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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: JULY 2, 1999
UST CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 0-9623 04-2436093
(STATE OR OTHER JURISDICTION (COMMISSION FILE NO.) (IRS EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
40 COURT STREET 02109
BOSTON, MASSACHUSETTS (ZIP CODE)
(ADDRESS OF PRINCIPAL
EXECUTIVE OFFICES)
(617) 726-7000
(REGISTRANT'S TELEPHONE
NUMBER, INCLUDING AREA CODE)
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<PAGE>
Item 5. Other Events.
A. On June 21, 1999, UST Corp., a Massachusetts corporation ("UST")
executed an Agreement and Plan of Merger (the "Merger Agreement") with Citizens
Financial Group, Inc., a Delaware corporation and wholly-owned subsidiary of
The Royal Bank of Scotland plc ("Citizens"), pursuant to which UST will be
acquired by Citizens. Citizens, headquartered in Providence, Rhode Island, is
the parent bank holding company of subsidiary banks operating in Rhode Island,
Connecticut, Massachusetts and New Hampshire. Citizens will acquire UST by
causing a newly-formed subsidiary Massachusetts corporation to be merged with
and into UST (the "Holding Company Merger"), with UST as the surviving
corporation of the Holding Company Merger as a wholly-owned subsidiary of
Citizens. Immediately after the Holding Company Merger, USTrust, the principal
bank subsidiary of UST will be merged with and into Citizens Bank of
Massachusetts, the Massachusetts bank subsidiary of Citizens.
In the Holding Company Merger, each share of common stock, par value
$0.625 per share ("UST Common Stock"), will be converted into the right to
receive $32.00 in cash. The Holding Company Merger will be treated as a taxable
purchase and sale of UST Common Stock for federal income tax purposes. The
Holding Company Merger is subject to satisfaction of certain conditions,
including approval by the Board of Governors of the Federal Reserve System, the
Massachusetts Board of Bank Incorporation and other regulators, and the
affirmative vote by the holders of at least two-thirds of the outstanding
shares of UST Common Stock. Subject to the receipt of all such approvals, the
Holding Company Merger is expected to be completed in January 2000. The full
text of the Merger Agreement is attached as Exhibit 1 hereto and is hereby
incorporated herein by reference.
Immediately after execution of the Merger Agreement on June 21, 1999, UST
entered into a Stock Option Agreement (the "Stock Option Agreement") with
Citizens pursuant to which UST has granted to Citizens the option to purchase,
under certain circumstances, up to 8,541,333 shares of UST Common Stock at an
exercise price of $24.25 per share. The full text of the Stock Option Agreement
is attached as Exhibit 2 hereto and is hereby incorporated herein by reference.
In connection with entering into the Merger Agreement, UST has amended the
Rights Agreement, dated as of September 19, 1995, by and between UST and United
States Trust Company, as Rights Agent (the "Rights Agreement Amendment"). A
copy of the Rights Agreement Amendment is attached as Exhibit 3 and is
incorporated herein by reference.
<PAGE>
Copies of the Merger Agreement, the Stock Option Agreement, the Rights
Agreement Amendment and UST's press release are attached as Exhibits 1, 2, 3
and 4, respectively and incorporated herein by reference.
B. Information contained in the Exhibits to this Current Report on Form
8-K may contain statements which are forward-looking in nature, such as
references to strategic plans and expectations. These forward-looking
statements are inherently uncertain, and actual results may differ from UST
expectations. Risk factors that could impact current and future performance
include but are not limited to: changes in asset quality; adverse changes in
the economy of UST's primary market; adverse changes in collateral values;
fluctuations in market rates and prices which can negatively affect net
interest margin, asset valuations and expense expectations; and changing
requirements of federal and state bank regulatory agencies that could material
impact future operations of UST.
C Exhibits
1. Agreement and Plan of Merger, dated as of June 21, 1999, by and
between UST Corp. and Citizens Financial Group, Inc.
2. Stock Option Agreement, dated as of June 21, 1999, by and between
UST Corp. and Citizens Financial Group, Inc.
3. Rights Agreement Amendment, dated as of June 21, 1999, by and
between UST Corp. and United States Trust Company, as Rights Agent.
4. UST Corp.'s press release dated June 21, 1999, related to the
acquisition of UST Corp. by Citizens Financial Group, Inc.
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities and Exchange Act of 1934,
UST has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
UST CORP.
/s/ Neal F. Finnegan
------------------------------------
Neal F. Finnegan
President and Chief
Executive Officer
/s/ Eric R. Fischer
------------------------------------
Eric R. Fischer
Executive Vice President,
General Counsel and Clerk
Dated: July 2, 1999
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of June 21,
1999, by and between CITIZENS FINANCIAL GROUP, INC., a Delaware corporation
(the "Buyer") and UST CORP., a Massachusetts corporation (the "Seller").
WHEREAS, the Boards of Directors of the Buyer and the Seller have
determined that it is in the best interests of their respective stockholders
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 Buyer will, subject to the terms and conditions set forth herein,
acquire the Seller;
WHEREAS, following the execution and delivery of this Agreement, the Buyer
shall take such action as is appropriate to form a subsidiary to be organized
as a corporation (the "Merger Sub") under the MBCL, and to cause the Merger Sub
to become a party to this Agreement, pursuant to which the Merger Sub shall
merge (the "Merger") with and into the Seller, upon the terms and subject to
the conditions set forth herein (the Seller and the Merger Sub being the
constituent corporations of the Merger);
WHEREAS, following the execution and delivery of this Agreement, Citizens
Bank of Massachusetts, a Massachusetts chartered stock savings bank and
subsidiary of the Buyer (the "Buyer Bank" and also sometimes referred to herein
as the "Surviving Bank"), shall enter into an Agreement and Plan of Merger (the
"Bank Merger Agreement") with USTrust, a Massachusetts chartered trust company
and subsidiary of the Seller (the "Seller Bank"), substantially in the form of
Exhibit I hereto, providing for the merger of the Seller Bank with and into the
Buyer Bank (the "Bank Merger") under the MGL, promptly following the
consummation of the Merger;
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 II, pursuant to which the Seller has granted an option to
purchase shares of its common stock (the "Seller Option") to the Buyer; 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:
<PAGE>
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement, in
accordance with the MBCL, at the Effective Time (as defined in Section 1.2
hereof), the Merger Sub shall merge with and into the Seller. The Seller shall
be the surviving corporation (hereinafter sometimes called the "Surviving
Corporation") in the Merger, and shall continue its corporate existence under
the laws of The Commonwealth of Massachusetts as a subsidiary of the Buyer.
Upon consummation of the Merger, the separate corporate existence of the Merger
Sub shall terminate.
1.2 Effective Time. The Merger shall become effective as set forth in the
articles of merger (the "Articles of Merger") which shall be submitted for
filing to the Secretary of State of The Commonwealth of Massachusetts pursuant
to Section 78(a) of the MBCL on the Closing Date (as defined in Section 9.1
hereof). The term "Effective Time" shall be the date and time when the Merger
becomes effective, as set forth in the Articles of Merger.
1.3 Effects of the Merger. At and after the Effective Time, the Merger
shall have the effects set forth in this Agreement and in Section 80 of the
MBCL.
1.4 Conversion of Seller Common Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of the Merger Sub, the Seller or
the holder of any of the shares of the Seller Common Stock (as defined below):
(a) Each share of the common stock, par value $0.625 per share, of the
Seller ("Seller Common Stock") issued and outstanding immediately prior to the
Effective Time (other than shares of Seller Common Stock held (x) in the
Seller's treasury or (y) directly or indirectly by the Buyer or the Seller or
any of their respective subsidiaries (except for Trust Account Shares and DPC
shares, as such terms are defined below) shall become and be converted
automatically into the right to receive in cash from the Buyer an amount equal
to $32.00 (the "Fixed Consideration"); provided, however, that:
(i) in the event that, (A) at any time prior to the Effective Time,
the Buyer or any Affiliate of the Buyer submits a bid or other offer to
acquire any assets or liabilities proposed to be divested in connection
with the merger of Fleet Financial Group, Inc. and BankBoston Corporation
(the "Branch Divestiture"), (B) the Effective Time does not occur on or
prior to January 31, 2000, (C) the condition contained in Section 7.1(a)
is satisfied and (D) the failure of the Effective Time to have occurred on
or prior to January 31, 2000 is not attributable to acts or omissions by
the Seller; then the Fixed Consideration shall be adjusted upwards by an
amount determined by (1) multiplying (a) the Fixed Consideration by (b)
6%, rounded at the date the foregoing calculation is made at the Effective
Time, to the nearest $.01, then (2) dividing the product determined
pursuant to clause (1) by 365 and then (3) multiplying the amount obtained
after the application of clauses (1) and (2) by the number of calendar
days in the period commencing on February 1, 2000 through and including
the Closing Date; or alternatively,
<PAGE>
(ii) in the event that, (A) prior to the Effective Time, the Buyer or
any Affiliate of the Buyer does not submit a bid or other offer to acquire
any assets or liabilities in the Branch Divestiture, (B) the Effective
Time does not occur on or prior to February 29, 2000, (C) the condition
contained in Section 7.1(a) is satisfied, and (D) the failure of the
Effective Time to have occurred on or prior to February 29, 2000 is not
attributable to acts or omissions by the Seller; then the Fixed
Consideration shall be adjusted upwards by an amount determined by (1)
multiplying (a) the Fixed Consideration by (b) 6%, rounded at the date the
foregoing calculation is made at the Effective Time, to the nearest $.01,
then (2) dividing the product determined pursuant to clause (1) by 365 and
then (3) multiplying the amount obtained after the application of clauses
(1) and (2) by the number of calendar days in the period commencing on
March 1, 2000 through and including the Closing Date.
The Fixed Consideration, to the extent adjusted as provided above, is
referred to herein as the "Merger Consideration."
(b) All of the shares of Seller Common Stock converted into the Merger
Consideration pursuant to this Article I shall no longer be outstanding and
shall automatically be canceled and shall cease to exist as of the Effective
Time, and each certificate (each a "Certificate") previously representing any
such shares of Seller Common Stock shall thereafter represent the right to
receive the Merger Consideration. Certificates previously representing shares
of Seller Common Stock shall be exchanged for the Merger Consideration upon the
surrender of such Certificates in accordance with Section 2.2 hereof, without
any interest thereon.
(c) At the Effective Time, all shares of Seller Common Stock that are
owned by the Seller as treasury stock and all shares of Seller Common Stock
that are owned directly or indirectly by the Buyer or the Seller or any of
their respective subsidiaries (other than shares of Seller Common Stock held
directly or indirectly in trust accounts, managed accounts and the like or
otherwise held in a fiduciary capacity that are beneficially owned by third
parties (any such shares, whether held directly or indirectly by the Buyer or
the Seller, as the case may be, being referred to herein as "Trust Account
Shares") and other than any shares of Seller Common Stock held by the Buyer or
the Seller or any of their respective subsidiaries in respect of a debt
previously contracted (any such shares of Seller Common Stock which are
similarly held, whether held directly or indirectly by the Buyer or the Seller
or any of their respective subsidiaries, being referred to herein as "DPC
Shares")) shall be canceled and shall cease to exist and no consideration shall
be delivered in exchange therefor.
<PAGE>
(d) Notwithstanding anything in this Agreement to the contrary, shares of
Seller Common Stock which are outstanding immediately prior to the Effective
Time, the holders of which shall have delivered to the Seller a written demand
for appraisal of such shares in the manner provided in the applicable
provisions of the MBCL ("Dissenting Shares"), shall not be converted into the
right to receive, or be exchangeable for, the Merger Consideration otherwise
payable in exchange for such shares of the Seller Common Stock pursuant to this
Section 1.4 but, instead, the holders thereof shall be entitled to payment of
the appraised value of such Dissenting Shares in accordance with the provisions
of the MBCL; provided, however, that (i) if any holder of Dissenting Shares
shall subsequently deliver a written withdrawal of his demand for appraisal of
such shares or (ii) if: any holder fails to establish his entitlement to
appraisal rights as provided in Sections 86 through 98 of the MBCL, such holder
or holders (as the case may be) shall forfeit the right to appraisal of such
shares of Seller Common Stock and each of such shares shall thereupon be deemed
to have been converted into the right to receive, and to have become
exchangeable for, as of the Effective Time, the Merger Consideration otherwise
payable in exchange for such shares of Seller Common Stock pursuant to this
Section 1.4, without any interest thereon.
(e) The Seller shall give the Buyer (i) prompt notice of any objections
filed pursuant to Sections 86 through 98 of the MBCL received by the Seller,
withdrawals of such objections, and any other instruments served in connection
with such objections pursuant to the MBCL and received by the Seller, and (ii)
the opportunity to direct all negotiations and proceedings with respect to
objections under the MBCL consistent with the obligations of the Seller
thereunder. The Seller shall not, except with the prior written consent of the
Buyer, (x) make any payment with respect to any such objection, (y) offer to
settle or settle any such objections or (z) waive any failure to timely deliver
a written objection in accordance with the MBCL.
1.5 Merger Sub Common Stock. At and after the Effective Time, each share
of common stock, par value $.01 per share, of the Merger Sub issued and
outstanding immediately prior to the Effective Time shall become and be
converted automatically into one share of common stock of the Surviving
Corporation.
1.6 Employee Stock Options. Prior to the Effective Time, the Seller shall
take all such action as is necessary to terminate The UST Corp. Stock
Compensation Plan, The 1993 Main Street Community Bancorp, Inc. Stock Option
Plan, The 1995 Affiliated Community Bancorp. Inc. Stock Option Plan, The 1986
Lexington Savings Bank Stock Option and Stock Appreciation Rights Plan, The
1994 Lexington Savings Bank Stock Option Plan, The Somerset Savings Bank 1986
Incentive Stock Option Plan, The Somerset Savings Bank 1995 Equity Incentive
Plan, The 1995 UST Director's Stock Option Plan and The 1996 UST Director's
Stock Option Plan, each as amended to date (collectively, the "Seller Stock
Option Plans"), and shall provide written notice to each holder of a then
outstanding stock option to purchase shares of Seller Common Stock pursuant to
the Seller Stock Option Plans (whether or not such stock option is then vested
or exercisable), that such stock option shall be, as at the date of such
notice, exercisable in full and that such stock option shall terminate at the
<PAGE>
Effective Time and that, if such stock option is not exercised or otherwise
terminated before the Effective Time, such holder shall be entitled to receive
in cancellation of such option a cash payment from the Seller at the Closing in
an amount equal to the excess of the Merger Consideration over the per share
exercise price of such stock option, multiplied by the number of shares of
Seller Common Stock covered by such stock option, subject to any required
withholding of taxes. Subject to the foregoing, the Seller Stock Option Plans
and all options issued thereunder shall terminate at the Effective Time. The
Seller hereby represents and warrants to the Buyer that the maximum number of
shares of Seller Common Stock subject to issuance pursuant to the exercise of
stock options issued and outstanding under the Seller Stock Option Plans is not
and shall not be at or prior to the Effective Time more than 2,386,818.
1.7 Articles of Organization. Unless otherwise provided by the Buyer, at
the Effective Time, the Articles of Organization of the Seller, as in effect at
the Effective Time, shall be the Articles of Organization of the Surviving
Corporation until thereafter amended in accordance with applicable law.
1.8 By-Laws. At the Effective Time, the By-Laws of the Buyer, as in effect
immediately prior to the Effective Time, shall be the By-Laws of the Surviving
Corporation until thereafter amended in accordance with applicable law.
1.9 Directors and Officers. The directors of Merger Sub immediately prior
to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Articles of
Organization and Bylaws of the Surviving Corporation, and the officers of
Merger Sub immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualified.
ARTICLE II
EXCHANGE OF SHARES
2.1 Buyer to Deposit Aggregate Merger Consideration. At or prior to the
Effective Time, the Buyer shall pay, or shall cause to be paid, to a bank or
trust company selected by the Buyer and reasonably acceptable to the Seller
(which may be a subsidiary or other Affiliate of the Buyer) (the "Exchange
Agent"), for the benefit of the holders of Certificates, for exchange in
accordance with this Article II, such amount of cash as is sufficient to pay
the aggregate Merger Consideration which holders of Seller Common Stock are
entitled to receive pursuant to Section 1.4 hereof.
2.2 Exchange of Shares.
(a) As soon as practicable after the Effective Time, and in no event later
than two business days thereafter, the Buyer shall cause the Exchange Agent to
mail to each holder of record of a Certificate or Certificates a form letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration into
<PAGE>
which the shares of Seller Common Stock represented by such Certificate or
Certificates shall have been converted pursuant to this Agreement. Upon proper
surrender of a Certificate for exchange and cancellation to the Exchange Agent,
together with such properly completed letter of transmittal, duly executed, the
holder of such Certificate shall be entitled to receive in exchange therefor,
the Merger Consideration, and the Certificate so surrendered shall forthwith be
canceled. No interest shall accrue or be paid on the Merger Consideration
payable upon the surrender of any Certificate for the benefit of the holder of
such Certificate. If payment of the Merger Consideration is to be made to a
person other than the person in whose name the surrendered Certificate is
registered on the stock transfer books of the Seller, it shall be a condition
of payment that the Certificate so surrendered shall be endorsed properly or
otherwise be in proper form for transfer and that the person requesting such
payment shall have paid all transfer and other taxes required by reason of the
payment of the Merger Consideration to a person other than the registered
holder of the Certificate surrendered or shall have established to the
satisfaction of the Surviving Corporation that such taxes either have been paid
or are not applicable.
(b) At any time following the sixth month after the Effective Time, the
Buyer or the Surviving Corporation shall be entitled to require the Exchange
Agent to deliver to it any funds which had been made available to the Exchange
Agent and not disbursed to holders of shares of Seller Common Stock (including,
without limitation, all interest and other income received by the Exchange
Agent in respect of all funds made available to it), and thereafter such
holders shall be entitled to look to the Buyer and the Surviving Corporation
only as general creditors thereof with respect to any Merger Consideration that
may be payable upon due surrender of the Certificates held by them.
(c) After the Effective Time, there shall be no transfers on the stock
transfer books of the Seller of the shares of Seller Common Stock which were
issued and outstanding immediately prior to the Effective Time. From and after
the Effective Time, the holders of shares of Seller Common Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares except as otherwise provided herein or by applicable
law. If, after the Effective Time, Certificates representing such shares are
presented for transfer to the Exchange Agent, they shall be canceled and
exchanged for the Merger Consideration as provided in this Article II.
(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 or any Merger Consideration
delivered in respect of any such shares 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, the Merger Consideration, as
determined in accordance with this Article II.
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller as follows:
3.1. Corporate Organization.
(a) The Buyer is a corporation duly organized, validly existing and in
corporate good standing under the laws of the State of Delaware. 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 and is in
corporate good standing 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 and in good
standing would not result in, with respect to the Buyer, a Material Adverse
Effect. The Buyer is a bank holding company registered with the Federal Reserve
Board under the BHCA.
(b) The Buyer Bank is a stock savings bank duly organized, validly
existing and in corporate good standing under the laws of The Commonwealth of
Massachusetts. The Buyer Bank 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 Bank is duly licensed or
qualified to do business and is in corporate good standing 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 and in corporate good standing, would not result in, with
respect to the Buyer Bank, a Material Adverse Effect. The deposit accounts of
the Buyer Bank are insured by the FDIC to the fullest extent permitted by law,
and all premiums and assessments required in connection therewith have been
paid by the Buyer.
3.2. Authority; No Violation.
(a) The Buyer has all requisite corporate power and authority to execute
and deliver this Agreement and the other Transaction Documents to which it is a
party and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and 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. 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), constitute the valid and binding
obligation of the Buyer enforceable against the Buyer in accordance with their
respective terms.
(b) The Buyer Bank has all requisite corporate power and authority to
execute and deliver the Bank Merger Agreement, to perform its obligations
thereunder and to consummate the transactions contemplated thereby. The
execution and delivery of the Bank Merger Agreement and the consummation of the
transactions contemplated thereby have been duly and validly approved by the
<PAGE>
Board of Directors of the Buyer Bank. Except for the adoption of the Bank
Merger Agreement by the Buyer Bank's stockholders, no other corporate
proceedings on the part of the Buyer Bank are necessary to authorize the Bank
Merger Agreement or the performance of the Buyer Bank's obligations thereunder
or to consummate the Bank Merger. The Bank Merger Agreement, upon execution and
delivery by the Buyer Bank, will be duly and validly executed and delivered by
the Buyer Bank, and (assuming due authorization, execution and delivery by the
Seller Bank) will constitute, the valid and binding obligation of the Buyer
Bank, enforceable against the Buyer Bank in accordance with its terms. The
Buyer shall cause the Bank Merger Agreement to be approved by the stockholders
of the Buyer Bank prior to the Effective Time.
(c) 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 hereby or thereby; nor the execution and delivery of
the Bank Merger Agreement by the Buyer Bank, nor the consummation by the Buyer
Bank of the transactions contemplated thereby; nor compliance by the Buyer or
the Buyer Bank with any of the terms or provisions hereof or thereof,, will (i)
assuming that the consents and approvals referred to in Section 3.3 hereof are
duly obtained, violate in any respect any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to the Buyer
or the Buyer Bank, or (ii) violate, conflict with, or 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
or the Buyer Bank under any of the terms, conditions or provisions of (A) the
Articles of Organization or other charter document of like nature or ByLaws of
the Buyer or the Buyer Bank, or (B) any note, bond, mortgage, indenture, deed
of trust, license, lease, agreement or other instrument or obligation to which
the Buyer or the Buyer Bank 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 Buyer or the Buyer Bank.
3.3. Consents and Approvals. Except for consents, waivers, notifications
or approvals of, or filings or registrations with, the FDIC, the Federal
Reserve Board, the Massachusetts Commissioner, the MBBI, the Massachusetts
Depositors Insurance Fund ("DIF"), the Massachusetts Housing Partnership Fund
("MHPF"), the Secretary of State of The Commonwealth of Massachusetts, the DOJ,
The London Stock Exchange Limited, and the Financial Services Authority and
other foreign bank regulatory approvals, 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 are necessary, in connection
with (a) the execution and delivery by the Buyer or the Buyer Bank of this
Agreement and the Bank Merger Agreement or (b) the consummation by the Buyer or
the Buyer Bank of the Merger or the Bank Merger. Neither the Buyer nor the
Buyer Bank has any knowledge of any fact or circumstance relating to the Buyer
<PAGE>
or its subsidiaries or other Affiliates, including related to the Year 2000
Problem, that is reasonably likely to materially impede or delay receipt of any
consents of regulatory or governmental authorities.
3.4. 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 September 30 for the fiscal years 1997 and 1998, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for the fiscal years 1996 through 1998, inclusive, accompanied by the
audit report of PricewaterhouseCoopers LLP, independent public accountants for
the Buyer, and (b) the unaudited consolidated balance sheet of the Buyer and
its subsidiaries as of March 31, 1999, and the related unaudited consolidated
statements of income and changes in stockholders' equity for the six (6) months
ended March 31, 1999 and March 31, 1998. The September 30, 1998 consolidated
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 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
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 yearend adjustments).
3.5. Broker's Fees. Neither the Buyer nor any of its officers, directors,
employees, Affiliates 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 Goldman, Sachs & Company 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.
3.6. Legal Proceedings. There is no claim, suit, action, proceeding or
investigation of any nature pending or, to the best knowledge of the Buyer,
threatened, against the Buyer or any subsidiary or other Affiliate of the Buyer
or challenging the validity or propriety of the transactions contemplated by
this Agreement, and which, if adversely determined, would, individually or in
the aggregate, materially adversely affect the Buyer's or the Buyer Bank's
ability to perform its respective obligations under this Agreement or the Bank
Merger 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 or other Affiliate of the Buyer having, or which insofar as
reasonably can be foreseen, in the future could have, any such effect.
3.7. Capital; Availability of Funds. On the date hereof, the Buyer is, and
on the Closing Date, the Buyer will be, "adequately capitalized" as such term
is defined in the rules and regulations promulgated by the Federal Reserve
Board. Buyer will have available to it, at the Effective Time, sources of
capital and financing sufficient to pay the aggregate Merger Consideration and
to pay any other amounts payable pursuant to this Agreement and to effect the
transactions contemplated hereby.
<PAGE>
3.8. Buyer Information. The information relating to the Buyer, its
subsidiaries and other Affiliates to be contained in the Proxy Statement, as
described in Section 6.1 hereof, and any other documents filed with the SEC in
connection herewith, to the extent such information is provided in writing by
the Buyer, will not, on the date the Proxy Statement (or any supplement or
amendment thereto) is first mailed to stockholders of the Seller or on the date
of the Seller Stockholders Meeting, contain any untrue statement of a material
fact or omit to state a material fact necessary to make such information not
misleading at the time and in light of the circumstances under which such
statement is made.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Buyer as follows:
4.1 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 is duly licensed or qualified to do business and is in
corporate good standing 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 and in
corporate good standing would not, individually or in the aggregate, result in
any Material Adverse Effect on the Seller. The Seller is a bank holding company
registered with the Federal Reserve Board under the BHCA. The Articles of
Organization and By-Laws of the Seller, copies of which have previously been
made available to the Buyer, are true, complete and correct copies of such
documents in effect as of the date of this Agreement. The Seller is not in
violation of any provision of its Articles of Organization or ByLaws. The
minute books of the Seller contain in all material respects true and complete
records of all meetings held and corporate actions taken since January 1, 1996
of the Seller's stockholders and Board of Directors (including committees of
the Seller's Board of Directors).
(b) Each Significant Subsidiary of the Seller is duly organized, validly
existing and in corporate good standing under the laws of the jurisdiction of
its incorporation. Each Significant Subsidiary of the Seller has all requisite
corporate power and authority to own, lease or operate all of its properties
and assets and to carry on its business as it is now being conducted. Each
Significant Subsidiary of the Seller is duly licensed or qualified to do
business in each jurisdiction in which the nature of the business conducted by
it or the character or location of the properties and assets owned, leased, or
operated by it makes such licensing or qualification necessary, except where
the failure to be so licensed or qualified and in good standing would not
individually or in the aggregate, result in any Material Adverse Effect on the
Seller.
<PAGE>
(c) Except as set forth in Section 4.1(c) of the Seller Disclosure
Schedule, the Seller has no subsidiaries and no Equity Investments (other than
investments in such subsidiaries).
(d) The Articles of Organization and By-Laws or equivalent organizational
documents of each Significant Subsidiary, copies of which have previously been
made available to the Buyer are true, correct and complete copies of such
documents in effect as of the date of this Agreement. Neither the Seller nor
any of its subsidiaries is in violation of any provision of its Articles of
Organization or equivalent organizational documents or of its Bylaws. The
minute books of each of the subsidiaries of the Seller which are banks contain
in all material respects true and complete records of all meetings held and
corporate actions taken since January 1, 1996 of their respective stockholders
and boards of directors (including committees of their respective boards of
directors).
4.2 Capitalization.
(a) The authorized capital stock of the Seller consists of 75,000,000
shares of Seller Common Stock and 4,000,000 shares of preferred stock, par
value $1.00 per share ("Seller Preferred Stock"). As of the date hereof, there
are 42,728,031 shares of Seller Common Stock and no shares of Seller Preferred
Stock issued and outstanding. As of the date hereof, there are 13,758 shares of
Seller Common Stock and no shares of Seller Preferred Stock held in the
treasury of the Seller. Except for Trust Account Shares and DPC Shares, no
shares of Seller Common Stock are held by the Seller's subsidiaries. In
addition, as of the date hereof, there were 2,386,818 shares of Seller Common
Stock reserved for issuance upon 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
(i) for rights issuable to holders of Seller Common Stock in accordance with
the Seller Rights Agreement, (ii) as provided in the Seller Option Agreement,
(iii) as referred to in this Section 4.2 (which includes director and employee
stock options) or (iv) as reflected in Section 4.2(a) of the Seller Disclosure
Schedule, the Seller does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments, rights agreements or
agreements of any character calling for the Seller to issue, deliver or sell,
or cause to be issued, delivered or sold any shares of Seller Common Stock or
Seller Preferred Stock or any other equity security of the Seller or any
subsidiary of the Seller or any securities convertible into, exchangeable for
or representing the right to subscribe for, purchase or otherwise receive any
shares of Seller Common Stock or Seller Preferred Stock or any other equity
security of the Seller or any subsidiary of the Seller or obligating the Seller
or any such subsidiary to grant, extend or enter into any such subscriptions,
options, warrants, calls, commitments, rights agreements or agreements. Except
as set forth in Section 4.2(a) of the Seller Disclosure Schedule, there are no
outstanding contractual obligations of the Seller to repurchase, redeem or
otherwise acquire any shares of capital stock of, or other equity interests in,
<PAGE>
the Seller or to provide funds to, or make any investment (in the form of a
loan, capital contribution or otherwise) in, any subsidiary of the Seller.
Section 4.2 of the Seller Disclosure Schedule sets forth (i) the names of the
optionees, the date of each option to purchase shares of Seller Common Stock
granted, the number of shares subject to each such option, the expiration date
of each such option, and the price at which each such option may be exercised
under the Seller Option Plans and (ii) the names of the grantees, the date of
each grant of Restricted Common Stock, the number of shares of Restricted
Common Stock granted, the vesting period of each such grant, and the
consideration paid or payable by the grantee in respect of each shares of such
Restricted Common Stock.
(b) The authorized capital stock of the Seller Bank consists of 300,000
shares of Common Stock, par value $47.50 per share ("Bank Common Stock"). As of
the date hereof, (i) 181,446 shares of Bank Common Stock are issued and
outstanding, all of which are owned directly or indirectly by the Seller, all
of which are duly authorized, validly issued, fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to the
ownership thereof, (ii) no shares of Bank Common Stock are held in the treasury
of the Seller Bank, and (iii) no shares of Bank Common Stock are held by any of
Seller's subsidiaries. Each share of Bank Common Stock owned by the Seller or
any of its subsidiaries is free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations on
the Seller's or any of its subsidiaries' voting rights, charges and other
encumbrances of any nature whatsoever.
(c) Section 4.2(c) of the Seller Disclosure Schedule lists each of the
subsidiaries of the Seller 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 Seller; (ii) the jurisdiction of
incorporation; and (iii) whether or not such subsidiary is a member of the
Federal Reserve System. Each of the subsidiaries of the Seller which is an
"insured depository institution" as defined in the FDIA and applicable
regulations thereunder, has its deposits insured by the Bank Insurance Fund and
the Savings Association Insurance Fund of the FDIC in accordance with the FDIA
to the fullest extent permitted by law, and each such subsidiary has paid all
premiums and 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 best knowledge of the Seller, threatened. No
subsidiary of the Seller has or is bound by any outstanding subscriptions,
options, warrants, calls, commitments, rights agreements 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, rights agreements or agreements. There are no outstanding
contractual obligations of any subsidiary of the Seller to repurchase, redeem
or otherwise acquire any shares of capital stock of, or other equity interests
in, the Seller or any such subsidiary or to provide funds to, or make any
investment (in the form of a loan, capital contribution or otherwise) in, any
such subsidiary of the Seller. 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.
<PAGE>
4.3 Authority; No Violation.
(a) The Seller has all requisite corporate power and authority to execute
and deliver this Agreement and the other Transaction Documents and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the other Transaction Documents, and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly approved by the [unanimous] vote of the Board of Directors of the
Seller. The Board of Directors of the Seller has directed that this Agreement
and the transactions contemplated hereby, including the Merger, 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 the Seller's stockholders, no
other corporate action and no other corporate proceedings on the part of the
Seller are necessary to authorize this Agreement and the other Transaction
Documents or 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) constitute
the valid and binding obligations of the Seller, enforceable against the Seller
in accordance with their respective terms.
(b) The Seller Bank has full corporate power and authority to execute and
deliver the Bank Merger Agreement, to perform its obligations thereunder and to
consummate the transactions contemplated thereby. The execution and delivery of
the Bank Merger Agreement, the performance of its obligations thereunder and
the consummation of the transactions contemplated thereby have been duly and
validly approved by the unanimous action of the Board of Directors of the
Seller Bank. Except for adoption of the Bank Merger Agreement by the Seller
Bank's stockholders, no other corporate action and no other corporate
proceedings on the part of the Seller Bank are necessary to authorize the Bank
Merger Agreement or the performance of the Seller Bank's obligations thereunder
or to consummate the transactions contemplated thereby. The Bank Merger
Agreement, upon execution and delivery by the Seller Bank, will be duly and
validly executed and delivered by the Seller Bank and will constitute a legal,
valid and binding obligation of the Seller Bank, enforceable against the Seller
Bank in accordance with its terms. Seller shall cause the Bank Merger Agreement
to be approved by the stockholders of the Seller Bank prior to the Effective
Time.
(c) 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 hereby or thereby; nor the execution and delivery of
the Bank Merger Agreement by the Seller Bank, nor the consummation by the
Seller Bank of the transactions contemplated thereby; nor compliance by the
Seller or the Seller Bank with any of the terms or provisions hereof or
thereof, will (i) assuming that the consents and approvals referred to in
Section 4.4 hereof are duly obtained, violate any statute, law, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to the Seller or any of its subsidiaries or by which any property or
asset of the Seller or any of its subsidiaries is bound or affected, 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
<PAGE>
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 Articles of Organization
or other charter document of like nature or Bylaws 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
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 would not have a Material Adverse
Effect on the Seller.
4.4 Consents and Approvals.
(a) Except for consents, waivers or approvals of, or filings or
registrations with, or notifications to, the Federal Reserve Board, the FDIC,
the Massachusetts Commissioner, the MBBI, the DIF, the MHPF, 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 Seller or the Seller Bank) are
necessary, in connection with (a) the execution and delivery by the Seller of
this Agreement and the execution and delivery of the Bank Merger Agreement by
the Seller Bank, or (b) the consummation by the Seller of the Merger or by the
Seller Bank of the Bank Merger. The affirmative vote of holders of two-thirds
of the outstanding shares of Seller Common Stock is the only vote of the
holders of any shares or series of capital stock or other securities of the
Seller necessary to approve this Agreement and the Merger. The affirmative vote
of twothirds of the outstanding shares of Bank Common Stock is the only vote of
the holders of any shares or series of capital stock or other securities of the
Seller Bank necessary to approve the Bank Merger. The Seller has no knowledge
of any fact or circumstance relating to the Seller or its subsidiaries,
including related to the Year 2000 Problem, that is reasonably likely to
materially impede or delay receipt of any consents of regulatory or
governmental authorities.
(b) The execution and delivery of this Agreement by the Seller, and the
execution and delivery of the Bank Merger Agreement by the Seller Bank, does
not require any consent, approval, authorization or permit of, or filing with
or notification to, any third party, except where the failure to obtain any
such consent, approval, authorization or permit, or to make any such filing or
notification, would not have a Material Adverse Effect on the Seller or prevent
consummation of the Merger or the Bank Merger.
4.5 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 1997 and 1998, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the fiscal years 1996 through 1998, inclusive, as reported in
the Annual Reports of the Seller on Form 10K for the fiscal year ended December
31, 1998 filed with the SEC under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), accompanied by the audit report of Arthur
<PAGE>
Andersen LLP, independent public accountants for the Seller, and (b) the
unaudited consolidated balance sheet of the Seller and its subsidiaries as of
March 31, 1999, the related unaudited consolidated statements of income and
changes in stockholders' equity for the three (3) months ended March 31, 1999
and March 31, 1998 and the related unaudited consolidated statements of cash
flows for the three (3) months ended March 31, 1999 and March 31, 1998, all as
reported in the Seller's Quarterly Report on Form 10Q for the quarter ended
March 31, 1999 filed with the SEC under the Exchange Act. The December 31, 1998
consolidated balance sheet ("Seller Balance Sheet") of the 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 10Q and 10K) 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 stockholders' equity of the Seller and its subsidiaries for the
respective fiscal periods or as of the respective dates therein set forth; and
each of such statements (including the related notes, where applicable) has
been and will be prepared in accordance with GAAP consistently applied during
the periods involved, except as otherwise set forth in the notes thereto
(subject, in the case of unaudited interim statements, to normal yearend
adjustments). Each of the consolidated financial statements of the Seller and
its subsidiaries, including, in each case, the notes thereto, made available to
the Buyer comply, and the financial statements to be filed with the SEC by the
Seller after the date hereof will comply, with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto. 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.
4.6 Broker's Fees. Neither the Seller nor any of its officers, directors,
employees, Affiliates 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 FoxPitt, Kelton Inc. ("FPK")
and for legal, accounting and other professional fees payable in connection
with the Merger. The Seller will be responsible for the payment of all such
fees. The fee payable to FPK in connection with the transactions contemplated
by this Agreement is as described in an engagement letter between the Seller
and FPK, a true and complete copy of which has heretofore been furnished to the
Buyer. The Seller has previously received the opinion of FPK to the effect
that, as of the date of such opinion, the Merger Consideration to be received
by the stockholders of the Seller pursuant to the Merger is fair to such
stockholders, and such opinion has not been amended or rescinded as of the date
of this Agreement.
4.7 Absence of Certain Changes or Events. Except as disclosed in the
Seller's Quarterly Report on Form 10Q for the quarter ended March 31, 1999, in
any Current Reports of the Seller on Form 8K filed prior to the date of this
Agreement, in Section 4.7 of the Seller Disclosure Schedule, in the Seller's
proxy statement filed with respect to its 1999 Annual Meeting of stockholders,
or as otherwise expressly permitted by this Agreement, since December 31, 1998,
the Seller and its subsidiaries have not incurred any material liability or
obligation of any nature (whether accrued, absolute, contingent or otherwise
<PAGE>
and whether due or to become due), except in the ordinary course of their
business consistent with their past practices, nor has there been (a) 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, (b) any change by the Seller or
any of its subsidiaries in its accounting methods, principles or practices,
other than changes required by applicable law or GAAP or regulatory accounting,
(c) any declaration, setting aside or payment of any dividend or distribution
in respect of any capital stock of the Seller or any of its subsidiaries or any
redemption, purchase or other acquisition of any of its securities, other than
in the ordinary course of business consistent with past practice, (d) any
increase in or establishment of any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option (including,
without limitation, the granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), stock purchase or other
employee benefit plan, or any other increase in the compensation payable or to
become payable to any directors, officers or employees of the Seller or any of
its subsidiaries, or any grant of severance or termination pay, or any contract
or arrangement entered into to make or grant any severance or termination pay,
any payment of any bonus, or the taking of any action not in the ordinary
course of business with respect to the compensation or employment of directors,
officers or employees of the Seller or any of its subsidiaries, (e) any
material acquisition or disposition of any assets or properties, or any
contract for any such acquisition or disposition entered into, or (f) any
material lease of real or personal property entered into, other than in
connection with foreclosed property or in the ordinary course of business
consistent with past practice.
4.8 Legal Proceedings. There is no claim, suit, action, proceeding or
investigation of any nature pending or, to the best knowledge of the Seller,
threatened, against the Seller or any subsidiary of the Seller or challenging
the validity or propriety of the transactions contemplated by this Agreement,
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 or the Seller Bank's ability to perform its obligations under this
Agreement or the Bank Merger Agreement, nor is there any judgment, decree,
injunction, rule, award or order of any legal or administrative body or
arbitrator outstanding against the Seller or any subsidiary of the Seller
having, or which insofar as reasonably can be foreseen, in the future could
have, any such effect. Seller has furnished to the Buyer copies of all attorney
responses to the request of the independent auditors for the Seller and its
subsidiaries in so far as they relate to loss contingencies of the Seller and
its subsidiaries as of December 31, 1998 and a written list of, and documents
relating to, all claims, suits, actions, proceedings or investigations pending
against Seller or any of its subsidiaries.
<PAGE>
4.9 Reports. Since January 1, 1996, the Seller and its subsidiaries have
timely filed, and subsequent to the date hereof will timely 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 10K, Forms 10Q, Forms 8K, proxy statements
and all other communications mailed by the Seller to its stockholders since
January 1, 1996 (and copies of all such reports, registrations statements and
communications have been or will be delivered by the Seller to the Buyer), (b)
the Federal Reserve Board, (c) the FDIC, and (d) any applicable state
securities or banking authorities (except, in the case of state securities
authorities, no such representation is made as to filings which are not
material) (all such reports and statements are collectively referred to herein
as the "Seller Reports") and has paid all fees and assessments due and payable
in connection with any of the foregoing. 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. Except as set forth in Section 4.9 of the Seller Disclosure
Schedule, none of the Seller's subsidiaries is required to file any form,
report or other document with the SEC. The Seller has made available to the
Buyer true and complete copies of all amendments and modifications that have
not been filed by the Seller with the SEC to all agreements, documents and
other instruments that previously had been filed by the Seller with the SEC and
are currently in effect. Except for normal periodic examinations and
examinations related to the Year 2000 Problem (the "Bank Examinations")
conducted by the FRB, the FDIC, the Massachusetts Commissioner or any other
Bank Regulator in the regular course of the business of the Seller and its
subsidiaries, since January 1, 1998, no Bank Regulator has initiated any
proceeding or, to the best knowledge of the Seller, investigation into the
business or operations of the Seller or any of its subsidiaries.
4.10 Agreements with Banking Authorities. Neither the Seller nor any of
its subsidiaries is a party to any commitment, letter (other than letters
addressed to regulated depository institutions generally), written agreement,
memorandum of understanding, order to cease and desist with, is subject to any
order or directive specifically naming or referring to Seller or any of its
subsidiaries by, 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 is currently in effect and restricts materially the conduct of its
business, or in any manner relates to its capital adequacy, loan loss
allowances or reserves, credit policies, management or overall safety and
soundness or such entity's ability to perform its obligations hereunder, and
neither the Seller nor any of its subsidiaries has received written
notification from any such federal or state governmental entity that any such
Person may be requested to enter into, or otherwise be subject to, any such
<PAGE>
commitment, letter, written agreement, memorandum of understanding or cease and
desist order. Neither the Seller nor any of its subsidiaries has been informed
by any Bank Regulator that it is contemplating issuing or requesting any such
order, directive, agreement, memorandum of understanding, commitment letter or
similar submission. Neither the Seller nor any of its subsidiaries is a party
to any agreement or arrangement entered into in connection with the
consummation of a federally assisted acquisition of a depository institution
pursuant to which the Seller or any of its subsidiaries is entitled to receive
financial assistance or indemnification from any governmental agency.
4.11 Absence of Undisclosed Liabilities. Except for those liabilities that
are fully reflected or reserved against on the Seller Balance Sheet and for
liabilities incurred in the ordinary course of business consistent with past
practice, since December 31, 1998, neither the Seller nor any of its
subsidiaries has incurred any obligation or liability (contingent or otherwise)
that, either alone or when combined with all similar liabilities, has had, or
could reasonably be expected to have, a Material Adverse Effect on the Seller.
4.12 Compliance with Applicable Law. Each of the Seller and each
Significant Subsidiary thereof holds all material licenses, franchises, permits
and authorizations necessary for the lawful conduct of its business, and each
of the Seller and each Significant Subsidiary thereof has complied with and is
not in violation of or default in any material respect under any, applicable
law, statute, order, rule, regulation or policy of, or agreement with, any
federal, state or local governmental agency or authority relating to the Seller
or such Significant Subsidiary, other than where such default or noncompliance
will not result in, or create the possibility of resulting in any Material
Adverse Effect on the Seller or any Significant Subsidiary of the Seller, and
neither the Seller nor any Significant Subsidiary of the Seller has received
any notice of any violation of any such law, statute, order, rule, regulation,
policy or agreement, or commencement of any proceeding in connection with any
such violation, and does not know of any violation of, any such law, statute,
order, rule, regulation, policy or agreement which would have such a result.
4.13 Taxes and Tax Returns. Except as set forth in Section 4.13 of the
Disclosure Schedule:
(a) Except where the failure to do so would not have a Material Adverse
Effect on the Seller Companies as a whole, the Seller and each of its
subsidiaries (referred to for purposes of this Section 4.13, collectively, as
the "Seller Companies") have, since December 31, 1992, 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"), and have paid all Taxes shown as
being due thereon.
(b) 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 or which if determined
adversely to the Seller Companies would not have a Material Adverse Effect on
the Seller Companies as a whole. The Income Tax Returns of the Seller Companies
have been examined by the Internal Revenue Service ("IRS") or other taxing
authority, as applicable, for all years through 1994 and any liability with
respect thereto has been satisfied. There are no material disputes pending or
written claims asserted for Taxes or assessments upon any Seller Company, nor
<PAGE>
has any Seller Company been requested to give any currently effective waivers
extending the statutory period of limitation applicable to any Federal, state,
county or local income tax return for any period. No deficiency in Taxes or
other proposed adjustment that has not been settled or otherwise resolved has
been asserted in writing by any taxing authority against any of the Seller
Companies, which if determined adversely to the Seller Companies would have a
Material Adverse Effect on the Seller Companies as a whole. No material Tax
Return of any of the Seller Companies is now under examination by any
applicable taxing authority. There are no material liens for Taxes (other than
current Taxes not yet due and payable) on any of the assets of any Seller
Company, except for such liens for Taxes that would not have a Material Adverse
Effect on the Seller Companies as a whole.
(c) Adequate provision has been made on the Seller Balance Sheet for all
Taxes of the Seller Companies in respect of all periods through the date
hereof.
(d) Except with respect to intra-Seller Company agreements made or
required under the federal consolidated tax return regulations, none of the
Seller Companies is a party to or bound by any Tax indemnification, Tax
allocation or Tax sharing agreement with any person or entity or has any
current or potential contractual obligation to indemnify any other person or
entity with respect to Taxes.
(e) None of the Seller Companies has filed or been included in a combined,
consolidated or unitary income Tax Return (including any consolidated federal
income Tax Return) other than one of which one of the Seller Companies was the
parent.
(f) Except as set forth in Section 4.13(f) of the Seller Disclosure
Schedule, none of the Seller Companies has made any payment, is obligated to
make any payment, or is a party to any agreement that could obligate it to make
any payment that will not be deductible under Code Section 162(m) or Code
Section 280G.
4.14 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 interfere in
any material respect with the respective business activities of the Seller or
any of its subsidiaries. No employees of the Seller or any of its subsidiaries
are represented by any labor union, and, to the best knowledge of the Seller's
management, no labor union is attempting to organize employees of the Seller or
any of its subsidiaries.
4.15 Employees.
(a) Except as set forth in Section 4.15(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(2) of ERISA, "employee welfare
benefit plan" (the "Seller Benefit Plans"), as such term is defined in Section
3(1) of ERISA, stock option plan, stock purchase plan, deferred compensation
<PAGE>
plan, other employee benefit plan for employees of the Seller or any of its
subsidiaries, or any other plan, program or arrangement of the same or similar
nature that provides benefits to nonemployee directors of the Seller or any of
its subsidiaries (collectively, the "Seller Other Plans").
(b) The Seller shall have made available to the Buyer complete and
accurate copies 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;
(v) most recent annual report on Form 5500; and (vi) summary plan description.
(c) Except as set forth in Section 4.15(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) Except as set forth in Section 4.15(d) of the Seller Disclosure
Schedule, to the best knowledge of the Seller, each of the Seller Pension Plans
and each of the Seller Benefit Plans, which are maintained or contributed to by
the Seller, 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.
(e) To the best knowledge of the Seller, there has been no reportable
event within the meaning of Section 4043(b) of ERISA or any waived funding
deficiency within the meaning of Section 412(d)(3) (or any predecessor section)
of the Code with respect to any Seller Pension Plan.
(f) To the best knowledge of the Seller, each of the Seller Pension Plans
which is intended to be a qualified plan within the meaning of Section 401(a)
of the Code is so qualified and has received a favorable determination letter
from the IRS that such Plan meets the requirements of Section 401(a) of the
Code and that the trust associated with such Seller Pension Plan is tax exempt
under Section 501(a) of the Code, and the Seller is not aware of any fact or
circumstance which would adversely affect the qualified status of any such
plan.
(g) The Seller has made or provided for all contributions to the Seller
Pension Plans required thereunder.
(h) Except as set forth in Section 4.15(h) of the Seller Disclosure
Schedule, neither the Seller nor any of its subsidiaries is party to or
maintains any contract or other arrangement with any employee or group of
employees, providing severance payments, stock or stockequivalent payments or
postemployment benefits of any kind or providing that any otherwise disclosed
plan, program or arrangement will irrevocably continue, with respect to any or
all of its participants, for any period of time.
<PAGE>
(i) Except as set forth in Section 4.15(i) of the Seller Disclosure
Schedule, neither the Seller nor any of its subsidiaries has ever (i)
maintained any "multiemployer plan" within the meaning of Section 4001(a)(3) of
ERISA, or (ii) provided healthcare or any other non-pension benefits to any
employees after their employment is terminated (other than as required by Part
6 of Subtitle B of Title I of ERISA or state health continuation laws) or has
ever promised to provide such post-termination benefits.
(j) Except as set forth in Section 4.15(j) of the Seller Disclosure
Schedule, no law suits, governmental administrative proceedings, claims (other
than routine claims for benefits) or complaints to, or by, any person or
governmental entity have been filed, are pending, or to the best knowledge of
the Seller, threatened with respect to any Seller Pension Plan, Seller Benefit
Plan or Seller Other Plan. Seller has previously delivered to the Buyer all
correspondence between the Seller and any Governmental Authority related to the
matter set forth in Section 4.15(j) of the Seller Disclosure Schedule. There is
no other material correspondence between the Seller and any Governmental
Authority related to any other Seller Benefit Plan.
4.16 Capitalization. The Seller and each of the subsidiaries of the Seller
which are "insured depository institutions" are "adequately capitalized" as
such term is defined in the rules and regulations promulgated by the Federal
Reserve Board and the FDIC.
4.17 Year 2000. Section 4.17 of the Seller Disclosure Schedule sets forth
the "mission-critical" computer systems (as such term is commonly used in
regulations and tradeorganization guidelines with respect to the Year 2000
Problem (as defined below)) owned or utilized by the Seller and its
subsidiaries (the "Seller Mission Critical Systems"). Seller has taken all
steps necessary to ensure that all of such Seller Mission Critical Systems will
not, or Seller has received written assurances from the applicable third-party
service providers with respect to each Seller Mission Critical System that each
of such Seller Mission Critical Systems will not, contain any material
deficiencies relating generally to formatting for entering dates (commonly
referred to and referred herein as the "Year 2000 Problem") and each Seller
Mission Critical System is in compliance in all material respects with all
regulations and trade organization guidelines concerning the Year 2000 Problem,
including, without limitation, all Interagency Statements issued by the Federal
Financial Institutions Examination Council, as well as separate issuances by
any regulatory agency having jurisdiction over Seller or any of its
subsidiaries with respect to the Year 2000 Problem. Section 4.17 of the Seller
Disclosure Schedule indicates which such Seller Mission Critical Systems are
licensed by the Seller from a third-party service provider. To the best
knowledge of the Seller, all of Seller's and its subsidiaries' other computer
systems ("Non-Mission Critical Systems") are in compliance in all material
respects with all regulations and trade organization guidelines concerning the
Year 2000 Problem. Except as set forth in Section 4.17 of the Seller Disclosure
Schedule, the Seller is not aware of any material expense that it will incur
prior to December 31, 1999 in connection with the Year 2000 Problem. Neither
<PAGE>
the Seller nor any of its subsidiaries is aware of any inability on the part of
any customer, insurance company or service provider with which the Seller or
any subsidiary of the Seller transacts business to timely remedy any
deficiencies of its own 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.
4.18 Material Agreements.
(a) Except as set forth in any of the Seller Disclosure Schedules or the
index of exhibits in the Seller's Annual Reports on Forms 10-K for the years
ended December 31, 1998, 1997 and 1996, 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, including without limitation, employment as a consultant 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, any subsidiary of the Seller and/or any Affiliate
thereof; (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 1998; (f) any agreement, arrangement, or commitment (whether written or
oral) which, upon the consummation of the transactions contemplated by this
Agreement or the Bank Merger Agreement, will result in any payment (whether of
severance pay or otherwise) becoming due from the Seller or any of its
subsidiaries to any officer or employee thereof, (g) any agreement, arrangement
or commitment (whether written or oral) which materially restricts the conduct
of any line of business by the Seller or any of its subsidiaries, or (h) any
agreement, arrangement or commitment (whether written or oral) (including any
stock option plan, stock appreciation rights plan, restricted stock plan or
stock purchase plan) any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement, or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. The Seller has previously delivered to the
Buyer true and complete copies of all employment, consulting and deferred
compensation agreements which are in writing and to which the Seller or any of
its subsidiaries is a party. Each contract, arrangement, commitment or
understanding of the type described in this Section, whether or not set forth
in Section 4.18 of the Seller Disclosure Schedule, is referred to herein as a
"Seller Contract."
(b) (i) To the best knowledge of the Seller, each Seller Contract listed
on such Seller Disclosure Schedule is legal, valid and binding upon the Seller
or Seller subsidiary, as the case may be, and in full force and effect, (ii)
the Seller and each Seller subsidiary has in all material respects performed
all obligations required to be performed by it to date under each such Seller
Contract, and (iii) no event or condition exists which constitutes or, after
notice or lapse of time or both, would constitute, a material default on the
part of the Seller or any Seller subsidiary under any such Seller Contract.
<PAGE>
4.19 Property and Leases
(a) Each of the Seller and each Seller subsidiary has good and marketable
title to all the real property and all other property owned by it and included
in the Seller Balance Sheet, free and clear of all mortgages, pledges, liens,
security interests, conditional and installment sale agreements, encumbrances,
charges or other claims of third parties of any kind (collectively, "Liens"),
other than (A) Liens that secure liabilities that are reflected in the Seller
Balance Sheet or incurred in the ordinary course of business after the date of
the Seller Balance Sheet, (B) Liens for current taxes and assessments not yet
past due or which are being contested in good faith, (C) inchoate mechanics'
and materialmen's Liens for construction in progress, (D) workmen's,
repairmen's, warehousemen's and carriers' Liens arising in the ordinary course
of business of the Seller or any of its subsidiaries consistent with past
practice, (E) all matters of record, Liens and other imperfections of title and
encumbrances which, either individually or in the aggregate, would not be
material, and (F) those items that secure public or statutory obligations or
any discount with, borrowing from, or obligations to any Federal Reserve Bank
or Federal Home Loan Bank, interbank credit facilities, or any transaction by
any Seller subsidiary acting in a fiduciary capacity (collectively, "Permitted
Liens").
(b) All leases of real property leased for the use or benefit of the
Seller or any of its subsidiaries to which any of the foregoing is a party
requiring rental payments in excess of $5,000,000 during the period of the
lease, and all amendments and modifications thereto, are in full force and
effect, and there exists no material default under any such lease by the Seller
or any of its subsidiaries nor, to the best knowledge of the Seller, any event
which with notice or lapse of time or both would constitute a material default
thereunder by the Seller or any other Seller subsidiaries, 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 such lease or in
a material liability to the Seller.
4.20 Loan Portfolio. To the best knowledge of the Seller, all of the loan
agreements, notes or borrowing arrangements with respect to loans in excess of
$2,500,000 in original principal amount (collectively, "Loans") originated and
held currently and at the Effective Time by the Seller or any of its
subsidiaries, and any other Loans purchased and held currently and at the
Effective Time by the Seller or any of its subsidiaries, were solicited,
originated and exist, and will exist at the Effective Time, in material
compliance with all applicable loan policies of the Seller or such subsidiary.
The information (including electronic information and information contained on
tapes and computer disks) with respect to all loans of the Seller and its
subsidiaries furnished to the Buyer by the Seller is true and complete in all
material respects.
4.21 Investment Securities. Except for pledges to secure public and trust
deposits, Federal Reserve borrowings, repurchase agreements and reverse
repurchase agreements entered into in arms'length transactions pursuant to
normal commercial terms and conditions and other pledges required by law, none
of the investments reflected in the consolidated balance sheet of the Seller
and its subsidiaries included in its Annual Report on Form 10K for the period
ended December 31, 1998, and none of the material investments made by the
<PAGE>
Seller or any of its subsidiaries since December 31, 1998, is subject to any
restriction (contractual, statutory or otherwise) that would materially impair
the ability of the entity holding such investment freely to dispose of such
investment at any time.
4.22 Derivative Transactions. Neither the Seller nor any or its
subsidiaries is engaged in transactions in or involving forwards, futures,
options on futures, swaps or similar derivative instruments except as agent on
the order and for the account of others other than Federal Home Loan Bank
advances or in connection with mortgage loan secondary market activities in the
ordinary course of business consistent with the Seller Bank's past practices.
4.23 Insurance. Section 4.23(a) of the Seller Disclosure Schedule sets
forth a summary of all material policies of insurance of the Seller and its
subsidiaries currently in effect, which summary is accurate and complete in all
material respects. All of the policies relating to insurance maintained by the
Seller or any of its subsidiaries with respect to its material properties and
the conduct of its business in any material respect (or any comparable policies
entered into as a replacement therefor) are in full force and effect and,
neither the Seller nor any of its subsidiaries has received any notice of
cancellation with respect thereto. Except as set forth in Section 4.23(b) of
the Seller Disclosure Schedule, all life insurance policies on the lives of any
of the current and former officers and directors of the Seller or any of its
subsidiaries which are maintained by the Seller or any such subsidiary which
are otherwise included as assets on the books of the Seller or such subsidiary
(i) are, or will at the Effective Time be, owned by the Seller or such
subsidiary, as the case may be, free and clear of any claims thereon by the
officers or members of their families, except with respect to the death
benefits thereunder, as to which the Seller or such subsidiary agree that there
will not be an amendment prior to the Effective Time without the consent of the
Buyer, and (ii) are accounted for properly as assets on the books of the Seller
or such subsidiary in accordance with GAAP in all material respects.
4.24 Environmental Matters.
(a) Except as set forth in the Environmental Reports, each of the Seller
and its subsidiaries and, to the best knowledge of the Seller, the Loan
Properties (each as hereinafter defined), are, and have been, in compliance
with all applicable environmental laws and with all rules, regulations,
standards and requirements of the United States Environmental Protection Agency
(the "EPA") and of state and local agencies with jurisdiction over pollution or
protection of the environment, except in each case as have not been or would
not be material.
(b) There is no suit, claim, action or proceeding pending or, to the best
knowledge of the Seller threatened, before any Governmental Authority or other
forum in which the Seller or any of its subsidiaries has been or, with respect
to threatened proceedings, may be, named as a defendant, responsible party or
potentially responsible party (i) for alleged noncompliance (including by any
predecessor), with any environmental law, rule, regulation, standard or
requirement or (ii) relating to the release into or presence in the Environment
(as hereinafter defined) of any Hazardous Materials (as hereinafter defined) or
<PAGE>
Oil (as hereinafter defined) occurring at or on a site owned, leased or
operated by the Seller or any of its subsidiaries, except in each case as have
not been or would not be material.
(c) To the best knowledge of Seller, there is no suit, claim, action or
proceeding pending or threatened, before any Governmental Authority or other
forum in which any Loan Property has been or, with respect to threatened
proceedings, may be, named as a defendant, responsible party or potentially
responsible party (i) for alleged noncompliance (including by any predecessor)
with any environmental law, rule, regulation, standard or requirement or (ii)
relating to the release into or presence in the Environment of any Hazardous
Material or Oil whether or not occurring at or on a site owned, leased or
operated by a Loan Property, except in each case as have not been or would not
be material.
(d) Except as set forth in Section 4.24(d) of the Seller Disclosure
Schedule, neither the Seller nor any of its subsidiaries, nor to their best
knowledge or any Loan Property, has received any written notice regarding a
matter on which a suit, claim, action or proceeding as described in subsection
(b) or (c) of this Section 4.24 could reasonably be based, except in each case
as have not been or would not be material. No facts or circumstances have come
to the Seller's attention which have caused it to believe that a material suit,
claim, action or proceeding as described in subsection (b) or (c) of this
Section 4.24 could reasonably be expected to occur.
(e) During the period of (i) the Seller's or any of its subsidiaries'
ownership or operation of any of their respective current properties or (ii)
the Seller's or any of its subsidiaries' holding of a security interest in a
Loan Property, to the best knowledge of Seller, there has been no release or
presence of Hazardous Material or Oil in, on, under or affecting such property
or Loan Property, except where such release or presence is not or would not,
either individually or in the aggregate, be material. To the best knowledge of
the Seller, prior to the period of (x) the Seller's or any of its subsidiaries'
ownership or operation of any of their respective current properties or any
previously owned or operated properties, or (y) the Seller's or any of its
subsidiaries' holding of a security interest in a Loan Property, there was no
release or presence of Hazardous Material or Oil in, on, under or affecting any
such property or Loan Property, except where such release or presence is not or
would not, either individually or in the aggregate, be material.
(f) Neither Seller nor any of its subsidiaries is an owner or operator of
any Loan Property and there are no Participation Facilities.
(g) The following definitions apply for purposes of this Section 4.24: (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 (as
a result of foreclosure), 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 or has participated 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, or
hazardous substance or hazardous material as defined in or pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act, 42
<PAGE>
U.S.C. ss.9601 et seq., or any other federal, state, or local environmental
law, regulation, or requirement; (iv) "Oil" means oil or petroleum of any kind
or origin or in any form, as defined in or pursuant to the Federal Clean Water
Act, 33 U.S.C. ss. 1251 et seq., or any other federal, state, or local
environmental law, regulation, or requirement; and (v) "Environment" means any
soil, surface waters, groundwaters, stream sediments, surface or subsurface
strata, and ambient air, and any other environmental medium.
4.25 Administration of Fiduciary Accounts. Each of the Seller and its
subsidiaries has properly administered in all material respects all accounts
for which it acts as a fiduciary, including, but not limited to, accounts for
which it serves as a trustee, agent, custodian, personal representative,
guardian, conservator or investment advisor, in accordance with the terms of
the governing documents and applicable law. The accountings for each such
fiduciary account are true and correct in all material respects and accurately
reflects the assets of such fiduciary account.
4.26 Investment Management Activities. Except as set forth in Section 4.26
of the Seller Disclosure Schedule, none of the Seller or any of its
subsidiaries is required to be registered as an investment adviser, a broker,
dealer, a commodity trading adviser, a commodity pool operator, a futures
commission merchant, an introducing broker, a registered representative or
associated person, a counseling officer, an insurance agent, a sales person or
in any similar capacity with the SEC, The Commodity Futures Trading Commission,
the National Futures Association, the securities commission of any state or any
self-regulatory body. The Seller and each of its subsidiaries has performed and
administered in all material respects all of its investment management or
investment advisory accounts in accordance with the terms and conditions of the
governing documents for such account and with applicable law. The accountings
for each such investment management and investment advisory account are true
and correct in all material respects and accurately reflect the assets of such
fiduciary accounts.
4.27 Recent Acquisitions. Except (i) as set forth Section 4.27 of the
Seller Disclosure Schedule and (ii) for the obligation to (x) maintain
directors and officers liability insurance policies for the benefit of certain
officers and directors of entities which either the Seller or a subsidiary has
acquired (whether by merger, stock acquisition, acquisition of assets or
otherwise), and (y) indemnify such parties for certain liabilities arising in
connection with their service as officers or directors of such entities,
neither the Seller nor any of its subsidiaries has any liability or obligation
of any nature (whether accrued, absolute, contingent, or otherwise and whether
or due or to become due) arising out of or relating to any such acquisition
which has not been adequately provided for, reflected or disclosed in the SEC
Reports or the Seller Balance Sheet.
4.28 Seller Rights Agreement. Seller has taken all necessary action so
that the entering into of this Agreement, the Bank Merger Agreement and the
Seller Option Agreement and the transactions contemplated hereby and thereby do
not and will not result in the grant of any rights to any person under the
Seller Rights Agreement or enable or require the Seller rights issuable
thereunder to be exercised, distributed or triggered. The Seller has adopted an
amendment to the Seller Rights Agreement in the form of Exhibit III attached
hereto.
<PAGE>
4.29 State Takeover Laws. The Board of Directors of the Seller has
approved the transactions contemplated by this Agreement, the Bank Merger
Agreement and the Seller Option Agreement and taken all other requisite action
such that the provisions of Ch. 110F of the Massachusetts General Laws and the
provisions of the Seller's Articles of Organization relating to special voting
requirements for certain business combinations will not apply to this Agreement
or the Seller Option Agreement or any of the transactions contemplated hereby
or thereby.
4.30 Proxy Statement; Seller Information. The information relating to the
Seller and its subsidiaries to be contained in the Proxy Statement as described
in Section 6.1 hereof, and any other documents filed with the SEC in connection
herewith, will not, on the date the Proxy Statement is first mailed to
stockholders of the Seller or at the time of the Seller Stockholders Meeting,
contain any statement which is false or misleading with respect to any material
fact, or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not false or misleading at
the time and in light of the circumstances under which such statement is made.
The Proxy Statement will comply in all material respects as to form with the
requirements of the Exchange Act and the rules and regulations thereunder.
4.31 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 Seller pursuant to the provisions hereof, contains
or will contain any untrue statement of a material fact or omits or will omit
to state a material fact necessary in order to make the statements herein or
therein not misleading. To the best knowledge of the Seller, all information
material to the Merger and the transactions contemplated by this Agreement, or
which is necessary to make the representations and warranties herein contained
not misleading, has been disclosed in writing to the Seller.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Conduct of Businesses Prior to the Effective Time. During the period
from the date of this Agreement to the Effective Time, except as expressly
contemplated or permitted by this Agreement, the Bank Merger Agreement or the
Seller Option Agreement, the Seller shall, and shall cause each of its
subsidiaries to, (i) conduct its business in the usual, regular and ordinary
course consistent with past practice, (ii) use reasonable best efforts to
maintain and preserve intact its business organization, employees and
advantageous business relationships and retain the services of its officers and
key employees, including without limitation, implementing a retention program
in furtherance thereof, which program shall be proposed by the Buyer after
consultation with the Seller; provided, that if the Merger shall not be
consummated, the Buyer shall reimburse the Seller for the cost of any retention
bonuses paid to or earned by the employees prior thereto pursuant to such
program, and (iii) take no action which would materially adversely affect or
<PAGE>
materially delay the ability of the Seller to obtain any necessary approvals of
any Governmental Authority required for the transactions contemplated hereby or
to perform its covenants and agreements under this Agreement, the Bank Merger
Agreement or the Seller Option Agreement.
5.2 Seller Forbearances. During the period from the date of this Agreement
to the Effective Time, except as set forth in Section 5.2 of the Seller
Disclosure Schedule and, except as expressly contemplated or permitted by this
Agreement the Bank Merger Agreement or the Seller Option Agreement (and the
Buyer acknowledges that any action taken by the Seller or any of its
subsidiaries prior to the Effective Time which is expressly permitted or
required by this Agreement shall not be deemed a breach of any representation,
warranty, agreement or covenant herein), the Seller shall not, and the Seller
shall not permit any of its subsidiaries to, without the prior written consent
of the Buyer, which consent shall not be unreasonably withheld:
(a) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money (other than shortterm
indebtedness incurred to refinance short-term indebtedness and indebtedness of
the Seller or any of its subsidiaries to the Seller or any of its subsidiaries;
it being understood and agreed that incurrence of indebtedness in the ordinary
course of business shall include, without limitation, the creation of deposit
liabilities, Federal Home Loan Bank borrowings, purchases of federal funds,
sales of certificates of deposit and entering into repurchase agreements),
assume, guarantee, endorse or otherwise as an accommodation become responsible
for the obligations of any other individual, corporation or other entity, or
make any loan or advance;
(b) adjust, split, combine or reclassify any shares of its capital stock
or issue any other securities in respect of, in lieu of or in substitution for
shares of its capital stock, make, declare or pay any dividend or make any
other distribution on, whether payable in cash, stock, property or otherwise,
or directly or indirectly redeem, purchase or otherwise acquire, any shares of
its capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, or grant any stock
appreciation rights or grant any individual, corporation or other entity any
right to acquire any shares or its capital stock (except for (i) regular
quarterly cash dividends in respect of each full fiscal quarter following the
date hereof at a rate not in excess of $.15 per share of Seller Common Stock
and consistent with past practice, (ii) dividends paid by any of the wholly
owned subsidiaries of the Seller to the Seller or any of its wholly-owned
subsidiaries, and (iii) a special one-time cash dividend in respect of any
partial fiscal quarter following the date hereof and prior to the Effective
Date, declared and payable prior to the Effective Time in an amount equal to
the per share number determined by multiplying .15 by a fraction, the numerator
of which is the number of calendar days from the beginning of the last fiscal
quarter during which the Effective Time is to occur, to the payment date of the
special dividend referred to herein and the denominator of which is the total
number of days in the quarter during which the Effective Time is to occur, and
in respect of which no regular quarterly dividend has been declared or paid,
which special dividend shall be payable if (A) prior to the Effective Time, the
<PAGE>
Buyer or any Affiliate of the Buyer submits a bid or other offer to acquire any
assets or liabilities in the Branch Divestiture and the Effective Time has not
occurred on or before January 31, 2000, or, alternatively, (B) prior to the
Effective Time, neither the Buyer nor any Affiliate of the Buyer submits a bid
or other offer to acquire any assets or liabilities in the Branch Divestiture
and the Effective Time does not occur on or before February 29, 2000); or
issue, sell pledge or encumber any additional shares of capital stock or any
options, warrants, convertible securities or other rights of any kind to
acquire any shares of such capital stock, or any other ownership interest,
except up to a maximum of 2,386,818 shares of Seller Common Stock pursuant to
the exercise of stock options or warrants outstanding as of the date of this
Agreement or except pursuant to the Seller Rights Agreement;
(c) sell, transfer, mortgage, encumber or otherwise dispose of any of its
properties or assets to any individual, corporation or other entity other than
a direct or indirect wholly-owned subsidiary, or cancel, release or assign any
indebtedness to any such person or any claims held by any such person, except
in the ordinary course of business consistent with past practice or pursuant to
contracts or agreements in force at the date of this Agreement;
(d) except for transactions in the ordinary course of business consistent
with past practice, make any material investment either by purchase of stock or
securities, contributions to capital, property transfers, or purchase of any
property or assets of any other individual, corporation or other entity other
than a wholly owned subsidiary thereof, or commitment to make such an
investment, and, in any event regardless of whether consistent with past
practice, make any such investment or commitment to make such an investment
which is in excess of $5.0 million; provided, however, that the terms of this
Section 5.2(d) shall not apply to the Seller's investment securities portfolio
or gap position, each of which is expressly covered by Section 5.2(i) hereof;
(e) except for transactions in the ordinary course of business consistent
with past practice, enter into, terminate or renew any material contract or
agreement, or make any change in any of its material contracts;
(f) (i) adopt, amend, renew or terminate any Plan or any agreement,
arrangement or plan between the Seller or any of its subsidiaries and one or
more of its current or former directors, officers or employees; (ii) enter
into, modify or renew any employment, severance or other agreement with any
director, officer or employee of the Seller or any of its subsidiaries; (iii)
establish, adopt, enter into or amend any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund policy or arrangement providing for any benefit to
any director, officer or employee; or (iv) increase in any manner the
compensation or fringe benefits of any of its employees or pay any pension or
retirement allowance not required by any existing plan or agreement to any such
employees or become a party to, amend or commit itself to any pension,
retirement, profitsharing or welfare benefit plan or agreement or employment
agreement with or for the benefit of any employee, in all cases, other than in
the ordinary course of business consistent with past practice; provided, that,
notwithstanding anything to the contrary set forth in this Agreement, prior to
the Closing Date, the Seller shall be permitted (A) in consultation with the
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Buyer, to determine bonuses to be paid to employees of the Seller and its
subsidiaries for the 1999 fiscal year, which bonuses (other than those bonuses
to be paid to employees of United States Trust Company) shall be determined in
the ordinary course of business and consistent with the Seller's Annual
Incentive Plan for Senior Officers and the 1998 Officer and Non-Officer Bonus
Programs, true and correct copies of each of which have been provided to the
Buyer, in each case as modified in the manner described in Section 5.2(f) of
the Seller Disclosure Schedule; provided, further, however, that in no event
shall the aggregate bonuses paid by the Seller to its employees pursuant to
this Section 5.2(f)(A) exceed 110% of the aggregate bonuses paid by the Seller
to its employees for the 1998 fiscal year; provided, further, that such bonuses
shall be paid in the manner described in Section 5.2(f)(A) of the Seller
Disclosure Schedule, and (B) to grant salary increases to its employees (other
than those employees of the Seller who are officers) at the regular review date
of such non-officer employees in an aggregate amount for all such non-officer
employees not to exceed three percent (3%) of the current annualized base
salaries of such non-officer employees or constitute more than a ten percent
(10%) increase with respect to any one such employee;
(g) settle any claim, action or proceeding, except in the ordinary course
of business consistent with past practice;
(h) amend its Articles of Organization or its By-Laws;
(i) other than after prior consultation with the Buyer, or in the ordinary
course of business, 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;
(j) enter into any new line of business or file any application to
relocate or terminate the operations of any banking office of the Seller or any
of its subsidiaries or, other than after prior consultation with Buyer,
materially expand the business currently conducted by the Seller and its
subsidiaries;
(k) acquire or agree to acquire, by merging or consolidating with, or by
purchasing an equity interest in or a portion of the assets of, or by any other
manner, any business or any corporation, partnership, other business
organization or any division thereof or any material amount of assets;
(l) except as provided in Section 5.8 hereof, 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 with respect to the Medford operations facility described
in Section 5.8 hereof, or in the ordinary and usual course of business
consistent with past practice, and in all cases the Seller agrees to obtain the
consent of the Buyer with respect to capital expenditures that individually
exceed $250,000 or cumulatively exceed $5,000,000;
(m) take any action with respect to accounting methods, principles or
practices, other than changes required by applicable law or GAAP or regulatory
accounting as concurred in by the Seller's independent accountants; or make any
tax election or settle or compromise any federal, state, local or foreign tax
liability;
<PAGE>
(n) make any new or additional equity investment in real estate or
commitment to make such an investment in real estate or in any real estate
development project, other than in connection with foreclosures, settlements in
lieu of foreclosure or troubled loan or debt restructurings in the ordinary
course of business consistent with past practice;
(o) change in any material respect its loan policies, except as required
by regulatory authorities;
(p) enter into or renew, amend or terminate, or give notice of a proposed
renewal, amendment or termination of or make any commitment with respect to,
(i) any lease, contract, agreement or commitment for office space, operations
space or branch space to which the Seller or any of its subsidiaries is a party
or by which the Seller or any of its subsidiaries or their respective
properties is bound; or (ii) regardless of whether consistent with past
practices, any lease, contract, agreement or commitment involving an aggregate
payment by or to the Seller or any of its subsidiaries of more than $1,000,000
or having a term of one year or more from the date of execution;
(q) commit any act or omission which constitutes a material breach or
default by the Seller or any of its subsidiaries under any Regulatory Agreement
or under any material contract or material license to which any of them is a
party or by which any of them or their respective properties is bound;
(r) engage in any activity that would result in the disqualification of
Affiliated Community Bancorp, Inc. as a security corporation, as described in
Section 38B(b) of Chapter 63 of the MGL;
(s) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue in any material respect at any time prior to the
Effective Time, or in any of the conditions to the Merger set forth in Article
VII not being satisfied or in a violation of any provision of this Agreement,
except, in every case, as may be required by applicable law; or
(t) authorize or agree to, or make any commitment to, take any of the
actions prohibited by this Section 5.2.
5.3 Buyer Forbearances. During the period from the date of this Agreement
to the Effective Time, except as expressly contemplated or permitted by this
Agreement, the Buyer and its Affiliates shall not, and the Buyer shall not
permit any of its subsidiaries to, without the prior written consent of the
Seller:
(a) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue in any material respect at any time prior to the
Effective Time, or in any of the conditions of the Merger set forth in Article
VII of this Agreement not being satisfied or in a violation of any provision of
this Agreement;
<PAGE>
(b) take any action that is intended or may reasonably be expected to
materially adversely affect or, except with respect to bidding or entering into
an agreement to acquire any assets or liabilities proposed to be divested in
connection with the merger of Fleet Financial Group, Inc. and BankBoston
Corporation, materially delay its ability to obtain any necessary approvals of
any Governmental Authority required for the transactions contemplated hereby or
to perform its covenants and agreements under this Agreement;
(c) agree to, or make any commitment to, take any of the actions
prohibited by this Section 5.3.
5.4 System Conversions. From and after the date hereof, the Buyer and the
Seller shall meet on a regular basis to discuss and plan for the conversion of
the Seller's and its subsidiaries' data processing and related electronic
informational systems to those used by the Buyer and its subsidiaries, which
planning shall include, but not be limited to, discussion of the possible
termination by the Seller of third-party service provider arrangements
effective at the Effective Time or at a date thereafter, non-renewal of
personal property leases and software licenses used by the Seller or any of its
subsidiaries in connection with its systems operations, retention of outside
consultants and additional employees to assist with the conversion, and
outsourcing, as appropriate, of proprietary or self-provided system services,
it being understood that the Seller shall not be obligated to take any such
action prior to the Effective Time and, unless the Seller otherwise agrees, no
conversion shall take place prior to the Effective Time. In the event that the
Seller or any of its subsidiaries takes, at the request of the Buyer, any
action relative to third parties to facilitate the conversion that results in
the imposition of any termination fees, expenses or charges, the Buyer shall
indemnify the Seller and its subsidiaries for any such fees, expenses and
charges, and the costs of reversing the conversion process, if for any reason
the Merger is not consummated in accordance with the terms of this Agreement.
5.5 Certain Changes and Adjustments. Prior to the Closing, the Buyer and
the Seller shall consult with each other concerning the Seller Bank's loan,
litigation and real estate valuation policies and practices (including loan
classifications and levels of reserves) and the Buyer Bank's plans with respect
to the foregoing after the Effective Time; provided, however, that neither the
Seller nor the Seller Bank shall be obligated to take any action pursuant to
this Section which is inconsistent with GAAP and, in any event, unless and
until the Buyer acknowledges, and the Seller and the Seller Bank are satisfied,
that all conditions to Seller's obligation to consummate the Merger have been
satisfied and that the Buyer intends to consummate the Merger in accordance
with the terms of this Agreement. No action taken by the Seller or the Seller
Bank pursuant to this Section or the consequences resulting therefrom shall be
deemed to be a breach of any representation, warranty, agreement or covenant
herein or constitute a Material Adverse Effect. In the event that the Seller or
any of its subsidiaries takes, at the request of the Buyer, any action pursuant
to this Section 5.5, the Buyer shall indemnify the Seller and its subsidiaries
for any fees, expenses and charges, and the costs of reversing the action
taken, if for any reason the Merger is not consummated in accordance with the
terms of this Agreement.
<PAGE>
5.6 Branches. Prior to the Effective Time, the Buyer and the Seller shall
consult and cooperate with each other concerning alignment of the Buyer Bank's
and the Seller Bank's branches following the Effective Time, and the Seller
will, if requested by the Buyer, cooperate with the Buyer to cause Seller Bank
to prepare and file applications for branch closings with all appropriate Bank
Regulators after all of the Requisite Regulatory Approvals have been obtained
(without regard to any applicable waiting periods). If for any reason the
Merger is not consummated in accordance with the terms of this Agreement, the
Buyer will reimburse the Seller for any fees or expenses incurred in connection
with the preparation and filing of such applications at the request of the
Buyer.
5.7 Servicing. The Seller agrees that upon the expiration of any of the
Seller's or its subsidiaries' 401(k) servicing agreements prior to the Closing,
it will enter into a new 401(k) servicing agreement with the same service
provider as the Buyer, provided, however, that the Seller or its subsidiaries
shall not be obligated to do so unless the terms of such new agreement are
comparable to or not materially less favorable than terms then available to the
Seller. If requested by the Buyer, the Seller shall, and shall cause certain of
its subsidiaries to, provide notices of termination with respect to certain
other servicing arrangements of the Seller or its subsidiaries existing as of
the date hereof; provided, however, that, if for any reason the Merger is not
consummated in accordance with the terms of this Agreement, the Buyer shall
indemnify the Seller and its subsidiaries for any fees, expenses, charges, and
the costs of reversing the action taken or entering into a new servicing
agreement on terms substantially similar to the servicing arrangements so
terminated pursuant to this Section 5.7.
5.8 Medford Operations Facility. From and after the date hereof, the Buyer
and the Seller shall consult and cooperate with each other with respect to the
completion of the building of the Seller's Medford operations facility and the
parties shall use their reasonable best efforts to continue utilizing for the
completion and renovation of such facility those contractors to whom
commitments to complete work in such facility have already been made by the
Seller as of the date hereof; provided, however, that the Seller shall not
enter into any new commitments with respect to capital expenditures on such
facility without the consent of the Buyer; provided, further, that in the event
that the Merger is not consummated in accordance with the terms of this
Agreement, at the Seller's option, within thirty (30) days of the Seller's
written request, the Buyer shall purchase the Medford operations facility from
the Seller at a cash purchase price equal to the net book value of such
facility as of the date of purchase and upon such other terms and conditions as
are conventional for the sale of similar commercial real estate.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Regulatory Matters; Consents.
(a) The Seller will as promptly as practicable, take all steps necessary
to duly call, give notice of, convene and hold a meeting of its stockholders
<PAGE>
(the "Seller Stockholders Meeting") to be held as soon as possible following
clearance by the SEC of the Seller Proxy Statement, for the purpose of
approving this Agreement and the Merger.
(b) The Seller's Board of Directors has adopted a resolution recommending
approval and adoption of this Agreement and the Merger by the Seller's
stockholders, and except as provided in the next sentence, the Board of
Directors of the Seller shall at all times recommend approval and adoption of
this Agreement and the Merger by the Seller's stockholders. The Board of
Directors of the Seller shall be permitted to withdraw or modify in a manner
adverse to the Buyer (or not to continue to make) its recommendation to its
stockholders if, but only if, (a) in the opinion of the Seller's outside
counsel, such action is required, in response to an unsolicited bona fide
written Superior Proposal, in order for the Board of Directors of the Seller to
comply with its fiduciary duties under applicable law, (b) the Seller has given
the Buyer five (5) business days' prior notice of the receipt of such Superior
Proposal and the Seller's Board of Directors has considered any proposed
changes to this Agreement (if any) proposed by the Buyer, and (c) the Seller
has fully and completely complied with Section 6.2 hereof. For the purposes of
this Agreement, "Superior Proposal" shall mean any bona fide Acquisition
Transaction for at least a majority of the outstanding shares of the Seller
Common Stock on terms the Board of Directors of the Seller determines in its
good faith judgment (taking into account the advice of a financial advisor of
nationally recognized reputation, taking into account all the terms and
conditions of the Acquisition Transaction, including any break-up fees, expense
reimbursement provisions and conditions to consummation) are in the aggregate
more favorable and provide greater value to all the Seller's stockholders than
this Agreement and the Merger taken as a whole. For purposes of this Agreement,
"Acquisition Transaction" means any offer or proposal for, or any indication of
interest in (w) a merger or consolidation, or any similar transaction,
involving the Seller or any Significant Subsidiary of the Seller, (x) a
purchase, lease or other acquisition or assumption of all or a substantial
portion of the assets or deposits of the Seller or all or substantially all of
the assets or deposits of any Significant Subsidiary of the Seller, (y) a
purchase or other acquisition (including by way of merger, consolidation, share
exchange or otherwise) of beneficial ownership (the term "beneficial ownership"
for purposes of this Agreement having the meaning assigned thereto in Section
13(d) of the Exchange Act, and the rules and regulations thereunder) of
securities representing 10% or more of the voting power of the Seller or more
than 25% of any Significant Subsidiary of the Seller, or (z) any substantially
similar transaction.
<PAGE>
(c) As soon as practicable after the date hereof, and in any event by July
15, 1999, the Seller shall prepare and file the Seller Proxy Statement with the
SEC under the Exchange Act and shall use its reasonable best efforts to have
the Seller Proxy Statement cleared by the SEC. The Buyer and the Seller shall
cooperate with each other in the preparation of the Seller Proxy Statement and
the Seller shall notify the Buyer promptly of the receipt of any comments of
the SEC with respect to the Seller Proxy Statement and of any requests by the
SEC for any amendment or supplement thereto or for additional information and
shall provide to the Buyer promptly copies of all correspondence between the
Seller or any representative of the Seller and the SEC. The Seller shall give
the Buyer and its counsel the opportunity to review the Seller Proxy Statement
prior to its being filed with the SEC and shall give the Buyer and its counsel
the opportunity to review all amendments and supplements to the Seller Proxy
Statement and all responses to requests for additional information and replies
to comments prior to their being filed with, or sent to, the SEC. Each of the
Buyer and the Seller agrees to use its reasonable best efforts, after
consultation with the other party hereto, to respond promptly to all such
comments of and requests by the SEC and to cause the Seller Proxy Statement and
all required amendments and supplements thereto to be mailed to the holders of
Seller Common Stock entitled to vote at the Seller Stockholders Meeting
referred to in Section 6.1(a) hereof at the earliest practicable time.
(d) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, to
obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Authorities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including, without limitation, the Merger and the Bank Merger), and
to comply with the terms and conditions of all such permits, consents,
approvals and authorizations of all such Governmental Authorities. The Buyer
and the Seller 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 Buyer or the Seller, as the case may be, and any of their respective
subsidiaries, which appear in any filing made with, or written materials
submitted to, any third party or any Governmental 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 Governmental 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.
(e) 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 Seller Proxy Statement or any other statement,
filing, notice or application made by or on behalf of any Affiliate of the
<PAGE>
Buyer, the Buyer or the Seller or any of their respective subsidiaries to any
Governmental Authority in connection with the Merger, the Bank Merger and the
other transactions contemplated by this Agreement.
(f) The Buyer and the Seller shall promptly advise each other upon
receiving (and the Buyer shall so advise with respect to communications
received by any Affiliate of the Buyer) any communication from any Governmental
Authority whose consent or approval is required for consummation of the
transactions contemplated by this Agreement that causes such party to believe
that there is a reasonable likelihood that any Requisite Regulatory Approval
will not be obtained or that the receipt of any such approval will be
materially delayed.
6.2 No Solicitation. Unless and until this Agreement shall have been
properly terminated by either party pursuant to Section 8.1 hereof, neither the
Seller nor any of its subsidiaries or Affiliates shall (and the Seller shall
use its reasonable best efforts to cause its representatives, including, but
not limited to, investment bankers, attorneys and accountants, not to),
directly or indirectly, encourage, solicit, initiate or take any action to
facilitate, any inquires or the making of an offer or proposal regarding, or
participate in any discussions or negotiations with, or provide any information
to, any Person (other than the Buyer and its Affiliates or representatives),
concerning any Acquisition Transaction provided, that the Seller may, in
response to an unsolicited written offer or proposal regarding an Acquisition
Transaction, furnish non-public information with respect to the Seller and its
subsidiaries to the third party making such written offer or proposal and may
participate in negotiations regarding such written offer or proposal if (A) the
Seller's Board of Directors determines in good faith based on the written
advice of outside counsel of the Seller that such action is required for the
Seller's Board of Directors to comply with the fiduciary duties applicable to
directors under applicable law and (B) the Seller has received from such third
party an executed confidentiality agreement with terms not materially less
favorable to the Seller than those contained in the Confidentiality Agreement
with the Buyer. Notwithstanding the foregoing, nothing contained in this
Section 6.2 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 14d9 and 14e2(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 Authority with respect to a proposed Acquisition
Transaction. The Seller agrees not to release any third party from, or waive
any provision of, any confidentiality or standstill agreement to which the
Seller or the Seller Bank is a party regarding an Acquisition Transaction.
<PAGE>
6.3 Access to Information.
(a) Upon reasonable notice and subject to applicable laws relating to the
exchange of information, each of the Buyer and the Seller, for the purposes of
verifying the representations and warranties of the other and relating to the
Merger and the other matters contemplated by this Agreement, shall, and shall
cause each of their respective subsidiaries to, afford to the officers,
employees, accountants, counsel and other representatives of the other party,
access, during normal business hours during the period prior to the Effective
Time, to all its properties, books, contracts, commitments and records, and,
during such period, each of the Buyer and the Seller shall, and shall cause
their respective subsidiaries to, make available to the other party (i) a copy
of each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the requirements of federal
securities laws or federal or state banking laws (other than reports or
documents which the Buyer or the Seller, as the case may be, is not permitted
to disclose under applicable law) and (ii) all other information concerning its
business, properties and personnel as such party may reasonably request.
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 the Buyer's or the
Seller's, as the case may be, customers, jeopardize the attorney-client
privilege of the institution in possession or control of such information or
contravene any law, rule, regulation, order, judgment, decree, fiduciary duty
or binding agreement entered into prior to the date of this Agreement. The
parties hereto will make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence apply.
(b) All information furnished by any party hereto to the other or its
representatives pursuant hereto shall be treated as the sole property of the
party providing the information and, if the Merger shall not occur, the party
being furnished such information shall return to the other party all of such
written information and all documents, notes, summaries or other materials
containing, reflecting or referring to, or derived from, such information. The
parties hereto shall, and shall use their reasonable best efforts to cause
their representatives to, keep confidential all such information, and shall not
directly or indirectly use such information for any competitive or other
commercial purpose. The obligation to keep such information confidential shall
continue for five years from the date the proposed Merger is abandoned and
shall not apply to (i) any information which (x) was already in the possession
of the party being furnished such information prior to the disclosure thereof
by the other party, (y) was then generally known to the public, or (z) was
disclosed to the party being furnished such information by a third party not
bound by an obligation of confidentiality; or (ii) disclosures made as required
by law.
(c) No investigation by either of the parties or their respective
representatives shall affect the representations and warranties of the other
set forth herein.
<PAGE>
6.4 Legal Conditions to Merger. Each of the Buyer and its Affiliates and
the Seller shall, and the Seller shall cause its subsidiaries to, use their
reasonable best efforts (a) to take, or cause to be taken, all actions
necessary, proper or advisable to comply promptly with all legal requirements
that may be imposed on such party or its subsidiaries with respect to the
Merger and, subject to the conditions set forth in Article VII hereof, to
consummate the transactions contemplated by this Agreement, and (b) to obtain
(and to cooperate with the other party to obtain) any material consent,
authorization, order or approval of, or any exemption by, any Governmental
Authority and any other third party that is required to be obtained by the
Buyer or the Seller or any of their respective subsidiaries in connection with
the Merger, the Bank Merger and the other transactions contemplated by this
Agreement.
6.5 Employment and Benefit Matters.
(a) From and after the Effective Time, 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. 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 the 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, the Buyer 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 the Buyer 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, arrangements 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 the Buyer will not, and will not cause any of its subsidiaries to,
challenge the validity of any obligation of the Seller or any subsidiary of the
Seller under, any employment, severance, change in control, post-employment,
consulting, supplemental retirement or such other compensation, contract or
arrangement with any current or former director, officer or employee of the
Seller. Notwithstanding the terms of this Agreement or any plan to the
contrary, prior to the Effective Time, the Seller shall be permitted to cause
one or more trusts to be formed and to fund such trusts, the purpose of which
will be to fund all obligations which may be payable after the Effective Time
to employees of the Seller under the Seller's Senior Executive Plan and such
other plans of the Seller set forth in Section 6.5(b) of 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 or when to terminate, merge or continue any
<PAGE>
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 or stock funds in retirement 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 4.15(a) of the
Seller Disclosure Schedule. 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 of the Seller for such employee.
(e) The provisions of this Section 6.5 respecting the Buyer's agreement to
honor the contracts, arrangements, commitments and understandings referred to
in Section 6.5(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.
(f) Notwithstanding anything to the contrary contained in this Agreement,
in no event shall the Seller or any of its subsidiaries take any action or make
any payments that would result, either individually or in the aggregate, in the
payment of an "excess parachute payment" within the meaning of Section 280G of
the Code or that would result, either individually or in the aggregate, in
payments that would be nondeductible pursuant to Section 162(m) of the Code.
6.6 Directors' and Officers' Indemnification and Insurance.
(a) In the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether civil, criminal or administrative,
including, without limitation, any such claim, action, suit, proceeding or
investigation in which any person who is now, or has been at any time prior to
the date of this Agreement, or who becomes prior to the Effective Time, a
director or officer or employee of Seller or any of its subsidiaries (the
"Indemnified Parties") is, or is threatened to be, made a party based in whole
or in part on, or arising in whole or in part out of, or pertaining to (i) the
fact that he is or was a director, officer or employee of the Seller, any of
the Seller's subsidiaries or any of their respective predecessors or (ii) this
Agreement, the Seller Option Agreement or any of the transactions contemplated
hereby or thereby, whether in any case asserted or arising before or after the
Effective Time, the parties hereto agree to cooperate and use their best
<PAGE>
efforts to defend against and respond thereto. It is understood and agreed that
after the Effective Time, the Buyer shall indemnify and hold harmless, as and
to the fullest extent permitted by law, each such Indemnified Party against any
losses, claims, damages, liabilities, costs, expenses (including reasonable
attorney's fees and expenses in advance of the final disposition of any claim,
suit, proceeding or investigation to each Indemnified Party to the fullest
extent permitted by law upon receipt of any undertaking required by applicable
law), judgments, fines and amounts paid in settlement in connection with any
such threatened or actual claim, action, suit, proceeding or investigation, and
in the event of any such threatened or actual claim, action, suit, proceeding
or investigation (whether asserted of arising before or after the Effective
Time), the Indemnified Parties may retain counsel reasonably satisfactory to
them after consultation with the Buyer; provided, however, that (1) the Buyer
shall have the right to assume the defense thereof and upon such assumption the
Buyer or the Buyer Bank shall not be liable to any Indemnified Party for any
legal expenses of other counsel or any other expenses subsequently incurred by
any Indemnified Party in connection with the defense thereof, except that if
the Buyer elects not to assume such defense or counsel for the Indemnified
Parties reasonably advises the Indemnified Parties that there are issues which
raise conflicts of interest between the Buyer and the Indemnified Parties, the
Indemnified Parties may retain counsel reasonably satisfactory to them after
consultation with the Buyer, and the Buyer shall pay the reasonable fees and
expenses of such counsel for the Indemnified Parties, (2) the Buyer shall be
obligated pursuant to this paragraph to pay for only one firm of counsel for
all Indemnified Parties, (3) the Buyer shall not be liable for any settlement
effected without its prior written consent (which consent shall not be
unreasonably withheld) and (4) the Buyer shall have no obligation hereunder to
any Indemnified Party when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final and
nonappealable, that indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law. Any Indemnified Party
wishing to claim Indemnification under this Section 6.6, upon learning of any
such claim, action, suit, proceeding or investigation, shall notify the Buyer
thereof, provided that the failure to so notify shall not affect the
obligations of the Buyer under this Section 6.6 except to the extent such
failure to notify materially prejudices the Buyer. The Buyer's obligations
under this Section 6.6 shall continue in full force and effect for a period of
six (6) years from the Effective Time; provided, however, that all rights to
indemnification in respect of any claim (a "Claim") asserted or made within
such period shall continue until the final disposition of such Claim.
(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 substantially comparable
coverage and containing terms and conditions no less favorable than those in
effect on the date hereof. In connection with the foregoing, the Seller agrees
to provide such insurer or substitute insurer with such representations as such
insurer may request with respect to the reporting of any prior claims.
(c) In the event the Buyer or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
<PAGE>
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of the Buyer
assume the obligations set forth in this section.
(d) The provisions of this Section 6.6 are intended to be for the benefit
of, and enforceable by, each Indemnified Party and his or her heirs and
representatives, and nothing herein shall affect any indemnification rights
that any Indemnified Party and his or her heirs and representatives may have
under the charter or by-laws of the Seller or any of its subsidiaries, any
contract or applicable law.
6.7 Additional Agreements. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation or the Surviving Bank with full
title to all properties, assets, rights, approvals, immunities and franchises
of any of the parties to the Merger or the Bank Merger, the proper officers and
directors of each party to this Agreement and their respective subsidiaries
shall take all such necessary action as may be reasonably requested by, and at
the sole expense of, the Buyer.
6.8 Advice of Changes. The Buyer and the Seller shall each promptly advise
the other party 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; provided, however, that the delivery of any notice pursuant
to this Section shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
6.9 Update of Disclosure Schedules. From time to time prior to the
Effective Time, the Seller will promptly supplement or amend the Seller
Disclosure Schedule to reflect any matter which, if existing, occurring or
known at the date of this Agreement, would have been required to be set forth
or described in the Seller Disclosure Schedule or which is necessary to correct
any information in the Seller Disclosure Schedule which has been rendered
inaccurate thereby. No supplement or amendment to the Seller Disclosure
Schedule shall have any effect for the purpose of determining satisfaction of
the conditions set forth in Section 7.2(b) hereof or compliance by the Seller
with the covenants set forth in Article V hereof.
6.10 Current Information.
(a) As soon as practicable, the Seller will furnish to the Buyer copies of
all such financial statements and reports as it or any of its subsidiaries
shall send to its stockholders, the SEC or any other Governmental Authority, to
the extent any such reports furnished to any such Governmental Authority are
not confidential and except as legally prohibited thereby, and will furnish to
the Buyer such additional financial data as the Buyer may reasonably request.
(b) Promptly upon receipt thereof, the Seller will furnish to the Buyer
copies of all internal control reports submitted to the Seller and its
<PAGE>
subsidiaries by independent auditors in connection with each annual, interim or
special audit of the books of the Seller and its subsidiaries made by such
auditors.
(c) The Seller will promptly notify the Buyer of any material change in
the normal course of business or in the operation of the properties of the
Seller or any of its subsidiaries and of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated), or the institution or the threat of material litigation
involving the Seller or any of its subsidiaries, and will keep the Buyer
reasonably informed of such events.
6.11 Liaison Committee. During the period from the date of this Agreement
to the Effective Time, the Seller will make available one or more of its
designated representatives (a) to confer on a regular and frequent basis (not
less than monthly) with representatives of the Buyer to report on (i) the
general status of the ongoing operations of the Seller and its subsidiaries,
(ii) the status of, and the action proposed to be taken with respect to, those
loans held by the Seller or any of its subsidiaries which, either individually
or in combination with one or more other loans to the same borrower thereunder,
have an aggregate outstanding principal amount of $5,000,000 or more and are
classified or non-performing assets, and (iii) the status of, and the action
proposed to be taken with respect to, foreclosed property and other real estate
owned, and (b) to communicate with respect to the manner in which the business
of the Seller and its subsidiaries are conducted and the disposition of certain
assets after the Effective Time, Year 2000 preparedness, the type and mix of
products and services, personnel matters, branch alignment, branch closings,
the granting of credit, and problem loan management, reserve adequacy and
accounting. In order to facilitate the foregoing, the Seller and the Buyer
shall promptly establish a liaison committee (the "Liaison Committee"), which
will be chaired by an officer designated by the Buyer and which will meet on a
regular basis to discuss these matters and may establish subcommittees from
timetotime to pursue various issues. In addition, during the period from the
date of this Agreement to the Effective Time, on the date that the Seller Bank
delivers to the members of its senior credit committee applicable information
and reports for the next upcoming meeting of such committee, the Seller shall
provide to a designated representative of the Buyer located in Boston,
Massachusetts access to the same information and reports as are provided to the
Seller Bank's senior credit committee members with respect to new loans and
extensions of credit proposed to be made by the Seller Bank in excess of
$5,000,000. The representative designated by the Buyer shall also be allowed to
attend the Seller Bank's senior credit committee meetings and be a non-voting
observer thereof. The Seller, if requested by the Buyer, will assist the Buyer
to prepare to sell a portion of its single family residential mortgage loans
and mortgage loan servicing rights following the Effective Time; provided, that
Buyer shall indemnify the Seller and its subsidiaries for any fees, expenses
and charges incurred by Seller in connection therewith if the Merger is not
consummated in accordance with the terms of this Agreement.
6.12 Bank Merger. Unless otherwise determined by the Buyer prior to the
Closing, at the effective time of the Bank Merger the Articles of Organization
and By-Laws of the Buyer Bank, as in effect immediately prior thereto, shall be
the Articles of Organization and By-Laws of the Surviving Bank until thereafter
<PAGE>
amended as provided by law and such Articles of Organization and By-Laws. The
directors and officers of the Buyer Bank immediately prior to the effective
time of the Bank Merger shall be the directors and officers of the Surviving
Bank, each to hold office in accordance with the Articles of Organization and
ByLaws of the Surviving Bank and until their respective successors are duly
elected or appointed and qualified.
6.13 Organization of the Merger Sub
(a) Prior to the Effective Time, the Buyer will take any and all necessary
action to cause (i) the Merger Sub to be organized, (ii) the Merger Sub to
become a direct wholly owned subsidiary of the Buyer, (iii) the directors and
stockholders of the Merger Sub to approve the transactions contemplated by this
Agreement, (iv) the Merger Sub to execute one or more counterparts to this
Agreement and to deliver at least one such counterpart so executed to the
Seller, whereupon the Merger Sub shall become a party to and be bound by this
Agreement, and (v) the Merger Sub to take all necessary action to complete the
transactions contemplated hereby subject to the terms and conditions hereof.
(b) On and as of the date the Merger Sub becomes a party to this
Agreement, the Buyer and the Merger Sub shall, jointly and severally, represent
and warrant to the Seller and the Bank as follows:
(i) The Merger Sub is a corporation duly organized, validly existing
and in good standing under the laws of The Commonwealth of Massachusetts
and all of its outstanding capital stock are owned, directly, by the
Buyer. Since the date of its organization, the Merger Sub has not engaged
in any activities other than in connection with or as contemplated by this
Agreement;
(ii) The Merger Sub has all necessary corporate power and authority
to enter into this Agreement and to carry on its obligations hereunder.
The execution and delivery of this Agreement by the Merger Sub and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Merger Sub
and will not (A) conflict with or violate the Articles of Organization or
Bylaws of the Merger Sub or (B) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to the Merger Sub or by
which any of its properties or assets is bound or affected; and
(iii) The Merger Sub has executed and delivered this Agreement and
this Agreement constitutes the legal, valid and binding obligation of the
Merger Sub enforceable against the Merger Sub in accordance with its
terms.
6.14 Community Commitments. From and after the Effective Time, Buyer shall
use its reasonable efforts to continue the community commitments undertaken by
the Buyer Bank and the Seller Bank prior to the date hereof in the communities
currently served by each of the Buyer Bank and the Seller Bank.
6.15 Consolidation of Corporate Structure. The parties hereto hereby agree
that prior to the consummation of the transactions contemplated hereby, at the
<PAGE>
Buyer's request, the Seller shall, subject to the receipt of all required
regulatory approvals and consents with respect to such actions, take the
following actions:
(a) As promptly as practicable after the date hereof, the Seller shall
contribute (i) all of the shares of Bank Common Stock which Seller holds and
(ii) all of the shares of the capital stock or other equity securities issued
by United States Trust Company to Affiliated Community Bancorp, Inc., the
Seller's wholly-owned subsidiary.
(b) On or before the date which is ten (10) days prior to the Closing
Date, the Seller shall cause each subsidiary of the Seller Bank identified by
the Buyer prior to the Closing Date to be liquidated.
(c) On or prior to the date which is ten (10) days prior to the Closing
Date, but subsequent to the liquidation of the subsidiaries referred to in
Section 6.15(b) immediately above, the Seller shall cause Seller Bank to
declare and pay a cash dividend (the "Special Dividend") to Affiliated
Community Bancorp, Inc. in an amount equal to the lesser of (i) the maximum
amount that Seller Bank may pay as a dividend to its shareholders without being
required to include in its gross income amounts charged against the reserves
identified in Section 593(e)(1)(B) or (C) of the Code, and (ii) an amount
designated in writing by the Buyer.
(d) Subsequent to the declaration and payment of the Special Dividend and
not less than three (3) days prior to the Closing Date, the Seller shall cause
Affiliated Community Bancorp, Inc. to liquidate into the Seller.
(e) In the event that the Merger is not consummated in accordance with the
terms hereof, the Buyer shall indemnify the Seller for any and all costs and
expenses incurred by the Seller with respect to the actions taken pursuant to
this Section 6.15.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligations To Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) Stockholder's Approval. This Agreement and the transactions
contemplated hereby shall have been approved by the requisite affirmative vote
of the holders of the outstanding shares of Seller Common Stock present and
voting at the Seller Stockholders Meeting in accordance with applicable law.
(b) Other Approvals. All regulatory approvals required to consummate the
transactions contemplated hereby shall have been obtained and shall remain in
full force and effect and all statutory waiting periods in respect thereof
shall have expired (all such approvals and the expiration of all such waiting
periods being referred to herein as the "Requisite Regulatory Approvals").
<PAGE>
(c) No Injunctions or Restraints; Illegality. No order, injunction or
decree issued by any court or agency of competent jurisdiction or other legal
restraint or prohibition (an "Injunction") preventing the consummation of the
Merger, the Bank Merger or any of the other transactions contemplated by this
Agreement shall be in effect. No statute, rule, regulation, order, injunction
or decree shall have been enacted, entered, promulgated or enforced by any
Governmental Authority which prohibits, materially restricts or makes illegal
consummation of the Merger or the Bank Merger.
7.2 Conditions to the Obligations of the Buyer. The obligation of the
Buyer to effect the Merger is also 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
and its subsidiaries taken as a whole.
(b) Representations and Warranties. The representations and warranties of
Seller contained in this Agreement that are qualified as to materiality shall
be true and correct and any such representations and warranties that are not so
qualified shall be true and correct in all material respects, in each case as
of the date of this Agreement and as of the Effective Time (or if made as of a
specified date, only as of such date) The Buyer shall have received a
certificate to the foregoing effect signed by the chairman or president and the
chief financial officer of the Seller.
(c) Performance of Obligations of the Seller. The Seller shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and the Buyer shall
have received a certificate signed on behalf of the Seller by the chairman or
president and the chief financial officer to such effect.
(d) Consents Under Agreements. The consent, approval or waiver of each
person (other than Requisite Regulatory Approvals contemplated in Section
7.1(b)) whose consent or approval shall be required in order to permit the
lawful consummation of the Merger and the Bank Merger shall have been obtained,
other than such consents or approvals, the failure of which to obtain would not
have a Material Adverse Effect on Seller or Buyer after the Effective Time.
(e) Stockholders Agreements. Agreements, substantially in the form
attached as Exhibit IV hereto, shall have been executed and delivered by at
least 80% of the directors of the Seller and all of the senior executive
officers of the Seller set forth in Section 7.2(e) of the Seller Disclosure
Schedule.
7.3 Conditions to the Obligations of the Seller. The obligation of the
Seller to effect the Merger is also subject to the satisfaction or waiver by
the Seller, at or prior to the Effective Time, of the following conditions:
<PAGE>
(a) Representations and Warranties. The representations and warranties of
the Buyer contained in this Agreement that are qualified as to materiality
shall be true and correct and any such representations and warranties that are
not so qualified shall be true and correct in all material respects, in each
case as of the date of this Agreement and as of the Effective Time (or if made
as of a specified date, only as of such date). The Seller shall have received a
certificate to the foregoing effect signed by the chairman or president and the
chief financial officer of the Buyer.
(b) Performance of Obligations of the Buyer. The Buyer shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and the Seller shall
have received a certificate signed on behalf of the Buyer by the chairman or
president and the chief financial officer to such effect.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 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 stockholders of the Seller:
(a) by mutual consent of the Seller and the Buyer in a written instrument,
if the Board of Directors of each so determines by a vote of a majority of the
members of its entire Board;
(b) by either the Board of Directors of the Buyer or the Board of
Directors of the Seller if any Governmental Authority that must grant a
Requisite Regulatory Approval has denied approval of the Merger and such denial
has become final and nonappealable or any Governmental Authority of competent
jurisdiction shall have issued a final nonappealable order permanently
enjoining or otherwise prohibiting the consummation of the transactions
contemplated by this Agreement;
(c) by either the Board of Directors of the Buyer or the Board of
Directors of the Seller if the Merger shall not have been consummated on or
before March 31, 2000, unless the failure of the Closing to occur by such date
shall be due to the failure of the party seeking to terminate this Agreement to
perform or observe the covenants and agreements of such party set forth herein;
(d) by either 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;
<PAGE>
(e) by either the Buyer or the Seller if the approval of the Seller's
stockholders required for the consummation of the Merger shall not have been
obtained by reason of the failure to obtain the required vote at a duly held
meeting of such party's stockholders or at any adjournment thereof;
(f) by the Buyer, if the Board of Directors of the Seller shall not have
publicly recommended to the stockholders of the Seller that such stockholders
vote in favor of the approval of this Agreement, the Merger and the other
transactions contemplated hereby or shall have withdrawn, modified or amended
such recommendation in a manner materially adverse to the Buyer; or
(g) by the Buyer, if the Seller determines to negotiate with, or disclose
any nonpublic information relating to the Seller or any of its subsidiaries or
afford access to their properties, books or records to, any Person in
connection with an Acquisition Transaction.
8.2 Effect of Termination.
(a) In the event of termination of this Agreement by either the Buyer or
the Seller as provided in Section 8.1, this Agreement shall forthwith become
void and have no effect, and none of the Buyer, the Seller, any of their
respective subsidiaries or any of the officers or directors of any of them
shall have any liability of any nature whatsoever hereunder, or in connection
with the transactions contemplated hereby, except that (i) Sections 6.3(b),
8.2, 9.2 and 9.3 and all obligations of the Buyer to indemnify or reimburse the
Seller under Article V and Section 6.15 hereof and all other obligations of the
parties intended to be performed after the termination of this Agreement shall
survive any termination of this Agreement; provided, however, that,
notwithstanding anything to the contrary herein, all obligations of the Buyer
to indemnify or reimburse the Seller under Article V and Section 6.15 hereof
shall terminate in the event that this Agreement is terminated by the Buyer
pursuant to Sections 8.1(f) or (g) hereof; provided, further however, that the
preceding proviso shall not apply upon a termination of this Agreement by the
Buyer pursuant to Section 8.1(g) hereof in the event that the Buyer has, as of
such date of termination, bid or made an offer to purchase any assets or
liabilities to be sold in connection with the Branch Divestiture unless the
Buyer shall have revoked or withdrawn such bid or offer, and (ii)
notwithstanding anything to the contrary contained in this Agreement, neither
the Buyer nor the Seller shall be relieved or released from any liabilities or
damages arising out of its willful breach of any provision of this Agreement.
(b) If this Agreement is terminated as a result of any breach of a
representation, warranty, covenant or other agreement which is caused by the
willful breach of a party hereto, such party shall be liable to the other party
for all outofpocket costs and expenses, including, without limitation, the
reasonable fees and expenses of lawyers, accountants and investment bankers,
incurred by such other party in connection with the entering into of this
Agreement and the carrying out of any and all acts contemplated hereunder
("Expenses"). The payment of Expenses is not an exclusive remedy, but is in
addition to any other rights or remedies available to the parties hereto at law
or in equity.
<PAGE>
8.3 Amendment. Subject to compliance with applicable law, this Agreement
may be amended by the parties hereto, by action taken or authorized by their
respective Boards of Directors, at any time before or after approval of the
matters presented in connection with Merger by the stockholders of the Buyer
and the Seller; provided, however, that after any approval of the transactions
contemplated by this Agreement by the stockholders of the Seller, there may not
be, without further approval of such stockholders, any amendment of this
Agreement that changes the amount or the form of the consideration to be
delivered hereunder to the holders of Seller Common Stock, other than as
contemplated by this Agreement. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions contained herein; provided,
however, that after any approval of the transactions contemplated by this
Agreement by the stockholders of the Seller, there may not be, without further
approval of such stockholders, any extension or waiver of this Agreement or any
portion thereof which reduces the amount or changes the form of the
consideration to be delivered to the holders of Seller Common Stock hereunder,
other than as contemplated by this Agreement. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if set forth
in a written instrument signed on behalf of such party, but such extension or
waiver or failure to insist on strict compliance with an 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
9.1 Closing. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") will take place at 10:00 a.m. on a date
and at a place to be specified by the parties, which shall be no later than
five business days after the satisfaction or waiver (subject to applicable law)
of the latest to occur of the conditions set forth in Article VII hereof,
unless extended by mutual agreement of the parties (the "Closing Date");
provided, however, that in no event shall the Closing take place prior to
January 3, 2000, which at the Buyer's discretion may be extended to a date no
later than January 31, 2000.
<PAGE>
9.2 Nonsurvival of Representations, Warranties and Agreements. None of the
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement (other than the Seller
Option Agreement, which shall terminate in accordance with their terms) shall
survive the Effective Time, except for Sections 5.2(f), 6.5 and 6.6 which by
its terms applies in whole or in part after the Effective Time.
9.3 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.
9.4 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 Buyer, to: Citizens Financial Group, Inc.
One Citizens Plaza
Providence, RI 02903-1339
Attention: Lawrence K. Fish
Chairman, President and Chief
Executive Officer
and to: Citizens Financial Group, Inc.
One Citizens Plaza
Providence, RI 02903-1339
Attention: Joel J. Brickman, Esq.
Senior Vice President, General
Counsel and Secretary
Tel: 401-456-7834
Fax: 401-455-5927
with required copies to: Goodwin, Procter & Hoar LLP
One Exchange Place
Boston, MA 02109
Attention: Regina M. Pisa, P.C.
Tel: 617-570-1525
Fax: 617-523-1231
(b) If to Seller, to: UST Corp.
40 Court Street
Boston, MA 02109
Attention: Neal F. Finnegan
President and Chief Executive
Officer
<PAGE>
and to: UST Corp.
40 Court Street
Boston, MA 02109
Attention: Eric R. Fischer, Esq.
Executive Vice President, General
Counsel and Clerk
Tel: 617-726-7377
Fax: 617-695-4175
with required copies to: Bingham Dana LLP
150 Federal Street
Boston, MA 02110
Attention: Neal J. Curtin, Esq. and
Stephen H. Faberman, Esq.
Tel: 617-951-8000
Fax: 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.
9.5 Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". No provision of this Agreement shall be construed to require the
Seller or the Buyer or any their respective subsidiaries or Affiliates to take
any action which would violate applicable law, rule or regulation. The phrases
"the date of this Agreement," "the date hereof" and terms of similar import,
unless the context otherwise requires, shall be deemed to be June 21, 1999.
9.6 Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
9.7 Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof other than the Seller Option
Agreement.
9.8 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the Commonwealth of Massachusetts, without regard
to any applicable conflicts of law principles.
9.9 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
<PAGE>
respect, by any court of competent jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement and
the parties shall use their reasonable best efforts to substitute a valid,
legal and enforceable provision which, insofar as practicable, implements the
original purposes and intents of this Agreement.
9.10 Publicity. Except as otherwise required by applicable law or the
rules of the NASD, neither the Buyer nor the Seller shall, or shall permit any
of its subsidiaries to, issue or cause the publication of any press release or
other public announcement with respect to, or otherwise make any public
statement concerning, the transactions contemplated by this Agreement without
the consent of the party, which consent shall not be unreasonably withheld.
9.11 Assignment; Reliance of Other Parties. Neither this Agreement nor any
of the rights, interests or obligations shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns. Except as otherwise specifically
provided in Sections 6.5(b) and 6.6, and with respect to the bonuses referred
to in Section 5.2(f) hereof, this Agreement (including the documents and
instruments referred to herein) is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
9.12 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that the provisions contained in this Agreement
were not performed in accordance with its specific terms or was otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions thereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
9.13 Alternative Structure. Notwithstanding anything to the contrary
contained in this Agreement, prior to the Effective Time, the Buyer shall be
entitled to revise the structure of the Merger, the Bank Merger and the other
transactions contemplated hereby and thereby, provided that, each of the
transactions comprising such revised structure shall (i) not subject the
stockholders of Seller, Seller or any of its subsidiaries to adverse tax
consequences, (ii) change the amount or form of consideration to be received by
the stockholders of Seller, (iii) alter to the detriment of the Seller or its
stockholders the benefits to be received by the Seller's stockholders
hereunder, (iv) jeopardize the receipt of any required regulatory approvals
relating to the consummation of the Merger or the Bank Merger, or (v) reduce
the obligations of the Buyer or the Buyer Bank hereunder or under the Bank
Merger Agreement. This Agreement and any related documents shall be
appropriately amended in order to reflect any such revised structure.
9.14 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:
<PAGE>
"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.
"associate" shall have the meaning ascribed thereto in Rule 14a-1 under
the Securities Exchange of 1934, as amended.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"Bank Examinations" shall have the meaning ascribed thereto in Section 4.9
hereof.
"Bank Regulator" shall mean and include, any pertinent federal or state
Governmental Authority changed with the supervision of banks or bank holding
companies or engaged in the insurance of bank deposits, including without
limitation, the FRB, the FDIC, the Massachusetts Commissioner and the MBBI.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"DOJ" shall mean the United States Department of Justice.
"EPA" shall have the meaning ascribed thereto in Section 4.24.
"Equity Investment" shall have the meaning set forth for such term as of
the date hereof in the FDIC's rules and regulations regarding activities and
investments of insured state banks at 12 C.F.R.ss.362.2(k).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"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.
"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.
<PAGE>
"IRS" shall mean the United States Internal Revenue Service.
"Liens" shall have the meaning ascribed to such term in Section 4.19
hereof.
"Loans" shall have the meaning ascribed to such term in Section 4.20
herein.
"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 mean the Commissioner of Banks of The
Commonwealth of Massachusetts.
"Material Adverse Effect" shall mean, with respect to any Person, a change
or effect that is or is reasonably likely to be materially adverse to 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.
"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.
"Permitted Liens" shall have the meaning ascribed to such term in Section
4.19.
"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
<PAGE>
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.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Seller Contract" shall have the meaning ascribed to such term in Section
4.18 hereof.
"Seller Disclosure Schedule" shall mean the disclosure schedule relating
to the Seller delivered to Buyer together herewith.
"Seller Rights Agreement" shall mean that certain Rights Agreement which
was adopted by the Seller on September 19, 1995, as amended.
"Seller Stock Option Plans" shall have the meaning ascribed thereto in
Section 2.10 hereof.
"Significant Subsidiary" shall mean those subsidiaries set forth in
Section 9.14 of the Seller Disclosure Schedule.
"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 twenty percent of the securities or other interests
having by their terms ordinary voting power to elect a majority of the board of
directors or others performing similar functions is directly or indirectly
owned or controlled by such party or by any one or more of its subsidiaries, or
by such party and one or more of its subsidiaries.
"Tax" shall mean any federal, state, local or foreign income, gross
receipts, franchise, estimated, alternative minimum, addon 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
<PAGE>
estimates, elections, schedules, statements or information) filed or required
to be filed in connection with the determination, assessment or collection of
any Tax or the administration of any laws, regulations or administrative
requirements relating to any Tax.
"Transaction Documents" shall mean this Agreement, the Bank Merger
Agreement and the Seller Option Agreement.
<PAGE>
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.
CITIZENS FINANCIAL GROUP, INC.
By: /s/ Lawrence K. Fish
----------------------
Name: Lawrence K. Fish
Title: Chairman, President and Chief
Executive Officer
Attest:
By: /s/ Michael Edwards
/s/ Joel Brickman ---------------------
- ----------------------- Name: Michael Edwards
Secretary Title: Senior Vice President and Treasurer
UST CORP.
By: /s/ Neal F. Finnegan
-------------------------
Name: Neal F. Finnegan
Title: President and Chief Executive Officer
Attest:
By: /s/ James K. Hunt
--------------------------
/s/s Eric R. Fischer Name: James K. Hunt
- ------------------------ Title: Treasurer
Clerk
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated June 21, 1999, between UST CORP., a
Massachusetts corporation ("Issuer"), and CITIZENS FINANCIAL GROUP, INC., a
Delaware corporation ("Grantee").
WITNESSETH:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), which agreement has been
executed by the parties hereto immediately prior to this Agreement; and
WHEREAS, as a condition to Grantee's entering into the Merger Agreement
and in consideration therefor, Issuer has agreed to grant 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 Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 8,541,333
fully paid and nonassessable shares of Issuer's Common Stock, par value $0.625
per share ("Common Stock"), at a price of $24.25 per share (the "Option
Price"); provided further that in no event shall the number of shares of Common
Stock 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
subject to or issued pursuant to the Option. 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.
(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 this Agreement), 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 Issuer or Grantee to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, and from time to time, if, but only if, both an Initial
Triggering Event (as hereinafter defined) and a Subsequent Triggering Event (as
hereinafter defined) shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined); provided that the Holder shall have
sent the written notice of such exercise (as provided in subsection (e) of this
Section 2) within 100 days following such Subsequent Triggering Event. Each of
the following shall be an "Exercise Termination Event": (i) the Effective Time
(as defined in the Merger Agreement) of the Merger; (ii) termination of the
<PAGE>
Merger Agreement in accordance with the provisions thereof if such termination
occurs prior to the occurrence of an Initial Triggering Event except a
termination by Grantee pursuant to Section 8.1(d) of the Merger Agreement
(unless the breach by Issuer giving rise to such right of termination is
non-volitional); or (iii) the passage of eighteen months after termination of
the Merger Agreement if such termination follows the occurrence of an Initial
Triggering Event or is a termination by Grantee pursuant to Section 8.1(d) of
the Merger Agreement (unless the breach by Issuer giving rise to such right of
termination is non-volitional)(provided that if an Initial Triggering Event
continues or occurs beyond such termination and prior to the passage of such
eighteen-month period, the Exercise Termination Event shall be twelve months
from the expiration of the Last Triggering Event but in no event more than
eighteen months after such termination). The "Last Triggering Event" shall mean
the last Initial Triggering Event to expire. The term "Holder" shall mean the
holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an "Issuer
Subsidiary"), without having received Grantee's prior written consent, shall
have entered into an agreement to engage in an Acquisition Transaction (as
hereinafter defined) 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 Securities Exchange Act of 1934, as amended (the "1934 Act"), and the
rules and regulations thereunder) other than Grantee or any of its Subsidiaries
(each a "Grantee Subsidiary") or the Board of Directors of Issuer shall have
recommended that the stockholders of Issuer approve or accept any Acquisition
Transaction or shall have failed to publicly oppose an Acquisition Transaction,
in each case with any person other than Grantee or a Grantee Subsidiary. For
purposes of this Agreement, "Acquisition Transaction" shall mean (w) a merger
or consolidation, or any similar transaction, involving Issuer or any
Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X promulgated
by the Securities and Exchange Commission (the "SEC") of Issuer, (x) a
purchase, lease or other acquisition of all or a substantial portion of the
assets of Issuer or any Significant Subsidiary of Issuer, (y) a purchase or
other acquisition (including by way of merger, consolidation, share exchange or
otherwise) of securities representing 10% or more of the voting power of Issuer
or any Significant Subsidiary of Issuer, or (z) any substantially similar
transaction; provided, however, that in no event shall any merger,
consolidation, purchase, liquidation, dividend in kind, reorganization or
similar transaction involving only the Issuer and one or more of its
Subsidiaries or involving only any two or more of such Subsidiaries, be deemed
to be an Acquisition Transaction, provided any such transaction is not entered
into in violation of the terms of the Merger Agreement;
(ii) Issuer or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized, recommended, proposed
or publicly announced its intention to authorize, recommend or propose, to
engage in an Acquisition Transaction with any person other than Grantee or a
Grantee Subsidiary, or the Board of Directors of Issuer shall have publicly
withdrawn or modified, or publicly announced its intention to withdraw or
modify, in any manner adverse to Grantee, its recommendation that the
stockholders of Issuer approve the transactions contemplated by the Merger
Agreement;
<PAGE>
(iii) The shareholders of Issuer shall have voted and failed to
approve and adopt the Merger Agreement and the Merger at a meeting which has
been held for that purpose or any adjournment or postponement thereof, or such
meeting shall not have been held in violation of the Merger Agreement or shall
have been canceled prior to termination of the Merger Agreement if, prior to
such meeting (or if such meeting shall not have been held or shall have been
canceled, prior to such termination), any person (other than the Grantee or a
Grantee Subsidiary) shall have made a proposal to Issuer or its stockholders by
public announcement or written communication that is or becomes the subject of
public disclosure to engage in an Acquisition Transaction;
(iv) Any person other than Grantee, any Grantee Subsidiary or
any Issuer Subsidiary acting in a fiduciary capacity in the ordinary course of
its business shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 10% or more of the outstanding shares of Common Stock
(the term "beneficial ownership" for purposes of this Option Agreement having
the meaning assigned thereto in Section 13(d) of the 1934 Act, and the rules
and regulations thereunder);
(v) Any person other than Grantee or any Grantee Subsidiary
shall have made a bona fide proposal to Issuer or its stockholders by public
announcement or written communication that is or becomes the subject of public
disclosure to engage in an Acquisition Transaction;
(vi) After an overture is made by a third party to Issuer or its
stockholders to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Merger Agreement and such
breach (x) would entitle Grantee to terminate the Merger Agreement and (y)
shall not have been cured prior to the Notice Date (as defined below); or
(vii) Any person other than Grantee or any Grantee Subsidiary,
other than in connection with a transaction to which 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,
whether in draft or final form, for approval to engage in an Acquisition
Transaction.
(c) 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 of beneficial ownership of 20%
or more of the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
clause (i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (y) shall be 20%.
(d) Issuer shall notify 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
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
<PAGE>
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being
herein referred to as the "Notice Date") specifying (i) the total number of
shares it will purchase pursuant to such exercise and (ii) a place and date not
earlier than three business days nor later than 60 business days from the
Notice Date for the closing of such purchase (the "Closing Date"); 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 (including any extensions thereof) have
expired or been terminated or such approvals have been obtained and any
requisite waiting period or periods (including any extensions thereof) shall
have passed. Any exercise of the Option shall be deemed to occur on the Notice
Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2,
the Holder shall pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer,
provided that failure or refusal of Issuer to designate such a bank account
shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, 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 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.
(h) Certificates for Common Stock delivered at a closing hereunder
may be endorsed with a restrictive legend that shall read substantially as
follows:
"The transfer of the shares represented by this certificate is subject to
certain provisions of an agreement between the registered holder hereof
and Issuer and to resale restrictions arising under the Securities Act of
1933, as amended. A copy of such agreement is on file at the principal
office of Issuer and will be provided to the holder hereof without charge
upon receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend
shall be removed by delivery of substitute certificate(s) without such
reference if the Holder shall have delivered to Issuer a copy of a letter from
the staff of the SEC, or an opinion of counsel, in form and substance
reasonably satisfactory to Issuer, to the effect that such legend is not
required for purposes of the 1933 Act; (ii) the reference to the provisions to
this Agreement in the above legend shall be removed by delivery of substitute
<PAGE>
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference; and (iii)
the legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
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
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. 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. Issuer agrees: (i) 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 additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock;
(ii) 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
Issuer; (iii) promptly to take all action as may from time to time be required
(including (x) complying with all premerger notification, reporting and waiting
period requirements specified in 15 U.S.C. sec. 18a and regulations promulgated
thereunder and (y) in the event, under the Bank Holding Company Act of 1956, as
amended (the "BHCA"), or the Change in Bank Control Act of 1978, as amended, or
any state banking law, prior approval of or notice to the Federal Reserve Board
or to any other federal or state regulatory authority is necessary before the
Option may be exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the Federal Reserve
Board or such other federal or state regulatory authority as they may require)
in order to permit the Holder to exercise the Option and Issuer duly and
effectively to issue shares of Common Stock pursuant hereto; and (iv) promptly
to take all action provided herein to protect the rights of the Holder against
dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender
of this Agreement at the principal office of Issuer, for other Agreements
providing for Options of different denominations entitling the holder thereof
to purchase, on the same terms and subject to the same conditions as are set
forth herein, in the aggregate the same number of shares of 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
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
<PAGE>
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, Issuer will execute and deliver a
new Agreement of like tenor and date. Any such new Agreement executed and
delivered shall constitute an additional contractual obligation on the part of
Issuer, whether or not the 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 shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise
of the Option and the Option Price shall be subject to adjustment from time to
time as provided in this Section 5. In the event of any change in, or
distributions in respect of, the Common Stock by reason of stock dividends,
split-ups, mergers, recapitalizations, combinations, subdivisions, conversions,
exchanges of shares, distributions on or in respect of the Common Stock that
would be prohibited under the terms of the Merger Agreement, or the like, the
type and number of shares of Common Stock purchasable upon exercise hereof and
the Option Price shall be appropriately adjusted in such manner as shall fully
preserve the economic benefits provided hereunder and proper provision shall be
made in any agreement governing any such transaction to provide for such proper
adjustment and the full satisfaction of the Issuer's obligations hereunder.
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 100 day after such Subsequent Triggering Event (whether on its
own behalf or on 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 a shelf registration statement under the 1933
Act covering the resale of this Option and any shares issued pursuant to this
Option and the issuance of any shares issuable pursuant to this Option to the
extent then permitted under the rules, regulations or policies of the SEC and,
to the extent not so permitted, the resale of such shares issuable pursuant to
this Option. The Issuer shall use its reasonable best efforts to cause such
registration statement to become effective and remain current in order to
permit the sale or other disposition of this Option and any shares of Common
Stock issued upon total or partial exercise of this Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee. Issuer will use
its reasonable best efforts to cause such registration statement first to
become effective and then to remain effective for such period not in excess of
180 days from the day such registration statement first becomes effective or
such shorter time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand two such registrations.
The foregoing notwithstanding, if, at the time of any request by Grantee for
registration of the Option or Option Shares as provided above, Issuer is in
registration with respect to an underwritten public offering of shares of
Common Stock, and if in the good faith judgment of the managing underwriter or
managing underwriters, or, if none, the sole underwriter or underwriters, of
such offering the inclusion of the Holder's Option or Option Shares would
interfere with the successful marketing of the shares of Common Stock offered
by Issuer, the number of Option Shares otherwise to be covered in the
registration statement contemplated hereby may be reduced; and provided,
<PAGE>
however, that after any such required reduction the number of Option Shares to
be included in such offering for the account of the Holder shall constitute at
least 25% of the total number of shares to be sold by the Holder and Issuer in
the aggregate; and provided further, however, that if such reduction occurs,
then 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. Upon receiving any request under this Section 6 from
any Holder, Issuer agrees to send a copy thereof to any other person known to
Issuer to be entitled to registration rights under this Section 6, in each case
by promptly mailing the same, postage prepaid, to the address of record of the
persons entitled to receive such copies. Notwithstanding anything to the
contrary contained herein, in no event shall Issuer be obligated to effect more
than two registrations pursuant to this Section 6 by reason of the fact that
there shall be more than one Grantee as a result of any assignment or division
of this Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase Event (as
defined below), (i) following a request of the Holder, delivered prior to an
Exercise Termination Event, Issuer (or any successor thereto) 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 the owner of Option Shares from
time to time (the "Owner") delivered within 100 days after such occurrence (or
such later period as provided in Section 10), Issuer shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "Option Share Repurchase Price") equal to the market/offer price
multiplied by the number of Option Shares so designated. The term "market/offer
price" shall mean the highest of (i) the price per share of Common Stock at
which a tender offer or exchange offer therefor has been made, (ii) the price
per share of Common Stock to be paid by any third party pursuant to an
agreement with Issuer, (iii) the highest closing price for shares of Common
Stock within the six-month period immediately preceding the date the Holder
gives notice of the required repurchase of this Option or the Owner gives
notice of the required repurchase of Option Shares, as the case may be, or (iv)
in the event of a sale of all or a substantial portion of Issuer's assets, the
sum of the price paid in such sale for such assets and the current market value
of the remaining assets of Issuer as determined by a nationally recognized
investment banking firm selected by the Holder or the Owner, as the case may
be, divided by the number of shares of Common Stock of 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 the Holder or Owner, as the case may be,
and reasonably acceptable to the Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and any Option Shares pursuant
to this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
<PAGE>
Section 7. Within the later to occur of (x) five business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto and (y) the time that is
immediately prior to the occurrence of a Repurchase Event, Issuer shall deliver
or cause to be delivered to the Holder the Option Repurchase Price and/or to
the Owner the Option Share Repurchase Price therefor or the portion thereof
that Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full,
Issuer shall immediately so notify the Holder and/or the Owner and thereafter
deliver or cause to be delivered, from time to time, to the Holder and/or the
Owner, as appropriate, the portion of the Option Repurchase Price and the
Option Share Repurchase Price, respectively, that it is no longer prohibited
from delivering, within five business days after the date on which Issuer is no
longer so prohibited; provided, however, that if Issuer at any time after
delivery of a notice of repurchase pursuant to paragraph (b) of this Section 7
is prohibited under applicable law or regulation from delivering to the Holder
and/or the Owner, as appropriate, the Option Repurchase Price and the Option
Share Repurchase Price, respectively, in full (and Issuer hereby undertakes to
use its best 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), the 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, in the latter case, Issuer shall promptly (i) deliver
to the Holder and/or the Owner, as appropriate, that portion of the Option
Repurchase Price or the Option Share Repurchase Price that Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Holder, a new Stock Option Agreement evidencing the right of the 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 the Owner a certificate for the
Option Shares it is then so prohibited from repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall be
deemed to have occurred (i) upon the consummation of any merger, consolidation
or similar transaction involving Issuer or any purchase, lease or other
acquisition of all or a substantial portion of the assets of Issuer, other than
any such transaction which would not constitute an Acquisition Transaction
pursuant to the proviso to Section 2 (b) (i) hereof or (ii) upon the
acquisition by any person of beneficial ownership of 50% or more of the then
outstanding shares of Common Stock, provided that no such event shall
constitute a Repurchase Event unless a Subsequent Triggering Event shall have
occurred prior to an Exercise Termination Event. The parties hereto agree that
Issuer's obligations to repurchase the Option or Option Shares under this
Section 7 shall not terminate upon the occurrence of an Exercise Termination
Event unless no Subsequent Triggering Event shall have occurred prior to the
occurrence of an Exercise Termination Event.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
<PAGE>
other than Grantee or one of its Subsidiaries, and shall not be the continuing
or surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge into Issuer and
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 50% of the outstanding voting shares and voting
share equivalents of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its assets to any person, other than Grantee or one
of its 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 (x) the Acquiring
Corporation (as hereinafter defined) or (y) any person that controls the
Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other than
Issuer), (ii) Issuer in a merger in which Issuer is the continuing or surviving
person, and (iii) the transferee of all or substantially all of Issuer's
assets.
(2) "Substitute Common Stock" shall mean the common stock issued
by the issuer of the Substitute Option upon exercise of the Substitute Option.
(3) "Assigned Value" shall mean the market/offer price, as
defined in Section 7.
(4) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer of
the Substitute Option, the Average Price shall be computed with respect to a
share of common stock issued by the person merging into Issuer or by any
company which controls or is controlled by 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 be as similar as possible and in no
event less advantageous to the Holder. 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 Substitute Common Stock as is equal to the Assigned Value multiplied
by the number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of the Substitute
<PAGE>
Option per share of Substitute Common Stock shall then be equal to the Option
Price multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock for which the Option is then exercisable and the
denominator of which shall be the number of shares of 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 shares of
Substitute Common Stock outstanding prior to exercise of 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 clause (e), the issuer of the Substitute Option (the "Substitute
Option Issuer") shall make a cash payment to Holder equal to the excess of (i)
the value of the Substitute Option without giving effect to the limitation in
this clause (e) over (ii) the value of the Substitute Option after giving
effect to the limitation in this clause (e). This difference in value shall be
determined by a nationally recognized investment banking firm selected by the
Holder or the Owner, as the case may be, and reasonably acceptable to the
Acquiring Corporation.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder.
9. (a) At the 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 (x) 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 Substitute Common Stock for which the Substitute
Option may then be exercised plus (y) Grantee's Out-of-Pocket Expenses (to the
extent not previously reimbursed), and at the request of the owner (the
"Substitute Share Owner") of shares of Substitute Common Stock (the "Substitute
Shares"), the Substitute Option Issuer shall repurchase the Substitute Shares
at a price (the "Substitute Share Repurchase Price") equal to (x) the Highest
Closing Price multiplied by the number of Substitute Shares so designated plus
(y) Grantee's Out-of-Pocket Expenses (to the extent not previously reimbursed).
The term "Highest Closing Price" shall mean the highest closing price for
shares of Substitute Common Stock within the six-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) The 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 the Substitute Option Holder or the Substitute Share Owner, as the
case may be, elects to require the Substitute Option Issuer to repurchase the
<PAGE>
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 business days after the surrender of the Substitute Option and/or
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 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 from repurchasing the Substitute Option
and/or the Substitute Shares in part or in full, the Substitute Option Issuer
shall immediately so notify the 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 the Substitute Share Owner, as
appropriate, the portion of the Substitute Share Repurchase Price,
respectively, which it is no longer prohibited from delivering, within five
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 subsection (b) of
this Section 9 prohibited under applicable law or regulation 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 full (and the Substitute Option Issuer shall use its
best efforts to receive all required regulatory and legal approvals as promptly
as practicable in order to accomplish such repurchase), the Substitute Option
Holder or Substitute Share Owner may revoke its notice of repurchase of the
Substitute Option or the Substitute Shares either in whole or to the extent of
the prohibition, whereupon, in the latter case, 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 100-day period for exercise of certain rights under Sections 2, 6,
7 and 13 shall be extended: (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 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
<PAGE>
(a) 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 Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof
through the termination of this Agreement in accordance with its terms will
have reserved for issuance upon the exercise of the Option, that number of
shares of 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,
encumbrance and security interests and not subject to any preemptive rights.
(c) Issuer has taken all action (including if required redeeming all
of the Rights or amending or terminating the Rights Agreement) so that the
entering into of this Option Agreement, the acquisition of shares of Common
Stock hereunder and the other transactions contemplated hereby do not and will
not result in the grant of any rights to any person under the Rights Agreement
or enable or require the Rights to be exercised, distributed or triggered.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Grantee. This Agreement has been duly executed and delivered by
Grantee.
(b) The Option is not being, and any shares of Common Stock or other
securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the Securities Act.
13. 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, without the express written consent of the other party, except
that in the event a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express provisions hereof,
may assign in whole or in part its rights and obligations hereunder within 90
days following such Subsequent Triggering Event (or such later period as
provided in Section 10); provided, however, that until the date 15 days
following the date on which the Federal Reserve Board approves an application
by Grantee under the BHCA to acquire the shares of Common Stock subject to the
<PAGE>
Option, Grantee may not assign its rights under the Option except in (i) a
widely dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares of
Issuer, (iii) an assignment to a single party (e.g., a broker or investment
banker) for the purpose of conducting a widely dispersed public distribution on
Grantee's behalf, or (iv) any other manner approved by the Federal Reserve
Board.
14. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including without limitation making application to list the
shares of Common Stock issuable hereunder on the Nasdaq National Stock Market
upon official notice of issuance and applying to the Federal Reserve Board
under the BHCA for approval to acquire the shares issuable hereunder, but
Grantee shall not be obligated to apply to state banking authorities for
approval to acquire the shares of Common Stock issuable hereunder until such
time, if ever, as it deems appropriate to do so.
15. (a) Grantee may, at any time during which Issuer would be required to
repurchase the Option or any Option Shares pursuant to Section 7, surrender the
Option (together with any Option Shares issued to and then owned by Grantee) to
Issuer in exchange for a cash fee equal to the Surrender Price (as defined
below); provided, however, that Grantee may not exercise its rights pursuant to
this Section 15 if Issuer has repurchased the Option (or any portion thereof)
or any Option Shares pursuant to Section 7. The "Surrender Price" shall be
equal to (i) $56.3 million, plus (ii) if applicable, the aggregate purchase
price previously paid pursuant hereto by Grantee with respect to any Option
Shares, minus (iii) if applicable, the sum of (A) the excess of (1) the net
cash amounts, if any, received by Grantee pursuant to the arms' length sale of
Option Shares (or any other securities into which such Option Shares were
converted or exchanged) to any party not affiliated with Grantee, over (2) the
aggregate purchase price previously paid pursuant hereto by Grantee with
respect to such Option Shares and (B) the net cash amounts, if any, received by
Grantee pursuant to an arms' length sale of a portion of the Option to any
party not affiliated with Grantee.
(b) Grantee may exercise its right to surrender the Option and any
Option Shares pursuant to this Section 15 by surrendering to Issuer, at its
principal office, this Agreement together with certificates for Option Shares,
if any, accompanied by a written notice stating (i) that Grantee elects to
surrender the Option and Option Shares, if any, in accordance with the
provisions of this Section 15 and (ii) the Surrender Price. The Surrender Price
shall be payable in immediately available funds on or before the second
business day following receipt of such notice by Issuer.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from paying the Surrender Price to Grantee in full, Issuer shall
immediately so notify Grantee and thereafter deliver or cause to be delivered,
from time to time, to Grantee, the portion of the Surrender Price that Issuer
is no longer prohibited from paying, within five business days after the date
on which Issuer is no longer so prohibited, provided, however, that if Issuer
at any time after delivery of a notice of surrender pursuant to paragraph (b)
of this Section 15 is prohibited under applicable law or regulation from paying
<PAGE>
to Grantee the Surrender Price in full (i) Issuer shall (A) use its reasonable
best efforts to obtain all required regulatory and legal approvals and to file
any required notices as promptly as practicable in order to make such payments,
(B) within five days of the submission or receipt of any documents relating to
any such regulatory and legal approvals, provide Grantee with copies of the
same, and (C) keep Grantee advised of both the status of any such request for
regulatory and legal approvals, as well as any discussions with any relevant
regulatory or other third party reasonably related to the same and (ii) Grantee
may revoke such notice of surrender by delivery of a notice of revocation to
Issuer and, upon delivery of such notice of revocation, the Exercise
Termination Date shall be extended to a date six months from the date on which
the Exercise Termination Date would have occurred if not for the provisions of
this Section 15(c) (during which period Grantee may exercise any of its rights
hereunder, including any and all rights pursuant to this Section 15).
(d) Grantee shall have rights substantially identical to those set
forth in paragraphs (a), (b) and (c) of this Section 15 with respect to the
Substitute Option and the Substitute Option Issuer during any period in which
the Substitute Option Issuer would be required to repurchase the Substitute
option pursuant to Section 9.
16. (a) Notwithstanding any other provision of this Agreement, this Option
may not be exercised for a number of shares as would, as of the date of
exercise, result in a Notional Total Profit (as defined below) of more than
$77.4 million; provided that nothing in this sentence shall restrict any
exercise of the Option permitted hereby on any subsequent date.
(b) As used herein, the term "Notional Total Profit" with respect to
any number of shares as to which Grantee may propose to exercise this Option
shall be the Total Profit (as defined below) determined as of the date of such
proposed exercise assuming that this Option were exercised on such date for
such number of shares and assuming that such shares, together with all other
Option Shares held by Grantee and its affiliates as of such date, were sold for
cash at the closing market price for the Common Stock as of the close of
business on the preceding trading day (less customary brokerage commissions).
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount received by Grantee
pursuant to Issuer's repurchase of the Option (or any portion thereof) pursuant
to Section 7, (ii) (x) the amount received by Grantee pursuant to Issuer's
repurchase of Option Shares (or any portion thereof) pursuant to Section 7,
less (y) the Grantee's purchase price for such Option Shares, (iii) the net
cash amounts received by Grantee pursuant to the sale of Option Shares (or any
other securities into which such Option Shares are converted or exchanged) to
any unaffiliated party, less (y) the Grantee's purchase price of such Option
Shares, (iv) any amounts received by Grantee on the transfer of the Option (or
any portion thereof) to any unaffiliated party, and (v) any amount equivalent
to the foregoing with respect to the Substitute Option.
17. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
<PAGE>
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
18. 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 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 Section
1(b) or 5 hereof), it is the express intention of Issuer to allow the Holder to
acquire or to require Issuer to repurchase such lesser number of shares as may
be permissible, without any amendment or modification hereof.
19. 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 Merger Agreement.
20. 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.
21. 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.
22. 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.
23. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties
with respect to the transactions contemplated hereunder and supersedes all
prior arrangements or understandings with respect thereof, written or oral. The
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns. Nothing in this Agreement, expressed or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
except as assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided herein.
24. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
UST CORP.
By: /s/ Neal F. Finnegan
-------------------------
Name: Neal F. Finnegan
Title: President and Chief Executive Officer
CITIZENS FINANCIAL
GROUP, INC.
By: /s/ Lawrence K. Fish
----------------------
Name: Lawrence K. Fish
Title: Chairman, President and Chief
Executive Officer
AMENDMENT TO RIGHTS AGREEMENT
Amendment, dated as of June 21, 1999 (this "Amendment"), to the Rights
Agreement, dated as of September 19, 1995 (the "Rights Agreement"), by and
between UST Corp., a Massachusetts corporation (the "Company") and United
States Trust Company, a Massachusetts chartered banking and trust company (the
"Rights Agent").
WHEREAS, in accordance with the terms of the Rights Agreement, the Company
deems it desirable to make certain amendments to the Rights Agreement; and
WHEREAS, Section 28 of the Rights Agreement provides that prior to the
Distribution Date (as defined in the Rights Agreement), the Company and the
Rights Agent shall, if the Company so directs, supplement or amend any
provision of the Rights Agreement without the approval of any holders of
certificates representing shares of the Company's common stock, par value
$0.625 per share (the "Common Shares"); and
WHEREAS, the Company intends to enter into an Agreement and Plan of Merger
(the "Merger Agreement") with Citizens Financial Group, Inc., a Delaware
corporation (the "Buyer"), pursuant to which, among other things, the Company
will be merged with a newly-formed subsidiary of the Buyer and, by virtue of
such merger, will become a wholly-owned subsidiary of the Buyer; and
WHEREAS, prior to entering into the Merger Agreement, the Company desires
to amend certain provisions of the Rights Agreement.
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein set forth, the parties hereby agree as follows:
1. Amendments of Section 1.
(a) The definition of "Acquiring Person" set forth in Section 1 of the
Rights Agreement is amended to add the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the contrary,
neither Citizens Financial Group, Inc. ("CFG") nor any of its
existing or future Affiliates or Associates shall be deemed to be an
Acquiring Person as a result of (i) the negotiation, execution or
delivery of the Agreement and Plan of Merger, dated as of June 21,
1999, by and among the Company and CFG (as the same may be amended
from time to time, the "Merger Agreement"), pursuant to which a
newly-formed subsidiary of CFG will be merged with and into the
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Company (the "Merger"), and the Company shall become a wholly-owned
subsidiary of CFG; (ii) the negotiation, execution or delivery of the
Stock Option Agreement, dated as of June 21, 1999, by and among the
Company and CFG (as the same may be amended from time to time, the
"Stock Option Agreement"); (iii) the negotiation, execution or
delivery of the Stockholders Agreements, each dated as of June 21,
1999, by and between CFG and certain officers and directors of the
Company as contemplated by the Merger Agreement (as the same may
amended from time to time, collectively, the "Stockholders
Agreements"); (iv) the acquisition of Common Shares pursuant to the
Merger Agreement or the consummation of the Merger; (v) the
acquisition of Common Shares pursuant to the Stock Option Agreement;
or (vi) the consummation of the other transactions contemplated by
the Merger Agreement."
(b) The definition of "Triggering Event" set forth in Section 1 of the
Rights Agreement is amended to add the following proviso at the end thereof:
"; provided, however, that no Triggering Event shall occur as a
result of (i) the negotiation, execution or delivery of the Merger
Agreement, the Stock Option Agreement or the Stockholders Agreements,
(ii) the acquisition of Common Shares pursuant to the Merger
Agreement, the Stock Option Agreement or the consummation of the
Merger, or (iii) the consummation of the other transactions
contemplated by the Merger Agreement."
2. Amendment of Section 3(a). Section 3(a) of the Rights Agreement is
amended to add the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the contrary, a
Distribution Date shall not be deemed to have occurred as a result of
(i) the negotiation, execution or delivery of the Merger Agreement,
the Stock Option Agreement or the Stockholders Agreements, (ii) the
acquisition of Common Shares pursuant to the Merger Agreement, the
Stock Option Agreement or the consummation of the Merger, or (iii)
the consummation of the other transactions contemplated by the Merger
Agreement."
3. Amendment of Section 7(a). Section 7(a) of the Rights Agreement is
amended to add the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the contrary,
neither (i) the negotiation, execution or delivery of the Merger
Agreement, the Stock Option Agreement or the Stockholders Agreements;
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(ii) the acquisition of Common Shares pursuant to the Merger
Agreement, the Stock Option Agreement or the consummation of the
Merger; nor (iii) the consummation of the other transactions
contemplated in the Merger Agreement, shall be deemed to be events
that cause the Rights to become exercisable pursuant to the
provisions of this Section 7 or otherwise."
4. Amendment of Section 11. Section 11 of the Rights Agreement is amended
to add the following sentence after the first sentence of said Section:
"Notwithstanding anything in this Rights Agreement to the contrary,
neither (i) the negotiation, execution or delivery of the Merger
Agreement, the Stock Option Agreement or the Stockholders Agreements;
(ii) the acquisition of Common Shares pursuant to the Merger
Agreement, the Stock Option Agreement or the consummation of the
Merger; nor (iii) the consummation of the other transactions
contemplated in the Merger Agreement, shall be deemed to be a Section
11(a)(ii) Event or to cause the Rights to be adjusted or to become
exercisable in accordance with this Section 11."
5. Amendment of Section 13. Section 13 of the Rights Agreement is amended
to add the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the contrary,
neither (i) the negotiation, execution or delivery of the Merger
Agreement, the Stock Option Agreement or the Stockholders Agreements;
(ii) the acquisition of Common Shares pursuant to the Merger
Agreement, the Stock Option Agreement or the consummation of the
Merger; nor (iii) the consummation of the other transactions
contemplated in the Merger Agreement, shall be deemed to be a Section
13 Event or to cause the Rights to be adjusted or to become
exercisable in accordance with Section 13."
6. Effectiveness. This Amendment shall be deemed effective as of the date
first written above, as if executed on such date. Except as amended hereby, the
Rights Agreement shall remain in full force and effect and shall be otherwise
unaffected hereby.
7. Miscellaneous. This Amendment shall be deemed to be a contract made
under the laws of The Commonwealth of Massachusetts and for all purposes shall
be governed by and construed in accordance with the laws of such state
applicable to contracts to be made and performed entirely within such state.
This Amendment may be executed in any number of counterparts, each of such
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counterparts shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same instrument. If any
provisions, covenant or restriction of this Amendment is held by a court of
competent jurisdiction or other authority to be invalid, illegal or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Amendment shall remain in full force and effect and shall
in no way be effected, impaired or invalidated.
EXECUTED under seal as of the date set forth above.
Attest: UST CORP.
/s/ Eric R. Fischer /s/ Neal F. Finnegan
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Name: Eric R. Fischer Name: Neal F. Finnegan
Title: Secretary Title: President and Chief Executive Officer
Attest: UNITED STATES TRUST
COMPANY
as Rights Agent:
/s/ Eric R. Fischer /s/ Domenic Colasacco
- ------------------------------ --------------------------
Name:Eric R. Fischer Name: Domenic Colasacco
Title: Title: Chairman and President
CITIZENS FINANCIAL GROUP TO ACQUIRE UST CORP.
Citizens Financial Group, Inc. ("Citizens"), a New England-based financial
services group owned by The Royal Bank of Scotland plc., and UST Corp. (Nasdaq:
USTB) today announced a definitive agreement under which Citizens will acquire
UST Corp. in a cash transaction for $1.4 billion, or $32 per share.
This acquisition, including Citizens' recently announced acquisition of
State Street Corporation's commercial banking business, solidifies Citizens as
the 2nd largest bank in New England with assets of $28 billion. This will be
the 17th overall acquisition for Citizens Financial Group, Inc. since 1988.
Neal F. Finnegan, UST Corp.'s President and CEO, will become non-executive
Chairman of Citizens Bank of Massachusetts. In addition, he will become a
director of Citizens Financial Group, Inc. Thomas J. Hollister, will continue
as President & CEO of the newly combined Citizens Bank of Massachusetts which
will grow from $8 billion (including the recently announced State Street
transaction) to $14 billion in assets.
Lawrence K. Fish, Citizens' Chairman, President & CEO said: "This
transaction firmly establishes Citizens as the second largest bank in New
England. It is a significant step in our mission to build Citizens into New
England's finest bank for customers, employees, and the community."
"Neal Finnegan and his team at UST have built a highly respected franchise
in eastern Massachusetts with tremendous shareholder value. We look forward to
combining the talents and resources of these two institutions to deepen our
roots in New England," Fish said.
Neal F. Finnegan, President & CEO of UST Corp. said: "I'm pleased that we
are able to combine with a first-rate company that shares our core values.
Larry Fish and his team at Citizens will strengthen our mission to provide
quality service to our customers and our community."
This acquisition will significantly expand Citizens' growing market
presence in eastern Massachusetts and throughout New England. The combined
entity will increase Citizens' deposits from $15.3 billion to $19.5 billion,
and increase Citizens' loan portfolio from $12.5 billion to $16.9 billion.
Citizens will have over 350 branches throughout New England, nearly 800
ATMs, and will be the 33rd largest bank in the country. Specifically in
Massachusetts, this acquisition will: Grow Citizens' Massachusetts assets from
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$8 billion (including the recently announced $2 billion State Street
transaction) to $14 billion. Increase Citizens' market share in key retail
markets, including Middlesex, Norfolk and Suffolk counties where Citizens will
be a strong number two in deposit market share. Expand Citizens' commercial
loan portfolio in small business and middle market lending. The combined entity
will have approximately 50,000 commercial customers. Bring several key lines of
business to Citizens including investment management (United States Trust
Company) and insurance brokerage (Brewer & Lord). Both of these companies will
continue to operate autonomously.
Goldman Sachs served as financial advisor to Citizens. Fox, Pitt-Kelton
served as financial advisor and provided a fairness opinion to UST Corp.
Goodwin, Procter & Hoar LLP provided legal counsel for Citizens. Bingham Dana
LLP provided legal counsel for UST Corp.
Citizens Financial Group, Inc., is an $18.9 billion financial services
company headquartered in Providence, RI. It operates as Citizens Bank in
Connecticut, Massachusetts, New Hampshire and Rhode Island. Citizens is a
wholly-owned subsidiary of The Royal Bank of Scotland, plc. For more
information visit the Citizens Bank website at www.citizensbank.com.
UST Corp. is a $5.9 billion Boston-based bank holding company with 87
banking offices in eastern Massachusetts.
