<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 4, 1994
REGISTRATION NO. 33-72554
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------------------
VERMONT FINANCIAL SERVICES CORP.
(exact name of registrant as specified in its charter)
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DELAWARE 03-0284445
(State of Incorporation) (IRS Employer Identification No.)
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100 MAIN STREET, BRATTLEBORO, VERMONT 05301
(802) 257-7151
(Address and telephone number of principal executive offices)
JOHN D. HASHAGEN, JR., PRESIDENT AND CHIEF EXECUTIVE OFFICER
VERMONT FINANCIAL SERVICES CORP.
100 MAIN STREET
BRATTLEBORO, VERMONT 05301
(802) 257-7151
(Name, address and telephone number for agent for service)
------------------------------------
Copies to:
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CHRISTOPHER CABOT, ESQUIRE JOHN J. GORMAN, ESQUIRE
SULLIVAN & WORCESTER LUSE, LEHMAN, GORMAN,
ONE POST OFFICE SQUARE POMERENK & SCHICK
BOSTON, MASSACHUSETTS 02109 1300 I STREET, N.W.
(617) 338-2800 WASHINGTON, D.C. 20005
(202) 962-8640
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
VERMONT FINANCIAL SERVICES CORP.
FORM S-4
CROSS REFERENCE SHEET SHOWING LOCATION
OF INFORMATION REQUIRED BY ITEMS OF FORM S-4
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ITEM OF PART I OF FORM S-4 LOCATION IN PROSPECTUS
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1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus.... Forepart and Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus................................ Inside Front Cover Page; Available
Information; Incorporation of Documents by
Reference
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............. Summary
4. Terms of the Transaction.................... Summary; The Merger; Description of VFSC
Common Stock
5. Pro Forma Financial Information............. Selected Historical and Pro Forma
Consolidated Financial Information; Pro
Forma Condensed Consolidated Financial
Statements
6. Material Contracts with the Company Being
Acquired.................................. Not Applicable
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters........................ Not Applicable
8. Interests of named Experts and Counsel...... Experts; Legal Opinions
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... Further Information
10. Information with Respect to S-3
Registrants............................... Not Applicable
11. Incorporation of Certain Information by
Reference................................. Not Applicable
12. Information with Respect to S-2 or S-3
Registrants............................... Incorporation of Documents By Reference
13. Incorporation of Certain Information by
Reference................................. Not Applicable
14. Information With Respect to Registrants
Other than S-2 or S-3 Registrants......... Not Applicable
15. Information With Respect to S-3 Companies... Not Applicable
16. Information With Respect to S-2 or S-3
Companies................................. The Companies; Selected Consolidated
Financial Data; Pro Forma Financial
Statements; The Merger; Certain Federal
Income Tax Consequences; Description of
Business; Management; Market Prices of
Securities; Risk Factors; Financial
Statements Not Applicable
17. Information with Companies Other Than S-2 or
S-3 Companies............................. Not Applicable
18. Information if Proxies, Consents or
Authorizations Are to be Solicited........ Cover Page; Summary; The Merger
19. Information if Proxies, Consent or
Authorizations Are Not to be Solicited.... Not Applicable
</TABLE>
<PAGE> 3
VERMONT FINANCIAL SERVICES CORP.
100 Main Street
Brattleboro, Vermont 05301
February , 1994
Dear Fellow Stockholder:
I am pleased to invite you to attend a Special Meeting of Stockholders of
Vermont Financial Services Corp. ("VFSC") for the purpose of voting on the
proposed merger of West Mass Bankshares, Inc. into VFSC. The proposed merger,
which was announced last August, would result in VFSC's becoming the owner of
United Savings Bank of Greenfield, Massachusetts, which conducts its business
through six banking offices in Western Massachusetts.
The Board of Directors of VFSC, after carefully evaluating the proposed
merger, believes that it is in the best interests of VFSC and its stockholders.
The Board has unanimously approved the merger and recommends that you vote FOR
its approval at the Special Meeting.
The enclosed Joint Proxy Statement and Prospectus contains a description of
the merger as well as background of the proposed transaction and the businesses
of the two merging companies and their subsidiaries. I encourage you to read
this document closely. Should you have any questions concerning the Special
Meeting, you may call us at (802) 257-7151. Additionally, Regan and Associates,
Inc., which has been retained by VFSC to assist in the solicitation of proxies,
is available to answer questions at (212) 587-3005.
Accompanying this letter are a Notice of the Special Meeting, a proxy card
and the Joint Proxy Statement and Prospectus. To assure that your shares are
properly represented at the meeting, please sign, date and return your proxy as
soon as possible in the envelope provided. If you attend the meeting in person,
you may vote your shares even if you have previously returned a proxy card.
However, if you are a stockholder whose shares are not registered in your own
name, you will need additional documentation from your record holder to vote
personally at the Special Meeting.
YOUR VOTE IS IMPORTANT. WE URGE YOU TO VOTE FOR THE PROPOSED MERGER.
Sincerely,
JOHN D. HASHAGEN, JR.
President and Chief Executive Officer
<PAGE> 4
VERMONT FINANCIAL SERVICES CORP.
100 Main Street
Brattleboro, Vermont 05301
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To the Stockholders of
VERMONT FINANCIAL SERVICES CORP.
Notice is hereby given that a Special Meeting of the Stockholders of
Vermont Financial Services Corp. ("VFSC") will be held at the Woodstock Inn,
Woodstock, Vermont on , 1994 at 10:00 a.m. local time (the "Special
Meeting"), for the purpose of considering and voting upon the following matters:
1. A proposal to approve and adopt the Agreement and Plan of
Reorganization (the "Merger Agreement"), dated as of August 24, 1993, as
amended on September 21 and October 7, 1993, by and between VFSC and West
Mass Bankshares, Inc. ("West Mass"), and to authorize VFSC to enter into a
Plan of Merger (the "Plan of Merger") with West Mass. Pursuant to the
Merger Agreement and Plan of Merger, West Mass would be merged with and
into VFSC (the "Merger"), upon and subject to the terms and conditions set
forth therein, all as more fully described in the attached Joint Proxy
Statement and Prospectus. If the Merger is approved, shares of Common Stock
of VFSC will be issued to stockholders of West Mass in exchange for their
shares of West Mass Common Stock, as more fully described in the attached
Joint Proxy Statement and Prospectus. Copies of the Merger Agreement and
the Plan of Merger are contained in Appendix A to the attached Joint Proxy
Statement and Prospectus.
2. Such other matters as may properly be brought before the meeting or
any adjournment or postponement thereof.
Only stockholders of record at the close of business on January , 1994
(the "Record Date") are entitled to notice of, and to vote at the Special
Meeting and any and all adjournments or postponements thereof. The affirmative
vote of the holders of two-thirds of the shares of Common Stock, $1.00 par
value, outstanding on the Record Date is required for approval of the Merger
Agreement and related Plan of Merger.
A complete list of the stockholders entitled to vote at the Special
Meeting, arranged in alphabetical order and showing the address of each
stockholder, and the number of shares registered in the name of each stockholder
will be filed at the Vermont National Bank branch at 2 The Green, Woodstock,
Vermont, at least ten days before the Special Meeting and shall be at all times
during ordinary business hours, and during the whole time of the Special
Meeting, open to examination by any stockholder for any purpose germane to the
Special Meeting.
Stockholders of VFSC do not have appraisal rights under Delaware law in
connection with the Merger.
By Order of the Board of Directors
RICHARD O. MADDEN
Secretary
February , 1994
<PAGE> 5
WEST MASS BANKSHARES, INC.
45 Federal Street
Greenfield, Massachusetts 01301
, 1994
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
West Mass Bankshares, Inc. ("West Mass") to be held on , 1994, at
Howard Johnson's Motor Lodge, Route 2A, Greenfield, Massachusetts, at a.m.
(the "Special Meeting").
At the Special Meeting, stockholders will be asked to approve the Agreement
and Plan of Reorganization (the "Merger Agreement"), dated as of August 24,
1993, by and between Vermont Financial Services Corp. ("VFSC") and West Mass,
and to authorize West Mass to enter into a Plan of Merger with VFSC. VFSC, a
Delaware corporation, is a registered bank holding company with its principal
place of business in Brattleboro, Vermont. VFSC's sole banking subsidiary,
Vermont National Bank, is the second largest bank in the State of Vermont with
total deposits of $782 million and total assets of $928 million at September 30,
1993. Vermont National Bank conducts business through a network of 32 offices
located in 7 of Vermont's 14 counties.
If the Merger Agreement is approved and the merger between VFSC and West
Mass consummated (the "Merger"), each outstanding share of West Mass Common
Stock, other than shares as to which dissenters' rights have been perfected and
shares held by West Mass as treasury stock, will be converted into the right to
receive that number of shares of VFSC Common Stock as shall equal the quotient
of $17.75 divided by the Market Value of VFSC Common Stock, as determined in the
manner specified in the accompanying Joint Proxy Statement and Prospectus (the
"Exchange Ratio"). However, in no event shall the Exchange Ratio be less than
0.8875 nor more than 0.9861 (except as a consequence of certain adjustments
provided for in the Merger Agreement).
West Mass may terminate the Merger Agreement (subject to certain
limitations) if, after the Special Meeting, the Market Value of the VFSC Common
Stock (as determined under the Merger Agreement) during a period commencing five
days before the Merger is to become effective, falls below $14.875 per share.
The Merger Agreement provides, however, that West Mass may not terminate the
agreement if the decline in the Market Value of VFSC Common Stock below $14.875
per share is matched by a parallel decline in an agreed-upon index of the stock
prices consisting of no less than three publicly-traded financial institutions.
West Mass stock certificates should not be returned to West Mass with the
proxy and should not be forwarded until you receive a letter of transmittal that
will be provided shortly after the Merger is consummated.
The Merger Agreement and Merger is described in the accompanying Joint
Proxy Statement and Prospectus, the forepart of which includes a summary of the
terms of the Merger and certain other information relating to the proposed
transaction. Consummation of the Merger is subject to certain conditions,
including the approval of the Merger Agreement by West Mass stockholders. We
urge you to read the Joint Proxy Statement and Prospectus carefully.
The West Mass Board of Directors has received the opinion of its financial
advisor, M.A. Schapiro & Co., Inc. ("M.A. Schapiro"), that the Exchange Ratio
(as defined in the Joint Proxy Statement and Prospectus) is fair to the
shareholders of West Mass from a financial point of view, and has determined
that the Merger Agreement is in the best interest of West Mass shareholders.
ACCORDINGLY, THE BOARD UNANIMOUSLY HAS APPROVED THE MERGER AGREEMENT AND
RELATED TRANSACTIONS AND RECOMMENDS THAT YOU VOTE IN FAVOR OF THE MERGER
AGREEMENT AT THE SPECIAL MEETING.
<PAGE> 6
M.A. Schapiro's opinion is summarized in the Joint Proxy Statement and
Prospectus, and the complete opinion is included as Appendix B to the Joint
Proxy Statement and Prospectus. We urge you to read these items carefully.
YOUR VOTE IS IMPORTANT. THE FAILURE TO VOTE WILL HAVE THE SAME EFFECT AS A
VOTE AGAINST THE MERGER AGREEMENT. You are urged to sign, date and mail the
enclosed proxy card promptly in the postage-prepaid envelope provided. If you
attend the Special Meeting, you may vote in person even if you have already
mailed your proxy card.
On behalf of the Board of Directors, I thank you for your continued
support. We appreciate your interest.
Sincerely yours,
Francis L. Lemay
President and Chief Executive Officer
<PAGE> 7
WEST MASS BANKSHARES, INC.
45 Federal Street
Greenfield, Massachusetts 01301
, 1994
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To the Stockholders of West Mass Bankshares, Inc.:
Notice is hereby given that a Special Meeting of the Stockholders of West
Mass Bankshares, Inc. ("West Mass") will be held at Howard Johnson's Motor
Lodge, Route 2A, Greenfield, Massachusetts on [date and time of meeting]
commencing at a.m. for the purpose of considering and voting upon the
following matters:
1. A proposal to approve and adopt the Agreement and Plan of Reorganization
(the "Merger Agreement"), dated as of August 24, 1993, by and between
Vermont Financial Services Corp. ("VFSC") and West Mass, and to
authorize West Mass to enter into a Plan of Merger with VFSC, pursuant
to which Merger Agreement and Plan of Merger, West Mass would be merged
with and into VFSC, and shareholders of West Mass would receive shares
of VFSC Common Stock, all as more fully described in the attached Joint
Proxy Statement and Prospectus. A copy of the Merger Agreement is
attached as Appendix A to the attached Joint Proxy Statement and
Prospectus. A copy of the Plan of Merger is attached as Exhibit A to the
Merger Agreement.
2. Such other matter or matters which may properly come before the meeting
or any adjournment or adjournments thereof.
Only shareholders of record at the close of business on January , 1994
(the "Record Date") are entitled to notice of, and to vote at, the Special
Meeting and any and all adjournments or postponements thereof. The affirmative
vote of the holders of two-thirds of the shares of Common Stock of West Mass
outstanding on the Record Date is required for approval of the Merger Agreement
and related Plan of Merger.
If the proposal described in Item 1 above is approved by the stockholders
at the Special Meeting, and effected by West Mass, any stockholder of West Mass
(i) who files with West Mass before the taking of the vote on the approval of
such action, written objection to the proposed action stating that he or she
intends to demand payment for his or her shares if the action is taken, and (ii)
whose shares are not voted in favor of such action, has or may have the right to
demand in writing from West Mass within twenty (20) days after the date of the
mailing to him or her of notice in writing that the corporate action has become
effective, payment of his or her shares and an appraisal of the value thereof.
West Mass, VFSC and any such stockholder shall in such cases have the rights and
duties and shall follow the procedures set forth in Sections 85 to 98,
inclusive, of Chapter 156B of the General Laws of Massachusetts.
A JOINT PROXY STATEMENT AND PROSPECTUS IS SET FORTH ON THE FOLLOWING PAGES
AND A PROXY CARD IS ENCLOSED HEREWITH. TO ENSURE THAT YOUR VOTE IS COUNTED,
PLEASE COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD IN THE ENCLOSED,
POSTAGE-PAID RETURN ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING IN PERSON. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY REVOKE YOUR PROXY
AND VOTE YOUR SHARES IN PERSON. HOWEVER, ATTENDANCE AT THE MEETING WILL NOT OF
ITSELF CONSTITUTE REVOCATION OF A PROXY. IF YOUR SHARES ARE NOT REGISTERED IN
YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORDHOLDER IN
ORDER TO VOTE PERSONALLY AT THE SPECIAL MEETING.
By Order of the Board of Directors
James A. Neill
Secretary
Greenfield, Massachusetts
, 1994
<PAGE> 8
WEST MASS BANKSHARES, INC.
VERMONT FINANCIAL SERVICES CORP.
JOINT PROXY STATEMENT
------------------------
VERMONT FINANCIAL SERVICES CORP.
PROSPECTUS FOR
1,350,375 SHARES COMMON STOCK
($1.00 PAR VALUE)
This Joint Proxy Statement and Prospectus is furnished in connection with
the solicitation of proxies from the holders of the common stock of West Mass
Bankshares, Inc. ("West Mass"), par value $0.10 per share ("West Mass Common
Stock"), for use at the Special Meeting of Stockholders of West Mass to be held
on , 1994 and any adjournments or postponements thereof (the "West
Mass Special Meeting") and from the holders of the common stock of Vermont
Financial Services Corp. ("VFSC"), $1.00 par value per share ("VFSC Common
Stock"), at the Special Meeting of stockholders of VFSC, to be held on
, 1994 and any adjournments or postponements thereof (the "VFSC
Special Meeting" and, collectively with the West Mass Special Meeting, the
"Special Meetings"). The solicitation of proxies from West Mass Stockholders is
made by West Mass' Board of Directors. The solicitation of proxies from VFSC
stockholders is made by VFSC's Board of Directors.
At the Special Meetings, the West Mass and the VFSC stockholders will be
asked to consider and act upon a proposal to approve and adopt the Agreement and
Plan of Reorganization between VFSC and West Mass dated August 24, 1993 and
amended on September 21 and October 7, 1993 and a related Plan of Merger
(together, the "Merger Agreement"), pursuant to which West Mass would be merged
with and into VFSC, with VFSC being the surviving corporation (the "Merger"). A
copy of the Merger Agreement is attached hereto as Appendix A and is
incorporated herein by reference.
This Joint Proxy Statement and Prospectus also constitutes a prospectus of
VFSC in respect of up to 1,350,375 shares of VFSC Common Stock to be issued to
West Mass stockholders in connection with the Merger. Such shares of VFSC Common
Stock are to be issued on the conversion of the outstanding shares of West Mass
Common Stock, as described in this Joint Proxy Statement and Prospectus. See
"THE MERGER -- Terms of the Merger."
Upon consummation of the Merger, each outstanding share of West Mass Common
Stock, other than shares as to which dissenters' rights have been perfected and
shares held by West Mass as treasury stock, will be converted into that number
of shares of VFSC Common Stock as shall equal the quotient of $17.75 divided by
the value of VFSC Common Stock as determined below (rounded to the nearest
thousandth) (the "Exchange Ratio") during the determination period expressed in
dollars; provided, however, that in no event shall the Exchange Ratio be less
than 0.8875 nor more than 0.9861 (except as a consequence of certain adjustments
provided for in the Merger Agreement). The value of VFSC Common Stock to be
issued in the Merger is to be determined as the average of the mid-point of the
daily inter-dealer or "inside" closing bid and asked per-share prices (in
thousandths) of VFSC Common Stock as reported by the National Association of
Securities Dealers Automated Quotation -- National Market System ("NASDAQ-NMS")
for the thirty (30) trading days immediately preceding the fifth trading day
prior to (but not including) the Effective Time (as defined in the Merger
Agreement) of the Merger (the "Valuation Formula"). West Mass stockholders will
receive cash in lieu of fractional shares. See "THE MERGER -- Terms of the
Merger."
The outstanding shares of VFSC Common Stock are, and the shares of VFSC
Common Stock offered hereby are expected to be, listed on NASDAQ-NMS. The last
reported sale price of VFSC Common Stock
<PAGE> 9
on NASDAQ-NMS on , 1993 was $ per share. If the Effective
Time were to have occurred on this date, then the value of VFSC Common Stock,
determined according to the Valuation Formula described above, would be
and the resulting Exchange Ratio would be . The Exchange
Ratio determined according to this hypothetical example would have resulted in
West Mass stockholders receiving an aggregate of shares of VFSC Common
Stock in the Merger. Inasmuch as the Merger is not expected to be consummated
for some months and the Valuation Formula is based on future prices of VFSC
Common Stock to be ascertained during the determination period, no assurances
can be given as to whether the value of VFSC Common Stock determined according
to the Valuation Formula and to be received by West Mass stockholders in the
Merger will equal, exceed or be less than the value stated in the above example.
The Exchange Ratio will be adjusted in the event that the outstanding
shares of VFSC Common Stock or West Mass Common Stock shall have been increased,
decreased, changed into or exchanged for a different number or kind of shares or
securities through a reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other like changes in VFSC's or
West Mass' capitalization other than pursuant to the Merger Agreement.
Consummation of the Merger is conditioned upon, among other things, receipt
of all required stockholder and regulatory approvals. If there are not
sufficient votes at the time of their Special Meetings to approve and adopt the
Merger Agreement, the stockholders of West Mass and/or VFSC may be asked to
approve adjournment of the Special Meeting to permit further solicitation of
proxies.
THE BOARD OF DIRECTORS OF WEST MASS UNANIMOUSLY RECOMMENDS APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT TO THE STOCKHOLDERS OF WEST MASS.
THE BOARD OF DIRECTORS OF VFSC UNANIMOUSLY RECOMMENDS THE APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT TO THE STOCKHOLDERS OF VFSC.
This Joint Proxy Statement and Prospectus does not cover any resales of
VFSC Common Stock received by West Mass stockholders in connection with the
Merger, and no person is authorized to make use of this Joint Proxy Statement
and Prospectus in connection with any such resale.
This Joint Proxy Statement and Prospectus and the form of proxy for the
Special Meetings are first being mailed to stockholders of West Mass and VFSC on
or about , 1994.
------------------------------
THE SHARES OF VFSC COMMON STOCK OFFERED HEREBY HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES AUTHORITY NOR HAS THE COMMISSION OR ANY STATE
SECURITIES AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS JOINT PROXY STATEMENT AND PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------
THE SHARES OF VFSC COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENT AGENCY.
------------------------------
The date of this Joint Proxy Statement and Prospectus is
March , 1994
2
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TABLE OF CONTENTS
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AVAILABLE INFORMATION.................................................................. 6
INCORPORATION OF DOCUMENTS BY REFERENCE................................................ 6
SUMMARY................................................................................ 8
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA....................................... 16
THE SPECIAL MEETINGS................................................................... 22
General.............................................................................. 22
Quorum and Voting for West Mass Special Meeting...................................... 22
Vote Required at West Mass Special Meeting........................................... 23
Quorum and Voting for VFSC Special Meeting........................................... 23
Vote Required at VFSC Special Meeting................................................ 23
Beneficial Ownership of West Mass Common Stock....................................... 24
Beneficial Ownership of VFSC Common Stock............................................ 25
THE MERGER............................................................................. 28
Background of the Merger; Reasons for the Merger; Opinions of Financial Advisors..... 28
Background of the Merger.......................................................... 28
Reasons of West Mass for the Merger............................................... 28
Opinion of Financial Advisor to West Mass......................................... 29
Reasons of VFSC for the Merger.................................................... 34
Opinion of Financial Advisor to VFSC.............................................. 35
Terms of the Merger; Consideration to be Received by West Mass Stockholders.......... 38
Effective Time of the Merger......................................................... 38
Surrender of West Mass Common Stock Certificates..................................... 39
Conditions to Consummation of the Merger............................................. 39
Regulatory Approvals Required........................................................ 40
Waiver and Amendment................................................................. 41
Termination.......................................................................... 41
Limitation on Solicitation........................................................... 42
Stock Option Agreement............................................................... 42
Business Pending the Merger.......................................................... 43
Interests of Certain Persons in the Merger........................................... 43
Employee Matters..................................................................... 44
Management and Operations After the Merger........................................... 45
Rights of West Mass Dissenting Stockholders.......................................... 45
Certain Federal Income Tax Consequences.............................................. 47
Accounting Treatment................................................................. 48
Resale of VFSC Common Stock Received by West Mass Stockholders....................... 48
Expenses............................................................................. 49
Certain Differences in Rights of Stockholders........................................ 49
Significant Differences Between the Corporation Laws of Massachusetts and Delaware... 49
Significant Differences Between the Charters and By-Laws of West Mass and VFSC....... 51
</TABLE>
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BUSINESS OF VFSC....................................................................... 53
General.............................................................................. 53
Properties........................................................................... 54
Legal Proceedings.................................................................... 54
Description of VFSC Capital Stock.................................................... 55
Market Price of and Dividends on VFSC Common Stock................................... 56
Directors and Executive Officers of VFSC............................................. 57
Change of Control Agreements......................................................... 58
Certain Transactions................................................................. 58
BUSINESS OF WEST MASS.................................................................. 59
General.............................................................................. 59
Market Price of and Dividends on West Mass Common Stock.............................. 60
SUPERVISION AND REGULATION............................................................. 61
Regulation of VFSC and West Mass..................................................... 61
General........................................................................... 61
Interstate Acquisitions........................................................... 61
Dividends......................................................................... 61
Certain Transactions by Bank Holding Companies with their Affiliates.............. 61
Holding Company Support of Subsidiary Banks....................................... 62
Regulation of VNB and USB............................................................ 62
General........................................................................... 62
Examinations and Supervision...................................................... 62
Dividends......................................................................... 63
Affiliate Transactions............................................................ 63
Deposit Insurance................................................................. 63
Federal Reserve Board Policies.................................................... 63
Consumer Protection Regulations; Bank Secrecy Act................................. 63
Capital Requirements................................................................. 64
General........................................................................... 64
Leverage Capital Ratio............................................................ 64
Risk-Based Capital Requirements................................................... 64
Regulatory Agreements............................................................. 65
Recent Banking Legislation........................................................... 65
General........................................................................... 65
Prompt Corrective Action.......................................................... 65
Risk-Based Deposit Insurance Assessments.......................................... 66
Brokered Deposits and Pass-Through Deposit Insurance Limitations.................. 67
Conservatorship and Receivership Amendments....................................... 67
Real Estate Lending Standards..................................................... 67
Standards for Safety and Soundness................................................ 67
Activities and Investments of Insured State Banks................................. 67
Consumer Protection Provisions.................................................... 68
PRO FORMA COMBINED FINANCIAL DATA...................................................... 68
EXPERTS................................................................................ 75
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VALIDITY OF VFSC COMMON STOCK.......................................................... 75
APPENDICES
Appendix A -- Agreement and Plan of Reorganization (as amended, with Exhibits,
including Plan of Merger)......................................................... A-1
Appendix B -- Opinion of M.A. Schapiro & Co., Inc.................................... B-1
Appendix C -- Opinion of McConnell, Budd & Downes, Inc............................... C-1
Appendix D -- Massachusetts General Law, Chapter 156B, Sections 85 through 98........ D-1
Appendix E -- Stock Option Agreement................................................. E-1
</TABLE>
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS JOINT PROXY
STATEMENT AND PROSPECTUS IN CONNECTION WITH THE MERGER AND OFFERING COVERED BY
THIS JOINT PROXY STATEMENT AND PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY VFSC OR
WEST MASS. THIS JOINT PROXY STATEMENT AND PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE VFSC COMMON STOCK IN
ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT AND
PROSPECTUS NOR ANY ISSUANCE OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
FACTS SET FORTH IN THIS JOINT PROXY STATEMENT AND PROSPECTUS OR IN THE AFFAIRS
OF VFSC OR WEST MASS SINCE THE DATE HEREOF.
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AVAILABLE INFORMATION
VFSC and West Mass are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in
accordance therewith, file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the Commission's
office at 450 Fifth Street, N.W., Washington, D.C. 20549 and the Regional
Offices of the Commission in New York -- 7 World Trade Center, Suite 1300, New
York, New York, 10048; and Chicago -- Northwest Atrium Center, 500 West Madison
Avenue, Suite 1400, Chicago, Illinois, 60611-2511. Copies of such material can
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. VFSC Common Stock and
West Mass Common Stock are listed on NASDAQ-NMS and such reports, proxy
statements and other information concerning VFSC and West Mass may be inspected
at the offices of the National Association of Security Dealers, 33 Whitehall,
New York, NY 10004.
VFSC has also filed a registration statement on Form S-4 (together with all
amendments and exhibits thereto, including documents and information
incorporated by reference, the "Registration Statement") with the Commission
under the Securities Act of 1933, as amended (the "Securities Act"), relating to
the shares of VFSC Common Stock to be issued in connection with the Merger. This
Joint Proxy Statement and Prospectus does not contain all the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is hereby made to the Registration Statement. Statements
contained in this Joint Proxy Statement and Prospectus as to the contents of any
document are not necessarily complete, and in each instance reference is made to
such document itself, each such statement being qualified in all respects by
such reference. The Registration Statement (and exhibits thereto) may be
inspected at the Office of the Commissioner at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies thereof may be obtained from the Commission
at prescribed rates.
INCORPORATION OF DOCUMENTS BY REFERENCE
Incorporated by reference into this Joint Proxy Statement and Prospectus
are the following documents and information heretofore filed with the
Commission. Except as noted below, these documents are not presented herein or
delivered herewith:
For VFSC (File No. 0-11012):
(i) Annual Report on Form 10-K for the year ended December 31, 1992;
(ii) Quarterly Reports on Form 10-Q for each of the quarters ended
March 31, 1993 and June 30, 1993 and the Quarterly Report on Form 10-Q, as
amended by a Form 10-Q/A, for the quarter ended September 30, 1993; and
(iii) The following portions of VFSC's Annual Report to Stockholders
for the year ended December 31, 1992: Selected Consolidated Financial Data
(page 7); Management's Discussion and Analysis of Financial Condition and
Results of Operations (pages 8 to 17); and consolidated financial
statements and notes thereto (pages 18 to 27).
Accompanying this Joint Proxy Statement and Prospectus are VFSC's Annual
Report to Stockholders for the year ended December 31, 1992, and Quarterly
Report on Form 10-Q for the quarter ended September 30, 1993.
For West Mass (File No. 0-15122):
(i) Annual Report on Form 10-K for the year ended December 31, 1992;
(ii) Quarterly Reports on Form 10-Q for each of the quarters ended
March 31, 1993, June 30, 1993 and September 30, 1993; and
(iii) Current Report on Form 8-K, dated August 24, 1993.
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(iv) The following portions of West Mass' Annual Report to
Stockholders for the year ended December 31, 1992: Selected Consolidated
Financial Data of West Mass (page 2); Management's Discussion and Analysis
(page 2); and consolidated financial statements and notes thereto (pages 9
to 27).
Accompanying this Joint Proxy Statement and Prospectus are West Mass'
Annual Report to Stockholders for the year ended December 31, 1992, and
Quarterly Report on Form 10-Q for the quarter ended September 30, 1993.
THIS JOINT PROXY STATEMENT AND PROSPECTUS INCORPORATES DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. A COPY OF SUCH
DOCUMENTS MAY BE OBTAINED WITHOUT CHARGE, EXCEPT FOR THE EXHIBITS TO SUCH
DOCUMENTS, UPON WRITTEN OR ORAL REQUEST. WRITTEN REQUESTS FOR VFSC DOCUMENTS
SHOULD BE MAILED TO VERMONT FINANCIAL SERVICES CORP., 100 MAIN STREET,
BRATTLEBORO, VERMONT 05301, ATTENTION: TREASURER; AND TELEPHONE REQUESTS SHOULD
BE DIRECTED TO THE TREASURER, RICHARD O. MADDEN, AT (802) 257-7151. WRITTEN
REQUESTS FOR WEST MASS DOCUMENTS SHOULD BE MAILED TO WEST MASS BANKSHARES, INC.,
45 FEDERAL STREET, GREENFIELD, MASSACHUSETTS 01301, ATTENTION: TREASURER; AND
TELEPHONE REQUESTS SHOULD BE DIRECTED TO THE TREASURER, KENNETH R. COLE, AT
(413) 774-3713. IN ORDER TO ENSURE DELIVERY OF THE DOCUMENTS PRIOR TO THE
SPECIAL MEETINGS, REQUESTS SHOULD BE RECEIVED BY , 1994.
ALL INFORMATION IN THIS JOINT PROXY STATEMENT AND PROSPECTUS REGARDING WEST
MASS AND ITS AFFILIATES HAS BEEN FURNISHED BY WEST MASS, AND ALL INFORMATION
HEREIN REGARDING VFSC AND ITS AFFILIATES HAS BEEN FURNISHED BY VFSC. NO PERSON
IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT
CONTAINED IN THIS JOINT PROXY STATEMENT AND PROSPECTUS IN CONNECTION WITH THE
SOLICITATION OF PROXIES AND OFFERING MADE HEREBY AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY VFSC OR WEST MASS. THIS JOINT PROXY STATEMENT AND PROSPECTUS DOES
NOT CONSTITUTE THE SOLICITATION OF A PROXY, OR AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO PURCHASE ANY SECURITIES, IN ANY JURISDICTION IN
WHICH SUCH SOLICITATION OF AN OFFER TO PURCHASE ANY SECURITIES MAY NOT BE
LAWFULLY MADE. THIS JOINT PROXY STATEMENT AND PROSPECTUS DOES NOT COVER ANY
RESALES OF THE VFSC COMMON STOCK OFFERED HEREBY TO BE RECEIVED BY STOCKHOLDERS
OF WEST MASS DEEMED TO BE "AFFILIATES" OF WEST MASS OR VFSC UPON THE
CONSUMMATION OF THE MERGER. NO PERSON IS AUTHORIZED TO MAKE USE OF THIS JOINT
PROXY STATEMENT AND PROSPECTUS IN CONNECTION WITH SUCH RESALES. NEITHER THE
DELIVERY OF THIS JOINT PROXY STATEMENT AND PROSPECTUS NOR ANY DISTRIBUTION OF
SECURITIES MADE HEREUNDER SHALL IMPLY THAT THERE HAS BEEN NO CHANGE IN THE
INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF VFSC OR WEST MASS SINCE THE
DATE HEREOF.
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SUMMARY
The following summary is not intended to be complete and is qualified in
all respects by the more detailed information in this Joint Proxy Statement and
Prospectus, the appendices hereto and the documents incorporated herein by
reference.
THE COMPANIES
VFSC. VFSC was organized in 1990 as the successor of Vermont Financial
Services Corp., a Vermont corporation ("VFSC Vermont"), pursuant to a merger of
VFSC Vermont into VFSC, effected for the purpose of changing the company's state
of incorporation from Vermont to Delaware. VFSC is a bank holding company and
has one wholly-owned subsidiary, Vermont National Bank, a national banking
association ("VNB"). At September 30, 1993, VFSC had total consolidated assets
of approximately $927.4 million and total consolidated stockholders' equity of
approximately $66.0 million. VNB engages in commercial and retail banking and in
the trust business, including the taking of deposits, the making of secured and
unsecured loans, the financing of commercial transactions, and the performance
of corporate, pension and personal trust services. VNB operates 32 branches
throughout the State of Vermont.
The principal offices of VFSC and VNB are located at 100 Main Street,
Brattleboro, Vermont 05301. VFSC's telephone number is (802) 257-7151.
VFSC and VNB are subject to federal, state and local laws applicable to
savings banks, banks and bank holding companies and to the regulations of the
Board of Governors of the Federal Reserve System, the Comptroller of the
Currency and the Federal Deposit Insurance Corporation.
For further information concerning VFSC, see "BUSINESS OF VFSC" and the
VFSC documents incorporated by reference herein as described under
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
WEST MASS. West Mass is a bank holding company, the principal subsidiary
of which is United Savings Bank ("USB"), which has six branch locations in
western Massachusetts. USB is principally engaged in the business of attracting
retail deposits from its banking offices and investing these funds primarily in
mortgage loans. At September 30, 1993, West Mass had total consolidated assets
of approximately $220.0 million and total consolidated stockholders' equity of
approximately $22.1 million.
The principal executive offices of West Mass are located at 45 Federal
Street, Greenfield, Massachusetts 01301. West Mass' telephone number is (413)
774-3713.
West Mass and USB are subject to federal, state and local laws applicable
to savings banks, banks, and bank holding companies and to the regulations of
the Federal Deposit Insurance Corporation and the Banking Commissioner of the
Commonwealth of Massachusetts.
For further information concerning West Mass, see "-- Selected Financial
Data of West Mass" and "BUSINESS OF WEST MASS."
THE MERGER
The Merger Agreement provides for the merger of West Mass with and into
VFSC, with VFSC to be the surviving corporation. Upon consummation of the
Merger, each outstanding share of West Mass Common Stock, other than shares held
by West Mass as treasury stock and as to which dissenters' rights have been
perfected, will be converted into that number of shares of VFSC Common Stock as
shall equal the quotient (rounded to the nearest thousandth) (the "Exchange
Ratio") of $17.75 divided by the per-share market value of VFSC Common Stock
during the determination period (the "value of VFSC Common Stock") but in no
event shall the Exchange Ratio be less than 0.8875 nor more than 0.9861. For
purposes of the Merger Agreement, the value of VFSC Common Stock means the
average of the mid-point of the daily inter-dealer or "inside" closing bid and
asked per-share prices (in thousandths) of VFSC Common Stock as reported by
NASDAQ-NMS for the 30 trading days immediately preceding the fifth trading day
prior to (but not including) the Effective Time (as defined in the Merger
Agreement) of the Merger (the "Valuation
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Formula"). West Mass stockholders will receive a cash payment in lieu of
fractional shares based on the same Exchange Ratio and market value
determination.
The Exchange Ratio will be adjusted in the event that the outstanding
shares of VFSC Common Stock or West Mass Common Stock shall have been increased,
decreased, changed into or exchanged for a different number or kind of shares or
securities through a reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other like changes in VFSC's or
West Mass' capitalization other than pursuant to the Merger Agreement. Each
outstanding share of VFSC Common Stock will remain outstanding and unchanged
following the Merger.
Although the Exchange Ratio will be determined by dividing the number of
shares of VFSC Common Stock equal to $17.75 by the value of VFSC Common Stock
determined according to the Valuation Formula (provided that the Exchange Ratio
shall not be less than 0.8875 nor greater than 0.9861), because (i) the value of
VFSC Common Stock determined according to the Valuation Formula will be based on
the average of the mid-point of the daily inter-dealer closing bid and asked per
share prices as reported by NASDAQ -- NMS for 30 consecutive trading days; and
(ii) the market prices of VFSC Common Stock are likely to fluctuate prior to the
receipt of VFSC Common Stock by exchanging West Mass stockholders, the actual
market value of the Merger consideration may be less than or greater than $17.75
at the time it is received by West Mass stockholders. Accordingly, there can be
no assurance that West Mass stockholders will be able to obtain $17.75 for the
shares of VFSC Common Stock received as a result of the Merger. See "THE MERGER
- -- Terms of the Merger; Consideration to be Received by West Mass Stockholders."
EFFECTIVE TIME OF THE MERGER
The Merger will become effective upon the filing of Articles of Merger
relating thereto with, and the issuance of a Certificate of Merger with respect
thereto by, the Secretary of State of the Commonwealth of Massachusetts and a
Certificate of Merger with, and the issuance of a Certificate of Merger by, the
Secretary of State of the State of Delaware. The Merger cannot become effective
until the West Mass and VFSC stockholders have approved the Merger Agreement and
all regulatory approvals and actions have been taken.
SPECIAL MEETINGS OF WEST MASS STOCKHOLDERS AND VFSC STOCKHOLDERS
The Special Meeting of West Mass stockholders to consider and vote upon the
Merger Agreement will be held at the Howard Johnson's Motor Lodge, Route 2A,
Greenfield, Massachusetts on [day of week], , 1994 at a.m. local
time. Only holders of record of West Mass Common Stock at the close of business
on , 1994 (the "West Mass Record Date"), will be entitled to notice of
and to vote at the West Mass Special Meeting. At the close of business on the
West Mass Record Date, there were outstanding and entitled to vote
shares of West Mass Common Stock. Each share of West Mass Common Stock is
entitled to one vote on the Merger Agreement.
The Special Meeting of VFSC Stockholders to consider and vote upon the
Merger Agreement and the issuance of VFSC Common Stock pursuant to the Merger
Agreement will be held at the Woodstock Inn, Woodstock, Vermont on [day of
week], , 1994 at 10:00 a.m. Only holders of record of VFSC Common
Stock at the close of business on , 1994 (the "VFSC Record Date"),
will be entitled to notice of and to vote at the VFSC Special Meeting. At the
close of business on the VFSC Record Date there were outstanding and entitled to
vote shares of VFSC Common Stock. Each share of VFSC Common Stock is
entitled to one vote on the Merger Agreement.
VOTES REQUIRED TO APPROVE THE MERGER
Approval of the Merger Agreement by West Mass stockholders requires the
affirmative vote of at least two-thirds of all shares of West Mass Common Stock
outstanding and entitled to vote at the West Mass Special Meeting.
It is expected that all of the shares of West Mass Common Stock
beneficially owned by directors and executive officers of West Mass and their
affiliates at the West Mass Record Date for the West Mass Special
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Meeting ( % of the total number of outstanding shares of West Mass Common
Stock at such date) will be voted for approval and adoption of the Merger
Agreement. As of the West Mass Record Date, neither VFSC nor its directors and
executive officers and their affiliates beneficially owned any shares of West
Mass Common Stock. See "THE SPECIAL MEETINGS -- Quorum and Voting for West Mass
Special Meeting."
If sufficient votes in favor of the Merger are not received before the West
Mass Special Meeting, the West Mass Special Meeting may be adjourned to a future
date in order to permit further solicitation of proxies in respect of the
Merger. In connection therewith, however, proxies voting against the Merger may
not be used by the proxyholders to vote in favor of adjournment pursuant to such
proxyholders' discretionary authority.
Approval of the Merger Agreement by VFSC Stockholders requires the
affirmative vote of at least two-thirds of all shares of VFSC Common Stock
outstanding and entitled to vote at the VFSC Special Meeting.
It is expected that all of the shares of VFSC Common Stock beneficially
owned by directors and executive officers of VFSC and their affiliates at the
VFSC Record Date for the VFSC Special Meeting ( shares or % of the
total number of outstanding shares of VFSC Common Stock at such date) will be
voted for approval and adoption of the Merger Agreement. As of the VFSC Record
Date, neither West Mass nor its directors and executive officers and their
affiliates beneficially owned any shares of VFSC Common Stock. See "THE SPECIAL
MEETINGS -- Quorum and Voting for VFSC Special Meeting" and "THE MERGER --
Rights of West Mass Dissenting Stockholders."
If sufficient votes in favor of the Merger are not received before the VFSC
Special Meeting, the VFSC Special Meeting may be adjourned to a future date in
order to permit further solicitation of proxies in respect of the Merger. In
connection therewith, however, proxies voting against the Merger may not be used
by the proxyholders to vote in favor of adjournment pursuant to such
proxyholders' discretionary authority.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF WEST MASS
THE BOARD OF DIRECTORS OF WEST MASS RECOMMENDS THAT WEST MASS STOCKHOLDERS
VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
The Board of Directors of West Mass believes that the Merger Agreement,
including the Exchange Ratio, and each of the transactions contemplated therein
are in the best interests of West Mass and are fair to and in the best interests
of its stockholders. The Board unanimously recommends that the stockholders of
West Mass vote for approval and adoption of the Merger Agreement.
In reaching its determination, the Board of Directors of West Mass
consulted with management of West Mass and with West Mass' financial and legal
advisors, and considered a number of factors, including the following: West
Mass' business, results of operations, prospects and financial condition; the
risks to West Mass of continuing to operate independently as a relatively small
banking institution in a consolidating market and the possible values to West
Mass' shares by remaining independent; the oral presentation of West Mass'
financial advisor, M.A. Schapiro & Co., Inc. ("M.A. Schapiro"), which was
subsequently confirmed in writing, that as of August 24, 1993 (the date the
Board approved the Merger Agreement), the Exchange Ratio was fair to West Mass
stockholders from a financial point of view; certain information concerning
VFSC's financial condition; results of operations and prospects; recent market
prices for shares of West Mass Common Stock and VFSC Common Stock and the
maximum and minimum Exchange Ratio; and the possible impact of the Merger on
West Mass' business, prospects, employees, customers and community. See "THE
MERGER -- Reasons of West Mass for the Merger."
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RECOMMENDATION OF THE BOARD OF DIRECTORS OF VFSC
THE BOARD OF DIRECTORS OF VFSC RECOMMENDS THAT VFSC STOCKHOLDERS VOTE FOR
APPROVAL OF THE MERGER AGREEMENT.
The Board of Directors of VFSC believes that the Merger Agreement is in the
best interests of VFSC and is fair to and in the best interests of its
stockholders. The Board unanimously recommends that the stockholders of VFSC
vote for approval and adoption of the Merger Agreement.
In reaching its determination to approve the Merger Agreement, the VFSC
Board of Directors consulted extensively with management and with VFSC's
financial and legal advisors. The Board reviewed and considered a number of
factors, including: West Mass' business, results of operations, prospects and
financial condition (including the condition of its loan portfolio); the likely
effect of the Merger on VFSC's financial condition and earnings, including its
capital ratios, return on assets and earnings per share; the oral presentation
of VFSC's financial advisor, McConnell, Budd & Downes, Inc. ("MB&D"), which has
since been confirmed in writing, that as of August 24, 1993 (the date the Board
approved the Merger Agreement) the Exchange Ratio was fair to VFSC stockholders
from a financial point of view; the proximity of the Franklin County
(Massachusetts) market to the main office and major markets of VFSC and VNB and
the concentration and competition in said Franklin County market; the conditions
to the Merger; certain information concerning VFSC's financial condition;
results of operations and prospects; recent market prices for shares of West
Mass Common Stock and VFSC Common Stock and the maximum and minimum Exchange
Ratio; and the terms of the Stock Option Agreement. See "THE MERGER -- Reasons
of VFSC for the Merger."
OPINION OF WEST MASS' FINANCIAL ADVISOR
M. A. Schapiro, the financial advisor to West Mass in connection with the
Merger, has delivered its written opinion to the Board of Directors of West Mass
to the effect that, as of August 24, 1993 and as of the date of this Joint Proxy
Statement and Prospectus, the Exchange Ratio provided in the Merger Agreement is
fair to West Mass stockholders from a financial point of view. The full text of
the opinion of M. A. Schapiro, which sets forth assumptions made, matters
considered and the limits on the review undertaken in connection with such
opinion, is attached hereto as Appendix B. West Mass stockholders are encouraged
to read this opinion in its entirety. M.A. Schapiro's opinion is directed only
to the Exchange Ratio and does not constitute a recommendation to any West Mass
stockholder as to how such stockholder should vote at the West Mass Special
Meeting. See "THE MERGER -- Background of the Merger, -- Reasons of West Mass
for the Merger, and -- Opinion of Financial Advisor to West Mass."
OPINION OF VFSC'S FINANCIAL ADVISOR
MB&D, the financial advisor to VFSC in connection with the Merger, has
delivered its written opinion, dated , 1993, to the Board of
Directors of VFSC that as of the date hereof, the Exchange Ratio provided in the
Merger Agreement was fair to the holders of VFSC Common Stock from a financial
point of view. The full text of the opinion of MB&D, which sets forth
assumptions made, matters considered and the limits on the review undertaken in
connection with such opinion, is attached hereto as Appendix C. VFSC
stockholders are encouraged to read this opinion in its entirety. MB&D's opinion
is directed only to the Exchange Ratio and does not constitute a recommendation
to any VFSC stockholder as to how such stockholder should vote at the VFSC
Special Meeting. See "THE MERGER -- Background of the Merger, -- Reasons of VFSC
for the Merger, and -- Opinion of Financial Advisor to VFSC."
NO SOLICITATION
Pursuant to the Merger Agreement, West Mass has agreed that neither it, any
of its subsidiaries, nor any of its directors, officers, employees,
representatives or agents or other persons controlled by it or any of its
subsidiaries shall, directly or indirectly, encourage or solicit or hold
discussions or negotiations with, or, except to the extent required by
applicable law after consultation with counsel, provide any information to, any
person, entity or group (other than the other party to the Merger Agreement and
its subsidiaries) concerning
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any merger, sale of substantial assets, sale of shares of capital stock or
similar transaction involving it or any of its subsidiaries. See "THE MERGER --
Limitation on Solicitation."
REGULATORY APPROVALS REQUIRED
The Merger is subject to the approval of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") and the Massachusetts Board
of Bank Incorporation (the "Massachusetts Board"). VFSC has filed applications
seeking these required regulatory approvals, and, on February 22, 1994, the
Federal Reserve Board issued an order approving the Merger. As of the date of
this Joint Proxy Statement and Prospectus, the approval of the Massachusetts
Board had not been received. There can be no assurance that such approval will
be received, or as to the timing of such approval or as to the conditions on
which it will be given if it is received. However, neither VFSC nor West Mass is
aware of any reason as to why the Massachusetts Board application would not be
approved.
CONDITIONS, WAIVER AND AMENDMENT, AND TERMINATION
The respective obligations of VFSC and West Mass to consummate the Merger
are subject to the satisfaction of a number of conditions, including the receipt
of all required regulatory approvals, and the approval of the Merger by the
requisite vote of VFSC's and West Mass' stockholders, and certain other
conditions customary in transactions of this kind. See "THE MERGER -- Conditions
to Consummation of the Merger."
The Merger Agreement may be amended by West Mass and VFSC at any time prior
to the Effective Time of the Merger, provided, however, that after any approval
of the Merger Agreement by the stockholders of either West Mass or VFSC, any
amendment of the Merger Agreement, or waiver of any condition contained therein,
which reduces the amount or changes the form of consideration to be delivered to
West Mass stockholders, or which makes any other change that is prohibited by
applicable law, requires the further approval of such stockholders. See "THE
MERGER -- Waiver and Amendment."
The Merger Agreement may be terminated at any time before the Merger
becomes effective under special circumstances specified in the Merger Agreement,
including, without limitation, (i) by mutual consent of VFSC and West Mass; (ii)
by VFSC or West Mass if the Effective Time shall not have occurred on or prior
to September 30, 1994; (iii) by VFSC or West Mass if the Merger Agreement and
the transactions contemplated thereby are not approved by the legally required
vote of the stockholders of VFSC or West Mass; (iv) by VFSC, if there shall have
been any material breach of any obligation of West Mass under the Merger
Agreement; or (v) by West Mass, if there shall have been any material breach of
any obligation of VFSC under the Merger Agreement. West Mass may also terminate
the Merger Agreement, subject to certain limitations, after approval of the
Merger by its stockholders, if the value of the VFSC Common Stock (as determined
under the Merger Agreement) during a thirty-day period commencing five days
before the Merger is to become effective, falls below $14.875 per share or as
adjusted for any stock split or stock dividend. The Merger Agreement provides,
however, that West Mass may not terminate the Merger Agreement if any decline in
the value of VFSC Common Stock (as determined under the Merger Agreement) below
$14.875 per share during the specific time period set forth in the Merger
Agreement is matched by a parallel decline in an agreed-upon index of the stock
prices of no less than three publicly-traded financial institutions. See "THE
MERGER -- Terms of the Merger; Termination."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of West Mass' management and Board of Directors have
certain interests in the Merger in addition to their interests as stockholders
of West Mass. These include provisions in the Merger Agreement relating to
VFSC's agreement to continue the rights of West Mass officers and directors to
be indemnified against certain liabilities arising before and including
consummation of the Merger to the extent such persons would be entitled to
indemnification under Massachusetts law and West Mass' charter and by-laws.
Additionally, VFSC has entered into agreements with the following officers of
West Mass and/or its subsidiary, USB, as to their continued employment after the
Merger: (i) Francis L. Lemay, (ii) Kenneth R.
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Cole, (iii) James Neill, (iv) Robert W. Phillips and (v) Matthew W. Noska. These
agreements provide for the continued employment of these individuals after the
Merger at their current salary levels. These agreements also contain provisions,
effective after the Merger, entitling each of these officers to certain
severance and other benefits if his employment terminates under certain
circumstances after a "change of control" of VFSC. See "THE MERGER -- Interest
of Certain Persons in the Merger."
BUSINESS PENDING THE MERGER
The Merger Agreement provides that, pending completion of the Merger, West
Mass will limit the manner in which it operates, including conducting its
business only in the ordinary, regular and usual course consistent with past
practice; using its best efforts to keep intact its business organization and
those of its subsidiaries; and generally maintaining the status quo of its and
its subsidiaries business and operations. See "THE MERGER -- Business Pending
the Merger."
STOCK OPTION AGREEMENT
At the same time as VFSC and West Mass entered into the Merger Agreement,
and as consideration therefor, VFSC and West Mass entered into a stock option
agreement (the "Stock Option Agreement") whereby West Mass granted VFSC an
option (the "Option") to purchase up to 306,960 fully-paid and nonassessable
shares of West Mass Common Stock at a price of $17.75 per share. The Option is
exercisable on the occurrence of certain events which create the potential for a
third party to acquire control of West Mass. To the best knowledge of VFSC and
West Mass, no such event as would permit exercise of the Option has occurred to
date.
The Stock Option Agreement and the West Mass' agreement that neither it nor
its directors, officers, employees or their affiliates will solicit or hold
discussions with potential acquirors (with an exception for actions required by
applicable law) may have the effect of discouraging persons who might now or
prior to the Effective Date be interested in acquiring all or a significant
portion of shares of West Mass Common Stock from considering such an
acquisition, even if such persons were to pay a higher price per share than
under the Merger Agreement. See "THE MERGER -- Stock Option Agreement."
EXCHANGE OF WEST MASS COMMON STOCK CERTIFICATES
The conversion of West Mass Common Stock into VFSC Common Stock will occur
automatically on the Effective Time of the Merger. Promptly following the
Merger, a bank to be selected by VFSC and West Mass (the "Exchange Agent") will
send a notice, and transmittal form, with instructions, to each holder of West
Mass Common Stock of record at the time the Merger becomes effective advising
such holder of the effectiveness of the Merger and of the procedure for
surrendering to the Exchange Agent their certificates formerly evidencing West
Mass Common Stock in exchange for new certificates evidencing newly issued VFSC
Common Stock.
WEST MASS STOCKHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL
THEY RECEIVE THE NOTICE AND TRANSMITTAL FORM FROM THE EXCHANGE AGENT. See "THE
MERGER -- Surrender of West Mass Common Stock Certificates."
Although the Exchange Ratio will be determined by dividing the number of
shares of VFSC Common Stock equal to $17.75 by the value of VFSC Common Stock
determined according to the Valuation Formula (provided that the Exchange Ratio
shall not be less than 0.8875 nor greater than 0.9861), because (i) the value of
VFSC Common Stock determined according to the Valuation Formula will be based on
the average of the mid-point of the daily inter-dealer closing bid and asked per
share prices as reported by NASDAQ-NMS for 30 consecutive trading days preceding
the Effective Time; and (ii) the market prices of VFSC Common Stock are likely
to fluctuate prior to the receipt of VFSC Common Stock by exchanging West Mass
stockholders, the actual market value of the Merger consideration may be less
than or greater than $17.75 at the time it is received by West Mass
stockholders. Accordingly, there can be no assurance that West Mass stockholders
will be able to obtain $17.75 for the shares of VFSC Common Stock received as a
result of the Merger.
13
<PAGE> 21
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
It is intended that the Merger will constitute a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, and,
therefore, that holders of West Mass Common Stock who receive VFSC Common Stock
in the Merger will not recognize gain or loss for federal income tax purposes as
a result of the Merger. THE FOREGOING TAX TREATMENT WILL NOT APPLY TO WEST MASS
STOCKHOLDERS' RECEIPT OF CASH IN LIEU OF FRACTIONAL SHARES OF VFSC COMMON STOCK
OR PURSUANT TO DISSENTER'S RIGHTS OF APPRAISAL. Consummation of the Merger is
conditioned upon, among other things, the receipt by each of VFSC and West Mass
of an opinion of counsel dated as of the Effective Time, substantially to the
foregoing effect. See "THE MERGER -- Certain Federal Income Tax Consequences."
RESALES OF VFSC COMMON STOCK
The shares of VFSC Common Stock issuable to stockholders of West Mass upon
consummation of the Merger may be traded freely by those stockholders who are
not "affiliates" of VFSC or West Mass. See "THE MERGER -- Resale of VFSC Common
Stock received by West Mass Stockholders."
ACCOUNTING TREATMENT
VFSC expects to account for the Merger using the pooling-of-interests
method under generally accepted accounting principles. See "-- Selected
Historical and Pro Forma Financial Data -- Pro Forma Combined Selected Financial
Data" and "THE MERGER -- Accounting Treatment."
DISSENTERS' RIGHTS OF APPRAISAL
Under Massachusetts law, holders of West Mass Common Stock who do not vote
to approve the Merger Agreement may elect to have the "fair value" of their
shares (determined in accordance with Massachusetts law) judicially appraised
and paid to them, if the Merger is consummated and if they strictly comply with
the provisions of Massachusetts General Laws Annotated Ch. 156B Sections 85
through 98, inclusive, a copy of which is attached hereto as Appendix D. Any
deviation from such requirements may result in the loss of dissenters' rights.
See "THE MERGER -- Rights of West Mass Dissenting Stockholders" and Appendix D.
CASH RECEIVED ON THE EXERCISE OF APPRAISAL RIGHTS WILL NOT BE SUBJECT TO THE TAX
TREATMENT AFFORDED UNDER SECTION 368(A) OF THE INTERNAL REVENUE CODE. See "THE
MERGER -- Certain Federal Income Tax Consequences."
Stockholders of VFSC do not have appraisal rights under Delaware law in
connection with the Merger.
MARKETS AND MARKET PRICES
VFSC Common Stock and West Mass Common Stock are listed on NASDAQ-NMS. The
following table sets forth the last reported sales price per share of VFSC
Common Stock as reported on NASDAQ-NMS and the "equivalent per share price" of
West Mass Common Stock, each as of (i) August 23, 1993, the last trading day
before VFSC and West Mass announced plans for the Merger, and (ii) February ,
1994. The "equivalent per share price" of the West Mass Common Stock as of such
dates is calculated by multiplying the last reported sales price of VFSC Common
Stock (set forth below under the heading "Historical VFSC Common Stock") by an
assumed Exchange Ratio of .9861 (the maximum Exchange Ratio under the Merger
Agreement).
<TABLE>
<CAPTION>
HISTORICAL
HISTORICAL HISTORICAL WEST MASS
VFSC COMMON WEST MASS EQUIVALENT
STOCK COMMON STOCK PER SHARE PRICE
----------- ------------ ---------------
<S> <C> <C> <C>
August 23, 1993 $ 19.00 $11.75 $ 18.74
February , 1994 $ $
</TABLE>
The Exchange Ratio will be adjusted in the event that the outstanding
shares of VFSC Common Stock or West Mass Common Stock shall have been increased,
decreased, changed into or exchanged for a different
14
<PAGE> 22
number or kind of shares or securities through reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other like
changes in VFSC's or West Mass' capitalization other than pursuant to the Merger
Agreement.
No assurance can be given as to what the market price of VFSC Common Stock
will be if and when the Merger is consummated or when such shares are actually
issued in the Merger.
CERTAIN DIFFERENCES IN RIGHTS OF STOCKHOLDERS
The rights of West Mass stockholders are currently governed by
Massachusetts corporate law, West Mass' Articles of Organization and Bylaws. On
completion of the Merger, West Mass' stockholders will become stockholders of
VFSC, and their rights will be governed by the Delaware General Corporation Law,
VFSC's Certificate of Incorporation and Bylaws. See "THE MERGER -- Certain
Differences in Rights of Stockholders" for a discussion of the material
differences in the rights of the holders of VFSC Common Stock and West Mass
Common Stock.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
At the Effective Time of the Merger, the separate corporate existence of
West Mass will cease to exist and VFSC will be the surviving corporation. USB
and its non-banking subsidiary will become direct subsidiaries of VFSC. It is
anticipated that the management of USB immediately after the Effective Time will
continue largely as before. Further, certain senior members of USB's management
have entered into employment and management continuity agreements with USB and
VFSC. Although the Merger Agreement provides that Mr. Francis L. Lemay will
continue as a member of the USB Board of Directors following the Merger, it
contains no other agreement as to the makeup of USB's Board of Directors after
the Merger. The Merger Agreement also provides that at the Effective Time Mr.
Lemay and another current director of West Mass, to be designated by West Mass
prior to the Effective Time, will be appointed to fill the two existing
vacancies on VFSC's Board of Directors. See "THE MERGER -- Interests of Certain
Persons in the Merger; Management and Operations After the Merger."
15
<PAGE> 23
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following tables set forth certain comparative per share and pro forma
equivalent per share data for VFSC and West Mass, certain selected historical
financial information for VFSC and West Mass, and certain unaudited pro forma
combined financial information giving effect to the Merger (for the nine months
ended September 30, 1993 and for the years ended December 31, 1990, 1991 and
1992) using the pooling-of-interests method of accounting. For a description of
the pooling-of-interests method of accounting with respect to the Merger and the
related effects on the historical financial statements of West Mass, see "THE
MERGER -- Accounting Treatment." The historical income statement data included
in the selected financial data for the five years ended December 31, 1992 are
derived from audited consolidated financial statements included in Annual
Reports on Form 10-K by VFSC and West Mass, respectively. The unaudited
historical financial data for the nine months ended September 30, 1993 has been
derived from amounts reported on Quarterly Reports on Form 10-Q by VFSC and West
Mass, respectively. This information should be read in conjunction with the
consolidated financial statements of each of VFSC and West Mass, and the related
notes thereto, delivered herewith and incorporated herein by reference, and in
conjunction with the unaudited pro forma financial information, including the
notes thereto, appearing elsewhere in this Joint Proxy Statement and Prospectus.
See "INCORPORATION OF DOCUMENTS BY REFERENCE", "PRO FORMA COMBINED FINANCIAL
DATA."
The pro forma combined financial information included within is not
necessarily indicative of the results of the future operations of the combined
entity or the actual results that would have been achieved had the Merger been
consummated prior to the periods indicated.
16
<PAGE> 24
COMPARATIVE PER SHARE DATA
(AT MAXIMUM EXCHANGE RATIO)
The following table sets forth for VFSC Common Stock and West Mass Common
Stock certain historical, unaudited pro forma and unaudited pro forma equivalent
per share information for the nine months ended September 30, 1993 and for each
of the three years in the period ended December 31, 1992. The information herein
should be read in conjunction with the pro forma combined financial information,
including the notes thereto, appearing elsewhere in this Joint Proxy Statement
and Prospectus. See "PRO FORMA COMBINED FINANCIAL DATA."
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED DECEMBER 31,
SEPTEMBER 30, ------------------------
1993 1992 1991 1990
----------------- ------ ------ ------
<S> <C> <C> <C> <C>
INCOME PER SHARE(1)
VFSC............................................... $ 0.93 $ 1.10 $ 0.05 $ 0.09
West Mass.......................................... $ 1.48 $ 1.07 $ 0.57 $ 0.70
VFSC Pro Forma..................................... $ 1.09 $ 1.10 $ 0.19 $ 0.25
West Mass Pro Forma Equivalent..................... $ 1.07 $ 1.08 $ 0.19 $ 0.25
FULLY DILUTED INCOME PER SHARE(1)
VFSC............................................... $ .93 $ 1.10 $ 0.05 $ 0.09
West Mass.......................................... $ 1.48 $ 1.07 $ 0.57 $ 0.70
VFSC Pro Forma..................................... $ 1.09 $ 1.10 $ 0.19 $ 0.25
West Mass Pro Forma Equivalent..................... $ 1.07 $ 1.08 $ 0.19 $ 0.25
DIVIDENDS DECLARED PER SHARE(2)
VFSC............................................... $ 0.16 $ 0.08 $ 0.15 $ 0.90
West Mass.......................................... $ 0.21 $ 0.28 $ 0.28 $ 0.28
VFSC Pro Forma..................................... $ 0.16 $ 0.08 $ 0.15 $ 0.90
West Mass Pro Forma Equivalent..................... $ 0.16 $ 0.08 $ 0.15 $ 0.89
BOOK VALUE PER SHARE AT PERIOD END(3)
VFSC............................................... $ 19.36 $18.54 $17.50 $17.50
West Mass.......................................... $ 16.86 $16.51 $15.67 $14.74
VFSC Pro Forma..................................... $ 18.74 $18.09 $17.07 $16.83
West Mass Pro Forma Equivalent..................... $ 18.48 $17.84 $16.83 $16.60
</TABLE>
- ---------------
[FN]
(1) Pro forma income per share data is calculated using historical income
information for VFSC and West Mass divided by the average pro forma shares
of the combined entity. The average pro forma shares of the combined entity
have been calculated by combining VFSC's historical average shares with the
historical average shares of West Mass as adjusted by an assumed Exchange
Ratio of 0.9861 (the maximum Exchange Ratio). The Exchange Ratio is subject
to change based on the determination of a value of VFSC Common Stock
according to the Valuation Formula prior to the Effective Time and there can
be no assurance as to whether the actual Exchange Ratio will be equal to or
smaller than the assumed ratio used in this table or elsewhere in this Joint
Proxy Statement and Prospectus. See "THE MERGER -- Terms of the Merger;
Consideration to be Received by West Mass Shareholders." The West Mass pro
forma equivalent income per share amounts are computed by multiplying the
VFSC pro forma amounts by the above-assumed Exchange Ratio.
(2) VFSC's pro forma dividends per share represent historical dividends paid by
VFSC. West Mass pro forma equivalent dividends per share represent such
amounts multiplied by the assumed Exchange Ratio of 0.9861 (the maximum
Exchange Ratio). See "THE MERGER -- Terms of the Merger; Consideration to be
Received by West Mass Shareholders."
(3) VFSC pro forma book value per share is based on the historical total
stockholders' equity of the combined entity divided by the total pro forma
common shares of the combined entity assuming an Exchange Ratio of 0.9861
(the maximum Exchange Ratio). See "THE MERGER -- Terms of the Merger;
Consideration to be Received by West Mass Shareholders."
17
<PAGE> 25
COMPARATIVE PER SHARE DATA
(AT MINIMUM EXCHANGE RATIO)
The following table sets forth for VFSC Common Stock and West Mass Common
Stock certain historical, unaudited pro forma and unaudited pro forma equivalent
per share information for the nine months ended September 30, 1993 and for each
of the three years in the period ended December 31, 1992. The information herein
should be read in conjunction with the pro forma combined financial information,
including the notes thereto, appearing elsewhere in this Joint Proxy Statement
and Prospectus. See "PRO FORMA COMBINED FINANCIAL DATA."
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED DECEMBER 31,
SEPTEMBER 30, ------------------------
1993 1992 1991 1990
----------------- ------ ------ ------
<S> <C> <C> <C> <C>
INCOME PER SHARE(1)
VFSC............................................... $ 0.93 $ 1.10 $ 0.05 $ 0.09
West Mass.......................................... $ 1.48 $ 1.07 $ 0.57 $ 0.70
VFSC Pro Forma..................................... $ 1.09 $ 1.10 $ 0.19 $ 0.25
West Mass Pro Forma Equivalent..................... $ 1.07 $ 0.98 $ 0.17 $ 0.22
FULLY DILUTED INCOME PER SHARE(1)
VFSC............................................... $ 0.93 $ 1.10 $ 0.05 $ 0.09
West Mass.......................................... $ 1.48 $ 1.07 $ 0.57 $ 0.70
VFSC Pro Forma..................................... $ 1.09 $ 1.10 $ 0.19 $ 0.25
West Mass Pro Forma Equivalent..................... $ 1.07 $ 0.98 $ 0.17 $ 0.22
DIVIDENDS DECLARED PER SHARE(2)
VFSC............................................... $ 0.16 $ 0.08 $ 0.15 $ 0.90
West Mass.......................................... $ 0.21 $ 0.28 $ 0.28 $ 0.28
VFSC Pro Forma..................................... $ 0.16 $ 0.08 $ 0.15 $ 0.90
West Mass Pro Forma Equivalent..................... $ 0.14 $ 0.07 $ 0.13 $ 0.80
BOOK VALUE PER SHARE AT PERIOD END(3)
VFSC............................................... $ 19.36 $18.54 $17.50 $17.50
West Mass.......................................... $ 16.86 $16.51 $15.67 $14.74
VFSC Pro Forma..................................... $ 19.27 $18.56 $17.53 $17.28
West Mass Pro Forma Equivalent..................... $ 17.10 $16.47 $15.50 $15.34
</TABLE>
- ---------------
(1) Pro forma income per share data is calculated using historical income
information for VFSC and West Mass divided by the average pro forma shares
of the combined entity. The average pro forma shares of the combined entity
have been calculated by combining VFSC's historical average shares with the
historical average shares of West Mass as adjusted by an assumed Exchange
Ratio of 0.8875 (the minimum Exchange Ratio). The Exchange Ratio is subject
to change based on the determination of a value of VFSC Common Stock
according to the Valuation Formula prior to the Effective Time and there can
be no assurance as to whether the actual Exchange Ratio will be equal to or
smaller than the assumed ratio used in this table or elsewhere in this Joint
Proxy Statement and Prospectus. See "THE MERGER -- Terms of the Merger;
Consideration to be Received by West Mass Shareholders." The West Mass pro
forma equivalent income per share amounts are computed by multiplying the
VFSC pro forma amounts by the above-assumed Exchange Ratio.
(2) VFSC's pro forma dividends per share represent historical dividends paid by
VFSC. West Mass pro forma equivalent dividends per share represent such
amounts multiplied by the assumed Exchange Ratio of 0.8875 (the minimum
Exchange Ratio). See "THE MERGER -- Terms of the Merger; Consideration to be
Received by West Mass Shareholders."
(3) VFSC pro forma book value per share is based on the historical total
stockholders' equity of the combined entity divided by the total pro forma
common shares of the combined entity assuming an Exchange Ratio of 0.8875
(the minimum Exchange Ratio). See "THE MERGER -- Terms of the Merger;
Consideration to be Received by West Mass Shareholders."
18
<PAGE> 26
VERMONT FINANCIAL SERVICES CORP.
SELECTED FINANCIAL DATA
The following table sets forth selected historical data regarding VFSC's
operating results and financial position for and at the periods indicated.
Results of operations, per share data, and the total cash dividends, allowance
for loan losses and nonperforming assets ratios for, and as of the end of, the
five fiscal years ended December 31, 1992 are derived from VFSC's consolidated
financial statements and the notes thereto which have been audited by Coopers &
Lybrand, VFSC's independent certified public accountants. The consolidated
financial statements as of December 31, 1992 and 1991, and for each of the years
in the three-year period ended December 31, 1992, and reported thereon, are
incorporated by reference elsewhere herein. See "INCORPORATION OF DOCUMENTS BY
REFERENCE." The data as of and for the nine-month periods ended September 30 are
derived from unaudited financial statements and reflect, in the opinion of
management of VFSC, all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of such data. Results of operations for the
nine months ended September 30, 1993 are not necessarily indicative of results
which may be expected for the year as a whole.
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS ENDED AT OR FOR THE
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
--------------------- ---------------------------------------------------------
1993 1992 1992 1991 1990 1989 1988
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(Dollars in thousands, except per share data)
RESULTS OF OPERATIONS:
Interest income.......................... $ 50,416 $ 53,899 $ 71,646 $ 82,867 $ 88,079 $ 86,657 $ 65,803
Interest expense......................... 18,894 25,930 33,116 46,558 53,292 50,749 35,508
--------- --------- --------- --------- --------- --------- ---------
Net interest income...................... 31,522 27,969 38,530 36,309 34,787 35,908 30,295
Provision for loan losses................ 3,900 5,750 7,500 14,400 13,565 2,800 2,700
--------- --------- --------- --------- --------- --------- ---------
Net interest income after provision for
loan losses............................ 27,622 22,219 31,030 21,909 21,222 33,108 27,595
Other operating income................... 12,336 10,709 13,912 13,317 10,105 8,301 7,498
Other operating expense.................. 35,630 29,808 39,882 35,652 32,264 29,321 24,649
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes........ 4,328 3,120 5,060 (426 ) (937 ) 12,088 10,444
Applicable income tax expense
(benefit).............................. 1,156 791 1,304 (610 ) (1,235 ) 3,395 2,871
--------- --------- --------- --------- --------- --------- ---------
Net income............................... $ 3,172 $ 2,329 $ 3,756 $ 184 $ 298 $ 8,693 $ 7,573
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
AVERAGE BALANCE SHEET DATA:
Total assets............................. $898,670 $883,967 $889,818 $871,082 $861,727 $800,881 $672,820
Loans, net of unearned income............ 682,119 662,276 668,197 667,677 671,465 629,945 523,671
Securities available for sale............ 136,051 146,927 145,243 125,255 110,063 95,980 84,265
Total deposits........................... 743,993 769,041 765,428 770,392 742,972 688,317 592,016
Total long term debt (1)................. -- -- -- -- -- 1,334 3,841
Stockholders' equity..................... 64,342 59,969 60,589 57,783 62,562 57,064 50,643
PER SHARE DATA (2):
Net Income:
Primary................................ $ .93 $ 0.69 $ 1.10 $ 0.05 $ 0.09 $ 2.70 $ 2.48
Fully diluted.......................... .93 0.69 1.10 0.05 0.09 2.60 2.33
Total cash dividends declared............ 0.16 0.00 0.08 0.15 0.90 1.00 0.86
Book value at period end:
Primary................................ 19.36 18.20 18.54 17.50 17.50 18.33 17.33
Fully diluted.......................... 19.36 18.20 18.54 17.50 17.50 18.33 16.74
Average primary shares outstanding....... 3,410,232 3,398,567 3,399,343 3,388,072 3,372,413 3,215,657 3,048,207
SELECTED FINANCIAL RATIOS(3):
Return on average total assets........... 0.47 % 0.35 % 0.42 % 0.02 % 0.03 % 1.09 % 1.13 %
Return on average stockholders' equity... 6.59 5.19 6.20 0.32 0.48 15.22 14.95
Net interest margin (4).................. 5.23 4.68 4.79 4.63 4.50 5.01 5.09
Total cash dividends as a percentage of
net income............................. 17.18 0.00 7.25 276.21 1,019.58 37.55 34.52
Average stockholders' equity to average
assets................................. 7.16 6.78 6.81 6.63 7.26 7.13 7.53
Core (leverage) capital ratio at period
end (5)................................ 7.10 6.89 6.94 6.62 6.69 7.22 7.07
Total risk-based capital ratio at period
end (6)................................ 11.21 10.56 10.77 10.37 9.72 NA NA
Allowance for loan losses to period end
loans, net of unearned income.......... 2.23 2.74 2.65 2.66 1.92 0.95 0.85
Nonperforming assets to period-end net
loans, plus other real estate owed and
in-substance foreclosure (7)........... 4.50 6.09 5.80 6.08 3.20 1.57 0.79
Net charge-offs to average net loans..... 1.23 0.93 1.05 1.55 1.02 0.25 0.31
</TABLE>
- ---------------
[FN]
(1) Represents convertible subordinated capital debentures, which were fully
converted into common stock in 1989.
(2) All share and per share data have been adjusted to reflect the 5% stock
dividend paid in 1989.
(3) Ratios for the periods ended September 30, 1993 and 1992 are on an
annualized basis.
(4) Net interest margin represents net interest income, stated on a fully
taxable equivalent basis, divided by average earning assets.
(5) Equal to stockholders' equity less intangibles divided by total assets less
intangibles.
(6) Equal to stockholders' equity less intangibles plus the allowable portion of
the allowance for loan losses divided by total risk weighted assets.
(7) Nonperforming assets include nonaccrual loans, restructured loans, other
real estate owned and in-substance foreclosure.
19
<PAGE> 27
WEST MASS BANKSHARES, INC.
SELECTED FINANCIAL DATA
The following table sets forth selected historical data regarding West
Mass' operating results and financial position for and at the end of the periods
presented. The selected data presented below under the captions "Results of
Operations" and "Per Share Data" for, and as of the end of, each of the years in
the five-year period ended December 31, 1992, are derived from the consolidated
financial statements of West Mass and subsidiaries, which financial statements
have been audited by KPMG Peat Marwick, independent certified public
accountants. The consolidated financial statements as of December 31, 1992 and
1991, and for each of the years in the three-year period ended December 31,
1992, and report thereon, are incorporated by reference elsewhere herein. See
"INCORPORATION OF DOCUMENTS BY REFERENCE." The data as of and for the nine-month
periods ended September 30, 1993 and 1992 are derived from unaudited
consolidated financial statements and reflect, in the opinion of management of
West Mass, all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of such data. Results of operations for the
nine-months ended September 30, 1993, are not necessarily indicative of results
which may be expected for the year as a whole.
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS ENDED
AT OR FOR THE
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1993 1992 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
(Dollars in thousands, except per share data)
RESULTS OF OPERATIONS:
Interest income............................... $ 11,581 $ 12,646 $ 16,648 $ 19,145 $ 18,620 $ 16,880 $ 13,922
Interest expense.............................. 4,757 6,248 8,049 11,311 12,040 11,343 9,010
Provision for loan losses..................... 153 1,499 1,930 1,348 455 158 91
-------- -------- -------- -------- -------- -------- --------
Net interest income after provision for loan
losses...................................... 6,671 4,899 6,669 6,486 6,125 5,379 4,821
Total non-interest income..................... 1,021 870 1,580 1,048 629 1,005 1,015
Total non-interest expense.................... 4,504 4,350 5,799 5,679 4,918 4,742 4,383
-------- -------- -------- -------- -------- -------- --------
Income before income taxes.................... 3,188 1,419 2,450 1,855 1,836 1,642 1,453
Income taxes.................................. 1,394 647 1,132 1,149 967 793 638
Cumulative effect of change in accounting for
income taxes................................ (100)
-------- -------- -------- -------- -------- -------- --------
Net income.................................... $ 1,894 $ 772 $ 1,318 $ 706 $ 869 $ 849 $ 815
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
AVERAGE BALANCE SHEET DATA:
Total assets.................................. $215,380 $206,020 $207,897 $206,706 $193,283 $178,214 $161,735
Loans, net of unearned income(1).............. 176,205 157,308 158,864 165,641 163,455 151,574 123,314
Investment securities......................... 17,444 23,384 27,696 18,899 13,162 13,446 10,704
Total deposits................................ 188,262 184,655 185,419 186,531 173,395 155,757 135,892
Stockholders' equity.......................... 21,338 19,680 19,808 18,831 18,027 17,959 17,458
PER SHARE DATA:
Net income:
Primary..................................... $ 1.48 $ 0.62 $ 1.07 $ 0.57 $ 0.70 $ 0.67 $ 0.62
Fully diluted............................... 1.48 0.62 1.07 0.57 0.70 0.67 0.62
Cash dividends declared....................... 0.21 0.21 0.28 0.28 0.28 0.28 0.20
Book value at period end, primary and fully
diluted..................................... 16.86 16.08 16.51 15.67 14.74 14.40 13.81
Book value, tangible.......................... 14.33 13.12 13.62 12.49 11.28 10.67 9.85
Average primary shares outstanding............ 1,277,515 1,235,550 1,235,550 1,235,550 1,235,550 1,265,918 1,315,545
SELECTED FINANCIAL RATIOS(2):
Return on average total assets................ 1.18% 0.50% 0.63% 0.34% 0.45% 0.48% 0.50%
Return on average stockholders' equity........ 11.87 5.24 6.66 3.75 4.82 4.73 4.67
Net interest margin(3)........................ 4.51 4.55 4.43 4.03 3.64 3.31 3.37
Total cash dividends as a percentage of net
income...................................... 13.73 33.55 26.25 49.01 39.82 41.58 31.90
Average stockholders' equity to average
assets...................................... 9.91 9.55 9.53 9.11 9.33 10.08 10.79
Core (leverage) capital ratio at period
end(4)...................................... 8.67 7.84 7.84 7.55 7.21 7.20 6.94
Total risk-based capital ratio at period
end(5)...................................... 15.43 13.21 12.62 12.88 10.89 NA NA
Allowance for loan losses to period end loans,
net of unearned income...................... 1.83 1.75 1.83 1.13 0.50 0.39 0.36
Nonperforming assets to period end net loans
plus other real estate owned and in
substance foreclosure(6).................... 4.51 5.86 5.89 6.01 3.38 1.52 1.53
Net charge-offs to average net loans.......... (0.03) 0.17 0.30 0.30 0.12 0.03 0.01
</TABLE>
- ---------------
(1) Amount at September 30, 1993 does not include 101 loans totalling $4,034,000
previously sold to the Federal Home Loan Mortgage Corporation under a
recourse agreement.
(2) Ratios for the periods ended September 30, 1993 and 1992 are on an
annualized basis.
(3) Net interest margin represents net interest income, stated on a fully
taxable equivalent basis, divided by average earning assets.
(4) Equal to stockholders' equity less intangibles divided by total assets less
intangibles.
(5) Equal to stockholders' equity less intangibles plus the allowable portion of
the allowance for loan losses divided by total risk weighted assets.
(6) Nonperforming assets include nonaccrual loans, restructured loans, other
real estate owned and in-substance foreclosure.
20
<PAGE> 28
PRO FORMA COMBINED SELECTED FINANCIAL DATA
The following table sets forth certain unaudited pro forma combined
financial data for VFSC and West Mass after giving effect to the Merger, as if
it had occurred as of the beginning of each of the periods indicated below,
after giving effect to certain pro forma adjustments. This information should be
read in conjunction with the historical consolidated financial statements of
VFSC and West Mass, including the notes thereto, which are contained,
respectively, in VFSC's Annual Report to Stockholders for 1992 and West Mass'
Annual Report to Stockholders for 1992, which reports are delivered with this
Joint Proxy Statement and Prospectus. See "PRO FORMA COMBINED FINANCIAL DATA."
The pro forma combined selected financial data may not be indicative of the
results that actually would have occurred had the Merger been consummated on the
dates indicated, or which may be attained in the future.
<TABLE>
<CAPTION>
AT OR FOR THE
AT OR FOR THE NINE YEARS ENDED DECEMBER 31,
MONTHS ENDED -----------------------------------
SEPTEMBER 30, 1993 1992 1991 1990
------------------ --------- --------- ---------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Interest income............................................ $ 61,997 $ 88,294 $ 102,012 $ 106,699
Interest expense........................................... 23,651 41,165 57,869 65,332
------------------ --------- --------- ---------
Net interest income........................................ 38,346 47,129 44,143 41,367
Provision for loan losses.................................. 4,053 9,430 15,748 14,020
------------------ --------- --------- ---------
Net interest income after provision for loan losses........ 34,293 37,699 28,395 27,347
Other operating income..................................... 13,357 15,492 14,365 10,734
Other operating expense.................................... 40,134 45,681 41,331 37,182
------------------ --------- --------- ---------
Income before income taxes................................. 7,516 7,510 1,429 899
Applicable income tax expense (benefit), net of cumulative
effect of change in accounting for income taxes.......... 2,450 2,436 539 (268)
------------------ --------- --------- ---------
Net income................................................. $ 5,066 $ 5,074 $ 890 $ 1,167
------------------ --------- --------- ---------
------------------ --------- --------- ---------
AVERAGE BALANCE SHEET DATA:
Total assets............................................... $1,114,050 $1,097,715 $1,077,788 $1,055,010
Loans, net of unearned income(1)........................... 858,324 827,061 833,318 834,920
Securities available for sale.............................. 153,495 166,733 138,612 123,225
Total deposits............................................. 932,255 950,847 956,923 916,367
Stockholders' Equity....................................... 85,680 80,397 76,614 80,589
PER SHARE DATA(2):
Net income, primary and fully diluted...................... $ 1.09 $ 1.10 $ 0.19 $ 0.25
Total cash dividends declared.............................. 0.17 0.13 0.19 0.74
Book value at period end, primary and fully diluted........ 19.00 18.09 17.07 16.83
Average shares outstanding, primary and fully diluted...... 4,669,990 4,617,719 4,606,448 4,590,789
SELECTED FINANCIAL RATIOS(3):
Return on average total assets............................. 0.61% 0.46% 0.08% 0.11%
Return on average stockholders' equity..................... 7.88 6.31 1.16 1.45
Net interest margin(4)..................................... 5.09 4.72 4.54 4.32
Total cash dividends as a percentage of net income......... 15.89 12.18 95.96 289.80
Average stockholders' equity to average assets............. 7.69 7.32 7.11 7.64
Core (leverage) capital ratio at period end(5)............. 7.40 7.11 6.79 6.73
Total risk-based capital ratio at period end(6)............ 11.91 11.11 10.80 9.89
Allowance for loan losses to period end loans, net of
unearned income.......................................... 2.14 2.49 2.37 1.64
Nonperforming assets to period end net loans plus other
real estate owned and in-substance foreclosure(7)........ 4.47 5.70 5.97 3.08
Net charge-offs to average net loans....................... 0.97 0.91 1.30 0.84
</TABLE>
- ---------------
[FN]
(1) Amount at September 30, 1993 does not include 101 loans totalling $4,034,000
previously sold to the Federal Home Loan Mortgage Corporation under a
recourse agreement.
(2) Equivalent pro forma net income, book value and dividends declared per share
have been determined after giving effect to the Exchange Ratio of 0.9861 on
average shares outstanding.
(3) Ratios for the nine month period ended September 30, 1993 are on an
annualized basis.
(4) Net interest margin represents net interest income stated on a fully taxable
equivalent basis, divided by average earning assets.
(5) Equal to stockholders' equity less intangibles divided by total assets less
intangibles.
(6) Equal to stockholders' equity less intangibles plus the allowable portion of
the allowance for loan losses divided by total risk weighted assets.
(7) Nonperforming assets include nonaccrual loans, restructured loans, other
real estate owned and in-substance foreclosure.
21
<PAGE> 29
THE SPECIAL MEETINGS
GENERAL
This Joint Proxy Statement and Prospectus is being furnished to the holders
of West Mass Common Stock and VFSC Common Stock in connection with the
solicitation of proxies for use at the Special Meetings. The solicitation of
proxies from West Mass stockholders is being made by the Board of Directors of
West Mass, and the solicitation of proxies from VFSC stockholders is being made
by the Board of Directors of VFSC.
The Special Meetings will be held for the purpose of considering and voting
on a proposal to approve the Merger Agreement, including the Plan of Merger, and
the transactions contemplated thereby, which is being submitted to both the VFSC
and the West Mass stockholders.
QUORUM AND VOTING FOR WEST MASS SPECIAL MEETING
Only stockholders of West Mass of record at the close of business on
(the "West Mass Record Date") are entitled to notice of and to vote at
the West Mass Special Meeting. As of the West Mass Record Date, there were
issued and outstanding shares of West Mass Common Stock entitled to
vote, of which shares, representing % of the shares issued and
outstanding, were beneficially owned by directors and officers of West Mass and
their respective affiliates. Each such director, officer and affiliate has
indicated his or her intention to vote the shares of West Mass Common Stock
beneficially owned by him or her in favor of approval of the Merger Agreement.
See "-- Beneficial Ownership of West Mass Common Stock." As of the West Mass
Record Date, 70,145 shares, representing 5.70% of the shares issued and
outstanding as of such date, were held by the Employee Stock Ownership Plan (the
"ESOP") of United Savings Bank ("USB"), West Mass' sole direct subsidiary. Under
the terms of the ESOP, each participant in the ESOP is entitled to exercise
voting rights with respect to all shares of West Mass Common Stock allocated to
such participant's account pursuant to the ESOP. All unallocated shares of West
Mass Common Stock under the ESOP are voted by the Trustee of the ESOP at the
direction of the Administrative Committee of USB's Board of Directors. As of
December 31, 1993, all shares of West Mass Common Stock held by the ESOP had
been fully allocated.
The presence in person or by proxy of a majority of the aggregate number of
shares of West Mass Common Stock issued and outstanding on the West Mass Record
Date is necessary to constitute a quorum for the transaction of business at the
West Mass Special Meeting.
Each West Mass stockholder is entitled to one vote, in person or by proxy,
for each share of West Mass Common Stock held of record in such stockholder's
name at the close of business on the West Mass Record Date.
VOTE REQUIRED AT WEST MASS SPECIAL MEETING
The approval and adoption of the Merger Agreement, including the Plan of
Merger, and the transactions contemplated thereby, requires the affirmative vote
of the holders of two-thirds of the outstanding shares of the West Mass Common
Stock. For purposes of determining the votes cast with respect to any matter
presented for consideration at the West Mass Special Meeting, only those cast
"for" or "against" are included. Abstentions and broker non-votes are counted
only for purposes of determining whether a quorum is present at the meeting.
Assuming that each director and officer and affiliate of West Mass votes in
favor of the Merger Agreement, the affirmative vote of the holders of an
additional shares of West Mass Common Stock, representing % of the
total number of shares issued and outstanding on the West Mass Record Date, will
be required to carry the proposal. If the requisite vote to carry the Merger
proposal is not obtained at the West Mass Special Meeting, each of West Mass and
VFSC has the right to terminate the Merger Agreement, subject to certain
limitations. See "THE MERGER -- Termination."
The enclosed proxy is being solicited by the Board of Directors of West
Mass. Each proxy will be voted as directed; however, if no direction is
indicated, each properly executed proxy will be voted FOR the approval and
adoption of the Merger Agreement, including the Plan of Merger, and the
transactions contemplated
22
<PAGE> 30
thereby, and in such a manner as management's proxyholders shall decide on such
other matters, if any, as may properly come before the West Mass Special
Meeting. Any stockholder who returns a proxy before the West Mass Special
Meeting has the right to revoke it prior to its exercise by delivering written
notice to the Clerk of West Mass, or by returning a duly executed proxy bearing
a later date, or by attending the West Mass Special Meeting and voting in
person. However, if shares are held in street name, a stockholder will need
additional documentation to vote in person at the West Mass Special Meeting.
In addition to soliciting proxies by mail, proxies may also be solicited by
telephone or personal interview by employees of West Mass or USB, who will not
receive additional compensation for such solicitation activity. West Mass has
also retained Regan and Associates, Inc. to assist in the solicitation of
proxies, at a fee of approximately $3,250, plus reasonable out-of-pocket
expenses.
If sufficient votes in favor of the Merger are not received before the West
Mass Special Meeting, the West Mass Special Meeting may be adjourned to a future
date in order to permit further solicitation of proxies in respect of the
Merger. In connection therewith, however, proxies voting against the Merger may
not be used by the proxyholders to vote in favor of adjournment pursuant to such
proxyholders' discretionary authority.
QUORUM AND VOTING FOR VFSC SPECIAL MEETING
Only stockholders of VFSC of record at the close of business on
(the "VFSC Record Date") are entitled to notice of and to vote at the VFSC
Special Meeting. As of the VFSC Record Date, there were issued and outstanding
shares of VFSC Common Stock entitled to vote, of which
shares, representing % of the shares issued and outstanding, were beneficially
owned by directors and officers of VFSC and their respective affiliates. Each
such director, officer and affiliate has indicated his or her intention to vote
the shares of VFSC Common Stock beneficially owned by him or her in favor of
approval of the Merger Agreement. See "-- Beneficial Ownership of VFSC Common
Stock."
The presence in person or by proxy of a majority of the aggregate number of
shares of VFSC Common Stock issued and outstanding on the VFSC Record Date is
necessary to constitute a quorum for the transaction of business at the VFSC
Special Meeting.
Each VFSC stockholder is entitled to one vote, in person or by proxy, for
each share of VFSC Common Stock held of record in such stockholder's name at the
close of business on the VFSC Record Date. A list of all stockholders entitled
to vote at the VFSC Special Meeting, including the address and number of shares
registered in the name of each stockholder, will be available for inspection by
any VFSC stockholder for ten business days prior to the VFSC Special Meeting at
the office of the Secretary, 100 Main Street, Brattleboro, Vermont. Such list
will also be available at the VFSC Special Meeting to any VFSC stockholder who
is present.
VOTE REQUIRED AT VFSC SPECIAL MEETING
The approval and adoption of the Merger Agreement, including the Plan of
Merger, and the transactions contemplated thereby, requires the affirmative vote
of the holders of two-thirds of the outstanding shares of the VFSC Common Stock.
For purposes of determining the votes cast with respect to any matter presented
for consideration at the VFSC Special Meeting, only those cast "for" or
"against" are included. Abstentions and broker non-votes are counted only for
purposes of determining whether a quorum is present at the meeting. Assuming
that each director and officer and affiliate of VFSC votes in favor of the
Merger Agreement, the affirmative vote of the holders of an additional
shares of VFSC Common Stock, representing % of the total number of
shares issued and outstanding on the VFSC Record Date, will be required to carry
the proposal. If the requisite vote to carry the Merger proposal is not obtained
at the VFSC Special Meeting, each of VFSC and West Mass has the right to
terminate the Merger Agreement, subject to certain limitations. See "THE MERGER
- -- Termination."
The enclosed proxy is being solicited by the Board of Directors of VFSC.
Each proxy will be voted as directed; however, if no direction is indicated,
each properly executed proxy will be voted FOR the approval and adoption of the
Merger Agreement, including the Plan of Merger, and the transactions
contemplated
23
<PAGE> 31
thereby, and in such a matter as management's proxyholders shall decide on such
other matters, if any, as may properly come before the VFSC Special Meeting. Any
stockholder who returns a proxy before the VFSC Special Meeting has the right to
revoke it prior to its exercise by delivering written notice to the Secretary of
VFSC, or by returning a duly executed proxy bearing a later date, or by
attending the VFSC Special Meeting and voting in person. However, if shares are
held in street name, a stockholder will need additional documentation to vote in
person at the VFSC Special Meeting.
In addition to soliciting proxies by mail, proxies may also be solicited by
telephone or personal interview by employees of VFSC or VNB, who will not
receive additional compensation for such solicitation activity. VFSC has also
retained Regan and Associates, Inc. to assist in the solicitation of proxies, at
a fee of approximately $4,250, plus reasonable out-of-pocket expenses.
If sufficient votes in favor of the Merger are not received before the VFSC
Special Meeting, the VFSC Special Meeting may be adjourned to a future date in
order to permit further solicitation of proxies in respect of the Merger. In
connection therewith, however, proxies voting against the Merger may not be used
by the proxyholders to vote in favor of adjournment pursuant to such
proxyholders' discretionary authority.
BENEFICIAL OWNERSHIP OF WEST MASS COMMON STOCK
The following table sets forth information as of , 1993, the West
Mass Record Date, with respect to the shares of West Mass Common Stock
beneficially owned by each director of West Mass, by the chief executive officer
of West Mass, and by all directors and executive officers as a group.
<TABLE>
<CAPTION>
PERCENT OF
AMOUNT AND NATURE OF WEST MASS
NAME BENEFICIAL OWNERSHIP(1) COMMON STOCK
- ----------------------------------------------------------- ----------------------- ------------
<S> <C> <C>
Raymond E. Duda............................................ 4,400 .35%
Francis L. Lemay........................................... 105,355(2) 8.08%(2)
J. Paul Cormier............................................ 666 .05%
Rolland W. Gifford Jr. .................................... 1,333 .10%
Edward J. Duggan........................................... 666 .05%
Allyn W. Coombs............................................ 6,933 .55%
All directors and officers as a group (9 persons).......... 176,890(3) 13.55%(3)
</TABLE>
- ---------------
(1) Unless otherwise indicated, each person effectively exercises sole voting
and dispositive power as to the shares reported.
(2) Includes 50,000 shares that may be purchased pursuant to the exercise of
stock options.
(3) Includes 91,400 shares that may be purchased pursuant to the exercise of
stock options.
The directors and officers of West Mass who own options to acquire shares
of West Mass Common Stock have indicated that they do not intend to exercise any
such options at any time prior to the West Mass Special Meeting.
24
<PAGE> 32
Other than as indicated above, the following table sets forth information
as of , 1994, the West Mass Record Date, as to persons who are
beneficial owners of more than 5% of the outstanding shares of West Mass Common
Stock.
<TABLE>
<CAPTION>
AMOUNT OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP PERCENT OF CLASS
---------------------------------- -------------------- ----------------
<S> <C> <C>
First Manhattan Co................ 115,100 9.25%
437 Madison Avenue
New York, NY 10022
FMR Corp.......................... 108,500 8.78%
82 Devonshire Street
Boston, Massachusetts 02109
United Savings Bank Employee
Stock Ownership Plan............ 70,145 5.70%
45 Federal Street
Greenfield, Massachusetts 01301
</TABLE>
BENEFICIAL OWNERSHIP OF VFSC COMMON STOCK
The following table sets forth information as of , 1994, the VFSC
Record Date, with respect to the shares of VFSC Common Stock beneficially owned
by each director of VFSC, by the chief executive officer of VFSC, and certain
other executive officers of VFSC, and by all directors and executive officers as
a group.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF VFSC
NAME BENEFICIAL OWNERSHIP COMMON STOCK
------------------------------------------- -------------------- ------------
<S> <C> <C>
Anthony F. Abatiell........................ 76,349(1) 2.24%
Zane V. Akins.............................. 368(2) 0.01%
Charles A. Cairns.......................... 3,459(3) 0.10%
Robert C. Cody............................. 17,244(4) 0.51%
Beverly G. Davidson........................ 2,319(5) 0.07%
James E. Griffin........................... 2,475(6) 0.07%
John D. Hashagen, Jr....................... 10,668(7) 0.31%
Daniel C. Lyons............................ 9,825(8) 0.29%
Kimball E. Mann............................ 11,013(9) 0.32%
Stephan A. Morse........................... 4,648(10) 0.14%
Donald E. O'Brien.......................... 4,401(11) 0.13%
Roger M. Pike.............................. 6,312(12) 0.19%
Mark W. Richards........................... 23,164(13) 0.69%
Directors and Executive Officers as a 198,033(14) 5.81%
Group(18)
</TABLE>
- ---------------
[FN]
(1) Includes 813 shares held jointly with a family member in which Mr. Abatiell
shares voting and investment power. Also includes 71,192 shares held in a
custodial capacity in VNB's trust department in which Mr. Abatiell has sole
voting and investment powers. Does not include options to acquire 1,000
additional shares, exercisable within sixty (60) days, pursuant to the
Directors' Non-Qualified Stock.
(2) Does not include options to acquire 1,000 shares, exercisable within sixty
(60) days, pursuant to the Directors' Non-Qualified Stock Option Plan.
(3) Does not include options to acquire 1,000 shares, exercisable within sixty
(60) days, pursuant to the Directors' Non-Qualified Stock Option Plan.
(4) Includes 12,554 shares held jointly with a family member in which Mr. Cody
shares voting and investment powers. Does not include options to acquire
1,000 shares, exercisable within sixty (60) days, pursuant to the
Directors' Non-Qualified Stock Option Plan.
25
<PAGE> 33
(5) Ms. Davidson shares voting and investment powers on 2,308 shares. Does not
include options to acquire 1,000 shares, exercisable within sixty (60)
days, pursuant to the Directors' Non-Qualified Stock Option Plan.
(6) Does not include options to acquire 1,000 shares, exercisable within sixty
(60) days, pursuant to the Directors' Non-Qualified Stock Option Plan.
(7) Includes 224 shares held by a family member in which Mr. Hashagen has no
voting or investment powers and as to which Mr. Hashagen disclaims
beneficial ownership. Also includes 200 shares held in the name of Green
Mountain Investment Club in which Mr. Hashagen shares voting and investment
powers and 7,024 shares held in the VNB Profit Sharing Plan. Does not
include options to acquire 5,000 shares, exercisable within sixty (60)
days, pursuant to the Officers' Non-Qualified Stock Option Plan.
(8) Includes 2,625 shares held jointly with a family member in which Mr. Lyons
shares voting and investment powers. Also includes 7,200 shares held by a
family member in which Mr. Lyons has no voting or investment powers and as
to which Mr. Lyons disclaims beneficial ownership. Does not include options
to acquire 1,000 shares, exercisable within sixty (60) days, pursuant to
the Directors' Non-Qualified Stock Option Plan.
(9) Includes 9,379 shares held jointly with a family member in which Mr. Mann
shares voting and investment powers. Also includes 814 shares held by a
family member in which Mr. Mann has no voting or investment powers and as
to which Mr. Mann disclaims beneficial ownership. Does not include options
to acquire 1,000 shares, exercisable within sixty (60) days, pursuant to
the Directors' Non-Qualified Stock Option Plan.
(10) Includes 2,507 shares held jointly with a family member. Also includes 504
shares held by a family member in which Mr. Morse has no voting or
investment powers and as to which Mr. Morse disclaims beneficial ownership.
Does not include options to acquire 1,000 shares, exercisable within sixty
(60) days, pursuant to the Directors' Non-Qualified Stock Option Plan.
(11) Does not include options to acquire 1,000 shares, exercisable within sixty
(60) days, pursuant to the Directors' Non-Qualified Stock Option Plan.
(12) Includes 777 shares held jointly with family members and 1,110 shares held
by Kinney, Pike Bell & Conner, Inc. in which Mr. Pike shares voting and
investment powers. Also includes 869 shares held by a family member in
which Mr. Pike has no voting or investment powers and as to which Mr. Pike
disclaims beneficial ownership. Does not include options to acquire 1,000
shares, exercisable within sixty (60) days, pursuant to the Directors'
Non-Qualified Stock Option Plan.
(13) Includes 23,364 shares held jointly with family members in which Mr.
Richards shares voting and investment powers. Does not include options to
acquire 1,000 shares, exercisable within sixty (60) days, pursuant to the
Directors' Non-Qualified Stock Option Plan.
(14) Does not include options to acquire 48,000 shares, or % of the
outstanding shares, exercisable within sixty (60) days, pursuant to the
Directors' and Officers' Non-Qualified Stock Option Plans.
26
<PAGE> 34
The following table sets forth information as of , 1994, the VFSC
Record Date, as to persons who are beneficial owners of more than 5% of the
outstanding shares of VFSC Common Stock.
<TABLE>
<CAPTION>
AMOUNT OF PERCENT
NAME AND ADDRESS BENEFICIAL OWNERSHIP OF CLASS
------------------------------------------------------------ -------------------- --------
<S> <C> <C>
David L. Babson & Company, Inc.............................. 231,700 6.80%
One Memorial Drive
Cambridge, MA 02142-1300
UBS Asset Management (New York) Inc......................... 189,200 5.55%
1211 Avenue of the Americas
New York, NY 10036-8796
Vermont National Bank....................................... 274,002 8.00%
Trust Department
100 Main Street
Brattleboro, VT 05301
</TABLE>
27
<PAGE> 35
THE MERGER
This section of the Joint Proxy Statement and Prospectus describes certain
aspects of the proposed Merger. To the extent that it relates to the Merger
Agreement or the Stock Option Agreement, the following description does not
purport to be complete and is qualified in its entirety by reference to the
Merger Agreement and the Stock Option Agreement, copies of which are attached
hereto, respectively, as Appendix A and Appendix E and are incorporated herein
by reference. All stockholders are urged to read the Merger Agreement, the Stock
Option Agreement and the other appendices hereto in their entirety.
BACKGROUND OF THE MERGER; REASONS FOR THE MERGER; OPINIONS OF FINANCIAL ADVISORS
BACKGROUND OF THE MERGER. During the fall and winter of 1992-93, John D.
Hashagen, President and Chief Executive Officer of VFSC, and Francis L. Lemay,
Chairman and Chief Executive Officer of West Mass, met and discussed on a few
occasions on a preliminary basis the possibility of a combination or affiliation
of West Mass and VFSC. Such discussions were preliminary and inconclusive, and
no agreements or understandings concerning such a combination or affiliation
were reached.
In April of 1993, Mr. Lemay and Mr. Hashagen discussed the possibility of
each company conducting a limited "due diligence" investigation of the other,
with a view to evaluating the feasibility of a business combination or similar
transaction. On April 22, 1993, VFSC and West Mass signed a Confidentiality
Agreement concerning certain information as might be disclosed to VFSC by West
Mass in connection with a due diligence investigation of West Mass. On several
occasions in May, June and July of 1993, representatives of VFSC, including
officers of MB&D, VFSC's financial advisor, conducted a limited due diligence
review of West Mass. This review included analysis of West Mass' earnings,
operations, markets, and financial condition, including its loan portfolio.
On July 6, 1993, a similar Confidentiality Agreement was executed by West
Mass and VFSC concerning information as might be disclosed to West Mass in
connection with a due diligence investigation of VFSC. West Mass' officers and
representatives of M.A. Schapiro conducted a due diligence investigation of
VFSC's business, operations and financial condition in early July of 1993.
At a meeting on August 3, 1993, the VFSC Board of Directors discussed the
possible transaction with West Mass and authorized Mr. Hashagen to attempt to
negotiate the terms of a merger with West Mass, subject to further Board review
and approval.
During the first half of August, 1993, West Mass senior management and a
special committee of its Board of Directors, in consultation with its financial
advisor, reviewed and evaluated in detail the business and other aspects of a
potential merger with VFSC. At a meeting of the West Mass Board of Directors on
August 12, 1993, management and the Board special committee reported to the full
Board the results of its review and analysis. At this meeting, the full West
Mass Board authorized management to attempt to negotiate the definitive terms of
a merger with VFSC, subject to final Board review and approval.
Separate special meetings of the West Mass Board and the VFSC Board were
called for August 24, 1993 to consider drafts of the Merger Agreement and the
Stock Option Agreement. The VFSC Board, after presentations by management,
financial advisors and legal counsel, unanimously approved the agreements at
that meeting and authorized Mr. Hashagen to execute them on behalf of VFSC. The
West Mass Board, after presentations from its management, financial advisor and
legal counsel, also approved the Merger Agreement and the Stock Option
Agreement.
Messrs. Hashagen and Lemay executed the Merger Agreement and the Stock
Option Agreement on the afternoon of August 24, 1993.
REASONS OF WEST MASS FOR THE MERGER. In reaching its determination to
approve the Merger Agreement and to authorize management to proceed with the
transactions contemplated thereby, including issuing the Option to VFSC pursuant
to the Stock Option Agreement, the Board of Directors of West Mass concluded
that the Merger Agreement was fair to, and in the best interests of, West Mass
and its stockholders. In so
28
<PAGE> 36
doing, the West Mass Board consulted with West Mass' legal and financial
advisors, as well as management, and considered a number of factors, among them
the following:
(a) The Board's familiarity with and review of VFSC's business,
operations, earnings and financial condition.
(b) The geographic proximity of VFSC's home office in Brattleboro,
Vermont, to West Mass' main office in Greenfield, Massachusetts -- only
about 20 miles on Interstate 91 -- and the effect such proximity would have
on the combined enterprise's ability to prosper in the contiguous Franklin
County, Massachusetts, and Southern Vermont banking markets.
(c) The provisions of the Merger Agreement to the effect that West
Mass' obligation to consummate the Merger would be conditioned on the
receipt of a written opinion from M.A. Schapiro that the terms of the
Merger Agreement are fair to West Mass' stockholders from a financial point
of view.
(d) The intent and expectation that the Merger would be a tax-free
reorganization under applicable Federal income tax laws.
(e) The belief of the West Mass Board that, upon analysis of the
anticipated financial effects of the Merger, the resulting institution
would be financially strong and capitalized well in excess of regulatory
capital requirements.
(f) The view of the West Mass Board that VFSC's approach to the
banking business, with its emphasis on quality products and customer
service, would compliment and enhance the business of USB.
(g) The current and anticipated economic and regulatory environment
and competitive constraints facing relatively small, independent financial
institutions.
(h) The fact that the Merger Agreement contained certain provisions,
including the right of West Mass to terminate the agreement (i) if there
shall have occurred circumstances which have had, or be reasonably likely
to have, a material adverse effect on the business, results of operations,
financial condition or prospects of VFSC, or (ii) if the market value of
VFSC Common Stock shall have declined below $14.875 per share for a period
of time prior to the consummation of the Merger (subject to certain
limitations).
The West Mass Board did not attempt to weight or prioritize the above
factors in making its determination.
THE BOARD OF DIRECTORS OF WEST MASS UNANIMOUSLY RECOMMENDS THAT WEST MASS'
STOCKHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT AT THE WEST MASS SPECIAL
MEETING.
OPINION OF FINANCIAL ADVISOR TO WEST MASS. West Mass retained M.A.
Schapiro to provide an opinion as to the fairness of the Exchange Ratio, from a
financial point of view, to West Mass and its stockholders. West Mass selected
M.A. Schapiro as its financial advisor because of its reputation and because
M.A. Schapiro has substantial experience in transactions such as the Merger.
M.A. Schapiro has, from time to time, provided other financial advisory services
to West Mass, including advising West Mass with respect to mergers and
acquisitions. M.A. Schapiro is a nationally recognized investment banking firm
specializing in the banking and financial services industry.
M.A. Schapiro has delivered its written opinions to the West Mass Board
that, as of August 24, 1993 and as of the date of this Joint Proxy Statement and
Prospectus, the Exchange Ratio was fair, from a financial point of view, to the
stockholders of West Mass. No limitations were imposed by the West Mass Board
upon M.A. Schapiro with respect to the investigations made or procedures
followed by M.A. Schapiro in rendering its opinions.
THE FULL TEXT OF THE OPINION OF M.A. SCHAPIRO DATED THE DATE OF THIS JOINT
PROXY STATEMENT AND PROSPECTUS, WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS
CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN BY
29
<PAGE> 37
M.A. SCHAPIRO, IS ATTACHED HERETO AS APPENDIX B. WEST MASS STOCKHOLDERS ARE
URGED TO READ THIS OPINION IN ITS ENTIRETY. M.A. SCHAPIRO'S OPINION IS DIRECTED
ONLY TO THE EXCHANGE RATIO AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY WEST
MASS STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE WEST MASS SPECIAL
MEETING. THE SUMMARY OF THE OPINION OF M.A. SCHAPIRO SET FORTH IN THIS JOINT
PROXY STATEMENT AND PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF SUCH OPINION. THE AUGUST 24, 1993 OPINION IS SUBSTANTIALLY
IDENTICAL TO THE OPINION ATTACHED HERETO.
In connection with its opinion dated the date hereof, M.A. Schapiro
reviewed, among other things: (a) the Merger Agreement and the Stock Option
Agreement; (b) this Joint Proxy Statement and Prospectus; (c) publicly available
reports filed with the Commission by West Mass and VFSC; (d) certain other
publicly available financial and other information concerning West Mass and
VFSC; (e) certain other internal information, including projections, relating to
West Mass and VFSC, prepared by the managements of West Mass and VFSC and
furnished to M.A. Schapiro for purposes of its analysis; and (f) publicly
available information concerning certain other banks and bank holding companies,
savings banks, savings and loans holding companies, the trading markets for
their securities and the nature and terms of certain other merger and
acquisition transactions believed relevant to its inquiry. M.A. Schapiro also
met with certain officers and representatives of West Mass and VFSC to discuss
the foregoing as well as other matters relevant to its inquiry, including the
past and current business operations, results of regulatory examinations,
financial condition, current loan quality and trends at VFSC, and future
prospects of West Mass and VFSC, both separately and on a combined basis. In
addition, M.A. Schapiro reviewed the reported price and trading activity for
West Mass and VFSC Common Stock, compared certain financial and stock market
information for West Mass and VFSC with similar information for certain other
companies the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations in the commercial banking and
thrift industries specifically and other industries generally and performed such
other studies and analysis as it considered appropriate. M.A. Schapiro also
discussed with the independent auditors of each company their review of such
company's financial and accounting affairs. M.A. Schapiro also took into account
its assessment of general economic, market and financial conditions and its
experience in other transactions, as well as its experience in securities
valuation and its knowledge of the banking industry generally. M.A. Schapiro's
opinions were necessarily based upon conditions as they existed and could be
evaluated on the respective dates thereof and the information made available to
M.A. Schapiro through the dates thereof.
In conducting its review and in arriving at its opinion, M.A. Schapiro
relied upon and assumed the accuracy and completeness of the financial and other
information provided to it or publicly available and did not attempt
independently to verify the same. M.A. Schapiro also assumed, without
independent verification, that the aggregate allowances for loan losses for West
Mass and VFSC were adequate to cover such losses. M.A. Schapiro did not make or
obtain any evaluations or appraisals of the property of West Mass or VFSC. M.A.
Schapiro was retained by the West Mass Board to express an opinion as to the
fairness, from a financial point of view, to the West Mass stockholders of the
Exchange Ratio in the Merger. M.A. Schapiro did not address West Mass'
underlying business decision to proceed with the Merger and did not make any
recommendations to the West Mass Board with respect to any approval of the
Merger.
In connection with rendering its opinions to the West Mass Board, M.A.
Schapiro performed a variety of financial analyses which are summarized below.
M.A. Schapiro believes that its analyses and the summary set forth herein must
be considered as a whole and that selecting portions of such analyses and the
factors considered therein, without considering all factors and analyses, could
create an incomplete view of the analyses and the processes underlying M.A.
Schapiro's opinion. The preparation of a fairness opinion is a complex process
involving subjective judgments and is not necessarily susceptible to partial
analyses or summary description. In its analyses, M.A. Schapiro made numerous
assumptions with respect to industry performance, business and economic
conditions, and other matters, many of which are beyond the control of West Mass
and VFSC. Any estimates contained in M.A. Schapiro's analyses are not
necessarily indicative of future results or values, which may be significantly
more or less favorable than such estimates. Estimates of values of companies do
not purport to be appraisals or necessarily reflect the price at which companies
or their
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<PAGE> 38
securities actually may be sold. None of the analyses performed by M.A. Schapiro
was assigned a greater significance by M.A. Schapiro than any other.
The projections reviewed by M.A. Schapiro were prepared by the managements
of West Mass and VFSC. Neither West Mass nor VFSC publicly discloses internal
management projections of the type provided to the West Mass Board and to M.A.
Schapiro in connection with the review of the Merger. Such projections were not
prepared with a view towards public disclosure. The projections were based on
numerous variables and assumptions which are inherently uncertain, including
without limitation factors related to general economic and competitive
conditions, as well as trends in asset quality. Accordingly, actual results
could vary significantly from those set forth in such projections.
The following is a brief summary of the analyses performed by M.A. Schapiro
in connection with its opinion as described to the West Mass Board of Directors
by M.A. Schapiro:
(a) Summary. M.A. Schapiro summarized the terms of the Merger, including
the conversion of each share of West Mass Common Stock into the right to receive
$17.75 of VFSC Common Stock, subject to adjustment and provided that the
Exchange Ratio will be no less than 0.8875 nor more than 0.9861 of VFSC Common
Stock. M.A. Schapiro analyzed the Stock Option granted by West Mass to VFSC to
purchase 19.9% of the outstanding West Mass Common Stock at $17.75 per share.
M.A. Schapiro also analyzed the competitive and economic factors in
Massachusetts and Vermont as they affect financial institutions, earnings
sensitivity, pricing comparability and earnings per share estimates for the pro
forma company in light of the continued rehabilitation of asset quality at VFSC.
(b) Analysis of Other Merger Transactions. M.A. Schapiro analyzed certain
other bank and thrift merger and acquisition transactions in New England in
which the consideration was under $100 million for the period from January 1,
1991 to August 2, 1993. M.A. Schapiro similarly analyzed certain thrift
acquisition transactions for the Northeastern region from January 1, 1991 to
August 2, 1993. M.A. Schapiro then compared the multiples produced by the VFSC
offer with the median deal multiples for all included transactions. This
analysis compared price/earnings, price/fully diluted book value and price/fully
diluted tangible book value multiples of the VFSC offer to the median multiples
for the transactions analyzed. Set forth below are the median deal multiples
presented to the West Mass Board:
<TABLE>
<CAPTION>
SELECTED SELECTED
NEW ENGLAND NORTHEASTERN VFSC/
THRIFT ACQUISITIONS THRIFT ACQUISITIONS WMBS
------------------- ------------------- ------
<S> <C> <C> <C>
Price/Earnings.................... 14.29x 16.72x 10.40 x
Price/Book........................ 108.93% 105.76% 104.70%
Price/Tangible Book............... 113.24 106.55 124.30
</TABLE>
M.A. Schapiro's analysis also showed that the range of implied valuations
of West Mass, applying the median deal multiples described above to West Mass'
earnings, book value and tangible book value, was $15.22 to $23.08 per share.
The results produced in this analysis do not purport to be indicative of actual
values or expected values of West Mass or the shares of West Mass Common Stock.
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<PAGE> 39
The thrift acquisition transactions for the Northeastern Region for the
period from January 1, 1991, included in the above multiples are:
<TABLE>
<CAPTION>
STATE OF STATE OF
BUYER TARGET BUYER TARGET
- -------- -------- --------------------- --------------------
<S> <C> <C> <C>
First Fidelity
NJ CT Bancorp Greenwich Financial
PA PA Keystone Financial Elmwood Bancorp
PA PA Sovereign Bancorp Valley Federal
RI MA Citizens Financial Boston Five Bancorp
PA PA BT Financial Corp. FirstSouth Bancorp
First Fidelity
NJ NY Bancorp Village Financial
MA CT Sun Life Assurance Danielson Federal
NJ NJ Collective Bancorp Montclair Bancorp
MA MA Haymarket Co-Op Bank CapeBank
NY NY KeyCorp Nat'l SB of Albany
PA NJ Sovereign Bancorp Harmonia Bancorp
PA PA Susquehanna Bcshrs. Central Financial
PA PA PNC Bank Corp. Flagship Financial
PA PA USBANCORP Community Bancorp
PA PA Integra Financial Landmark Savings
NY NY Independence Savings LI City Financial
NY NY TrustCo Bank Corp Home & City Savings
</TABLE>
The thrift acquisition transactions for New England for the period from
January 1, 1991 to August 2, 1993 are:
<TABLE>
<CAPTION>
STATE OF STATE OF
BUYER TARGET BUYER TARGET
- -------- -------- --------------------- --------------------
<S> <C> <C> <C>
First Fidelity
NJ CT Bancorp Greenwich Financial
RI MA Citizens Financial Boston Five Bancorp
MA CT Sun Life Assurance Danielson Federal
MA MA Haymarket Co-Op Bank CapeBank
</TABLE>
(c) Discounted Cash Flow. M.A. Schapiro used two scenarios in performing a
discounted cash flow analysis of West Mass. The first scenario assumed annual
earnings appreciation of West Mass of 5.5%, discount rates of 10% to 14%,
different terminal price multiples ranging from 10x to 14x to apply to 1997
estimated earnings and a 30% dividend payout. This first scenario showed a range
of present values per share of West Mass Common Stock from $15.01 to $23.85. The
second scenario used the same assumptions as the first scenario, with the
exception that the earnings assumptions for West Mass remained stable at $2.5
million annually through 1997. This second scenario showed a range of present
values per share of West Mass Common Stock from $12.24 to $19.34. The results
produced in this analysis do not purport to be indicative of the actual values
or expected values of West Mass or of the shares of West Mass Common Stock.
(d) Analysis of the Combined Company. M.A. Schapiro analyzed certain
balance sheet and income statement data for West Mass and VFSC on both an
historical and pro-forma basis. Such analysis reviewed the profitability,
capital, credit quality, market niches of VFSC, and the ranking and
competitiveness within the Vermont/Western Massachusetts banking market. The
analysis showed, among other things, that the pro forma company would be nearly
$1.2 billion in assets with nearly $90 million in stockholder's equity.
Profitability was analyzed from the impact of realizing no-expense savings due
to VFSC's commitment to retain all West Mass employees. However, the expected
earnings of the pro-forma company was assumed to be enhanced by the continued
reduction in problem assets at VFSC and its related workout costs, gradual
improvement in Vermont's economy, as well as with the introduction of greater
commercial loan and trust services and products throughout West Mass' branch
network.
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<PAGE> 40
(e) Exchange Analysis. M.A. Schapiro considered the effect of the
limitations on the Exchange Ratio contained in the Merger Agreement. The effect
of such limitations is that stockholders of West Mass could receive VFSC Common
Stock valued at less than $17.75 per share of West Mass Common Stock if VFSC
Common Stock trades below $18.00 per share during the Determination Period set
forth in the Merger Agreement. If the price per share of VFSC Common Stock
during the Determination Period trades at $14.875 per share, then the value
received by West Mass stockholders could be as low as $14.67 per share.
(f) Analysis of Comparable Companies. M.A. Schapiro examined the operating
and trading performance of West Mass in comparison to selected publicly traded
thrifts located in Massachusetts with the total assets of between $100 million
and $1.0 billion. The group of twenty-four companies included Abington Savings,
Andover Bancorp, Bank of Braintree, Central Co-Operative, Co-Operative Bank of
Concord, Family Bancorp, First Essex Bancorp, Framingham Savings, Grove Bank,
Hibernia Savings, Hingham Institution for Savings, Home Port Bancorp, Lawrence
Savings, Lexington Savings, MASSBANK Corp., Medford Savings, Peoples Savings of
Brockton, Peoples Bancorp of Worcester, Quincy Savings, Sandwich Co-Operative,
Somerset Savings, Sterling Bancshares, Warren Bancorp, and West Newton Savings.
M.A. Schapiro analyzed the relative performance and outlook for West Mass
by comparing certain financial and trading market information of West Mass with
the group of comparable thrifts. M.A. Schapiro compared West Mass with the
comparable thrifts based upon selected operating statistics, including
capitalization, profitability and credit quality. Using data at, or for the
twelve months ended, June 30, 1993, and pricing data as of August 9, 1993, the
median market price to latest twelve months earnings multiple was 9.4x for the
comparable thrifts and 6.4x for West Mass. The median price to stated book value
was 77.2% for the comparable thrifts and 64.9% for West Mass. The median price
to tangible book value was 78.2% for the comparable thrifts and 77.0% for West
Mass. The implied market trading values for West Mass derived from such
comparable company analysis utilizing the resulting median valuation ratios
ranged from approximately $11.16 to $16.11 per share.
M.A. Schapiro examined the operating and trading performance of VFSC in
comparison to selected publicly traded commercial banks and bank holding
companies located in New England and upstate New York with total assets of
between $500 million and $2.0 billion. The group of fourteen companies included
Lafayette American Bancorp (CT), Putnam Trust Company (CT), UST Corp. (MA),
Independent Bank Corp. (MA), Cape Cod Bank & Trust (MA), Bank of New Hampshire
Corp. (NH), Arrow Financial Corp. (NY), Community Bank System (NY), Evergreen
Bancorp (NY), NBT Bancorp (NY), TrustCo Bank Corp. (NY), BankNorth Group (VT),
Chittenden Corp. (VT), and Merchants Bancshares (VT).
M.A. Schapiro analyzed the relative performance and outlook for VFSC by
comparing certain financial and trading market information of VFSC with the
group of comparable commercial banks. M.A. Schapiro compared VFSC with the
comparable commercial banks based upon selected operating statistics, including
capitalization, profitability and credit quality. Using data at, or for the
twelve months ended June 30, 1993, and pricing data as of August 9, 1993, the
median market price to latest twelve months earnings multiple was 12.7x for the
comparable commercial banks and 12.3x for VFSC. The median price to stated book
value was 109.7% for the comparable commercial banks and 98.6% for VFSC. The
median price to tangible book value was 119.2% for the comparable commercial
banks and 98.8% for VFSC. The median capitalization levels for the comparable
commercial banks was 7.25% common equity to assets, 7.12% tangible common equity
to assets, and 10.42% core capital ratio. VFSC ratios for these measures was
7.28%, 7.27% and 9.91%, respectively. The median return on average assets was
0.58% for the comparable commercial banks and 0.58% for VFSC. The median return
on average common equity was 7.54% for the comparable commercial banks and 8.33%
for VFSC. The median ratio of non-performing assets to loans and other real
estate owned was 4.53% for the comparable commercial banks and 5.15% for VFSC.
The median ratio of reserves to non-performing assets was 55.52% for the
comparable commercial banks and 44.78% for VFSC, while reserves to loans was
2.67% for the comparable commercial banks and 2.36% for VFSC.
In connection with its opinion dated the date of this Joint Proxy Statement
and Prospectus, M.A. Schapiro also confirmed the appropriateness of its reliance
on the analysis used to render its August 24, 1993
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<PAGE> 41
opinion by performing procedures to update certain of such analyses and by
reviewing the assumptions on which such analyses were based and the factors
considered in connection therewith.
M.A. Schapiro is a nationally recognized investment banking firm and is
continually engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive bidding,
secondary distributions of listed and unlisted securities, and valuations for
estate, corporate and other purposes.
West Mass and M.A. Schapiro have entered into a letter agreement, dated May
15, 1993 (the "M.A. Schapiro Engagement Letter"), relating to the services to be
provided by M.A. Schapiro in connection with the Merger. West Mass has agreed to
pay M.A. Schapiro a fee (the "Fee") for its services equal to 1.0% of the value
of the consideration received by West Mass and its stockholders which, based
upon a projected exchange value of $17.75, will equal $219,310. The Fee, which
will be paid in cash, will be paid according to the following schedule:
one-third of the Fee was paid upon the execution of the Merger Agreement;
one-third will be paid upon receipt of West Mass' stockholder approval; with the
remaining one-third to be paid at the Effective Time. All such payments shall be
non-refundable. For purposes of the M.A. Schapiro Engagement Letter, the value
of the consideration received by West Mass and its stockholders shall mean the
fair market value of VFSC Common Stock based on the average closing price as
reported on NASDAQ -- NMS for the ten trading days prior to the Effective Time.
In the M.A. Schapiro Engagement Letter, West Mass also has agreed to indemnify
M.A. Schapiro against certain liabilities, including liabilities under the
federal securities laws.
M.A. Schapiro's opinion does not constitute a recommendation to any West
Mass stockholder as to how such stockholder should vote on the Merger proposal.
REASONS OF VFSC FOR THE MERGER. In reviewing the terms of the proposed
Merger and making its determination to approve the Merger Agreement, the Board
of Directors of VFSC concluded that the Merger Agreement was fair to, and in the
best interests of, VFSC and its stockholders. VFSC's Board consulted VFSC's
financial and legal advisors, as well as management, and considered a number of
factors, among them the following:
(a) West Mass' strong share of the market in Franklin County,
Massachusetts, and the size and makeup of its primary competitors.
(b) VFSC's level of comfort with West Mass' business, operations,
earnings and financial condition, including its loan portfolio.
(c) The proximity of VFSC's home office in Brattleboro, Vermont, to
the contiguous Franklin County (Massachusetts) market, and the effect this
proximity would have on VFSC's ability to compete with success and prosper
in the new market area.
(d) The condition to VFSC's obligation to consummate the Merger that
it receive a written opinion from MB&D that the Exchange Ratio is fair to
VFSC's stockholders from a financial point of view, and the oral summary of
such opinion delivered at the August 24 Board meeting.
(e) The belief of the VFSC Board that, upon analysis of the
anticipated financial effects of the Merger, the resulting institution
would be financially strong and capitalized well in excess of regulatory
capital requirements.
(f) The view of the Board that VFSC's approach to the banking
business, with its emphasis on quality products and customer service, would
compliment and enhance the business of USB, enabling the combined
enterprise to be a strong competitor in the Western Massachusetts
marketplace.
(g) The current and anticipated economic and regulatory environment
and competitive constraints facing relatively small, independent financial
institutions.
(h) The fact that the Merger Agreement contains certain provisions,
including the right of VFSC to terminate the agreement if there shall have
occurred circumstances which have had, or be reasonably
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<PAGE> 42
likely to have, a material adverse effect on the business, results of
operations, financial condition or prospects of West Mass.
(i) The Exchange Ratio, and the fact that the Merger Agreement
provides that the Exchange Ratio will not exceed 0.9861 share of VFSC
Common Stock for each share of West Mass Common Stock.
(j) The potential long-term effect of the addition of West Mass'
business to VFSC's earnings power.
The VFSC Board did not attempt to weight or prioritize the above factors in
making its determination.
THE BOARD OF DIRECTORS OF VFSC UNANIMOUSLY RECOMMENDS THAT VFSC'S STOCKHOLDERS
VOTE FOR APPROVAL OF THE MERGER AGREEMENT AT THE VFSC SPECIAL MEETING.
OPINION OF FINANCIAL ADVISOR TO VFSC. VFSC retained MB&D to advise it in
connection with the negotiations preceding the execution of the Merger Agreement
and provide an opinion as to the fairness of the Exchange Ratio set forth in the
Merger Agreement to VFSC and its stockholders from a financial point of view.
VFSC and its Board of Directors selected MB&D based on prior experience of VFSC
working with certain of the principals of MB&D in terms of capital markets
transactions, branch acquisition analysis and merger and acquisition analysis.
MB&D was selected based on its qualifications and experience in the financial
analysis of financial institutions and merger and acquisition transactions
involving financial institutions. VFSC retained MB&D to assist it in evaluating
possible acquisition candidates both within Vermont and in the states
immediately adjacent to Vermont. Among the entities considered by MB&D was West
Mass. MB&D suggested to VFSC that contact be made by the President and Chief
Executive Officer of VFSC to the Chairman and Chief Executive Officer of West
Mass to determine whether or not the subject of a possible affiliation would be
of any interest to West Mass. MB&D is a financial consulting and investment
banking firm specializing in the banking and financial services industry. MB&D
is also a NASDAQ broker-dealer and produces equity research for investors in the
securities of financial institutions.
MB&D has delivered its oral and written opinions to the Board of Directors
of VFSC that, subject to the limitations set forth in the opinion, as of August
24, 1993 and as of the date of this Joint Proxy Statement and Prospectus, the
Exchange Ratio (including the maximum and minimum ratios permitted) provided for
in the Merger Agreement is fair to the holders of VFSC Common Stock from a
financial point of view.
THE FULL TEXT OF THE OPINION OF MB&D DATED THE DATE OF THIS JOINT PROXY
STATEMENT AND PROSPECTUS WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED
AND LIMITS ON THE REVIEW UNDERTAKEN IS ATTACHED HERETO AS APPENDIX C. VFSC'S
STOCKHOLDERS ARE URGED TO READ THIS OPINION IN ITS ENTIRETY. MB&D'S OPINION IS
DIRECTED TO THE POSSIBLE RANGE OF EXCHANGE RATIOS WHICH MAY BE OBTAINED IN THE
MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF VFSC COMMON
STOCK AS TO HOW SUCH HOLDER SHOULD VOTE AT THE VFSC SPECIAL MEETING. THE SUMMARY
OF THE OPINION OF MB&D SET FORTH IN THIS JOINT PROXY STATEMENT AND PROSPECTUS IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION ITSELF.
THE CONCLUSION OF THE ORAL OPINION OF AUGUST 24, 1993 IS SUBSTANTIALLY THE SAME
AS THE CONCLUSION OF THE OPINION WHICH APPEARS IN APPENDIX C.
In arriving at its opinion, MB&D reviewed publicly available business and
financial information relating to West Mass and its banking subsidiary, USB, and
publicly available business and financial information relating to VFSC and its
subsidiary, VNB. MB&D also reviewed the Merger Agreement and the related Stock
Option Agreement as well as the Registration Statement on Form S-4 of VFSC which
includes the Joint Proxy Statement and Prospectus. MB&D also reviewed certain
other information including internal reports and documents of VFSC, West Mass
and USB and other internal, management-prepared financial information. MB&D
discussed projections for future periods for both VFSC and West Mass with VFSC
and West Mass, respectively. MB&D also met with and had discussions with members
of the senior management of each of VFSC and West Mass and their respective
banking subsidiaries regarding their respective past and current business
operations, financial condition, and future prospects. The discussions also
encompassed the results of recently completed regulatory examinations at the
subsidiary banks of both institutions, trends in asset quality and problem asset
resolution at both institutions and the relative state of the local economies in
which each institution conducts business. MB&D also held discussions with the
respective independent auditors of VFSC and West Mass regarding the financial
and accounting affairs of the two companies and reviewed with the senior
management of VFSC the results of VFSC's conversations and discussion with the
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<PAGE> 43
senior members of management of West Mass concerning the past and present
business operations, financial condition and future prospects of both West Mass
and USB.
In addition to the foregoing, MB&D reviewed the annual reports to
stockholders and annual reports on Form 10-K of each of West Mass and VFSC for
the years ended December 31, 1990, 1991 and 1992 and certain interim reports to
stockholders for the periods ended March 31, 1993, June 30, 1993 and September
30, 1993 as well as the quarterly reports on Form 10-Q of VFSC and West Mass for
the same periods. MB&D also studied the historical stock prices and trading
volumes of the common stock of both VFSC and West Mass. MB&D reviewed and
studied the publicly available financial data and stock market performance of a
number of publicly traded bank holding companies and thrifts which MB&D believes
to be reasonably comparable to VFSC and West Mass. In addition, MB&D reviewed
the terms and conditions of recent acquisitions of publicly traded thrifts which
it deemed to be comparable to the acquisition of West Mass by VFSC. MB&D also
conducted such other studies, analyses and investigations as it deemed
appropriate under the circumstances surrounding this transaction.
In the course of its review and analysis, MB&D considered, among other
things, such topics as relative capitalization, capital adequacy, relative asset
quality, loan loss reserve adequacy, the composition of the loan portfolio, the
respective asset and liability compositions of the parties to the transaction
and the relations of each parent entity to its respective primary regulator and
of each subsidiary bank to its primary regulator. MB&D's opinion also takes into
account its assessment of general economic, market and financial conditions, its
experience in other transactions, as well as its experience in securities
valuation and its knowledge of the banking and thrift industry generally. In the
process of its review and analysis, MB&D relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information provided to it by the management of both VFSC and West Mass.
In reaching its opinion, MB&D did not perform or obtain from any other source
any independent appraisals of the assets of VFSC or of West Mass. MB&D also
relied on the management of each of VFSC and West Mass and their respective
subsidiary banks as to the reasonableness of the financial and operating
forecasts and of the assumptions on which they are based, which were provided to
it.
In connection with rendering its opinions to the Board of Directors of
VFSC, MB&D informed VFSC that it performed a number of financial analyses which
are summarized below. MB&D has indicated that the various analyses summarized
should be considered as a whole and cautioned against a selective reliance on
any single portion of the analyses. MB&D also stated that (i) the preparation of
a fairness opinion is an involved process employing both objective and
subjective judgments, the evaluation of many factors and varies as to the steps
involved based on the form of the specific transaction and the identities and
historical performances of the parties to the transaction; (ii) estimates which
comprise a part of MB&D's analysis are not necessarily indicative of future
results or values; and (iii) estimates of values referenced in any such analysis
are not intended to be appraisals and may not reflect the price at which the
companies or their securities may actually be sold.
The following is a summary of the analyses completed by MB&D in connection
with rendering and reaffirming its opinion:
(a) Analysis of the Anticipated Transaction. MB&D analyzed the
anticipated impact of the proposed Merger on the projected future results
of VFSC and on its projected consolidated pro forma balance sheet.
Specifically, MB&D stated that it would expect, based on a range of
possible Exchange Ratios running from a minimum of 0.8875 share of VFSC
Common Stock in exchange for each share of West Mass Common Stock to a
maximum of 0.9861 share of VFSC Common Stock in exchange for each share of
West Mass Common Stock, that, based on the assumptions employed, the
dilutive effect on estimated future earnings (as estimated by MB&D) (before
consideration of possible cost reductions as a result of the Merger) of
VFSC resulting from a transaction completed in 1994 would not be
significant. MB&D indicated that the elimination of the maximum expected
amount of such earnings dilution would require an increase in after-tax
income produced by West Mass of less than 5% over the estimate for West
Mass as used in the analysis. Alternatively, MB&D indicated that the
elimination of anticipated dilution to earnings per share could be achieved
through a reduction in the annualized pre-tax non-interest expense levels
at which West Mass has been operating, of less than 10%. MB&D also pointed
out
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<PAGE> 44
that the elimination of the maximum anticipated dilution could be
accomplished through a combination of increased net income and decreased
non-interest expense of West Mass. To the extent that the actual Exchange
Ratio is less than the maximum of 0.9861, the dilutive impact to earnings
resulting from the acquisition of West Mass will be reduced. MB&D indicated
that it is not expected that there will be any permanent dilutive effect on
earnings of VFSC as a result of the Merger based on anticipated increases
in both net interest income and non-interest income at USB as a result of
the planned introduction of new lending products and services. MB&D also
considered the likely impact of the expected transaction (which is to be
accounted for on a pooling-of-interests basis) on the balance sheet and
capitalization ratios of VFSC. MB&D indicated that it anticipated that the
transaction will increase the tangible capital ratio of VFSC by more than
20 basis points and the equity capital ratio of VFSC by more than 40 basis
points.
(b) Discounted Cash Flow Analysis. MB&D indicated that it examined
two scenarios in projecting future cash flows of a free-standing West Mass
(employing conservative assumptions) in order to facilitate a discounted
cash flow analysis. The first scenario assumed an annual asset growth of 5%
and a return on assets averaging 0.90% (a rate which, although less than
the year-to-date for September 30, 1993 annualized performance of West
Mass, is well above annual results recorded by West Mass in 1990, 1991 and
1992). The scenario contemplated a range of possible terminal values based
on price earnings multiples of from 10x to 14x applied to projected
earnings for the twelve months ended December 31, 1998 and annual dividends
based on a static dividend payout ratio of 30% applied to the growing
income stream. The discount rates applied to the resulting cash flows
ranged from 10% to 14% and incorporated both concepts of the time value of
money and risk. The second scenario employed most of the same assumptions
as the first scenario except that it incorporated an earnings annuity
concept for West Mass with West Mass earning a constant $2.4 million for a
five-year period. The first scenario showed a range of present discounted
values for a free standing West Mass of from $12.05 per share to $19.14 per
share and the second scenario showed a range of present discounted value
for a free standing West Mass of from $11.83 per share to $18.67 per share.
MB&D cautioned that the results produced in this analysis do not purport to
be indicative of the actual values of the securities of West Mass.
(c) Analysis of Other Comparable Transactions. MB&D indicated that it
reviewed a selection of other publicly-announced transactions between
financial institutions in New England and in the Northeast. MB&D stated
that it does not place undue reliance on comparables analysis as a
methodology due to what it perceives as the serious inherent limitations of
the practice, adding that comparables analysis often fails to adequately
take into consideration such factors as differences in the underlying
capitalization of the acquiror and the acquired institution, differences in
the historic earnings patterns recorded by the two institutions which can
demonstrate a different picture than is obtained by examining only recent
financial results, differences in the form or forms of consideration used
to complete the transaction and differences between the planned methods of
accounting for the completed transaction. Nevertheless, MB&D reviewed 14
transactions which were either pending or had been completed within the
past twelve months in the Northeast. Based on publicly reported
information, the median multiple of book value (unadjusted for intangibles)
represented by the announced transaction price in the 14 examples
considered was 1.39 times the most recent quarter end unadjusted book value
of the acquired entity. MB&D stated that the announced transaction price of
$17.75 represents approximately 1.05 times the unadjusted book value of
West Mass as of September 30, 1993 and 1.24 times the adjusted book value
of West Mass (adjusted to eliminate intangible assets as of September 30,
1993). Based on publicly reported information, the median multiple of the
earnings reported for the last twelve months prior to the public
announcements for the 14 example transactions reviewed was 17.62 times.
MB&D believes that this figure is distorted by the fact that earnings of
many financial institutions in the region covered have been negatively
affected during the past year by poor asset quality and the effects of the
regional economy which has been operating on less than a robust basis.
Based on the assumed transaction price of $17.75, the multiple of the last
twelve months earnings for West Mass as of the announcement date is 10.30
times.
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Pursuant to a letter agreement with VFSC dated August 16, 1993, MB&D is to
receive a fee of $105,000 for its services in connection with the Merger and for
rendering its opinion, such fee payable one-third at the time the Merger
Agreement was signed by VFSC and West Mass, one-third on the date of VFSC's
mailing of the Joint Proxy Statement and Prospectus, and one-third at the
Effective Time. In addition, VFSC is to reimburse MB&D for its reasonable
out-of-pocket expenses incurred in connection with the Merger. VFSC has agreed
to indemnify MB&D and its directors, officers and employees against certain
losses, claims, damages and liabilities relating to or arising out of MB&D's
engagement, including liabilities under the federal securities laws.
MB&D's opinion does not constitute a recommendation to any VFSC stockholder
as to how such stockholder should vote on the Merger proposal.
TERMS OF THE MERGER; CONSIDERATION TO BE RECEIVED BY WEST MASS STOCKHOLDERS
At the time the Merger becomes effective, West Mass will merge with and
into VFSC, and VFSC will be the surviving corporation. The Certificate of
Incorporation and Bylaws of VFSC as in effect immediately prior to the Merger
will be the Certificate of Incorporation and Bylaws of VFSC after the Merger as
the surviving corporation.
Upon consummation of the Merger, each outstanding share of West Mass Common
Stock, other than shares held by West Mass as treasury shares or as to which
dissenters' rights have been perfected, will be converted into that number of
shares of VFSC Common Stock determined according to the Exchange Ratio, namely
such number of VFSC shares as shall equal the quotient (rounded to the nearest
thousandth) of $17.75 divided by the value of VFSC Common Stock (as defined
below) during the determination period expressed in dollars; provided, however,
that in no event shall the Exchange Ratio be less than 0.8875 nor more than
0.9861. For purposes of the Merger Agreement, the value of VFSC Common Stock
during the determination period means the average of the mid-point of the daily
inter-dealer or "inside" closing bid and asked per-share prices (in thousandths)
of VFSC Common Stock as reported by NASDAQ-NMS for the 30 trading days
immediately preceding the fifth trading day prior to (but not including) the
Effective Time of the Merger (the "Valuation Formula"). See "-- Rights of West
Mass Dissenting Stockholders" and "BUSINESS OF VFSC -- Description of VFSC
Capital Stock."
No fractional shares of VFSC Common Stock will be issued in the Merger.
Instead, the Merger Agreement provides that West Mass stockholders will receive
cash in lieu of such fractional shares. The cash amount paid in lieu of
fractional shares will be determined by multiplying such holder's fractional
interest by the value of VFSC Common Stock during the determination period as
defined above.
Although the Exchange Ratio will be determined by dividing the number of
shares of VFSC Common Stock equal to $17.75 by the value of VFSC Common Stock
determined according to the Valuation Formula (provided that the Exchange Ratio
shall not be less than 0.8875 nor greater than 0.9861), because (i) the value of
VFSC Common Stock determined according to the Valuation Formula will be based on
the average of the mid-point of the daily inter-dealer closing bid and asked per
share prices as reported by NASDAQ-NMS for 30 consecutive trading days; and (ii)
the market prices of VFSC Common Stock are likely to fluctuate prior to the
receipt of VFSC Common Stock by exchanging West Mass stockholders, the actual
market value of the Merger consideration may be less than or greater than $17.75
at the time it is received by West Mass stockholders. Accordingly, there can be
no assurance that West Mass stockholders will be able to obtain $17.75 for the
shares of VFSC Common Stock received as a result of the Merger.
Shares of VFSC Common Stock issued and outstanding at the time the Merger
becomes effective will remain issued and outstanding thereafter and will not be
affected by the Merger.
EFFECTIVE TIME OF THE MERGER
The Merger will become effective upon the filing of (i) Articles of Merger
relating thereto with the Secretary of State of the Commonwealth of
Massachusetts and the issuance by the Secretary of State of the Commonwealth of
Massachusetts of a Certificate of Merger with respect thereto and (ii) a
Certificate of Merger with the Secretary of State of the State of Delaware and
the issuance by the Secretary of State of the
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State of Delaware of a Certificate of Merger with respect thereto. The parties
to the Merger Agreement will promptly cause such Articles of Merger and
Certificate of Merger to be so filed after each of the conditions to
consummation of the Merger has been satisfied or waived and following approval
by the stockholders of VFSC and West Mass. The Merger cannot become effective
until West Mass and VFSC stockholders have approved the Merger Agreement and all
required regulatory approvals and actions have been obtained and taken. See "--
Regulatory Approvals Required." Subject to satisfaction of the conditions
contained in the Merger Agreement, the parties currently anticipate that the
Merger will become effective during the quarter ending March 31, 1994, although
there can be no assurance as to whether or when the Merger will become
effective. See "-- Conditions to Consummation of the Merger."
SURRENDER OF WEST MASS COMMON STOCK CERTIFICATES
As soon as practicable after the Merger becomes effective, the Exchange
Agent will send a notice and transmittal form to each holder of West Mass Common
Stock of record at the time the Merger becomes effective (other than holders who
have properly exercised dissenters' rights of appraisal, see "-- Rights of West
Mass Dissenting Stockholders") advising such holder of the effectiveness of the
Merger and of the procedure for surrendering to the Exchange Agent such holder's
certificate or certificates formerly evidencing West Mass Common Stock in
exchange for a new certificate(s) evidencing VFSC Common Stock.
WEST MASS STOCKHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL
THEY RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS FROM THE EXCHANGE
AGENT.
Upon surrender to the Exchange Agent of certificates formerly evidencing
West Mass Common Stock, together with a properly completed and signed letter of
transmittal, there will be issued and mailed to the holder thereof a new
certificate or certificates representing the number of whole shares of VFSC
Common Stock to which such holder is entitled under the Merger Agreement and,
where applicable, a check for the amount of cash payable in lieu of a fractional
share of VFSC Common Stock. If the holder requests participation in the VFSC
Dividend Reinvestment Plan, a notification of shares held on deposit by the
Exchange Agent will be mailed to the holder in lieu of the stock certificate
and/or check noted above. A certificate representing VFSC Common Stock or a
check in lieu of a fractional share will be issued in a name other than the name
in which the surrendered West Mass stock certificate was registered only if the
West Mass stock certificate surrendered is properly endorsed or accompanied by
appropriate stock powers and is otherwise in proper form for transfer.
After the Merger becomes effective, each certificate formerly evidencing
West Mass Common Stock (other than certificates as to which dissenters' rights
of appraisal have been exercised) will, until it is surrendered to the Exchange
Agent, be deemed for all corporate purposes to evidence ownership of that number
of whole shares of VFSC Common Stock into which it was converted as a result of
the Merger.
If any certificate formerly evidencing West Mass Common Stock has been
lost, stolen or destroyed, the Exchange Agent shall issue in exchange for such
lost, stolen or destroyed certificate, upon the making of an affidavit of that
fact by the holder thereof, such shares of VFSC Common Stock and cash for
fractional shares, if any, as may be required pursuant to the Merger Agreement;
provided, however, that VFSC may, in its discretion and as a condition to the
issuance of a certificate representing the VFSC Common Stock into which such
West Mass Common Stock has been converted, require the owner thereof to deliver
a bond in such sum as VFSC may direct as indemnity against any claim that may be
made against West Mass, VFSC, the Exchange Agent or any other party with respect
to the certificate alleged to have been lost, stolen or destroyed. After the
Merger becomes effective, no further registration of transfers on the records of
West Mass will be made as to certificates formerly evidencing West Mass Common
Stock and any certificates which are presented for such registration of transfer
will be cancelled and exchanged for certificates representing shares of VFSC
Common Stock as described above.
CONDITIONS TO CONSUMMATION OF THE MERGER
The obligations of both VFSC and West Mass to consummate the Merger are
subject to satisfaction of the following conditions, among others: (i) the
Merger Agreement and the transactions contemplated thereby shall have been
approved by the stockholders of VFSC and West Mass; (ii) all regulatory
approvals required
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for the consummation of the Merger shall have been obtained; (iii) the
Registration Statement relating to the shares of VFSC Common Stock to be issued
pursuant to the Merger Agreement shall have become effective; and (iv) neither
VFSC nor West Mass shall be subject to any order, decree or injunction of a
court or agency of competent jurisdiction which enjoins or prohibits
consummation of the Merger.
The obligation of VFSC to consummate the Merger is further subject to
additional conditions, including, without limitation, the following:
(a) There shall not have occurred any change in the business, assets,
financial condition, results of operations or prospects of West Mass or any
of its subsidiaries which has, or is reasonably likely to have,
individually or in the aggregate, a material adverse effect on the
business, results of operations, financial condition or prospects of West
Mass.
(b) West Mass shall have complied with and performed in all material
respects its obligations under the Merger Agreement, and its
representations and warranties in the Merger Agreement shall be true and
correct in all material respects at the Effective Time.
(c) VFSC shall have received a letter from its independent public
accountants, Coopers & Lybrand, as to the accounting treatment of the
Merger as a pooling of interests.
(d) VFSC shall have received the opinion of Sullivan & Worcester, its
legal counsel, as to the tax aspects of the Merger.
(e) VFSC shall have received the opinion of MB&D as to the fairness of
the Exchange Ratio to VFSC's stockholders from a financial point of view.
The obligation of West Mass to consummate the Merger is subject to
additional conditions, including, without limitation, the following:
(a) There shall not have occurred any change in the business, assets,
financial condition, results of operations or prospects of VFSC or any of
its subsidiaries which has, or is reasonably likely to have, individually
or in the aggregate, a material adverse effect on the business, results of
operations, financial condition or prospects of VFSC. In this regard, the
Merger Agreement provides that if the average of VFSC s Nonperforming
Assets (defined below) for the two months ending immediately prior to the
fifth trading day before the Effective Time constitutes an increase of
22.5% or more above the amount of such Nonperforming Assets at June 30,
1993, such increase shall be deemed to have such a material adverse effect.
"Nonperforming Assets" is defined in the Merger Agreement as the total of
non-accrual loans, troubled debt, restructured loans, other real estate
owned, and in-substance foreclosures, all determined according to generally
accepted accounting principles.
(b) VFSC shall have complied with and performed in all material
respects its obligations under the Merger Agreement, and its
representations and warranties in the Merger Agreement shall be true and
correct in all material respects at the Effective Time.
(c) West Mass shall have received the opinion of Luse, Lehman, Gorman,
Pomerenk & Schick, its legal counsel, as to the tax aspects of the Merger.
(d) West Mass shall have received the written opinion of M.A. Schapiro
as to the fairness of the Exchange Ratio to West Mass' stockholders from a
financial point of view.
REGULATORY APPROVALS REQUIRED
Consummation of the Merger is subject to, among other things, prior receipt
of all necessary regulatory approvals from state and federal authorities and
expiration of all required waiting periods. VFSC has filed an application (the
"FRB Application") for approval of the Federal Reserve Board under Section
3(a)(5) of the Bank Holding Company Act of 1956 (12 U.S.C. sec.1842), of the
Merger of West Mass with and into VFSC. On February 22, 1994, the Federal
Reserve Board issued an order approving the Merger.
In addition to the FRB Application, VFSC has submitted an application to
the Massachusetts Board for approval under Massachusetts General Statutes
Annotated, Chapter 167A, Section 4, to merge VFSC and West Mass.
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As of the date of this Joint Proxy and Prospectus Statement, the approval
of the Massachusetts Board had not been received. There can be no assurance that
such approval will be received, or as to the timing or conditions of such
approval, if any. However, neither VFSC nor West Mass is aware of any reason why
the Massachusetts Board application would not be approved.
WAIVER AND AMENDMENT
Generally, before the Special Meetings, VFSC and West Mass can amend,
extend the time for performance under, or waive compliance of the other party
with, any of the terms or conditions of Merger Agreement. After approval of the
Merger at the Special Meetings, West Mass and VFSC cannot amend the Merger
Agreement in any manner which reduces or changes the form of consideration to be
delivered to the West Mass stockholders in connection with the Merger without
further stockholder approval. VFSC and West Mass cannot waive compliance with
the mutual closing conditions that (a) the Merger must be approved by the
legally required vote of each party's stockholders, (b) the Merger must have
received all requisite regulatory approvals, (c) the Registration Statement
shall have become effective, and (d) neither party be subject to a decree, order
or injunction of a court of competent jurisdiction which enjoins or prohibits
the Merger.
Section 7.1(H) of the Merger Agreement has been twice amended after the
Merger Agreement was signed on August 24, 1993. This section permitted VFSC to
terminate the Merger Agreement if Francis L. Lemay, Kenneth R. Cole, James A.
Neill, Matthew W. Noska and Robert W. Phillips did not enter into employment
agreements (to be effective as of the Effective Time) satisfactory to VFSC
within thirty days from August 24. The parties agreed to extend such 30-day
deadline through October 18, 1993. See "-- Interests of Certain Persons in the
Merger."
TERMINATION
The Merger Agreement may be terminated at any time before the Merger
becomes effective (i) by mutual written consent of VFSC and West Mass duly
authorized by their respective Boards of Directors; (ii) by VFSC or West Mass if
the Effective Time shall not have occurred on or prior to September 30, 1994
(unless the failure of such occurrence shall be due to the failure of the party
seeking to terminate the Merger Agreement to perform or observe its agreements
required to be performed or observed by such party at or before the Effective
Time); or (iii) by VFSC or West Mass if the Merger Agreement and the
transactions contemplated thereby are not approved by the legally required
affirmative vote of the stockholders of VFSC or West Mass at the Special
Meetings or at any adjournments thereof. VFSC may terminate the Merger Agreement
if there shall have been any material breach of any obligation of West Mass
under the Merger Agreement and any such breach shall not have been remedied
within 30 days after receipt by West Mass of notice in writing from VFSC
specifying the nature of such breach and requesting that it be remedied. West
Mass may terminate the Merger Agreement if there shall have been any material
breach of any obligation of VFSC under the Merger Agreement and such breach
shall not have been remedied within 30 days after receipt by VFSC of notice in
writing from West Mass specifying the nature of such breach and requesting that
it be remedied.
West Mass may terminate the Merger Agreement by action of its Board of
Directors after stockholder approval, by giving written notice of such election
to VFSC, in the event that the value of the VFSC Common Stock during the
determination period as defined in and calculated pursuant to Section 2.1 of the
Plan of Merger is less than $14.875; provided, however, that West Mass shall
have no such termination rights if the average of the Comparable Index Price (as
defined below) for the thirty (30) trading days immediately preceding the fifth
trading day prior to (but not including) the Effective Time represents a decline
from the Comparable Index Price as determined on the date on which West Mass'
stockholders shall have voted to approve the Merger Agreement and such decline
is equal to or greater than 90% of the percentage decline between (a) the
mid-point of the daily closing inter-dealer or "inside" bid and asked per-share
price (in thousandths and in dollars) of the VFSC Common Stock as reported on
NASDAQ-NMS on the West Mass Special Meeting Date, and (b) $14.875. The
"Comparable Index Price" means on any date the average of the mid-point of the
closing inter-dealer or "inside" bid and asked prices per share as reported on
NASDAQ-
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NMS of the common stock of the following issuers: Chittenden Corporation,
BankNorth Group, Inc., NBT Bancorp, Inc., and Community Bank Systems, Inc. If
the common stock of any one or more of the above-mentioned issuers should cease
to be traded on NASDAQ-NMS or listed on a national securities exchange during
the applicable measuring period, VFSC and West Mass shall in good faith select a
mutually acceptable replacement issuer from among banks or bank holding
companies whose voting stock is publicly traded and reported on NASDAQ-NMS or
listed on a national securities exchange, which are located in the Northeast,
and whose most recent fiscal year-end total assets were not more than $1.5
billion.
LIMITATION ON SOLICITATION
West Mass has agreed that during the term of the Merger Agreement it and
each of its subsidiaries will not, directly or indirectly, encourage, solicit,
initiate or participate in any discussions or negotiations, or (subject to the
fiduciary duties of the West Mass Board of Directors as advised in writing by
outside counsel) provide any information to any third party concerning any
merger, tender offer, sale of substantial assets, sale of shares of capital
stock or other similar transaction involving West Mass or any of its
subsidiaries. West Mass further agreed that it and its subsidiaries will use
their best efforts to cause their officers, directors, employees,
representatives and agents (including investment bankers, attorneys and
accountants) to comply with the above limitation on solicitation activity. Such
limitation does not prohibit West Mass or its Board of Directors from making
disclosures to West Mass' stockholders which, in the judgment of the Board on
written advice from outside counsel, may be required under applicable law.
The foregoing provisions may have the effect of discouraging competing
offers from third parties to acquire or merge with West Mass, even if such
offers were to be at a higher price.
STOCK OPTION AGREEMENT
Simultaneously with the execution of the Merger Agreement, on August 24,
1993, VFSC and West Mass entered into a Stock Option Agreement (the "Stock
Option Agreement"), a copy of which is attached hereto as Appendix E and
incorporated herein by reference. Pursuant to the Stock Option Agreement, West
Mass granted VFSC an option (the "Option") to purchase up to 306,960 (19.9% of
the shares of West Mass Common Stock that would be outstanding after such
issuance) authorized but unissued shares of West Mass Common Stock for $17.75
per share.
The Option becomes exercisable in whole or in part, after the occurrence of
the following events (each a "Triggering Event"):
(a) any person or group (as such terms are defined in the Securities
and Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations thereunder), other than VFSC or a wholly-owned subsidiary
of VFSC, acquires after August 24, 1993 beneficial ownership of or the
right to acquire such beneficial ownership or to vote at least 15 percent
of the then outstanding West Mass Common Stock, other than any person
acquiring such beneficial ownership by will or operation of law; or
(b) there shall be publicly announced any proposal by such a person or
group relating to (i) any merger, consolidation or acquisition of all or
substantially all of the assets of West Mass or other business combination
involving West Mass prior to the meeting of West Mass' stockholders
contemplated by the Merger Agreement and West Mass' stockholders fail to
adopt the Merger Agreement at such meeting, or (ii) a change in the
composition of 20 percent or more of the West Mass Common Stock then
outstanding.
The Stock Option Agreement may have the effect of discouraging persons or
companies which might now or prior to the Effective Time be interested in
acquiring all or a significant portion of the outstanding shares of West Mass
Common Stock from considering such a transaction, even if such persons were to
pay a higher price per share than under the Merger Agreement.
The Option will expire on the earliest to occur of (i) one year after one
of the foregoing Triggering Events has occurred; (ii) immediately after the
Effective Time of the Merger; (iii) the termination of the Merger
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Agreement in accordance with its terms before the occurrence of a Triggering
Event; or (iv) 180 days after VFSC shall have terminated the Merger Agreement on
account of a material breach thereof by West Mass.
In the event of a change in the number of outstanding shares of West Mass
due to a stock dividend, merger, recapitalization, subdivision, conversion,
exchange of shares or similar transaction, the type and number of shares of West
Mass Common Stock subject to the Option will be adjusted appropriately so that
VFSC shall receive on exercise of the Option the number and class of shares or
other securities or property that it would have held if the Option had been
exercised immediately before such event. Whenever the number of shares subject
to the Option is so adjusted, the exercise price of the Option shall be adjusted
by multiplying the original price by a fraction, the numerator of which shall
equal the number of shares subject to the Option before adjustment and the
denominator of which shall be the number of shares subject to the Option after
adjustment.
Upon the occurrence of a Triggering Event, VFSC may request West Mass to
prepare, file and keep current with respect to the Option and the shares of West
Mass Common Stock subject thereto a registration statement under the Securities
Act of 1933 with the Commission. West Mass is required to use its best efforts
to cause such registration statement to become effective and then remain
effective for at least 90 days. VFSC has the right to demand two such
registrations.
After the occurrence of a Triggering Event, VFSC may sell, assign or
otherwise transfer its rights and obligations under the Stock Option Agreement
to any person or group of persons, subject only to compliance with applicable
law.
BUSINESS PENDING THE MERGER
West Mass agreed in the Merger Agreement that during the period of time
from August 24, 1993 to the Effective Time, it would, and would cause its
subsidiaries to, conduct its business and engage in transactions only in the
ordinary and usual course of business, consistent with past practices. The
Merger Agreement defines the permitted scope of West Mass' business under this
provision as "conducting its banking and other business in the ordinary and
usual course, not entering into any material transactions except in the ordinary
and usual course of business consistent with past practices," and refraining
from a series of activities listed in the Merger Agreement, which include,
without limitation, the following:
(a) engaging or participating in any material transaction or incurring
any material liability out of the ordinary course of business.
(b) disposing of any assets, except in the ordinary course of business
and in an immaterial aggregate amount.
(c) declaring or paying any dividend in respect of the West Mass
Common Stock, except for West Mass' regular quarterly dividend not to
exceed $0.07 per share.
(d) issuing additional shares of capital stock or securities
convertible into such shares or options, warrants or conversion rights to
acquire such shares of capital stock.
(e) incurring additional debt obligations or other obligations in
respect of borrowed money except in the ordinary course of business
consistent with past practice.
(f) incurring or committing to capital expenditures except below
certain thresholds.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
EMPLOYMENT AGREEMENTS. Five senior officers of West Mass and USB have
entered into employment agreements at the request of VFSC which will extend
beyond the Effective Time. The agreements will be rendered ineffective if the
Merger is not consummated or the Merger Agreement is terminated in accordance
with its terms.
Francis L. Lemay, West Mass' current Chairman and Chief Executive Officer,
executed an agreement with VFSC and USB under which it is agreed that he will be
President and Chief Executive Officer of USB
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until December 31, 1994. Thereafter, VFSC has agreed that Mr. Lemay shall
continue as Chairman and a Director of USB until December 31, 1997. Mr. Lemay's
contract also provides that he will serve as a consultant to VFSC from December
31, 1994 through December 31, 1997. Mr. Lemay's base salary under the foregoing
agreement until December 31, 1994 is $199,000, which is approximately his
current salary, with an increase not to exceed 10% on April 1, 1994. His
compensation for consulting services after December 31, 1994 is to be $25,000
per year. Mr. Lemay is also to be one of two West Mass directors to serve on
VFSC's Board of Directors after the Effective Time. Currently, each director of
VFSC who is not an officer of VFSC or a subsidiary receives an annual retainer
of $4,800 and, in addition, a $400 fee for each regular monthly Board meeting
attended as well as a $300 fee for each meeting of a committee of the Board
attended. It is not anticipated that Mr. Lemay will receive any such director's
fees while serving as an operating officer of USB.
Additionally, VFSC and USB have entered into agreements to employ the
following West Mass or USB officers after the consummation of the Merger:
Kenneth R. Cole as Senior Vice President and Treasurer of USB; James Neill as
Senior Vice President of USB; and Robert W. Phillips and Matthew W. Noska as
Vice Presidents of USB. Under these agreements, Mr. Cole is to receive a base
salary of $82,500, Mr. Neill a base salary of $76,300, Mr. Phillips a base
salary of $59,700 and Mr. Noska a base salary of $52,000. Each agreement is to
expire three years from the Effective Time of the Merger, except that Mr.
Noska's agreement is to expire one year from the Effective Time.
In addition to and as a part of the foregoing agreements, Messrs. Cole,
Neill, Phillips and Noska have entered management continuity agreements which
are similar in form to agreements currently in force between VFSC and VNB and
their senior officers. Each agreement's term ends on January 31, 1995 and is
automatically renewable thereafter unless VFSC and USB elect not to renew it.
Under the management continuity agreements, the above officers would be entitled
to the following severance payments if terminated under certain circumstances
after a change of control of VFSC or USB: Messrs. Cole, Phillips and Neill --
200% of base salary at the time of termination; Mr. Noska -- 100% of base salary
at the time of termination.
The management continuity agreements define a "change of control" as (i)
the acquisition by a person or group of 25% of the combined voting power of
VFSC's or USB's then outstanding securities; (ii) during any two-year period
those persons, who at the beginning of such period were members of VFSC's or
USB's Board of Directors and any new director whose election was approved by at
least two-thirds of the directors then still in office who either were directors
at the beginning of such period or whose election or nomination was previously
so approved, cease to constitute a majority of such board; or (iii) the
stockholders of VFSC or USB approve a merger or consolidation of VFSC or USB
which would result in such stockholders holding less than 70% of the combined
voting power of the surviving entity immediately thereafter, or if such
stockholders approve the sale of all or substantially all of the assets of VFSC
or USB.
The management continuity agreements do not provide for severance benefits
in instances where termination is due to death, disability or retirement.
Further, no benefits are payable in instances of termination for cause, defined
as (i) the willful and continued failure of the officer to perform his duties
and (ii) willful conduct materially injurious to VFSC or USB.
INDEMNIFICATION. The Merger Agreement requires VFSC to indemnify and hold
harmless, to the extent permitted by law, each director and officer, and each
former director and officer, of West Mass and USB with respect to actions or
failures to act which occurred on or prior to the date on which the Merger is
consummated, upon the same terms and conditions as each such person would be
entitled to be indemnified by West Mass and/or USB as the case may be, at the
Effective Time of the Merger pursuant to the charter or by-laws of West Mass or
USB, as the case may be.
EMPLOYEE MATTERS
VFSC has agreed in the Merger Agreement that the life insurance, vacation
pay, sick leave, executive incentive, short-term disability, long-term
disability, medical, pension, profit sharing, deferred compensation,
supplemental executive retirement and other employee benefits of West Mass shall
initially be unaffected by the Merger. The Merger Agreement further provides
that as soon as practicable after the Effective Time the Board of Directors of
VFSC (which shall then include two persons formerly on West Mass' Board) shall
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cause a study to be made of the employee benefit plans of the combined business
and its subsidiaries with a view to a possible combination of such plans and
unification of benefits thereunder. The agreement also provides that in
implementing such a review of benefit plans, the Board of Directors of VFSC
shall attempt to assure that the employees of West Mass and its subsidiaries
receive, in the aggregate, benefits no less favorable than those received by the
employees of VFSC and VNB, and, to the extent practicable, the Board of
Directors of VFSC shall provide that West Mass employees will be credited for
prior years' service with West Mass or USB to the extent that any plans of West
Mass are combined with those of VFSC.
In addition, all rights with respect to West Mass Common Stock pursuant to
stock options granted by West Mass under any stock option plan prior to the date
of the Merger Agreement shall be converted into corresponding rights to purchase
shares of VFSC Common Stock. The number of shares of VFSC Common Stock subject
to each converted option shall be determined on the same basis as in the Merger
Agreement, except that options for fractional shares will be rounded to the
nearest whole number. The exercise price for each converted option shall be
determined by dividing the aggregate exercise price provided in the existing
West Mass stock options by the number of shares of VFSC Common Stock subject to
such converted option. See "THE MERGER -- terms of the Merger."
MANAGEMENT AND OPERATIONS AFTER THE MERGER
At the Effective Time, the separate corporate existence of West Mass shall
cease to exist, and the surviving corporation will be VFSC. USB and VNB will be
direct subsidiaries of VFSC.
It is anticipated that the management of USB immediately after the
Effective Time will continue largely as before; senior members of USB management
have entered into employment and management continuity agreements at the request
of VFSC. The Merger Agreement, however, contains no agreements as to the make-up
of USB's Board of Directors after the Merger, except with respect to Mr. Lemay's
continuation thereon and as chairman thereof. See "-- Interests of Certain
Persons in the Merger; Employment Agreements."
The Merger Agreement also provides that Mr. Lemay will, at the Effective
Time, be appointed to fill a currently existing vacancy in Class III of VFSC's
Board of Directors and that another person from among those who are currently
members of West Mass' Board of Directors to be designated by West Mass before
the Effective Time will be appointed to fill a vacancy in Class II of VFSC's
Board. The term of VFSC's Class II directors expires at the 1995 annual meeting
of VFSC's stockholders; and the term of Class III expires at the 1996 annual
meeting of VFSC's stockholders. Moreover, VFSC has agreed to appoint Mr. Lemay
and the other West Mass designee to the Board of Directors of VNB. Such persons
are to serve in such directorships in accordance with the respective charters
and by-laws of VFSC and VNB.
The Merger Agreement provides that, as soon as practicable after the
Effective Time, the Board of Directors of VFSC will cause a study to be made of
the employee benefit plans of VFSC and West Mass and their respective
subsidiaries, including without limitation, the ESOP of USB, with a view towards
the possible combination of such plans to the extent practicable and desirable.
Subject to the results of such study, the Board of Directors of VFSC may
discontinue or amend any particular plan after the Effective Time. In
implementing the review of such plans, the Board of Directors of VFSC shall
attempt to assure that the employees of West Mass and USB receive, in the
aggregate, benefits no less favorable than those received by employees of VFSC
and VNB and to the extent practicable, shall provide that West Mass' and/or
USB's employees will be credited for prior years' services with West Mass and/or
USB. After the Effective Time, but pending the completion of such study, it is
anticipated that VFSC will not make any contributions to the ESOP.
RIGHTS OF WEST MASS DISSENTING STOCKHOLDERS
Any West Mass stockholder who elects to exercise his or her rights of
dissent and who complies with the procedures set forth in Sections 85 through
98, inclusive, of Chapter 156B of Massachusetts General Laws Annotated, attached
hereto as Appendix D, shall be entitled to receive cash for the fair value of
those shares for which such stockholder exercises his or her dissenter rights.
Stockholders contemplating the exercise of
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dissenters' rights should carefully review Appendix D containing Massachusetts
General Laws Annotated Chapter 156B, Sections 85 through 98, inclusive. The
following, qualified in its entirety by the provisions set forth in Appendix D,
is a summary of the steps which must be taken for the effective exercise of
dissenters' rights:
(a) Written Objection. Any stockholder electing to exercise the right
of dissent shall file with West Mass, prior to or at the West Mass Special
Meeting, a written objection to the proposed Merger stating said
stockholder's intention to demand payment for his or her shares if the
proposed Merger is approved.
(b) Not Vote in Favor of the Merger. Shares for which dissenters'
rights are sought must not be voted in favor of the Merger.
(c) Notice of Effectiveness of Action. If the Merger is approved by
the West Mass stockholders at the West Mass Special Meeting, VFSC is
required, within ten (10) days of the Effective Time of the Merger, to send
to each dissenting stockholder of West Mass who properly filed a written
objection thereto and whose shares were not voted in favor of the approval
of such Merger, a notice (the "Company Notice") that the Merger has become
effective.
(d) Written Demand. Each dissenting stockholder must, within twenty
(20) days after the date on which such stockholder receives the Company
Notice, make written demand on VFSC that it pay such stockholder the fair
value of his or her shares. Any stockholder failing to make demand within
the twenty (20) day period shall be bound by the terms of the Merger
Agreement. Any stockholder making such demand shall thereafter be entitled
only to payment of such shares and shall not be entitled to vote or to
exercise any other rights of a stockholder. No further notice will be given
of the time periods within which a dissenting stockholder must give notice
of his or her intention to exercise his or her dissenters' rights.
UNLESS THE AFOREMENTIONED REQUIREMENTS ARE STRICTLY MET, SUCH SHARES WILL
AUTOMATICALLY LOSE ANY DISSENTERS' RIGHTS.
(e) Fair Value. The fair value of a dissenter's share is determined
as of the day prior to the date on which the vote was taken approving the
proposed Merger, excluding any appreciation or depreciation in anticipation
of the Merger.
(f) Payment. If within thirty (30) days after the Effective Time of
the Merger, the fair value of such shares is agreed upon between any such
dissenting stockholder and the Board of Directors of VFSC, payment therefor
shall be made within thirty (30) days after the expiration of the period
during which demand could be made. Upon payment of the agreed value, the
dissenting stockholder shall cease to have any interest in such shares. If
VFSC and a dissenting stockholder do not agree on the fair value of the
dissenting shares within thirty (30) days, the stockholder may, within four
(4) months of the expiration of the thirty (30) day period, file a bill of
equity in the Superior Court of Massachusetts to determine the fair value
of such shares.
Only a holder of record of shares of West Mass Common Stock is entitled to
assert appraisal rights for the shares of West Mass Common Stock registered in
that holder's name. A demand for appraisal should be executed by or on behalf of
the holder of record fully and correctly as his or her name appears on his or
her stock certificates. If the shares of West Mass Common Stock are owned of
record in a fiduciary capacity, such as by a trustee, guardian or custodian,
execution of the demand should be made in that capacity, and if the shares of
West Mass Common Stock are owned of record by more than one person, as in a
joint tenancy or tenancy in common, the demand should be executed by or on
behalf of all joint owners. An authorized agent, including one or more joint
owners, may execute a demand for appraisal on behalf of a holder of record;
however, the agent must identify the record owner or owners and expressly
disclose the fact that, in executing the demand, the agent is agent for such
owner or owners. A record holder such as a broker who holds shares of West Mass
Common Stock as nominee for several beneficial owners may exercise appraisal
rights with respect to the shares of West Mass Common Stock held for one or more
beneficial owners while not exercising such rights with respect to the shares of
West Mass Common Stock held for other beneficial owners; in such case, the
written demand should set forth the number of shares of West Mass Common Stock
as to which
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appraisal is sought and where no number of shares of West Mass Common Stock is
expressly mentioned, the demand will be presumed to cover all shares of West
Mass Common Stock held in the name of the record owner. Stockholders who hold
their shares of West Mass Common Stock in brokerage accounts or other nominee
forms and who wish to exercise appraisal rights must take all necessary steps in
order that a demand for appraisal is made by the record holder of such shares
and are urged to consult with their brokers to determine the appropriate
procedures for the making of a demand for appraisal by the record holder and for
surrendering the certificates for such shares to the transfer agent for West
Mass Common Stock for notation of appraisal rights as set forth below.
Any West Mass stockholder who desires to exercise his or her rights to
dissent should carefully review Massachusetts General Laws Annotated, Chapter
156B, Sections 85 through 98, inclusive, set forth in Appendix D and is urged to
consult such stockholder's legal advisor before exercising or attempting to
exercise such rights.
The foregoing summary of the applicable provisions of Massachusetts General
Laws Annotated, Chapter 156B, Sections 85 through 98, inclusive, is not intended
to be a complete statement of such provisions and is qualified in its entirety
by reference to such Sections, the full texts of which are attached as Appendix
D to this Joint Proxy Statement and Prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Neither VFSC nor West Mass has requested or will receive an advance ruling
from the Internal Revenue Service as to the tax consequences of the Merger.
Consummation of the Merger is conditioned on there being delivered the opinions
of Sullivan & Worcester, counsel to VFSC, and Muldoon, Murphy & Faucette,
counsel to West Mass, that for Federal income tax purposes, under current law,
assuming that the Merger and related transactions will take place as described
in the Merger Agreement and certain related instruments described therein
(including the Plan of Merger), the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code. The Merger
Agreement provides that this condition may be waived by either VFSC or West
Mass. However, it is unlikely that the Merger will be consummated if this
condition is not satisfied.
If the Merger constitutes such a reorganization, the following would be the
material Federal income tax consequences of the Merger:
(a) No gain or loss will be recognized by West Mass or VFSC by reason
of the Merger.
(b) No gain or loss will be recognized by a West Mass stockholder upon
the exchange of his or her West Mass Common Stock for VFSC Common Stock
OTHER THAN AS A RESULT OF CASH PAYMENTS MADE IN LIEU OF FRACTIONAL SHARES
OR PAYMENTS TO WEST MASS STOCKHOLDERS WHO EXERCISE DISSENTERS' RIGHTS.
(c) The basis of the VFSC Common Stock received by a stockholder who
exchanges his or her West Mass Common Stock for VFSC Common Stock will be
the same as the basis of the West Mass Common Stock surrendered in exchange
therefor (subject to any adjustments required by the receipt of cash in
lieu of a fractional share interest of VFSC Common Stock).
(d) The holding period for tax purposes of the VFSC Common Stock
received by a West Mass stockholder will include the period during which
the West Mass Common Stock surrendered in exchange therefor was held
(provided that such West Mass Common Stock was held by such West Mass
stockholder as a capital asset at the Effective Time of the Merger).
(e) Cash, if any, received by a West Mass stockholder in lieu of a
fractional share interest of VFSC Common Stock will be treated as having
been received as a distribution in full payment in exchange for the
fractional share interest of VFSC Common Stock which he or she would
otherwise be entitled to receive and will qualify as capital gain or loss
(assuming the West Mass Common Stock was a capital asset in such
stockholder's hands at the Effective Time of the Merger).
(f) Cash which a West Mass dissenting stockholder receives as payment
for his or her shares of West Mass Common Stock will be capital gain or
loss to the extent that the amount received varies from the dissenting
stockholder's adjusted basis in the West Mass Common Stock (assuming the
West Mass Common Stock was a capital asset in such stockholder's hands at
the Effective Time of the Merger).
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THE FOREGOING IS ONLY A GENERAL DESCRIPTION OF CERTAIN ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER WITHOUT REGARD TO THE PARTICULAR FACTS AND
CIRCUMSTANCES OR THE TAX POSTURE OF EACH STOCKHOLDER OF WEST MASS. IT DOES NOT
DISCUSS ALL OF THE CONSEQUENCES THAT MAY BE RELEVANT TO WEST MASS STOCKHOLDERS
ENTITLED TO SPECIAL TREATMENT UNDER THE CODE (SUCH AS INSURANCE COMPANIES,
DEALERS IN SECURITIES, EXEMPT ORGANIZATIONS OR FOREIGN PERSONS). THE SUMMARY SET
FORTH ABOVE DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OF ALL POTENTIAL TAX
EFFECTS OF THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT OR THE MERGER
ITSELF. NO INFORMATION IS PROVIDED HEREIN WITH RESPECT TO THE TAX CONSEQUENCES,
IF ANY, OF THE MERGER UNDER STATE, LOCAL OR FOREIGN TAX LAWS. WEST MASS
STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE SPECIFIC
TAX CONSEQUENCES OF THE MERGER TO THEM, INCLUDING THE APPLICATION OF STATE,
LOCAL AND FOREIGN TAX LAWS.
ACCOUNTING TREATMENT
Consummation of the Merger is conditioned upon it being accounted for as a
pooling-of-interests and upon the receipt by VFSC of a letter to such effect
from Coopers & Lybrand, VFSC's independent certified public accountants. Under
the pooling-of-interests method of accounting, the historical recorded amounts
of the assets and liabilities, revenues and expenses of VFSC and West Mass will
be carried forward at their previously recorded amounts. Assets and liabilities,
revenues and expenses will be retroactively presented as if VFSC and West Mass
were combined for the entire fiscal period in which the Merger occurs and for
all periods prior to the Merger at previously recorded amounts.
In order for the Merger to qualify for pooling-of-interests accounting
treatment, substantially all (90% or more) of the outstanding West Mass Common
Stock must be exchanged for VFSC Common Stock with substantially similar terms.
VFSC and West Mass have agreed to use their best efforts to cause the Merger to
qualify for pooling-of-interests accounting treatment; provided, however, that
VFSC is not precluded from exercising its rights under the Stock Option
Agreement.
For information concerning certain conditions to be imposed in the Merger
on the exchange of West Mass Common Stock for VFSC Common Stock by "Affiliates"
(defined below) of West Mass and certain restrictions to be imposed on the
transferability of the VFSC Common Stock received by those Affiliates in order,
among other things, to assure the availability of pooling-of-interests
accounting treatment, see "-- Resale of VFSC Common Stock Received by West Mass
Stockholders" below.
The pro forma financial information presented in this Joint Proxy Statement
and Prospectus has been prepared using the pooling-of-interests method of
accounting to account for the Merger. See PRO FORMA COMBINED FINANCIAL DATA.
RESALE OF VFSC COMMON STOCK RECEIVED BY WEST MASS STOCKHOLDERS
The shares of VFSC Common Stock issuable to stockholders of West Mass upon
consummation of the Merger have been registered under the Securities Act. Such
shares may be traded freely without restriction by those stockholders who are
not deemed to be "Affiliates" of VFSC or West Mass. An "Affiliate" is generally
defined as a person (usually executive officers and directors) who controls, is
controlled by, or is under common control with, VFSC or West Mass at the time of
the Special Meetings or VFSC at or after the Effective Time of the Merger.
West Mass has agreed to use all reasonable efforts to cause each person who
may be deemed an Affiliate of West Mass to execute and deliver to VFSC a letter
providing that such Affiliate will not sell, assign, transfer, or otherwise
dispose of any VFSC Common Stock obtained as a result of the Merger, except in
compliance with the Securities Act and the rules and regulations of the
Securities and Exchange Commission thereunder, including Rule 145, and in any
case (a) within the 30-day period immediately preceding the Effective Time of
the Merger; (b) until such time as financial results covering at least 30 days
of post-Merger operations of VFSC have been published by VFSC. The VFSC stock
certificates issued to Affiliates in the Merger will bear a legend summarizing
the foregoing restrictions.
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EXPENSES
The Merger Agreement provides that, generally, all legal and other costs
and expenses incurred in connection with the Merger Agreement and the
transactions contemplated thereby are to be paid by the party which incurred
them. The costs and expenses of printing and mailing this Joint Proxy Statement
and Prospectus are to be shared equally by West Mass and VFSC.
CERTAIN DIFFERENCES IN RIGHTS OF STOCKHOLDERS
The rights of West Mass stockholders are governed by the Articles of
Organization of West Mass (the "West Mass Articles"), the Bylaws of West Mass
(the "West Mass Bylaws") and the laws of the Commonwealth of Massachusetts. The
rights of VFSC stockholders are governed by the Certificate of Incorporation of
VFSC, as amended (the "VFSC Certificate"), the Bylaws of VFSC (the "VFSC
Bylaws") and the laws of the State of Delaware. After the Merger becomes
effective, the rights of West Mass stockholders who become VFSC stockholders
will be governed by the VFSC Certificate and the VFSC Bylaws. In most respects,
the rights of West Mass stockholders and VFSC stockholders are similar. See
"BUSINESS OF VFSC -- Description of VFSC Capital Stock." While it is not
practical to describe all changes in the rights of West Mass stockholders that
will result from the difference between the West Mass Articles and Bylaws and
the VFSC Certificate and Bylaws, the following is a summary of the material
differences.
SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATION LAWS OF MASSACHUSETTS AND
DELAWARE
STOCKHOLDER ACTION BY WRITTEN CONSENT. Unless the corporation's
certificate of incorporation otherwise provides, Delaware law allows stockholder
action by written consent of the majority of shares without prior notice to the
other stockholders. Notice must be furnished to all stockholders after the
effectiveness of the action. Conversely, Massachusetts requires the written
consent of all of the stockholders to any action taken without a meeting. The
VFSC Certificate specifically denies the right of the VFSC stockholders to
consent in writing to any action taken without a meeting.
APPRAISAL RIGHTS. Massachusetts grants appraisal rights in more
circumstances than does Delaware. Unlike Delaware, Massachusetts grants
appraisal rights to stockholders when the corporation sells all or substantially
all of its assets or when the corporation adopts any amendments to its Articles
of Organization which "adversely affects" the rights of a stockholder. Both
Delaware and Massachusetts provide for appraisal rights in the event of a merger
or consolidation, but Delaware denies appraisal rights in a merger or
consolidation when the shares of the corporation are traded on a national
exchange or held by more than 2,000 stockholders, unless the consideration to be
received in the transaction is other than shares of stock of the surviving
corporation. In addition, Delaware denies appraisal rights for stockholders of
the surviving corporation in a merger if their approval is not required because
no more than 20% of the stock of the surviving corporation is issued in the
merger (as described below). Under Massachusetts law, dissenting stockholders
are entitled under all of these circumstances to a cash appraisal remedy in any
merger, consolidation or a sale of substantially all of the assets.
CALLING STOCKHOLDERS' MEETINGS. Under Massachusetts law, a special meeting
of stockholders may be called by the board of directors, the president or by the
secretary upon the written request of the holders of at least 10% of the
outstanding shares entitled to vote at such meeting. In the case of corporations
with a class of stock registered under the Exchange Act, the holders of at least
40% of the outstanding shares entitled to vote at the meeting (or such other
percentage, if any, as may be specified in the articles of organization or
bylaws) may call a special meeting. Under Delaware law, a special meeting of
stockholders may be called by the board of directors or by any person authorized
to do so in the certificate of incorporation or the bylaws.
CUMULATIVE VOTING FOR DIRECTORS. Unlike Massachusetts corporate law,
Delaware law permits cumulative voting for directors, if provided in the
certificate of incorporation. VFSC's Certificate and Bylaws do not provide for
cumulative voting.
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STOCKHOLDER INSPECTION RIGHTS. Stockholder inspection rights are more
extensive in Delaware, extending to books and records of the corporation,
whereas in Massachusetts, statutory inspection rights only apply to the articles
of organization, bylaws, stock transfer records and records of the meetings of
incorporators and stockholders.
STOCKHOLDER APPROVAL FOR CERTAIN MERGERS. Under Delaware law, the
surviving corporation need not obtain stockholder approval of a merger if the
certificate of incorporation of the surviving corporation is not changed and any
stock issued by the surviving corporation in the merger does not exceed 20% of
its total shares. Under Massachusetts law, such a merger would require approval
by the stockholders of the surviving corporation.
INDEMNIFICATION PROVISIONS. Under both Delaware and Massachusetts law, a
corporation may indemnify officers and directors against certain liabilities and
expenses. However, Delaware law, but not Massachusetts law, requires a
corporation to indemnify directors and officers against expenses (including
attorneys' fees) reasonably incurred in connection with litigation, to the
extent that the director or officer has been successful on the merits or
otherwise in defense of the litigation. Delaware law is also more specific than
Massachusetts law as to the scope of permissible indemnification in a number of
respects, including the propriety of making advances to reimburse litigation
expenses (including attorneys' fees) incurred by an officer or director prior to
final disposition of the litigation.
REMOVAL OF DIRECTORS. Under Massachusetts law, except as otherwise
provided in a corporation's articles of organization or bylaws, directors may be
removed from office with or without cause by the holders of a majority of the
shares entitled to vote in the election of directors or with cause by a majority
of the directors then in office. Under Delaware law, although the stockholders
may generally remove directors with or without cause by a majority vote,
stockholders may remove members of classified boards only for cause unless the
certificate of incorporation provides otherwise. The VFSC Certificate and the
VFSC ByLaws provide that directors may be removed only for cause and only by the
affirmative vote of a majority of the stockholders. Unlike Massachusetts law,
Delaware law does not permit directors to remove other directors. Massachusetts
law requires that a director may be removed for cause only after a reasonable
notice and opportunity to be heard before the body proposing to remove him.
There is no comparable provision in the Delaware law.
INTERESTED DIRECTOR TRANSACTIONS. Delaware law provides that a transaction
between a corporation and one of its directors or an entity in which a director
has an interest shall not be void or voidable because of such fact, and sets
forth the criteria by which such a transaction will be upheld. Massachusetts law
has no comparable provision.
SALE OF ASSETS; MERGER. Massachusetts law requires a two-thirds (2/3) vote
of the shares of each class of stock outstanding and entitled to vote thereon to
authorize a sale, lease or exchange of all or substantially all of a
corporation's assets or a merger or consolidation to which the corporation is a
party, except that the articles of organization can provide for a greater or
lesser (but not less than a majority) vote. Delaware law requires the vote of
only the holders of a majority of the outstanding shares entitled to vote to
approve such transactions, although the certificate of incorporation may require
a higher vote, as does the VFSC Certificate. Delaware law also permits a reverse
(i.e., parent into subsidiary) short form (i.e., no vote required by
stockholders of the parent corporation if the parent owns 90% or more of the
subsidiary) merger. Massachusetts law dispenses with the vote of the parent's
stockholders only when the subsidiary merges into the parent.
CHARTER AMENDMENTS. Under Massachusetts law, certain amendments to the
articles of organization require a two-thirds vote of each class of stock
outstanding and entitled to vote thereon, unless the articles of organization
provide for a greater or lesser (but not less than a majority) vote. Under
Delaware law, amendments to the certificate of incorporation require a majority
vote unless the certificate of incorporation requires a higher vote, as does the
VFSC Certificate, in certain cases.
DIVIDENDS. Massachusetts does not specify the sources out of which
dividends must be paid, nor does it forbid the impairment of capital. Rather,
the law imposes liability on the directors if, at the time the Board of
Directors authorizes any distribution, such distribution violates the articles
of organization of the corporation
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or if the corporation is then or is thereby rendered insolvent. Delaware permits
payment of dividends only out of surplus and out of profits for the current or
preceding fiscal year.
SIGNIFICANT DIFFERENCES BETWEEN THE CHARTERS AND BYLAWS OF WEST MASS AND VFSC
The provisions of the West Mass Articles and Bylaws differ from those of
the VFSC Certificate and Bylaws in certain material respects, as described
below:
AUTHORIZED STOCK. The VFSC Certificate authorizes VFSC to issue up to
25,000,000 shares of capital stock, of which 20,000,000 are VFSC Common
Stock and 5,000,000 are VFSC Preferred Stock. As of February , 1994, VFSC
had not issued any shares of VFSC Preferred Stock. No holder of VFSC Common
Stock has any preemptive rights to purchase or subscribe for any shares of
capital stock or other securities which may be issued by VFSC.
The West Mass Articles authorizes West Mass to issue up to 20,000,000
shares of capital stock, of which 12,500,000 are West Mass Common Stock and
7,500,000 are West Mass Preferred Stock. As of February , 1994, West Mass
had not issued any shares of West Mass Preferred Stock. No holder of West
Mass Common Stock has any preemptive rights to purchase or subscribe for
any shares of capital stock or other securities which may be issued by West
Mass.
SIZE AND CLASSIFICATION OF BOARD OF DIRECTORS. The VFSC Certificate
and the West Mass Articles each provide for a classified Board of Directors
consisting of three classes of directors, with directors of each class
elected by the stockholders to serve for staggered three-year terms. Only
one class of directors may be elected by the VFSC and the West Mass
stockholders at each annual meeting, with the remaining directors (in the
other classes) continuing with their respective three-year terms. The VFSC
Certificate and the West Mass Bylaws both require that the respective
classes of directors be as nearly equal in size as possible. Consequently,
the Board of Directors of VFSC currently consists of two classes of 5
members and one class of 6 members, for a total number of directors equal
to 16. The Board of Directors of West Mass currently consists of two
classes of 2 members and one class of 3 members, for a total number of
directors equal to 7. For information concerning the current directors of
VFSC and West Mass, see "BUSINESS OF VFSC -- Directors and Executive
Officers of VFSC."
DIRECTOR NOMINATIONS AND OTHER STOCKHOLDER MATTERS. The VFSC Bylaws
provide that director nominations may be made by the Board of Directors or
by any stockholder entitled to vote in the election of directors generally;
provided, however, that all stockholders intending to nominate director
candidates for election must deliver written notice thereof to the
Secretary of VFSC, which notice must be received not less than 60 nor more
than 90 days prior to the annual meeting or, if less than 70 days' notice
or prior public disclosure of the date of such meeting is given or made to
stockholders, within ten days after the date on which notice of such
meeting is first given to stockholders or such public disclosure was made,
whichever occurs first. Such notice must set forth certain information
concerning such stockholder and his or her nominee(s), including their
names, addresses, background, and such other information as would be
required to be included in a proxy statement soliciting proxies for the
election of the nominees of such stockholder, and the consent of each
nominee to serve as a director of VFSC if so elected. The Chairman of the
meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedure.
The VFSC Bylaws also require that stockholders give advance notice and
follow certain other procedures set forth therein with regard to business
they wish to bring before an annual meeting of stockholders. The VFSC
Bylaws provide that all stockholders intending to bring business before
such meeting must deliver written notice thereof to the Secretary of VFSC
in the same manner and within the same periods as required for stockholder
nominees for seats on the Board of Directors, as described in the preceding
paragraph. Such notice must set forth certain information concerning such
stockholder and the proposed business, including any material interest of
the stockholder in such business. The Chairman of the meeting may refuse to
permit business to be brought before the meeting if notice is not given in
compliance with the foregoing procedure.
The West Mass Bylaws provide that director nominations may be made by
the Board of Directors or any stockholder; provided, however, that such
stockholder nominations must be delivered in writing to the
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Secretary of West Mass at least 90 days prior to the date of release of the
West Mass proxy statement circulated to its stockholders in connection with
the previous year's annual meeting, except that if no annual meeting was
held in the previous year, any such nomination must be delivered in writing
to the Secretary of West Mass at least 90 days prior to West Mass' fiscal
year-end. Such notice must set forth certain information concerning such
stockholder and his or her nominee(s), including their names, addresses,
background and such other information as would be required to be included
in a proxy statement soliciting proxies for the election of nominees for
director. The Board of Directors of West Mass may reject any nomination not
timely or properly made.
The West Mass Bylaws also require that stockholders give advance
notice and follow certain other procedures set forth therein with regard to
new business they wish to be taken up at any annual meeting of West Mass
stockholders. Specifically, the West Mass Bylaws provide that any
stockholder wishing to bring new business before the meeting must file
written notice with the Secretary of West Mass in the same manner and
within the same periods as required for stockholder nominees for seats on
the West Mass Board of Directors, as described in the preceding paragraph.
Such notice must set forth certain information concerning such stockholder
and the proposed business, including any financial interest of the
stockholder, in such proposal. The West Mass Board of Directors may reject
any stockholder proposal not timely made in accordance with the foregoing
procedure.
SUPERMAJORITY VOTING REQUIREMENT FOR CERTAIN TRANSACTIONS AND
AMENDMENTS. Delaware permits corporations to institute "supermajority"
voting requirements with respect to amendments of their corporate charters.
A supermajority voting provision is one which requires the approval of more
than a simple majority of the outstanding shares. The VFSC Certificate
requires a two-thirds (2/3) vote to effect a merger, consolidation, or sale
of all or substantially all of its assets and further provides that a
supermajority vote of two-thirds (2/3) of the outstanding shares entitled
to vote is required in order to amend certain Articles of the VFSC
Certificate.
The consequence of these supermajority provisions is that such
transactions or any such amendment of the VFSC Certificate will require the
approval of at least two-thirds (2/3) of the outstanding shares entitled to
vote. Accordingly, a minority of stockholders holding a portion of VFSC
stock which is greater than one-third (1/3) of the VFSC outstanding shares
could block such transactions or such amendment of the specified Articles
of the VFSC Certificate.
Massachusetts law provides that a corporation's articles of
organization may be amended by a vote of two-thirds (2/3) of each class of
stock outstanding and entitled to vote thereon (except for amendments with
respect to a corporation's name or the amount or par value of its
authorized capital stock which require a majority vote) or a lesser
proportion if so provided in the articles of organization. If any amendment
adversely affects the rights of any class or series of stock, then the vote
of such class or series also will be necessary to authorize such amendment.
The West Mass Articles require a vote of 80% of the outstanding shares of
West Mass Common Stock in order to amend, repeal, or adopt any provision
inconsistent with, certain Articles of the West Mass Articles.
REMOVAL OF DIRECTORS. Under Delaware law, a director of a classified
board of directors may be removed by a vote of its stockholders for cause
only, unless otherwise provided in the corporation's certificate of
incorporation. The VFSC Bylaws provide for removal of a Director by a
majority vote of the stockholders for cause only. These VFSC removal
provisions do not affect the rights of stockholders to vote against, or
abstain from voting in, the re-election of any particular director when his
or her term expires.
Under Massachusetts law, directors may be removed with or without
cause by majority vote of the stockholders, unless otherwise provided by
the articles of organization or bylaws. The West Mass Bylaws provide that
the Directors of West Mass may be removed for cause only upon the
affirmative vote of 80% of the outstanding shares of West Mass Common
Stock.
SPECIAL STOCKHOLDER MEETINGS. Under Delaware law, special meetings of
stockholders may be called only by the board of directors or other persons
authorized in the certificate of incorporation or bylaws. Under
Massachusetts law, special meetings of the stockholders may be called by
the board of directors or any stockholder(s) owning at least 10% of the
outstanding voting stock of the corporation.
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<PAGE> 60
The VFSC Bylaws provide that a special stockholder meeting may be called by
the Board of Directors, the Chairman of the Board or the President of VFSC.
INDEMNIFICATION AND LIMITATION OF LIABILITY. Under Delaware law, a
corporation is permitted to adopt a provision in its certificate of
incorporation reducing or eliminating the liability of a director to the
corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, provided that such liability does not arise
from certain proscribed conduct (including intentional misconduct and
breach of the duty of loyalty to the corporation or its stockholders). VFSC
has adopted such a provision in the VFSC Certificate.
Article Nine of the VFSC Certificate eliminates director liability to
VFSC or its stockholders for monetary damages arising out of a director's
breach of his duty of care. The duty of care refers to the fiduciary duty
of a director to be sufficiently diligent and careful in considering a
transaction or taking or refusing to take some corporate action. Without
Article Nine, a breach of the duty of care by a director could give rise to
personal liability for monetary damage caused to VFSC or its stockholders.
Liability for a breach of the duty of care arises when directors have
failed to exercise sufficient care in reaching decisions or otherwise
attending to their responsibilities as directors. Article Nine does not
eliminate the duty of care; it only eliminates monetary damage awards
occasioned by a breach of that duty.
Article Nine does not limit a director's liability for violation of
the federal securities laws, nor would it limit or eliminate liability
based on the following types of claims:
(i) Liability based on a breach of the director's duty of loyalty
to VFSC or its stockholders;
(ii) Liability based on the payment of an improper dividend or an
improper repurchase of VFSC stock under Section 174 of the
Delaware General Corporation Law;
(iii) Liability for actions or failures to act which the director
knew were in violation of law;
(iv) Liability arising out of intentional misconduct by the
director;
(v) Liability arising out of any transaction pursuant to which the
director received some improper personal benefit; and
(vi) Liability for actions taken or failures to act by the director
not in good faith.
The West Mass Bylaws provide indemnification for each director of West
Mass to the fullest extent permitted by Massachusetts law for certain
expenses and liabilities arising out of such individual's actions as a
director, but provides no such indemnification for any director's willful
misconduct in the performance of his or her duties as a director.
The foregoing discussion of certain similarities and material differences
between the laws of Massachusetts and Delaware generally and between rights of
West Mass stockholders and the rights of VFSC stockholders under their
respective charter documents and Bylaws is only a summary of certain laws and
provisions and does not purport to be a complete description of such
similarities and differences, and is qualified in its entirety by reference to
the full text of the Massachusetts and Delaware statutes and the charter
documents and Bylaws of West Mass and VFSC.
BUSINESS OF VFSC
GENERAL
VFSC, a Delaware corporation organized in 1990, is a registered bank
holding company under the Bank Holding Company Act of 1956, as amended, and its
main office is located in Brattleboro, Vermont. Assets of VFSC were $928 million
at September 30, 1993. VFSC owns 100 percent of the stock of VNB. VFSC has no
other active subsidiaries and engages in no activities other than holding the
stock of VNB.
VNB, a national banking association, is the successor to the original Bank
of Brattleborough, which was chartered in 1821. VNB is the second largest bank
in the State of Vermont with total deposits of $782 million
53
<PAGE> 61
and total assets of $927 million at September 30, 1993. VNB conducts business
through 32 offices located in seven of Vermont's 14 counties, including the
cities of Brattleboro, Burlington, Rutland and Montpelier.
VNB offers a wide range of personal and commercial banking services,
including the acceptance of demand, savings, and time deposits; making secured
and unsecured loans; issuing letters of credit; and offering fee based services.
In addition, VNB offers a wide range of trust and trust related services,
including services as executor, trustee, administrator, custodian and guardian.
VNB lending services include making real estate, commercial, industrial,
agricultural and consumer loans. VNB also offers data processing services
consisting primarily of payroll and automated clearing house for several outside
clients. VNB provides financial and investment counseling to municipalities and
school districts within its service area and also provides central depository,
lending, payroll and other banking services for such customers. VNB also
provides safe deposit facilities, Master Card and Visa credit card services.
Over ninety percent of VNB's loans are made to individuals and businesses which
are located in or have properties in Vermont. VNB owns and operates 27 automated
teller machines (ATMs) at its branch locations and 4 ATMs in other locations. In
addition, VNB is a member of the Plus, Yankee 24, NYSE, and VISA networks and
has access to the Honor, Cirrus, Discover, American Express and Master Card
networks.
According to the State of Vermont Department of Banking, Insurance and
Securities, as of September 30, 1993, 5 state-chartered savings banks, 11
state-chartered commercial banks and 9 national banks are located and do
business in the State of Vermont, the area in which VNB conducts its business.
As of such date, VNB had 12.3%, 12.7% and 12.5% of the total assets, loans and
deposits, respectively, of these 25 banking institutions.
VNB competes on the local and the regional levels with other commercial
banks and financial institutions for all types of deposits, loans and trust
accounts. Competitors include metropolitan banks and financial institutions
based in southern New England and New York City, many of which have greater
financial resources.
In the retail market for financial services, competitors include other
banks, credit unions, finance companies, thrift institutions and, increasingly,
brokerage firms, insurance companies, and mortgage loan companies.
In the personal and commercial trust business, competitors include mutual
funds, insurance companies, and investment advisory firms.
VFSC and its subsidiary, on December 31, 1992, employed approximately 600
persons. VFSC enjoys good relations with its employees. A variety of employee
benefits are available to officers and employees, including health, group life
and disability income replacement insurance, a funded, non-contributory pension
plan and an incentive savings and profit sharing plan.
PROPERTIES
VNB operates banking facilities in 32 locations within Vermont.
The offices of VNB are in good physical condition with modern equipment and
facilities adequate to meeting the banking needs of customers in the communities
served.
LEGAL PROCEEDINGS
VFSC is a party to litigation arising in the ordinary course of its
business.
Management, after reviewing these claims with legal counsel, is of the
opinion that these matters, when resolved, will not have a material effect on
VFSC's consolidated financial statements.
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<PAGE> 62
DESCRIPTION OF VFSC CAPITAL STOCK
COMMON STOCK
GENERAL. As of , 1994, VFSC Common Stock consisted of 20,000,000
authorized shares, $1.00 par value per share, of which were issued and
outstanding (exclusive of treasury shares). VFSC Common Stock is traded on
NASDAQ-NMS. The transfer agent and registrar for VFSC Common Stock is VNB.
Shares of VFSC Common Stock may be issued from time to time, in such amount
and proportions and for such consideration as may be fixed by the Board of
Directors of VFSC. No holder of VFSC Common Stock has any preemptive or
preferential rights to purchase or to subscribe for any shares of capital stock
or other securities which may be issued by VFSC. VFSC Common Stock has no
redemption or sinking fund provisions applicable thereto and has no conversion
rights.
The outstanding shares of VFSC Common Stock are fully paid and
non-assessable.
LIQUIDATION. In the event of any liquidation, dissolution or winding up of
VFSC, whether voluntary or involuntary, the holders of VFSC Common Stock are
entitled to receive, on a share-for-share basis, any assets or funds of VFSC
which are distributable to the holders of VFSC Common Stock upon such events,
subject to the prior rights of creditors of VFSC and the holders of outstanding
shares of VFSC Preferred Stock, if any.
VOTING. The holders of VFSC Common Stock are entitled to one vote for each
share in all matters voted upon by the stockholders of VFSC. The shares of VFSC
Common Stock have noncumulative voting rights; consequently, the holders of a
majority in interest of VFSC Common Stock can conceivably elect all of the
directors of VFSC and, in such event, the holders of the remaining shares voting
for election of directors would not be able to elect any person or persons to
the Board of Directors of VFSC.
DIVIDENDS. When and if dividends, payable as cash, stock or other
property, are declared by the Board of Directors of VFSC out of funds legally
available therefor, the holders of VFSC Common Stock are entitled to share
equally, share for share, in such dividends. The payment of dividends on VFSC
Common Stock is subject to applicable bank regulatory approval.
PREFERRED STOCK
GENERAL. Under the VFSC Certificate, the Board of Directors of VFSC is
authorized, without further stockholder action, to provide for the issuance of
up to 5,000,000 shares of VFSC Preferred Stock, in one or more series, with such
designations or titles; dividend rates, special or relative rights in the event
of liquidation, distribution or sale of assets or dissolution or winding up of
VFSC; any sinking fund provisions; any redemption or purchase account provision;
any conversion provisions; and any voting rights thereof, as shall be set forth
as and when established by the Board of Directors of VFSC.
As of , 1994, VFSC had not issued any shares of VFSC Preferred
Stock.
55
<PAGE> 63
MARKET PRICE OF AND DIVIDENDS ON VFSC COMMON STOCK
The following table sets forth the market prices per share for the periods
indicated, based on high and low sales prices as reported on NASDAQ-NMS.
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW
------------------------------------------------------ ----- -----
<S> <C> <C>
1991
March 31, 1991...................................... $10 $ 4 1/4
June 30, 1991....................................... 10 3/4 6 1/2
September 30, 1991.................................. 12 6 1/4
December 31, 1991................................... 11 8 5/8
1992
March 31, 1992...................................... $19 1/2 $ 9
June 30, 1992....................................... 17 7/8 14 1/2
September 30, 1992.................................. 16 1/4 13
December 31, 1992................................... 16 3/8 13 1/2
1993
March 31, 1993...................................... $21 $14 1/2
June 30, 1993....................................... 23 16 1/2
September 30, 1993.................................. 19 1/2 17
</TABLE>
On August 23, 1993, the last trading day before VFSC and West Mass
announced plans for the Merger, the closing price per share of VFSC Common Stock
was $19.00.
The following table sets forth the dividends per share that have been
declared by VFSC for each of the periods indicated.
<TABLE>
<CAPTION>
DIVIDENDS
QUARTER ENDED PER SHARE
----------------------------------------------------------- ---------
<S> <C>
1991
March 31, 1991........................................... $.15
June 30, 1991............................................ $0
September 30, 1991....................................... $0
December 31, 1991........................................ $0
1992
March 31, 1992........................................... $0
June 30, 1992............................................ $0
September 30, 1992....................................... $0
December 31, 1992........................................ $.08
1993
March 31, 1993........................................... $0
June 30, 1993............................................ $.08
September 30, 1993....................................... $.08
</TABLE>
The payment of dividends by VFSC is subject to the discretion of VFSC's
Board of Directors and may be affected or limited by a variety of factors,
including operating results and financial condition, regulatory limitations and
notice requirements, capital adequacy, asset quality and other factors. Holding
companies such as VFSC engage in no business other than acting as the holding
company of their subsidiaries. The only funds available to VFSC for the payment
of dividends are cash and cash equivalents held at the holding company level,
dividends paid by VNB to VFSC, and borrowings. The principal source of VFSC's
revenues is dividends
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<PAGE> 64
paid by VNB. The payment of dividends by VNB is subject to regulatory
requirements and limitations. VNB is prohibited from paying cash dividends to
the extent that any such payment would reduce the institution's capital below
required capital levels. See "SUPERVISION AND REGULATION -- Regulation of VFSC
and West Mass -- Dividends -- Regulation of VNB and USB -- Dividends."
Payment of dividends after the Merger will be subject to the discretion of
the Board of Directors of VFSC and, in addition, will be subject to each of the
factors described above with respect to VFSC and VNB, including such regulatory
limitations and notice requirements.
DIRECTORS AND EXECUTIVE OFFICERS OF VFSC
At December 31, 1992, the directors of VFSC and the executive officers of
VFSC with their ages, occupation or employment, class and year of appointment,
are as follows:
DIRECTORS
<TABLE>
<CAPTION>
CLASS AND YEAR
NAME AND PRINCIPAL FIRST BECAME
OCCUPATION OR EMPLOYMENT(1) DIRECTOR
- ------------------------------------------------------------------------------- --------------
<S> <C>
ANTHONY F. ABATIELL (53)....................................................... III
Attorney, Partner, Abatiell & Wysolmerkski Law Offices, Rutland, VT 1982
ZANE V. AKINS (52)............................................................. I
President, Akins & Associates 1987
President & Director, Anitech International, Inc., Brattleboro, VT
CHARLES A. CAIRNS (51)......................................................... I
President, Champlain Oil Co., Inc. and Coco Mart, Inc., 1986
South Burlington, VT
</TABLE>
<TABLE>
<S> <C>
ROBERT C. CODY (68)............................................................ I
President, Cody Chevrolet, Inc.; 1974
Chairman, Cody Management Associates (Real Estate Ownership & Management)
Montpelier, VT
BEVERLY G. DAVIDSON (61)....................................................... I
Secretary, Treasurer of RCAS (Vermont State Fair); 1980
Treasurer, N.M.&B. Ltd. (NutriSystem Weight Control)
Rutland, VT
JAMES E. GRIFFIN (65).......................................................... II
President, J.R. Resources, Inc. (Business Consultants), Rutland, VT 1972
JOHN D. HASHAGEN, JR. (51)..................................................... I
President and Chief Executive Officer, Vermont Financial Services Corp. 1987
President and Chief Executive Officer, Vermont National Bank
Brattleboro, VT
DANIEL C. LYONS (62)........................................................... II
Lyons Pontiac-Cadillac GMC Trucks 1974
Toyota, Inc., Berlin, VT
KIMBALL E. MANN (58)........................................................... I
President, J. E. Mann, Inc., (Women's Department Store), Brattleboro, VT 1969
STEPHAN A. MORSE (46).......................................................... III
President and CEO, The Windham Foundation, Inc. 1986
Grafton, VT
DONALD E. O'BRIEN (67)......................................................... III
Attorney, Burlington, VT 1978
ROGER M. PIKE (52)............................................................. III
Vice President, Kinney, Pike, Bell & Conner, Inc. (Insurance), Rutland, VT 1980
MARK W. RICHARDS (47).......................................................... III
President, Richards, Gates, Hoffman & Clay (Insurance), Brattleboro, VT 1988
</TABLE>
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<PAGE> 65
- ---------------
(1) During the past five years, the principal occupation and employment of each
director has been set forth above, except as follows: John D. Hashagen, Jr.
previously served as Executive Vice President and Senior Vice President of
Vermont Financial Services Corp.; and Zane V. Akins was Chief Executive
Officer, Holstein-Friesian Association of America; Executive Vice President
Holstein-Friesian Services, Inc. (Cattle Registration), until December 31,
1990.
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED TO
NAME AND AGE OFFICE OFFICE
---------------------------- ------------------------------------------- ----------
<S> <C> <C>
John D. hashagen, Jr. (51)... President and Chief Executive Officer, 1990
Vermont Financial Services Corp.
President and Chief Executive Officer, 1987
Vermont National Bank
Richard O. Madden (44)...... Treasurer, Vermont Financial Services Corp. 1986
Senior Vice President, Vermont National 1987
Bank
Chief Financial Officer, Vermont National 1986
Bank
W. Bruce Fenn (51).......... Executive Vice President, Vermont National 1988
Bank
Senior Vice President, Vermont National 1987
Bank
Robert G. Soucy (47)........ Executive Vice President, Vermont National 1988
Bank
Senior Vice President, Vermont National 1984
Bank
</TABLE>
In accordance with the provisions of VFSC's Bylaws, the officers hold
office at the pleasure of the Board of Directors.
CHANGE OF CONTROL AGREEMENTS
VFSC and USB have entered into severance agreements with Messrs. Neill,
Phillips, Cole and Noska. These agreements are triggered by a change of control
and a subsequent termination of employment under certain circumstances. Payments
are equal to a multiple of annual salary. For Messrs. Cole, Phillips and Neill,
such payments would equal 200% of base salary at the time of termination; for
Mr. Noska, such payment would equal 100% of base salary at the time of
termination.
The severance agreements define a "change of control" as (i) the
acquisition by a person or group of 25% of the combined voting power of VFSC's
or USB's then outstanding securities; (ii) during any two-year period persons,
who at the beginning of such period were members of VFSC's or USB's Board of
Directors and any new director whose election was approved by at least
two-thirds of the directors then still in office who either were directors at
the beginning of such period or whose election or nomination was previously so
approved, cease to constitute a majority of such board; or (iii) the approval by
the stockholders of VFSC or USB of a merger or consolidation of VFSC or USB
which would result in such shareholders holding less than 70% of the combined
voting power of the surviving entity immediately thereafter, or the approval of
such shareholders of the sale of all or substantially all of the assets of VFSC
or USB.
The severance agreements do not provide for severance benefits in instances
where termination is due to death, disability or retirement. Further, no
benefits are payable in instances of termination for cause, defined as (i) the
willful and continued failure of the officer to perform his duties, and (ii)
willful conduct materially injurious to VFSC or USB. These management continuity
agreements are similar in form to outstanding agreements between VFSC and VNB
and certain of their executives.
CERTAIN TRANSACTIONS
Some directors and officers of VFSC and VNB and their associates were
customers of and had transactions with VFSC and VNB in the ordinary course of
business during 1992. Additional transactions
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<PAGE> 66
may be expected to take place in the ordinary course of business in the future.
Some of VFSC's directors are directors, officers, trustees, or principal
security holders of corporations or other organizations which were customers of
or had transactions with VNB in the ordinary course of business during 1992. All
outstanding loans and commitments included in such transactions were made in the
ordinary course of business on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with other persons and did not involve more than the normal risk of
collectibility nor present other unfavorable features. As of December 31, 1992,
the aggregate of loans by VFSC outstanding to VFSC's officers, directors and
their associates amounted to $2.1 million.
In addition to banking and financial transactions, VFSC and VNB have had
other transactions with, or used products or services of, various organizations
of which directors of VFSC are directors or officers. The amounts involved have
in no case been material in relation to the business of VFSC and VNB, and it is
believed that they have not been material in relation to the business of such
other organizations or to the individuals concerned. It is expected that VFSC
and VNB will continue to have similar transactions with, and use products or
services of, such organizations in the future.
Two directors of VFSC are attorneys who have been retained in the past to
represent VFSC and VNB in appropriate circumstances.
BUSINESS OF WEST MASS
GENERAL. West Mass is a Massachusetts business corporation and is
registered as a bank holding company under the Bank Holding Company Act of 1956,
as amended. West Mass' sole direct subsidiary is USB, an FDIC-insured,
Massachusetts-chartered savings bank, headquartered in Greenfield,
Massachusetts. West Mass was organized at the direction of USB in connection
with USB's conversion from mutual to stock form of organization. The conversion
was completed on November 6, 1986. The primary activity of West Mass at this
time is its ownership of all of the outstanding capital stock of USB.
USB is a Massachusetts chartered stock savings bank originally incorporated
in 1855 as the Shelburne Falls Five Cent Savings Bank, which subsequently
changed its name to the Shelburne Falls Savings Bank. In 1975, the Shelburne
Falls Savings Bank merged with the Conway Savings Bank under the name of United
Savings Bank. In 1978, USB merged with the Haydenville Savings Bank. USB
centralized its operations in Greenfield in 1981. In April, 1988, USB purchased
the deposits, real estate, furniture and equipment of four (4) branch offices of
First National Bank of Boston located in Shelburne Falls, Greenfield (2) and
South Deerfield, all in Franklin County, Massachusetts. The deposits of these
four offices totalled $40.4 million. USB maintains full service banking offices
in Greenfield (2), Conway, Haydenville, Shelburne Falls and South Deerfield.
USB's market area is centered in Franklin County which abuts the southern
borders of both Vermont and New Hampshire.
USB is primarily engaged in the business of attracting deposits from the
general public and originating loans secured by first liens on residential real
estate. USB also makes mortgage loans on commercial real estate and originates
consumer loans, most of which are collateralized. USB maintains a portion of its
assets in federal government and agency obligations, various types of corporate
securities and other authorized investments. USB provides traditional deposit
services as well as money market deposit instruments, demand deposits and NOW
accounts. USB has installed a proprietary system of "Money Mover 24" automated
teller machines (ATMs) in all its branch offices; the ATMs are part of the
Cirrus system, which operates nationally, and the Yankee 24 network with members
throughout New England in over 2000 locations.
USB has a wholly-owned subsidiary, Hayburne, Inc., which is incorporated in
the Commonwealth of Massachusetts. Hayburne, Inc., owns the "Hayburne Building",
a 26,000 square foot office building located at 55 Federal Street, Greenfield,
Massachusetts, in which office space is leased to various tenants.
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<PAGE> 67
MARKET PRICE OF AND DIVIDENDS ON WEST MASS COMMON STOCK
The following table sets forth the market prices per share of West Mass
Common Stock for the periods indicated, based on high and low sales prices as
reported on NASDAQ-NMS.
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW
-------------------------------------------------- ------- ------
<S> <C> <C>
1991
March 31, 1991.................................. $ 6.00 $4.50
June 30, 1991................................... 5.75 4.75
September 30, 1991.............................. 5.75 4.75
December 31, 1991............................... 5.75 4.875
1992
March 31, 1992.................................. $ 7.75 $5.25
June 30, 1992................................... 7.25 6.25
September 30, 1992.............................. 7.25 6.50
December 31, 1992............................... 7.625 6.50
1993
March 31, 1993.................................. $10.25 $7.25
June 30, 1993................................... 11.50 9.50
September 30, 1993.............................. 17.00 9.75
</TABLE>
There were approximately 560 stockholders of record of West Mass Common
Stock as of the West Mass Record Date.
The following table sets forth the dividends per share that have been
declared by West Mass for each of the periods indicated.
<TABLE>
<CAPTION>
DIVIDENDS
QUARTER ENDED PER SHARE
---------------------------------------------------------- ---------
<S> <C>
1991
March 31, 1991.......................................... $ .07
June 30, 1991........................................... .07
September 30, 1991...................................... .07
December 31, 1991....................................... .07
1992
March 31, 1992.......................................... $ .07
June 30, 1992........................................... .07
September 30, 1992...................................... .07
December 31, 1992....................................... .07
1993
March 31, 1993.......................................... $ .07
June 30, 1993........................................... .07
September 30, 1993...................................... .07
</TABLE>
The payment of dividends by West Mass is subject to the discretion of West
Mass' Board of Directors and may be affected or limited by a variety of factors,
including its operating results and financial condition, regulatory limitations
and requirements, capital adequacy, tax considerations and other factors. The
only funds available to West Mass for the payment of dividends are cash and cash
equivalents held at the holding company level, and dividends paid by USB to West
Mass. The payment of dividends by USB is subject to regulatory requirements and
limitations, including, without limitation, a certain Memorandum of Understand-
60
<PAGE> 68
ing between USB and the FDIC and the Massachusetts Commissioner of Banks which
prohibits payment of dividends unless, after payment thereof, USB's Tier 1
Capital Ratio is not less than 6% and its reserve for loan losses is adequate.
Since February 15, 1993, the effective date of the Memorandum of Understanding,
USB has met each of the above requirements. Accordingly, the Memorandum of
Understanding has not restricted the ability of USB to pay dividends. See
"SUPERVISION AND REGULATION -- Regulation of VNB and USB Dividends."
SUPERVISION AND REGULATION
VFSC, West Mass, VNB and USB are subject to extensive regulation under
federal and state banking laws and regulations. The following discussion of
certain of the material elements of the regulatory framework applicable to banks
and bank holding companies is not intended to be complete and is qualified in
its entirety by the text of the relevant state and federal statutes and
regulations. A change in the applicable laws or regulations may have a material
effect on the business of VFSC, West Mass, VNB and/or USB.
REGULATION OF VFSC AND WEST MASS
GENERAL. As bank holding companies, VFSC and West Mass are subject to
supervision and regulation by the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") under the Bank Holding Company Act of 1956,
as amended (the "BHC Act"). Under the BHC Act, bank holding companies generally
may not acquire ownership or control of more than 5% of any class of voting
shares or substantially all of the assets of any company, including a bank,
without the prior approval of the Federal Reserve Board. In addition, bank
holding companies are generally prohibited under the BHC Act from engaging in
non-banking activities, subject to certain exceptions. As bank holding
companies, VFSC's and West Mass' activities and those of their non-bank
subsidiaries are limited generally to the business of banking and activities
determined by the Federal Reserve Board to be so closely related to banking as
to be a proper incident thereto. The Federal Reserve Board has authority to
issue cease and desist orders and assess civil money penalties against bank
holding companies and their non-bank subsidiaries, officers, directors and other
institution-affiliated parties and to remove officers, directors and other
institution-affiliated parties to terminate or prevent unsafe or unsound banking
practices or violations of laws or regulations.
INTERSTATE ACQUISITIONS. Under the BHC Act, a bank holding company may
acquire a bank in another state only if the law of the state in which the bank
to be acquired is located specifically authorizes such acquisition of an
in-state bank by an out-of-state bank holding company. State legislation enacted
in recent years has substantially lessened prior legislative restrictions on
geographic expansion by bank holding companies from and into Massachusetts and
Vermont. For example, under nationwide interstate banking legislation which
became effective in 1990, bank holding companies whose subsidiaries' banking
operations are principally conducted in any state outside Massachusetts or
Vermont are now authorized to acquire Massachusetts or Vermont banking
organizations, provided that such companies' home states afford Massachusetts or
Vermont banking organizations reciprocal rights to acquire banks in such states.
DIVIDENDS. The Federal Reserve Board has authority to prohibit bank
holding companies from paying dividends if such payment would be an unsafe or
unsound practice. The Federal Reserve Board has indicated generally that it may
be an unsound practice for bank holding companies to pay dividends unless the
bank holding company's net income over the preceding year is sufficient to fund
the dividends and the expected rate of earnings retention is consistent with the
organization's capital needs, asset quality, and overall financial condition.
The payment of dividends by VFSC is also subject to the requirement that VFSC
provide notification to the Federal Reserve Board at least 15 days prior to any
proposed dividend action. This 15-day prior notice requirement imposed by the
Federal Reserve Bank will continue until rescinded by the Federal Reserve Bank.
VFSC's and West Mass' ability to pay dividends is dependent upon the flow of
dividend income to them from VNB and USB, respectively, which may be affected or
limited by regulatory restrictions imposed by federal or state bank regulatory
agencies. See "-- Regulation of VNB and USB -- Dividends."
CERTAIN TRANSACTIONS BY BANK HOLDING COMPANIES WITH THEIR
AFFILIATES. There are various legal restrictions on the extent to which bank
holding companies, such as VFSC and West Mass, and their non-
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bank subsidiaries can borrow, obtain credit from or otherwise engage in "covered
transactions" with their insured depository institution subsidiaries. Such
borrowings and other covered transactions by an insured depository institution
subsidiary (and its subsidiaries) with its non-depository institution affiliates
are limited to the following amounts: (a) in the case of any one such affiliate,
the aggregate amount of covered transactions of the insured depository
institution and its subsidiaries cannot exceed 10% of the capital stock and
surplus of the insured depository institution; and (b) in the case of all
affiliates, the aggregate amount of covered transactions of the insured
depository institution and its subsidiaries cannot exceed 20% of the capital
stock and surplus of the insured depository institution. "Covered transactions"
are defined by statute for these purposes to include a loan or extension of
credit to an affiliate, a purchase of or investment in securities issued by an
affiliate, a purchase of assets from an affiliate unless exempted by the Federal
Reserve Board, the acceptance of securities issued by an affiliate as collateral
for a loan or extension of credit to any person or company, or the issuance of a
guarantee, acceptance or letter of credit on behalf of an affiliate. Covered
transactions are also subject to certain collateral security requirements.
Further, a bank holding company and its subsidiaries are prohibited from
engaging in certain tying arrangements in connection with any extension of
credit, lease or sale of property of any kind, or furnishing of any service.
HOLDING COMPANY SUPPORT OF SUBSIDIARY BANKS. Under Federal Reserve Board
policy, VFSC and West Mass are each expected to act as a source of financial
strength to each of their subsidiary banks and to commit resources to support
each of such subsidiaries. This support of each of their subsidiary banks may be
required at times when, absent such Federal Reserve Board policy, VFSC and West
Mass might not otherwise be inclined to provide it. In addition, any capital
loans by a bank holding company to any of its subsidiary banks are subordinate
in right of payment to deposits and certain other indebtedness of such
subsidiary banks. In the event of a bank holding company's bankruptcy, any
commitment by the bank holding company to a federal bank regulatory agency to
maintain capital of a subsidiary bank will be assumed by the bankruptcy trustee
and entitled to a priority of payment.
Under the Federal Deposit Insurance Act, as amended ("FDI Act"), an
FDIC-insured depository institution, such as VNB or USB, can be held liable for
any loss incurred by, or reasonably expected to be incurred by, the FDIC after
August 9, 1989 in connection with (i) the "default" of a commonly controlled
FDIC-insured depository institution, or (ii) any assistance provided by the FDIC
to any commonly controlled depository institution in "danger of default". For
these purposes, the term "default" is defined generally as the appointment of a
conservator or receiver and "in danger of default" is defined generally as the
existence of certain conditions indicating that a default is likely to occur
without Federal regulatory assistance.
REGULATION OF VNB AND USB
GENERAL. As an FDIC-insured state-chartered bank, USB is subject to
supervision of and regulation by the Commissioner of Banking of the Commonwealth
of Massachusetts (the "Commissioner") and the FDIC. This supervision and
regulation is for the protection of depositors, the BIF (as hereinafter
defined), and consumers and is not for the protection of the VFSC's and West
Mass' stockholders. The prior approval of the FDIC and the Commissioner is
required for USB to establish or relocate an additional branch office, assume
deposits, or engage in any merger, consolidation or purchase of sale of all or
substantially all of the assets of any bank or savings association.
As a national bank, VNB is subject to supervision of and regulation by the
Office of the Comptroller of the Currency (the "OCC").
EXAMINATIONS AND SUPERVISION. The FDIC and the Commissioner regularly
examine the operations of USB, and the OCC regularly examines the operations of
VNB, including but not limited to their capital adequacy, reserves, loans,
investments, earnings, liquidity, compliance with laws and regulations, record
of performance under the Community Reinvestment Act and management practices. In
addition, VNB and USB are required to furnish quarterly and annual reports of
income and condition to the FDIC and periodic reports to the Commissioner or the
OCC, as the case may be. The enforcement authority of the FDIC includes the
power to impose civil money penalties, terminate insurance coverage, remove
officers and directors and issue cease-and-desist orders to prevent unsafe or
unsound practices or violations of laws or
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regulations governing its business. In addition, under recent federal banking
legislation, the FDIC has authority to impose additional restrictions and
requirements with respect to banks that do not satisfy applicable regulatory
capital requirements. See "-- Recent Banking Legislation -- Prompt Corrective
Action" below.
DIVIDENDS. The principal source of VFSC's and West Mass' revenue is
dividends from VNB and USB, their respective bank subsidiaries. Payment of
dividends by USB is subject to certain Massachusetts banking law restrictions.
In addition, USB entered into a Memorandum of Understanding with the FDIC and
the Massachusetts Commissioner of Banks as of February 15, 1993 which, among
other things, prohibits payment of dividends by USB unless, after payment of
such dividends, USB's Tier 1 Leverage Capital Ratio is not less than 6% and its
reserves for loan losses is adequate. At June 30, 1993, USB's Tier 1 Leverage
Capital Ratio was 6.94%. See "-- Capital Requirements -- Regulatory Agreements."
For a discussion of other restrictions on payment of dividends by USB and VNB,
see "BUSINESS OF VFSC -- Market Price of and Dividends on VFSC Common Stock" and
"BUSINESS OF WEST MASS -- Market Price of and Dividends on West Mass Common
Stock."
The FDIC has authority to prevent VNB and USB from paying dividends if such
payment would constitute an unsafe or unsound banking practice or reduce their
respective Bank's capital below safe and sound levels. In addition, recently
enacted federal legislation prohibits FDIC-insured depository institutions from
paying dividends or making capital distributions that would cause the
institution to fail to meet minimum capital requirements. See "-- Recent Banking
Legislation -- Prompt Corrective Action" below.
AFFILIATE TRANSACTIONS. VNB and USB are subject to restrictions imposed by
federal law on extensions of credit to, purchases of assets from, and certain
other transactions with, affiliates, and on investments in stock or other
securities issued by affiliates. Such restrictions prevent VNB and USB from
making loans to affiliates unless the loans are secured by collateral in
specified amounts and have terms at least as favorable to the bank as the terms
of comparable transactions between the bank and non-affiliates. Further, federal
and Massachusetts laws significantly restrict extensions of credit by VNB and
USB to their respective directors, executive officers and principal stockholders
and related interests of such persons.
DEPOSIT INSURANCE. VNB's and USB's deposits are insured by the Bank
Insurance Fund ("BIF") of the FDIC to the legal maximum of $100,000 for each
insured depositor. The Federal Deposit Insurance Act provides that the FDIC
shall set deposit insurance assessment rates on a semi-annual basis at a level
sufficient to increase the ratio of BIF reserves to BIF-insured deposits to at
least 1.25% over a 15-year period commencing in 1991. The FDIC has recently
established a framework of risk-based insurance assessments to accomplish this
increase. See "-- Recent Banking Legislation -- Risk-Based Deposit Insurance
Assessments" below. The BIF insurance assessments may be increased further in
the future if necessary to restore and maintain BIF reserves.
FEDERAL RESERVE BOARD POLICIES. The monetary policies and regulations of
the Federal Reserve Board have had a significant effect on the operating results
of banks in the past and are expected to continue to do so in the future.
Federal Reserve Board Policies affect the levels of bank earnings on loans and
investments and the levels of interest paid on bank deposits through the Federal
Reserve System's open-market operations in United States government securities,
regulation of the discount rate on bank borrowings from Federal Reserve Banks
and regulation of non-earning reserve requirements applicable to bank deposit
account balances.
CONSUMER PROTECTION REGULATION; BANK SECRECY ACT. Other aspects of the
lending and deposit business of VNB and USB that are subject to regulation by
the FDIC, the Commissioner and the OCC include disclosure requirements with
respect to interest, payment and other terms of consumer and residential
mortgage loans and disclosure of interest and fees and other terms of and the
availability of funds for withdrawal from consumer deposit accounts. In
addition, VNB and USB are subject to federal and state laws and regulations
prohibiting certain forms of discrimination in credit transactions, and imposing
certain record keeping, reporting and disclosure requirements with respect to
residential mortgage loan applications. In addition, VNB and USB are subject to
federal laws establishing certain record keeping, customer identification, and
reporting requirements with respect to certain large cash transaction, sales of
travelers checks or other monetary instruments and the international
transportation of cash or monetary instruments.
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CAPITAL REQUIREMENTS
GENERAL. The FDIC has established guidelines with respect to the
maintenance of appropriate levels of capital by FDIC-insured banks. The Federal
Reserve Board has established substantially identical guidelines with respect to
the maintenance of appropriate levels of capital, on a consolidated basis, by
bank holding companies. If a banking organization's capital levels fall below
the minimum requirements established by such guidelines, a bank or bank holding
company will be expected to develop and implement a plan acceptable to the FDIC
or the Federal Reserve Board, respectively, to achieve adequate levels of
capital within a reasonable period, and may be denied approval to acquire or
establish additional banks or non-bank businesses, merge with other institutions
or open branch facilities until such capital levels are achieved. Recently
enacted Federal legislation requires federal bank regulators to take "prompt
corrective action" with respect to insured depository institutions that fail to
satisfy minimum capital requirements and imposes significant restrictions on
such institutions. See "-- Recent Banking Legislation -- Prompt Corrective
Action" below.
LEVERAGE CAPITAL RATIO. The regulations of the FDIC require FDIC-insured
banks to maintain a minimum "Leverage Capital Ratio" or "Tier 1 Capital" (as
defined in the Risk-Based Capital Guidelines discussed in the following
paragraphs) to Total Assets of 3.0%. The regulations of the FDIC state that only
banks with the highest federal bank regulatory examination rating will be
permitted to operate at or near such minimum level of capital. All other banks,
including USB and VNB, are expected to maintain an additional margin of capital,
equal to at least 1% to 2% of Total Assets, above the minimum ratio. Any bank
experiencing or anticipating significant growth is expected to maintain capital
well above the minimum levels. The Federal Reserve Board's guidelines impose
substantially similar leverage capital requirements on bank holding companies on
a consolidated basis.
RISK-BASED CAPITAL REQUIREMENTS. The regulations of the FDIC also require
FDIC-insured banks to maintain minimum capital levels measured as a percentage
of such banks' risk-adjusted assets. A bank's capital for this purpose may
include two components -- "Core" (Tier 1) Capital and "Supplementary" (Tier 2)
Capital. Core Capital consists primarily of common stockholders' equity, which
generally includes common stock, related surplus and retained earnings, certain
non-cumulative perpetual preferred stock and related surplus, and minority
interests in the equity accounts of consolidated subsidiaries, less intangible
assets, primarily goodwill. Supplementary Capital elements include, subject to
certain limitations, a portion of the allowance for losses on loans and leases,
perpetual preferred stock that does not qualify for inclusion in Tier 1 capital,
long-term preferred stock with an original maturity of at least 20 years for
issuance and related surplus, certain forms of perpetual debt and mandatory
convertible securities, and certain forms of subordinated debt and
intermediate-term preferred stock.
The risk-based capital rules of the FDIC and the Federal Reserve Board
assign a bank's balance sheet assets and the credit equivalent amounts of the
bank's off-balance sheet obligations to one of four risk categories, weighted at
0%, 20%, 50% or 100%, respectively. Applying these risk-weights to each category
of the bank's balance sheet assets and to the credit equivalent amounts of the
bank's off-balance sheet obligations and summing the totals results in the
amount of the bank's total Risk-Adjusted Assets for purposes of the risk-based
capital requirements. Risk-Adjusted Assets can either exceed or be less than
reported balance sheet assets, depending on the risk profile of the banking
organization. Risk-Adjusted Assets for institutions such as USB and VNB will
generally be less than reported balance sheet assets because their respective
retail banking activities include proportionally more residential mortgage loans
with a lower risk weighing and relatively smaller off-balance sheet obligations.
Effective as of December 31, 1992, the risk-based capital regulations
require all banks to maintain a minimum ratio of Total Capital to Risk-Adjusted
Assets of 8.0%, of which at least one-half (4.0%) must be Core (Tier 1) Capital.
For the purpose of calculating these ratios: (i) a banking organization's
Supplementary Capital eligible for inclusion in Total Capital is limited to no
more than 100% of Core Capital; and (ii) the aggregate amount of certain types
of Supplementary Capital eligible for inclusion in Total Capital is further
limited. The regulations limit the portion of the allowance for loan losses
eligible for inclusion in Total
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Capital to 1.25% of Risk-Adjusted Assets. The Federal Reserve Board has
established substantially identical risk-based capital requirements to be
applied to bank holding companies on a consolidated basis.
At December 31, 1992, VFSC's consolidated Total and Tier 1 Risk-Based
Capital Ratios were 10.77% and 9.51%, respectively. As of September 30, 1993,
VFSC's consolidated Total and Tier 1 Risk-Based Capital Ratios were 11.25% and
9.8%, respectively. These ratios exceeded applicable regulatory requirements.
VFSC's comparable ratios at December 31, 1991 were 10.37% and 9.10%,
respectively.
At December 31, 1992, West Mass' consolidated Total and Tier 1 Risk-Based
Capital Ratios were 12.62% and 11.40%, respectively. As of September 30, 1993,
West Mass' consolidated Total and Tier 1 Risk-Based Capital Ratios were 15.43%
and 14.16%, respectively. These ratios exceeded applicable regulatory
requirements. West Mass' comparable ratios at December 31, 1991 were 12.88% and
11.65%, respectively.
Based on the above figures and accompanying discussion, both VFSC and West
Mass meet all regulatory capital requirements on an historical as well as on a
pro forma basis.
REGULATORY AGREEMENTS. Following an examination in November 1992, USB
entered into a Memorandum of Understanding with the FDIC and the Massachusetts
Commissioner of Banks as of February 15, 1993. Among other things, such
Memorandum of Understanding requires USB to maintain a minimum Tier 1 Leverage
Capital Ratio of 6% and prohibits payment of dividends unless, after payment of
such dividends, USB's Tier 1 Leverage Capital Ratio is not less than 6% and its
reserves for loan losses is adequate. At June 30, 1993, USB's Tier 1 Leverage
Capital Ratio was 6.94%, while on a consolidated basis, West Mass' Tier 1
Leverage Capital Ratio was 8.32%.
Following an OCC examination of VNB, on December 12, 1990 the Board of
Directors of VNB entered into a commitment letter with the OCC whereby the Board
committed to the following programs and actions: (i) to appoint a Board
Compliance Committee; (ii) to develop and implement plans and processes designed
to improve asset quality; (iii) to initiate a review of all policies related to
the bank's lending activities; (iv) to review and enhance the internal loan
review function; (v) to initiate a review of the bank's credit files; (vi) to
review the adequacy of the allowance for loan and lease losses; (vii) to
establish plans to improve earnings performance and maintain capital sufficient
to meet regulatory risk-based capital requirements; (viii) to review policies
and other means to monitor and maintain an adequate liquidity position; and (ix)
to submit periodic status reports on the bank's progress in implementing the
programs and actions enumerated in the commitment letter. On January 18, 1994,
the OCC rescinded the commitment letter.
RECENT BANKING LEGISLATION
GENERAL. On December 19, 1991, the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") was enacted. The FDICIA extensively revised
the regulatory and funding provisions of the FDI Act and made revisions to
several federal banking statutes. Certain of these changes are summarized below.
PROMPT CORRECTIVE ACTION. Among other things, FDICIA requires the federal
banking regulators to take "prompt corrective action" with respect to, and
imposes significant restrictions on, any bank that fails to satisfy its
applicable minimum capital requirements. FDICIA establishes five capital
categories consisting of "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized." Under applicable regulations, a bank that has a Total
Risk-Based Capital Ratio of 10.0% or greater, a Tier 1 Risk-Based Capital Ratio
of 6.0% or greater and a Leverage Capital Ratio of 5.0% or greater, and is not
subject to any written agreement, order, capital directive or prompt corrective
action directive to meet and maintain a specific capital level for any capital
measure is deemed to be "well capitalized." A bank that has a Total Risk-Based
Capital Ratio of 8.0% or greater, a Tier 1 Risk-Based Capital Ratio of 4.0% or
greater and a Leverage Capital Ratio of 4.0% or greater and does not meet the
definition of a well capitalized bank is considered to be "adequately
capitalized." A bank that has a Total Risk-Based Capital Ratio of less than 8.0%
or has a Tier 1 Risk-Based Capital Ratio that is less than 4.0% [or
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a Leverage Capital Ratio of less than 4.0%] is considered "undercapitalized." A
bank that has a Total Risk-Based Capital Ratio of less than 6.0%, or a Tier 1
Risk-Based Capital Ratio that is less than 3.0% or a Leverage Capital Ratio that
is less than 3.0% is considered to be "significantly undercapitalized", and a
bank that has a ratio of tangible equity to total assets equal to or less than
2% is deemed to be "critically undercapitalized." A bank may be deemed to be in
a capital category lower than is indicated by its actual capital position if it
is determined to be in an unsafe or unsound condition or receives an
unsatisfactory examination rating. At September 30, 1993, VNB's and USB's ratios
of tangible equity to assets as calculated under the prompt corrective action
rule were 6.90% and 7.36%, respectively. FDICIA generally prohibits a bank from
making capital distributions (including payment of dividends) or paying
management fees to controlling stockholders or their affiliates if, after such
payment, the bank would be undercapitalized.
Under FDICIA and the applicable implementing regulations, an
undercapitalized bank will be (i) subject to increased monitoring by the FDIC;
(ii) required to submit to the FDIC an acceptable capital restoration plan
within 45 days; (iii) subject to strict asset growth limitations; and (iv)
required to obtain prior regulatory approval for certain acquisitions,
transactions not in the ordinary course of business, and entry into new lines of
business. In addition to the foregoing, the FDIC may issue a "prompt corrective
action directive" to any undercapitalized institution. Such a directive may
require sale or recapitalization of the bank, impose additional restrictions on
transactions between the bank and its affiliates, limit interest rates paid by
the bank on deposits, limit asset growth and other activities, require
divestiture of the subsidiaries, require replacement of directors and officers,
and restrict capital distributions by the bank's parent holding company.
In addition to the foregoing, a significantly undercapitalized institution
may not award bonuses or increases in compensation to its senior executive
officers until it has submitted an acceptable capital restoration plan and
received approval from the FDIC.
Not later than 90 days after an institution becomes critically
undercapitalized, the appropriate federal banking agency for the institution
must appoint a receiver or, with the concurrence of the FDIC, a conservator,
unless the agency, with the concurrence of the FDIC, determines that the
purposes of the prompt corrective action provisions would be better served by
another course of action. FDICIA requires that any alternative determination be
"documented" and reassessed on a periodic basis. Notwithstanding the foregoing,
a receiver must be appointed after 270 days unless the appropriate federal
banking agency and the FDIC certify that the institution is viable and not
expected to fail.
RISK-BASED DEPOSIT INSURANCE ASSESSMENTS. Effective January 1, 1993, a
transitional risk-based structure was implemented by the FDIC pursuant to the
FDICIA and the average assessment rate paid by Savings Association Insurance
Fund-insured and BIF-insured institutions was increased. Under the rule
implementing the transitional system, the FDIC assigns an institution to one of
three capital categories consisting of (1) well capitalized, (2) adequately
capitalized, or (3) undercapitalized, and one of three supervisory categories.
An institution's assessment rate depends on the capital category and supervisory
category to which it is assigned. Under the transitional system, there are nine
assessment risk classifications (i.e., combinations of capital categories and
supervisory subgroups within each capital group) to which differing assessment
rates are applied. Assessment rates will range from 0.23% of deposits for an
institution in the highest category (i.e., well-capitalized and healthy from a
supervisory standpoint) to .31% of deposits for an institution in the lowest
category (i.e., undercapitalized and substantial supervisory concern). The risk
classification to which an institution is assigned by the FDIC is confidential
and may not be disclosed.
On June 17, 1993, the FDIC adopted a final rule establishing a new
risk-based system that will be implemented beginning with the semi-annual
assessment period commencing on January 1, 1994, as required under FDICIA.
Except for limited changes, the structure of the new risk-based system will be
substantially the same as the structure of the transitional system it will
replace. Under the FDIC rule implementing the new risk-based system, an
institution's deposit insurance assessment rate will be determined by assigning
the institution to a capital category and a supervisory subgroup to determine
which one of the nine risk classification categories is applicable, in
substantially the same manner as for the transitional system discussed above.
The FDIC is authorized to raise the assessment rates in certain circumstances.
If the FDIC determines to increase the assessment rates for all institutions,
institutions in all risk categories could be
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affected. The FDIC has exercised this authority several times in the past and
may raise BIF insurance premiums again in the future. If such action is taken by
the FDIC, it could have an adverse effect on the earnings of the VFSC and West
Mass, the extent of which is not currently quantifiable.
BROKERED DEPOSITS AND PASS-THROUGH DEPOSIT INSURANCE LIMITATIONS. Under
FDICIA, a bank cannot accept brokered deposits unless it either (i) is "Well
Capitalized" or (ii) is "Adequately Capitalized" and has received a written
waiver from the FDIC. For this purpose, "Well Capitalized" and "Adequately
Capitalized" are defined the same as under the Prompt Corrective Action
regulations. See "-- Prompt Corrective Action" above. Banks that are not in the
"Well Capitalized" category are prohibited from offering rates of interests on
deposits that are more than 75 basis points above prevailing deposits.
Pass-through insurance coverage is not available for deposits of certain
employee benefits plans in banks that do not satisfy the requirements for
acceptance of brokered deposits, except that pass-through insurance coverage
will be provided for employee benefit plan deposits in institutions which at the
time of acceptance of the deposit meet all applicable regulatory requirements
and send written notice to their depositors that their funds are eligible for
pass-through deposit insurance.
CONSERVATORSHIP AND RECEIVERSHIP AMENDMENTS. FDICIA authorizes the FDIC to
appoint itself conservator or receiver for a state-chartered bank under certain
circumstances and expands the grounds for appointment of a conservator or
receiver for an insured depository institution to include (i) consent to such
action by the board of directors of the institution; (ii) cessation of the
institution's status as an insured depository institution; (iii) the institution
is undercapitalized and has no reasonable prospect of becoming adequately
capitalized, or fails to become adequately capitalized when required to do so,
or fails to timely submit an acceptable capital plan, or materially fails to
implement an acceptable capital plan; and (iv) the institution is critically
undercapitalized or otherwise has substantially insufficient capital. FDICIA
provides that an institution's directors shall not be liable to its stockholders
or creditors for acquiescing in or consenting to the appointment of the FDIC as
receiver or conservator for, or as a supervisor in the acquisition of, the
institution.
REAL ESTATE LENDING STANDARDS. FDICIA requires the federal bank regulatory
agencies to adopt uniform real estate lending standards. The FDIC recently
adopted implementing regulations which establish supervisory limitations on
Loan-to-Value ("LTV") ratios in real estate loans by FDIC-insured banks. The
regulations require FDIC-insured banks to establish LTV ratio limitations within
or below the prescribed uniform range of supervisory limits.
STANDARDS FOR SAFETY AND SOUNDNESS. FDICIA requires the federal bank
regulatory agencies to prescribe, by regulation, standards for all insured
depository institutions and depository institution holding companies relating
to: (i) internal controls, information systems and internal audit systems; (ii)
loan documentation; (iii) credit underwriting; (iv) interest rate risk exposure;
(v) asset growth; and (vi) compensation, fees and benefits. The compensation
standards would prohibit employment contracts, compensation or benefit
arrangements, stock option plans, fee arrangements or other compensatory
arrangements that would provide "excessive" compensation, fees or benefits, or
that could lead to material financial loss. In addition, the federal bank
regulatory agencies are required by FDICIA to prescribe standards specifying;
(i) maximum classified assets to capital ratios; (ii) minimum earnings
sufficient to absorb losses without impairing capital; and (iii) to the extent
feasible, a minimum ratio of market value to book value for publicly-traded
shares of depository institutions and depository institution holding companies.
ACTIVITIES AND INVESTMENTS OF INSURED STATE BANKS. FDIC provides that an
insured state bank such as USB may not engage as a principal, directly or
through a subsidiary, in any activity that is not permissible for a national
bank unless the FDIC determines that the activity does not pose a significant
risk to the BIF, and the bank is in compliance with its applicable capital
standards. In addition, an insured state bank may not acquire or retain,
directly or through a subsidiary, any equity investment of a type, or in an
amount, that is not permissible for a national bank.
Subject to certain limited exceptions, the foregoing provisions of FDICIA
prohibits insured state banks such as USB or any subsidiary of such insured
state banks from retaining or acquiring equity investments. However, under an
exception in the statute, an insured state bank such as USB that (i) is located
in a state
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such as Massachusetts which authorized, as of September 30, 1991, state banks to
invest in common or preferred stock listed on a national securities exchange
("listed stock") or shares of an investment company registered under the
Investment Company Act of 1940 ("registered shares") and (ii) during the period
beginning September 30, 1990 and ending on November 26, 1991 made or maintained
investments in listed stocks and registered shares, may retain whatever listed
stock or registered shares it lawfully acquired or held prior to December 19,
1991 and may continue to acquire listed stock and registered shares, provided
that the maximum permissible investment in either listed stock or registered
shares may not exceed, taken together in the aggregate, 100% of the bank's Tier
I Capital. In order to acquire or retain any listed stock or registered shares
under this exception, the bank must file a one-time notice with the FDIC
containing specified information, and the FDIC must determine that acquiring or
retaining the listed stock or registered shares will not pose a significant risk
to BIF. Any such approval may be subject to whatever conditions or restrictions
the FDIC determines to be necessary or appropriate and will terminate with
respect to further acquisitions of listed stock or registered shares if the bank
or its holding company experiences a change in control and in certain other
circumstances.
Insured state banks are required to divest any equity investments made
impermissible by FDICIA including any listed stock and registered shares for
which FDIC approval is not obtained, as quickly as prudently possible but in no
event later than December 19, 1996, and to submit a plan for such divestiture to
the FDIC.
CONSUMER PROTECTION PROVISIONS. FDICIA also includes provisions requiring
advance notice to regulators and customers for any proposed branch closing and
authorizing (subject to future appropriation of the necessary funds) reduced
insurance assessments for institutions offering "lifeline" banking accounts or
engaged in lending in distressed communities. FDICIA also includes provisions
requiring depository institutions to make additional and uniform disclosures to
depositors with respect to the rates of interest, fees and other terms
applicable to consumer deposit accounts.
The United States Congress has periodically considered and adopted
legislation which has resulted in and could result in further regulation or
deregulation of both banks and other financial institutions. Such legislation
could place in more direct competition with other financial institutions,
including mutual funds, securities brokerage firms and investment banking firms.
No assurance can be given as to whether any additional legislation will be
enacted or as to the effect of such legislation on the business of USB or VNB.
PRO FORMA COMBINED FINANCIAL DATA
The following unaudited pro forma combined condensed financial statements
have been prepared to reflect the Merger of West Mass with and into VFSC on a
pooling-of-interests basis. Under pooling-of-interests accounting treatment for
the Merger, the recorded assets and liabilities of VFSC and West Mass are
carried forward to the combined company at their recorded amounts. See "THE
MERGER -- Accounting Treatment." The following pro forma financial statements
reflect the exchange of West Mass shares of Common Stock for VFSC Common Stock
in connection with the Merger at the maximum Exchange Ratio of 0.9861. This
unaudited pro forma combined financial data should be read in conjunction with
the consolidated historical financial statements of West Mass and VFSC,
including the respective notes thereto, which are delivered with and
incorporated by reference in this Joint Proxy Statement and Prospectus, and with
the unaudited pro forma financial information, including the notes thereto,
appearing elsewhere in this Joint Proxy Statement and Prospectus. See
"INCORPORATION OF DOCUMENTS BY REFERENCE," "SELECTED HISTORICAL AND PRO FORMA
FINANCIAL DATA."
The pro forma combined financial data included within is not necessarily
indicative of the results of future operations of the combined entity or the
actual results that would have been achieved had the Merger been consummated
prior to the periods indicated. Moreover, the pro forma combined consolidated
statement of condition reflects preliminary pro forma adjustments made to
combine West Mass with VFSC utilizing pooling-of-interests accounting treatment.
The actual adjustments to the surviving corporation's accounts will be made as
of the Effective Time of the Merger and may differ from those reflected in the
within pro forma financial statements.
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VERMONT FINANCIAL SERVICES CORP. -- WEST MASS BANKSHARES, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF CONDITION
SEPTEMBER 30, 1993
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
VFSC WMBS PRO FORMA NEW VFSC
(HISTORICAL) (HISTORICAL) ADJUSTMENTS PRO FORMA
------------ ------------ ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash and Due from Banks.................... $ 46,193 $ 5,398 $ 51,591
Interest Bearing Balances with Banks....... 50 204 254
Securities Available for Sale.............. 143,722 $19,008(1) 162,730
Investment Securities...................... 19,008 (19,008)(1) 0
Federal Funds Sold......................... 0 3,637 3,637
Loans...................................... 696,385 183,504 879,889
Allowance for Loan Losses............. (15,285) (3,361) (18,646)
------------ ------------ ---------
Net Loans........................ 681,100 180,143 861,243
Premises and Equipment..................... 19,152 3,360 22,512
Other Real Estate Owned.................... 12,036 2,289 14,325
Other Assets............................... 25,128 6,132 31,260
------------ ------------ ---------
Total Assets..................... $927,381 $220,171 $1,147,552
------------ ------------ ---------
------------ ------------ ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Total Deposits........................ $781,778 $191,145 $ 972,923
Federal Funds Purchased and Securities
Sold with Agreements to
Repurchase.......................... 57,756 57,756
Borrowed Money........................ 15,734 5,587 21,321
ESOP Obligation....................... 72 72
Other Liabilities..................... 6,042 1,265 7,307
------------ ------------ ---------
Total Liabilities................ 861,310 198,069 1,059,379
Stockholders' Equity:
Common Stock.......................... 3,518 138 $ 1,227(2) 4,883
Capital Surplus....................... 41,178 9,393 (2,470)(2) 48,101
Undivided Profits..................... 23,480 13,886 37,366
Security Valuation Allowance.......... (46) (46)
Treasury Stock, at Cost............... (2,059) (1,243) 1,243(2) (2,059)
ESOP Shares........................... (72) (72)
------------ ------------ ----------- ---------
Total Stockholders' Equity....... 66,071 22,102 88,173
------------ ------------ ---------
Total Liabilities and
Stockholders' Equity........... $927,381 $220,171 $1,147,552
------------ ------------ ---------
------------ ------------ ---------
</TABLE>
69
<PAGE> 77
VERMONT FINANCIAL SERVICES CORP. -- WEST MASS BANKSHARES, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1993
(Dollars in thousands, except for per share data)
(Unaudited)
<TABLE>
<CAPTION>
VFSC WMBS PRO FORMA NEW VFSC
(HISTORICAL) (HISTORICAL) ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans................ $ 43,384 $ 10,750 $ 54,134
Interest on Securities Available for
Sale.................................... 7,015 $740(3) 7,755
Other..................................... 17 831 (740)(3) 108
------------ ------------ ------------ ------------
Total Interest Income................ 50,416 11,581 61,997
Interest Expense:
Deposits.................................. 16,661 4,584 21,245
Other..................................... 2,233 173 2,406
------------ ------------ ------------
Total Interest Expense............... 18,894 4,757 23,651
------------ ------------ ------------
Net Interest Income............................ 31,522 6,824 38,346
Provision for possible loan losses............. 3,900 153 4,053
------------ ------------ ------------
27,622 6,671 34,293
Other Income................................... 12,336 1,021 13,357
Other Expenses................................. 35,630 4,504 40,134
------------ ------------ ------------
Income Before Income Taxes..................... 4,328 3,188 7,516
Applicable Income Taxes........................ 1,156 1,294 2,450
------------ ------------ ------------
Net Income................................ $ 3,172 $ 1,894 $ 5,066
------------ ------------ ------------
------------ ------------ ------------
Weighted average common shares outstanding..... 3,410,232 1,277,515 4,669,990
Earnings per share(4).......................... $0.93 $1.48 $1.09
</TABLE>
70
<PAGE> 78
VERMONT FINANCIAL SERVICES CORP. -- WEST MASS BANKSHARES, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1992
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
NEW
PRO VFSC
VFSC WMBS FORMA PRO
(HISTORICAL) (HISTORICAL) ADJUSTMENTS FORMA
------- ------- ------ -------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans............... $60,602 $14,748 $75,350
Interest on Securities Available for
Sale................................... 11,004 $1,740 (3) 12,744
Other.................................... 40 1,900 (1,740) (3) 200
------- ------- ------ -------
Total Interest Income............... 71,646 16,648 88,294
Interest Expense:
Deposits................................. 30,869 7,968 38,837
Other.................................... 2,247 81 2,328
------- ------- -------
Total Interest Expense.............. 33,116 8,049 41,165
------- ------- -------
Net Interest Income........................... 38,530 8,599 47,129
Provision for possible loan losses............ 7,500 1,930 9,430
------- ------- -------
31,030 6,669 37,699
Other Income.................................. 13,912 1,580 15,492
Other Expenses................................ 39,882 5,799 45,681
------- ------- -------
Income Before Income Taxes.................... 5,060 2,450 7,510
Applicable Income Taxes....................... 1,304 1,132 2,436
------- ------- -------
Net Income............................... $ 3,756 $ 1,318 $ 5,074
------- ------- -------
------- ------- -------
Weighted average common shares outstanding.... 3,399,343 1,235,550 4,617,719
Earnings per share(4)......................... $1.10 $1.07 $1.10
</TABLE>
71
<PAGE> 79
VERMONT FINANCIAL SERVICES CORP. -- WEST MASS BANKSHARES, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1991
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
NEW VFSC
VFSC WMBS PRO FORMA PRO
(HISTORICAL) (HISTORICAL) ADJUSTMENTS FORMA
------------ ------------ ----------- --------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans............. $ 71,340 $ 17,114 $88,454
Interest on Securities Available for
Sale................................. 10,891 $ 1,700 (3) 12,591
Other.................................. 636 2,031 (1,700)(3) 967
------------ ------------ --------
Total Interest Income............. 82,867 19,145 102,012
Interest Expense:
Deposits............................... 44,462 11,301 55,763
Other.................................. 2,096 10 2,106
------------ ------------ --------
Total Interest Expense............ 46,558 11,311 57,869
------------ ------------ --------
Net Interest Income......................... 36,309 7,834 44,143
Provision for possible loan losses.......... 14,400 1,348 15,748
------------ ------------ --------
21,909 6,486 28,395
Other Income................................ 13,317 1,048 14,365
Other Expenses.............................. 35,652 5,679 41,331
------------ ------------ --------
Income (loss) Before Income Taxes........... (426) 1,855 1,429
Applicable Income Taxes (Benefit)........... (610) 1,149 539
------------ ------------ --------
Net Income............................. $ 184 $ 706 $ 890
------------ ------------ --------
------------ ------------ --------
Weighted average common shares
outstanding............................... 3,388,072 1,235,550 4,606,448
Earnings per share(4)....................... $0.05 $0.57 $0.19
</TABLE>
72
<PAGE> 80
VERMONT FINANCIAL SERVICES CORP. -- WEST MASS BANKSHARES, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1990
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
PRO NEW VFSC
VFSC WMBS FORMA PRO
(HISTORICAL) (HISTORICAL) ADJUSTMENTS FORMA
------- ------- ------ --------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans............. $77,499 $17,332 $ 94,831
Interest on Securities Available for
Sale................................. 9,410 $1,035 (3) 10,445
Other.................................. 1,170 1,288 (1,035)(3) 1,423
------- ------- ------ --------
Total Interest Income............. 88,079 18,620 106,699
Interest Expense:
Deposits............................... 49,504 12,012 61,516
Other.................................. 3,788 28 3,816
------- ------- --------
Total Interest Expense............ 53,292 12,040 65,332
------- ------- --------
Net Interest Income......................... 34,787 6,580 41,367
Provision for possible loan losses.......... 13,565 455 14,020
------- ------- --------
21,222 6,125 27,347
Other Income................................ 10,105 629 10,734
Other Expenses.............................. 32,264 4,918 37,182
------- ------- --------
Income (loss) Before Income Taxes........... (937) 1,836 899
Applicable Income Taxes (Benefit)........... (1,235) 967 (268)
------- ------- --------
Net Income............................. $ 298 $ 869 $ 1,167
------- ------- --------
------- ------- --------
Weighted average common shares
outstanding............................... 3,372,413 1,235,550 4,590,789
Earnings per share(4)....................... $0.09 $0.70 $0.25
</TABLE>
73
<PAGE> 81
VERMONT FINANCIAL SERVICES -- WEST MASS BANKSHARES, INC.
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
Note 1.
To reclassify West Mass' investment securities to conform to VFSC's
presentation and accounting policies.
Note 2.
To reflect the issuance of 1,227,000 shares of VFSC Common Stock in
exchange for the shares of West Mass Common Stock outstanding based upon the
maximum Exchange Ratio of 0.9861.
Note 3.
To reclassify West Mass' investment earnings to conform to VFSC's
presentation.
Note 4.
Pro forma earnings per share have been computed after giving effect to the
maximum Exchange Ratio of 0.9861 on the weighted average shares of common stock
outstanding.
74
<PAGE> 82
EXPERTS
The consolidated financial statements of West Mass Bankshares, Inc. and
subsidiaries as of December 31, 1992 and 1991, and for each of the years in the
three-year period ended December 31, 1992, have been incorporated by reference
herein and in the Registration Statement in reliance on the report of KPMG Peat
Marwick, independent certified public accountants, incorporated by reference
herein and upon the authority of said firm as experts in accounting and
auditing. Representatives of KPMG Peat Marwick are expected to be present at the
West Mass Special Meeting, will have an opportunity to make a statement if they
wish to do so and are expected to be available to respond to appropriate
questions.
The consolidated financial statements of VFSC and subsidiaries appearing in
VFSC's 1992 Annual Report to Stockholders delivered herewith have been certified
by Coopers & Lybrand, independent certified public accountants, as set forth in
their report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing. Representatives of Coopers & Lybrand are expected to be
present at the VFSC Special Meeting, will have an opportunity to make a
statement if they wish to do so and are expected to be available to respond to
appropriate questions.
VALIDITY OF VFSC COMMON STOCK
The validity of the VFSC Common Stock offered in connection with the Merger
will be passed upon by Sullivan & Worcester, Boston, Massachusetts, counsel to
VFSC. Certain federal income tax consequences of the Merger and other legal
matters in connection with the Merger will be passed upon by Luse, Lehman,
Gorman, Pomerenk & Schick, special counsel to West Mass and USB.
75
<PAGE> 83
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement"), dated as of August
24, 1993, between VERMONT FINANCIAL SERVICES CORP., a Delaware corporation
("VT"), and WEST MASS BANKSHARES, INC., a Massachusetts corporation ("MA").
WHEREAS, the respective Boards of Directors of VT and MA are of the opinion
that the transactions described herein are in the best interests of the parties
to this Agreement and their respective stockholders.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein and in the Plan of Merger (as
hereinafter defined), the parties hereto agree as follows:
ARTICLE I
THE MERGER
1. THE MERGER.
1.1 THE MERGER. Subject to the terms and conditions of this Agreement and
the Plan of Merger attached hereto as Exhibit A (the "Plan of Merger"), MA shall
be merged with and into VT (the "Merger") and VT shall be the surviving
corporation in the Merger. The Plan of Merger provides for the terms of the
Merger and the mode of carrying the same into effect. At the Effective Time, the
terms and conditions set forth in the Plan of Merger shall be implemented. Such
terms and conditions are incorporated by reference herein and made a part
hereof.
1.2 MANNER OF EXCHANGING SHARES. The method of exchanging outstanding
shares of the capital stock of MA for shares of the capital stock of VT pursuant
to the Merger is set forth in the Plan of Merger.
1.3 EFFECTIVE TIME. The term "Effective Time" shall mean the date and time
at which the Merger shall have become effective pursuant to the laws of the
Commonwealth of Massachusetts and the laws of the State of Delaware,
respectively.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF MA
2. REPRESENTATIONS AND WARRANTIES OF MA.
MA hereby represents and warrants to VT as follows:
2.1 CORPORATE ORGANIZATION.
A. MA is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts. MA has the
corporate power and authority to own or lease all of its properties and
assets and to carry on its business as it is now being conducted, and 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 or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or
qualified would not, individually or in the aggregate, have a material
adverse effect on MA and its subsidiaries taken as a whole. MA is a bank
holding company registered with the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") under the Bank Holding Company
Act of 1956, as amended (the "BHCA"). The terms "subsidiary" and
"subsidiaries" when used with reference to MA shall mean any corporation or
corporations which are consolidated with MA for financial reporting
purposes.
A-1
<PAGE> 84
B. Each subsidiary of MA is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation. Each
subsidiary of MA has the corporate power and authority to own or lease all
of its properties and assets and to carry on its business as it is now
being conducted, and 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 or leased by it
makes such licensing or qualification necessary, except where the failure
to be so licensed or qualified would not, either individually or in the
aggregate, have a material adverse effect on MA and its subsidiaries taken
as a whole.
C. The minute books of MA and its subsidiaries contain complete and
accurate records of all meetings and other corporate actions held or taken
since December 31, 1989 of its stockholders and Board of Directors
(including committees of its Board of Directors).
2.2 CAPITALIZATION.
A. The authorized capital stock of MA consists of 12,500,000 shares of
common stock, par value $0.10 per share ("MA Common Stock") and 7,500,000
shares of serial preferred stock, par value $0.10 per share ("MA Preferred
Stock"). As of the date hereof, there were 1,235,550 shares of MA Common
Stock issued and outstanding, and 148,590 shares of MA Common Stock held in
MA's treasury. As of the date hereof, there are no shares of MA Preferred
Stock issued and outstanding and no such shares held in MA's treasury. In
addition, as of the date of this Agreement, there are 124,860 shares of MA
Common Stock reserved for issuance upon exercise of outstanding stock
options, and 306,960 shares of MA Common Stock reserved for issuance upon
exercise of the option (the "MA Option") issued to VT pursuant to the Stock
Option Agreement of even date herewith between VT and MA (the "Stock Option
Agreement"). All issued and outstanding shares of MA Common Stock have been
duly authorized and validly issued and are fully paid and nonassessable and
free of pre-emptive rights, with no personal liability attaching to the
ownership thereof. Except as referred to in this Section 2.2 or reflected
in the disclosure schedule which is being delivered by MA to VT herewith
(the "MA Disclosure Schedule"), MA does not have and is not bound by any
outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any
shares of MA Common Stock or any other equity security of MA or any
securities representing the right to purchase or otherwise receive any
shares of MA Common Stock or any other equity security of MA.
B. The MA Disclosure Schedule lists all of the subsidiaries of MA as
of the date of this Agreement and indicates for each such subsidiary as of
such date the jurisdiction of incorporation. United Savings Bank ("MA
Bank") is a state chartered savings bank under the laws of the Commonwealth
of Massachusetts and is an "insured bank" as defined in the Federal Deposit
Insurance Act and applicable regulations thereunder. No subsidiary of MA
has or is bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or
issuance of any equity security of a MA subsidiary or any securities
representing the right to purchase or otherwise receive any such equity
security. All of the shares of capital stock of each of the MA subsidiaries
are fully paid and nonassessable and are owned by MA or a MA subsidiary
free and clear of any claim, lien, encumbrance or rights of third parties.
2.3 AUTHORITY; NO VIOLATION.
A. MA has full corporate power and authority to execute and deliver
this Agreement, the Plan of Merger and the Stock Option Agreement and to
consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement, the Stock Option Agreement and the Plan of
Merger and the consummation of the transactions contemplated hereby and
thereby have been duly and validly approved by the Board of Directors of
MA. The Board of Directors of MA has directed that this Agreement and the
Plan of Merger and the transactions contemplated hereby and thereby be
submitted to the MA stockholders for approval at a meeting of such
stockholders and, except for the approval of this Agreement and the Plan of
Merger by the stockholders of MA, no other corporate proceedings on the
part of MA are necessary to consummate the transactions so contemplated.
This Agreement has been duly and validly executed and delivered by MA and
constitutes the valid and binding obligation of MA,
A-2
<PAGE> 85
enforceable against MA in accordance with its terms (subject, as to
enforceability, to applicable bankruptcy, insolvency and similar laws of
general application relating to or affecting the rights and remedies of
creditors and the application of general principles of equity whether
considered in a proceeding in equity or at law).
B. Except as set forth in the MA Disclosure Schedule, neither the
execution and delivery of this Agreement and the Plan of Merger by MA nor
the consummation by MA of the transactions contemplated hereby and thereby,
nor compliance by MA with any of the terms or provisions hereof or thereof,
will (a) assuming that the consents and approvals referred to in Section
2.4 hereof are duly obtained, violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to MA or
any of its subsidiaries or any of their respective properties or assets, or
(b) violate, conflict with, result in a breach of any provisions of,
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of,
accelerate the performance required by, or result in a right of termination
or acceleration or the creation of any lien, security interest, charge or
other encumbrance upon any of the respective properties or assets of MA or
any of its subsidiaries under, any of the terms, conditions or provisions
of (i) the Articles of Organization or By-Laws or similar organization
documents of MA or any of its subsidiaries, or (ii) any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which MA or any of its subsidiaries is a party,
or by which they or any of their respective properties or assets may be
bound or affected, except for such violations, conflicts, breaches or
defaults which either individually or in the aggregate will not have a
material adverse effect on the business, results of operations, financial
condition or prospects of MA and its subsidiaries taken as a whole.
2.4 CONSENTS AND APPROVALS. Except for consents and approvals of or
filings or registrations with the Federal Reserve Board, the Massachusetts Board
of Bank Incorporation, the Securities and Exchange Commission (the "SEC"), the
Secretary of State of the Commonwealth of Massachusetts, the Secretary of State
of the State of Delaware, certain state "Blue Sky" or securities commissioners,
and the stockholders of MA and VT, or as may be set forth in the MA Disclosure
Schedule, no consents or approvals of or filings or registration 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 MA
of this Agreement and the Plan of Merger, or (b) the consummation by MA of the
Merger.
2.5 FINANCIAL STATEMENTS. MA has previously delivered to VT copies of (a)
the consolidated balance sheets of MA and its subsidiaries as of December 31 for
the fiscal years 1990 through 1992, inclusive, and the related consolidated
statements of income, changes in stockholders' equity and cash flow for the
fiscal years 1989 through 1992, inclusive, as reported in MA's Annual Reports on
Form 10-K for the fiscal years ended December 31, 1991 and December 31, 1992
filed with the SEC under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), in each case accompanied by the audit report of KPMG Peat
Marwick, independent public accountants with respect to MA, and (b) the
unaudited consolidated balance sheets of MA and its subsidiaries as of June 30,
1993 and June 30, 1992 and the related unaudited consolidated statements of
income, changes in stockholders' equity and cash flow for the six-month periods
then ended as reported in MA's Quarterly Reports on Form 10-Q filed with the SEC
under the Exchange Act. The December 31, 1992 consolidated balance sheet (the
"MA Balance Sheet") of MA (including the related notes, where applicable) fairly
presents the consolidated financial position of MA and its subsidiaries as of
the date thereof, and the other financial statements referred to herein
(including the related notes, where applicable) fairly present, and the
financial statements to be included in the Forms 10-Q and 10-K to be filed by MA
with the SEC after the date hereof will fairly present, the consolidated income,
changes in stockholders' equity and cash flow of MA 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 generally accepted accounting principles
consistently applied during the period involved, except as otherwise set forth
in the notes thereto (subject, in the case of interim statements, to normal
year-end audit adjustments). The books and records of MA and its subsidiaries
have been, and are being, maintained in accordance with applicable legal and
accounting requirements and reflect only actual transactions.
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<PAGE> 86
2.6 INVESTMENT BANKERS. Neither MA nor any of its officers or directors
has employed any broker or finder or incurred any liability for any broker's
fees, commissions or finder's fees in connection with any of the transactions
contemplated by this Agreement, except that MA has engaged, and will pay a fee
or commission to, M.A. Schapiro & Co., Inc. in accordance with the terms of a
letter agreement between such firm and MA, a copy of which has been previously
delivered by MA to VT. Said investment banking firm has orally advised MA's
Board of Directors that the Merger is fair to MA's stockholders from a financial
point of view and it has undertaken to deliver a written fairness opinion for
inclusion in the Proxy Statement (as defined in Section 4.4 below).
2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in the MA
Disclosure Schedule or as disclosed in MA's Quarterly Reports on Form 10-Q for
the quarter ended June 30, 1993, there has not been any material adverse change
in the business, operations, properties, assets or financial condition of MA and
its subsidiaries taken as a whole from that described in MA's Annual Report on
Form 10-K filed with the SEC under the Exchange Act for the fiscal year ended
December 31, 1992 and, to the best of MA's knowledge, no fact or condition now
exists which MA believes will cause such a material adverse change in the
future.
2.8 LEGAL PROCEEDINGS. Except as set forth in the MA Disclosure Schedule,
neither MA nor any of its subsidiaries is a party to any, and there are no
pending or, to the best of MA's knowledge, threatened, material legal,
administrative, arbitral or other proceedings, claims, actions or governmental
investigations of any nature against MA or any of its subsidiaries or
challenging the validity or propriety of the transactions contemplated by this
Agreement or the Plan of Merger and, to the best of MA's knowledge, there is no
reasonable basis for any other material proceeding, claim, action or
governmental investigation against MA. Neither MA nor any of its subsidiaries is
a party to any order, judgment or decree which will, or might reasonably be
expected to, materially adversely affect the business, results of operations,
financial condition or prospects of MA or its subsidiaries taken as a whole,
except as set forth in the MA Disclosure Schedule.
2.9 TAXES AND TAX RETURNS. Each of MA and its subsidiaries has duly filed
and will file in correct form all federal, state and local information returns
and tax returns required to be filed by it on or prior to the Effective Time
(all such returns being accurate and complete in all material respects) and, has
duly paid or will pay, or made or will make provisions for the payment of, all
material taxes and other governmental charges which have been incurred or are
due or claimed to be due from it by federal, state or local taxing authorities
on or prior to the Effective Time (including, without limitation, those due in
respect of its properties, income, business, capital stock, deposits,
franchises, licenses, sales and payrolls) other than taxes or other charges
which (a) (i) are not delinquent, or (ii) are being contested in good faith
through appropriate proceedings (and set forth in the MA Disclosure Schedule),
and (b) have not been finally determined. Except as may be set forth in the MA
Disclosure Schedule, the amounts set up as reserves for taxes on the MA Balance
Sheet are sufficient in the aggregate for the payment of all unpaid federal,
state and local taxes (including any interest or penalties thereon), whether or
not disputed, accrued or applicable, for the period ended December 31, 1992 or
for any year or period prior thereto, and for which MA or any of its
subsidiaries may be liable in its own right or as transferee of the assets of,
or successor to, any corporation, person, association, partnership, joint
venture or other entity. The federal income tax returns of MA and its
subsidiaries have not been examined by the Internal Revenue Service (the "IRS")
for at least ten (10) years. Except as may be set forth in the MA Disclosure
Schedule, there are no material disputes pending, or claims asserted for, taxes
or assessments upon MA or any of its subsidiaries, nor has MA or any of its
subsidiaries been requested to give any currently effective waivers extending
the statutory period of limitation applicable to any federal, state or local
income tax return for any period. Neither MA nor any subsidiary is a "consenting
corporation" within the meaning of Section 341(f) of the Internal Revenue Code
of 1986, as amended (the "Code"). MA and each subsidiary have at all times been
taxable as Subchapter C corporations under the Code. Neither MA nor any
subsidiary has ever been a member of any consolidated group (other than with MA
and its subsidiaries) for federal tax purposes. There are no liens or
encumbrances on any of the assets of MA or any subsidiary that arose in
connection with any failure (or alleged failure) to pay any tax. Neither MA nor
any subsidiary (a) is a party to any tax allocation or sharing agreement, or (b)
has any liability or obligation for the taxes of any person, firm, corporation,
partnership or other entity (other than MA or any subsidiary) under Treas. Reg.
sec.1.1502-6 (or any similar provision of any applicable law), as a transferee
or
A-4
<PAGE> 87
successor, by contract, or otherwise. In addition, (a) proper and accurate
amounts have been withheld by MA and its subsidiaries from their employees for
all prior periods in compliance in all material respects with the tax
withholding provisions of applicable federal, state and local laws, (b) federal,
state and local returns which are accurate and complete in all material respects
have been filed by MA and its subsidiaries for all periods for which returns
were due with respect to income tax withholding, Social Security and
unemployment taxes, and (c) the amounts shown on such returns to be due and
payable have been paid in full or adequate provision therefor has been included
by MA in the MA Balance Sheet.
2.10 EMPLOYEES.
A. Except as set forth in the MA Disclosure Schedule, neither MA nor
any of its subsidiaries maintains or contributes to any "employee pension
benefit plan" (the "MA Pension Plans"), "employee welfare benefit plan"
(the "MA Welfare Plans") (as such terms are defined in Section 3 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), or
any stock option plan, stock purchase plan, deferred compensation plan, or
other similar employee benefit plan.
B. MA has delivered to VT a complete and accurate copy of each of the
following with respect to each of the MA Pension Plans and MA Welfare Plans
as and to the extent requested by VT: (a) plan documents (including without
limitation all Summary Plan Descriptions); (b) trust agreement or insurance
contract, if any; (c) most recent IRS determination letter; (d) most recent
actuarial report, if any; and (e) most recent annual report on Form 5500.
C. The present value of all accrued benefits under each of the MA
Pension Plans subject to Title IV of ERISA did not, as of the latest
valuation date, exceed the then current value of the assets of such plans
allocable to such accrued benefits, based upon the actuarial assumptions
currently utilized for such Plans.
D. Except as set forth in the MA Disclosure Schedule, to the best
knowledge of MA, each of the MA Pension Plans and each of the MA Welfare
Plans has been administered in compliance with its terms in all material
respects and is in compliance in all material respects with the applicable
provisions of ERISA (including, but not limited to, the funding and
prohibited transactions provisions thereof), the Internal Revenue Code of
1986, as amended (the "Code"), and other applicable laws.
E. 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 MA Pension Plan.
F. MA and its subsidiaries have made or provided for all contributions
to the MA Pension Plans required thereunder.
G. Neither MA nor any of its subsidiaries has contributed to any
"Multiemployer Plan", as such term is defined in Section 3(37) of ERISA.
H. Other than as may be described in the MA Balance Sheet, and other
than claims for benefits, contributions, and premiums to the Pension
Benefit Guaranty Corporation (the "PBGC") not yet due, neither MA nor any
of its subsidiaries has incurred any material liability under any provision
of ERISA or other applicable statute or rule of law relating to any of the
MA Pension Plans or MA Welfare Plans, or any employee benefit plan or
employee welfare benefit plan, within the meaning of Section 3 of ERISA,
maintained by any organization that has transferred to MA or any of its
subsidiaries any material business, whether through sale of assets,
statutory merger or otherwise.
I. Each of the MA Pension Plans which is intended to be a qualified
plan within the meaning of Section 401(a) of the Code has been determined
by the IRS to be so qualified, and MA is not aware of any fact or
circumstance which would adversely affect the qualified status of any such
plan.
J. Except as set forth in the MA Disclosure Schedule, neither MA nor
any of its subsidiaries is party to or maintains any contract or other
arrangement with any employee or group of employees, providing severance
payments, stock or stock-equivalent payments or post-employment benefits of
any kind.
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2.11 AGREEMENTS WITH BANKING AUTHORITIES. Except as set forth in the MA
Disclosure Schedule, neither MA nor any of its subsidiaries is a party to any
commitment, letter, written agreement, memorandum of understanding or order to
cease and desist with any federal or state governmental authority charged with
the supervision or regulation of banks or bank holding companies or engaged in
the insurance of bank deposits which in any manner restricts the conduct of its
business, or in any manner relates to its capital adequacy, credit policies,
management or overall safety and soundness or such entity's ability to perform
its obligations hereunder or consummate the transactions contemplated hereby.
2.12 MATERIAL AGREEMENTS. Except as set forth in the MA Disclosure
Schedule, and except for this Agreement and the agreements specifically referred
to herein, as of the date of this Agreement neither MA 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 MA and its subsidiaries taken as a whole, except those entered into
in the ordinary course of business; (b) any agreement, arrangement or commitment
relating to the employment or consultancy of any person providing for payments
in excess of $80,000 per annum; (c) any contract, agreement or understanding
with any labor union; or (d) any contract or agreement or amendment thereto that
would be required to be filed as an exhibit to a Form 10-K by MA as of the date
hereof that has not been filed as an exhibit to the Form 10-K filed by MA for
the fiscal year ended December 31, 1992.
2.13 OWNERSHIP OF PROPERTY. MA and its subsidiaries have good and, as to
real property, marketable title to all assets and properties, whether real or
personal, tangible or intangible, including, without limitation, the capital
stock of MA's subsidiaries and all other assets and properties reflected in MA's
consolidated balance sheet as of June 30, 1993, or acquired subsequent thereto
(except to the extent that such assets and properties have been disposed of for
fair value in the ordinary course of business since June 30, 1993) subject to no
encumbrances, liens, mortgages, security interests or pledges, except (a) those
items that secure liabilities that are reflected in said balance sheet or the
notes thereto or incurred in the ordinary course of business after the date of
such balance sheet, (b) statutory liens for amounts not yet delinquent or which
are being contested in good faith, and (c) such encumbrances, liens, mortgages,
security interests, and pledges that are not in the aggregate material to the
assets and properties of MA and its subsidiaries taken as a whole. MA and its
subsidiaries as lessees have the right under valid and subsisting leases to
occupy, use, possess and control all property leased by MA and its subsidiaries
as presently occupied, used, possessed and controlled by MA and its
subsidiaries.
2.14 REPORTS. Since January 1, 1990, MA and its subsidiaries have filed,
and subsequent to the date hereof will file, all reports, registrations and
statements, together with any amendments required to be made with respect
thereto, that were and are required to be filed with (a) the SEC, including, but
not limited to, Forms 10-K, 10-Q, 8-K and proxy statements (and all such Forms
and proxy statements have been or will be delivered by MA to VT), (b) the
Federal Reserve Board, (c) the Comptroller of the Currency of the United States
(the "Comptroller"), (d) the Federal Deposit Insurance Corporation (the "FDIC"),
(e) the Massachusetts Board of Bank Incorporation, and (f) any applicable state
securities or banking authorities (subject, in the case of state securities
authorities, to filings which are material) (all such reports and statements are
collectively referred to herein as the "MA Reports"). As of their respective
dates, the MA Reports complied and will 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 and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided, however,
that information as of a later date shall be deemed to modify information as of
an earlier date.
2.15 COMPLIANCE WITH APPLICABLE LAW. Each of MA and its subsidiaries holds
all material licenses, franchises, permits and authorizations necessary for the
lawful conduct of its business under and pursuant to all, and has complied with
and is not in default in any respect under any applicable law, statute, order,
rule, regulation, policy and/or guideline of, or agreement with, any federal,
state or local governmental authority relating to MA or any of its subsidiaries
(other than where such default or non-compliance is not likely to result in a
material limitation on the conduct of the business of MA or any of its
subsidiaries, is not likely to
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cause MA or any of its subsidiaries to incur substantial financial penalty, and
is not likely to otherwise have a material adverse effect on MA and its
subsidiaries taken as a whole) and neither MA nor any of its subsidiaries has
received notice of violation of, and does not know of any violations of, any of
the above.
2.16 MA INFORMATION. The information relating to MA to be contained in the
VT Registration Statement and the Proxy Statement (defined in Section 4.4
hereof), and any other documents filed with the SEC or any regulatory agency in
connection herewith, to the extent such information is approved by MA, will not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make such information not misleading.
2.17 AFFILIATES. Except as set forth in the MA Disclosure Schedule, there
is no person who, as of the date hereof, may be deemed to be an "affiliate" of
MA as that term is used in Rule 145 under the Securities Act of 1933, as amended
(the "Securities Act"), and the rules and regulations thereunder and who will
become a beneficial owner of VT Common Stock pursuant to the Merger (the "MA
Affiliates"). The MA Affiliates have executed and delivered to VT written
agreements in or substantially in the form of Exhibit B hereto.
2.18 NO PROHIBITED INTERLOCKS. No officer of director of MA or MA Bank who
is to be an officer or director of VT, MA Bank or VT Bank from and after the
Effective Time is subject to disqualification to serve in such capacity on
account of an interlocking relationship which is prohibited by the Clayton Act,
the Depository Institution Management Interlocks Act, Federal Reserve Regulation
L (including, without limitation, subsection 2(i) thereof) or other applicable
federal of state law or regulation.
2.19 ENVIRONMENTAL MATTERS.
A. Except as set forth in the MA Disclosure Schedule, MA and each of
its subsidiaries, including, without limitation, MA Bank and Hayburne,
Inc., the Participation Facilities and, to the best of MA's knowledge, the
Loan Properties (each as hereinafter defined) are and have been in
compliance with all applicable laws, rules, regulations, standards and
requirements of the EPA and of state and local agencies with jurisdiction
over pollution or protection of the environment, and none of any such
violations will result in a material adverse effect on the business,
results of operations, financial condition or prospects of MA and its
subsidiaries taken as a whole.
B. Except as set forth in the MA Disclosure Schedule, there is no
suit, claim, action or proceeding now pending, or known to MA to be
threatened, before any court, governmental agency or board or other forum
in which MA, its subsidiaries or any Participation Facility has been or,
with respect to threatened proceedings, may be, named as a defendant (a)
for alleged noncompliance (including by any predecessor), with any
environmental law, rule or regulation, or (b) relating to the release into
the environment of any Hazardous Material (as hereinafter defined) whether
or not occurring at or on a site owned, leased or operated by Seller or any
Participation Facility, and none of such suits, claims, actions or
proceedings will result in a material adverse effect on the business,
results of operations, financing condition or prospects of MA and its
subsidiaries taken as a whole.
C. To the best of MA's knowledge and except as set forth in the MA
Disclosure Schedule, there is no suit, claim, action or proceeding pending
or threatened before any court, governmental agency or board or other forum
in which any Loan Property has been or, with respect to threatened
proceedings, may be, named as a defendant or involved (a) for alleged
noncompliance (including by any predecessor) with any environmental law,
rule or regulation, or (b) relating to the release into the environment of
any Hazardous Material whether or not occurring at or on a site owned,
leased, operated or involving a Loan Property, and none of any such suits,
claims, actions or proceedings will or is reasonably likely to result in a
material adverse effect on the business, results of operations, financial
condition or prospects of MA and its subsidiaries taken as a whole.
D. The following definitions apply for purposes of this Section 2.19:
"Loan Property" means any property in which MA or any subsidiary
holds a security interest or mortgage, and, where required by the
context, said term means the owner or operator of such property.
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"Participation Facility" means any facility in which MA or any
subsidiary participates in the management and, where required by the
context, said term means the owner or operator of such property.
"Hazardous Material" means any pollutant, contaminant, or hazardous
substance under the Comprehensive Environmental Response, Compensation,
and Liability Act, 42 U.S.C. sec. 9601 et seq., or the Resource
Conservation and Recovery Act, 42 U.S.C. sec. 6901 et seq., or any
similar state law, and specifically includes oil and any other petroleum
derived products.
2.20 CHAPTERS 110D AND 110F NOT APPLICABLE. The provisions of Chapters
110D and 110F of the Massachusetts General Laws will not, prior to the
termination of this Agreement, apply to this Agreement, the Plan of Merger or
the Stock Option Agreement or any of the transactions contemplated hereby or
thereby.
2.21 OWNERSHIP OF VT COMMON STOCK. As of the date hereof, neither MA nor,
to its best knowledge, any of its affiliates or associates (as such terms are
defined under the Exchange Act), (a) beneficially own, directly or indirectly,
or (b) are parties to any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of, in each case, shares of
capital stock of VT, which in the aggregate represent 5% or more of the
outstanding shares of capital stock of VT entitled to vote generally in the
election of directors (other than shares held in a fiduciary capacity).
2.22 INSURANCE. MA and each of is subsidiaries is presently insured, and
since January 1, 1989 has been insured, for reasonable amounts against such
risks as companies engaged in a similar business in a similar location would, in
accordance with good business practice, customarily be insured.
2.23 LABOR. No work stoppage involving MA or any of its subsidiaries is
pending or, to the best knowledge of MA's management, threatened. Neither MA nor
any of its subsidiaries is involved in, or threatened with or affected by, any
dispute, arbitration, lawsuit or administrative proceeding relating to labor or
employment matters which might reasonably be expected to result in a material
adverse effect on the business, results of operations, financial condition or
prospects of MA and its subsidiaries taken as a whole. No employees of MA or any
of its subsidiaries are represented by any labor union, and, to the best
knowledge of MA's management, no labor union is attempting to organize employees
of MA or any of its subsidiaries.
2.24 MATERIAL INTERESTS OF CERTAIN PERSONS. Except as disclosed in MA's
proxy statement for its 1993 annual meeting of stockholders, no officer or
director of MA, or any "associate" (as such term is defined in Rule 14a-1 under
the Exchange Act) of any such officer or director, has any material interest in
any material contract or property (real or personal), tangible or intangible,
used in or pertaining to the business of MA or any of its subsidiaries.
2.25 ABSENCE OF REGISTRATION OBLIGATIONS. Neither MA nor any of its
subsidiaries is under any obligation, contingent or otherwise, by reason of any
agreement to register any of its securities under the Securities Act which will
survive the Merger.
2.26 LOANS. All currently outstanding loans of, or current extensions of
credit by MA, MA Bank and MA's other subsidiaries, if any, (individually, a
"Loan", and collectively, the "Loans") were solicited, originated and currently
exist in material compliance with all applicable requirements of federal and
state law and regulations promulgated thereunder. The Loans are adequately
documented and each note evidencing a Loan or loan or credit agreement or
security instrument related to the Loans constitutes a valid, legal and binding
obligation of the obligor thereunder, enforceable in accordance with the terms
thereof, except where the failure thereof, individually or in the aggregate,
would not have a material adverse effect on the business, results of operations,
financial condition or prospects of MA and its subsidiaries taken as a whole.
There are no oral modifications or amendments or additional agreements related
to the Loans that are not reflected in the applicable records of MA or its
subsidiaries, and no claims of defense as to the enforcement of any Loan has
been asserted, and MA is aware of no acts of omissions which would give rise to
any claim or right of
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rescission, set-off, counterclaim or defense, except where such would not have,
either individually or in the aggregate, a material adverse effect on the
business, results of operations, financial condition or prospects of MA and its
subsidiaries taken as a whole. MA currently maintains, and shall continue to
maintain, an allowance for loan losses allocable to the Loans which is adequate
to provide for all known and estimable losses, net of any recoveries relating to
such extensions of credit previously charged off, on the Loans, such allowance
for loan losses complying in all material respects with all applicable loan loss
reserve requirements established in accordance with GAAP and by any governmental
authorities having jurisdiction with respect to MA or any of its subsidiaries.
Except as set forth on the MA Disclosure Schedule, none of the Loans is
presently serviced by third parties and there is no obligation which could
result in any Loan becoming subject to any third party servicing.
2.27 ABSENCE OF UNDISCLOSED LIABILITIES. Neither MA nor any of its
subsidiaries has any obligation or liability (contingent or otherwise) that is
material to MA and its subsidiaries on a consolidated basis, or that when
combined with all similar obligations or liabilities would be material to MA and
its subsidiaries on a consolidated basis, except as disclosed or reflected in
the MA Balance Sheet or any of the other financial statements described in
Section 2.5 above or in the MA Disclosure Schedule.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF VT
3. REPRESENTATIONS AND WARRANTIES OF VT.
VT hereby represents and warrants to MA as follows:
3.1 CORPORATE ORGANIZATION.
A. VT is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. VT has the corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted, and 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 or leased by it makes such licensing or qualification
necessary, except where the failure to be so licensed or qualified would
not, individually or in the aggregate, have a material adverse effect on VT
and its subsidiaries taken as a whole. VT is a bank holding company
registered with the Federal Reserve Board under the BHCA. The term
"subsidiaries" when used with reference to VT shall mean the corporations
which are consolidated with VT for financial reporting purposes.
B. Each subsidiary of VT is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation. Each
subsidiary of VT has the corporate power and authority to own or lease all
of its properties and assets and to carry on its business as it is now
being conducted, and 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 or leased by it
makes such licensing or qualification necessary, except where the failure
to be so licensed or qualified, would not, either individually or in the
aggregate, have a material adverse effect on VT and its subsidiaries taken
as a whole.
C. The minute books of VT contain complete and accurate records of all
meetings and other corporate actions held or taken since December 31, 1989
of its stockholders and Board of Directors (including committees of its
Board of Directors).
3.2 CAPITALIZATION.
A. The authorized capital stock of VT consists of 20,000,000 shares of
common stock, par value $1.00 per share ("VT Common Stock"), and 5,000,000
shares of preferred stock, par value $1.00 per share ("VT Preferred
Stock"). As of July 28, 1993, there were 3,515,467 shares of VT Common
Stock and no shares of VT Preferred Stock issued and outstanding and
105,249 shares of VT Common Stock
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held in VT's treasury. As of the date hereof, there were no shares of VT
Preferred Stock issued and outstanding and no such shares were held in VT's
treasury. As of the date of this Agreement, there are 105,100 shares of VT
Common Stock reserved for issuance (from treasury or new issuance) upon the
exercise of outstanding stock options, 91,850 shares of VT Common Stock
reserved for issuance pursuant to VT's Employee Stock Purchase Plan, and
63,954 shares of VT Common Stock reserved for issuance pursuant to VT's
Dividend Reinvestment Plan. All issued and outstanding shares of VT Common
Stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. Except as referred to in this Section
3.2 or reflected in the disclosure schedule which is being delivered by VT
to MA herewith (the "VT Disclosure Schedule"), VT does not have and is not
bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or
issuance of any shares of VT Common Stock or VT Preferred Stock or any
other equity security of VT or any securities representing the right to
purchase or otherwise receive any shares of VT Common Stock or VT Preferred
Stock or any other equity security of VT.
B. The VT Disclosure Schedule lists all of its subsidiaries as of the
date of this Agreement and indicates for each such subsidiary as of such
date the jurisdiction of incorporation. Vermont National Bank ("VT Bank")
is a member in good standing of the Federal Reserve System and is an
"insured bank" as defined in the Federal Deposit Insurance Act and
applicable regulations thereunder. No subsidiary of VT has or is bound by
any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any
equity security of a VT subsidiary or any securities representing the right
to purchase or otherwise receive any such equity security. Except as
provided in Section 55 of the National Bank Act in the case of VT Bank, all
of the shares of capital stock of each of the subsidiaries held by it are
fully paid and nonassessable and, except for directors' qualifying shares,
are owned by VT or a VT subsidiary free and clear of any claim, lien,
encumbrance or rights of third parties.
3.3 AUTHORITY; NO VIOLATION.
A. VT has full corporate power and authority to execute and deliver
this Agreement, the Stock Option Agreement and the Plan of Merger and to
consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement, the Stock Option Agreement and the Plan of
Merger and the consummation of the transactions contemplated hereby and
thereby have been duly and validly approved by the Board of Directors of
VT. The Board of Directors of VT has directed that this Agreement and the
Plan of Merger and the transactions contemplated hereby and thereby be
submitted to the stockholders of VT for approval at a meeting of such
stockholders and, except for the adoption of this Agreement and the Plan of
Merger by its stockholders, no other corporate proceedings on the part of
VT are necessary to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by VT and
constitutes the valid and binding obligations of VT, enforceable against VT
in accordance with its terms (subject, as to enforceability, to applicable
bankruptcy, insolvency and similar laws of general application relating to
or affecting the rights and remedies of creditors and the application of
general principles of equity whether considered in a proceeding in equity
or at law).
B. Neither the execution and delivery of this Agreement and the Plan
of Merger by VT nor the consummation by VT of the transactions contemplated
hereby and thereby, nor compliance by VT with any of the terms or
provisions hereof or thereof, will (a) assuming that the consents and
approvals referred to in Section 3.4 are duly obtained, violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree
of injunction applicable to VT or any of its subsidiaries or any of their
respective properties or assets, or (b) violate, conflict with, result in a
breach of any provisions of, constitute a default (or an event which with
notice or lapse of time, or both, would constitute a default) under, result
in the termination of, accelerate the performance required by, or result in
a right of termination or acceleration or the creation of any lien,
security interest, charge or other encumbrance upon any of the respective
properties or assets of VT or any of its subsidiaries under, any of the
terms, conditions or provisions of (i) the Certificate of Incorporation or
By-Laws or similar organization
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documents of VT or any of its subsidiaries, or (ii) any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which VT or any of its subsidiaries is a party,
or by which they or any of their respective properties or assets may be
bound or affected, except for such violations, conflicts, breaches or
defaults which either individually or in the aggregate will not have a
material adverse effect on the business, results of operations, financial
condition or prospects of VT and its subsidiaries taken as a whole.
3.4 CONSENTS AND APPROVALS. Except for consents and approvals of or
filings or registrations with the Federal Reserve Board, Massachusetts Board of
Bank Incorporation, the SEC, the Secretary of State of the Commonwealth of
Massachusetts, the Secretary of State of the State of Delaware, certain state
"Blue Sky" or securities commissioners, and the stockholders of VT and MA, no
consents or approvals of or filings or registration 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 VT of this
Agreement and the Plan of Merger, or (b) the consummation by VT of the Merger.
3.5 FINANCIAL STATEMENTS. VT has previously delivered to MA copies of (a)
the consolidated statements of condition of VT and its subsidiaries as of
December 31 for the fiscal years 1990 through 1992, inclusive, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for the fiscal years 1989 through 1992, inclusive, as reported in VT's
Annual Reports on Form 10-K for the fiscal years ended December 31, 1991 and
December 31, 1992 filed with the SEC under the Exchange Act, in each case
accompanied by the audit report of Coopers & Lybrand, independent public
accountants with respect to VT, and (b) the unaudited consolidated statements of
condition of VT and its subsidiaries as of June 30, 1993 and June 30, 1992 and
the related unaudited consolidated statements of income, changes in
stockholders' equity and cash flows for the six-month periods then ended as
reported in VT's Quarterly Reports on Form 10-Q filed with the SEC under the
Exchange Act. The December 31, 1992 consolidated statements of condition (the
"VT Balance Sheet") of VT (including the related notes, where applicable) fairly
presents the consolidated financial position of VT and its subsidiaries as of
the date thereof, and the other financial statements referred to herein
(including the related notes, where applicable) fairly present, and the
financial statements to be included in the Forms 10-Q and 10-K to be filed by VT
with the SEC after the date hereof will fairly present, the consolidated income,
in stockholders' equity and cash flows of VT 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 generally accepted accounting principles
consistently applied during the periods involved, except as otherwise set forth
in the notes thereto (subject, in the case of unaudited interim statements, to
normal year-end audit adjustments). The books and records of VT and its
subsidiaries have been, and are being, maintained in accordance with applicable
legal and accounting requirements and reflect only actual transactions.
3.6 INVESTMENT BANKERS. Neither VT nor any of its officers or directors
has employed any broker or finder or incurred any liability for any broker's
fees, commissions or finder's fees in connection with any of the transactions
contemplated by this Agreement, except that VT has engaged, and will pay a fee
or commission to, McConnell, Budd & Downes, Inc. in accordance with the terms of
a letter agreement between such firm and VT, a copy of which has been previously
delivered by VT to MA. Said investment banking firm has orally advised VT's
Board of Directors that the Merger is fair to VT's stockholders from a financial
point of view and it has undertaken to deliver a written fairness opinion for
inclusion in the Proxy Statement (as defined in Section 4.4 below).
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in the VT
Disclosure Schedule or as disclosed in VT's Quarterly Reports on Form 10-Q for
the quarter ended June 30, 1993, there has not been any material adverse change
in the business, operations, properties, assets or financial condition of VT and
its subsidiaries taken as a whole from that described in VT's Annual Report on
Form 10-K filed with the SEC under the Exchange Act for the fiscal year ended
December 31, 1992 and, to the best of VT's knowledge, no fact or condition now
exists which VT believes will cause such a material adverse change in the
future.
3.8 LEGAL PROCEEDINGS. Neither VT nor any of is subsidiaries is a party to
any and there are no pending or, to the best of VT's knowledge, threatened
material legal, administrative, arbitral or other proceedings,
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claims, actions or governmental investigations of any nature against VT or any
of its subsidiaries or challenging the validity or propriety of the transactions
contemplated by this Agreement or the Plan of Merger and, to the best of VT's
knowledge, there is no reasonable basis for any other material proceeding,
claim, action or governmental investigation against VT. Neither VT nor any of
its subsidiaries is a party to any order, judgment or decree which will, or
might reasonably be expected to, materially adversely affect the business,
results of operations, financial condition or prospects of VT and its
subsidiaries taken as a whole.
3.9 TAXES AND TAX RETURNS. Each of VT and its subsidiaries has duly filed
and will file in correct form all federal, state and local information returns
and tax returns required to be filed by it on or prior to the Effective Time
(all such returns being accurate and complete in all material respects) and has
duly paid or will pay, or made or will make provisions for the payment of, all
material taxes and other governmental charges which have been incurred or are
due or claimed to be due from it by federal, state or local taxing authorities
on or prior to the Effective Time (including, without limitation, those due in
respect of its properties, income, business, capital stock, deposits,
franchises, licenses, sales and payrolls) other than taxes or other charges
which (a) (i) are not delinquent, or (ii) are being contested in good faith (and
set forth in the VT Disclosure Schedule), and (b) have not been finally
determined. The amounts set up as reserves for taxes on the VT Balance Sheet are
sufficient in the aggregate for the payment of all unpaid federal, state and
local taxes (including any interest or penalties thereon), whether or not
disputed, accrued or applicable, for the period ended December 31, 1992 or for
any year or period prior thereto, and for which VT or any of its subsidiaries
may be liable in its own right or as transferee of the assets of, or successor
to, any corporation, person, association, partnership, joint venture or other
entity. The federal income tax returns of VT and its subsidiaries have been
examined by the Internal Revenue Service and any liability with respect thereto
has been satisfied, or the statute of limitations has expired, in each case for
all years to and including 1980, and any deficiencies asserted as a result of
such examinations have been satisfied. Except as may be set forth in the VT
Disclosure Schedule, there are no material disputes pending, or claims asserted
for, taxes or assessments upon VT or any of its subsidiaries nor has VT or any
of its subsidiaries been requested to give any currently effective waivers
extending the statutory period of limitation applicable to any federal, state or
local income tax return for any period. In addition, (a) proper and accurate
amounts have been withheld by VT and its subsidiaries from their employees for
all prior periods in compliance in all material respects with the tax
withholding provisions of applicable federal, state and local laws, (b) federal,
state and local returns which are accurate and complete in all material respects
have been filed by VT and its subsidiaries for all periods for which returns
were due with respect to income tax withholding, Social Security and
unemployment taxes, and (c) the amounts shown on such returns to be due and
payable have been paid in full or adequate provision therefor has been included
by VT in the VT Balance Sheet.
3.10 EMPLOYEES.
A. Except as set forth in the VT Disclosure Schedule, neither VT nor
any of its subsidiaries maintains or contributes to any "employee pension
benefit plan" (the "VT Pension Plans"), "employee welfare benefit plan"
(the "VT Welfare Plans") (as such terms are defined in Section 3 ERISA), or
any stock option plan, stock purchase plan, deferred compensation plan, or
other similar employee benefit plan.
B. VT has delivered to MA a complete and accurate copy of each of the
following with respect to each of the VT Pension Plans and VT Welfare Plans
as and to the extent requested by MA: (a) plan document; (b) trust
agreement or insurance contract, if any; (c) most recent IRS determination
letter; (d) most recent actuarial report, if any; and (e) most recent
annual report on Form 5500.
C. The present value of all accrued benefits under each of the VT
Pension Plans subject to Title IV of ERISA did not, as of the latest
valuation date, exceed the then current value of the assets of such plans
allocable to such accrued benefits, based upon the actuarial assumptions
currently utilized for such Plans.
D. To the best knowledge of VT, each of the VT Pension Plans and each
of the VT Welfare Plans has been administered in compliance with its terms
in all materials 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.
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E. 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 VT Pension Plan.
F. VT and its subsidiaries have made or provided for all contributions
to the VT Pension Plans required thereunder.
G. Neither VT nor any of its subsidiaries has contributed to any
"Multiemployer Plan", as such term is defined in Section 3(37) of ERISA.
H. Other than as may be described in the VT Balance Sheet, and other
than claims for benefits, contributions, and premiums to the PBGC not yet
due, neither VT nor any of its subsidiaries has incurred any material
liability under any provision of ERISA or other applicable statute or rule
of law relating to any of the VT Pension Plans or VT Welfare Plans or any
employee benefit plan or employee welfare benefit plan, within the meaning
of Section 3 of ERISA, maintained by any organization that has transferred
to VT and its subsidiaries any material business, whether through sale of
assets, statutory merger or otherwise.
I. Each of the VT Pension Plans which is intended to be a qualified
plan within the meaning of Section 401(a) of the Code has been determined
by the IRS to be so qualified, and VT is not aware of any fact or
circumstance which would adversely affect the qualified status of any such
plan.
J. Except as set forth in the VT Disclosure Schedule, neither VT 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 post-employment benefits of
any kind.
3.11 AGREEMENTS WITH BANKING AUTHORITIES. Except as set forth in the VT
Disclosure Schedule, neither VT nor any of its subsidiaries is a party to any
commitment, letter, written agreement, memorandum of understanding or order to
cease and desist with any federal or state governmental authority charged with
the supervision or regulation of banks or bank holding companies or engaged in
the insurance of bank deposits which in any manner restricts the conduct of its
business, or in any manner relates to its capital adequacy, credit policies,
management or overall safety and soundness or such entity's ability to perform
its obligations hereunder or consummate the transactions contemplated hereby.
3.12 MATERIAL AGREEMENTS. Except for this Agreement and the agreements
specifically referred to herein, as of the date of this Agreement, neither VT
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 VT and its subsidiaries taken as a whole, except
those entered into in the ordinary course of business; (b) any agreement,
arrangement, or commitment relating to the employment or consultancy of any
person providing for payments in excess of $80,000 per annum other than those
entered into in the ordinary course of business; (c) any contract, agreement, or
understanding with any labor union; or (d) any contract or agreement or
amendment thereto that would be required to be filed as an exhibit to a Form
10-K by VT as of the date hereof that has not been filed as an exhibit to the
Form 10-K filed by VT for the fiscal year ended December 31, 1992.
3.13 OWNERSHIP OF PROPERTY. VT and its subsidiaries have good and, as to
real property, marketable title to all assets and properties, whether real or
personal, tangible or intangible, including, without limitation, the capital
stock of VT's subsidiaries and all other assets and properties reflected in VT's
consolidated balance sheet as of June 30, 1993, or acquired subsequent thereto
(except to the extent that such assets and properties have been disposed of for
fair value in the ordinary course of business since June 30, 1993) subject to no
encumbrances, liens, mortgages, security interests or pledges, except (i) those
items that secure liabilities that are reflected in said balance sheet or the
notes thereto or incurred in the ordinary course of business after the date of
such balance sheet, (ii) statutory liens for amounts not yet delinquent or which
are being contested in good faith, and (iii) such encumbrances, liens,
mortgages, security interests and pledges that are not in the aggregate material
to the assets and properties of VT and its subsidiaries taken as a whole. VT and
its subsidiaries as lessees have the right under valid and subsisting leases to
occupy, use, possess and control all
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property leased by VT and its subsidiaries as presently occupied, used,
possessed and controlled by VT and its subsidiaries.
3.14 REPORTS. Since January 1, 1990, VT and its subsidiaries have filed,
and subsequent to the date hereof will file, all reports, registrations and
statements, together with any amendments required to be made with respect
thereto, that were and are required to be filed with (i) the SEC, including, but
not limited to, Forms 10-K, 10-Q, 8-K and proxy statements (and all such Forms
and proxy statements have been or will be delivered by VT to MA), (ii) the
Federal Reserve Board, (iii) the Comptroller, (iv) the FDIC, and (v) any
applicable state securities or banking authorities (subject, in the case of
state securities authorities, to filings which are material) (all such reports
and statements are collectively referred to herein as the "VT Reports"). As of
their respective dates, the VT Reports complied and will 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 and will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that information as of a later date shall be
deemed to modify information as of an earlier date.
3.15 COMPLIANCE WITH APPLICABLE LAW. Each of VT and its subsidiaries holds
all material licenses, franchises, permits and authorizations necessary for the
lawful conduct of its business under and pursuant to all, and has complied with
and is not in default in any respect under any applicable law, statute, order,
rule, regulation, policy and/or guideline of any federal, state or local
governmental authority relating to VT or any of its subsidiaries (other than
where such default or non-compliance is not likely to result in a material
limitation on the conduct of the business of VT or any of its subsidiaries, is
not likely to cause VT or any of its subsidiaries to incur a substantial
financial penalty, and is not likely to otherwise have a material adverse effect
on VT and its subsidiaries taken as a whole) and neither VT nor any of its
subsidiaries has received notice of violation of, and does not know of any
violations of, any of the above.
3.16 VT INFORMATION. The information relating to VT and its subsidiaries
to be contained in the registration statement and proxy statement contemplated
by Section 4.4 hereof, and any other documents filed with the SEC or any
regulatory agency in connection herewith, to the extent such information is
approved by VT, will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make such information not misleading.
3.17 NO PROHIBITED INTERLOCKS. No officer or director of VT or VT Bank who
is to be an officer or director of VT, MA Bank or VT Bank from and after the
Effective Time is subject to disqualification to serve in such capacity on
account of an interlocking relationship which is prohibited by the Clayton Act,
the Depository Institution Management Interlocks Act, Federal Reserve Regulation
L (including, without limitation, subsection 2(k) thereof) or other applicable
federal or state law or regulation.
3.18 OWNERSHIP OF MA COMMON STOCK. As of the date hereof, neither VT nor,
to its best knowledge, any of its affiliates or associates (as such terms are
defined under the Exchange Act), (a) beneficially own, directly or indirectly,
or (b) are parties to any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of, in each case, shares of
capital stock of MA, which in the aggregate represent 5% or more of the
outstanding shares of capital stock of MA entitled to vote generally in the
election of directors (other than shares held in a fiduciary capacity).
3.19 ABSENCE OF UNDISCLOSED LIABILITIES. Neither VT nor any of its
subsidiaries has any obligation or liability (contingent or otherwise) that is
material to VT and its subsidiaries on a consolidated basis, or that when
combined with all similar obligations or liabilities would be material to VT and
its subsidiaries on a consolidated basis, except as disclosed or reflected in
the VT Balance Sheet or any of the other financial statements described in
Section 3.5 above or in the VT Disclosure Schedule.
3.20 ENVIRONMENTAL MATTERS.
A. Except as set forth in the VT Disclosure Schedule, VT and each of
its subsidiaries, including, without limitation, VT Bank, the Participation
Facilities and, to the best of VT's knowledge, the Loan Properties (each as
hereinafter defined) are and have been in compliance with all applicable
laws, rules,
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regulations, standards and requirements of the EPA and of state and local
agencies with jurisdiction over pollution or protection of the environment,
and none of any such violations will result in a material adverse effect on
the business, results of operations, financial condition or prospects of VT
and its subsidiaries taken as a whole.
B. Except as set forth in the VT Disclosure Schedule, there is no
suit, claim, action or proceeding now pending, or known to VT to be
threatened, before any court, governmental agency or board or other forum
in which VT, its subsidiaries or any Participation Facility has been or,
with respect to threatened proceedings, may be, named as a defendant (a)
for alleged noncompliance (including by any predecessor), with any
environmental law, rule or regulation, or (b) relating to the release into
the environment of any Hazardous Material (as hereinafter defined) whether
or not occurring at or on a site owned, leased or operated by Seller or any
Participation Facility, and none of such suits, claims, actions or
proceedings will result in a material adverse effect on the business,
results of operations, financing condition or prospects of VT and its
subsidiaries taken as a whole.
C. To the best of VT's knowledge and except as set forth in the VT
Disclosure Schedule, there is no suit, claim, action or proceeding pending
or threatened before any court, governmental agency or board or other forum
in which any Loan Property has been or, with respect to threatened
proceedings, may be, named as a defendant or involved (a) for alleged
noncompliance (including by any predecessor) with any environmental law,
rule or regulation, or (b) relating to the release into the environment of
any Hazardous Material whether or not occurring at or on a site owned,
leased, operated or involving a Loan Property, and none of any such suits,
claims, actions or proceedings will or is reasonably likely to result in a
material adverse effect on the business, results of operations, financial
condition or prospects of VT and its subsidiaries taken as a whole.
D. The following definitions apply for purposes of this Section 3.20:
"Loan Property" means any property in which VT or any subsidiary
holds a security interest or mortgage, and, where required by the
context, said term means the owner or operator of such property.
"Participation Facility" means any facility in which VT or any
subsidiary participates in the management and, where required by the
context, said term means the owner or operator of such property.
"Hazardous Material" means any pollutant, contaminant, or hazardous
substance under the Comprehensive Environmental Response, Compensation,
and Liability Act, 42 U.S.C. sec. 9601 et seq., or the Resource
Conservation and Recovery Act, 42 U.S.C. sec. 6901 et seq., or any
similar state law, and specifically includes oil and any other petroleum
derived products.
3.21 INSURANCE. VT and each of is subsidiaries is presently insured, and
since January 1, 1989 has been insured, for reasonable amounts against such
risks as companies engaged in a similar business in a similar location would, in
accordance with good business practice, customarily be insured.
3.22 LABOR. No work stoppage involving VT or any of its subsidiaries is
pending or, to the best knowledge of VT's management, threatened. Neither VT nor
any of its subsidiaries is involved in, or threatened with or affected by, any
dispute, arbitration, lawsuit or administrative proceeding relating to labor or
employment matters which might reasonably be expected to result in a material
adverse effect on the business, results of operations, financial condition or
prospects of VT and its subsidiaries taken as a whole. No employees of VT or any
of its subsidiaries are represented by any labor union, and, to the best
knowledge of VT's management, no labor union is attempting to organize employees
of VT or any of its subsidiaries.
3.23 MATERIAL INTERESTS OF CERTAIN PERSONS. Except as disclosed in VT's
proxy statement for its 1993 annual meeting of stockholders, no officer or
director of VT, or any "associate" (as such term is defined in Rule 14a-1 under
the Exchange Act) of any such officer or director, has any material interest in
any material contract or property (real or personal), tangible or intangible,
used in or pertaining to the business of VT or any of its subsidiaries.
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3.24 LOANS. All currently outstanding loans of, or current extensions of
credit by VT, VT Bank and VT's other subsidiaries, if any, (individually, a
"Loan", and collectively, the "Loans") were solicited, originated and currently
exist in material compliance with all applicable requirements of federal and
state law and regulations promulgated thereunder. The Loans are adequately
documented and each note evidencing a Loan or loan or credit agreement or
security instrument related to the Loans constitutes a valid, legal and binding
obligation of the obligor thereunder, enforceable in accordance with the terms
thereof, except where the failure thereof, individually or in the aggregate,
would not have a material adverse effect on the business, results of operations,
financial condition or prospects of VT and its subsidiaries taken as a whole.
There are no oral modifications or amendments or additional agreements related
to the Loans that are not reflected in the applicable records of VT or its
subsidiaries, and no claims of defense as to the enforcement of any Loan has
been asserted, and VT is aware of no acts of omissions which would give rise to
any claim or right of rescission, set-off, counterclaim or defense, except where
such would not have, either individually or in the aggregate, a material adverse
effect on the business, results of operations, financial condition or prospects
of VT and its subsidiaries taken as a whole. VT currently maintains, and shall
continue to maintain, an allowance for loan losses allocable to the Loans which
is adequate to provide for all known and estimable losses, net of any recoveries
relating to such extensions of credit previously charged off, on the Loans, such
allowance for loan losses complying in all material respects with all applicable
loan loss reserve requirements established in accordance with GAAP and by any
governmental authorities having jurisdiction with respect to VT or any of its
subsidiaries. None of the Loans is presently serviced by third parties and there
is no obligation which could result in any Loan becoming subject to any third
party servicing.
ARTICLE IV
COVENANTS OF THE PARTIES
4. COVENANTS OF THE PARTIES.
4.1 CONDUCT OF THE BUSINESS OF MA. During the period from the date of
this Agreement to the Effective Time, and except as may be required pursuant to
this Agreement, MA:
(a) shall, and shall cause each of its subsidiaries to, conduct its
business and engage in transactions only in the ordinary and usual course
of business consistent with past practices, which shall mean (i) conducting
its banking and other business in the ordinary and usual course, (ii)
refraining from any of the activities described in Section 4.1(b) below and
(iii) not entering into any material transactions except in the ordinary
and usual course of business consistent with past practices;
(b) shall not and shall not permit any of its subsidiaries to, without
the prior written consent of VT:
(i) engage or participate in any material transaction or incur or
sustain any material obligation or liability except in the ordinary,
regular and usual course of its businesses consistent with past
practices;
(ii) offer an interest rate with respect to any deposit that would
constitute such deposit a "brokered deposit" under 12 C.F.R. sec.
337.6(a)(1)(ii);
(iii) except in the ordinary, regular and usual course of business
consistent with past practices and in an immaterial aggregate amount,
sell, lease, transfer, assign, encumber or otherwise dispose of or enter
into any contract, agreement or understanding to lease, transfer,
assign, encumber or dispose of any of its assets;
(iv) file any application to relocate any branch office;
(v) terminate, or give any notice (written or verbal) to customers
or governmental authorities or agencies to terminate the operations of
any branch office;
(vi) waive any material right, whether in equity or at law, that it
has with respect to any asset except in the ordinary, regular and usual
course of business consistent with past practice; or
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(vii) terminate any employee involuntarily so as to give rise to
any claim by such employee for any lump-sum severance or other
termination benefits under the provisions of Massachusetts General Laws
Chapter 149, Section 183.
(c) shall use all reasonable efforts, and cause each of its
subsidiaries to use all reasonable efforts, to preserve intact its business
organization and goodwill in all material respects, keep available the
services of its officers and employees as a group and maintain satisfactory
relationships with borrowers, depositors, other customers and others having
business relationships with it;
(d) shall, at VT's request, use its best efforts to cooperate with VT
with respect to preparation for the combination and integration of the
businesses, systems and operations of VT and MA, and shall confer on a
regular and frequent basis with one or more representatives of VT to report
as requested on operational and related matters;
(e) shall, subject to any restrictions under applicable law or
regulation, promptly notify VT of any emergency or other change in the
normal course of its or its subsidiaries' businesses or in the operation of
its or its subsidiaries' properties and of any governmental complaints,
investigations or hearings (or communications indicating that the same may
be contemplated) if such emergency, change, complaint, investigation or
hearing would be material to the business, results of operations, financial
condition or prospects of MA and its subsidiaries taken as a whole;
(f) shall not declare or pay any dividends on or make any other
distributions in respect of MA Common Stock other than MA's regular
quarterly dividend not to exceed $0.07 per share;
(g) shall not adopt or amend (other than amendments required by
applicable law or amendments that reduce amounts payable by it or its
subsidiaries) in any material respect any pension plan, employee benefit
plan, deferred compensation plan, option arrangement or equity incentive
arrangement or enter (or permit any of its subsidiaries to enter) into any
employment severance or similar contract with any person (including,
without limitation, contracts with management which might require that
payments be made upon the consummation of the transactions contemplated
hereby) or amend any such existing agreements, plans or contracts to
increase any amounts payable thereunder or benefits provided thereunder, or
grant or permit any increase in compensation to its or its subsidiaries'
employees as a class or pay any bonus except in the ordinary course of
business consistent with past practices or as otherwise expressly consented
to by VT in writing;
(h) shall not, with respect to itself or any of its subsidiaries,
authorize, recommend, propose or announce an intention to authorize,
recommend or propose, or enter into an agreement with respect to, any
merger, consolidation, purchase and assumption transaction or business
combination (other than the Merger), any acquisition of a material amount
of assets or securities or assumption of liabilities (including deposit
liabilities), any disposition of a material amount of assets or securities,
or any release or relinquishment of any material contract rights not in the
ordinary course of business and consistent with past practices;
(i) shall not propose or adopt amendments to its articles of
organization (or other charter document) or by-laws or those of any of its
subsidiaries;
(j) shall not issue, deliver or sell any shares (whether original
issuance or from treasury shares) of its capital stock or securities
convertible into or exercisable for shares of its capital stock (or permit
any of its subsidiaries to issue, deliver or sell any shares of such
subsidiaries' capital stock or securities convertible into or exercisable
for shares of such subsidiaries' capital stock) except upon exercise or
fulfillment of rights or options issued or existing pursuant to employee
benefit plans, programs or arrangements, dividend reinvestment plans, or
the terms of convertible securities, all to the extent outstanding or in
existence on the date hereof, and except as pursuant to the Stock Option
Agreement, as applicable, or effect any stock split, reverse stock split,
recapitalization, reclassification or similar transaction or otherwise
change its equity capitalization as it existed on June 30, 1993;
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(k) shall not grant, confer or award any options, warrants, conversion
rights or other rights, not existing on the date hereof, to acquire any
shares of its capital stock;
(l) shall not purchase, redeem or otherwise acquire, or permit any of
its subsidiaries to purchase, redeem or otherwise acquire, any shares of
its capital stock or any securities convertible into or exercisable for any
shares of its capital stock, except in a fiduciary capacity or in
connection with any dividend reinvestment plan in existence on the date
hereof;
(m) shall not impose, or suffer the imposition, on any share of
capital stock held by it or by any of its subsidiaries of any material
lien, charge or encumbrance, or permit any such lien, charge, or
encumbrance to exist;
(n) shall not incur, or permit any of its subsidiaries to incur, any
additional debt obligation or other obligation for borrowed money, or to
guaranty any additional debt obligation or other obligation for borrowed
money, except in the ordinary course of business consistent with past
practices, which shall include but not necessarily be limited to creation
of deposit liabilities, purchases of federal funds, sales of certificates
of deposit and entry into repurchase agreements or other similar
arrangements commonly employed by banks;
(o) shall not incur or commit to any capital expenditures or any
obligations or liabilities in connection therewith, other than capital
expenditures and such related obligations or liabilities incurred or
committed to in the ordinary and usual course of business consistent with
past practices, and, in all cases, MA agrees to consult with VT with
respect to capital expenditures that individually exceed $25,000 or
cumulatively exceed $75,000; except in respect of MA's plans for the
purchase of certain teller equipment and an executive automobile,
concerning which MA has heretofore consulted with VT;
(p) shall not change its methods of accounting in effect at December
31, 1992, except as may be required by changes in GAAP as concurred in by
MA's independent auditors, and MA shall not change its fiscal year;
(q) shall file all reports, applications and other documents required
to be filed by it with the SEC or any other governmental entity between the
date of this Agreement and the Effective Time and shall make available to
VT copies of all such reports promptly after the same are filed;
(r) shall cooperate with VT with the objective of seeking appropriate
modification or rescission of all formal and informal supervisory
enforcement actions, if any, undertaken to date by state and/or federal
bank regulatory authorities with respect to MA and/or any of its
subsidiaries, and which are presently in effect, in connection with the
Merger; and
(s) shall not agree, in writing or otherwise, to take any of the
foregoing actions or any action which would make any of its representations
or warranties contained herein untrue or incorrect in any material respect.
4.2 ACCESS TO PROPERTIES AND RECORDS; CONFIDENTIALITY.
A. Each party hereto hereby shall permit the other party reasonable
access to its properties and those of its subsidiaries, and shall disclose
and make available to such other party all books, papers and records
relating to the assets, stock, ownership, properties, operations,
obligations and liabilities of it and its subsidiaries, including, but not
limited to, all books of account (including the general ledger), tax
records, minute books of directors' and stockholders' meetings,
organizational documents, by-laws, material contracts and agreements,
filings with any regulatory authority, accountants' work papers, litigation
files, plans affecting employees, and any other business activities or
prospects in which such other party may have a reasonable interest in light
of the transactions contemplated hereby. MA shall make arrangements with
each third party provider of services to MA to permit VT reasonable access
to all of MA's records held by each such third party. Neither MA nor VT nor
any of their respective subsidiaries shall be required to provide access to
or to disclose information where such access or disclosure would violate or
prejudice the rights of any customer, would jeopardize the attorney-client
privilege of the institution in possession or control of such information,
or would contravene any law, rule,
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regulation, order, judgment, decree or binding agreement. The parties will
make appropriate substitute disclosure arrangements under circumstances in
which the restrictions of the preceding sentence apply.
B. All information furnished by each party hereto to the other shall
be treated as the sole property of the party furnishing the information
until consummation of the transactions contemplated hereby, and, if such
transactions shall not occur, the party receiving the information, or any
of its affiliates or representatives, shall return to the party which
furnished such information all documents or other materials containing,
reflecting or referring to such information for the period hereinafter
referred to, shall 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 two years from the date this Agreement is terminated and
shall not apply to (a) any information which (i) the party receiving the
information can establish by convincing evidence was already in its
possession prior to the disclosure thereof by the party furnishing the
information; (ii) was then generally known to the public; (iii) became
known to the public through no fault of the party receiving the
information; or (iv) was disclosed to the party receiving the information
by a third party not bound by an obligation of confidentiality, or (b)
disclosures in accordance with an order of a court or governmental
authority of competent jurisdiction. In the event that either party or its
affiliates or representatives are requested or required in the context of a
litigation, governmental, judicial or regulatory investigation or other
similar proceeding (by oral questions, interrogatories, requests for
information or documents, subpoenas, civil investigative demands or similar
process) to disclose any confidential information concerning the other
party, the party or its affiliate or its representatives so requested or
required will directly or through such affiliate or representative, if
practicable and legally permitted, prior to providing such information, and
as promptly as practicable after receiving such request, provide the other
party with notice of each such request or requirement so that the other
party may seek an appropriate protective order or other remedy or, if
appropriate, waive compliance with the provisions of this Agreement. If, in
the absence of a protective order or the receipt of a waiver hereunder, the
party or affiliate or representative so requested or required is, in the
written opinion of its counsel, legally required to disclose confidential
information to any tribunal, governmental or regulatory authority, or
similar body, the party or affiliate or representative so required may
disclose that portion of the confidential information which it is advised
in writing by such counsel it is legally required to so disclose to such
tribunal or authority or similar body without liability to the other party
hereto for such disclosure. The parties and their affiliates and
representatives will exercise reasonable efforts to obtain assurance that
confidential treatment will be accorded the information so disclosed.
4.3 NO SOLICITATION. Unless and until this Agreement shall have been
terminated by either party pursuant to Section 7.1, MA and each of its
subsidiaries shall not (and MA and each of its subsidiaries shall use its best
efforts to cause its officers, directors, employees, representatives and agents,
including, but not limited to investment bankers, attorneys and accountants, not
to), directly or indirectly, encourage, solicit, initiate or participate in any
discussions or negotiations with, or, subject to the fiduciary obligations of
MA's Board of Directors (as advised in writing by outside counsel), provide any
information to, any corporation, partnership, person or other entity or group
(other than VT and its affiliates or representatives) concerning any merger,
tender offer, sale of substantial assets, sale of shares of capital stock or
debt securities or similar transaction involving MA or any of its subsidiaries
(an "Acquisition Transaction"). Notwithstanding the foregoing, nothing contained
in this Section 4.3 shall prohibit MA or its Board of Directors from making such
disclosure to MA's stockholders which, in the judgment of the Board of Directors
with the written advice of outside counsel, may be required under applicable
law. MA will immediately communicate to VT 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 MA's
receipt of any such proposal or inquiry) or its receipt of any request for
information from the Federal Reserve Board, the United States Department of
Justice, or any other governmental agency or authority with respect to a
proposed Acquisition Transaction.
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4.4 REGULATORY MATTERS; CONSENTS.
A. The parties will cooperate in connection with (a) the preparation
and filing by VT with the SEC under the Securities Act of a registration
statement on Form S-4 relating to the shares of VT Common Stock to be
issued pursuant to this Agreement and in accordance with the terms and
conditions of the Plan of Merger (the "VT Registration Statement"), (b) the
preparation and filing by MA of a joint proxy statement (the "Proxy
Statement") with the SEC under the Exchange Act as shall be necessary or
desirable in order to consummate the transactions contemplated by this
Agreement, each to be undertaken as promptly as practicable, and MA and VT
will use their respective best efforts to have the VT Registration
Statement declared effective by the SEC and to mail the Proxy Statement to
their respective stockholders. The parties shall also take any reasonable
action required to be taken under any state "Blue Sky" laws in connection
with the Merger. Neither party shall take or permit any of its subsidiaries
to take any action that materially adversely affects its ability to
consummate the transactions contemplated under this Agreement in a
reasonably timely manner.
B. Each of VT and MA will cooperate with the other and use its best
efforts to prepare all necessary documentation, to effect all necessary
filings and to obtain all necessary permits, consents, approvals and
authorizations of all third parties and governmental bodies necessary to
consummate the transactions contemplated by this Agreement. Each party
hereto shall have the right to review and approve in advance all
characterizations of it and its subsidiaries which appear in any filing
made in connection with the transactions contemplated by this Agreement
with any governmental body. In exercising the foregoing right, the parties
hereto shall act as promptly as practicable. VT and MA, as the case may be,
will promptly furnish the other with copies of written communications to,
or received by it or by any subsidiary from, any regulatory authority in
respect of the transactions contemplated hereby.
4.5 APPROVALS OF STOCKHOLDERS. Each of MA and VT will:
(a) take all steps necessary duly to call, give notice of, convene and
hold a meeting of its stockholders for the purpose of approving this
Agreement, the Plan of Merger, and the transactions contemplated hereby and
thereby and for such other purposes as may be necessary or desirable;
(b) subject to the fiduciary duties of its Board of Directors under
applicable law, as determined by the Board of Directors after consultation
with legal counsel, recommend to its stockholders the approval of this
Agreement, the Plan of Merger and the transactions contemplated hereby and
thereby and such other matters as may be submitted to its stockholders in
connection with this Agreement and the Plan of Merger; and
(c) cooperate and consult with each other with respect to each of the
foregoing matters.
Each of MA and VT will use its best efforts to obtain the necessary approvals of
its stockholders of this Agreement, the Plan of Merger and the transactions
contemplated hereby and thereby.
4.6 FURTHER ASSURANCES. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its best efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
In case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall take all such necessary action.
4.7 DUE DILIGENCE PERIOD AND DISCLOSURE SUPPLEMENTS.
A. Each party will undertake a due diligence investigation and review
of the books, records and facilities of the other and its subsidiaries as
soon as practicable following the date of this Agreement and will complete
such due diligence investigation and review not later than thirty (30) days
following the date of this Agreement. At the conclusion of the parties' due
diligence periods, each party shall notify the other of all matters then
known to it which it shall in good faith determine to be either (a)
inconsistent in any material and adverse respect with any of the
representations and warranties of the other contained in this Agreement, as
qualified by the Disclosure Schedules, or (b) in the good faith judgment of
its Board
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of Directors, of such significance as to have or possibly have a material
adverse effect on the business results of operations, financial condition
or prospects of the other party and its subsidiaries taken as a whole. If
either party so notifies the other, then this Agreement shall forthwith
terminate in accordance with the provisions of Article VII hereof.
B. From time to time prior to the Effective Time, and in any event
immediately prior thereto, each party will promptly supplement or amend its
Disclosure Schedule delivered in connection with this Agreement with
respect to any matter hereafter arising which, if existing, occurring or
known at the date of this Agreement, would have been required to be set
forth or described in such Disclosure Schedule or which is necessary to
correct any information in such Disclosure Schedule which has become
inaccurate. No supplement or amendment to such Disclosure Schedules shall
have any effect for the purpose of determining satisfaction of any of the
conditions set forth in Article V hereof.
4.8 PUBLIC ANNOUNCEMENTS. Except as otherwise required by law or the rules
of NASD, VT and MA will cooperate with each other in the development and
distribution of all news releases and other public information disclosures with
respect to this Agreement or any of the transactions contemplated hereby.
4.9 EMPLOYEE BENEFIT PLANS. The life insurance, vacation pay, sick leave,
executive incentive, short-term disability, long-term disability, medical,
pension, profit sharing, deferred compensation, supplemental executive
retirement, and other employee benefit plans of VT and MA initially shall be
unaffected by the Merger and the other transactions contemplated by this
Agreement except as may be required by law or required to maintain the
tax-qualified classification of a plan. As soon as practicable after the
Effective Time, the Board of Directors of VT shall cause a study to be made of
the respective employee benefit plans maintained by VT and MA and all of their
respective direct and indirect subsidiaries with a view to the possible
combination of such plans and unification of the benefits thereunder, to the
extent practicable and to the extent deemed desirable by the Board of Directors.
Subject to the foregoing, the Board of Directors may discontinue or amend any
particular plan of either VT or MA after the Effective Time. In implementing
such review of employee benefit and welfare plans, the Board of Directors shall
attempt to assure that the employees of MA and MA's subsidiaries receive, in the
aggregate, benefits no less favorable than those received by the employees of VT
and VT Bank, and, to the extent practicable, the Board of Directors shall
provide that MA employees will be credited for prior years' services with MA or
a MA subsidiary to the extent that any plans of MA are combined with those of
VT.
4.10 BOARD OF DIRECTORS OF VT AND VT BANK. At the Effective Time, Francis
Lemay shall be appointed to fill a vacancy currently existing in Class III of
VT's Board of Directors, the term of which Class III expires at the 1996 annual
meeting of VT's stockholders and another person (currently a member of MA's
Board of Directors) to be designated by MA prior to the Closing shall be
appointed to fill a vacancy currently existing in Class II of VT's Board of
Directors, the term of which Class II expires at the 1995 annual meeting of VT's
stockholders. At the Effective Time, VT shall cause such aforesaid Francis Lemay
and such other person to be elected as directors of VT Bank. Such persons shall
serve in such directorships in accordance with the respective charters and
by-laws of VT and VT Bank.
4.11 POOLING. Each party agrees to use its best efforts to avoid actions
that would prevent treatment of the Merger on a pooling of interests basis.
4.12 TAX-FREE REORGANIZATION TREATMENT. Neither VT nor MA shall
intentionally take or cause to be taken any action, whether before or after the
Effective Time, which would disqualify the Merger as a "reorganization" within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended;
provided, however, that nothing herein shall limit the ability of VT to exercise
its rights under the Stock Option Agreement.
4.13 ACCOUNTANTS' LETTERS. MA shall use all reasonable efforts to cause to
be delivered to VT letters from its independent public accountants (KPMG Peat
Marwick), dated the date on which the VT Registration Statement (or last
pre-effective amendment thereto) shall become effective and dated the date of
the Closing, relating to the transactions contemplated by this Agreement, and
addressed to VT, in form and
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substance which is reasonably satisfactory to VT and customary in transactions
of the nature contemplated hereby.
4.14 INDEMNIFICATION. From and after the Effective Time, VT shall agree to
indemnify, defend and hold harmless former and then existing directors of MA or
any subsidiary of MA against all losses, claims, damages, costs, expenses,
liabilities or judgments or amounts that are paid in settlement on or in
connection with any claim, action, suit, proceeding or investigation arising out
of the fact that such person is or was a director or officer of MA or any
subsidiary, but only to the extent that such person is or would be entitled to
such indemnification under MA's Articles of Organization and By-Laws in effect
on the date hereof or under Massachusetts law.
4.15 FINANCIAL RESULTS. VT shall publish unaudited financial results
covering at least 30 days of combined operations of VT and MA as soon as
practicable but in no event later than twenty-five (25) days after the last day
of the first full calendar month following the Effective Time and VT shall file
a Form 8-K for this purpose if necessary.
ARTICLE V
CLOSING CONDITIONS
5. CLOSING CONDITIONS.
5.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS UNDER THIS AGREEMENT. The
respective obligations of each party under this Agreement shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions,
none of which may be waived:
A. This Agreement, the Plan of Merger and the transactions
contemplated hereby and thereby shall have been approved by the affirmative
vote of the holders of at least two-thirds of the outstanding shares of MA
Common Stock and by the affirmative vote of the holders of at least
two-thirds of the outstanding shares of VT Common Stock, in accordance with
applicable law.
B. All authorizations, consents orders or approvals of, or
declarations or filings with, and all expirations of waiting periods
imposed by, any governmental or regulatory authority or agency (all of the
foregoing being referred to as "Consents") which are necessary in the
opinion of counsel to each of the parties for the consummation of the
Merger shall have been filed, occurred or been obtained (all such
authorizations, orders, declarations, approvals, filings and consents and
the lapse of all such waiting periods being referred to as the "Requisite
Regulatory Approvals") and all such Requisite Regulatory Approvals shall be
in full force and effect. In addition, VT shall have received all state
securities or blue sky permits and other authorizations necessary to issue
the VT Common Stock pursuant to the Merger in accordance with all
applicable state securities or blue sky laws.
C. The VT Registration Statement relating to the shares of VT Common
Stock to be issued pursuant to the Merger shall have become effective under
the Securities Act and shall not be subject to a stop order or a threatened
stop order.
D. Neither VT nor MA shall be subject to any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the transactions contemplated by this
Agreement.
5.2 ADDITIONAL CONDITIONS OF VT'S OBLIGATIONS UNDER THIS AGREEMENT. The
obligations of VT under this Agreement shall be further subject to the
satisfaction, at or prior to the Effective Time, of the following additional
conditions, any one or more of which may be waived by VT:
A. There shall not have occurred any change in the business, assets,
financial condition, results of operations or prospects of MA 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 business, results of
operations, financial condition or prospects of MA.
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B. Each of the obligations of MA required to be performed by MA at or
prior to the Closing pursuant to the terms of this Agreement shall have
been duly performed and complied with in all material respects and the
representations and warranties of MA contained in this Agreement shall be
true and correct in all material respects as of the date of this Agreement
and as of the Effective Time as though made at and as of the Effective
Time, except as to any representation or warranty which specifically
relates to an earlier date and except where the facts which cause the
failure of any representation or warranty to be so true and correct would
not, either individually or in the aggregate, constitute a material or
adverse change in the assets, business, financial condition or results of
operation of MA and its subsidiaries taken as a whole, and VT shall have
received a certificate to that effect signed by the president and chief
financial officer of MA.
C. All action required to be taken by, or on the part of, MA to
authorize the execution, delivery and performance of this Agreement and the
consummation by MA of the transactions contemplated hereby shall have been
duly and validly taken by the Board of Directors and stockholders of MA,
and VT shall have received certified copies of the resolutions evidencing
such authorizations of MA.
D. VT shall have received certificates (dated as of a day as close as
practicable to the date of the Closing) from appropriate authorities as to
the legal existence and good standing of MA and MA Bank.
E. Any and all permits, consents, waivers, clearances, approvals and
authorizations of all non-governmental and non-regulatory third parties
which are necessary in connection with the consummation of the transactions
contemplated by this Agreement and are required to be received or obtained
by MA, shall have been obtained by MA, other than permits, consents,
waivers, clearances, approvals and authorizations the failure of which to
obtain would neither make it impossible to consummate the Merger nor result
in any material adverse effect with respect to the business, results of
operations, financial condition or prospects of VT (on a consolidated basis
with MA).
F. VT shall have received an opinion or opinions, dated the date of
the Closing, from Muldoon, Murphy & Faucette, counsel to MA, covering the
matters set forth in Exhibit C hereto.
G. MA shall have caused to be delivered to VT letters from independent
public accountants (KPMG Peat Marwick) with respect to MA, dated the date
on which the VT Registration Statement (or last amendment thereto),
relating to the transactions contemplated by this Agreement shall become
effective, and dated the date of the Closing, and addressed to VT, in form
and substance which is customary in transactions of the nature contemplated
hereby.
H. VT shall have received a letter from Coopers & Lybrand, dated the
date of the Closing, substantially to the effect that, on the basis of a
review of this Agreement and the transactions contemplated hereby (and
taking into account the facts and circumstances existing at the time of
such letter, including without limitation, the number of shares of VT
Common Stock and MA Common Stock with respect to which all actions required
to be taken under the Delaware General Corporation Law and the
Massachusetts Business Corporation Law prior to such date to perfect
dissenters' appraisal rights have been taken) in its opinion Accounting
Principles Board Opinion No. 16 requires that the Merger be accounted for
as a pooling of interests. In rendering such opinion, such accounting firm
may rely on the representations of the respective managements of VT and MA.
I. VT shall have received an opinion, dated the date of the Closing,
from Sullivan & Worcester, counsel to VT, substantially to the effect that,
on the basis of facts and representations set forth in, or set forth in
writing elsewhere and referred to in, such opinion that are consistent with
the state of facts existing at the Effective Time, for federal income tax
purposes the Merger constitutes a tax-free transaction under the Code (it
being understood that such opinion will not extend to cash received by
dissenters, if any, or paid in lieu of fractional shares) and in respect of
such other substantial federal income tax effects of the Merger as VT may
reasonably require. In rendering any such opinion, such counsel may rely,
to the extent they deem necessary or appropriate, upon opinions of other
counsel and upon representations of the managements and affiliates of VT.
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J. All necessary consents or permits from or filings with state
securities commissions shall have been obtained or made.
K. No suit, action or other proceeding involving any governmental
authority shall be pending in which such authority seeks to restrain or
prohibit the Merger.
L. There shall not be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Merger or VT after the Effective Time, by any federal or state governmental
agency or authority which, in connection with the granting of any Consent
or Requisite Regulatory Approval necessary to consummate the Merger or
otherwise, imposes any condition or restriction upon VT, any VT subsidiary
or MA or any MA subsidiary after the Merger (including, without limitation,
requirements relating to the disposition of assets or limitations on
interest rates), which would so materially adversely impact the economic or
business benefits of the transactions contemplated by this Agreement as to
render inadvisable in the reasonable judgment of VT the consummation of the
Merger.
M. VT shall have received the written opinion of McConnell, Budd &
Downes, Inc., dated at or prior to the time of the mailing of the Proxy
Statement to VT's stockholders, to the effect that the Merger is fair to
VT's stockholders from a financial point of view.
5.3 ADDITIONAL CONDITIONS TO MA'S OBLIGATIONS UNDER THIS AGREEMENT. The
obligations of MA under this Agreement shall be further subject to the
satisfaction, at or prior to the Effective Time, of the following additional
conditions, any one or more of which may be waived by MA:
A. There shall not have occurred any change in the business, assets,
financial conditions, results of operations or prospects of VT 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 business,
results of operations, financial condition or prospects of VT. Without
limiting the foregoing, if the average of VT's Nonperforming Assets (as
defined below) for the two month-end periods ending immediately prior to
the fifth trading date before the Effective Time represents an increase of
not less than 22.5% over the amount of such Nonperforming Assets at June
30, 1993, such increase shall be deemed a material adverse effect for
purposes of this Section 5.3(A). An increase in such Nonperforming Assets
of less than 22.5% over such period will not be deemed to have such a
material adverse effect. "Nonperforming Assets" shall mean for any period
the total of non-accrual loans, troubled debt, restructured loans, other
real estate owned, and in-substance foreclosures, all determined according
to generally accepted accounting principles applied consistently with the
VT financial statements described in Section 3.5 hereof.
B. Each of the obligations of VT required to be performed by VT at or
prior to the Closing pursuant to the terms of this Agreement shall have
been duly performed and complied with in all material respects and the
representations and warranties of VT contained in this Agreement shall be
true and correct in all material respects as of the date of this Agreement
and as of the Effective Time as though made at and as of the Effective Time
(except as to any representation or warranty which specifically relates to
an earlier date) and MA shall have received a certificate to that effect
signed by the president and the chief financial officer of VT.
C. All action required to be taken by, or on the part of, VT to
authorize the execution, delivery and performance of this Agreement and the
consummation by VT of the transactions contemplated hereby shall have been
duly and validly taken by the Board of Directors and stockholders of VT,
and MA shall have received certified copies of the resolutions evidencing
such authorizations of VT.
D. MA shall have received certificates (dated as of a day as close as
practicable to the date of the Closing) from appropriate authorities as to
the legal existence and good standing of VT and VT Bank.
E. Any and all permits, consents, waivers, clearances, approvals and
authorizations of all non-governmental and non-regulatory third parties
which are necessary in connection with the consummation of the transactions
contemplated by this Agreement and are required to be received or obtained
by VT, shall have been obtained by VT, other than permits, consents,
waivers, clearances, approvals and
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authorizations the failure of which to obtain would neither make it
impossible to consummate the Merger nor result in a material adverse effect
on the business, results of operations, financial condition or prospects of
VT (on a consolidated basis with MA) after the Merger.
F. MA shall have received opinions, dated the date of the Closing,
from Sullivan & Worcester, counsel to VT, such opinions to cover the
matters set forth in Exhibit D hereto.
G. MA shall have received an opinion, dated the date of the Closing,
from Muldoon, Murphy & Faucette, counsel to MA, substantially to the effect
that, on the basis of facts and representations set forth in, or set forth
in writing elsewhere and referred to in, such opinion that are consistent
with the state of facts existing at the Effective Time, for federal income
tax purposes the Merger constitutes a tax-free transaction under the Code
in that no gain or loss will be recognized by stockholders of MA upon the
receipt, pursuant to this Agreement, of stock in VT in exchange for stock
of VT (it being understood that such opinion will not extend to cash
received by dissenters, if any, or paid in lieu of fractional shares) and
in respect of such other substantial federal income tax effects of the
Merger as such party may reasonably require. In rendering any such opinion,
such counsel may rely, to the extent they deem necessary or appropriate,
upon opinions of other counsel and upon representations of the managements
and affiliates of MA.
H. No suit, action or other proceeding involving any governmental
authority shall be pending in which such authority seeks to restrain or
prohibit the Merger.
I. MA shall have received the written opinion of M.A. Schapiro & Co.,
Inc., dated at or prior to the time of mailing the Proxy Statement to MA's
stockholders, to the effect that the Merger is fair to MA's stockholders
from a financial point of view.
ARTICLE VI
CLOSING
6. CLOSING.
6.1 TIME AND PLACE. Subject to the provisions of Articles V and VII
hereof, the Closing of the transactions contemplated hereby shall take place at
a location to be agreed upon by the parties, at 10:00 a.m., local time, on the
first business day after the date on which all of the conditions contained in
Article V, to the extent not waived, are satisfied; or at such other place, at
such other time, or on such other date as VT and MA may mutually agree upon for
the Closing to take place. The parties shall use their respective best efforts
to cause the Closing to occur within thirty (30) days after the receipt of all
Consents in respect of the Requisite Regulatory Approvals.
6.2 DELIVERIES AT CLOSING. Subject to the provisions of Articles V and VII
hereof, at the Closing there shall be delivered to VT and MA the opinions,
certificates and other documents and instruments required to be delivered under
Article V hereof.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7. TERMINATION, AMENDMENT AND WAVIER.
7.1 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 VT and MA stockholders:
A. By mutual written consent of VT and MA properly duly authorized by
their respective Boards of Directors.
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B. By VT or MA if the Effective Time shall not have occurred on or
prior to September 30, 1994, unless the failure of such occurrence shall be
due to the failure of the party seeking to terminate this Agreement to
perform or observe its agreements set forth herein required to be performed
or observed by such party at or before the Effective Time.
C. By VT or MA if this Agreement and the transactions contemplated
hereby are not approved by the legally required affirmative vote of the
stockholders of VT or MA at meetings held for such purpose or at any
adjournments thereof or if there has been a denial of any Requisite
Regulatory Approval required to consummate the Merger, unless such failure
to obtain stockholder approval or regulatory denial shall be due to the
failure of the party seeking to terminate this Agreement to perform or
observe its agreements set forth herein.
D. By VT, if there shall have been any material breach of any
obligation of MA hereunder and any such breach shall not have been remedied
within 30 days after receipt by MA of notice in writing from VT specifying
the nature of such breach and requesting that it be remedied.
E. By MA, if there shall have been any material breach of any
obligation of VT hereunder and such breach shall not have been remedied
within 30 days after receipt by VT of notice in writing from MA specifying
the nature of such breach and requesting that it be remedied.
F. By MA, by action of its Board of Directors after approval of the
Merger by the stockholders of MA, by giving written notice of such election
to VT, in the event that the "market value of the VT Common Stock during
the determination period" as defined in and calculated pursuant to Section
2.1 of the Plan of Merger (the "VT Market Price") is less than $14.875;
provided, however, that MA shall have no termination rights under this
Section 7.1(F) if the average of the Comparable Index Price (as defined
below) for the thirty (30) trading days immediately preceding the fifth
trading day prior to (but not including) the Effective Time represents a
decline from the Comparable Index Price as determined on the date on which
MA's stockholders shall have voted to approve the Plan of Merger (the "MA
Meeting Date") and such decline is equal to or greater than 90% of the
percentage decline between (i) the mid-point of the daily closing "inside"
bid and asked per-share price (in thousandths and in dollars) of the VT
Common Stock as reported on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") on the MA Meeting Date, and (ii)
$14.875. For purposes of this Section 7.1(F), the "Comparable Index Price"
shall mean on any date the average of the mid-point of the closing "inside"
bid and asked prices per share as reported on NASDAQ of the common stock of
the following issuers: Chittenden Corporation (NASDAQ symbol -- CNDN),
BankNorth Group, Inc. (NASDAQ symbol -- BKNG), NBT Bancorp, Inc. (NASDAQ
symbol -- NBTB), Bank of New Hampshire Corporation (NASDAQ symbol -- BNHC),
and Community Bank Systems, Inc. (NASDAQ symbol -- CBSI). If the common
stock of any one or more of the above-mentioned issuers should cease to be
traded on the over-the-counter market managed by the NASD and reported by
NASDAQ or listed on a national securities exchange during the Measuring
Period, then the Comparable Index Price shall be recalculated for all dates
applicable to this Section 7.1(F) to consist of the remaining issuers;
provided that the Comparable Index Price shall not consist of less than
three issuers. If the common stock of more than two of the above-mentioned
issuers should cease to be traded on the over-the-counter market managed by
the NASD and reported by NASDAQ or listed on a national securities exchange
during the Measuring Period, then MA and VT shall in good faith select a
mutually acceptable replacement issuer from among banks or bank holding
companies whose voting stock is publicly traded and reported by NASDAQ or
listed on a national securities exchange, which are located in the
Northeast, and whose most recent fiscal year-end total assets were not more
than $1.5 billion.
G. By VT or MA, as the case may be, as and to the extent provided in
Section 4.7 of this Agreement.
H. By VT if the following officers of MA or MA Bank shall not have
entered into employment agreements in form and substance satisfactory to
VT, such agreements to modify as of the Effective Time existing agreements
between such officers and MA and MA Bank and to survive the Merger: Francis
L. Lemay, Kenneth R. Cole, James A. Neill, Matthew W. Noska, and Robert W.
Phillips; provided,
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however, that VT's rights of termination under this Section 7.1(H) shall
expire automatically if not exercised by written notice to MA on or before
thirty (30) days from the date hereof.
7.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
by either VT or MA as provided above, this Agreement shall forthwith become void
(other than Sections 4.2(B) and 8.1 hereof, which shall remain in full force and
effect) and there shall be no further liability on the part of VT or MA or their
respective officers or directors to the other except for (a) the liability of VT
and MA under such Sections and (b) liability arising out of a breach of this
Agreement, and provided further that the Stock Option Agreement shall be
governed by its own terms as to termination. In the event any party shall
default in its obligations hereunder, any non-defaulting party may pursue any
remedy available at law or in equity to enforce its rights and shall be paid by
the defaulting party for all damages (except consequential damages), costs and
expenses, including legal, accounting, investment banking, printing and mailing
expenses, incurred or suffered by the non-defaulting party in connection
herewith or in the enforcement of its rights hereunder.
7.3 AMENDMENT, EXTENSION AND WAIVER. Subject to applicable law, at any
time prior to the consummation of the transactions contemplated by this
Agreement, whether before or after approval thereof by the stockholders of MA
and VT, MA and VT may
(a) amend this Agreement;
(b) extend the time for the performance of any of the obligations or
other acts of any other party hereto;
(c) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto; or
(d) waive compliance with any of the agreements or conditions
contained in Articles IV and V (other than Section 5.1) hereof;
provided, however, that after any approval of the transactions contemplated by
this Agreement by either the MA or VT stockholders, there may not be, without
further approval of such stockholders, any amendment, extension or waiver of
this Agreement which reduces the amount or changes the form of consideration to
be delivered to such stockholders hereunder other than as contemplated in this
Agreement. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto. Any agreement on the part of a
party hereto to any extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party, but such waiver or failure
to insist on strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
ARTICLE VIII
MISCELLANEOUS
8. MISCELLANEOUS.
8.1 EXPENSES. Except as provided in Section 7.2 hereof, all legal and
other costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such costs
and expenses, provided that the costs and expenses of printing and mailing the
Proxy Statement and VT Registration Statement shall be shared equally by VT and
MA.
8.2 SURVIVAL. The respective representations, warranties and covenants of
the parties to this Agreement shall not survive the Effective Time but shall
terminate as of the Effective Time, except for the covenants contained herein
which by their terms are applicable after the Effective Time, which covenants
shall survive the Effective Time.
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8.3 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 cable, telegram or
telex addressed as follows:
If to VT, to:
Vermont Financial Services Corp.
100 Main Street
Brattleboro, Vermont 05301
Attention: John D. Hashagen, Jr., President
With a copy to:
Sullivan & Worcester
One Post Office Square
Boston, Massachusetts 02109
Attention: Christopher Cabot, Esquire
If to MA, to:
West Mass Bankshares, Inc.
45 Federal Street
Greenfield, Massachusetts 01301
Attention: Francis L. Lemay, President
With a copy to:
Muldoon, Murphy & Faucette
5101 Wisconsin Avenue, N.W.
Washington, D.C. 20016
Attention: John J. Gorman, Esquire
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.
8.4 PARTIES IN INTEREST. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party hereto without
the prior written consent of the other parties, and that nothing in this
Agreement is intended to confer, expressly or by implication, upon any other
person any rights or remedies under or by reason of this Agreement.
8.5 COMPLETE AGREEMENT. This Agreement, including the documents and other
writings referred to herein or delivered pursuant hereto, contains the entire
agreement and understanding of the parties with respect to its subject matter.
Except as set forth in the Plan of Merger and the Stock Option Agreement and the
related MA Option, there are no restrictions, agreements, promises, warranties,
covenants or undertakings between the parties other than those expressly set
forth herein or therein. This Agreement supersedes all prior agreements
(including the previously executed confidentiality agreements) and the
understandings between the parties, both written and oral, with respect to its
subject matter.
8.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
8.7 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Delaware.
8.8 HEADINGS. The Article and Section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
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8.9 EFFECT OF INVESTIGATIONS. No investigation by the parties hereby made
heretofore or hereafter, whether pursuant to this Agreement or otherwise, shall
affect the representations and warranties of the parties which are contained
herein and each such representation and warranty shall survive such
investigation, subject, however, to Section 8.2 hereof.
8.10 SEVERABILITY. In the event that any one or more provisions of this
Agreement shall for any reason be held invalid, illegal or unenforceable in any
respect, by any court of competent jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement and the
parties shall use their best efforts to substitute a valid, legal and
enforceable provision which, insofar as practicable, implements the purposes and
intents of this Agreement.
8.11 SPECIFIC ENFORCEABILITY. The parties recognize and hereby acknowledge
that it is impossible to measure in money the damages that would result to a
party by reason of the failure of either of the parties to perform any of the
obligations imposed on it by this Agreement. Accordingly, if any party should
institute an action or proceeding seeking specific enforcement of the provisions
hereof, each party against which such action or proceeding is brought hereby
waives the claim or defense that the party instituting such action or proceeding
has an adequate remedy at law and hereby agrees not to assert in any such action
or proceeding the claim or defense that such a remedy at law exists.
IN WITNESS WHEREOF, VT and MA have caused this Agreement to be executed by
their duly authorized officers as of the day and year first above written.
VERMONT FINANCIAL SERVICES CORP.
/S/ JOHN D. HASHAGEN, JR.
By: ................................
Title: President and Chief
Executive Officer
WEST MASS BANKSHARES, INC.
/S/ FRANCIS L. LEMAY
By: ................................
Title: Chairman and Chief
Executive Officer
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EXHIBIT A
PLAN OF MERGER
PLAN OF MERGER, dated as of , 199 (the "Plan of Merger"), by and
between Vermont Financial Services Corp., a Delaware corporation ("VT") and West
Mass Bankshares, Inc., a Massachusetts corporation ("MA"). VT and MA are
hereinafter sometimes collectively referred to as the "Constituent
Corporations".
This Plan of Merger is being entered into pursuant to an Agreement and Plan
of Reorganization, dated as of August 24, 1993 (the "Reorganization Agreement"),
between VT and MA.
In consideration of the premises, and the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
1. THE MERGER.
1.1 SURVIVING CORPORATION. In accordance with the provisions of this Plan
of Merger, the General Corporation Law of the State of Delaware (the "Delaware
GCL") and the Massachusetts Business Corporation Law (the "Massachusetts BCL"),
at the Effective Time (as defined in Section 1.6 hereof), MA shall be merged
with and into VT (the "Merger") and the separate corporate existence of MA shall
cease. VT shall be the surviving corporation in the Merger (hereinafter
sometimes referred to as the "Surviving Corporation") and shall continue its
corporate existence under the laws of the State of Delaware. The name of the
Surviving Corporation shall be unchanged.
1.2 EFFECT OF THE MERGER. At the Effective Time, the Surviving Corporation
shall thereupon and thereafter possess all the rights, privileges, immunities,
powers and franchises, as well of a public as of a private nature, of the
Constituent Corporations and all of the debts, choses in action and other
interests due or belonging to the Constituent Corporations and shall be subject
to, and responsible for, all of the debts, liabilities and duties of the
Constituent Corporations, all as more fully set forth in Section 259(a) of the
Delaware GCL and Section 80 of the Massachusetts BCL.
1.3 ADDITIONAL ACTIONS. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of MA acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger or to otherwise
carry out this Plan of Merger, the officers and directors of the Surviving
Corporation shall and will be authorized to execute and deliver, in the name and
on behalf of the Constituent Corporations or otherwise, all such deeds, bills of
sale, assignments and assurances and to take and do, in the name and on behalf
of the Constituent Corporations or otherwise, all such other actions and things
as may be necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties or assets in the
Surviving Corporation or to otherwise carry out this Plan of Merger.
1.4 CERTIFICATE OF INCORPORATION AND BY-LAWS. The Certificate of
Incorporation and By-Laws of VT, as in effect at the Effective Time, shall be
the Certificate of Incorporation and By-Laws of the Surviving Corporation and
shall thereafter continue to be its Certificate of Incorporation and By-Laws
until amended as provided therein or by law.
1.5 EFFECTIVE TIME; CONDITIONS. If the Reorganization Agreement and this
Plan of Merger are duly adopted by the stockholders of each of the Constituent
Corporations, the other conditions precedent set forth in the Reorganization
Agreement have been satisfied or waived (where permitted), and this Plan of
Merger is not terminated under Section 4.1 hereof, a Certificate of Merger with
respect to the Merger shall be filed and recorded under the Delaware GCL (the
"Delaware Certificate") and Articles of Merger with respect to the
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Merger shall be filed with the Secretary of State of the Commonwealth of
Massachusetts. The Merger shall become effective at the time and date which is
the later of (i) the issuance by the Secretary of State of the Commonwealth of
Massachusetts of a certificate of merger with respect to the Merger, and (ii)
the issuance by the Secretary of State of the State of Delaware of a certificate
of merger with respect to the Merger (such time and date is herein referred to
as the "Effective Time").
ARTICLE II
2. CONVERSION OF SHARES.
2.1 MANNER OF CONVERTING SHARES. The manner of converting shares of
capital stock of MA into shares of capital stock of VT upon the Effective Time
shall be as follows: Except as provided in this Plan of Merger, each share of
the Common Stock of MA, $0.10 par value, (the "MA Common Stock"), which is
issued and outstanding immediately prior to the Effective Time, and all rights
in respect thereof, shall, upon the Effective Time, automatically and without
any action on the part of the holder thereof, become and be converted (subject
to the provisions hereof regarding fractional shares) into that number of shares
of the common stock of VT, $1.00 par value, (the "VT Common Stock"), as shall
equal the quotient (rounded to the nearest thousandth) (the "Exchange Ratio") of
$17.75 divided by the market value of VT Common Stock during the determination
period expressed in dollars; provided, however, that in no event shall the
Exchange Ratio be less than 0.8875 nor more than 0.9861 (except as a consequence
of adjustments made pursuant to Section 2.5 hereof). For the purposes of this
Agreement, the term "market value of VT Common Stock during the determination
period" shall mean the average of the mid-point of the daily "inside" closing
bid and asked per-share prices (in thousandths) of VT Common Stock as reported
by the National Association of Securities Dealers' Automatic Quotation System
("NASDAQ") for the 30 trading days immediately preceding the fifth trading day
prior to (but not including) the Effective Time. The parties agree that for
purposes hereof the Bloomberg "Composite/Close/Price" Table may be used, if
available, for determination of the market value of VT Common Stock during the
determination period, and, if unavailable, the parties shall obtain the
requisite information from NASDAQ. No fractional shares of VT Common Stock will
be issued, but in lieu thereof, there shall be a cash payment as provided in
Section 2.6 hereof. Until surrendered as provided in Section 2.2, certificates
representing MA Common Stock shall be deemed for all corporate purposes,
including voting and payment of dividends, to evidence ownership of the number
of full shares of VT Common Stock to be delivered in exchange therefor as
provided above. Shares of MA Common Stock held in MA's treasury (and
certificates representing the same), if any, shall be cancelled, and no shares
of VT Common Stock shall be issued therefor.
2.2 EXCHANGE OF SHARES. As soon as practicable after the Effective Time, a
bank to be selected by VT and reasonably satisfactory to MA (it being agreed
that a bank subsidiary of VT shall be satisfactory to MA), acting as exchange
agent (the "Exchange Agent") shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of MA Common Stock (the "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 after the Effective Time, Certificates representing such shares are
presented for transfer to the Exchange Agent, they shall be cancelled and
exchanged for certificates representing shares of VT Common Stock as provided in
this Article II.
2.3 SHARES OF DISSENTING HOLDERS. No conversion under Section 2.1 hereof
shall be made with respect to the shares of MA Common Stock held by a Dissenting
Holder (as such term is defined below); provided, however, that each share of MA
Common Stock outstanding immediately prior to the Effective Time and held by a
Dissenting Holder who shall, after the Effective Time, withdraw his demand for
appraisal or lose his right of appraisal, in either case pursuant to the
applicable provisions of the Massachusetts BCL, shall be deemed to be converted,
as of the Effective Time, into shares of VT Common Stock as specified in Section
2.1 hereof. The term "Dissenting Holder" shall mean a holder of MA Common Stock
who has demanded appraisal rights in compliance with the applicable provisions
of the Massachusetts BCL concerning the right of such holder to dissent from the
Merger and demand appraisal of such holder's shares of MA Common Stock.
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2.4 DISSENTER'S RIGHTS. Any Dissenting Holder (i) who files with MA an
objection to the Merger in writing before the approval of this Plan of Merger by
the shareholders of MA and who states in such objection that he intends to
demand payment for his shares if the Merger is concluded, and (ii) whose shares
are not voted in favor of the Merger shall be entitled to demand payment for his
shares of MA Common Stock and an appraisal of the value thereof, in accordance
with the provisions of Sections 86 through 98 of the Massachusetts BCL.
2.5 ANTI-DILUTION. In the event that, subsequent to the date of this Plan
of Merger but prior to the Effective Time, the outstanding shares of VT Common
Stock or MA Common Stock shall have been increased, decreased, changed into or
exchanged for a different number or kind of shares or securities through
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split, or other like changes in VT's or MA's capitalization, other
than pursuant to the Agreement, as the case may be (a "Recapitalization"), then
an appropriate and proportionate adjustment shall be made to the Exchange Ratio
so that each holder of MA Common Stock shall receive under Section 2.1 hereof
the number of shares of VT Common Stock (except for fractional shares) that such
holder would have held immediately following the Recapitalization if the Merger
had occurred immediately prior to the Recapitalization or the record date
therefor, as applicable.
2.6 FRACTIONAL SHARES. In lieu of the issuance of fractional shares of VT
Common Stock pursuant to Section 2.1 of this Plan of Merger, cash adjustments,
without interest, will be paid to the holders of MA Common Stock in respect of
any fractional share interest that would otherwise be issuable and the amount of
such cash adjustment shall be equal to an amount in cash determined by
multiplying such holder's fractional interest by the "market value of VT Common
Stock during the determination period" as defined in Section 2.1 above. For
purposes of determining whether, and in what amounts, a particular holder of MA
Common Stock would be entitled to receive cash adjustments under this Section
2.6, shares of record held by such holder and represented by two or more
certificates shall be aggregated.
ARTICLE III
3. EMPLOYEE STOCK PLANS; STOCK OPTIONS.
3.1 EMPLOYEE STOCK PLANS. From and after the Effective Time, all of the
duties and obligations of MA pursuant to MA's Stock Option Plan and Employees
Stock Ownership Plan (collectively, the "MA Stock Plans") with respect to
unexercised options and restricted stock outstanding at the Effective Time shall
be assumed by the Surviving Corporation and no further grants of options or
awards of restricted stock shall be made pursuant to the MA Stock Plans. Each
option granted under the MA Option Plans that remains unexercised immediately
prior to the Effective Time shall thereafter represent the right to acquire, on
the same terms and conditions as such option (except that all references to MA
shall be deemed to refer to VT), at and after the Effective Time, a number of
shares of VT Common Stock issuable upon exercise of such option equal to the
number of shares of MA Common Stock issuable upon exercise of the option
immediately prior to the Effective Time; and the option exercise price per share
of VT Common Stock at which such option is exercisable shall be the option
exercise price per share of MA Common Stock at which such option is exercisable
immediately prior to the Effective Time.
ARTICLE IV
4. AMENDMENT AND TERMINATION.
4.1 TERMINATION. Notwithstanding the approval and adoption of this Plan of
Merger by the stockholders of MA, this Plan of Merger shall terminate forthwith
in the event that the Reorganization Agreement shall be terminated as therein
provided. In the event of the termination of this Plan of Merger as provided
above, this Plan of Merger shall forthwith become void and there shall be no
liability on the part of any of the parties hereto except as otherwise provided
in the Reorganization Agreement.
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4.2 AMENDMENT. This Plan of Merger shall not be amended except by an
instrument in writing signed on behalf of each of the parties hereto pursuant to
an amendment to the Reorganization Agreement approved in the manner therein
provided. If any such amendment to the Reorganization Agreement is so approved,
any amendment to this Plan of Merger required by such amendment to the
Reorganization Agreement shall be effected by the parties hereto by action taken
by their respective Boards of Directors or Executive Committees.
ARTICLE V
5. MISCELLANEOUS.
5.1 COUNTERPARTS. This Plan of Merger shall be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to each of the other parties.
5.2 GOVERNING LAW. This Plan of Merger shall be governed by and construed
in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
Attest VERMONT FINANCIAL SERVICES CORP.
- --------------------
By: ------------------------------
Title:
Attest WEST MASS BANKSHARES, INC.
- -------------------- By: ------------------------------
Title:
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EXHIBIT B
August 24, 1993
Vermont Financial Services Corp.
100 Main Street
Brattleboro, Vermont 05301
Gentlemen:
I have been advised that I may be deemed to be an "affiliate" of West Mass
Bankshares, Inc. ("MA"), as that term is defined for purposes of paragraphs (c)
and (d) of Rule 145 ("Rule 145") of the Rules and Regulations of the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act").
Pursuant to the terms and conditions of the Agreement and Plan of
Reorganization, dated as of today (the "Agreement"), by and between MA and
Vermont Financial Services Corp., a Delaware corporation ("VT"), MA shall be
merged with and into VT (the "Merger") and each of the shares of common stock,
par value $0.10 per share, of MA ("MA Common Stock"), owned by me as of the
Effective Time (as defined in the Agreement) may be converted into and
exchangeable for shares of common stock, par value $1.00 per share, of VT (the
"VT Common Stock").
A. In connection therewith, I represent and warrant to VT and agree that:
1. I shall not make any sale, transfer or other disposition of the
shares of VT Common Stock I receive pursuant to the Merger (the "Shares")
in violation of the Securities Act or the rules and regulations of the
Commission promulgated thereunder.
2. I have been advised that the issuance of the Shares to me pursuant
to the Merger has been registered with the Commission under the Securities
Act. However, I have also been advised that, because at the time the
Agreement was submitted to the shareholders of MA, I may be deemed to have
been an "affiliate" of MA and that, because any distribution by me of the
Shares I receive as aforesaid has not been registered under the Securities
Act, I may not sell, transfer or otherwise dispose of such Shares unless
(i) the distribution of such Shares has been registered under the
Securities Act, (ii) a sale of such Shares is made in conformity with the
provisions of Rule 145, or (iii) in the opinion of counsel acceptable to
VT, some other exemption from registration requirements is available with
respect to any such proposed distribution, sale, transfer or other
disposition of such shares.
B. I understand and agree that:
1. I will not sell, transfer or otherwise dispose of any shares of MA
Common Stock or shares of common stock, par value $1.00 per share, of VT
within the 30-day period immediately preceding the Effective Time (as
defined in the Agreement) of the Merger.
2. I will not sell, transfer or otherwise dispose of any of the
Shares, or reduce any interest in or my risk relating to such Shares, until
after such time as financial results covering at least 30 days of post-
Merger operations of VT have been published by VT in the form of a
quarterly earnings report, an effective registration statement filed with
the Commission, a report to the Commission on Forms 10-K, 10-Q or 8-K, or
any other public issuance which includes such combined results of
operations.
3. VT is under no obligation to register the sale, transfer or other
disposition of the Shares to be received by me in the Merger or to take any
other action necessary for the purpose of making an exemption from the
registration requirements available.
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4. Stop transfer instructions will be issued with respect to the
Shares I will receive as aforesaid, and there will be placed on the
certificates representing such Shares, or any certificates delivered in
substitution therefor, a legend stating in substance:
"The shares represented by this certificate were issued in a
transaction to which Rule 145 under the Securities Act of 1933 applies.
The shares represented by this certificate may only be transferred in
accordance with the terms of a letter agreement dated , 1993
between the registered holder and VT, a copy of which agreement is on
file at the principal offices of Vermont Financial Services Corp."
5. Unless the transfer by me of the Shares is a sale made in
conformity with the provisions of Rule 145(d) or made pursuant to a
registration statement under the Securities Act, VT reserves the right to
put the following legend on the certificates issued to my transferee:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 and were acquired from a
person who received such shares in a transaction to which Rule 145 under
the Securities Act of 1933 applies. The shares have not been acquired by
the holder with a view to, or for resale in connection with, any
distribution thereof within the meaning of the Securities Act of 1933
and may not be sold, pledged or otherwise transferred except in
accordance with an exemption from the registration requirements of the
Securities Act of 1933."
It is understood and agreed that the legends set forth in paragraphs 4 and
5 above shall be removed by delivery of substitute certificates without such
legend if I shall have delivered to VT a copy of a letter from the staff of the
Commission, or an opinion of counsel in form and substance satisfactory to VT,
to the effect that such legend is not required for the purpose of the Securities
Act.
I have carefully read this letter and the Agreement and have discussed its
requirements of each and other applicable limitations upon my ability to sell,
transfer or otherwise dispose of the Shares to the extent I felt necessary with
my counsel or counsel for MA.
Very truly yours,
------------------------------------
Print Name
------------------------------------
Signature
Accepted this day of
, 1993
VERMONT FINANCIAL SERVICES CORP.
By: -----------------------------
Title:
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EXHIBIT C
The opinions required to be delivered to VT pursuant to Section 5.2(F) of
the Agreement, to the effect specified below, may include qualifications as may
be reasonably acceptable by VT.
A. MA is a corporation organized, existing and in good standing under
the laws of the Commonwealth of Massachusetts.
B. MA Bank is duly organized, validly existing and in good standing as
a savings bank under the laws of the Commonwealth of Massachusetts. The
deposit accounts of MA Bank are insured by the Federal Deposit Insurance
Corporation up to the maximum allowable limit, and, to the knowledge of
such counsel, there are no pending or threatened proceedings for the
termination of such insurance.
C. MA has the corporate power and authority to carry on its business
as described in MA's Annual Report on Form 10-K for the year ended December
31, 1992 and to own and operate its properties in connection therewith.
D. The authorized capital stock of MA consists of 12,500,000 shares of
common stock, par value $0.10 per share ("MA Common Stock"), and 7,500,000
shares of serial preferred stock, par value $0.10 per share ("MA Preferred
Stock"), of which (as of 1993) shares of MA Common
Stock are validly issued, fully paid and nonassessable, and of which
shares of MA Common Stock are held in MA's treasury, and of which
no shares of MA Preferred Stock are issued.
E. MA has the corporate power and corporate authority to enter into
the Agreement and the Plan of Merger and to consummate the transactions
provided for therein and the execution and delivery of the Agreement and
the Plan of Merger by MA, and the consummation by MA of the transactions
provided for therein, have been duly authorized by requisite corporate
action on the part of MA. The Agreement and the Plan of Merger have been
executed and delivered by MA, and (assuming the valid execution and
delivery of the Agreement and the Plan of Merger by VT) are valid and
binding obligations of MA, enforceable against MA in accordance with their
terms.
F. No consent or approval of, or other action by, or notice to or
filing with any court or administrative or governmental body which has not
been obtained, taken or made is required for MA to execute and deliver the
Agreement and the Plan of Merger and to consummate the Merger as
contemplated therein.
G. The execution, delivery and performance of the Agreement and the
Plan of Merger by MA will not result in or constitute a violation of or a
default under (i) the Articles of Organization, and amendments thereto, or
By-Laws of MA, or (ii) any agreement, instrument, order, judgment or decree
to which MA is subject and which has been specifically identified to you by
MA as one of such documents which is material to the business or financial
condition of MA and its subsidiaries taken as a whole.
H. To the best of such counsel's knowledge, there are no material
legal or governmental actions or proceedings pending or threatened to which
MA is a party that would adversely affect the ability of MA to perform its
obligations under the Agreement or the Plan of Merger.
I. The joint proxy statement and the registration statement filed
pursuant to Section 4.4 of the Agreement comply as to form in all material
respects with the requirements of the Exchange Act and the Securities Act,
respectively (except as to any financial statements and other financial and
statistical data included or incorporated by reference therein and the
information included or incorporated by reference therein which relates to
VT and its subsidiaries, as to which such counsel expresses no opinion).
In addition, such counsel shall state that it has participated in
conferences with officers and other representatives of MA and representatives of
VT, at which the contents of the joint proxy statement and the registration
statement referred to above and related matters were discussed and, although
such counsel is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the joint
proxy statement or the registration statement or for any verification thereof,
on the basis of the foregoing, no facts have come to such counsel's attention
that leads it to believe that the
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registration statement, as of the time it became effective, or the joint proxy
statement, as of the date of the special meeting of stockholders of MA to which
it relates, contained an untrue statement of a material fact or omitted to state
a material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading, except that
such counsel expresses no view with respect to the financial statements,
schedules and other financial and statistical data included in the registration
statement or the joint proxy statement.
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EXHIBIT D
The opinions required to be delivered to MA pursuant to Section 5.3(F) of
the Agreement, to the effect specified below, may include qualifications as may
be reasonably acceptable to MA.
A. VT is a corporation organized, existing and in good standing under
the laws of the State of Delaware.
B. VT Bank is duly organized, validly existing and in good standing as
a national banking association under the laws of the United States. The
deposit accounts of VT Bank are insured by the Federal Deposit Insurance
Corporation up to the maximum allowable limit, and, to the knowledge of
such counsel, there are no pending or threatened proceedings for the
termination of such insurance.
C. VT has the corporate power and authority to carry on its business
as described in VT's Annual Report on Form 10-K for the year ended December
31, 1992 and to own and operate its properties in connection therewith.
D. The authorized capital stock of VT consists of 20,000,000 shares of
common stock, par value $1.00 per share ("VT Common Stock"), and 5,000,000
shares of preferred stock, par value $1.00 per share ("VT Preferred
Stock"), of which (as of , 1993) shares of VT Common
Stock are validly issued, fully paid and nonassessable, and of which
shares of VT Common Stock are held in VT's treasury, and of which
no shares of VT Preferred Stock are issued.
E. VT has the corporate power and corporate authority to enter into
the Agreement and the Plan of Merger and to consummate the transactions
provided for therein and the execution and delivery of the Agreement and
the Plan of Merger by VT, and the consummation by VT of the transactions
provided for therein, have been duly authorized by requisite corporate
action on the part of VT. The Agreement and the Plan of Merger have been
executed and delivered by MA, and (assuming the valid execution and
delivery of the Agreement and the Plan of Merger by MA) are valid and
binding obligations of VT, enforceable against MA in accordance with their
terms.
F. No consent or approval of, or other action by, or notice to or
filing with any court or administrative or governmental body which has not
been obtained, taken or made is required for VT to execute and deliver the
Agreement and the Plan of Merger and to consummate the Merger as
contemplated therein.
G. The execution, delivery and performance of the Agreement and the
Plan of Merger by VT will not result in or constitute a violation of or a
default under (i) the Certificate of Incorporation, and amendments thereto,
or By-Laws of VT, or (ii) any agreement, instrument, order, judgment or
decree to which VT is subject and which has been specifically identified to
you by VT as one of such documents which is material to the business or
financial condition of VT and its subsidiaries taken as a whole.
H. To the best of such counsel's knowledge, there are no material
legal or governmental actions or proceedings pending or threatened to which
VT is a party that would adversely affect the ability of VT to perform its
obligations under the Agreement or the Plan of Merger.
I. The joint proxy statement and the registration statement filed
pursuant to Section 4.4 of the Agreement comply as to form in all material
respects with the requirements of the Exchange Act and the Securities Act,
respectively (except as to any financial statements and other financial and
statistical data included or incorporated by reference therein and the
information included or incorporated by reference therein which relates to
MA and its subsidiaries, as to which such counsel expresses no opinion).
In addition, such counsel shall state that it has participated in
conferences with officers and other representatives of VT and representatives of
MA, at which the contents of the joint proxy statement and the registration
statement referred to above and related matters were discussed and, although
such counsel is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the joint
proxy statement or the registration statement or for any verification thereof,
on the basis of the foregoing, no facts have come to such counsel's attention
that leads it to believe that the
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registration statement, as of the time it became effective, or the joint proxy
statement, as of the date of the special meeting of stockholders of VT to which
it relates, contained an untrue statement of a material fact or omitted to state
a material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading, except that
such counsel expresses no view with respect to the financial statements,
schedules and other financial and statistical data included in the registration
statement or the joint proxy statement.
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FIRST AMENDMENT
TO
AGREEMENT AND PLAN OF REORGANIZATION
This FIRST AMENDMENT to that certain Agreement and Plan of Reorganization
by and between VERMONT FINANCIAL SERVICES CORP. and WEST MASS BANKSHARES, INC.
dated as of August 24, 1993 (the "Agreement") is made as of this 21st day of
September, 1993. Unless otherwise defined herein, terms defined in the Agreement
shall have the same meanings when used in this First Amendment.
WHEREAS, Section 7.1(H) of the Agreement provides that VT may terminate the
Agreement if certain officers of MA and MA Bank have not entered into employment
agreements satisfactory to VT within a certain number of days after August 24,
1993; and
WHEREAS, VT and MA wish to extend the date on which VT may exercise the
above-referenced termination provision so as to provide additional time for the
finalization of the terms of such above-referenced agreements.
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, VT and MA hereby agree that Section 7.1(H) of the Agreement is
hereby amended and restated in its entirety to read as follows:
"H. By VT if the following officers of MA or MA Bank shall not have
entered into employment agreements in form and substance satisfactory
to VT, such agreements to modify as of the Effective Time existing
agreements between such officers and MA and MA Bank and to survive the
Merger: Francis L. Lemay, Kenneth R. Cole, James A. Neill, Matthew W.
Noska, and Robert W. Phillips; provided, however, that VT's rights of
termination under this Section 7.1(H) shall expire automatically if
not exercised by written notice to MA on or before 5:00 p.m. (Eastern
time) on Friday, October 8, 1993."
All other provisions of the Agreement remain unchanged.
IN WITNESS WHEREOF, MA and VT have caused this First Amendment to be
executed as of the day and date first above written.
VERMONT FINANCIAL SERVICES CORP.
/S/ RICHARD O. MADDEN
By: ................................
Title: EVP/Treasurer/Secretary
WEST MASS BANKSHARES, INC.
/S/ FRANCIS L. LEMAY
By: ................................
Title: President
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SECOND AMENDMENT
TO
AGREEMENT AND PLAN OF REORGANIZATION
This SECOND AMENDMENT to that certain Agreement and Plan of Reorganization
by and between VERMONT FINANCIAL SERVICES CORP. and WEST MASS BANKSHARES, INC.
dated as of August 24, 1993 as amended by a First Amendment dated as of
September 21, 1993 (as so amended, the "Agreement") is made as of this 7th day
of October, 1993. Unless otherwise defined herein, terms defined in the
Agreement shall have the same meanings when used in this Second Amendment.
WHEREAS, Section 7.1(H) of the Agreement provides that VT may terminate the
Agreement if certain officers of MA and MA Bank have not entered into employment
agreements satisfactory to VT within a certain number of days after August 24,
1993; and
WHEREAS, VT and MA wish to extend the date on which VT may exercise the
above-referenced termination provision so as to provide additional time for the
finalization of the terms of such above-referenced agreements.
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, VT and MA hereby agree that Section 7.1(H) of the Agreement is
hereby amended and restated in its entirety to read as follows:
"H. By VT if the following officers of MA or MA Bank shall not have
entered into employment agreements in form and substance satisfactory
to VT, such agreements to modify as of the Effective Time existing
agreements between such officers and MA and MA Bank and to survive the
Merger: Francis L. Lemay, Kenneth R. Cole, James A. Neill, Matthew W.
Noska, and Robert W. Phillips; provided, however, that VT's rights of
termination under this Section 7.1(H) shall expire automatically if
not exercised by written notice to MA on or before 5:00 p.m. (Eastern
time) on Monday, October 18, 1993."
All other provisions of the Agreement remain unchanged.
IN WITNESS WHEREOF, MA and VT have caused this Second Amendment to be
executed as of the day and date first above written.
VERMONT FINANCIAL SERVICES CORP. WEST MASS BANKSHARES, INC.
/S/ JOHN D. HASHAGEN, JR. /S/ FRANCIS L. LEMAY
By: .......................... By: .......................
Title: President Title: Chairman
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<PAGE> 124
VERMONT FINANCIAL SERVICES CORP.
100 MAIN STREET
BRATTLEBORO, VERMONT 05301
February 3, 1994
West Mass Bankshares, Inc.
45 Federal Street
Greenfield, Massachusetts 01301
Attn: Francis L. Lemay, President
Re: Agreement and Plan of Reorganization by and between West Mass
Bankshares, Inc. and Vermont Financial Services Corp.
Gentlemen:
Reference is hereby made to an Agreement and Plan of Reorganization by and
between Vermont Financial Services Corp. and West Mass Bankshares, Inc. dated
August 24, 1993, as amended by amendments dated September 21, 1993 and October
7, 1993 and a related Plan of Merger (together, the "Merger Agreement"). This is
to confirm that all references in the Merger Agreement to the counsel to West
Mass Bankshares, Inc. shall be deleted and replaced with Luse, Lehman, Gorman,
Pomerenk & Schick, the address of which is:
1300 I Street, N.W.
Washington, DC 20005
Attn: John J. Gorman, Esquire
Except as expressly modified hereby, the Merger Agreement shall remain in
full force and effect.
If you are in agreement with the foregoing, please sign and return the
enclosed copy of this letter.
VERMONT FINANCIAL SERVICES CORP.
/S/ JOHN D. HASHAGEN, JR.
By:
Name: John D. Hashagen, Jr.
Title: President
Consented and agreed to as of the
date first above indicated:
WEST MASS BANKSHARES, INC.
/S/ FRANCIS L. LEMAY
By:
Name: Francis L. Lemay
Title: President
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<PAGE> 125
APPENDIX B
M.A. SCHAPIRO & CO., INC.
[LETTERHEAD]
DRAFT
,1993
Board of Directors
West Mass Bankshares, Inc.
45 Federal Street
Greenfield, MA 01301
Dear Sirs:
You have asked us to advise you with respect to the fairness to the
stockholders of West Mass Bankshares, Inc. (the "Company"), from a financial
point of view, of the consideration to be paid by Vermont Financial Services,
Corp. ("VFSC") pursuant to the terms of an Agreement and Plan of Reorganization,
dated August 24, 1993, (the "Agreement") and Plan of Merger, dated August 24,
1993 (the "Plan"), each between the Company and VFSC. It is our understanding
that pursuant to the Agreement and the Plan, the Company will be merged with and
into VFSC with VFSC continuing as the surviving corporation (the "Merger"). Each
outstanding share of common stock, par value $0.10 per share, of the Company
("Common Stock") will be converted into the right to receive that number of
shares of VFSC's common stock, par value $1.00 per share, equal to the quotient
of $17.75 dividend by the market value of VFSC's common stock during the
determination period defined in the Plan (the "Exchange Ratio"), provided that
the Exchange Ratio will be no less than 0.8875 nor more than 0.9861 as set forth
in the Agreement and the Plan. The terms and conditions of the Merger are more
fully set forth in the Agreement.
In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to the Company and VFSC. We have
also reviewed certain other information, including financial forecasts, provided
to us by the Company and VFSC and have met with the management and
representatives of VFSC to discuss the business and prospects of VFSC.
We have also considered certain financial and stock market data of the
Company and VFSC and we have compared that data with similar data for other
publicly held companies in businesses similar to that of the Company and VFSC,
and we have considered the financial terms of certain other business
combinations which have recently been effected. We have discussed with the
management and representatives of VFSC their estimates of the prospects and
plans for continued reduction in non-performing assets of VFSC. We also
considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which we deemed
relevant.
In connection with our review, we have not independently verified any of
the foregoing information and have relied on it being complete and accurate in
all material respects.
With respect to the financial forecasts, we have assumed (and have not
independently verified) that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of VFSC's
management and representatives as to the future financial performance of VFSC.
In addition, we have not made an independent evaluation or appraisal of the
assets and liabilities of the Company or VFSC, nor have we been furnished with
any such evaluations or appraisals. We were not authorized to solicit, nor did
we solicit third party indications of interest with respect to the acquisition
of all or part of the Company. Our opinion herein is based upon circumstances
existing and disclosed to us as of the date hereof.
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<PAGE> 126
M.A. Schapiro & Co., Inc., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We have
acted as financial advisor to the Board of Directors of the Company in
connection with the Merger and will receive a fee for our services. In the past,
we have provided financial advisory services for the Company.
It is understood that this letter is for the information of the Board of
Directors only and is not to be quoted or referred to, in whole or in part, in
any registration statement, prospectus, or proxy statement, or in any other
written document used in connection with the offering or sale of securities nor
shall this letter be used for any other purposes, without M.A. Schapiro's prior
written consent; provided however that this letter may be quoted in, referred to
and filed as an exhibit to the joint Prospectus/Proxy Statement to be used in
connection with the approval of the Agreement by the stockholders of the Company
and VFSC. The opinion expressed herein is not intended to confer rights or
remedies upon the Company, any stockholder of the Company, or any other person.
Based upon the foregoing and subject to the various assumptions and
limitations set forth herein, it is our opinion that, as of the date hereof, the
Exchange Ratio is fair from a financial point of view to the Company and its
stockholders.
Very truly yours,
M.A. SCHAPIRO & CO., INC.
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<PAGE> 127
APPENDIX C
MCCONNELL BUDD & DOWNES, INC.
[LETTERHEAD]
, 1993
DRAFT
The Board of Directors
Vermont Financial Services Corp.
100 Main Street
Brattleboro, Vermont 05301
Dear Members of the Board:
You have requested our opinion as to the fairness from a financial point of
view to the holders of common stock, $1.00 par value, of Vermont Financial
Services Corp. ("VFSC") of the Exchange Ratio, (within the maximum and minimum
limits defined hereinbelow) by which the consideration to be paid to the holders
of the common stock, $0.10 par value, of West Mass Bankshares, Inc. ("WMBS") is
to be determined, in accordance with the terms of the Agreement and Plan of
Reorganization dated as of August 24, 1993, as amended, and the related Plan of
Merger between VFSC and WMBS (together, the "Merger Agreement"), which agreement
provides for WMBS to be merged with and into VFSC, with VFSC to be the surviving
corporation (the "Merger"). Under the terms of the Merger Agreement, each
outstanding share of WMBS common stock, other than shares already held by VFSC,
shares held by WMBS as treasury stock and shares of WMBS as to which dissenters'
rights have been perfected, will be converted into that number of shares of VFSC
common stock as shall equal the quotient (rounded to the nearest thousandth)
(the "Exchange Ratio") of $17.75 divided by the per share market value of VFSC
common stock during the determination period (the "Market Value of VFSC Common
Stock") but in no event shall the Exchange Ratio be less than 0.8875 nor more
than 0.9861. For purposes of the Merger Agreement, the Market Value of VFSC
Common Stock means the average of the mid-point of the daily interdealer or
"inside" closing bid and asked per share prices (in thousandths) of VFSC Common
Stock as reported by NASDAQ-NMS for the 30 trading days immediately preceding
the fifth trading day prior to (but not including) the Effective Time of the
Merger. The terms of the transaction are set forth in detail in the Joint Proxy
Statement and Prospectus and we refer the reader to this document to ensure a
more complete understanding of the proposed transaction. Terms not otherwise
defined in this letter shall have the same meanings given them in the Merger
Agreement.
McConnell, Budd & Downes, Inc., as part of its investment banking business
is continually engaged in the valuation of Bank Holding Companies, Banks, Thrift
Holding Companies and Thrifts and their securities in connection with mergers
and acquisitions, negotiated underwritings, competitive biddings, market making
as a NASD market maker, secondary distributions of listed securities, private
placements and valuations for corporate and other purposes. We are familiar with
VFSC having acted as financial advisor to VFSC since April 1, 1992 on a
contractual basis, including in the negotiations leading up to the transaction
with WMBS. In the course of our acting as financial advisor to VFSC in
conjunction with this transaction we have received fees for our services and
will receive additional fees contingent on certain occurrences. We will receive
a fee for rendering this opinion. In the ordinary course of our business, we
actively trade the equity securities of VFSC and trade the equity securities of
WMBS, for our own account, for the accounts of our customers and for the
accounts of individual employees of MB&D. Accordingly we may from time to time
hold a long or short position in the equity securities of either or both VFSC
and WMBS. McConnell, Budd & Downes, Inc. also covers VFSC and WMBS in certain of
its equity research products.
In arriving at our opinion, we have reviewed publicly available business
and financial information relating to WMBS and its subsidiary, United Savings
Bank, and publicly available business and financial information relating to VFSC
and its subsidiary Vermont National Bank. We have also reviewed the Merger
Agreement and the related Stock Option Agreement as well as the Registration
Statement on Form S-4 of VFSC which includes the Joint Proxy Statement and
Prospectus relating to the special meetings of stockholders of VFSC
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and WMBS. The special meetings are to be held in connection with the Merger and
in the referenced Joint Proxy Statement and Prospectus, a copy of this letter is
discussed and appears as an appendix. We have also reviewed certain other
information including internal reports and documents of VFSC as well as both of
WMBS and United Savings Bank and other internal, management-prepared financial
information provided to us by both WMBS and VFSC. We have also met with and had
discussions with members of the senior management of each of VFSC and WMBS and
their respective banking subsidiaries regarding their respective past and
current business operations, financial condition, future prospects and
projections for future periods. We have also held discussions with the
respective independent auditors of VFSC and of WMBS regarding the financial and
accounting affairs of the two companies. In addition we have reviewed with the
senior management of VFSC the results of their conversations and discussions
with the senior members of management of WMBS concerning the past and present
business operations, financial condition and future prospects of both WMBS and
United Savings Bank. In addition to the foregoing, we have reviewed the annual
reports to stockholders and annual reports on form 10-K of each of WMBS and VFSC
for the years ended December 31, 1990, 1991 and 1992. In addition we have
reviewed certain interim reports to stockholders for the periods ended March 31,
1993, June 30, 1993 and September 30, 1993 as well as the quarterly reports on
form 10-Q of each company for the same periods. We have studied the historical
stock prices and trading volumes of the common stocks of both VFSC and WMBS. We
have reviewed and studied the publicly available financial data and stock market
performance of a number of publicly traded bank holding companies and thrifts
which we believe are respectively comparable to VFSC and WMBS. In addition we
have reviewed the terms and conditions of recent acquisitions of publicly traded
thrifts which we deem to be comparable to the acquisition of WMBS by VFSC. We
have also conducted such other studies, analyses and investigations as we deemed
appropriate under the circumstances surrounding this transaction.
In the course of our review and analysis we considered, among other things,
such topics as relative capitalization, capital adequacy, relative asset
quality, loan loss reserve adequacy, the composition of the loan portfolio, the
respective asset and liability compositions of the parties to the transaction
and the relations of each parent entity to its respective primary regulator and
of each subsidiary bank to its primary regulator. In the process of our review
and analysis, we have relied upon and assumed, without independent verification,
the accuracy and completeness of the financial and other information provided to
us by the management of both VFSC and WMBS. In reaching our opinion, we have not
performed or obtained from any other source, any independent appraisals of the
assets of VFSC or of WMBS. We have also relied on the management of each of VFSC
and WMBS and their respective subsidiary banks as to the reasonableness of the
financial and operating forecasts and of the assumptions on which they are
based, which were provided to us.
In the course of rendering this opinion, which is being rendered prior to
receipt of all required regulatory approvals necessary for the consummation of
the transaction, we are assuming that no conditions will be imposed by any
regulatory agency in connection with its approval of the transaction that will
have a material adverse effect on the results of operations or the financial
condition or the prospects of VFSC. Finally we have assumed, with your consent,
that the Merger will be recorded as a pooling of interests under generally
accepted accounting principles.
Based upon and subject to the foregoing, it is our opinion that, as of the
date of this letter, the Exchange Ratio, (including the maximum and minimum
ratios permitted) provided for in the Merger Agreement is fair to the holders of
VFSC common stock, $1.00 par value, from a financial point of view.
Sincerely yours,
McConnell, Budd & Downes, Inc.
By:
David A. Budd
Managing Director
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APPENDIX D
MASSACHUSETTS CORPORATION LAW CHAPTER 156B, SECTIONS 85-98
Section 85 Dissenting stockholder; right to demand payment for stock; exception
A stockholder in any corporation organized under the laws of Massachusetts
which shall have duly voted to consolidate or merge with another corporation or
corporations under the provisions of sections seventy-eight or seventy-nine who
objects to such consolidation or merger may demand payment for his stock from
the resulting or surviving corporation and an appraisal in accordance with the
provisions of sections eighty-six to ninety-eight, inclusive, and such
stockholder and the resulting or surviving corporation shall have the rights and
duties and follow the procedure set forth in those sections. This section shall
not apply to the holders of any shares of stock of a constituent corporation
surviving a merger if, as permitted by subsection (c) of section seventy-eight,
the merger did not require for its approval a vote of the stockholders of the
surviving corporation.
Section 86 Sections applicable for appraisal; prerequisites
If a corporation proposes to take a corporate action as to which any
section of this chapter provides that a stockholder who objects to such action
shall have the right to demand payment for his shares and an appraisal thereof,
sections eighty-seven to ninety-eight, inclusive, shall apply except as
otherwise specifically provided in any section of this chapter. Except as
provided in sections eighty-two and eighty-three, no stockholder shall have such
right unless (1) he files with the corporation before the taking of the vote of
the shareholders on such corporate action, written objection to the proposed
action stating that he intends to demand payment for his shares if the action is
taken and (2) his shares are not voted in favor of the proposed action.
Section 87 Statement of rights of objecting stockholders in notice of meeting;
form
The notice of the meeting of stockholders at which the approval of such
proposed action is to be considered shall contain a statement of the rights of
objecting stockholders. The giving of such notice shall not be deemed to create
any rights in any stockholder receiving the same to demand payment for his
stock, and the directors may authorize the inclusion in any such notice of a
statement of opinion by the management as to the existence or non-existence of
the right of the stockholders to demand payment for their stock on account of
the proposed corporate action. The notice may be in such form as the directors
or officers calling the meeting deem advisable, but the following form of notice
shall be sufficient to comply with this section:
"If the action proposed is approved by the stockholders at the meeting
and effected by the corporation, any stockholder (1) who files with the
corporation before the taking of the vote on the approval of such action,
written objection to the proposed action stating that he intends to demand
payment for his shares if the action is taken and (2) whose shares are not
voted in favor of such action has or may have the right to demand in
writing from the corporation (or, in the case of a consolidation or merger,
the name of the resulting or surviving corporation shall be inserted),
within twenty days after the date of mailing to him of notice in writing
that the corporate action has become effective, payment for his shares and
an appraisal of the value thereof. Such corporation and any such
stockholder shall in such cases have the rights and duties and shall follow
the procedure set forth in sections 88 to 98, inclusive, of chapter 156B of
the General Laws of Massachusetts."
Section 88 Notice of effectiveness of action objected to
The corporation taking such action, or in the case of a merger or
consolidation the surviving or resulting corporation, shall, within ten days
after the date on which such corporate action became effective, notify each
stockholder who filed a written objection meeting the requirements of section
eighty-six and whose shares were not voted in favor of the approval of such
action, that the action approved at the meeting of the corporation of which he
is a stockholder has become effective. The giving of such notice shall not be
deemed to create any rights in any stockholder receiving the same to demand
payment for his stock. The notice shall
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be sent by registered or certified mail, addressed to the stockholder at his
last known address as it appears in the records of the corporation.
Section 89 Demand for payment; time for payment
If within twenty days after the date of mailing of a notice under
subsection (e) of section eighty-two, subsection (f) of section eighty-three, or
section eighty-eight, any stockholder to whom the corporation was required to
give such notice shall demand in writing from the corporation taking such
action, or in the case of a consolidation or merger from the resulting or
surviving corporation, payment for his stock, the corporation upon which such
demand is made shall pay to him the fair value of his stock within thirty days
after the expiration of the period during which such demand may be made.
Section 90 Demand for determination of value: bill in equity; venue
If during the period of thirty days provided for in section eighty-nine the
corporation upon which such demand is made and any such objecting stockholder
fail to agree as to the value of such stock, such corporation or any such
stockholder may within four months after the expiration of such thirty-day
period demand a determination of the value of the stock of all such objecting
stockholders by a bill in equity filed in the superior court in the county where
the corporation in which such objecting stockholder held stock had or has its
principal office in the commonwealth.
Section 91 Parties to suit to determine value; service
If the bill is filed by the corporation, it shall name as parties
respondent all stockholders who have demanded payment for their shares and with
whom the corporation has not reached agreement as to the value thereof. If the
bill is filed by a stockholder, he shall bring the bill in his own behalf and in
behalf of all other stockholders who have demanded payment for their shares and
with whom the corporation has not reached agreement as to the value thereof, and
service of the bill shall be made upon the corporation by subpoena with a copy
of the bill annexed. The corporation shall file with its answer a duly verified
list of all such other stockholders, and such stockholders shall thereupon be
deemed to have been added as parties to the bill. The corporation shall give
notice in such form and returnable on such date as the court shall order to each
stockholder party to the bill by registered or certified mail, addressed to the
last known address of such stockholder as shown in the records of the
corporation, and the court may order such additional notice by publication or
otherwise as it deems advisable. Each stockholder who makes demand as provided
in section eighty-nine shall be deemed to have consented to the provisions of
this section relating to notice, and the giving of notice by the corporation to
any such stockholder in compliance with the order of the court shall be a
sufficient service of process on him. Failure to give notice to any stockholder
making demand shall not invalidate the proceedings as to other stockholders to
whom notice was properly given, and the court may at any time before the entry
of a final decree make supplementary orders of notice.
Section 92 Decree determining value and ordering payment; valuation date
After hearing the court shall enter a decree determining the fair value of
the stock of those stockholders who have become entitled to the valuation of and
payment for their shares, and shall order the corporation to make payment of
such value, together with interest, if any, as hereinafter provided, to the
stockholders entitled thereto upon the transfer by them to the corporation of
the certificates representing such stock if certificated or, if uncertificated,
upon receipt of an instruction transferring such stock to the corporation. For
this purpose, the value of the shares shall be determined as of the day
preceding the date of the vote approving the proposed corporate action and shall
be exclusive of any element of value arising from the expectation or
accomplishment of the proposed corporate action.
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Section 93 Reference to special master
The court in its discretion may refer the bill or any question arising
thereunder to a special master to hear the parties, make findings and report the
same to the court, all in accordance with the usual practice in suits in equity
in the superior court.
Section 94 Notation on stock certificates of pendency of bill
On motion the court may order stockholder parties to the bill to submit
their certificates of stock to the corporation for the notation thereon of the
pendency of the bill and may order the corporation to note such pendency in its
records with respect to any uncertificated shares held by such stockholder
parties, and may on motion dismiss the bill as to any stockholder who fails to
comply with such order.
Section 95 Costs; interest
The costs of the bill, including the reasonable compensation and expenses
of any master appointed by the court, but exclusive of fees of counsel or of
experts retained by any party, shall be determined by the court and taxed upon
the parties to the bill, or any of them, in such manner as appears to be
equitable, except that all costs of giving notice to stockholders as provided in
this chapter shall be paid by the corporation. Interest shall be paid upon any
award from the date of the vote approving the proposed corporate action, and the
court may on application of any interested party determine the amount of
interest to be paid in the case of any stockholder.
Section 96 Dividends and voting rights after demand for payment
Any stockholder who has demanded payment for his stock as provided in this
chapter shall not thereafter be entitled to notice of any meeting of
stockholders or to vote such stock for any purpose and shall not be entitled to
the payment of dividends or other distribution on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the date of the vote approving the proposed corporate action) unless:
(1) A bill shall not be filed within the time provided in section
ninety;
(2) A bill, if filed, shall be dismissed as to such stockholder; or
(3) Such stockholder shall with the written approval of the
corporation, or in the case of a consolidation or merger, the resulting or
surviving corporation, deliver to it a written withdrawal of his objections
to and an acceptance of such corporate action.
Notwithstanding the provisions of clauses (1) to (3), inclusive, said
stockholder shall have only the rights of a stockholder who did not so demand
payment for his stock as provided in this chapter.
Section 97 Status of shares paid for
The shares of the corporation paid for by the corporation pursuant to the
provisions of this chapter shall have the status of treasury stock, or in the
case of a consolidation or merger the shares or the securities of the resulting
or surviving corporation into which the shares of such objecting stockholder
would have been converted had he not objected to such consolidation or merger
shall have the status of treasury stock or securities.
Section 98 Exclusive remedy; exception
The enforcement by a stockholder of his right to receive payment for his
shares in the manner provided in this chapter shall be an exclusive remedy
except that this chapter shall not exclude the right of such stockholder to
bring or maintain an appropriate proceeding to obtain relief on the ground that
such corporate action will be or is illegal or fraudulent as to him.
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APPENDIX E
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of August 24, 1993, between West Mass
Bankshares, Inc., a Massachusetts corporation ("MA"), and Vermont Financial
Services, Corp., a Delaware corporation ("VT").
WHEREAS, VT and MA have entered into an Agreement and Plan of
Reorganization of even date herewith (the "Merger Agreement"), which agreement
is being executed by the parties hereto simultaneously with this Agreement; and
WHEREAS, as a condition to VT's entry into the Merger Agreement and in
consideration for such entry, MA has agreed to grant VT the Option (as
hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. GRANT OF OPTION. On the terms and conditions contained in this
Agreement, MA hereby grants to VT an unconditional, irrevocable option (the
"Option") to purchase up to 306,960 shares (the "Option Shares") of the common
stock, par value $0.10 per share (the "Common Shares"), of MA, representing 19.9
percent (19.9%) of the aggregate of the issued and outstanding Common Shares
including the Option Shares as of the date hereof, at a price of $17.75 per
share (the "Option Price").
2. EXERCISE OF OPTION. The Option may not be exercised or transferred
except upon and after the occurrence of any of the events set forth in this
paragraph 2. VT may exercise or transfer the Option, in whole or in part, at any
time or from time to time after (a) any person or group (as such terms are
defined in the Securities and Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations thereunder), other than VT or a
wholly-owned subsidiary of VT, acquires after the date hereof beneficial
ownership of or the right to acquire such beneficial ownership or to vote at
least 15 percent (15%) of the then outstanding Common Shares, other than any
person acquiring such beneficial ownership by will or operation of law; or (b)
there shall be publicly announced any proposal by such a person or group
relating to (i) any merger, consolidation or acquisition of all or substantially
all of the assets of MA or other business combination involving MA prior to the
meeting of MA's stockholders contemplated by Section 4.5 of the Merger Agreement
and MA's stockholders fail to adopt the Merger Agreement at such meeting, or
(ii) a change in the composition of 20 percent (20%) or more of the Common
Shares then outstanding. MA shall notify VT promptly in writing of the
occurrence of any of the events set forth in the preceding sentence, it being
understood that the giving of such notice by MA shall not be a condition to the
right of VT to transfer or exercise the Option. MA will not take any action
which would have the effect of preventing or disabling MA from delivering the
Option Shares to VT upon exercise of the Option or otherwise performing its
obligations under this Agreement. In the event VT wishes to exercise the Option,
VT shall send a written notice to MA specifying the total number of Option
Shares it wishes to purchase and a place and date between one and ten business
days inclusive from the date such notice is given for the closing of such
purchase (a "Closing"), provided, however, that a Closing shall not occur prior
to the receipt of all necessary regulatory approvals therefor.
3. PAYMENT AND DELIVERY OF CERTIFICATES. At any Closing hereunder VT will
make payment to MA of the aggregate price for the Option Shares so purchased by
delivery of immediately available funds and MA will deliver to VT a stock
certificate or certificates representing the number of Option Shares so
purchased, registered in the name of VT or its designee in such denominations as
were specified by VT in its notice of exercise. In connection with any partial
exercise of the Option, VT (or any direct or indirect assignee or transferee of
VT) shall be entitled to surrender this Stock Option Agreement to MA in exchange
for two or more Stock Option Agreements entitling the holders thereof to
purchase in the aggregate the same number of Common Shares as may be purchasable
hereunder.
E-1
<PAGE> 133
4. REPRESENTATIONS AND WARRANTIES OF MA. MA hereby represents and warrants
to VT as follows:
A. Authority Relative to this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Board
of Directors of MA and no other corporate proceedings on the part of MA
are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly
executed and delivered by MA.
B. Option Shares. MA 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, 306,960 Common Shares, all of which, upon issuance pursuant
hereto, shall be duly authorized, validly issued, fully paid,
nonassessable, and shall be delivered free and clear of all claims,
liens, encumbrances and security interests and not subject to any
preemptive rights.
5. REGISTRATION RIGHTS.
A. On or after the occurrence of an event permitting exercise of the
Option pursuant to paragraph 2 hereof, MA shall, at the request of VT
(whether on its own behalf or on the behalf of any subsequent holder of
this Option (or part thereof) or any of the Option Shares issued pursuant
hereto), promptly prepare, file and keep current a registration statement
under the Securities Act of 1933 (the "Securities Act") governing this
Option and any shares issued and issuable pursuant to this Option and shall
use its best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other
disposition of this Option and any Option Shares issued upon total or
partial exercise of this Option in accordance with any plan of disposition
adopted by VT, except that MA shall not be required to maintain the
effectiveness of such registration statement for more than 90 days. VT
shall have the right to demand two such registrations. In connection with
each such registration, MA shall use its best efforts to cause to be
delivered to VT (and any other holder whose Option or Options Shares are
the subject of such registration) such certificates, opinions, accountants'
letters and other documents as VT (or such subsequent holder) shall
reasonably request. All expenses incurred by MA in complying with the
provisions of this paragraph 5, including without limitation, all
registration and filing fees, printing fees and disbursements of counsel
for MA and blue sky fees and expenses shall be paid by MA, except that all
underwriting discounts and selling commissions applicable to the sales and
all fees and disbursements for counsel for VT shall be paid by VT and/or
the holder whose Option or Option Shares are the subject of such
registration.
B. On or after the occurrence of any event permitting exercise of the
Option pursuant to paragraph 2 hereof, each time MA shall determine to
proceed with the actual preparation and filing of a registration statement
under the Securities Act in connection with the proposed offer and sale for
money of any of its securities (other than in connection with a dividend
reinvestment, employee stock purchase, stock option or similar plan or a
registration statement on Form S-4) by it or any of its security holders,
MA will give written notice of its determination to VT. Upon the written
request of VT given within 10 days after receipt of any such notice from
MA, MA will cause all securities which VT shall request to be included in
such registration statement contemplated by this subparagraph B to be
included in such registration statement; provided, however, that nothing
herein shall prevent MA from, at any time, abandoning or delaying any such
registration; provided further, however, that if MA determines not to
proceed with a registration after the registration statement has been filed
with the Securities and Exchange Commission, MA shall promptly complete the
registration for the benefit of VT if VT agrees to bear all incremental
expenses incurred by MA as the result of such registration after MA has
decided not to proceed. If any registration pursuant to this subparagraph B
shall be underwritten in whole or in part, VT may require that any
securities requested for inclusion pursuant to this subparagraph B be
included in the underwriting on the same terms and conditions as the
securities otherwise being sold through underwriters.
E-2
<PAGE> 134
6. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
A. In the event that any additional Common Shares are issued or
otherwise become outstanding after the date of this Agreement (other
than pursuant to exercise of the Option pursuant to this Agreement or as
contemplated by subparagraph 6(B) of this Agreement), including, without
limitation, pursuant to stock option or other employee plans or as a
result of the exercise of conversion rights, the number of Common Shares
subject to the Option shall be increased so that, after such issuance,
it equals 19.9% of the number of Common Shares then issued and
outstanding without giving effect to any shares subject or issued
pursuant to the Option.
B. In the event of any change in the Common Shares by reason of
stock dividend, split-up, merger, recapitalization, subdivision,
conversion, combination, exchange of shares or similar transaction, the
type and number of Option Shares, and the Option Price therefor, shall
be adjusted appropriately, and proper provision shall be made in the
agreements governing such transaction, so VT shall receive upon exercise
of the Option the number and class of shares or other securities or
property that VT would have held immediately after such event if the
Option had been exercised immediately prior to such event, or the record
date therefor, as applicable. Whenever the number of Option Shares (or
other securities) purchasable upon exercise hereof is adjusted as
provided in this subparagraph 6(B), the Option Price shall be adjusted
by multiplying the Option Price by a fraction, the numerator of which is
equal to the number of Option Shares prior to the Adjustment and the
denominator of which is equal to the number of Option Shares (or other
securities) purchasable after the adjustment.
7. FILINGS AND CONSENTS. VT and MA each will use its best efforts to make
all filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement.
8. SPECIFIC PERFORMANCE. Each of the parties hereto acknowledges and
agrees that it would not have an adequate remedy at law and would be irreparably
harmed in the event that any of the provisions of this Agreement were not
performed by the other party hereto in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that each of the parties
hereto shall be entitled to injunctive relief to prevent breaches of this
Agreement and to specifically enforce the terms and provisions hereof, in
addition to any other remedy to which each of the parties hereto may be
entitled, at law or in equity.
9. ENTIRE AGREEMENT. This Agreement and the Merger Agreement (together
with the documents designated in Section 8.5 thereof) constitute the entire
agreement between the parties with respect to the subject matter hereof and
supersede all other prior agreements and understandings, both written and oral,
among the parties or any of them with respect to the subject matter hereof.
10. ASSIGNMENT. At any time or from time to time upon or after the
occurrence of any event set forth in the second sentence of paragraph 2 hereof,
VT may sell, assign or otherwise transfer its rights and obligations hereunder,
in whole or in part, to any person or group of persons, subject only to
compliance with applicable law. In order to effectuate the foregoing, VT (or any
direct or indirect assignee or transferee of VT) shall be entitled to surrender
this Stock Option Agreement to MA in exchange for two or more Stock Option
Agreements entitling the holders thereof to purchase in the aggregate the same
number of shares of Common Stock as may be purchasable hereunder.
11. VALIDITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
E-3
<PAGE> 135
12. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in person, by cable, telegram or telex, or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties as
follows):
If to VT:
Vermont Financial Services Corp.
100 Main Street
Brattleboro, Vermont 05301
Attention: John D. Hashagen, Jr., President
With a copy to:
Sullivan & Worcester
One Post Office Square
Boston, Massachusetts 02109
Attention: Christopher Cabot, Esquire
If to MA:
West Mass Bankshares, Inc.
45 Federal Street
Greenfield, Massachusetts 01301
Attention: Francis Lemay, President
With a copy to:
Muldoon, Murphy & Faucette
5101 Wisconsin Avenue, N.W.
Washington, DC 20016
Attention: John J. Gorman, Esquire
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
14. DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
15. PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person (other than an
assignee or transferee of VT pursuant to paragraph 10 hereof) any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
17. EXPENSES. All costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
18. TERMINATION. The Option granted hereby, to the extent not previously
exercised, shall terminate upon the earliest of (i) one year after the
occurrence of any event set forth in paragraph 2 hereof, (ii) immediately after
the Effective Time (as defined in the Merger Agreement), (iii) the termination
of the Merger Agreement in accordance with the terms thereof prior to the
occurrence of any event set forth in paragraph 2 hereof (other than as provided
in subparagraph iv below), or (iv) 180 days after the termination of the Merger
Agreement in accordance with the terms of Section 7.1(D) thereof.
E-4
<PAGE> 136
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
VERMONT FINANCIAL SERVICES CORP.
By: /S/ JOHN D. HASHAGEN, JR.
President
WEST MASS BANKSHARES, INC.
By: /S/ FRANCIS L. LEMAY
President
E-5
<PAGE> 137
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The General Corporation Law of Delaware empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that he or she
is or was a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise. A corporation may indemnify against expenses (including attorneys'
fees) and, other than in respect of any action by or in the right of the
corporation, against judgments, fines and amounts paid in settlement actually
and reasonably incurred in connection with such action, suit or proceeding if
the person indemnified acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful. In the case of any action by or in the
right of the corporation, no indemnification may be made in respect to any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action was brought shall determine that
despite the adjudication of liability such person is fairly and reasonably
entitled to indemnity for such expenses which the court shall deem proper. The
Delaware General Corporation Law further provides that to the extent a director,
officer, employee or agent of a corporation has been successful in the defense
of any action, suit or proceeding referred to above or in the defense of any
claim, issue or matter therein, he or she shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him or her in
connection therewith.
The Certificate of Incorporation and By-Laws of Registrant provide, in
general, that, under the circumstances permitted by the General Corporation Law
of the State of Delaware, and to the fullest extent thereof, the Registrant
shall indemnify any person who was or is a party or is threatened to be made a
party to any action, suit or proceeding of the type described above by reason of
the fact that he or she is or was a director, officer, employee or agent of
Registrant or is or was serving at the request of Registrant as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise.
The Registrant carries Directors and Officers Liability Insurance in
connection with the foregoing.
<TABLE>
ITEM 21. EXHIBITS & FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<CAPTION>
NUMBER DESCRIPTION
------ --------------------------------------------------------------------------------
<C> <S> <C>
2.1 Agreement and Plan of Reorganization dated as of August 24, 1993 (included as
Appendix A to the Joint Proxy Statement and Prospectus).
2.2 Stock Option Agreement dated as of August 24, 1993 (included as Appendix E to
the Joint Proxy Statement and Prospectus).
3.1 Certificate of Incorporation of VFSC (incorporated by reference to Exhibit 3.1
of VFSC's Report on Form 8-K dated April 23, 1990).
</TABLE>
<TABLE>
<C> <S> <C>
3.2 Bylaws of VFSC (incorporated by reference to Exhibit 3.2 of VFSC's Report on
Form 8-K dated April 23, 1990).
4 Form of certificate for VFSC Common Stock.***
5 Opinion of Sullivan & Worcester as to legality.*
8.1 Form of Opinion of Sullivan & Worcester as to tax matters.**
8.2 Form of Opinion of Luse, Lehman, Gorman, Pomerenk & Schick as to tax matters.
</TABLE>
II-1
<PAGE> 138
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ --------------------------------------------------------------------------------
<C> <S> <C>
10.1 Management Continuity Agreements dated February 9, 1990 between VFSC's
predecessor and each of the following five executive officers:
(a) John D. Hashagen, Jr.
(b) Robert C. Wilcox
(c) Richard O. Madden
(d) W. Bruce Fenn
(e) Robert G. Soucy
(Incorporated by reference to Exhibit 3.2 of VFSC's Form 10-K for the fiscal
year ended December 31, 1990).
10.2 Executive Deferred Compensation Agreement dated July 19, 1988 by and between
VFSC, as and for VNB, and W. Bruce Fenn.**
10.3 Executive Deferred Compensation Agreement dated August 9, 1988 by and between
VFSC, as and for VNB, and Robert G. Soucy.**
10.4 Executive Deferred Compensation Agreement dated May 13, 1988 by and between VNB
and William H. George.**
10.5 Executive Deferred Compensation Agreement dated April 11, 1989 by and between
VFSC, as and for VNB, and Richard O. Madden.**
10.6 Executive Deferred Compensation Agreement dated August 1, 1988 by and between
VFSC, as and for VNB, and John D. Hashagen, Jr.**
10.7 Employment Agreement dated October 1, 1993 by and among USB, VFSC and Francis L.
Lemay.**
10.8 Employment Agreement dated October 19, 1993 by and among USB, VFSC and Kenneth
R. Cole.**
10.9 Employment Agreement dated October 19, 1993 by and among USB, VFSC and James
Neill.**
10.10 Employment Agreement dated October 19, 1993 by and among USB, VFSC and Robert W.
Phillips.**
10.11 Employment Agreement dated October 19, 1993 by and among USB, VFSC and Matthew
W. Noska.**
22.1 Form of Proxy for West Mass Special Meeting.**
22.2 Form of Proxy for VFSC Special Meeting.**
22.3 Form of Opinion of M.A. Schapiro & Co., Inc. (included as Appendix B to the
Joint Proxy Statement and Prospectus).
22.4 Form of Opinion of McConnell, Budd & Downes, Inc. (included as Appendix C to the
Joint Proxy Statement and Prospectus).
23.1 Consent of Coopers & Lybrand with respect to VFSC.
23.2 Consent of KPMG Peat Marwick with respect to West Mass.
23.3 Consent of Sullivan & Worcester (included in Exhibit 5).*
23.4 Consent of Luse, Lehman, Gorman, Pomerenk & Schick.*
23.5 Consent of M.A. Schapiro & Co., Inc.**
23.6 Consent of McConnell, Budd & Downes, Inc.**
23.7 Consent of Francis L. Lemay.**
23.8 Consent of Allyn Coombs.
24 Power of Attorney of certain officers and directors of VFSC.**
</TABLE>
(b) Financial Statement Schedules -- Not applicable.
(c) Not applicable.
- ---------------
[FN]
* To be filed by amendment.
** Previously filed.
*** Not required to be filed under EDGAR.
II-2
<PAGE> 139
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any factors or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply
if the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the
registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) If the registrant is a foreign private issuer, to file a
post-effective amendment to the registration statement to include any
financial statements required by Rule 3-19 of Regulation S-X at the start
of any delayed offering or throughout a continuous offering.
(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reoffering by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form.
(6) That every prospectus (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415(sec.230.415) of this chapter), will be filed
as a part of an amendment to the Registration Statement and will not be
used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(7) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail other equally prompt means. This
includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(8) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
(9) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual report to
security-holders that is incorporated by reference in the
II-3
<PAGE> 140
prospectus and furnished pursuant to and meeting the requirements of Rule
14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X is not set forth in the prospectus, to deliver, or cause to
be delivered to each person to whom the prospectus is sent or given, the
latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
II-4
<PAGE> 141
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this amendment to its
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the Town of Brattleboro, State of Vermont, on March 4, 1994.
VERMONT FINANCIAL SERVICES CORP.
By: /S/ JOHN D. HASHAGEN, JR.
----------------------------------
John D. Hashagen, Jr., President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- ------------------------------------- ------------------
<C> <S> <C>
/S/ JOHN D. HASHAGEN, JR. President and Director (Principal March 4, 1994
- ------------------------------------- Executive Officer)
John D. Hashagen, Jr.
/S/ RICHARD O. MADDEN Treasurer (Chief Financial and March 4, 1994
- ------------------------------------- Accounting Officer)
Richard O. Madden
</TABLE>
<TABLE>
<C> <S> <C>
ANTHONY F. ABATIELL* Director March 4, 1994
- -------------------------------------
Anthony F. Abatiell
ZANE V. AKINS* Director March 4, 1994
- -------------------------------------
Zane V. Akins
CHARLES A. CAIRNS* Director March 4, 1994
- -------------------------------------
Charles A. Cairns
Director March 4, 1994
- -------------------------------------
Robert C. Cody
BEVERLY G. DAVIDSON* Director March 4, 1994
- -------------------------------------
Beverly G. Davidson
JAMES E. GRIFFIN* Director March 4, 1994
- -------------------------------------
James E. Griffin
DANIEL C. LYONS* Director March 4, 1994
- -------------------------------------
Daniel C. Lyons
KIMBALL E. MANN* Director March 4, 1994
- -------------------------------------
Kimball E. Mann
</TABLE>
II-5
<PAGE> 142
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- ------------------------------------- ------------------
<C> <S> <C>
STEPHEN A. MORSE* Director March 4, 1994
- -------------------------------------
Stephen A. Morse
DONALD E. O'BRIEN* Director March 4, 1994
- -------------------------------------
Donald E. O'Brien
ROGER M. PIKE* Director March 4, 1994
- -------------------------------------
Roger M. Pike
MARK W. RICHARDS* Director March 4, 1994
- -------------------------------------
Mark W. Richards
</TABLE>
*By: /S/ JOHN D. HASHAGEN, JR.
--------------------------------
John D. Hashagen, Jr.,
Attorney-in-Fact
II-6
<PAGE> 143
<TABLE>
<CAPTION>
PAGE
NUMBER DESCRIPTION NUMBER
------ ----------------------------------------------------------------------- ------
<C> <S> <C>
2.1 Agreement and Plan of Reorganization dated as of August 24, 1993
(included as Appendix A to the Joint Proxy Statement and Prospectus).
2.2 Stock Option Agreement dated as of August 24, 1993 (included as Exhibit
E to the Joint Proxy Statement and Prospectus).
3.1 Certificate of Incorporation of VFSC (incorporated by reference to
Exhibit 3.1 of VFSC's Report on Form 8-K dated April 23, 1990).
</TABLE>
<TABLE>
<C> <S> <C>
3.2 Bylaws of VFSC (incorporated by reference to Exhibit 3.2 of VFSC's
Report on Form 8-K dated April 23, 1990).
4 Form of Certificate for VFSC Common Stock.***
5 Opinion of Sullivan & Worcester as to legality.*
8.1 Form of Opinion of Sullivan & Worcester as to tax matters.**
8.2 Form of Opinion of Luse, Lehman, Gorman, Pomerenk & Schick.
10.1 Management Continuity Agreements dated February 9, 1990 between VFSC's
predecessor and each of the following five executive officers:
(a) John D. Hashagen, Jr.
(b) Robert C. Wilcox
(c) Richard O. Madden
(d) W. Bruce Fenn
(e) Robert G. Soucy
(Incorporated by reference to Exhibit 3.2 of VFSC's Form 10-K for the
fiscal year ended December 31, 1990).
10.2 Executive Deferred Compensation Agreement dated July 19, 1988 by and
between VFSC, as and for VNB, and W. Bruce Fenn.**
10.3 Executive Deferred Compensation Agreement dated August 9, 1988 by and
between VFSC, as and for VNB, and Robert G. Soucy.**
10.4 Executive Deferred Compensation Agreement dated May 13, 1988 by and
between VNB and William H. George.**
10.5 Executive Deferred Compensation Agreement dated April 11, 1989 by and
between VFSC, as and for VNB, and Richard O. Madden.**
10.6 Executive Deferred Compensation Agreement dated August 1, 1988 by and
between VFSC, as and for VNB, and John D. Hashagen, Jr.**
10.7 Employment Agreement dated October 1, 1993 by and among USB, VFSC and
Francis L. Lemay.**
10.8 Employment Agreement dated October 19, 1993 by and among USB, VFSC and
Kenneth R. Cole.**
10.9 Employment Agreement dated October 19, 1993 by and among USB, VFSC and
James Neill.**
10.10 Employment Agreement dated October 19, 1993 by and among USB, VFSC and
Robert W. Phillips.**
10.11 Employment Agreement dated October 19, 1993 by and among USB, VFSC and
Matthew W. Noska.**
22.1 Form of Proxy for West Mass Special Meeting.**
22.2 Form of Proxy for VFSC Special Meeting.**
22.3 Form of Opinion of M.A. Schapiro & Co., Inc. (included as Appendix B to
the Joint Proxy Statement and Prospectus).
</TABLE>
<PAGE> 144
<TABLE>
<CAPTION>
PAGE
NUMBER DESCRIPTION NUMBER
------ ----------------------------------------------------------------------- ------
<C> <S> <C>
22.4 Form of Opinion of McConnell, Budd & Downes, Inc. (included as Appendix
C to the Joint Proxy Statement and Prospectus).
23.1 Consent of Coopers & Lybrand with respect to VFSC.
23.2 Consent of KPMG Peat Marwick with respect to West Mass.
23.3 Consent of Sullivan & Worcester (included in Exhibit 5).*
23.4 Consent of Luse, Lehman, Gorman, Pomerenk & Schick.*
23.5 Consent of M.A. Schapiro & Co., Inc.**
23.6 Consent of McConnell, Budd & Downes, Inc.**
23.7 Consent of Francis L. Lemay.**
23.8 Consent of Allyn Coombs.
24 Power of Attorney of certain officers and directors of VFSC.**
</TABLE>
- ---------------
[FN]
* To be filed by amendment.
** Previously filed.
*** Not required to be filed under EDGAR.
<PAGE> 1
EXHIBIT 8.2
LUSE LEHMAN GORMAN POMERENK & SCHICK
A PROFESSIONAL CORPORATION
COUNSELORS AT LAW
FRANKLIN SQUARE
1300 I STREET, N.W., SUITE 220
WASHINGTON, D.C. 20005
____________
TELEPHONE (202) 962-8640
FACSIMILE (202) 962-8653
WRITER'S DIRECT DIAL NUMBER
February , 1994
Broad of Directors
West Mass Bankshares, Inc.
45 Federal Street
Greenfield, Massachusetts 01301
Re: Federal Tax Consequences of the Merger of
West Mass Bankshares, Inc. into Vermont Financial Services Corp.
Gentleman:
You have requested an opinion on the federal income tax consequences
of the proposed merger of West Bankshares, Inc. ("West Mass") into Vermont
Financial Services Corp. ("VFSC") pursuant to a plan of reorganization (the
"Plan of Reorganization").
The proposed transaction is described in the section of this letter
entitled "STATEMENT OF FACTS," and the tax consequences of the proposed
transaction will be as set forth in the section of this letter entitled
"OPINION."
STATEMENT OF FACTS
West Mass Bankshares, Inc., Massachusetts corporation with its
principal place of business in Greenfield, Massachusetts, is a bank holding
company registered under the Bank Holding Company Act of 1956, as amended. West
Mass owns 100 percent of the shares of United Savings Bank ("USB"), which has
six branch locations in Massachusetts. USB is a Massachusetts-chartered savings
bank. Its principal office is in Greenfield, Massachusetts. USB offers a wide
range of deposit and loan products. Deposit products range from several
different types of business and personal checking accounts to a wide variety of
time deposits. These include savings, certificates of deposit and individual
retirement accounts. Loan products include residential mortgages, commercial
mortgages, consumer loans, home equity loans, commercial loans and lines of
credit.
<PAGE> 2
LUSE LEHMAN GORMAN POMERENK & SCHICK
A PROFESSIONAL CORPORATION
Board of Directors
February , 1994
Page 2
Vermont Financial Services Corp., a Delaware corporation with its
principal place of business in Brattleboro, Vermont, is a bank holding company
registered under the Bank Holding Company Act of 1956, as amended. VFSC has one
wholly-owned subsidiary, Vermont National Bank, a national banking association
("VNB"). VNB engages in commercial and retail banking and in the trust
business, including the taking of deposits, the making of secured and unsecured
loans, the financing of commercial transactions, and the performance of
corporate, pension and personal trust services. VNB operates thirty-two
branches throughout the State of Vermont. VFSC and VNB are subject to federal,
state, and local laws and regulations applicable to bank holding companies and
to banks, and to the regulations of the Board of Governors of the Federal
Reserve System, the Comptroller of the Currency, and the Federal Deposit
Insurance Corporation.
West Mass' and VFSC desire for West Mass to merge with and into VFSC
(the "Merger"), with VFSC surviving such Merger, in accordance with the
applicable laws of the Commonwealth of Massachusetts and the State of Delaware
and in accordance with the Agreement dated August 24, 1993 (the "Plan of
Reorganization").
West Mass' business reasons for entering into the proposed Merger
include the following: the terms and conditions of the Merger agreement; the
general financial conditions of West Mass and VFSC; recent market prices for
VFSC and West Mass Common Stock; the lack of an active public trading market
for West Mass Common Stock; the nature of the banking businesses of West Mass
and VFSC; the outlook for West Mass in a changing banking and financial
services industry, including the advent of interstate banking; and the fact
that the Merger represents an opportunity for the holders of West Mass Common
Stock to exchange their shares at a favorable exchange ratio for a security
with a greater potential market liquidity than West Mass Common Stock.
VFSC's business reasons for the Merger include greater potential
anticipated profitability for the new, combined organization, which is expected
to result in additional lending capacity to the combined organization, and
better access to facilities and services for its customers.
On the closing date (the "Effective Date"), West Mass shall merge with
and into VFSC; the separate existence of West Mass shall cease; VFSC shall be
the surviving corporation in the Merger; and all of the property, rights,
powers and duties and obligations of West Mass shall be taken and deemed to be
transferred to and vested in VFSC, as the surviving corporation in the Merger,
all in accordance with the applicable laws of the commonwealth of Massachusetts
and the State of Delaware.
On or after the Effective Date, the articles of incorporation and the
bylaws of VFSC, as in effect immediately prior to the Effective Date, shall
automatically continue as the articles of
<PAGE> 3
LUSE LEHMAN GORMAN POMERENK & SCHICK
A PROFESSIONAL CORPORATION
Board of Directors
February , 1994
Page 3
incorporation and bylaws of VFSC, as the surviving corporation in the Merger,
until thereafter altered, amended, or repealed.
Each share of West Mass Common Stock issued and outstanding immediately
prior to the Effective Date (except for shares as to which dissenters' rights
have been perfected), shall, on the Effective Date, be converted into that
number of shares of VFSC Common Stock as shall equal the quotient (rounded to
the neareast throusandth) (the "Exchange Ratio") of $17.75 divided by the
market value of VFSC Common Stock during the determination period expressed in
dollars; provided, however, that in no event shall the Exchange Ratio be less
than 0.8875 nor more than 0.9861 (except as a consequence of certain
adjustements provided for in the Merger Agreement). For purposes of the Merger
Agreement, the market value of VFSC Common Stock during the determination period
means the average of the mid-point of the daily "inside" closing bid and asked
per-share prices (in thousandths) of VFSC Common Stock as reported by the
National Association of Securities Dealers' Automatic Quotation System for the
30 trading days immediately preceding the fifth trading day prior to (but not
including) the Effective Date of the Merger.
No fractional shares of VFSC Common Stock will be issued in the Merger.
Instead, the Merger Agreement provides that VFSC will pay or cause to be paid
to West Mass shareholders cash in lieu of such fractional shares in an amount
equal to the cash value of the fractional shares which otherwise would be
issued. The cash amount paid in lieu of fractional shares will be determined by
multiplying such holders' fractional interest by the market value of VFSC
Common Stock during the determination period as previously defined.
Shares of VFSC Common Stock issued and outstanding as of the Effective
Date of the Merger will remain issued and outstanding thereafter and will not
be affected by the Merger.
SURRENDER OF WEST MASS COMMON STOCK CERTIFICATES
As soon as practicable after the Merger becomes effective, a Bank to be
selected by VFSC and reasonably satisfactory to West Mass (the "Exchange
Agent"), will send a notice and transmittal form to each holder of record of
West Mass Common Stock at the time the Merger becomes effective (other than
holders who have effectively exercised dissenters' right of appraisal) advising
such holder of the effectiveness of the Merger and of the procedure for
surrendering to the Exchange Agent their certificates formerly evidencing West
Mass Common Stock in exchange for new certificates evidencing VFSC Common
Stock.
Upon surrender to the Exchange Agent of one or more certificates
formerly evidencing West Mass Common Stock, together with a properly completed
and signed letter of transmittal, there will be issued and mailed to the holder
thereof a new certificate or certificates representing
<PAGE> 4
LUSE LEHMAN GORMAN POMERENK & SCHNICK
A PROFESSIONAL CORPORATION
Board of Directors
February , 1994
Page 4
the number of whole shares of VFSC Common Stock to which such holder is
entitled under the merger Agreement and, where applicable, a check for the
amount of cash payable in lieu of a fractional share of West Mass Common Stock.
A certificate representing VFSC Common Stock or a check in lieu of a fractional
share will be issued in a name other than the name in which the surrendered
West Mass stock certificate was registered only if (i) the West Mass stock
certificate surrendered is properly endorsed or accompanied by appropriate
stock powers and is otherwise in proper form for transfer and (ii) the person
requesting the issuance of such certificate or check either pays to the
Exchange Agent any transfer or other taxes required by reason of the issuance
of such certificate or check in a name other than that of the registered holder
of the certificate surrendered or establishes to the satisfaction of the
Exchange Agent that such tax has been paid or is not applicable.
After the Merger becomes effective, each certificate formely evidencing
West Mass Common Stock (other than certificates as to which dissenters' rights
of appraisal have been exercised) will, until it is surendered to the Exchange
Agent, be deemed for all corporate proposes to evidence ownership of that
number of whole shares of VFSC Common Stock into which it was converted as a
result of the Merger.
CONDITIONS TO CONSUMMATION OF THE MERGER
The Merger will occur only if the Merger Agreement is approved and
adopted by the requisite vote of West Mass shareholders. In addition,
consummation of the Merger is subject to the satisfaction of certain other
conditions as described in the Merger Agreement and the Registration Statement,
unless waived (to the extent such waiver is permitted by law).
Only West Mass shareholders of record as of the close of business on
, will have the right to vote on the proposed Merger. Any West Mass
shareholder who elects to exercise his or her rights of dissent and who
complies with the procedures set forth in Sections 86 through 98, inclusive,
of Chapter 156B of Massachusetts General laws Annotated shall be entitled to
receive cash for the fair value of those shares for which such shareholder
exercises his or her dissenter rights.
STOCK OPTION AGREEMENT
Simultaneously with the execution of the Merger Agreement, VFSC and
West Mass entered into a Stock Option Agreement (the "Stock Option Agreement"),
pursuant to which VFSC granted an option (the "Option") to purchase, subject
to adjustment in certain events, up to 306,960 authorized but unissued shares
of West Mass Common Stock for $17.75 per share. The Option becomes exercisable
in whole or in part, after the occurrence of the following events:
<PAGE> 5
LUSE LEHMAN GORMAN POMERENK & SCHICK
A PROFESSIONAL CORPORATION
Board of Directors
February , 1994
Page 5
1. any person or group (as such terms are defined in the Securities
and Exchange Act of 1934, as amended, and the rules and regulations thereunder,
other than VFSC or a wholly-owned subsidiary of VFSC acquires after August 24,
1993 beneficial ownership of or the right to acquire beneficial ownership or to
vote at least 15 percent (15%) of the then outstanding West Mass Common Stock,
other than any person acquiring such beneficial ownership by will or operation
of law; or
2. there shall be publicly announced any proposal by such a person or
group relating to (i) any merger, consolidaton or acquisition of all or
substantially all of the assets of West Mass or other business combination
involving West Mass prior to the meeting of West Mass shareholders contemplated
by the Merger Agreement and the Company's shareholders fail to adopt the Merger
Agreement at such meeting, or (ii) a change in the composition of 20 percent
(20%) or more of the West Mass Common Stock then outstanding.
The Stock Option Agreement is intended to make it more difficult and
expensive for another party to obtain control or acquire West Mass.
The Stock Option Agreement will expire on the earliest to occur of (i)
one year after one of the foregoing triggering events has occurred; (ii)
immediately after the effective time of the Merger; (iii) the termination of
the Merger Agreement in accordance with its terms before the occurrence of a
triggering event; or (iv) 180 days after VFSC shall have terminated the Merger
Agreement on account of a material breach thereof by West Mass.
In the event of a change in the shares of West Mass due to a stock
dividend, merger, recapitalization, subdivision, conversion, change of shares
or similar transaction, the type and number of shares of West Mass subject to
the Option will be adjusted appropriately so that VFSC shall receive on
exercise of the Option the number and class of shares or other securities or
property that it would have held if the Option had been exercised immediately
before such event. Whenever the number of shares subject to the Option is so
adjusted, the exercise price of the Option shall be adjusted by multiplying the
original price by a fraction, the numerator of which shall equal the number of
shares subject to the Option before adjustment and the denominator of which
shall be the number of shares subject to the Option after adjustment.
After the occurrence of a triggering event, VFSC may sell, assign or
otherwise transfer its rights and obligations under the Stock Option Agreement
to any person or group of persons, subject only to compliance with applicable
law.
* * *
<PAGE> 6
LUSE LEHMAN GORMAN POMERENK & SCHICK
A PROFESSIONAL CORPORATION
Board of Directors
February , 1994
Page 6
You have also provided the following representations concerning this
transaction:
(a) The Merger of West Mass into VFSC will satisfy the statutory requirements
of the state laws of both Delaware and Massachusetts. Furthermore, the
Merger will comply with the regulations and any other legal requirements
imposed by Delaware and Massachusetts.
(b) As of the Effective Date of the Merger, the former shareholders of West
Mass will have a continuing interest through stock ownership in VFSC,
equal in value to at least 50 percent of the value of all of the formerly
outstanding stock of West Mass as of the same date.
(c) To the best of the knowledge of the management of West Mass, there is no
plan or intention by the shareholder of West Mass who own 5 percent or
more of West Mass Common Stock, and there is no plan or intention on the
part of the remaining shareholders of West Mass to sell, exchange or
otherwise dispose of a number of shares of the VFSC Common Stock received
in the Merger that would reduce the West Mass shareholders' ownership of
VFSC Common Stock to a number of shares having a value, as of the Effective
Date, of less than 50 percent of the value of all of the formerly out-
standing stock of West Mass as of the same date. For purposes of this
representation, shares of West Mass Common Stock exchanged for cash or
other property, surrendered by dissenters, or exchanged for cash in lieu
of fractional shares of VFSC Common Stock will be treated as outstanding
West Mass Common Stock on the Effective Date. Moreover, shares of VFSC
Common Stock held by West Mass shareholders and otherwise sold, redeemed,
or disposed of prior or subsequent to the Merger will be considered in
making this representation.
(d) This fair market value of the VFSC Common Stock and other consideration
received by West Mass shareholders will be approximately equal to the fair
market value of the West Mass Common Stock surrendered in the exchange.
(e) To the best of the knowledge of the management of West Mass, VFSC has no
plan or intention to reacquire any of its Common Stock issued in the
transaction.
(f) To the best of the knowledge of the management of West Mass, VFSC has no
plan or intention to sell or otherwise dispose of any of the assets of
West Mass acquired in the Plan of Reorganization, except for dispositions
made in the ordinary course of business or transfers described in section
368(a)(2)(C) of the Code.
(g) The liabilities of West Mass to be assumed by VFSC and the liabilities to
which the
<PAGE> 7
LUSE LEHMAN GORMAN POMERENK & SCHICK
A PROFESSIONAL CORPORATION
Board of Directors
February , 1994
Page 7
transferred assets of West Mass are subject were incurred in the ordinary
course of business and are associated with the assets of West Mass.
(h) To the best of the knowledge of the management of West Mass, following the
Merger, VFSC and its subsidiaries will continue the historic business of
West Mass or use a significant portion of the historic business assets of
West Mass in a business.
(i) West Mass, VFSC, and their shareholders will pay their respective
expenses, if any, incurred in connection with the Merger (except as other-
wise provided in the Plan of Reorganization).
(j) There is no intercorporate indebtedness existing between West Mass and
VFSC that was issued, acquired, or will be settled at a discount.
(k) No two parties to the transaction are investment companies as defined in
section 368(a)(2)(F)(iii) and (iv) of the Code.
(l) West Mass is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of section 368(a)(3)(A) of the Code.
(m) The fair market value of the assets of West Mass tranferred to VFSC will
equal or exceed the sum of the liabilities assumed by VFSC plus the
amount of liabilities, if any, to which the transferred assets are subject.
(n) The total adjusted basis of the assets of West Mass transferred to VFSC
will equal or exceed the sum of the liabilities to be assumed by VFSC,
plus the amount of the liabilities, if any, to which the transferred
assets are subject.
(o) No shares of Common Stock of VFSC will be issued to or purchased by West
Mass shareholders or employees at a discount or as compensation for
services rendered or to be rendered.
LIMITATIONS ON OPINION
Our opinions expressed herein are based solely upon current provisions
of the Internal Revenue Code 1986, as amended (the "Code") including applicable
regulations thereunder and current judicial and administrative authority. Any
future amendments to the Code or applicable regulations, or new judicial
decisions or administrative interpretations, any of which could be retroactive
in effect, could cause us to modify our opinion. No opinion is expressed herein
with regard to the federal or state tax consequences of the Merger under any
section of the Code (or
<PAGE> 8
LUSE LEHMAN GORMAN POMERENK & SCHICK
A PROFESSIONAL CORPORATION
Board of Directors
February , 1994
Page 8
under state or local tax law) except if and to the extent specifically
addressed.
OPINION
Based solely upon the foregoing representations and information and
assuming the transaction occurs in accordance with the Plan of Reorganization
(and taking into consideration the limitations at the end of the opinion), it
is our opinion that:
(1) Provided that the Merger of West Mass with and into VFSC becomes
effective under the Delaware General Corporation Law and the Massachusetts
Business Corporation Law, as is contemplated in section 1.5 of the Plan of
Merger, the proposed statutory merger of West Mass will be a reorganization
within the meaning of section 368(a)(1)(A) of the Code. West Mass and VFSC will
each be "a party to a reorganization" within the meaning of section 368(b).
(2) No gain or loss will be recognized to West Mass on the transfer of
its assets to VFSC in exchange for VFSC Common Stock and the assumption by VFSC
of the liabilities of West Mass (section 361(a) and 357(a)).
(3) No gain or loss will be recognized by VFSC on the receipt of the
assets of West Mass in exchange for VFSC Common Stock (section 1032(a)).
(4) The basis of the West Mass assets in the hands of the VFSC will be
the same as the basis of such assets in the hands of West Mass immediately
prior to the Merger (section 362(b)).
(5) The holding period of the West Mass assets in the hands of VFSC
will include the period which the assets were held by West Mass (section
1223(2)).
(6) Gain, if any, will be recognized by holders of the shares of West
Mass Common Stock who receive both VFSC Common Stock (including a fractional
share interest) and cash in exchange for their West Mass Common Stock, but not
in excess of the amount of cash received. If the exchange has the effect of the
distribution of a dividend (determined with the application of section 318(a)
of the Code), then the amount of the gain recognized that is not in excess of a
shareholder's ratable share of undistributed earnings and profits will be
treated as a dividend. The determination of whether the exchange has the effect
of a dividend will be made in accordance with the principles set forth in
Commissioner v. Clark, 489 U.S. 726 (1989). No loss will be recognized on the
exchange of West Mass Common Stock for VFSC Common Stock (including a
fractional share interest, if any) and cash, as described above (section
354(a)(1)).
(7) Those West Mass shareholders, if any, who receive solely cash in
exchange for their West Mass Common Stock (other than the trustee of the ESOP)
and as a result hold no VFSC Common Stock directly or through application of
the attribution rules of section 318(a),
<PAGE> 9
LUSE LEHMAN GORMAN POMERENK & SCHICK
A PROFESSIONAL CORPORATION
Board of Directors
February , 1994
Page 9
shall be treated as having a complete termination of interest within the
meaning of section 302(b)(3), and the cash that the shareholders receive will
be treated as a distribution in payment in exchange for their West Mass Common
Stock, as provided in section 302(a). As provided in section 1001, gain or loss
(subject to the limitations of section 267) will be realized and recognized to
such shareholders measured by the difference between the cash received and the
basis of the West Mass Common Stock surrendered, as determined under section
1011.
(8) The payment of cash in lieu of fractional share interests of VFSC
Common Stock will be treated as if the fractional share interests were
distributed as part of the Merger and then redeemed by VFSC. Such cash payments
will be treated as having been received as distributions in full payment in
exchange for the fractional share interests redeemed, as provided in section
302(a) of the IRC.
(9) The basis of the VFSC Common Stock to be received by West Mass
shareholders will be the same as the basis of the West Mass Common Stock
exchanged therefor, decreased by the amount of cash received, and increased by
the amount, if any, that was treated as a dividend and the amount of gain
recognized by such shareholders on the exchange, if any (not including any
portion of such gain that is treated as a dividend) (section 358(a)(1)).
(10) The holding period of VFSC Common Stock to be received by West
Mass shareholders will include the holding period of the West Mass Common Stock
exchanged therefor, provided that the West Mass Common Stock is held as a
capital asset on the date of the exchange (section 1223(1)).
* * *
This opinion is based on the assumption that the transaction will be
consummated in accordance with the Plan of Reorganization as well as all the
information and representations referred to herein. Any change in the
transaction could cause us to modify our opinion. We hereby consent to the
filing of this opinion as an exhibit to the Registration Statement on Form S-4
being filed by VFSC and to the use of the name of our firm where it appears in
the Registration Statement and in the prospectus, and any amendments thereto.
Sincerely,
LUSE LEHMAN GORMAN POMERENK & SCHICK
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of
our report, which includes an explanatory paragraph regarding the Company's
change in its method of accounting for income taxes, dated January 22, 1993, on
our audits of the consolidated financial statements of Vermont Financial
Services Corp. and Subsidiary. We also consent to the reference to our firm
under the captions "Vermont Financial Services Corp. -- Selected Financial
Data" and "Experts."
/s/ COOPERS & LYBRAND
COOPERS & LYBRAND
Springfield, Massachusetts
March 4, 1994
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
West Mass Bankshares, Inc.
We consent to the use of our report incorporated by reference herein and
the reference to our firm under the headings "West Mass Bankshares, Inc. --
Selected Financial Data" and "Experts" in the prospectus.
/s/ KPMG PEAT MARWICK
KPMG PEAT MARWICK
Springfield, Massachusetts
March 4, 1994
<PAGE> 1
EXHIBIT 23.8
CONSENT OF ALLYN COOMBS
To the Board of Directors of
Vermont Financial Services Corp. ("VFSC")
I hereby consent to my appointment to the Board of Directors of VFSC in
accordance with the Agreement and Plan of Reorganization dated as of August 27,
1993, as amended, by and between VFSC and West Mass Bankshares, Inc. and to the
reference to such appointment in the Registration Statement on Form S-4 of VFSC.
/s/ ALLYN COOMBS
-------------------------------------
Allyn Coombs
Greenfield, Massachusetts
February 14, 1994
