buyer
Common Stock or Seller Common Stock shall have been
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increased, decreased, changed into or exchanged for a different number 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 this 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 2.06(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 2.07, 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".
2.08 EXCHANGE AGENT. Prior to the Effective Time, the Buyer shall appoint
United States Trust Company as exchange agent (the "EXCHANGE AGENT") for the
purpose of exchanging certificates representing shares of Seller Common Stock
for certificates representing shares of Buyer Common Stock, 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 Section 2.09(f)
hereof.
2.09 PROCEDURES.
(a) Certificates which represent shares of Seller Common Stock (including
certificates representing shares of predecessor entities to Seller which have
previously been converted into 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 Section 2.06 hereof
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) Buyer shall use all reasonable efforts to cause the Exchange Agent to
send to each holder of record of shares of Seller Common Stock outstanding at
the Effective Time as promptly as practicable, and in any event within seven (7)
days after the Effective Time, transmittal materials (which shall be reviewed
with and be reasonably acceptable to Seller) 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
Section 2.06 hereof. 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
certificate for the number of shares of Buyer Common Stock to which such holder
is entitled pursuant to Section 2.06(b)(i) hereof and such Certificate as
surrendered shall forthwith be canceled. 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 Section 2.06 hereof. If, after the
Effective Time, Certificates are presented for transfer to the Seller, they
shall be canceled 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) After the Effective Time, holders of certificates of Seller Common Stock
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 pursuant to
the
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provisions hereof, or (ii) the rights afforded to any Dissenting Holder (as
defined in Section 2.06(c)) under applicable provisions of the MBCL.
(d) 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.
(e) 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 with respect thereof, as determined in
accordance with this Article II.
(f) In lieu of the issuance of fractional shares of Buyer Common Stock
pursuant to Section 2.06(b) of this Agreement, 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 "Average 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 2.09(f),
shares of record held by such holder and represented by two or more Certificates
shall be aggregated.
(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 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.
2.10 CONVERSION OF OPTIONS. Each stock option (other than the Seller
Option) issued by the Seller to a third party pursuant to any stock option plan
of the Seller (the "SELLER STOCK OPTION PLANS"), 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
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
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(c) The duration and other terms of each such stock option shall be
otherwise governed by the terms of the Seller Stock Option Plan under which
such option was granted and 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 Common Stock which is an
Incentive Stock Option, 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 Option 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.
2.11 POSSIBLE ALTERNATIVE STRUCTURE. Notwithstanding any other provision
of this Agreement to the contrary, prior to the Effective Time, the Buyer shall
be entitled to revise the structure of the transaction to provide (a) that the
Merger Subsidiary shall be merged with and into the Seller at the Effective
Time, with the Seller as the surviving corporation of the Merger; (b) that a
newly-formed special purpose subsidiary of the Buyer ("NEWCO") shall be merged
with and into the Seller at the Effective Time, with the Seller as the surviving
corporation of the Merger, or alternatively, that the Seller shall merge with
and into Newco at the Effective Time, with Newco as the surviving corporation of
the Merger, or (c) that the Seller shall be merged directly with and into the
Buyer at the Effective Time with the Buyer as the surviving corporation of the
Merger. Notwithstanding the foregoing or any other provision of this Agreement
to the contrary, the Buyer and the Seller may jointly elect prior to the
Effective Time, to substitute an alternative structure for the accomplishment of
the transactions contemplated by this Agreement; it being understood by the
Buyer and the Seller that any change to the structure of the Merger pursuant to
this second sentence of Section 2.11 shall not be adopted if such change would
materially delay consummation of the Merger or such change would have an adverse
impact on the financial benefits reasonably expected to be derived by the
stockholders of the Seller from the transactions provided for herein. Buyer and
Seller agree that this Agreement shall be appropriately amended in order to
reflect any alternative structure.
2.12 SUBSIDIARY BANK MERGERS. Subject to Section 5.18 hereof, Buyer and
Seller shall take such actions as Buyer determines to be desirable to effectuate
mergers of the subsidiary banks of the Buyer and the Seller, either immediately
before, concurrently with or following the Effective Time, PROVIDED, HOWEVER,
that any such merger of the subsidiary banks of the Buyer and the Seller shall
not prolong the period required to complete the Merger in any material respect.
If requested by the Buyer, the Seller shall cause its subsidiary banks to enter
into one or more agreements and plan of merger with the Buyer Bank providing for
the mergers of such subsidiary banks with the Buyer Bank.
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 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.
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(b) The Buyer Bank is a bank and trust company duly organized, validly
existing and in good standing under the laws of The Commonwealth of
Massachusetts. The Buyer Bank has all requisite 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 Bank 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.
(c) Except as set forth in Section 3.01(c) of the Buyer Disclosure
Schedule, the Buyer has no subsidiaries and no Equity Investments (other
than investments in such subsidiaries).
3.02 MERGER SUBSIDIARY.
(a) Merger Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of The Commonwealth of Massachusetts.
The authorized capital stock of the Merger Subsidiary consists of 100 shares
of Merger Subsidiary Common Stock, of which, as of December 12, 1997, 100
shares were issued and outstanding. All of the 100 shares of Merger
Subsidiary Common Stock are owned by the Buyer. All issued and outstanding
shares of Merger Subsidiary 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.
(b) Merger Subsidiary has the corporate power to enter into this
Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly approved by the Board of
Directors of the Merger Subsidiary. The Buyer, as the sole stockholder of
the Merger Subsidiary, will vote all outstanding shares of Merger Subsidiary
Common Stock in favor of the Merger and will not vote to modify or rescind,
or otherwise permit the modification or recision of such vote prior to a
termination of this Agreement in accordance with Section 8.01 hereof. This
Agreement is a valid and binding obligation of Merger Subsidiary,
enforceable in accordance with its 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.
3.03 CAPITALIZATION.
(a) The authorized capital stock of the Buyer consists of 45,000,000
shares of 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 December 12, 1997, there were 29,719,593 shares of Buyer Common Stock and
no shares of Buyer Preferred Stock issued and outstanding. In addition, as
of the close of business on December 12, 1997, there were 1,396,808 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 personal
liability attaching to the ownership thereof. Except (i) for rights issuable
to holders of Buyer Common Stock in accordance with the Buyer Rights
Agreement, (ii) as permitted under this Agreement, (iii) as referred to in
this Section 3.03 (which includes director and employee stock options) or
(iv) as reflected in Section 3.03(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
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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 3.03(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 and the Savings Association 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 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.
3.04 AUTHORITY; NO VIOLATION.
(a) The Buyer has all requisite corporate power and authority to execute
and deliver this Agreement, the other Transaction Documents and to
consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement, the other Transaction Documents 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 Board
of Directors of the Buyer has directed that this Agreement and the
transactions contemplated hereby be submitted to the stockholders of the
Buyer for approval at a meeting of such stockholders and, except for the
adoption of this Agreement by the Buyer's stockholders, no other corporate
proceedings on the part of the Buyer are necessary to consummate the Merger.
This Agreement and the other Transaction Documents have been duly and
validly executed and delivered by the Buyer and (assuming due authorization,
execution and delivery by the Seller) constitutes the valid and binding
obligation of the Buyer, 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.
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(b) Neither the execution and delivery of this Agreement or the other
Transaction Documents by the Buyer nor the consummation by the Buyer of the
transactions contemplated by this Agreement; nor compliance by the Buyer
with any of the terms or provisions of this Agreement, will (i) assuming
that the consents and approvals referred to in Section 3.05 hereof are duly
obtained, violate in any material respect any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction applicable to
the Buyer, 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 properties or assets
of the Buyer 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 (B) any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which the
Buyer 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 have a
Material Adverse Effect on the Buyer.
3.05 CONSENTS AND APPROVALS. Except for consents, waivers or approvals of,
or filings or registrations with, the Federal Reserve Board, the MBBI, the
Securities and Exchange Commission (the "SEC"), the Secretary of State of The
Commonwealth of Massachusetts, NASDAQ, and the DOJ, 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 or the stockholders of the Buyer or the
Merger Subsidiary) are necessary, in connection with (a) the execution and
delivery by the Buyer of this Agreement, (b) the execution and delivery by the
Merger Subsidiary of this Agreement, or (c) the consummation by the Buyer or the
Merger Subsidiary of the Merger. The affirmative vote of holders of a majority
of the outstanding shares of Buyer Common Stock is the only vote of the holders
of any shares or series of capital stock or other securities of the Buyer
necessary to approve this Agreement and the Merger. 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(d) herein.
3.06 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 1994 through 1996, inclusive, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the fiscal years 1994 through 1996, 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, 1994 through December 31, 1996 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 public
accountants for the Buyer, and (b) the unaudited consolidated balance sheet of
the Buyer and its subsidiaries as of September 30, 1997, the related unaudited
consolidated statements of income and changes in stockholders' equity for the
nine (9) months ended September 30, 1997 and September 30, 1996 and the related
unaudited consolidated statements of cash flows for the nine (9) months ended
September 30, 1997 and September 30, 1996, all as reported in the Buyer's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 filed
with the SEC under the Exchange Act. The December 31, 1996 consolidated balance
sheet ("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 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
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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.
3.07 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 3.06 above.
3.08 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.
3.09 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Buyer's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997
or in any Current Reports of the Buyer on Form 8-K filed prior to the date of
this Agreement, since December 31, 1996, 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.
3.10 LEGAL PROCEEDINGS. There is no suit, action or proceeding pending or,
to the best knowledge of the Buyer, threatened, against the Buyer or any
subsidiary of the Buyer or challenging the validity or propriety of the
transactions contemplated by this Agreement, 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.
3.11 REPORTS. Since January 1, 1995, 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.
3.12 BUYER COMMON STOCK. Buyer Common Stock to be issued pursuant to this
Agreement 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.
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3.13 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
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 being hereinafter referred to as, "TRUST ACCOUNT SHARES")) and any
other shares held in respect of a debt previously contracted (any such shares,
"DPC SHARES").
3.14 AGREEMENTS WITH BANKING AUTHORITIES. Except as set forth in Section
3.14 of the Buyer Disclosure Schedule, 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, order to cease and desist with, or has been required to adopt
any board resolution by, 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.
3.15 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.
Section1818(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 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.
3.16 POOLING OF INTERESTS TREATMENT. To the Buyer's knowledge, it has not
taken any action that would, or is likely to, cause the Merger to fail to
qualify for "pooling of interests" accounting treatment under Accounting
Principles Board Opinion No. 16.
3.17 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 3.17, 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.
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(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.
(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.
3.18 INSURANCE. The Buyer and each of its subsidiaries is presently
insured, and since January 1, 1997 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 Buyer has made available to the Seller copies of policies relating
to insurance maintained by the Buyer or its subsidiaries with respect to their
properties and the conduct of their respective businesses.
3.19 LABOR. No work stoppage involving the Buyer or any of its
subsidiaries is pending or, to the best knowledge of the Buyer's management,
threatened. Neither the Buyer nor any of its subsidiaries is involved in, or, to
the best knowledge of the Buyer'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 Buyer. No employees of the Buyer or any of
its subsidiaries are represented by any labor union, and, to the best knowledge
of the Buyer's management, no labor union is attempting to organize employees of
the Buyer or any of its subsidiaries.
3.20 EMPLOYEES.
(a) Except as set forth in Section 3.20(a) of the Buyer Disclosure
Schedule, neither the Buyer nor any of its subsidiaries maintains or
contributes to any "employee pension benefit plan" (the "BUYER PENSION
PLANS"), as such term is defined in Section 3(2) of ERISA or "employee
welfare benefit plan" (the "BUYER BENEFIT PLANS"), as such term is defined
in Section 3(1) of ERISA.
(b) The current value of the assets of each of the Buyer Pension Plans
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.
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(c) To the knowledge of the Buyer, each of the Buyer Pension Plans and
each of the Buyer Benefit Plans, which are 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.
(d) To the 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.
(e) To the 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.
3.21 CAPITALIZATION. As of the date hereof, and giving effect to the
transactions contemplated hereby on a PRO FORMA basis, the Buyer and each of the
subsidiaries of the Buyer which are "insured depository institutions" 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.
3.22 CRA RATING. The Buyer Bank was rated "Outstanding" following its most
recent Community Reinvestment Act examination by the FDIC. The Buyer has not
received any notice of, and the Buyer has no knowledge of, any planned or
threatened objection by any community group to the transactions contemplated
hereby.
3.23 YEAR 2000. The Buyer has made available to the Seller a copy of the
report furnished by the Buyer to the regulatory agencies having jurisdiction
over the Buyer and its subsidiaries concerning the modifications required to the
Buyer's computer systems, if any, in order for each systems to contain no
deficiencies relating generally to formatting for entering dates (commonly
referred to and referred to herein as the "Year 2000 Problem"). The Buyer is not
aware of any inability on the part of any customer, insurance company or service
provider with which the Buyer transacts business to timely remedy their own
deficiencies in respect of the Year 2000 Problem, which inability, individually
or in the aggregate, reasonably could be expected to have a Material Adverse
Effect on the Buyer.
3.24 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.
3.25 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.
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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
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 and each of its Significant Subsidiaries
is duly licensed or qualified to do business in each jurisdiction in which
the nature of the business conducted by it or the character of the
properties and assets owned, leased or operated by it makes such
qualification or licensing necessary, except where the failure to be so
qualified would not result in, with respect to the Seller, a Material
Adverse Effect. Section 4.01(a) of the Seller Disclosure Schedule lists each
of the jurisdictions in which the Seller or its subsidiaries possess any
such foreign qualifications or licenses and lists such license held in such
jurisdiction The Seller has previously made available to Buyer for
inspection true and complete copies as amended to date of the Charter and
By-Laws of the Seller and each Significant Subsidiary. The Seller is a bank
holding company registered with the Federal Reserve Board under the BHCA and
as a savings and loan holding company registered and in good standing with
the OTS under the Home Owners' Loan Act ("HOLA").
(b) Except as set forth in Section 4.01(b) of the Seller Disclosure
Schedule, the Seller has no subsidiaries and no Equity Investments (other
than its investments in such subsidiaries). Section 4.01(b) of the Seller
Disclosure Schedule lists for each subsidiary and Equity Investment of the
Seller, the percentage of Seller's ownership in such subsidiary or Equity
Investment, the activities of such subsidiary or Equity Investment,
including but not limited to, whether or not such subsidiary or Equity
Investment is engaged principally or otherwise, directly or indirectly
through a joint venture, partnership or other entity, in the sale of mutual
funds, insurance or the development of real estate. No subsidiary or Equity
Investment of the Seller engages in any activity, principally or otherwise,
that is not permitted for a national bank or otherwise authorized under
applicable FDIC or OTS regulations. 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.
(c) The minute books of the Seller and its Significant Subsidiaries
contain complete and accurate records of all meetings and other corporate
actions authorized at such meetings held or taken since January 1, 1995 to
date of its stockholders and Board of Directors.
4.02 CAPITALIZATION.
(a) The authorized capital stock of the Seller consists of (i)
18,000,000 shares of Seller Common Stock, of which, as of the close of
business on December 12 1997, 6,503,646 shares were issued and outstanding,
and (ii) 2,000,000 shares of preferred stock, par value $0.01 per share (the
"SELLER PREFERRED STOCK"), of which, as of the close of business on December
12, 1997, no shares were issued and outstanding. In addition, as of the
close of business on December 12, 1997, there were 635,444 shares of Seller
Common Stock reserved for issuance upon the exercise of outstanding stock
options. 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 with respect to the Seller Option and as referred
to in this Section 4.02(a), the Seller does not have and is not bound by any
outstanding subscriptions, options, warrants, calls, commitments 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
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security 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 obligating 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 the
Seller to repurchase, redeem or otherwise acquire any shares of capital
stock 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) 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 and the
Savings Association Insurance Fund of the FDIC in accordance with the FDIA.
Further, the Deposit Insurance Fund of the Mutual Savings Central Fund, Inc.
of Massachusetts insures the deposits of Seller Savings Bank in excess of
the FDIC's insurance limits. Each such depository institution has paid all
assessments and filed all reports with the FDIC, the OTS and the Mutual
Savings Central Fund, Inc. of Massachusetts, as applicable and as required
by the FDIA and the Deposit 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.
(c) 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
depository institution, all of the shares of capital stock of each of the
subsidiaries of the Seller 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 all requisite corporate power and authority to
execute and deliver this Agreement, the other Transaction Documents and to
consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement, the other Transaction Documents and the
consummation of the transactions contemplated hereby and thereby have been
duly and validly unanimously approved by the Board of Directors of the
Seller. The Board of Directors of the Seller has directed that this
Agreement 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 by its
stockholders, no other corporate proceedings on the part of the Seller are
necessary to consummate the Merger. This Agreement and the other Transaction
Documents have been duly and validly executed and delivered by the Seller
and (assuming due authorization, execution and delivery by the Buyer and the
Merger Subsidiary) constitute 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
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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 this Agreement or the other
Transaction Documents by the Seller, nor the consummation by the Seller of
the transactions contemplated by this Agreement, or the other Transaction
Documents, nor compliance by the Seller, with any of the terms or provisions
thereof, will, assuming that the consents and approvals referred to in
Section 4.04 are duly obtained and except as set forth in Section 4.03(b) of
the Seller Disclosure Schedule, (i) violate in any material respect 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
properties or assets of the Seller or any of its subsidiaries under, any of
the terms, conditions or provisions of (A) the Charter or By-Laws of the
Seller or any of its subsidiaries, 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 it or any of its 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 have a Material Adverse Effect on
the Seller.
4.04 CONSENTS AND APPROVALS. Except for consents, waivers or approvals of,
or filings or registrations with, the Federal Reserve Board, the MBBI, the SEC,
the Secretary of State of The Commonwealth of Massachusetts, the DOJ, NASDAQ,
certain state "Blue Sky" or securities commissioners or 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 and
stockholders of the Seller) are necessary, in connection with (a) the execution
and delivery by the Seller of this Agreement or (b) the consummation by the
Seller, of the Merger. The affirmative vote of holders of a majority 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 this Agreement and the Merger. The Seller has no knowledge of any fact
or circumstance relating to the Seller 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(d) herein.
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 for the fiscal years 1995 and 1996, inclusive, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for the fiscal years 1995 and 1996, inclusive, as reported in the Seller's
Annual Reports on Form 10-K for each of the two (2) fiscal years ended December
31, 1995 and December 31, 1996, which were filed with the SEC under the Exchange
Act, in each case accompanied by the audit report of Arthur Andersen LLP,
independent accountants for the Seller, and, with respect to the Seller's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995, together with
additional reports of KPMG Peat Marwick LLP and Wolf & Company, P.C., and (b)
the unaudited consolidated balance sheets of the Seller and its subsidiaries as
of September 30, 1997 and September 30, 1996, the related unaudited consolidated
statements of income and changes in stockholders' equity for the nine (9) months
ended September 30, 1997 and September 30, 1996 and the related unaudited
consolidated statements of cash flows for the nine (9) months ended September
30, 1997 and September 30, 1996, all as reported in the Seller's Quarterly
Report on Form 10-Q for the nine (9) months ended September 30, 1997 filed with
the SEC under the Exchange Act. The December 31, 1996 consolidated balance sheet
(the "SELLER BALANCE SHEET") of the
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Seller (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 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
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, except as disclosed or reflected
in the Seller Balance Sheet or any of the other financial statements described
in Section 4.05 above or Section 4.06 of the Seller Disclosure Schedule.
4.07 BROKER'S FEES. Neither the Seller nor any of its or its subsidiaries'
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
Incorporated and except for legal, accounting and other professional fees
payable in connection with the Merger. The Seller will be responsible for the
payment of 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 quarter ended September 30, 1997
or in any Current Reports of the Seller on Form 8-K filed prior to the date of
this Agreement, since December 31, 1996, 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.
4.09 LEGAL PROCEEDINGS. Except as set forth on Section 4.09 of the Seller
Disclosure Schedule, there is no suit, action or other proceeding pending or, to
the knowledge of the Seller, threatened, against the Seller or any of its
subsidiaries or challenging the validity or propriety of the transactions
contemplated by this Agreement, 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 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 of its subsidiaries 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 "COMPANIES") have, since December
31, 1989, timely filed in correct form all Tax Returns that were required to
be filed by any of them on or prior to the date hereof (the "FILED TAX
RETURNS").
(b) The Companies have paid all Taxes shown as being due in 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 Companies would not have a Material Adverse
Effect. No deficiency in Taxes or other proposed adjustment that has not
been settled or otherwise
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resolved has been asserted in writing by any taxing authority against any of
the Companies, which if determined adversely to the Companies would have a
Material Adverse Effect. No material Tax Return of any of the 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 Company.
(d) Adequate provision has been made on the Seller Balance Sheet for all
Taxes of the Companies in respect of all periods through the date hereof.
(e) Except with respect to intra-Company agreements made or required
under the federal consolidated tax return regulations, none of the 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 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 Companies
(including predecessor entities) or the Seller was the parent.
(g) None of the 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" (the "SELLER PENSION
PLANS"), as such term is defined in Section 3 of ERISA, "employee welfare
benefit plan" (the "SELLER BENEFIT PLANS"), as such term is defined in
Section 3 of ERISA, stock option plan, stock purchase plan, deferred
compensation plan, other employee benefit plan for employees of the Seller
or its subsidiaries, or any other plan, program or arrangement of the same
or similar nature that provides benefits to non-employee directors of the
Seller or its subsidiaries (collectively, the "SELLER OTHER PLANS").
(b) The Seller shall make available upon request by the Buyer 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, if any.
(c) Except as set forth in Section 4.11(c) of the Seller Disclosure
Schedule, the current value of the assets of each of the Seller Pension
Plans 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.
(d) To the 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 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.
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(f) The Seller and its subsidiaries has made or provided for all
contributions to the Seller Pension Plans required thereunder.
(g) Except as set forth in Section 4.11(g) of the Seller Disclosure
Schedule, neither Seller nor any of its subsidiaries contributes or has
contributed to any "Multiemployer Plan," as such term is defined in Section
3(37) of ERISA.
(h) Except as set forth in Section 4.11(h) of the Seller Disclosure
Schedule, to the 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 a party to or
maintains or contributes to any contract or other arrangement with any
employee or group of employees, providing severance payments, stock or
stock-equivalent payments or post-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.
4.12 AGREEMENTS WITH BANKING AUTHORITIES. Except as set forth in Section
4.12 of the Seller Disclosure Schedule, 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, order to cease and desist with, or has been required to adopt
any board resolution by, any federal or state governmental entity charged with
the supervision or regulation of banks 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 the Seller has not 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 Section 4.13 of the
Seller Disclosure Schedule or the index of exhibits in the Seller's Annual
Report on Form 10-K for the year ended December 31, 1996, 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, 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 1996.
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 any of its subsidiaries (including all of the branches
of the Seller and all of the Seller's or any of its subsidiaries' properties
acquired by foreclosure proceedings in the ordinary course of business) as of
the date hereof. The Seller and its subsidiaries have good and marketable title
to all assets and properties, whether real or personal, tangible or intangible,
and all other assets and properties reflected in the Seller's consolidated
balance sheet as of September 30, 1997, 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
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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.
Seller has all licenses and permits necessary to conduct the business of banking
at its branch premises and Seller has made available to the Buyer a copy of all
deeds and leases relating to all real property owned or leased by the Seller or
its subsidiaries. The Seller has not 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. Each of the Seller and its
subsidiaries as lessee has 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. 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 in the consolidated balance sheet of the Seller as of
September 30, 1997. All such leases constitute legal, valid and binding
obligations of the Seller or such subsidiary 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
and renewal terms of each such lease. The Seller has not 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 leases any real property.
4.15 REPORTS. Since January 1, 1995, the Seller and its subsidiaries have
filed, and subsequent to the date hereof will file, all reports, 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-Q,
10-K, 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 OTS, (d) the FDIC, and (e) 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 its
subsidiaries holds all licenses, franchises, permits and authorizations
necessary for the lawful conduct of their respective businesses, and, except as
set forth in Section 4.16 of the Seller Disclosure Schedule, each of the Seller
and its subsidiaries has complied with and is not in 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 and its subsidiaries (other than where such default or
noncompliance will not result
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in, or create the possibility of resulting in, a material limitation on the
conduct of the business of the Seller or any of its subsidiaries, will not
cause, or create the possibility of causing, the Seller or any of its
subsidiaries thereof to incur any financial penalty in excess of $20,000
(including but not limited to CMPS), and will not otherwise result, or create
the possibility of resulting in any Material Adverse Effect on the Seller or any
of its subsidiaries, and the Seller has not received any notice of any violation
of, or 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 fines or penalties), 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 subsidiaries and the Participation
Facilities (as such term is hereinafter defined) are and have been since the
longer of (i) January 1, 1992 or (ii) the applicable statute of limitations,
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 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 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.
(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
subsidiaries of any of their current properties, or (ii) the participation
by the Seller or any of its 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 subsidiary to any liability which would result in a Material Adverse
Effect with respect to the Seller or any Significant Subsidiary of Seller.
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 the Seller
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 material amount
of Hazardous Material, was stored, produced or otherwise located.
(f) The Seller and its 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
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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 subsidiaries which could be reasonably likely to
prevent the Seller or such 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 the Seller or in a Material Adverse Effect with
respect to the Seller or any subsidiary.
(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
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 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. Section9601 ET SEQ., or
the Resource Conservation and Recovery Act, 42 U.S.C. SectionSection6901 ET
SEQ., the Clear Water Act, 33 U.S.C. Section1321, 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 OWNERSHIP OF BUYER COMMON STOCK. Except as set forth in Section 4.18
of the Seller Disclosure Schedule, as of the date hereof, neither the Seller
nor, to its best knowledge, any of its Affiliates or Associates (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 and DPC Shares).
4.19 INSURANCE. The Seller and each of its subsidiaries are presently
insured, and since January 1, 1997 have been insured, for reasonable amounts
against such risks as companies engaged in a similar businesses 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 and its subsidiaries with respect to their
properties and the conduct of their businesses.
4.20 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. No employees of the Seller
or 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 its subsidiaries.
4.21 MATERIAL INTERESTS OF CERTAIN PERSONS. Except as disclosed in Section
4.21 of the Seller Disclosure Schedule, no officer or director of the Seller, or
any Associate 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.
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4.22 ABSENCE OF REGISTRATION OBLIGATIONS. The Seller is not 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.
4.23 LOANS.
(a) 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 each note
evidencing a Loan or loan or credit agreement or security 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 and 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. 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 have been asserted for which there is a reasonable
possibility of an adverse determination to the Seller, 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 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 for which
there is a reasonable possibility of an adverse determination to the Seller,
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 and
its Significant Subsidiaries. Except as set forth in Section 4.23 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.
(b) The Seller has made available to the Buyer a copy of the most recent
report filed by the Seller and its Significant Subsidiaries with the
Commissioner of Banks of The Commonwealth of Massachusetts with respect to
Loans with any director, executive officer or, to the knowledge of the
Seller, five percent stockholder of the Seller or any Affiliate or Associate
of any director, executive officer or five percent stockholder of the
Seller.
4.24 POOLING OF INTERESTS TREATMENT. To the Seller's knowledge, it has not
taken any action that would or is likely to cause the Merger to fail to qualify
for "pooling of interests" accounting treatment under Accounting Principles
Board Opinion No. 16.
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4.25 CAPITALIZATION. As of the date hereof, without giving effect to the
transactions contemplated hereby, the Seller and each of the subsidiaries of the
Seller which are "insured depository institutions" met 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 such Person's
capital or compliance with any special capital requirement, standard or ratio.
4.26 CRA RATING. Each of the subsidiaries of the Seller which are "insured
depository institutions" (other than the Seller Bank & Trust Company, which has
not had a Community Reinvestment Act examination as of the date hereof) were
rated at least "Satisfactory" following their most recent Community Reinvestment
Act examinations by the regulatory agencies responsible for their supervision.
The Seller has not received any notice of and the Seller has no knowledge of any
planned or threatened objection by any community group to the transactions
contemplated hereby.
4.27 YEAR 2000. The Seller has made available to the Buyer a copy of the
report furnished by the Seller to the regulatory agencies having jurisdiction
over the Seller and its subsidiaries concerning the modifications required to
the Seller's computer systems, if any, in order for such systems to contain no
deficiencies relating generally to formatting for entering dates (commonly
referred to and referred to herein as the "Year 2000 Problem"). The Seller is
not aware of any inability on the part of any customer, insurance company or
service provider with which the Seller or its subsidiaries transacts business to
timely remedy their own deficiencies in respect of the Year 2000 Problem, which
inability, individually or in the aggregate, reasonably could be expected to
have a Material Adverse Effect on the Seller.
4.28 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, 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.
4.29 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.
ARTICLE V
COVENANTS OF THE PARTIES
5.01 CONDUCT OF THE BUSINESS OF THE SELLER. During the period from the
date of this Agreement to the Effective Time, 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 as set
forth in Section 5.01(a) of the Seller Disclosure Schedule and 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;
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(B) using all reasonable efforts to maintain and keep its properties in
as good repair and condition in all material respects as they presently
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) except as set forth in Section 5.01(b) of the Seller Disclosure
Schedule, 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.
Section337.6(a)(l)(ii), other than in the ordinary course of business
consistent with past practices;
(iii) except as set forth in Section 5.18 hereof and 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;
(iv) except as set forth in Section 5.01(b) of the Seller Disclosure
Schedule, file any application to open, close or relocate any branch
office;
(v) except as set forth in Section 5.01(b) of the Seller Disclosure
Schedule, 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 all reasonable
efforts to cooperate with the Buyer with respect to preparation for the
combination and integration 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, subject to any restrictions under applicable law or
regulation, promptly notify the Buyer of any emergency or other change in
the normal course of its business or in the operation of its 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 or financial condition of the Seller;
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(e) shall not make any loan or extend any credit on other than the
terms, conditions and standards offered by Seller in the ordinary course of
business consistent with past practice, other than in connection with any
loan workouts in accordance with applicable law and consistent with prudent
banking practices;
(f) 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;
(g) except as described in Section 5.01(g) of the Seller Disclosure
Schedule, shall not adopt or amend (other than amendments required by
applicable law or amendments that reduce amounts payable by it) 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, 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 any officer or to its
employees as a class or pay any bonus other than increases and bonuses in
the ordinary course of business consistent with past practice;
(h) shall not, except as provided in Section 5.18 hereof, 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 not in the ordinary course of business and
consistent with past practices;
(i) shall not propose or adopt amendments to its, or any of its
Significant Subsidiaries', Charter or By-Laws;
(j) 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 upon the exercise or
fulfillment of rights or options issued or existing pursuant to employee
benefit plans or any other equity compensation programs or arrangements with
employees, directors or others, employee stock ownership plans of the Seller
or any subsidiary of the Seller 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
September 30, 1997;
(k) 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;
(l) shall not 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;
(m) shall not impose, or suffer the imposition, on any share of capital
stock held by it of any material lien, charge, or encumbrance, or permit any
such lien, charge, or encumbrance to exist;
(n) 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
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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;
(o) except as set forth in Section 5.01(o) of the Seller Disclosure
Schedule, 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;
(p) shall not change its methods of accounting in effect at December 31,
1996, except as may be required by changes in GAAP as concurred in by the
Seller's independent auditors, and the Seller shall not change its fiscal
year;
(q) shall file all reports, applications and other documents required to
be filed by it with the SEC, the FRB, the OTS, the FDIC or any other
governmental entity between the date of this Agreement and the Effective
Time and shall make available to the Buyer copies of all such reports
promptly after the same are filed;
(r) shall not, except as expressly contemplated hereby, enter into any
contract with any Affiliate;
(s) shall not, except for transactions in the ordinary course of
business consistent with past practice, or as otherwise contemplated or
required by this Agreement or in furtherance of the transactions
contemplated hereby, 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 and, subject to the provisions of Section
5.15 hereof, leases without material adverse change of terms;
(t) shall not, other than in prior consultation with Buyer, materially
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; and
(u) 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 and its
subsidiaries' properties, 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, 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,
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 and
its subsidiaries to permit the Buyer reasonable access to all of the
Seller's or such subsidiary'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
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institution in possession or control of such information, or would
contravene any law, rule, regulation, order, judgment, decree or binding
agreement. 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 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
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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).
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 or Affiliates shall (and the Seller shall use
all reasonable 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 and as advised in writing by
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 (an "ACQUISITION TRANSACTION"); PROVIDED, that
in accordance with the fiduciary obligations of the Seller's Board of Directors
as determined in good faith and as advised in writing by outside counsel, the
Seller may participate in discussions in the event that the Seller, its
Affiliates or its Representatives did not solicit, encourage 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 as
determined in good faith and as advised in writing by 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 promptly prepare and file with the
SEC 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 be included as a prospectus and/or such other form as may be
necessary or appropriate relating to the registration of the shares of Buyer
Common Stock to be issued in the Merger. Each of the Buyer and the Seller
shall use all reasonable efforts to have the S-4 and any other applicable
registration statement 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 Seller
shall furnish all information concerning the Seller and the holders of the
Seller 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,
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and any of their respective subsidiaries, which appear in the Joint Proxy
Statement, 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 and
therein.
(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 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.
(d) 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.
(e) 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.
(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 by 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, except as required by the fiduciary
duties of the such party's Board of Directors (as determined in good faith and
in consultation with such party's 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 (c) and (d) of Rule 145 under the Securities Act (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
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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 as contemplated by and in accordance with SEC Accounting
Release No. 135.
(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
the 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.
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 actions 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 Surviving Corp. 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 Surviving Corp. with 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 on the text of the Public Announcement before making it public.
5.09 TAX-FREE REORGANIZATION TREATMENT; ACCOUNTING TREATMENT.
(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.
5.10 POST-CLOSING GOVERNANCE. At the first meeting of the Board of
Directors of the Buyer after the Effective Time, the Board of Directors of the
Buyer shall be expanded by five (5) members and Timothy J. Hansberry and four
additional individuals selected by the Seller and approved by the Buyer in its
reasonable judgment prior to the Effective Time shall be appointed as directors
of the Buyer. To the extent practicable, such five individuals shall be
appointed as equally as possible among the three classes of the Buyer's
directors and Timothy J. Hansberry shall be appointed to the class of directors
whose term comes up for reelection in the year 2001. One of the individuals
selected by the Seller and approved by the Buyer
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to be appointed as a director of the Buyer shall also be appointed to the
Executive Committee of the Buyer's Board of Directors and a second individual
shall be appointed to the Audit Committee of the Buyer. At the first meeting of
the Board of Directors of the Buyer Bank, Timothy J. Hansberry shall become a
director of the Buyer Bank. After the Effective Time, Neal F. Finnegan shall
serve as Chief Executive Officer of the Buyer and Chairman and Chief Executive
Officer of the Buyer Bank and Timothy J. Hansberry shall serve as Vice Chairman
and Chief Operating Officer of the Buyer and President and Chief Operating
Officer of the Buyer Bank. After the Effective Time, John G. Fallon shall serve
as an Executive Vice President of the Buyer and Quentin J. Greeley shall serve
as Senior Vice President & Associate General Counsel of the Buyer Bank. The
Buyer or the Buyer Bank, as applicable, shall offer to execute and deliver an
executive employment agreement with each such officer on the Closing Date. At
the Effective Time, subject to Section 5.18 hereof, 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. At the Effective Time,
subject to this Section 5.10, the officers of the Surviving Corp. shall consist
of those persons who were officers of the Buyer immediately prior to the
Effective Time each to hold office in accordance with the Articles of
Organization and By-Laws of the Surviving Corp. The parties agree that the Buyer
Bank shall use its best efforts to create a regional community banking
organization within the Buyer Bank. Such regional organization, which shall be
implemented as soon after the Effective Time as is reasonably practicable, shall
include the establishment of geographic regions headed by regional presidents
who will have line responsibility for both small business and consumer business
lines within their assigned geographic region and who shall report to Timothy J.
Hansberry as President and Chief Operating Officer of the Buyer Bank.
5.11 STOCK EXCHANGE 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.
5.12 EMPLOYMENT AND BENEFIT MATTERS.
(a) From and after the Effective Time and through the last day of the
calendar quarter in which the Effective Time occurs, and subject to
applicable law, the Buyer shall continue the plans of Seller and its
subsidiaries as set forth in Section 4.11 of the Seller Disclosure Schedule
and in effect at the Effective Time. From and after such date, the Buyer
agrees to provide the employees of the Seller and its subsidiaries (the
"SELLER EMPLOYEES") who remain employed after the Effective Time
(collectively, the "TRANSFERRED SELLER EMPLOYEES") with the types and levels
of employee benefits maintained by the Buyer for similarly situated
employees of the Buyer and its Affiliates. The Buyer will treat, and cause
its applicable benefit plans to treat, the service of Seller Employees with
Seller or any subsidiary of Seller as service rendered to Buyer or any
Affiliate of Buyer for purposes of eligibility to participate, vesting and
for other appropriate benefits including, but not limited to, applicability
of minimum waiting periods for participation, but not for benefit accrual
(including minimum pension amount) attributable to any period before the
Effective Time. Without limiting the foregoing, Buyer and its Affiliates
shall not treat any employee of the Seller or any of its subsidiaries as a
"new" employee for purposes of any exclusions under any health or similar
plan of Buyer or any of its Affiliates for a pre-existing medical condition,
and will make appropriate arrangements with its insurance carrier(s) to
ensure such result.
(b) Compensation Arrangements. Following the Effective Time, the Buyer
shall honor and shall cause its subsidiaries to honor in accordance with
their terms all individual employment, termination, severance, change in
control, post-employment and other compensation agreements and plans
existing prior to the execution of this Agreement, which are between the
Seller or any subsidiary of the Seller and any director, officer or employee
thereof and which have been disclosed in the Seller Disclosure Schedule, and
the Buyer will not, and will not cause any of its subsidiaries to, challenge
the validity of
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any obligation of the Seller or any subsidiary of the Seller under, any
employment, consulting, supplemental retirement or other compensation,
contract or arrangement with any current or former director, officer or
employee of the Seller, provided such contract or arrangement was set forth
in the Seller Disclosure Schedule.
(c) Continuation of Plans. Notwithstanding anything to the contrary
contained herein, the Buyer shall have sole discretion with respect to the
determination as to whether to terminate, merge or continue any employee
benefit plans and programs of the Seller; PROVIDED, HOWEVER,that the Buyer
shall continue to maintain the Seller plans (other than stock based or
incentive plans) until the Seller Employees are permitted to participate in
the Buyer's plans. Nothing in this Agreement shall alter or limit the
Buyer's obligations, if any, under ERISA, as amended by the Consolidated
Omnibus Budget Reconciliation Act of 1985 and/or the Health Insurance
Portability and Accountability Act of 1996 with respect to the rights of
Seller Employees and their qualified beneficiaries in connection with the
group health plan maintained by the Seller as of the Effective Time.
(d) Severance Obligations. For a period of one (1) year after the
Closing Date, the Buyer will provide all Seller Employees who are not
otherwise covered by a specific termination, severance or change in control
agreement with a severance plan with provisions which are at least as
favorable in the aggregate to any Seller Employee whose employment is
terminated after the Effective Time as the severance plan or policy
currently maintained by the Seller or any Seller subsidiary for such
employee as disclosed in Section 4.11(a) of the Seller Disclosure Schedule
(it being understood by the parties hereto that the continuation of
employer-paid medical/dental benefits contained in Seller's current
severance policy as set forth in paragraph 5 of Section 4.11(a) of the
Seller Disclosure Schedule, also applies to individuals covered by those
specific special termination, severance or change in control agreements set
forth in Section 5.12(b) of the Seller Disclosure Schedule unless such
specific agreements expressly provide otherwise) . Any Seller Employee whose
position is terminated on or prior to the Effective Time shall be entitled
to severance benefits in accordance with the severance plan or policy
currently maintained by the Seller or any subsidiary for such employee.
(e) The provisions of this Section 5.12 respecting the Buyer's agreement
(i) to grant service credits as provided in Section 5.12(a) and (ii) to
honor the contracts, arrangements, commitments and understandings referred
to in Section 5.12(b) are intended to be for the benefit of and enforceable
by the persons referred to therein or the parties to these agreements,
respectively, and their heirs and representatives.
5.13 ACCOUNTANTS' LETTERS. Each of the Seller and the Buyer shall use all
reasonable efforts to cause to be delivered to the other letters from its
respective independent public accountants dated the date of the Closing,
relating to the financial condition of the Seller or the Buyer, as the case may
be, and 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 letter and customary in transactions of the nature contemplated
hereby.
5.14. MAINTENANCE OF RECORDS. Through the Effective Time, 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.
5.15 LEASES. The Seller shall consult with the Buyer before renewing or
extending any material lease of the Seller or any subsidiary of the Seller of
real property or material 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 or such subsidiary of the Seller shall not cancel,
terminate or take other action that is
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likely to result in any cancellation or termination of any such lease without
prior written notice to the Buyer.
5.16 ADVICE OF CHANGES. The Seller and Buyer shall, subject to any
restrictions under applicable law or regulations, promptly advise the other of
any change or event having a Material Adverse Effect on it or which it believes
would or would be reasonably likely to cause or constitute a material breach of
any of its representations, warranties or covenants contained herein. From time
to time prior to the Effective Time, each party will promptly supplement or
amend the Disclosure Schedules delivered in connection with the execution of
this Agreement to reflect any matter which, if existing, occurring or known at
the date of this Agreement, would have been required to be set forth or
described in such Disclosure Schedules or which is necessary to correct any
information in such Disclosure Schedules which has been rendered inaccurate
thereby. No supplement or amendment to such Disclosure Schedules shall have any
effect for the purpose of determining satisfaction of the conditions set forth
in Sections 6.02(a) or 6.03(a) hereof, as the case may be, or the compliance by
the Seller, with the covenants set forth in Sections 5.01.
5.17 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 Seller Stock Option Plans shall be converted
into corresponding rights to purchase shares of Buyer Common Stock in accordance
with the applicable provisions of Article II hereof.
5.18 MIDDLESEX BANK & TRUST COMPANY. From and after the date hereof until
the date which is thirty (30) days prior to the Effective Time, the Seller shall
have the right, but not the obligation, to sell all, but not less than all, of
the shares of Middlesex Bank & Trust Company held by the Seller on the date
hereof, or acquired thereafter, at a purchase price in an amount no less than
$8,000,000 in the aggregate; PROVIDED, HOWEVER, that the Seller shall not sell
such shares if the sale would prevent the Merger from qualifying for pooling of
interests accounting treatment.
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 the Seller Common Stock and the 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.
5.20 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 period of six (6) years after the Effective Time on terms no less
favorable than those in effect on the date hereof and shall at the Effective
Time provide evidence of such extension of coverage to the Seller; 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.
5.21 REGISTRATION OF SHARES. As soon as practicable after the Effective
Time, but in any event no later than thirty (30) days after 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
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shares of Buyer Common Stock subject to the stock options of the Seller to be
assumed by the Buyer pursuant to Section 2.10 hereof and the Buyer shall use all
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.
5.22 NEWCO. In the event that the Buyer changes the structure of the
Merger pursuant to Section 2.11(b) hereof, the Buyer will, prior to the
Effective Time, cause Newco to be organized under the laws of The Commonwealth
of Massachusetts. The authorized capital stock of Newco will consist of one
hundred (100) shares of common stock, $1.00 par value per share, all of which
shares shall be directly owned by the Buyer. The Buyer, as the sole stockholder
of Newco, will vote all outstanding shares of capital stock of Newco in favor of
the Merger and will not vote to modify or rescind, or otherwise permit the
modification or recision of, such vote prior to a termination of this Agreement
in accordance with Section 8.01 hereof. In such case, the Buyer shall cause
Newco to execute and deliver one or more counterparts or other appropriate
joinder to this Agreement, whereupon Newco shall become a party to and be bound
by this Agreement. On and as of such date that Newco so becomes a party to this
Agreement, Buyer shall be deemed to have provided, with respect to Newco, the
representations and warranties set forth in Section 3.02 hereof with respect to
Merger Subsidiary for all purposes of this Agreement.
5.23 COVENANTS OF BUYER.
(a) From the date of this Agreement until the earlier of the Effective
Time or the date of termination of this Agreement under Section 8.01 hereof,
the Buyer covenants and agrees that it shall take no action which would (i)
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 or (ii) materially adversely affect the
ability of any party to perform its covenants and agreements under this
Agreement.
(b) From the date hereof until the earlier of the Effective Time or the
date of termination of this Agreement under Section 8.01 hereof, Buyer shall
advise Seller of any proposed material transaction involving Buyer's
acquisition of, or by, or merger with, another banking or financial services
organization. Such advice shall be communicated to Seller's chief executive
officer, and Seller shall be required to keep all such information
confidential, unless and until it otherwise becomes generally available to
the public other than as a result of a disclosure by Seller in breach of its
obligation hereunder.
5.24 BANK MERGERS. At the request of the Buyer, subject to Sections 2.12
and 5.18 hereof, the Seller shall take and shall cause its bank subsidiaries to
take all necessary actions to effectuate mergers of each of the subsidiary banks
with the Buyer Bank in accordance with the requirements of all applicable laws
and regulations.
5.25 SELLER ESOPS. The parties hereto acknowledge and agree that they
shall use all reasonable efforts to ensure, subject to the requirements of
Section 5.09(b) and all applicable laws, including without limitation the
requirements of ERISA, that any net benefits that may be payable or otherwise
distributed to employees after the Effective Time from or by either of the
Employee Stock Ownership Plans maintained as of the date hereof by Lexington
Savings Bank and The Federal Savings Bank ("SELLER ESOPS"), upon termination of
the Seller ESOPs as permitted by Section 5.12(b) hereof, whether realized in the
form of shares of Buyer Common Stock or any other form of compensation, shall be
paid or otherwise distributed only to persons who are employees of either such
subsidiary of Seller on January 1, 1998 and on the Closing Date.
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<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) STOCKHOLDER'S APPROVAL. This Agreement and the transactions
contemplated hereby shall have been approved by the affirmative vote of the
holders of at least a majority of the outstanding shares of Seller Common
Stock and Buyer Common Stock present and voting at meetings 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 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.
(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.
(e) ACCOUNTING TREATMENT. Each of the parties shall have received a
letter from Arthur Andersen LLP, each dated the date of the Closing,
substantially to the effect that, on the basis of a review of the 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.
(b) REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. 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 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).
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
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<PAGE>
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) 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, imposes any condition or 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.
(e) TAX OPINION. The Buyer shall have received an opinion, dated the
date of the Closing from its counsel, Bingham Dana 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.
(f) 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.
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.
(b) REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. 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 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)
and the Seller shall have received a certificate to that 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.
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<PAGE>
(d) TAX OPINION. The Seller shall have received an opinion, dated the
dates of the Joint Proxy Statement and the Closing from Sullivan & Worcester
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.
(f) NASDAQ LISTING. The shares of Buyer Common Stock issuable to
Seller's stockholders pursuant to this Agreement shall have been authorized
for listing on NASDAQ upon official notice of issuance.
(g) EXCHANGE AGENT CERTIFICATION. The Exchange Agent 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 interest.
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 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.
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
transactions contemplated hereby by the parties respective stockholders:
(a) by mutual written consent of the Seller and the Buyer authorized by
their respective Boards of Directors;
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<PAGE>
(b) by the Seller or the Buyer if the Effective Time shall not have
occurred on or prior to August 31, 1998 (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;
(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 either party'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 party's stockholders or at any adjournment
thereof;
(e) 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 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 $24.06 and
(ii) the number obtained by dividing the Closing Price by 28.31 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 Schedule 8.01(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 SCHEDULE 8.01(E) hereto.
If the Buyer or any company listed on SCHEDULE 8.01(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 SCHEDULE 8.01(E) any company as to which there
is pending at any time during the Determination Period any publicly
announced proposal for such company to be acquired by another company in
exchange for its stock. Upon such exclusion, the weight of each remaining
company in Schedule
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<PAGE>
8.01(e) will be adjusted accordingly so that sum of all the weights of the
remaining companies equals 100%.
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(e), the Buyer shall have the option to increase
the consideration to be received by the holders of Seller Common Stock pursuant
to Article II hereof by adjusting the Conversion Number to equal a number
(calculated to the nearest one-thousandth) obtained by dividing (x) $33.92 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(e) and the Agreement shall remain in effect in accordance with its
terms (except as the Conversion Number shall have been so modified);
(f) 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 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 or in the Seller Option Agreement which
breach is not cured after thirty (30) days written notice thereof is given
to the party committing such breach; or
(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, 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 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 either party,
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 expressly provided 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
A-44
<PAGE>
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 Joint Proxy Statement shall be borne equally by the Buyer and
the Seller.
9.02 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. 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, 5.10, 5,12, 5.20, 5.21 and 5.25 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.
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:
Affiliated Community Bancorp, Inc.
716 Main Street
Waltham, Massachusetts 02154
Attention: Timothy J. Hansberry
President and Chief Executive Officer
Facsimile No.: (617) 891-4643
with a required copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, MA 02109
Attention: Stephen J. Coukos, Esq.
Facsimile No.: (617) 338-2880
(b) If to the Buyer, to:
UST Corp.
40 Court Street
Boston, Massachusetts 02109
Attention: Neal F. Finnegan
President and Chief Executive Officer
Facsimile No.: (617) 726-7332
with a required copy to:
A-45
<PAGE>
UST Corp.
40 Court Street
Boston, Massachusetts 02109
Attention: Eric R. Fischer, Esq.
Executive Vice President, General Counsel and Clerk
Facsimile No.: (617) 695-4175
and
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
Attention: Neal J. Curtin, Esq.
and
Stephen H. Faberman, 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 5.10, 5.12(e), 5.20 and 5.21.
9.05 COMPLETE AGREEMENT. This Agreement, including the documents and other
writings referred to herein or delivered pursuant hereto, including the
Confidentiality Agreement, this Agreement 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 this Agreement, the other 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.
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.
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<PAGE>
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 all reasonable 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.
IN WITNESS WHEREOF, the Buyer and the Seller 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.
<TABLE>
<S> <C> <C>
UST CORP.
By: /s/ NEAL F. FINNEGAN
-----------------------------------------
Name: Neal F. Finnegan
Title: President and Chief
Executive Officer
By: /s/ JAMES K. HUNT
-----------------------------------------
Name: James K. Hunt
Title: Executive Vice President
and Chief Financial Officer
MOSAIC CORP.
By: /s/ NEAL F. FINNEGAN
-----------------------------------------
Name: Neal F. Finnegan
Title: President and Chief
Executive Officer
By: /s/ JAMES K. HUNT
-----------------------------------------
Name: James K. Hunt
Title: Executive Vice President
and Chief Financial Officer
AFFILIATED COMMUNITY BANCORP, INC.
By: /s/ TIMOTHY J. HANSBERRY
-----------------------------------------
Name: Timothy J. Hansberry
Title: President and Chief
Executive Officer
By: /s/ JOHN G. FALLON
-----------------------------------------
Name: John G. Fallon
Title: Executive Vice President
and Chief Financial Officer
</TABLE>
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<PAGE>
Schedule 8.01(e)
<TABLE>
<CAPTION>
MARKET RELATIVE
COMPANY NAME STATE CAP WEIGHT
- ------------------------------------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
"TRANCHE A"
Imperial Bancorp..................................................................... CA $ 1,270.7 5.05%
Cullen/Frost Bankers, Inc............................................................ TX $ 1,247.7 4.95%
Whitney Holding Corporation.......................................................... LA $ 1,182.8 4.7%
UMB Financial Corporation............................................................ MO $ 1,031.7 4.1%
Community First Bankshares, Inc...................................................... ND $ 922.2 3.7%
Susquehanna Bancshares, Inc.......................................................... PA $ 851.0 3.4%
HUBCO, Inc........................................................................... NJ $ 804.6 3.2%
United Bankshares, Inc............................................................... WV $ 708.3 2.8%
First Midwest Bancorp, Inc........................................................... IL $ 706.2 2.8%
Hancock Holding Company.............................................................. MS $ 684.2 2.7%
Provident Bankshares Corporation..................................................... MD $ 680.4 2.7%
TrustCo Bank Corp NY................................................................. NY $ 629.6 2.5%
Silicon Valley Bancshares............................................................ CA $ 575.5 2.3%
Riggs National Corp.................................................................. DC $ 766.4 3.05%
Chittenden Corporation............................................................... VT $ 509.6 2.05%
<CAPTION>
MARKET RELATIVE
COMPANY NAME STATE CAP WEIGHT
- ------------------------------------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
"TRANCHE B"
Medford Bancorp, Inc................................................................. MA $ 171.43 4.05%
Sandwich Bancorp, Inc................................................................ MA $ 82.52 1.95%
MASSBANK Corp........................................................................ MA $ 166.01 3.9%
SIS Bancorp Inc...................................................................... MA $ 208.58 4.9%
MetroWest Bank....................................................................... MA $ 122.12 2.9%
BostonFed Bancorp Inc................................................................ MA $ 112.29 2.65%
FirstFed America Bancorp Inc......................................................... MA $ 177.41 4.2%
Andover Bancorp Inc.................................................................. MA $ 191.79 4.5%
First Essex Bancorp Inc.............................................................. MA $ 156.18 3.7%
First Federal of East Hartford....................................................... CT $ 99.58 2.35%
American Bank of Connecticut......................................................... CT $ 113.35 2.65%
Mechanics Savings Bank............................................................... CT $ 144.90 3.4%
NSS Bancorp Inc...................................................................... CT $ 92.24 2.2%
Dime Financial Corp.................................................................. CT $ 157.44 3.7%
Bancorp Connecticut Inc.............................................................. CT $ 125.88 2.95%
</TABLE>
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<PAGE>
APPENDIX B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of December 15, 1997, between AFFILIATED
COMMUNITY BANCORP, INC., a Massachusetts corporation (the "ISSUER") and UST
CORP., a Massachusetts corporation (the "GRANTEE").
WHEREAS, the Grantee and the Issuer have entered into an Affiliation
Agreement and Plan of Reorganization of even date herewith (as may be amended
and in effect from time to time, the "ACQUISITION AGREEMENT"), which agreement
is being executed by the parties thereto prior to the execution of 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 1,300,078
fully paid and nonassessable shares (the "OPTION SHARES") of common stock, par
value $0.01 per share, of the Issuer ("COMMON STOCK") at a price of $32.937 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 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 in 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, (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.
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(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 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) 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);
(iii) 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, 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 (B) 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 application or notice has been
accepted for processing, for approval to engage in an Acquisition
Transaction;
(iv) 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
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(v) 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 50% 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 percent (20%) 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 percent (20%) 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
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
DECEMBER 15, 1997, A COPY OF WHICH AGREEMENT WILL BE PROVIDED TO THE
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HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST
THEREFOR."
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 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 an additional
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
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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.
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 all reasonable efforts to
qualify such shares under any applicable state securities laws. Issuer will use
all reasonable 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, (i) Issuer is in registration
with respect to an underwritten public offering of shares of Common Stock, and
(ii) 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
Price, multiplied by the number of shares for which this Option may then be
exercised, 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. The term "MARKET/OFFER PRICE" shall
mean the highest of (w) the price per share of the Common
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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 sale 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 (the "PAYMENT DATE")
after the surrender of the Option and/or certificates representing Option Shares
and the receipt of such notice or notices relating thereto (the "SURRENDER
DATE"), 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 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 all
reasonable efforts to obtain 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
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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
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 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
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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, and at the request of each owner (the "SUBSTITUTE
SHARE OWNER") of shares of the Substitute Common Stock (the "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. 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 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
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<PAGE>
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. 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 (a) the Grantee shall, at any
time, be permitted to assign its rights under this Option Agreement or the
Option created hereunder to any Affiliate (as defined in the Acquisition
Agreement) of the Grantee and (b) 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
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<PAGE>
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
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 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
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<PAGE>
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(a)
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.
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.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Stock Option
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.
<TABLE>
<S> <C> <C>
AFFILIATED COMMUNITY BANCORP, INC.
By: /s/ TIMOTHY J. HANSBERRY
-----------------------------------------
Title: PRESIDENT AND CHIEF EXECUTIVE
OFFICER
UST CORP.
By: /s/ NEAL F. FINNEGAN
-----------------------------------------
Title: PRESIDENT AND CHIEF EXECUTIVE
OFFICER
</TABLE>
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<PAGE>
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
UST Corp.
40 Court Street
Page 1
APPENDIX C
December 15, 1997
UST Corp.
40 Court Street
Boston, MA 02109
Attention: Neal F. Finnegan
President and Chief Executive Officer
Ladies & Gentlemen
The undersigned (the "STOCKHOLDER") owns and has sole voting power with
respect to the number of shares of the common stock, par value $0.01 per share
(the "SHARES"), of Affiliated Community Bancorp, Inc., a Massachusetts
corporation (the "SELLER"), indicated opposite the Stockholder's name on
SCHEDULE 1 attached hereto.
Immediately after 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.
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
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CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
UST Corp.
40 Court Street
Page 2
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,
--------------------------------------
AGREED TO AND ACCEPTED AS
OF THE DATE FIRST ABOVE WRITTEN
UST CORP.
By:
- -----------------------------------------
Name:
Title:
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<PAGE>
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
UST Corp.
40 Court Street
Page 3
SCHEDULE 1
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF STOCKHOLDER OWNED WITH SOLE VOTING POWER
- -------------------------------------------------------- ---------------------------------------------------------------
<S> <C>
</TABLE>
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CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
UST Corp.
40 Court Street
Page 1
APPENDIX D
[LOGO]
May 11, 1998
Board of Directors
UST Corp.
40 Court Street
Boston, Massachusetts 02108
Ladies and Gentlemen:
Fox-Pitt, Kelton Inc. ("Fox-Pitt, Kelton") understands that UST Corp.
("UST") and Affiliated Community Bancorp, Inc. ("Affiliated") have entered into
an Affiliation Agreement and Plan of Reorganization, dated as of December 15,
1997 (the "Merger Agreement"), which provides for, among other things, the
merger of Affiliated with and into Mosaic Corp. ("Mosaic"), a wholly-owned
subsidiary of UST Corp., with Mosaic as the surviving corporation (the
"Merger"). Pursuant to the Merger Agreement and subject to the terms and
conditions set forth therein, at the effective time of the Merger, each issued
and outstanding share of common stock of Affiliated, par value $0.01 per share
(the "Affiliated Common Stock"), shall be converted into the right to receive
1.41 shares (the "Exchange Ratio") of common stock of UST, par value $0.625 per
share (the "UST Common Stock"). The terms and conditions of the Merger are more
fully set forth in the Merger Agreement.
You have asked for Fox-Pitt, Kelton's opinion as to whether the Exchange
Ratio is fair, from a financial point of view, to UST.
In arriving at the opinion set forth below, Fox-Pitt, Kelton has, among
other things:
(a) reviewed and analyzed certain publicly available financial
statements for UST and Affiliated;
(b) analyzed certain internal financial statements, including financial
projections, and other financial and operating data prepared by the
managements of UST and Affiliated;
(c) discussed the past, present and future operations, financial
condition and prospects of UST and Affiliated with the senior management of
the respective companies;
(d) compared the financial performance and condition as well as the
trading activities and market prices of Affiliated and UST with that of
certain other comparable publicly traded companies;
(e) reviewed and discussed with the senior management of UST the
strategic objectives of the Merger and certain other benefits of the Merger
to UST;
(f) reviewed the financial terms, to the extent publicly available, of
certain merger and acquisition transactions comparable, in whole or in part,
to the Merger;
(g) reviewed the Merger Agreement; and
(h) performed such other analyses as we have deemed appropriate.
D-1
<PAGE>
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
UST Corp.
40 Court Street
Page 2
Fox-Pitt, Kelton has assumed and relied upon, without independent
verification, the accuracy and completeness of all of the financial and other
information it has reviewed for the purposes of providing this opinion, and we
have not assumed any responsibility for independent verification of such
information. Fox-Pitt, Kelton has not assumed any responsibility for independent
valuation of the assets and liabilities of UST or Affiliated nor does it assume
any responsibility for reviewing loan files or visiting branch locations. With
respect to the financial projections, Fox-Pitt, Kelton has assumed that they
have been reasonably prepared by the respective managements of UST and
Affiliated on bases reflecting the best currently available estimates and
judgments of the future financial performance of UST and Affiliated. We express
no view as to such projections or the assumptions on which they are based.
Fox-Pitt, Kelton's opinion is based upon economic, market and other conditions
as they exist and can be evaluated on March , 1998.
In the normal course of its investment banking business, Fox-Pitt, Kelton is
regularly engaged in the valuation of banking and thrift company securities in
connection with acquisitions, negotiated underwritings, secondary distributions
of listed and unlisted securities, private placements and valuations for various
other purposes. As specialists in the securities of banks and thrifts, Fox-Pitt,
Kelton has experience in, and knowledge of, the valuation of such enterprises.
In the normal course of its business, Fox-Pitt, Kelton provides research
coverage on UST and has traded the equity securities of UST for its own account
and for the accounts of customers and, accordingly, may at any time hold a long
or short position in such securities. We have been retained by UST to provide
general financial advice and receive an annual fee for this service. In
addition, we have acted as financial advisor to UST in connection with this
Merger, will be receiving an additional fee upon the signing of a Merger
Agreement and will be receiving an additional fee upon closing of the Merger.
It is understood that this letter is for the information of the Board of
Directors of UST and may not be used for any other purpose without our prior
written consent.
Based upon and subject to the foregoing, Fox-Pitt, Kelton is of the opinion
on the date hereof that the Exchange Ratio is fair, from a financial point of
view, to UST.
Very truly yours,
[LOGO]
FOX-PITT, KELTON INC.
D-2
<PAGE>
APPENDIX E
[LOGO]
May 11, 1998
Board of Directors
Affiliated Community Bancorp, Inc.
716 Main St.
Waltham, MA 02254-9035
Gentlemen:
Affiliated Community Bancorp, Inc. (the "Company") and UST Corp. (the
"Acquiring Company" or the "Purchaser"), propose to enter into a transaction
(the "Merger") in which the Company will merge with and into a wholly owned
subsidiary of the Purchaser and each share of the Company's common stock, par
value $0.01 per share (the "Shares"), will be converted into 1.41 shares of the
Acquiring Company's common stock (the "Consideration"), par value $0.625 per
share (the "Acquiring Company Shares"). In connection with the Merger, the
parties have entered into an agreement (the "Stock Option Agreement") pursuant
to which the Company granted the Purchaser an option to acquire a number of
shares (subject to adjustment) which, if issued, would represent no more than
19.9% of the total number of outstanding shares. The Merger is expected to be
considered by the shareholders of the Company and the Acquiring Company at
special meetings and consummated shortly thereafter. We note that on December
10, 1997, the Acquiring Company announced the signing of a definitive agreement
to acquire Somerset Savings Bank ("Somerset").
You have asked us whether or not, in our opinion, the proposed Consideration
to be received by the shareholders of the Company pursuant to the Merger is fair
to the shareholders of the Company from a financial point of view.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed the Company's audited Annual Reports, Forms 10K, Forms
10-Q and related financial information for the three fiscal years ended
December 31, 1997, and the Company's related unaudited financial information
for the three months ended March 31, 1998;
(2) Reviewed the Acquiring Company's audited Annual Reports, Forms 10-K
and related financial information for the five fiscal years ended December
31, 1997, and the Acquiring Company's related unaudited financial
information for the three months ended March 31, 1998;
(3) Reviewed audited Annual Reports, Forms F-2 and related financial
information for the three fiscal years ended December 31, 1997, in each case
for Somerset;
(4) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets and prospects of the
Company and the Acquiring Company furnished to us by the Company and the
Acquiring Company;
(5) Conducted discussions with members of senior management of the
Company concerning businesses and prospects of the Company;
(6) Conducted discussions with members of senior management of the
Acquiring Company concerning the business and prospects of the Acquiring
Company and Somerset;
(7) Reviewed the historical market prices and trading activity for the
Shares and the Acquiring Company Shares and compared them with those of
certain publicly traded companies which we deemed to be relevant;
E-1
<PAGE>
(8) Compared the results of operations of the Company and the Acquiring
Company with those of certain companies which we deemed to be relevant;
(9) Compared the proposed financial terms of the Merger with the
financial terms of certain other mergers and acquisitions which we deemed to
be relevant;
(10) Reviewed the Affiliation Agreement and Plan of Reorganization and
the related Stock Option Agreement, each dated December 15, 1997, relating
to the Merger;
(11) Reviewed such other financial studies and analyses and performed
such other investigations and taken into account such other matters as we
deemed necessary, including our assessment of general economic, market and
monetary conditions.
In preparing our opinion, we have relied on the accuracy and completeness of
all information supplied or otherwise made available to us by the Company and
the Acquiring Company, and we have not assumed any responsibility to
independently verify such information or undertaken an independent appraisal of
the assets of the Company, the Acquiring Company, or Somerset. With respect to
the financial forecasts examined by us, we have assumed that they were
reasonably prepared and reflect good faith estimates and judgments of the
management of the Company and the Acquiring Company as to the future performance
of the respective companies. We note that no substantive financial forecasts
have been provided to us with respect to Somerset. This opinion does not address
the relative merits of the Merger and any other transactions or business
strategies discussed by the Board of Directors of the Company as alternatives to
the Merger or the decision of the Board of Directors to proceed with the Merger.
No opinion is expressed herein as to the price at which the securities to be
issued in the Merger to the shareholders of the Company may trade at any time.
Our opinion is based on economic, monetary and market conditions existing on the
date hereof. We have not reviewed the loan files of either the Company, the
Acquiring Company or Somerset.
Our opinion is directed to the Board of Directors of the Company and does
not constitute a recommendation to any shareholder of the Company as to how any
such shareholder should vote on the Merger.
In the ordinary course of business PaineWebber may trade in the securities
of the Company and the Acquiring Company.
PaineWebber is currently acting as financial advisor to the Company in
connection with the Merger and will be receiving a fee in connection with the
rendering of this opinion.
On the basis of, and subject to the foregoing, we are of the opinion that
the proposed Consideration to be received by the shareholders of the Company
pursuant to the Merger is fair to such shareholders from a financial point of
view.
This opinion has been prepared for the information of the Board of Directors
of the Company in connection with the Merger and shall not be reproduced,
summarized, described or referred to, provided to any person or otherwise made
public or used for any other purpose without the prior written consent of
PaineWebber Incorporated; provided, however, that this letter may be reproduced
in full in the Proxy Statement related to the Merger.
Very truly yours,
[LOGO]
E-2
<PAGE>
APPENDIX F
TEXT OF SECTIONS 85 TO 98 OF CHAPTER 156B OF THE
MASSACHUSETTS BUSINESS CORPORATION LAW
SECTION85. DISSENTING STOCKHOLDER; RIGHT TO DEMAND PAYMENT FOR STOCK; EXCEPTION
A stockholder in any corporation organized under the laws of Massachusetts
which shall have duly voted to consolidate or merge with another corporation or
corporations under the provisions of sections seventy-eight or seventy-nine who
objects to such consolidation or merger may demand payment for his stock from
the resulting or surviving corporation and an appraisal in accordance with the
provisions of sections eighty-six to ninety-eight, inclusive, and such
stockholder and the resulting or surviving corporation shall have the rights and
duties and follow the procedure set forth in those sections. This section shall
not apply to the holders of any shares of stock of a constituent corporation
surviving a merger if, as permitted by subsection (c) of section seventy-eight,
the merger did not require for its approval a vote of the stockholders of the
surviving corporation.
SECTION86. SELECTIONS APPLICABLE TO APPRAISAL; PREREQUISITES
If a corporation proposes to take a corporate action as to which any section
of this chapter provides that a stockholder who objects to such action shall
have the right to demand payment for his shares and an appraisal thereof,
sections eighty-seven to ninety-eight, inclusive, shall apply except as
otherwise specifically provided in any section of this chapter. Except as
provided in sections eighty-two and eighty-three, no stockholder shall have such
right unless (1) he files with the corporation before the taking of the vote of
the shareholders on such corporate action, written objection to the proposed
action stating that he intends to demand payment for his shares if the action is
taken and (2) his shares are not voted in favor of the proposed action.
SECTION87. STATEMENT OF RIGHTS OF OBJECTING STOCKHOLDERS IN NOTICE OF MEETING;
FORM
The notice of the meeting of stockholders at which the approval of such
proposed action is to be considered shall contain a statement of the rights of
objecting stockholders. The giving of such notice shall not be deemed to create
any rights in any stockholder receiving the same to demand payment for his
stock, and the directors may authorize the inclusion in any such notice of a
statement of opinion by the management as to the existence or non-existence of
the right of the stockholders to demand payment for their stock on account of
the proposed corporate action. The notice may be in such form as the directors
or officers calling the meeting deem advisable, but the following form of notice
shall be sufficient to comply with this section:
"If the action proposed is approved by the stockholders at the meeting
and effected by the corporation, any stockholder (1) who files with the
corporation before the taking of the vote on the approval of such action,
written objection to the proposed action stating that he intends to demand
payment for his shares if the action is taken and (2) whose shares are not
voted in favor of such action has or may have the right to demand in writing
from the corporation (OR, IN THE CASE OF A CONSOLIDATION OR MERGER, THE NAME
OF THE RESULTING OR SURVIVING CORPORATION SHALL BE INSERTED), within twenty
days after the date of mailing to him of notice in writing that the
corporate action has become effective, payment for his shares and an
appraisal of the value thereof. Such corporation and any such stockholder
shall in such cases have the rights and duties and shall follow the
procedure set forth in sections 88 to 98, inclusive, of chapter 156B of the
General Laws of Massachusetts."
SECTION88. NOTICE OF EFFECTIVENESS OF ACTION OBJECTED TO
The corporation taking such action, or in the case of a merger or
consolidation the surviving or resulting corporation, shall, within ten days
after the date on which such corporate action became effective,
F-1
<PAGE>
notify each stockholder who filed a written objection meeting the requirements
of section eighty-six and whose shares were not voted in favor of the approval
of such action, that the action approved at the meeting of the corporation of
which he is a stockholder has become effective. The giving of such notice shall
not be deemed to create any rights in any stockholder receiving the same to
demand payment for his stock. The notice shall be sent by registered or
certified mail, addressed to the stockholder at his last known address as it
appears in the records of the corporation.
SECTION89. DEMAND FOR PAYMENT; TIME FOR PAYMENT
If within twenty days after the date of mailing of a notice under subsection
(e) of section eighty-two, subsection (f) of section eighty-three, or section
eighty-eight, any stockholder to whom the corporation was required to give such
notice shall demand in writing from the corporation taking such action, or in
the case of a consolidation or merger from the resulting or surviving
corporation, payment for his stock, the corporation upon which such demand is
made shall pay to him the fair value of his stock within thirty days after the
expiration of the period during which such demand may be made.
SECTION90. DEMAND FOR DETERMINATION OF VALUE; BILL IN EQUITY; VENUE
If during the period of thirty days provided for in section eighty-nine the
corporation upon which such demand is made and any such objecting stockholder
fail to agree as to the value of such stock, such corporation or any such
stockholder may within four months after the expiration of such thirty-day
period demand a determination of the value of the stock of all such objecting
stockholders by a bill in equity filed in the superior court in the county where
the corporation in which such objecting stockholder held stock had or has its
principal office in the commonwealth.
SECTION91. PARTIES TO SUIT TO DETERMINE VALUE; SERVICE
If the bill is filed by the corporation, it shall name as parties respondent
all stockholders who have demanded payment for their shares and with whom the
corporation has not reached agreement as to the value thereof. If the bill is
filed by a stockholder, he shall bring the bill in his own behalf and in behalf
of all other stockholders who have demanded payment for their shares and with
whom the corporation has not reached agreement as to the value thereof, and
service of the bill shall be made upon the corporation by subpoena with a copy
of the bill annexed. The corporation shall file with its answer a duly verified
list of all such other stockholders, and such stockholders shall thereupon be
deemed to have been added as parties to the bill. The corporation shall give
notice in such form and returnable on such date as the court shall order to each
stockholder party to the bill by registered or certified mail, addressed to the
last known address of such stockholder as shown in the records of the
corporation, and the court may order such additional notice by publication or
otherwise as it deems advisable. Each stockholder who makes demand as provided
in section eighty-nine shall be deemed to have consented to the provisions of
this section relating to notice, and the giving of notice by the corporation to
any such stockholder in compliance with the order of the court shall be a
sufficient service of process on him. Failure to give notice to any stockholder
making demand shall not invalidate the proceedings as to other stockholders to
whom notice was properly given, and the court may at any time before the entry
of a final decree make supplementary orders of notice.
SECTION92. DECREE DETERMINING VALUE AND ORDERING PAYMENT; VALUATION DATE
After hearing the court shall enter a decree determining the fair value of
the stock of those stockholders who have become entitled to the valuation of and
payment for their shares, and shall order the corporation to make payment of
such value, together with interest, if any, as hereinafter provided, to the
stockholders entitled thereto upon the transfer by them to the corporation of
the certificates representing such stock if certificated or, if uncertificated,
upon receipt of an instruction transferring such stock to the corporation. For
this purpose, the value of the shares shall be determined as of the day
F-2
<PAGE>
preceding the date of the vote approving the proposed corporate action and shall
be exclusive of any element of value arising from the expectation or
accomplishment of the proposed corporate action.
SECTION93. REFERENCE TO SPECIAL MASTER
The court in its discretion may refer the bill or any question arising
thereunder to a special master to hear the parties, make findings and report the
same to the court, all in accordance with the usual practice in suits in equity
in the superior court.
SECTION94. NOTATION ON STOCK CERTIFICATES OF PENDENCY OF BILL
On motion the court may order stockholder parties to the bill to submit
their certificates of stock to the corporation for the notation thereon of the
pendency of the bill and may order the corporation to note such pendency in its
records with respect to any uncertificated shares held by such stockholder
parties, and may on motion dismiss the bill as to any stockholder who fails to
comply with such order.
SECTION95. COSTS; INTEREST
The costs of the bill, including the reasonable compensation and expenses of
any master appointed by the court, but exclusive of fees of counsel or of
experts retained by any party, shall be determined by the court and taxed upon
the parties to the bill, or any of them, in such manner as appears to be
equitable, except that all costs of giving notice to stockholders as provided in
this chapter shall be paid by the corporation. Interest shall be paid upon any
award from the date of the vote approving the proposed corporate action, and the
court may on application of any interested party determine the amount of
interest to be paid in the case of any stockholder.
SECTION96. DIVIDENDS AND VOTING RIGHTS AFTER DEMAND FOR PAYMENT
Any stockholder who has demanded payment for his stock as provided in this
chapter shall not thereafter be entitled to notice of any meeting of
stockholders or to vote such stock for any purpose and shall not be entitled to
the payment of dividends or other distribution on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the date of the vote approving the proposed corporate action) unless:
(1) A bill shall not be filed within the time provided in section ninety;
(2) A bill, if filed, shall be dismissed as to such stockholder; or
(3) Such stockholder shall with the written approval of the corporation, or
in the case of a consolidation or merger, the resulting or surviving
corporation, deliver to it a written withdrawal of his objections to and an
acceptance of such corporate action.
Notwithstanding the provisions of clauses (1) to (3), inclusive, said
stockholder shall have only the rights of a stockholder who did not so demand
payment for his stock as provided in this chapter.
SECTION97. STATUS OF SHARES PAID FOR
The shares of the corporation paid for by the corporation pursuant to the
provisions of this chapter shall have the status of treasury stock, or in the
case of a consolidation or merger the shares or the securities of the resulting
or surviving corporation into which the shares of such objecting stockholder
would have been converted had he not objected to such consolidation or merger
shall have the status of treasury stock or securities.
SECTION98. EXCLUSIVE REMEDY; EXCEPTION
The enforcement by a stockholder of his right to receive payment for his
shares in the manner provided in this chapter shall be an exclusive remedy
except that this chapter shall not exclude the right of such stockholder to
bring or maintain an appropriate proceeding to obtain relief on the ground that
such corporate action will be or is illegal or fraudulent as to him.
F-3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 67 of Chapter 156B of the Massachusetts General Laws authorizes a
corporation to indemnify any director, officer, employee or other agent of the
corporation to whatever extent specified in or authorized by (a) the articles of
organization, (b) a by-law adopted by the stockholders or (c) a vote adopted by
the holders of a majority of the shares of stock entitled to vote on the
election of directors.
The Registrant's Articles of Organization provide that the Registrant shall,
to the fullest extent legally permissible, indemnify each person who is or was a
director, officer, employee or other agent of the Registrant and each person who
is or was serving at the request of the Registrant as such of another
corporation or of any partnership, joint venture, trust, employee benefit plan
or other enterprise or organization, against all liabilities, costs and
expenses, including but not limited to amounts paid in satisfaction of
judgments, in settlement or as fines and penalties, and counsel fees and
disbursements, reasonably incurred by him or her in connection with the defense
or disposition of or otherwise in connection with or resulting from any action,
suit or other proceeding, whether civil, criminal, administrative or
investigative, before any court or administrative or legislative or
investigative body, in which he or she may be or may have been involved as a
party or otherwise or with which he or she may be or may have been threatened,
while in office or thereafter, by reason of his or her being or having been such
a director, officer, employee, agent or trustee, or by reason of any action
taken or not taken in any such capacity. Under Massachusetts law and the
Articles, no indemnification may be provided for any person with respect to any
matter as to which he or she shall have been adjudicated in any proceeding not
to have acted in good faith in the reasonable belief that his or her action was
in the best interest of the Registrant or other entity served or, to the extent
that such matter relates to service with respect to an employee benefit plan, in
the best interest of the participants or beneficiaries of such employee benefit
plan.
If, in an action, suit or proceeding brought by or in the name of the
Registrant, a director of the Registrant is held not liable for monetary
damages, whether because that director is relieved of personal liability under
the provisions of the Articles of Organization, or otherwise, that director
shall be deemed to have met the standard of conduct set forth above and to be
entitled to indemnification for expenses reasonably incurred in the defense of
such action, suit or proceeding.
As to any matter disposed of by settlement pursuant to a consent decree or
otherwise, no indemnification either for the amount of such settlement or for
any other expenses shall be provided unless such settlement shall be approved as
in the best interests of the Registrant, after notice that it involves such
indemnification, (a) by vote of a majority of the disinterested directors then
in office (even though the disinterested directors be less than a quorum), (b)
by any disinterested person or persons to whom the question may be referred by
vote of a majority of such disinterested directors, or (c) by vote of the
holders of a majority of the outstanding stock at the time entitled to vote for
directors, voting as a single class, exclusive of any stock owned by any
interested person, or (d) by any disinterested person or persons to whom the
question may be referred by vote of the holders or a majority of such stock. No
such approval shall prevent the recovery from any such officer, director,
employee, agent or trustee of any amounts paid to him or her or on his or her
behalf as indemnification in accordance with the preceding sentence if such
person is subsequently adjudicated by a court of competent jurisdiction not to
have acted in good faith in the reasonable belief that his or her action was in
the best interests of the Registrant.
The right of indemnification provided in the Registrant's Articles of
Organization shall not be exclusive of or affect any other rights to which any
director, officer, employee, agent or trustee may be entitled or which may
lawfully be granted to him or her. Indemnification of a "director," "officer,"
"employee," "agent," and "trustee" includes their respective executors,
administrators and other legal
II-1
<PAGE>
representatives. An "interested" person is one against whom the action, suit or
other proceeding in question or another action, suit or other proceeding on the
same or similar grounds is then or had been pending or threatened, and a
"disinterested" person is a person against whom no such action, suit or other
proceeding is then or had been pending or threatened.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS.
(a) The following is a list of exhibits to this Registration Statement:
(2)(a)--Affiliation Agreement and Plan of Reorganization, dated as of
December 15, 1997, by and among UST, Mosaic and AFCB (included as APPENDIX A
to the Joint Proxy Statement-Prospectus).
(2)(b)--Stock Option Agreement, dated as of December 15, 1997, by and
between UST and AFCB (included as APPENDIX B to the Joint Proxy
Statement-Prospectus).
(2)(c)--Form of Voting Agreement, dated as of December 15, 1997, executed by
the directors and certain executive officers of AFCB (included as APPENDIX C
to the Joint Proxy Statement-Prospectus).
(3)(a)--Amended and Restated Articles of Organization of UST, incorporated
herein by reference to Exhibit 3(a) to UST's Annual Report on Form 10-K for
the year ended December 31, 1996.
(3)(b)--By-laws of UST, as amended to date, incorporated herein by reference
to Exhibit 3(b) to UST's Annual Report on Form 10-K for the year ended
December 31, 1996.
(4)--Rights Agreement, dated as of September 19, 1995, between UST and
United States Trust Company, as Rights Agent, and the description of the
Rights, incorporated herein by reference to UST's Registration Statement on
Form 8-A relating to the Rights and to Exhibit 1 of such Registration
Statement.
(5)--Opinion of Eric R. Fischer, Esq.
(8)(a)--Form of Opinion of Bingham Dana LLP as to certain tax matters.
(8)(b)--Form of Opinion of Sullivan & Worcester LLP as to certain tax
matters.
(23)(a)--Consents of Arthur Andersen LLP.
(23)(b)--Consent of Wolf & Company, P.C.
(23)(c)--Consent of KPMG Peat Marwick LLP.
(23)(d)--Consent of Eric R. Fischer, Esq. (included in Exhibit 5).
(23)(e)--Consent of Bingham Dana LLP.
(23)(f)--Consent of Sullivan & Worcester LLP (included in Exhibit 8(b)).
(23)(g)--Consent of Fox-Pitt, Kelton, Inc.
(23)(h)--Consent of PaineWebber Incorporated.
(23)(i)--Consent of Timothy J. Hansberry
(24)--Power of Attorney of certain officers and directors (included on pages
II-5 and II-6).
(99)(a)--Form of Proxy for Special Meeting of Stockholders of UST.
(99)(b)--Form of Proxy for Special Meeting of Stockholders of AFCB.
(99)(c)--Text of Sections 85 to 98 of the Massachusetts Business
Corporations Law (included as APPENDIX F to the Joint Proxy
Statement-Prospectus).
II-2
<PAGE>
(b) Financial Statements Schedules:
Not Applicable.
(c) Fairness Opinions:
Included in Part I as APPENDICES D and E to the Joint Proxy
Statement-Prospectus included in this Registration Statement.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering rate
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent not more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
Registrant undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
The Registrant undertakes that every prospectus (i) that is filed pursuant
to the immediately preceding paragraph, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an
II-3
<PAGE>
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for the purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Joint Proxy
Statement-Prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form S-4,
within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston and The Commonwealth of Massachusetts as of
May 7, 1998.
UST CORP.
BY: /S/ ERIC R. FISCHER
-----------------------------------------
Eric R. Fischer
(EXECUTIVE VICE PRESIDENT,
GENERAL COUNSEL AND CLERK)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. By so signing, each of the undersigned,
in his or her capacity as a director or officer, or both, as the case may be, of
the Registrant, does hereby appoint Neal F. Finnegan, James K. Hunt and Eric R.
Fischer, and each of them severally, or if more than one acts, a majority of
them, his or her true and lawful attorneys or attorney to execute in his or her
name, place and stead, in his or her capacity as a director or officer or both,
as the case may be, of the Registrant, the Registration Statement on Form S-4
and with respect to the shares of UST Common Stock issued in connection with
this offering and any and all amendments to said Registration Statement and all
instruments necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission.
Each of said attorneys shall have full power and authority to do and perform
in the name and on behalf of each of the undersigned, in any and all capacities,
every act whatsoever requisite or necessary to be done in the premises as fully
and to all intents and purposes as each of the undersigned might or could do in
person, hereby ratifying and approving the acts of said attorneys and each of
them.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ --------------------------------------- ----------------
<C> <S> <C>
President and May 7, 1998
/s/ NEAL F. FINNEGAN Chief Executive Officer
------------------------------------------- (Principal Executive Officer)
(Neal F. Finnegan) and Director
Executive Vice May 7, 1998
/s/ JAMES K. HUNT President, Chief Financial
------------------------------------------- Officer and Treasurer
(James K. Hunt) (Principal Financial Officer
and Principal Accounting Officer)
/s/ CHESTER G. ATKINS Director May 7, 1998
-------------------------------------------
(Chester G. Atkins)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ --------------------------------------- ----------------
<C> <S> <C>
/s/ DAVID E. BRADBURY Director May 7, 1998
-------------------------------------------
(David E. Bradbury)
/s/ ROBERT M. COARD Director May 7, 1998
-------------------------------------------
(Robert M. Coard)
/s/ ROBERT L. CULVER Director May 7, 1998
-------------------------------------------
(Robert L. Culver)
/s/ ALAN K. DERKAZARIAN Director May 7, 1998
-------------------------------------------
(Alan K. DerKazarian)
/s/ DONALD C. DOLBEN Director May 7, 1998
-------------------------------------------
(Donald C. Dolben)
/s/ EDWARD GUZOVSKY Director May 7, 1998
-------------------------------------------
(Edward Guzovsky)
/s/ WALLACE M. HASELTON Director May 7, 1998
-------------------------------------------
(Wallace M. Haselton)
/s/ BRIAN W. HOTAREK Director May 7, 1998
-------------------------------------------
(Brian W. Hotarek)
/s/ FRANCIS X. MESSINA Director May 7, 1998
-------------------------------------------
(Francis X. Messina)
/s/ MICHAEL A. MILLER Director May 7, 1998
-------------------------------------------
(Michael A. Miller)
/s/ SYDNEY L. MILLER Director May 7, 1998
-------------------------------------------
(Sydney L. Miller)
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ --------------------------------------- ----------------
<C> <S> <C>
/s/ VIKKI L. PRYOR Director May 7, 1998
-------------------------------------------
(Vikki L. Pryor)
/s/ GERALD M. RIDGE Director May 7, 1998
-------------------------------------------
(Gerald M. Ridge)
/s/ WILLIAM SCHWARTZ Director May 7, 1998
-------------------------------------------
(William Schwartz)
/s/ BARBARA C. SIDELL Director May 7, 1998
-------------------------------------------
(Barbara C. Sidell)
/s/ JAMES V. SIDELL Director May 7, 1998
-------------------------------------------
(James V. Sidell)
/s/ PAUL D. SLATER Director May 7, 1998
-------------------------------------------
(Paul D. Slater)
/s/ EDWARD J. SULLIVAN Director May 7, 1998
-------------------------------------------
(Edward J. Sullivan)
/s/ G. ROBERT TOD Director May 7, 1998
-------------------------------------------
(G. Robert Tod)
/s/ MICHAEL J. VERROCHI, JR. Director May 7, 1998
-------------------------------------------
(Michael J. Verrochi, Jr.)
/s/ GORDON M. WEINER Director May 7, 1998
-------------------------------------------
(Gordon M. Weiner)
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
(2)(a) -- Affiliation Agreement and Plan of Reorganization, dated as of December 15, 1997, by and among UST,
Mosaic and AFCB (included as APPENDIX A to the Joint Proxy Statement-Prospectus).
(2)(b) -- Stock Option Agreement, dated as of December 15, 1997, by and between UST and AFCB (included as
APPENDIX B to the Joint Proxy Statement-Prospectus).
(2)(c) -- Form of Voting Agreement, dated as of December 15, 1997, executed by the directors and certain
executive officers of AFCB (included as APPENDIX C to the Joint Proxy Statement-Prospectus).
(3)(a) -- Amended and Restated Articles of Organization of UST, incorporated herein by reference to Exhibit
3(a) to UST's Annual Report on Form 10-K for the year ended December 31, 1996.
(3)(b) -- By-laws of UST, as amended to date, incorporated herein by reference to Exhibit 3(b) to UST's Annual
Report on Form 10-K for the year ended December 31, 1996.
(4) -- Rights Agreement, dated as of September 19, 1995, between UST and United States Trust Company, as
Rights Agent, and the description of the Rights, incorporated herein by reference to UST's
Registration Statement on Form 8-A relating to the Rights and to Exhibit 1 of such Registration
Statement.
(5) -- Opinion of Eric R. Fischer, Esq.
(8)(a) -- Form of Opinion of Bingham Dana LLP as to certain tax matters.
(8)(b) -- Form of Opinion of Sullivan & Worcester LLP as to certain tax matters.
(23)(a) -- Consents of Arthur Andersen LLP.
(23)(b) -- Consent of Wolf & Company, P.C.
(23)(c) -- Consent of KPMG Peat Marwick LLP.
(23)(d) -- Consent of Eric R. Fischer, Esq. (included in Exhibit 5).
(23)(e) -- Consent of Bingham Dana LLP.
(23)(f) -- Consent of Sullivan & Worcester LLP (included in Exhibit 8(b)).
(23)(g) -- Consent of Fox-Pitt, Kelton, Inc.
(23)(h) -- Consent of PaineWebber Incorporated.
(23)(i) -- Consent of Timothy J. Hansberry
(24) -- Power of Attorney of certain officers and directors (included on pages II-5 and II-6).
(99)(a) -- Form of Proxy for Special Meeting of Stockholders of UST.
(99)(b) -- Form of Proxy for Special Meeting of Stockholders of AFCB.
(99)(c) -- Text of Sections 85 to 98 of the Massachusetts Business Corporations Law (included as APPENDIX F to
the Joint Proxy Statement-Prospectus).
</TABLE>
<PAGE>
EXHIBIT 5
UST CORP.
40 Court Street
Boston, Massachusetts 02108
May 7, 1998
UST Corp.
40 Court Street
Boston, Massachusetts 02108
Re: UST CORP. REGISTRATION STATEMENT ON FORM S-4
RELATING TO 9,200,000 SHARES OF COMMON STOCK
Ladies and Gentlemen:
This opinion is rendered to you in connection with the filing by UST
Corp., a Massachusetts corporation (the "Corporation") of its Registration
Statement on Form S-4 (the "Registration Statement") with the Securities and
Exchange Commission, relating to the registration under the Securities Act of
1933 of 9,300,000 shares (the "Shares") of the Corporation's Common Stock, par
value $0.625 per share (the "Common Stock"), filed with Securities and Exchange
Commission on or about May 7, 1998, all of which Shares are to be issued to
shareholders of Affiliated Community Bancorp, Inc. ("AFCB"), in connection with
the Corporation's acquisition of AFCB, pursuant to the terms of an Affiliation
Agreement and Plan of Reorganization, dated as of December 15, 1997 (the
"Agreement"), among the Corporation. Mosaic Corp. and AFCB.
In rendering this opinion as General Counsel of the Corporation, I and an
attorney in my office acting under my direction have participated with the
Corporation and its officers in the preparation, review and filing of the
Registration Statement and the related proxy statement-prospectus (the "Proxy
Statement-Prospectus") included therein, have examined other corporate documents
and records, have made such examination of law, and have discussed with the
officers and directors of the Corporation and its subsidiaries such questions of
fact as we have deemed necessary or appropriate. We have also relied upon
certificates and statements of such officers and directors as to factual matters
and have assumed the genuineness of all signatures not known to us as well as
the authenticity of all documents submitted to us as copies.
Subject to the foregoing and to the approval of the Corporation's
acquisition of AFCB by the Corporation's stockholders prior to the issuance
of the Shares, it is my opinion that the Common Stock has been
<PAGE>
duly authorized and, upon the issuance thereof in accordance with the Agreement,
will be validly issued, fully paid and non-assessable.
I hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the use of my name in the Registration Statement
and the related Proxy Statement-Prospectus.
Very truly yours,
/s/ Eric R. Fischer
-------------------------
Eric R. Fischer,
Executive Vice President,
General Counsel and Clerk
<PAGE>
EXHIBIT 8(a)
May 7, 1998
UST Corp.
40 Court Street
Boston, Massachusetts 02108
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 6.02(e) of the
Affiliation Agreement and Plan of Reorganization dated as of December 15, 1997
(the "Agreement") among UST Corp., a Massachusetts corporation, Mosaic Corp., a
Massachusetts corporation and wholly owned subsidiary of UST Corp., and
Affiliated Community Bancorp, Inc., a Massachusetts corporation ("AFCB").
Pursuant to the Agreement, AFCB will merge with and into Mosaic Corp. in a
transaction (the "Merger") in which the existing stockholders of AFCB, other
than dissenting stockholders, will receive common stock of UST Corp. in exchange
for their issued and outstanding shares of common stock of AFCB. You have
requested our opinion as to certain federal income tax consequences anticipated
to follow from implementation of the Agreement.
For purposes of our opinion, we have examined and relied upon the
originals or copies, certified or otherwise identified to us to our
satisfaction, of the Agreement, the Notices of Special Meeting of
Stockholders of UST Corp. and AFCB and accompanying Joint Proxy
Statement-Prospectus dated May 11, 1998, included in the Registration
Statement on Form S-4 filed with the Securities and Exchange Commission by
UST Corp. and AFCB on or about May 7, 1998 and related documents
(collectively, the "Documents"). In that examination, we have assumed the
genuineness of all signatures, the authenticity and completeness of all
<PAGE>
UST Corp.
May 7, 1998
Page 2
documents purporting to be originals (whether reviewed by us in original or copy
form) and the conformity to the originals of all documents purporting to be
copies.
As to certain factual matters, we have relied with your consent upon, and
our opinion is limited by, the representations of the various parties set forth
in the Documents and on the Certificates from UST Corp., Mosaic Corp., AFCB, and
certain shareholders of AFCB dated on or about the date hereof copies of which
are attached hereto. Our opinion assumes that all representations set forth in
the Documents and in such Certificates are true and correct in all material
aspects as of the date hereof. In addition, our opinion is limited solely to the
provisions of the federal Internal Revenue Code as now in effect (the "Code"),
and the regulations, rulings, and interpretations thereof in force as of this
date and we assume no obligation to advise you of changes in the law or fact
that occur after the date of this opinion.
On the basis of and subject to the foregoing, and assuming due adoption
and implementation of the Agreement in accordance with its terms and consistent
with the representations set out in the Documents and Certificates, we are of
the opinion that for federal income tax purposes, the Merger will constitute a
reorganization under Section 368(a) of the Code.
This opinion is being delivered to you for your use in connection
with the referenced transaction and such other uses to which we have given
<PAGE>
UST Corp.
May 7, 1998
Page 3
our prior written consent.
Very truly yours,
/s/ Bingham Dana LLP
----------------------------
BINGHAM DANA LLP
<PAGE>
[SULLIVAN & WORCESTER LETTERHEAD]
May 7, 1998
Affiliated Community Bancorp, Inc.
716 Main Street
Waltham, Massachusetts 02154
Attention: Timothy J. Hansberry
President and Chief Executive Officer
Ladies and Gentlemen:
In connection with the registration by UST Corp., a Massachusetts
corporation (the "BUYER"), of shares of Buyer Common Stock for issuance in
connection with the Affiliation Agreement and Plan of Reorganization dated as
of December 15, 1997, by and among the Buyer, Mosaic Corp., a Massachusetts
corporation and wholly owned subsidiary of the Buyer ("MERGER SUBSIDIARY"),
and Affiliated Community Bancorp, Inc., a Massachusetts corporation (the
"SELLER"), which agreement, as amended, and all other agreements expressly
contemplated thereby, are collectively referred to herein as the "AGREEMENT",
this opinion is furnished to you to be filed as Exhibit 8(b) to the
Registration Statement on Form S-4 (the "REGISTRATION STATEMENT") under the
Securities Act of 1933, as amended (the "SECURITIES ACT") filed on the date
hereof with the Securities and Exchange Commission. Capitalized terms used
herein without definition have the meanings ascribed to them in the
Registration Statement or in the Agreement, as the context may require.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and
"CONTROL" shall mean the ownership of stock possessing at least eighty
percent (80%) of the total combined voting power of all classes of stock
entitled to vote and at least eighty percent (80%) of the total number of
shares of all other classes (and each other class) of stock of a corporation.
FACTS. Pursuant to the Agreement, the Seller will merge with and into
Merger Subsidiary, and the separate corporate existence of the Seller will
cease (the "MERGER"). Merger Subsidiary will be the surviving corporation in
the Merger and will remain a wholly-owned subsidiary of the Buyer. For
federal income tax purposes, the Merger is intended to qualify as a tax-free
reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D)
of the Code.
ASSUMPTIONS. In rendering our opinions, we have with your permission
assumed the accuracy of the following assumptions as of the Effective Time,
and we have assumed that the Merger will be consummated pursuant to the terms
of and in accordance with the Agreement.
<PAGE>
Affiliated Community Bancorp, Inc.
May 6, 1998
Page 2
A. The fair market value of the Buyer Common Stock and other consideration
received by each Seller shareholder in the Merger will be approximately
equal to the fair market value of the Seller stock surrendered in exchange
therefor.
B. There is no plan or intention on the part of the shareholders of the
Seller who own, directly or indirectly, a five percent (5%) or greater
interest (by value) in the Seller, and to the best of the knowledge of
the management of the Seller there is no plan or intention on the part of
the remaining Seller shareholders, to sell, exchange or otherwise dispose
of a number of shares of Buyer Common Stock received in the Merger that
would reduce the Seller shareholders' ownership of such Buyer Common Stock
to a number of shares having a value, as of the date of the Merger, which
is less than fifty percent (50%) of the value of all the formerly
outstanding stock of the Seller as of the same date. For purposes of this
assumption, shares of Seller stock exchanged for cash or other property,
surrendered by dissenters, or exchanged for cash in lieu of fractional
shares of Buyer Common Stock will be treated as outstanding Seller stock
on the date of the Merger. Moreover, shares of Seller stock and shares of
Buyer stock held by Seller shareholders and otherwise sold, redeemed, or
disposed of prior or subsequent to the Merger have been considered in
making this assumption.
C. Following the Merger, Merger Subsidiary will hold at least ninety percent
(90%) of the fair market value of the net assets of the Seller and at
least seventy percent (70%) of the fair market value of the gross assets
of the Seller held immediately prior to the Merger. For purposes of this
assumption, amounts paid by the Seller to dissenters, amounts paid by the
Seller to shareholders who receive cash or other property in the Merger,
amounts used by the Seller to pay reorganization expenses, and all
redemptions and distributions made by the Seller immediately preceding the
Merger (except for regular, normal dividends) are included as assets of
the Seller held immediately prior to the Merger. Moreover, liabilities of
the Seller to pay reorganization expenses are excluded from the
computation of the fair market value of its net assets immediately prior
to the Effective Time.
D. The Buyer is in control of Merger Subsidiary.
E. Following the Merger, Merger Subsidiary will not issue additional shares
of stock that would result in the Buyer losing control of Merger
Subsidiary.
F. Merger Subsidiary has no plan or intention to issue any warrants, options,
convertible securities, or any other type of right pursuant to which any
person could acquire stock in Merger Subsidiary that, if exercised or
converted, would result in the Buyer losing control of Merger Subsidiary.
G. Neither the Buyer nor Merger Subsidiary has any plan or intention, either
directly or indirectly through an affiliate, to reacquire any of its stock
issued in the Merger.
<PAGE>
Affiliated Community Bancorp, Inc.
May 6, 1998
Page 3
H. The Buyer has no plan or intention to liquidate Merger Subsidiary.
I. Other than the Merger itself, the Buyer has no plan or intention to merge
Merger Subsidiary with and into another corporation.
J. The Buyer has no plan or intention to sell or otherwise dispose of any of
the stock of Merger Subsidiary, except for transfers permitted by Section
368(a)(2)(C) of the Code and the administrative authorities under Section
368 of the Code.
K. The Buyer has no plan or intention to cause or to permit the Merger
Subsidiary to sell or otherwise dispose of any of the Seller's assets
acquired in the Merger, except for (i) dispositions made in the ordinary
course of business or transfers permitted by Section 368(a)(2)(C) of the
Code and the administrative authorities under Section 368 of the Code, or
(ii) the subsidiary bank merger contemplated by Section 2.12 of the
Agreement.
L. The liabilities of the Seller assumed by Merger Subsidiary and the
liabilities to which the transferred assets of the Seller are subject were
incurred by the Seller in the ordinary course of its business.
M. Merger Subsidiary will continue the historic business of the Seller or use
a significant portion of the Seller's business assets in a business.
N. Other than as provided in the Agreement, the Buyer, Merger Subsidiary, the
Seller and the shareholders of the Seller have paid and will pay their
respective expenses, if any, incurred in connection with the Merger.
O. Other than as provided in the Agreement, none among the Buyer, Merger
Subsidiary, the Seller and the shareholders of the Seller has assumed,
paid, or reimbursed the expenses of another, nor will any do so.
P. Other than as provided in the Agreement, no consideration for the Merger
has been or will be provided by the Buyer or an affiliate of the Buyer to
the Seller or the shareholders of the Seller.
Q. No dividends or distributions will be made with respect to the stock of
the Seller immediately preceding or in contemplation of the Merger, other
than regular normal dividends.
R. There is no intercorporate indebtedness existing between or among any of
the Buyer, the Seller, or Merger Subsidiary that was issued, acquired, or
will be settled at a discount.
<PAGE>
Affiliated Community Bancorp, Inc.
May 6, 1998
Page 4
S. None of the Buyer, Merger Subsidiary, and the Seller is an investment
company as defined in Sections 368(a)(2)(F)(iii) and (iv) of the Code.
T. None of the Buyer, Merger Subsidiary, and the Seller is under the
jurisdiction of a court in a Title 11 or similar case within the meaning
of Section 368(a)(3)(A) of the Code.
U. Each of the fair market value and aggregate tax bases of the assets of
the Seller transferred to Merger Subsidiary will equal or exceed the sum
of the liabilities assumed by Merger Subsidiary, plus the amount of
liabilities, if any, to which the transferred assets are subject.
V. No stock of Merger Subsidiary will be issued in the Merger.
W. No shares of Seller stock are held either directly or indirectly by the
Buyer or the Buyer Bank (other than Trust Account Shares and DPC Shares).
X. The payment of cash in lieu of fractional shares of Buyer Common Stock is
solely for the purpose of avoiding the expense and inconvenience to the
Buyer of issuing fractional shares and does not represent separately-
bargained-for consideration. The total cash consideration that will be
paid in the Merger to the shareholders of the Seller instead of issuing
fractional shares of Buyer Common Stock will not exceed one percent (1%)
of the total consideration that will be issued in the Merger to the
shareholders of the Seller in exchange for their shares of Seller stock.
The fractional share interests of each shareholder of the Seller will be
aggregated, and no shareholder of the Seller will receive, for such
shareholder's fractional share interests, cash in an amount equal to or
greater than the value of one full share of Buyer Common Stock.
Y. Any compensation paid by the Buyer or an affiliate of the Buyer to any
shareholder-employee or shareholder-consultant of the Seller will be for
services actually rendered or to be rendered and will be commensurate
with amounts paid to third parties bargaining at arm's length for similar
services. None of the compensation paid to any such shareholder-employee
or shareholder-consultant of the Seller will be separate consideration
for, or allocable to, any of his Seller shares. None of the Buyer Common
Stock received by any such shareholder-employee or shareholder-consultant
of the Seller pursuant to the Merger will be separate consideration for,
or allocable to, any employment, consulting, or similar agreement or
arrangement.
Z. The Seller is not and, within the past five (5) years has not been, a
"United States real property holding corporation" as defined in Section
897 of the Code, and will supply to its foreign shareholders any required
statements to that effect pursuant to Treasury Regulations Section
1.897-2(g)-(h).
<PAGE>
Affiliated Community Bancorp, Inc.
May 6, 1998
Page 5
OPINIONS. Based on the foregoing facts and assumptions, and assuming
the accuracy thereof, we are of the opinion that, for federal income tax
purposes:
1. The Merger will qualify as a reorganization within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code.
2. The Buyer, Merger Subsidiary, and the Seller will each be "a party
to a reorganization" within the meaning of Section 368(b) of the Code.
3. No gain or loss will be recognized by the Seller upon the transfer of
its assets to Merger Subsidiary in the Merger. Sections 357 and 361 of
the Code.
4. No gain or loss will be recognized by a Seller stockholder as a
result of the Merger, except (1) with respect to cash received by such
stockholder in lieu of fractional shares of Buyer Common Stock (as
discussed below) and (2) if a stockholder of the Seller receives cash
in the Merger other than in lieu of a fractional share, then gain, if
any, realized by such stockholder will be recognized only to the
extent of such cash received. If a Seller stockholder's receipt of
cash (other than cash in lieu of fractional shares) has the effect of
a dividend distribution, then the amount of gain recognized that is
not in excess of such stockholder's ratable share of the Seller's
undistributed earnings and profits will be treated as a dividend.
Section 356 of the Code. The determination of whether a stockholder's
exchange has the effect of a dividend distribution will be made on a
stockholder-by-stockholder basis, in accordance with the principles of
CLARK V. COMMISSIONER, 489 U.S. 726 (1989). Section 356 of the Code.
5. A Seller stockholder who receives cash in the Merger in lieu of a
fractional share interest in Buyer Common Stock will be treated as if
the fractional share interest was actually received by such
stockholder as part of the Merger and then redeemed by Buyer,
resulting in the cash that the stockholder receives in lieu of a
fractional share interest being treated as having been received in
full payment in a taxable sale of the stock redeemed as provided in
Section 302(a) of the Code.
6. The aggregate basis in the Buyer Common Stock received in the Merger
by a Seller stockholder will equal such stockholder's basis in the
Seller stock surrendered in exchange therefor, increased by any income
or gain recognized in the Merger by such holder, and decreased by the
cash received in the Merger by such holder (including cash received in
lieu of fractional shares). Section 358 of the Code.
7. The holding period of Buyer Common Stock to be received in the Merger
by a Seller stockholder will include his holding period of the Seller
stock surrendered in exchange therefor, provided that the Seller stock
surrendered was held as a capital asset on the date of the Merger.
Section 1223(1) of the Code.
<PAGE>
Affiliated Community Bancorp, Inc.
May 6, 1998
Page 6
No opinion is expressed concerning the consequences to any party of any matter
other than those specifically addressed above, and in particular, we express
no opinion with respect to the state or local tax treatment of the Merger. In
addition, no opinion is expressed concerning the consequences of canceling
and retiring shares of Seller stock held either directly or indirectly by the
Buyer or the Buyer Bank (other than Trust Account Shares and DPC Shares)
pursuant to Section 2.06(b)(ii) of the Agreement.
MISCELLANEOUS. The foregoing opinions are based on the Code as in
effect on the date hereof and administrative and judicial interpretations of
it. No assurance can be given that the Code will not change or that such
interpretations will not be revised or amended adversely, possibly with
retroactive effect.
This opinion is not intended to satisfy the closing opinion required by
Section 6.03(d) of the Agreement, which closing opinion will be delivered at
the Effective Time and be based upon executed representations made by the
Buyer, the Seller, and certain Seller shareholders.
This opinion is intended solely for the benefit and use of Affiliated
Community Bancorp, Inc. and its shareholders, and it is not to be used,
released, quoted, or relied upon by anyone else for any purpose (other than
as required by law) without our prior written consent. We hereby consent to
the filing of this opinion as an exhibit to the Registration Statement and to
the reference to our firm made therein under the captions "LEGAL OPINIONS"
and "THE AFFILIATION - Certain Federal Income Tax Consequences". In giving
such consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act or
the Rules and Regulations of the Securities and Exchange Commission
promulgated thereunder.
Very truly yours,
/s/ Sullivan & Worcester LLP
SULLIVAN & WORCESTER LLP
<PAGE>
Exhibit 23(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement on Form S-4 of UST Corp. of our
report dated January 28, 1998 included in UST's Annual Report on Form 10-K for
the year ended December 31, 1997 and to all references to our firm included in
this Registration Statement.
/s/ Arthur Andersen LLP
-----------------------
ARTHUR ANDERSEN LLP
Boston, Massachusetts
May 4, 1998
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated January 14, 1998
included in Affiliated Community Bancorp, Inc.'s Form 10-K for the year ended
December 31, 1997 and to all references to our Firm included in this
registration statement.
/s/ Arthur Andersen LLP
-----------------------
ARTHUR ANDERSEN LLP
Boston, Massachusetts
May 4, 1998
<PAGE>
Exhibit 23(b)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
in the Registration Statement on Form S-4 of UST Corp. of our report dated
January 16, 1998 relating to the consolidated financial statements of Somerset
Savings Bank as of December 31, 1997 and 1996, and for each of the years in the
three-year period ended December 31, 1997, which appears in the Current Report
on Form 8-K of UST Corp. dated April 24, 1998.
/s/ Wolf & Company, P.C.
------------------------
WOLF & COMPANY, P.C.
Boston, Massachusetts
May 6, 1998
<PAGE>
Exhibit 23(c)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We Consent to the incorporation by reference in the Registration Statement
on Form S-4 of UST Corp. of our report dated January 15, 1996 with respect to
the consolidated financial statements of The Federal Savings Bank as of December
31, 1995 and for the year then ended, which report appears in the December 31,
1997 annual report of Affiliated Community Bancorp, Inc.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Boston, Massachusetts
May 4, 1998
<PAGE>
EXHIBIT 23(e)
May 7, 1998
UST Corp.
40 Court Street
Boston, Massachusetts 02108
Ladies and Gentlemen:
We hereby consent to the references to this Firm under the captions "THE
MERGER--Federal Income Tax Consequences" and "LEGAL OPINIONS" in the Joint Proxy
Statement-Prospectus included in the registration statement on Form S-4 filed
with the Securities and Exchange Commission on or about May 7, 1998 by UST Corp.
and Affiliated Community Bancorp, Inc. ("AFCB") in connection with the proposed
merger of AFCB with and into your subsidiary, Mosaic Corp.
Very truly yours,
/s/ Bingham Dana LLP
------------------------------
BINGHAM DANA LLP
<PAGE>
EXHIBIT 23(g)
[LETTERHEAD OF FOX-PITT, KELTON, INC.]
May 11, 1998
UST Corp.
40 Court Street
Boston, Massachusetts 02108
Ladies and Gentlemen:
We hereby consent to the use of our written opinion letter dated as of the
date of this Joint Proxy Statement-Prospectus to the Board of Directors of
UST Corp. included as Appendix D to the Joint Proxy Statement - Prospectus
which forms a part of the Registration Statement on Form S-4 relating to the
proposed merger of Affiliated Community Bancorp, Inc. with and into a
wholly-owned subsidiary of UST Corp. and to the references to such opinion,
to our December 15, 1997 oral and written opinion provided to the Board of
Directors of UST Corp. and to this firm in the Joint Proxy Statement -
Prospectus. In giving such consent, we do not admit that we come within the
category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder, nor do we admit that we are
experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
/s/ Fox-Pitt, Kelton, Inc.
FOX-PITT, KELTON, INC.
<PAGE>
EXHIBIT 23(h)
[LETTERHEAD OF PAINEWEBBER INCORPORATED]
We hereby consent to the use of our opinion letter, dated May 11, 1998
to the Board of Directors of AFCB included as Appendix E to the Joint Proxy
Statement -Prospectus which forms a part of the Registration Statement on
Form S-4 relating to the merger of AFCB with and into a wholly-owned
subsidiary of UST and to the references to such opinion in such Joint Proxy
Statement - Prospectus under the captions "THE AFFILIATION" Opinion of AFCB's
Financial Advisor. In giving such consent, we do not admit that we come
within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the rules and regulations issued
by the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Painewebber Incorporated
------------------------------
PAINEWEBBER INCORPORATED
<PAGE>
EXHIBIT 23(i)
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
I hereby consent to my inclusion as a prospective director of UST Corp. in
the Registration Statement on Form S-4 of UST Corp., including the Joint Proxy
Statement - Prospectus constituting a part thereof, and any amendments thereto.
/s/ Timothy J. Hansberry
Timothy J. Hansberry
<PAGE>
Exhibit 99(a)
[Front]
UST CORP.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF UST CORP.
The undersigned stockholder of UST Corp., a Massachusetts corporation (the
"Company"), hereby constitutes and appoints Neal F. Finnegan, Eric R. Fischer
and James K. Hunt, and each of them, his Attorneys and Proxies (with full
power of substitution in each), and hereby authorizes them to represent the
undersigned and to vote, as designated on the reverse, all the shares of
Common Stock of the Company held of record by the undersigned on May 7, 1998
at the Special Meeting of Stockholders of the Company, to be held on
Wednesday, June 10, 1998, and at any adjournments thereof.
THE PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED HOLDER, IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2.
- --------------------------------------------------------------------------------
PLEASE VOTE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please sign this Proxy exactly as your name appears on the books of the Company.
Joint owners should each sign personally. Trustee and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of the
authorized officer who should state his or her title.
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- -------------------------------- --------------------------------
- -------------------------------- --------------------------------
- -------------------------------- --------------------------------
<PAGE>
/X/ PLEASE MARK VOTE
AS IN THIS EXAMPLE
1.) Aproval of the Affiliation Agreement with Affiliated Community Bancorp, Inc.
and the transactions contemplated thereby.
For Against Abstain
|_| |_| |_|
2.) Amendment to UST Articles increasing the number of authorized shares from
45,000,000 to 75,000,000.
For Against Abstain
|_| |_| |_|
Authorizing the Proxies in their discretion to consider and act upon such other
matters as may properly come before the meeting.
---------------
Please be sure to sign and date this proxy. Date
- ---------------------------------------------------------------
Shareholder sign here Co-owner sign here
- ---------------------------------------------------------------
Mark box at right if comments or address change have been noted on the reverse
side of the card. |_|
<PAGE>
Exhibit 99(b)
REVOCABLE PROXY/VOTING INSTRUCTION CARD
AFFILIATED COMMUNITY BANCORP, INC.
Proxy for Special Meeting of Stockholders
to be Held on June 10, 1998
This proxy is solicited by the Board of Directors
The undersigned hereby constitutes and appoints Jack E. Chappell and
Timothy J. Hansberry, or either of them as Proxies of the undersigned, with full
power to appoint his substitute, and authorizes each of them to represent and to
vote all shares of Common Stock of Affiliated Community Bancorp, Inc. (the
"Company") held by the undersigned as of the close of business on May 7, 1998
at the Special Meeting of Stockholders to be held at [the Sheraton
Lexington Inn, 727 Marrett Road, Route 2A, Lexington, Massachusetts] on
Wednesday, June 10, 1998 at 10 a.m., or at any adjournments or postponements
thereof.
When properly executed, this proxy will be voted in the manner directed
herein by the undersigned stockholder(s). If no direction is given, this proxy
will be voted FOR Proposal 1. In their discretion, the Proxies are each
authorized to vote upon such other business as may properly come before the
meeting or any adjournments or postponements thereof. A stockholder wishing to
vote in accordance with the Board of Directors' recommendation need only sign
and date this proxy and return it in the enclosed envelope.
The undersigned hereby acknowledge(s) receipt of a copy of the
accompanying Notice of Special Meeting of Stockholders and the Joint Proxy
Statement--Prospectus with respect thereto, and hereby revoke(s) any proxy or
proxies heretofore given. This proxy may be revoked at any time before it is
exercised.
(Continued, and to be signed and dated, on reverse side)
- ----------------
SEE
REVERSE
SIDE
- ----------------
- ----------------
<PAGE>
|X| PLEASE MARK VOTE
AS IN THIS EXAMPLE
1.) Proposal to approve and adopt the Affiliation Agreement and Plan of
Reorganization, dated as of December 15, 1997 (the "Affiliation Agreement"),
among the Company, UST Corp. ("UST"), and Mosaic Corp. ("Mosaic"), a
wholly-owned subsidiary of UST, and the transactions contemplated thereby,
pursuant to which the Company will merge with and into Mosaic, and each
outstanding share of Common Stock of the Company will be converted into 1.41
shares of UST Common Stock, upon the terms and subject to the conditions set
forth therein, as described in the accompanying Joint Proxy
Statement-Prospectus. A copy of the Affiliation Agreement is attached as
Appendix A to the accompanying Joint Proxy Statement-Prospectus.
For Against Abstain
|_| |_| |_|
Mark Here For
Address Change And
Note At Left
|_|
Mark Here
If You Plan
To Attend
The Meeting
|_|
Please Date, Sign and Mail Your Proxy Card Promptly in the Enclosed Envelope
Please sign name exactly as shown. Where there is more than one holder, each
should sign. When signing as an attorney, administrator, executor, guardian or
trustee, please add your title as such, if executed by a corporation, the proxy
should be signed by a duly authorized person, stating his or her title or
authority.
