<PAGE> 1
As filed with the Securities and Exchange Commission
on September 30, 1998
Registration No.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
WESTBANK CORPORATION
(Exact name of Registrant as specified in its charter)
MASSACHUSETTS 6022 04-2830731
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Classification Code Identification No.)
incorporation or Number)
organization)
WESTBANK CORPORATION
225 PARK AVENUE
P. O. BOX 149
WEST SPRINGFIELD, MA 01090-0149
TEL. (413) 747-1400
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
225 PARK AVENUE
P. O. BOX 149
WEST SPRINGFIELD, MA 01090-0149
TEL. (413) 747-1400
(Address of principal place of business or intended principal
place of business)
DONALD R. CHASE
225 PARK AVENUE
WEST SPRINGFIELD, MA 01090-0149
TEL. (413) 747-1400
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
<TABLE>
<CAPTION>
<S> <C> <C>
With copies of all communications to:
J. J. CRANMORE LESLIE L. DAVENPORT RAYMOND P. FAUCHER, SR.
CRANMORE, FITZGERALD & MEANEY SHIPMAN & GOODWIN LLP CARGILL BANCORP, INC.
49 WETHERSFIELD AVENUE ONE AMERICAN ROW 163 PUTNAM STREET
HARTFORD, CONNECTICUT 06114 HARTFORD, CT 06103-2819 PUTNAM, CT 06260-0431
TELEPHONE (860) 522-9100 TELEPHONE (860) 251-5918 (860) 963-2265
</TABLE>
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective and all
other conditions to the Merger of Cargill Bancorp, Inc. with and into Westbank
Corporation pursuant to the Affiliation and Merger Agreement described in the
accompanying Proxy Statement-Prospectus have been satisfied or waived.
If any of the securities being registered on this Form are to be
offered: in connection with the Formation of a holding company and there is
compliance with General Instruction G, check the following box: [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Each Class of
Securities to be Proposed Maximum Amount Proposed Maximum Aggregate Offering Amount of Registration
Registered to be Registered Offering Price Per Unit Price Fee
<S> <C> <C> <C> <C>
Common Stock par value
$2.00 per share 565,096 $11.50 (1) $3,925,525 (1) $1,158.03
</TABLE>
(1) Pursuant to Rule 457(f), the maximum aggregate offering price has been
determined as the value of the shares of Cargill Bancorp, Inc. acquired
by Westbank Corporation in the Merger.
<PAGE> 2
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE TIME UNTIL THE REGISTRANT WILL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT WILL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(A), MAY DETERMINE.
<PAGE> 3
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 16, 1998
TO THE SHAREHOLDERS OF CARGILL
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Special Meeting") of Cargill Bancorp, Inc. ("Cargill") will be held on December
16, 1998 at 10:00 a.m., local time, at the Heritage Road Cafe, 5 Heritage Road,
Putnam, Connecticut, for the purpose of considering and voting upon the
following matters:
A proposal to approve and adopt the Affiliation and Merger Agreement,
dated as of July 15, 1998 (the "Merger Agreement"), by and among
Cargill, Cargill Bank, Park West Bank and Trust Company and Westbank
Corporation ("Westbank") and the transactions contemplated thereby,
including the Merger of Cargill with and into Westbank (the "Merger")
upon the terms and subject to the conditions set forth in the Merger
Agreement as more fully described in the accompanying Proxy
Statement-Prospectus. A copy of the Merger Agreement is attached as
Appendix A to the accompanying Proxy Statement-Prospectus and certain
related documents are attached as exhibits thereto; and
Such other matters as may properly come before the Special Meeting or
any adjournments thereof.
NOTE: The Cargill Board of Directors is not aware of any other
business to come before the Special Meeting.
The Cargill Board of Directors has fixed the close of business on
November 5, 1998 as the record date (the "Record Date") for the determination of
shareholders entitled to notice of and to vote at the Special Meeting and any
adjournments or postponements thereof. Only shareholders of record at the close
of business on such date are entitled to notice of and to vote at the Special
Meeting and any adjournments or postponements. The presence, in person or by
proxy, of one-third of the aggregate number of shares of Cargill Common Stock
outstanding on the Record Date is necessary to constitute a quorum at the
Special Meeting.
Your vote is important regardless of the number of shares you own.
Approval of the Merger requires the affirmative vote of the holders of not less
than two-thirds of all issued and outstanding shares of Cargill Common Stock,
whether or not such shares are present at the Special Meeting. Each shareholder,
even though he or she now plans to attend the Special Meeting, is requested to
sign, date and return the enclosed Proxy without delay in the enclosed
postage-paid return envelope. You may revoke your Proxy at any time prior to its
exercise. Any shareholder present at the Special Meeting or at any adjournments
or postponements thereof may revoke his or her Proxy and vote personally on each
matter brought before the Special Meeting. Because of the required two-thirds
vote, it is particularly important that all shareholders vote at the Special
Meeting. An abstention or non-vote will have the effect of a vote against the
Merger Agreement.
By Order of the Board of Directors,
Secretary
<PAGE> 4
November __, 1998
Putnam, Connecticut
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
THE PROPOSAL TO APPROVE AND ADOPT THE MERGER AGREEMENT AND EACH OF
THE TRANSACTIONS COMPLETED THEREBY.
Please do not send in any stock certificates at this time.
<PAGE> 5
The Proxy is being solicited by the Board of Directors of Cargill Bancorp, Inc.
CARGILL BANCORP, INC.
163 PROVIDENCE STREET
P.O. BOX 431
PUTNAM, CT 06260-0431
AND
WESTBANK CORPORATION
225 PARK AVENUE
P. O. BOX 149
WEST SPRINGFIELD, MA 01090-0149
(413) 747-1400
PROXY STATEMENT AND PROSPECTUS
565,096 shares of Common Stock, par value $2.00 per share
of Westbank Corporation
The Boards of Directors of Westbank Corporation ("Westbank") and
Cargill Bancorp, Inc. ("Cargill") have agreed that Westbank will acquire Cargill
in a merger transaction (the "Merger"). Cargill's subsidiary, Cargill Bank, will
become a subsidiary of Westbank, but will remain a separate Connecticut
chartered stock savings and loan association and will stay headquartered in
Putnam, Connecticut. The Merger will enable Cargill Bank to offer more products
and services to customers and will enable Westbank to extend its operations into
the Connecticut market, and we believe it will benefit both companies and
shareholders.
If you are a Cargill shareholder, you will receive shares of Westbank
common stock ("Westbank Common Stock") for each share of Cargill common stock
("Cargill Common Stock") you own on the date of the Merger, as described below.
YOUR VOTE IS VERY IMPORTANT. The Merger cannot be completed unless the
shareholders of Cargill approve it. Cargill has scheduled a special meeting (the
"Special Meeting") for its shareholders to vote on the Merger. The Special
Meeting to vote on the Merger will take place on Wednesday, December 16, 1998,
at 10:00 a.m. at the Heritage Road Cafe, 5 Heritage Road, Putnam, Connecticut.
Whether or not you plan to attend the Special Meeting, please take the
time to vote by completing and mailing the enclosed proxy card to us. If you
complete and return your card but don't indicate how you want to vote, your
proxy will be counted as a vote in favor of the Merger. If you don't return your
card or abstain from voting, the effect will be a vote against the Merger. If
you decide to attend the Special Meeting, you may vote in person even though you
have already submitted a proxy.
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<PAGE> 6
This document serves as a Proxy Statement for the Special Meeting of
Cargill and as a Prospectus of Westbank with respect to shares of Westbank
Common Stock, par value $2.00 per share, to be offered to Cargill shareholders
in connection with the Merger.
SHARES OF WESTBANK COMMON STOCK ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER
OBLIGATIONS OF ANY BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATORS HAVE APPROVED OR DISAPPROVED THE WESTBANK COMMON STOCK TO BE ISSUED
IN THE MERGER OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR ADEQUATE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
YOUR ENTIRE INVESTMENT.
PLEASE DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED
POSTAGE-PAID RETURN ENVELOPE.
IF THE MERGER IS APPROVED BY THE SHAREHOLDERS AT THE SPECIAL MEETING AND
EFFECTED BY CARGILL, SHAREHOLDERS OF CARGILL WHO FOLLOW THE PROCEDURES SET FORTH
IN SECTION 262 OF TITLE 8 OF DELAWARE GENERAL CORPORATION LAW WILL HAVE
DISSENTERS' RIGHTS OF APPRAISAL AS THEREIN PROVIDED. A COPY OF THAT SECTION IS
ATTACHED AS APPENDIX D TO THE PROXY STATEMENT-PROSPECTUS.
Proxy Statement-Prospectus dated November __, 1998 and first mailed to
shareholders on or about November __, 1998.
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<PAGE> 7
TABLE OF CONTENTS
SUMMARY.......................................................................10
The Companies.................................................................10
What Cargill Shareholders Will Receive........................................10
Reasons for the Merger........................................................11
Recommendation to Shareholders................................................12
Required Vote; Shareholders' Agreements.......................................12
Ownership of Westbank Following the Merger....................................12
Management and Operations after the Merger....................................12
Opinions of Financial Advisers................................................12
Conditions to the Merger......................................................13
Termination of the Merger Agreement...........................................13
Amendment, Waiver and Extension of the Merger Agreement.......................13
Regulatory Approvals..........................................................14
Certain Federal Income Tax Consequences.......................................14
Stock Option Agreement........................................................14
Appraisal Rights and Dissenting Shareholders..................................14
Certain Differences in the Rights of Shareholders.............................15
Market Prices and Dividend Data...............................................15
Future Westbank Acquisition Activity..........................................16
Cautionary Statement Concerning Forward-looking Statements....................16
COMPARATIVE PER SHARE DATA....................................................18
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<PAGE> 8
SELECTED CONSOLIDATED FINANCIAL DATA OF WESTBANK (UNAUDITED)..................20
SELECTED CONSOLIDATED FINANCIAL DATA OF CARGILL (UNAUDITED)...................22
SELECTED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION (UNAUDITED)...................................................24
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED) ................26
THE MEETING...................................................................35
Matters to Be Discussed at the Special Meeting................................35
Record Date; Stock Entitled to Vote; Quorum...................................35
Solicitation of Proxies.......................................................35
Required Vote.................................................................36
Solicitation Expenses.........................................................37
Beneficial Ownership of Cargill Common Stock..................................37
Appraisal Rights and Dissenting Shareholders..................................38
THE MERGER....................................................................40
General.......................................................................40
Background of the Merger......................................................41
Recommendation of the Cargill Board and Reasons for the Merger................44
Opinions of Financial Advisers................................................45
Effective Time of the Merger; Closing Date....................................56
Conversion of Shares of Cargill Common Stock Pursuant to the Merger...........56
Certificate Exchange Procedures...............................................57
Conduct of Business Pending the Merger........................................58
Conditions to Consummation of the Merger......................................61
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<PAGE> 9
Termination...................................................................63
Amendment, Extension and Waiver...............................................63
Regulatory Approvals..........................................................64
Expenses......................................................................65
Stock Option Agreement........................................................66
Shareholders' Agreements......................................................68
Westbank Letter Agreements....................................................68
No Solicitation...............................................................68
Management and Operations after the Merger....................................69
Interests of Certain Persons in the Merger....................................69
Employment Obligations........................................................69
Cargill Stock Options.........................................................70
Resale of Westbank Common Stock...............................................70
Certain Federal Income Tax Consequences.......................................71
Accounting Treatment..........................................................72
INFORMATION REGARDING WESTBANK................................................73
INFORMATION REGARDING CARGILL.................................................74
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF CARGILL...............................74
INDEX TO FINANCIAL STATEMENTS OF CARGILL......................................95
DESCRIPTION OF WESTBANK CAPITAL STOCK.........................................96
COMPARISON OF THE RIGHTS OF HOLDERS OF WESTBANK COMMON STOCK
AND CARGILL COMMON STOCK.....................................................100
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<PAGE> 10
Special Meeting of Shareholders..............................................100
Inspection Rights............................................................101
Action by Consent of Shareholders............................................101
Preemptive Rights............................................................101
Dividends and Repurchases of Stock...........................................102
Classification of the Board of Directors.....................................102
Removal of Directors.........................................................102
Vacancies on the Board of Directors..........................................103
Exculpation of Directors.....................................................103
Indemnification of Directors, Officers and Others............................104
Mergers, Share Exchanges or Asset Sales; Anti-Takeover Provisions of
State Law....................................................................104
Amendments to Charter........................................................106
Amendments to Bylaws.........................................................106
Dissenters' Appraisal Rights.................................................107
Shareholders Rights Plan.....................................................107
LEGAL MATTERS................................................................107
EXPERTS......................................................................108
WHERE YOU CAN FIND MORE INFORMATION..........................................108
INFORMATION INCORPORATED BY REFERENCE........................................108
APPENDICES
Appendix A Affiliation and Merger Agreement
Exhibit A - Form of Shareholders' Voting Agreement
Exhibit B-1 - Opinion of Ostrowski & Company, Inc.
Exhibit B-2 - Opinion of Northeast Capital & Advisory, Inc.
Exhibit C - Stock Option Agreement
Exhibit D - Form of Letter Agreement
Exhibit E-1 - Form of Opinion of Shipman & Goodwin LLP
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<PAGE> 11
Exhibit E-2 - Form of Opinion of Cranmore, FitzGerald & Meaney
Appendix B Updated Opinion of Ostrowski & Company, Inc. dated November
__, 1998
Appendix C Updated Opinion of Northeast Capital & Advisory,
Inc. dated November __, 1998
Appendix D Text of Section 262 of Title 8 of the Delaware General
Corporation Law
INFORMATION NOT REQUIRED IN PROSPECTUS......................................II-1
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<PAGE> 12
SUMMARY
The following summary of the material aspects of the Merger is not
intended to be complete and is qualified by the more detailed discussion
elsewhere in this Proxy Statement-Prospectus. The Affiliation and Merger
Agreement between Westbank and Cargill, which we refer to throughout this Proxy
Statement- Prospectus as the "Merger Agreement," is attached as Appendix A. To
understand the Merger fully, you should read carefully this entire Proxy
Statement-Prospectus, including the Merger Agreement, and the other documents we
have referred you to. See "WHERE YOU CAN FIND MORE INFORMATION." (Page 108)
THE COMPANIES
Westbank is a bank holding company. It conducts business through its
subsidiary bank, Park West Bank and Trust Company ("Park West Bank"), and offers
a wide variety of financial services, including retail and commercial banking,
residential mortgage origination and servicing, commercial and industrial
lending, commercial real estate lending and consumer lending. Park West Bank
operates a network of branches located in Hampden County and Hampshire County,
Massachusetts. Westbank and Park West Bank are subject to regulation by the
Federal Reserve Board, the Federal Deposit Insurance Corporation (the "FDIC")
and the Massachusetts Division of Banks. As of June 30, 1998, Westbank had total
assets of $350,922,000, total deposits of $304,652,000, net loans of
$253,384,000, and shareholders' equity of $26,044,000.
Cargill is a unitary savings and loan holding company. Its subsidiary,
Cargill Bank, is a Connecticut chartered stock savings and loan association that
provides a variety of deposit, loan and investment products and services to
small businesses and consumers. Cargill's principal executive offices are
located at 163 Providence Street, Putnam, Connecticut 06260. Its telephone
number at that location is (860) 963-2265. Cargill Bank conducts business from
three offices located in Putnam, Woodstock and Quinebaug, Connecticut. Cargill
is subject to regulation by the Office of Thrift Supervision (the "OTS") and the
Commissioner of Banking of the State of Connecticut. As of June 30, 1998,
Cargill had total assets of $47,908,000, total deposits of $42,442,000, net
loans of $33,961,000 and shareholders' equity of $3,411,000.
WHAT CARGILL SHAREHOLDERS WILL RECEIVE (SEE PAGE 56)
If you are a Cargill shareholder and the Merger is approved, you will
receive shares of Westbank Common Stock for each share of Cargill Common Stock
you own on the date of the Merger. To calculate the exact number of Westbank
shares you will receive, we will average the closing prices of Westbank Common
Stock for each of the 20 trading days that end five days before the date of the
Merger.
For example, assume that the Merger was approved and had occurred on
July 15, 1998. The average closing bid price of Westbank Common Stock for the 20
days ending on July 10, 1998, five trading days prior to July 15, was $14.13. In
this example, you would have received $18.38 worth of Westbank Common Stock for
each share of Cargill Common Stock that you owned on July 15.
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<PAGE> 13
In addition to Westbank Common Stock, you will also receive a check for
a small amount of cash instead of any fractional shares you might otherwise
receive. For instance, if you own 10 shares of Cargill Common Stock, they would
be converted into 13 shares of Westbank stock in the Merger, based on the
anticipated exchange ratio described in the Merger Agreement of 1.3008 X 10. If
the average closing price was $14.13, instead of receiving a .008 shares of
Westbank Common Stock, you would be paid $.11.
Cargill can terminate the Merger Agreement if the actual average
closing bid price of Westbank Common Stock is less than $12.00 per share, unless
Westbank agrees to issue more Westbank Common Stock so that you will receive at
least $17.00 value per share in Westbank Common Stock. However, Westbank is not
required to issue more shares, and it is possible under these circumstances that
the Cargill Board of Directors (the "Cargill Board") could conclude that
proceeding with the Merger at the lower price would still be in your best
interest and consistent with the Cargill Board's fiduciary duties and permit the
Merger to proceed without obtaining additional shareholder approval.
You should not send in your Cargill stock certificates until we notify
you to do so after the Merger takes place.
REASONS FOR THE MERGER
After considering various alternatives that would allow it to improve
its overall performance and earnings potential, Cargill approached several
financial institutions, including Westbank, to discuss strategic alliances.
Cargill eventually focused on Westbank, believing that a combination of the two
companies could expand the resources of each and give both the opportunity to
enhance shareholder value and to offer a greater variety of products and
services. The ensuing negotiations resulted in the Merger Agreement.
Both Westbank and Cargill recognize that the banking industry,
nationally and in New England, is undergoing substantial consolidation. Banking
laws and regulations now permit banks to offer new types of financial services
to businesses and consumers and have eliminated barriers to interstate
operations. Westbank and Cargill each offers various products and services not
currently provided by the other. By combining, we expect to become more
efficient and to be better positioned to expand beyond our current market areas.
Combining the companies should enable us to increase revenues, reduce costs and
improve services. We believe that our combined company will not only enable
Cargill to maximize long-term shareholder value while serving the interests of
its customers, suppliers, employees and community, but will also further the
interests of Westbank and its shareholders.
In deciding to approve and recommend the Merger Agreement, our Cargill
Board considered a number of factors, including the financial strength, enhanced
prospects and opportunities for growth of the combined organization; the
potential benefits to our shareholders; the effects on our customers, suppliers,
employees and communities; the value of the stock Westbank offered and how it
compared with other preliminary, informal proposals made at the time; and the
opinions of our financial advisers that the stock being offered by Westbank is
fair from a financial point of view.
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<PAGE> 14
You can find a more detailed discussion of the background to the Merger
Agreement and our reasons for the Merger in this Proxy Statement-Prospectus
under the heading entitled "THE MERGER," at page 41.
RECOMMENDATION TO SHAREHOLDERS
The Cargill Board believes that the Merger is in your best interest and
unanimously recommends that you vote FOR the proposal to approve the Merger
Agreement.
REQUIRED VOTE; SHAREHOLDERS' AGREEMENTS (SEE PAGES 36 AND 38)
The Merger Agreement must be approved by the holders of two-thirds of
all outstanding shares of the Common Stock of Cargill.
The directors and executive officers of Cargill have agreed that they
will vote all [ ] shares of Cargill stock owned or controlled by them in
favor of the Merger Agreement. This represents about [ %] of the outstanding
shares of Cargill.
OWNERSHIP OF WESTBANK FOLLOWING THE MERGER (SEE PAGE 69)
Westbank expects to issue approximately 360,080 shares of its stock to
Cargill shareholders in connection with the Merger, which would constitute
between 8 and 15% of the outstanding stock of Westbank after the Merger. The
shares will be listed for trading on the Nasdaq National Market.
MANAGEMENT AND OPERATIONS AFTER THE MERGER (SEE PAGE 69)
After the Merger takes place, the management and Board of Directors of
Westbank and Cargill Bank will consist of those individuals who served
immediately prior to the Effective Time (as such term is defined below), except
that Donald R. Chase, the President and Chief Executive Officer and a director
of Westbank, will join the Board of Cargill Bank, and one of the current
directors of Cargill will join the Westbank Board of Directors (the "Westbank
Board"). In addition, such other individuals as may be designated by Westbank
will be asked to serve on the Cargill Bank Board to constitute a majority of the
Cargill Bank Board of Directors and a new Chief Executive Officer for Cargill
will be appointed by Westbank to replace Robert G. Eggleston, Jr. who resigned
in October 1998.
OPINIONS OF FINANCIAL ADVISERS (SEE PAGE 45)
Cargill asked its financial adviser, Ostrowski & Company, Inc.
("O&Co.") for advice on the fairness of the amount that Westbank is offering to
Cargill shareholders in the Merger. O&Co. performed a number of analyses in
which it compared the companies' historical stock prices and other measures of
financial performance, compared the financial terms of the Merger to those of
other publicly announced transactions, and estimated the relative values of
Westbank and Cargill based on past and anticipated future performance and the
benefits that could be expected from the
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<PAGE> 15
Merger. O&Co. delivered an opinion to Cargill that the exchange ratio of
Westbank stock for Cargill stock in the Merger is fair to Cargill's shareholders
from a financial point of view. Northeast Capital & Advisors, Inc. ("NECA") also
delivered an opinion to Westbank stating that the exchange ratio of the Merger
is fair from a financial point of view to Westbank and its shareholders. These
opinions are attached as Appendix B and Appendix C to this Proxy
Statement-Prospectus.
CONDITIONS TO THE MERGER (SEE PAGE 61)
To complete the Merger, we must meet a number of conditions in addition
to obtaining the vote of our shareholders, including the following:
- no law or injunction may effectively prohibit the Merger;
- we must receive all necessary approvals of governmental authorities;
and
- we must receive legal opinions that the Merger will be treated as a
tax-free reorganization under the Internal Revenue Code.
In some instances, if we wish to waive a condition, we may be required
to resolicit the approval of the shareholders of Cargill.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 63)
In addition to terminating the Merger Agreement if Westbank's stock
price falls below $12.00 per share, unless Westbank increases the number of
shares of Westbank stock to be exchanged for each share of Cargill stock,
Cargill can decide to terminate the Merger Agreement without completing the
Merger, and either of Cargill or Westbank can terminate the Merger Agreement, if
any of the following occurs:
- the Merger is not completed by March 31, 1999;
- the Merger is not approved by Cargill shareholders;
- a court or other governmental authority permanently prohibits the
Merger; or
- the other party breaches or materially fails to comply with any of
its representations, warranties or obligations under the Merger
Agreement.
AMENDMENT, WAIVER AND EXTENSION OF THE MERGER AGREEMENT (SEE PAGE 63)
We may amend the Merger Agreement at any time before the Merger
actually takes place, and may agree to extend the time within which any action
required by the Merger Agreement is to take place. Similarly, without
resoliciting and obtaining further approval from shareholders, Cargill can waive
the requirement that Cargill's shareholders must receive $17.00 per share if
Westbank's Common Stock price falls below $12.00 per share if the Cargill Board
concludes that proceeding with the Merger at the lower price would still be in
Cargill's Shareholders best interest and consistent with the Cargill Board's
fiduciary duties.
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<PAGE> 16
REGULATORY APPROVALS (SEE PAGE 64)
The Merger must be approved by the Federal Reserve Board, the
Commissioner of the Connecticut Department of Banking and the Massachusetts
Board of Bank Incorporation, and Westbank has filed applications with those
agencies seeking the necessary approvals, which are still pending. Westbank must
notify the OTS after consummation of the Merger and request deregistration of
Cargill as a unitary savings and loan holding company. If the Federal Reserve
Board approves the Merger, the United States Department of Justice has up to 30
days in which to challenge such approval on antitrust grounds. It is possible
that some of these governmental authorities may impose conditions for granting
approval. We cannot predict with certainty whether we will obtain the required
regulatory approvals within the time frame contemplated by the Merger Agreement
or on conditions that would not be detrimental to either Westbank or Cargill or
the combined company.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 71)
We have structured the Merger so that Westbank, Cargill and Cargill's
shareholders will not recognize any gain or loss for federal income tax purposes
in the Merger, except for taxes payable because of cash received by Cargill
shareholders instead of fractional Westbank shares or pursuant to the exercise
of dissenters' rights as described below.
STOCK OPTION AGREEMENT (SEE PAGE 66)
In connection with the Merger Agreement, Cargill granted Westbank an
option to purchase up to 84,804 shares of Cargill Common Stock at an exercise
price of $12.00 per share. Westbank may exercise this option only if certain
events ordinarily associated with another party attempting to "break up" the
Merger and acquire Cargill occur. As of this date, none of those events has
occurred. Under the option agreement, if any such event did occur and Westbank
were entitled to exercise the option, it would also be entitled to consequential
damages, as well as a reimbursement of its costs and fees of $150,000 from
Cargill. The option and the fees were granted as an incentive to Westbank to
proceed with the Merger, and may discourage other persons who might be
interested in acquiring Cargill.
APPRAISAL RIGHTS AND DISSENTING SHAREHOLDERS (SEE PAGE 38)
Holders of Cargill Common Stock who do not vote in favor of the Merger
and who follow certain procedures set forth in the law will be entitled to
dissenters' rights under Section 262 of Title 8 of the Delaware General
Corporation Law. The text of the pertinent statutory provisions is attached as
Appendix D. Holders of Westbank Common Stock will not vote and do not have
dissenters' rights in connection with the Merger.
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<PAGE> 17
CERTAIN DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS
Once the Merger occurs, Cargill's shareholders (other than dissenting
shareholders) will automatically become shareholders of Westbank, and their
rights will be governed by Massachusetts law rather than Delaware law and by
Westbank's corporate governing documents, including its articles of organization
and bylaws. You can find a detailed discussion of the differences between the
rights of Cargill and Westbank shareholders in this Proxy Statement-Prospectus
under the heading entitled "COMPARISON OF THE RIGHTS OF HOLDERS OF WESTBANK
COMMON STOCK AND CARGILL COMMON STOCK" at page 100.
MARKET PRICES AND DIVIDEND DATA
Westbank Common Stock is listed for trading on the Nasdaq National
Market System under the symbol "WBKC". Cargill Common Stock is not listed for
trading on any market.
The following table shows the range of high and low bid prices for
Westbank Common Stock and Cargill Common Stock during each quarter since January
1, 1996. It also shows the quarterly cash dividends paid by Westbank and Cargill
on their shares. The source of the Westbank bid ranges is the local newspaper's
listing of the NASD regional market quotations. The source of the Cargill bid
ranges is Fechtor, Detwiler and Co., Inc., a market maker in Cargill's Common
Stock.
<TABLE>
<CAPTION>
CASH DIVIDENDS
WESTBANK CARGILL PER SHARE OF
COMMON STOCK COMMON STOCK COMMON/STOCK
HIGH / LOW HIGH / LOW WESTBANK CARGILL
QUARTER ENDED
<S> <C> <C> <C> <C> <C> <C>
1996
March 31 $8 1/4 $6 3/4 $6 7/8 $6 7/8 $ 0.06 $0
June 30 8 3/4 7 5/8 7 7 0.06 0
September 30 8 3/8 7 1/4 7 1/2 7 1/4 0.06 0
December 31 9 3/4 7 1/2 7 11/16 7 1/2 0.06 0
1997
March 31 $10 $8 3/4 $7 1/2 $7 5/16 $0.075 $0
June 30 9 1/2 8 1/2 8 3/4 8 0.075 0
September 30 11 8 5/8 9 8 3/4 0.075 0
December 31 13 5/8 10 5/8 10 10 0.075 0
1998
March 31 $17 1/4 $12 $11 1/8 $11 1/8 $0.10 $0
June 30 16 1/4 13 7/8 11 1/2 11 0.10 0
September 30 - - 11 1/2 11 1/2 0.10 0
Through October 30
</TABLE>
-15-
<PAGE> 18
On July 1, 1998, 1998, Westbank announced a quarterly dividend of $.10
per share payable on July 20, 1998 to holders of record as of the close of
business on July 14, 1998.
On July 14, 1998, the last business day before the Merger was
announced, the closing price for a share of Westbank stock was $14.13 and the
most recent sales price for a share of Cargill stock was $11.50. If $14.13 had
been the average of the closing bid prices under the Merger Agreement, a Cargill
shareholder receiving Westbank stock in exchange for a share of Cargill stock on
that day under the terms of the Merger Agreement would have received shares of
Westbank stock with a value of $18.38 ($14.13 X 1.3008). On _______ __, 1998,
the last day before this Proxy Statement-Prospectus was printed for which we had
information, the closing price was $_______. If that had been the average, a
Cargill shareholder would have received stock with a value of $_______[$_____ X
______].
FUTURE WESTBANK ACQUISITION ACTIVITY
Both nationally and in New England, the banking industry is undergoing
a period of consolidation marked by numerous mergers and acquisitions. Westbank
has no formal plan to acquire other banking or thrift institutions, but it may
occasionally be presented with opportunities before or after the Merger to
acquire existing institutions that could expand and strengthen Westbank's market
position. If such an opportunity arises, Westbank may engage in discussions or
negotiations about the target company, and may acquire or seek to acquire such
entity. If the purchase price for any such acquisition were to include a premium
over the target's book or market value, which is not unusual, Westbank's book
value might be diluted, at least in the short term.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Each company makes forward-looking statements in this document that are
subject to risks and uncertainties. Forward-looking statements include the
information concerning possible or assumed future results of operations of our
companies set forth under "Recommendation of the Cargill Board and Reasons for
the Merger," "Recommendation of the Westbank Board and Reasons for the Merger"
and "Opinions of Financial Advisers" and statements preceded by, followed by or
including words such as "believes," "anticipates," "plans", "expects" and
similar expressions. For those statements, we claim the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. You should understand that the following
important factors, in addition to those discussed elsewhere in this document and
the documents we incorporate by reference, could affect the future results of
the companies and could cause those results to differ materially from those
expressed in our forward-looking statements:
1. our revenues after the Merger are lower than we expect, our
restructuring charges are higher than we expect, we lose more
deposits, customers or business than we expect, or our
operating costs after the Merger are greater than we expect;
-16-
<PAGE> 19
2. competition among depository and other financial institutions
increases significantly;
3. we have more trouble obtaining regulatory approvals for the
Merger than we expect;
4. we have more trouble integrating our businesses or retaining
key personnel than we expect;
5. our costs savings from the Merger are less than we expect, or
we are unable to obtain those cost savings as soon as we
expect;
6. changes in the interest rate environment reduce our margins;
7. general economic or business conditions are worse than we
expect;
8. legislative or regulatory changes adversely affect our
business;
9. technological changes and systems integration are harder to
make or more expensive than we expect; and
10. adverse changes occur in the securities markets.
-17-
<PAGE> 20
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical per share, pro forma
combined per share and pro forma equivalent per share information with respect
to Westbank Common Stock and Cargill Common Stock at the dates and for the
periods presented, giving effect to the Merger using the pooling-of-interests
method of accounting, based on an Exchange Ratio of 1.3008 and assuming that
360,080 shares of Westbank Common Stock are issued in the Merger and based upon
the assumptions described in the Notes to Pro Forma Condensed Combined Financial
Statements (Unaudited) included elsewhere herein. See "THE MERGER-Accounting
Treatment" and "Pro Forma Condensed Combined Financial Statement (Unaudited)."
The selected per share data set forth below should be read in
conjunction with, and is qualified in its entirety by, the historical
consolidated financial statements of Westbank, including the related notes,
incorporated herein by reference, and the historical consolidated financial
statements of Cargill, including the related notes, and the "Pro Forma Condensed
Combined Financial Statements (Unaudited)" included elsewhere herein. See "WHERE
YOU CAN FIND MORE INFORMATION," "INFORMATION INCORPORATED BY REFERENCE" and the
historical consolidated financial statements of Cargill included elsewhere
herein. The data set forth below is not necessarily indicative of the results of
the future operations of Westbank upon consummation of the Merger or the actual
results that would have been achieved had the Merger been consummated prior to
the periods presented.
COMPARATIVE PER SHARE FINANCIAL INFORMATION
<TABLE>
<CAPTION>
WESTBANK CARGILL COMMON
COMMON STOCK STOCK
PRO FORMA
COMBINED CONTINUING PRO FORMA
HISTORICAL CORPORATION (1) HISTORICAL(2) EQUIVALENT
<S> <C> <C> <C> <C>
Basic income (loss)(4)(5):
Six months ended June 30, 1998 $ .46 $ .45 $ .42 $ .59
Year ended December 31, 1997 .93 .88 .58 1.14
Year ended December 31, 1996 .68 .59 (.42) .77
Year ended December 31, 1995 .74 .69 .28 .90
Diluted income (loss) per share (4)(5):
Six months ended June 30, 1998 .45 .43 .37 .56
Year ended December 31, 1997 .89 .85 .54 1.11
Year ended December 31, 1996 .66 .57 (.42) .74
Year ended December 31, 1995 .72 .67 .28 .87
Cash dividends declared per
common share (5)(6)
Six months ended June 30, 1998 .20 .20 -- .26
Year ended December 31, 1997 .30 .30 -- .39
Year ended December 31, 1996 .24 .24 -- .31
Year ended December 31, 1995 .20 .20 -- .26
Book value per common share at:
June 30, 1998 6.91 7.02 (3) 11.98 9.13 (3)
December 31, 1997 6.63 6.78 (3) 11.73 8.82 (3)
</TABLE>
- -----
(1) Reflects the assumed issuance of 360,080 shares of Westbank Common
Stock in the merger based upon an exchange ratio of 1.3008 assuming the
average closing price is $14.13. See "Notes to Pro Forma Condensed
Combined Financial Statement (Unaudited)."
(2) The information above reflects Cargill's historic financial data at and
for the six months ended March 31, 1998, and at and for the years ended
September 30, 1997, 1996, and 1995.
-18-
<PAGE> 21
(3) Pro forma book value per share of Westbank Common Stock was calculated
by dividing total pro forma combined shareholders' equity amounts as of
the applicable date by the sum of (i) the total shares of Westbank
Common Stock outstanding as of the applicable date and (ii) the total
shares of Cargill Common Stock outstanding as of the applicable date,
276,814 at March 31, 1998 and 257,227 at September 30, 1997, multiplied
by the Exchange Ratio of 1.3008 shares of Westbank Common Stock for
each share of Cargill Common Stock. Pro forma equivalent combined book
value per share of Cargill Common Stock represents the pro forma
combined book value per share of Westbank Common Stock multiplied by
the Exchange Ratio of 1.3008. Assuming that the actual Average Closing
Price was the $14.13 closing per share price of Westbank Common Stock
on July 15, 1998. The Exchange Ratio is subject to adjustment based on
the actual Average Closing Price.
(4) Westbank pro forma combined basic and diluted income per share
represents historical net income available to common stockholders for
Westbank and Cargill combined on the assumption that Westbank and
Cargill had been combined for the periods presented on a
pooling-of-interests basis, divided by the number of basic weighted
average shares (for basic earnings per share) and diluted weighted
average shares. Diluted weighted average shares includes the effect of
potentially dilutive securities such as stock options, as applicable,
of Westbank Common Stock which would have been issued and outstanding
assuming the Merger had been completed at the beginning of the period
based on an Exchange Ratio of 1.3008 shares of Westbank Common Stock
for each share of Cargill Common Stock. Per common share amounts
assuming dilution were computed assuming the exercise of stock options
and repurchase of common stock with the proceeds resulting from such
exercise using the average market price per share of Westbank Common
Stock or Cargill Common Stock, as appropriate, for the applicable
period. The pro forma combined income information does not reflect
Merger costs, expense savings or revenue enhancements that may occur as
a result of the Merger. See "Notes to Pro Forma Condensed Combined
Financial Statements (unaudited)." Cargill equivalent pro forma
earnings per common share amounts represent Pro Forma Combined
Continuing Corporation amounts multiplied by an Exchange Ratio of
1.3008 shares of Westbank Common Stock for each share of Cargill Common
Stock. Assuming that the actual Average Closing Price was the $14.13
closing per share price of Westbank Common Stock on July 15, 1998. The
Exchange Ratio is subject to adjustment based on the actual Average
Closing Price.
(5) Income per share and cash dividends declared per common share
information reflects Westbank and Cargill for their years ended
December 31 and September 30, respectively, and for the six months
ended June 30, 1998 and March 31, 1998 respectively.
(6) Westbank pro forma combined dividends declared per common share
represent historical dividends paid by Westbank. Westbank, as the
resulting corporation from the Merger will pay dividends at a rate to
be determined by Westbank Board of Directors; it is anticipated that
the initial dividend will be at the most recent rate paid by Westbank.
Cargill pro forma equivalent dividends declared per common share
represent Westbank pro forma dividends declared per common share
multiplied by an Exchange Ratio of 1.3008. Assuming that the actual
Average Closing Price was the $14.13 closing per share price of
Westbank Common Stock on July 15, 1998. The Exchange Ratio is subject
to adjustment based on the actual Average Closing Price.
-19-
<PAGE> 22
SELECTED HISTORICAL FINANCIAL DATA OF WESTBANK (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth certain consolidated financial
and other data of Westbank at the dates and for the periods indicated. The
consolidated financial information for the six-month periods ended June 30, 1998
and 1997 has not been audited, but in the opinion of management of Westbank, all
adjustments necessary for a fair presentation have been included. All such
adjustments are of a normal, recurring nature. The results of operations for the
six months ended June 30, 1998 are not necessarily indicative of the results of
operations that may be expected for the entire year. For additional financial
information about Westbank, reference is made to the "Management Discussion and
Analysis of Financial Results" and the Consolidated Financial Statements of
Westbank and related notes incorporated by reference herein.
<TABLE>
<CAPTION>
AS OF OR FOR THE
SIX MONTHS AS OF OR FOR THE YEARS ENDED
ENDED JUNE 30 DECEMBER 31
---------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Interest income $ 12,106 $ 11,126 $ 23,156 $ 20,600 $ 20,261 $ 17,046 $ 16,809
Interest expense 5,561 4,945 10,372 8,758 8,540 6,199 6,736
--------- --------- --------- --------- --------- --------- ---------
Net interest income 6,545 6,181 12,784 11,842 11,721 10,847 10,073
Provision for loan losses (6) 19 190 190 868 2,690 1,473 790
--------- --------- --------- --------- --------- --------- ---------
Net interest income after
provision for loan losses 6,526 5,991 12,594 10,974 9,031 9,374 9,283
Noninterest income 1,206 991 2,261 2,140 2,917 2,459 2,861
Noninterest expense 4,913 4,616 9,313 9,272 8,515 10,088 10,072
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes and
cumulative effect of accounting change 2,819 2,366 5,542 3,842 3,433 1,745 2,072
Income tax expense (benefit) 1,095 992 2,311 1,594 1,080 (430) 525
--------- --------- --------- --------- --------- --------- ---------
Net income before cumulative effect of
change in accounting principle 1,724 1,374 3,231 2,248 2,353 2,175 1,547
--------- --------- --------- --------- --------- --------- ---------
Cumulative effect of change in
accounting principle (7) -- -- -- -- -- -- 400
--------- --------- --------- --------- --------- --------- ---------
Net income $ 1,724 $ 1,374 $ 3,231 $ 2,248 $ 2,353 $ 2,175 $ 1,947
========= ========= ========= ========= ========= ========= =========
BALANCE SHEET DATA:
Total assets $ 350,922 $ 307,896 $ 308,265 $ 284,909 $ 253,777 $ 243,313 $ 228,863
Loans receivable, gross 255,888 233,641 235,263 220,673 200,971 196,002 178,069
Allowance for possible loan losses 2,504 2,560 2,848 2,481 3,707 3,325 3,472
Investment securities 61,543 46,850 54,591 35,682 35,569 29,547 31,979
Deposits 304,652 274,362 271,560 255,491 227,962 218,563 202,431
Borrowings 18,552 10,778 11,884 8,769 7,177 8,625 12,420
Total shareholders' equity 26,044 21,252 23,751 19,745 17,703 15,344 13,271
</TABLE>
-20-
<PAGE> 23
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net income (1):
Basic $ 0.46 $ 0.40 $ 0.93 $ 0.68 $ 0.74
Diluted $ 0.45 $ 0.39 $ 0.89 $ 0.66 $ 0.72
Cash dividends paid $ 0.20 $ 0.15 $ 0.30 $ 0.24 $ 0.20
Book value (2) $ 6.91 $ 6.12 $ 6.63 $ 5.90 $ 5.50
Weighted average shares outstanding:
Basic 3,744,757 3,473,046 3,487,160 3,285,093 3,181,742
Diluted 3,849,895 3,543,085 3,612,919 3,404,242 3,271,875
SELECTED FINANCIAL RATIOS (3):
Return on average assets (4) 1.08% .95% 1.07% .84% .93%
Return on average shareholders' equity (4) 13.69% 13.42% 15.03% 12.11% 14.04%
Net interest margin (4)(5) 4.30% 4.50% 4.48% 4.73% 4.94%
Cash dividends paid per share as a percentage of
basic income per share 43.47% 37.50% 32.26% 35.29% 27.03%
Equity to total assets 7.42% 6.90% 7.70% 6.93% 6.98%
Core (leverage) capital ratio at period end 7.40% 6.93% 7.68% 6.97% 6.95%
Total risk-based capital ratio at period end 12.69% 11.71% 12.71% 11.69% 11.24%
Allowance for loan losses to total gross loans 0.98% 1.10% 1.21% 1.12% 1.84%
Nonperforming assets to total assets 0.22% 0.57% 0.45% 0.95% 3.11%
Net charge-offs (recoveries) as a percentage of
average loans (4) 1.49% .05% (.08)% 1.00% 1.17%
Other real estate owned as a percentage of total
assets .08% .10% .05% .12% .51%
- -------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
PER SHARE DATA:
Net income (1):
Basic $ 0.69 $ 0.49
Diluted $ 0.68 $ 0.48
Cash dividends paid -- --
Book value (2) $ 4.89 $ 4.25
Weighted average shares outstanding:
Basic 3,132,934 3,118,725
Diluted 3,203,985 3,190,486
SELECTED FINANCIAL RATIOS (3):
Return on average assets (4) .93% .86%
Return on average shareholders' equity (4) 14.77% 15.80%
Net interest margin (4) (5) 5.01% 4.85%
Cash dividends paid per share as a percentage of
basic income per share -- --
Equity to total assets 6.31% 5.80%
Core (leverage) capital ratio at period end 6.37% 5.80%
Total risk-based capital ratio at period end 9.80% 8.98%
Allowance for loan losses to total gross loans 1.70% 1.95%
Nonperforming assets to total assets 3.06% 3.08%
Net charge-offs (recoveries) as a percentage of
average loans (4) .89% .44%
Other real estate owned as a percentage of total
assets .64% 1.38%
- -------------
</TABLE>
(1) Reflects the adoption in 1997 of SFAS No. 128 "Earnings Per Share."
Prior periods have been restated.
(2) Common shareholders' equity divided by total shares of common stock
outstanding.
(3) With the exception of end-of-period ratios, all ratios are based on
average daily balances.
(4) Selected financial ratios for the six months ended June 30, 1998 and
1997, are presented on an annual basis.
(5) Net interest income on a tax equivalent basis divided by average
interest earning assets. Net interest income on a tax equivalent basis
is based on the federal statutory rate of 34% and applicable state
rates.
(6) The increase in the provision for loan losses during 1995 was
attributable to the increase in non-performing loans.
(7) Represents the adoption of Financial Accounting Standard No. 109,
"Accounting for Income Taxes."
-21-
<PAGE> 24
SELECTED HISTORICAL FINANCIAL DATA OF CARGILL (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth certain financial and other data of
Cargill at the dates and the periods indicated. The table has been derived from,
and should be read in conjunction with, the historical financial statements of
Cargill, including the notes related thereto. The financial information for the
six month periods ended March 31, 1998 and 1997 have not been audited, but in
the opinion of management of Cargill, all adjustments necessary for a fair
presentation have been included. All such adjustments are of a normal, recurring
nature. The results of operations for the six months ended March 31, 1998 are
not necessarily indicative of the results of operations that may be expected for
the entire year. For additional financial information about Cargill, reference
is made to the index to Cargill Consolidated Financial Statements and the more
detailed financial information contained elsewhere herein.
<TABLE>
<CAPTION>
AS OF OR FOR THE
SIX MONTHS AS OF OR FOR THE YEARS ENDED
ENDED MARCH 31 SEPTEMBER 30,
1998 1997 1997 1996 1995
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Interest income $ 1,778 $ 1,784 $ 3,568 $ 3,459 $ 3,214
Interest expense 819 869 1,719 1,766 1,605
-------- -------- -------- -------- --------
Net interest income 959 915 1,849 1,693 1,609
Provision for loan losses 22 42 116 76 217
Noninterest income 90 132 268 200 187
Net interest income after provision for loan losses 937 873 1,733 1,617 1,392
Noninterest expense (1) 825 844 1,753 2,006 1,454
-------- -------- -------- -------- --------
Income (loss) before income taxes
and cumulative effect of accounting change 202 161 248 (189) 125
Income tax expense (benefit) 88 50 95 (78) 52
-------- -------- -------- -------- --------
Net income (loss) before cumulative effect of
changes accounting principle 114 111 153 (111) 73
Cumulative effect of change in accounting
principle (7) -- -- -- -- --
-------- -------- -------- -------- --------
Net income (loss) $ 114 $ 111 $ 153 $ (111) $ 73
======== ======== ======== ======== ========
BALANCE SHEET DATA:
Total assets $ 46,973 $ 47,847 $ 47,302 $ 46,894 $ 45,813
Loans receivable, gross 34,115 37,663 35,853 36,974 36,585
Allowance for possible loan losses 238 238 209 218 217
Investment securities 7,671 4,827 5,382 4,902 4,082
Deposits 42,806 44,047 43,119 42,523 41,516
Borrowings -- -- -- 500 500
Total shareholders' equity 3,315 3,082 3,167 2,971 3,083
PER SHARE DATA:
Net income (loss) (2):
Basic $ 0.42 $ 0.43 $ 0.58 ($ 0.42) $ 0.28
Diluted $ 0.37 $ 0.37 $ 0.54 ($ 0.42) $ 0.28
</TABLE>
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
RESULTS OF OPERATIONS:
Interest income $ 2,601 $ 2,747
Interest expense 1,282 1,359
-------- --------
Net interest income 1,319 1,388
Provision for loan losses 55 14
Noninterest income 182 179
Net interest income after provision for loan losses 1,264 1,374
Noninterest expense (1) 1,146 1,116
-------- --------
Income (loss) before income taxes
and cumulative effect of accounting change 300 437
Income tax expense (benefit) 123 199
-------- --------
Net income (loss) before cumulative effect of
changes accounting principle 177 128
Cumulative effect of change in accounting
principle (7) (22) --
-------- --------
Net income (loss) $ 155 $ 238
======== ========
BALANCE SHEET DATA:
Total assets $ 41,501 $ 38,671
Loans receivable, gross 32,709 31,981
Allowance for possible loan losses 77 39
Investment securities 4,033 2,916
Deposits 38,105 35,245
Borrowings -- --
Total shareholders' equity 3,011 2,857
PER SHARE DATA:
Net income (loss) (2):
Basic $ 0.67 $ 0.78
Diluted $ 0.67 $ 0.78
</TABLE>
-22-
<PAGE> 25
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Cash dividends paid (8) - - - - - - -
Book value (3) $11.98 $11.76 $11.73 $11.33 $11.76 $11.47 $9.31
Weighted Average Shares Outstanding:
Basic 272,183 262,305 262,569 262,305 262,305 262,305 306,747
Diluted 305,150 304,189 285,680 262,305 262,305 262,305 306,747
SELECTED FINANCIAL RATIOS(4):
Return on average assets(5) 0.49% 0.46% 0.32% (0.24)% 0.17% 0.39% 0.63%
Return on average shareholders' equity (5) 7.00% 7.11% 4.86% (3.46%) 2.44% 5.06% 8.25%
Net interest margin (5)(6) 4.39% 4.15% 4.25% 3.96% 3.75% 3.44% 3.79%
Cash dividends paid per share as a
percentage of basic income per share - - - - - - -
Equity to total assets 7.06% 6.44% 6.69% 6.34% 6.73% 7.26% 7.39%
Allowance for loan losses to total gross loans 0.70% 0.63% 0.58% 0.59% 0.60% 0.24% 0.12%
Non-performing assets to total assets 1.60% 3.09% 1.71% 2.33% 1.47% 1.61% 0.30%
Net charge-offs (recoveries) as a percentage
of average loans -0.02% 0.06% 0.33% 0.20% 0.22% 0.05% 0.02%
Other real estate owned as a percentage of
total assets 0.51% 1.16% 0.43% 0.63% 0.60% 0.44% 0.25%
</TABLE>
- ---------------------------
(1) Noninterest expense for the year ended September 30, 1996 includes
Cargill's share of a special assessment of $272,000 imposed on all
financial institutions with deposits insured by Savings Association
Insurance Fund ("SAIF").
(2) Reflects the adoption in 1997 of SFAS No. 128, "Earnings Per Share."
Prior periods have been restated.
(3) Common shareholders' equity divided by total shares of common stock
outstanding.
(4) With the exception of end-of-period ratios, all ratios are based on
average daily balances.
(5) Selected financial ratios for the six months ended March 31, 1998 and
1997 are presented on an annual basis.
(6) Net interest income on a tax equivalent basis divided by average
interest earning assets. Net interest income on a tax equivalent basis
is based on the federal statutory rate of 34% and applicable state tax
rates.
(7) Represents the adoption of Financial Accounting Standard No. 109,
"Accounting of Income Taxes."
(8) In each of the fiscal years ended September 30, 1993 to 1998, Cargill
issued a 5% stock dividend.
-23-
<PAGE> 26
SELECTED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION (UNAUDITED)
The unaudited selected pro forma condensed combined financial
information set forth below gives effect to the Merger under the
pooling-of-interests accounting method. The selected pro forma condensed
combined operating data treats the Merger as if it had been consummated at the
beginning of the respective periods indicated, and the selected pro forma
condensed combined balance sheet data treats the Merger as if it had been
consummated at the dates indicated. The pro forma condensed combined per common
share data gives effect to the assumed issuance of 360,080 shares of Westbank
Common Stock based on an Exchange Ratio of 1.3008. The unaudited pro forma
historical condensed combined year-end statement of financial condition
information reflects Westbank and Cargill at their year-end reporting periods of
December 31 and September 30, respectively, and for the annual periods then
ended for the statement of operations information. Financial information for six
months ended June 30, 1998 and 1997 combine Westbank for such reporting periods
with Cargill interim results for the six months ended March 31, 1998 and 1997.
Following the Merger, the Continuing Corporation fiscal year, like that of
Westbank, will end on December 31. See "Pro Forma Condensed Combined Financial
Statements (Unaudited)."
The selected pro forma condensed combined financial information set
forth below is presented for illustrative purposes only and is not necessarily
indicative of the operating results or financial position that would have
occurred if the Merger had been consummated at the dates assumed herein, nor is
it necessarily indicative of future operating results or financial position. The
selected pro forma condensed combined financial information does not give effect
to the anticipated merger costs, expense savings and revenue enhancement
opportunities that could result from the Merger or any other items or income or
expense which may result from the Merger. See "Pro Forma Condensed Combined
Financial Statements (Unaudited)." As a result, the pro forma combined financial
information of the continuing corporation at the Effective Time and thereafter
may be significantly different from the pro forma financial information
presented herein.
SUMMARY PRO FORMA FINANCIAL DATA (1)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
AS OF OR FOR THE SIX OF OR FOR THE YEARS
MONTHS END ENDED DECEMBER 31
---------- -----------------
1998 1997 1997 1996 1995
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C>
Total assets $397,895 $355,743 $355,567 $331,803 $299,590
Loans receivable, net 287,261 271,304 271,116 260,346 241,375
Investment securities 69,214 51,677 59,973 40,584 39,651
Deposits 347,458 318,409 314,679 298,014 269,478
Borrowed funds 18,552 10,778 11,884 9,269 7,677
Shareholders' equity 28,984 24,334 24,658 21,532 19,839
RESULTS OF OPERATIONS:
Interest income $ 13,884 $ 12,910 $ 26,724 $ 24,059 $ 23,475
Interest expense 6,380 5,814 12,091 10,524 10,145
-------- -------- -------- -------- --------
Net interest income 7,504 7,096 14,633 13,535 13,330
Provision for loan losses 41 232 306 944 2,907
-------- -------- -------- -------- --------
Net interest income after provision
for loan losses 7,463 6,864 14,327 12,591 10,423
Noninterest income 1,296 1,123 2,529 2,340 3,104
Noninterest expense (2) 5,738 5,460 11,066 11,278 9,969
-------- -------- -------- -------- --------
Income before income taxes 3,021 2,527 5,790 3,653 3,558
Income taxes 1,183 1,042 2,406 1,516 1,132
-------- -------- -------- -------- --------
Net income $ 1,838 $ 1,485 $ 3,384 $ 2,137 $ 2,426
======== ======== ======== ======== ========
</TABLE>
-24-
<PAGE> 27
<TABLE>
<S> <C> <C> <C> <C> <C>
COMMON SHARE DATA (3)(4):
Basic income per share $ .45 $ .39 $ .88 $ .59 $ .69
Diluted income per share $ .43 $ .38 $ .85 $ .57 $ .67
SELECTED FINANCIAL RATIOS (5):
Return on average assets (6) 1.00% .88% .97% .68% .81%
Return on average shareholders' equity (6) 12.93% 12.58% 13.73% 9.81% 12.29%
Net interest margin (6) 4.31% 4.45% 4.45% 4.62% 4.78%
Equity to total assets 7.38% 6.84% 7.57% 6.85% 6.94%
Core (leverage) capital ratio at
period end 7.26% 6.86% 7.55% 6.88% 6.92%
Total risk-based capital ratio
at period end 12.75% 11.81% 12.67% 11.92% 11.37%
Allowance for loan losses to total gross loans .94% 1.02% 1.11% 1.04% 1.62%
Nonperforming assets to total assets .38% .91% .61% 1.14% 2.89%
</TABLE>
- --------------------
(1) The information reflects Cargill's historical financial data as of or for
the six months ended March 31, 1998 and 1997 and as of or for the years
ended September 30, 1997, 1996, 1995.
(2) Noninterest expense for the year ended December 31, 1996 included
Cargill's share of a special assessment imposed on all financial
institutions with deposits insured by SAIF of $272,000.
(3) Westbank pro forma combined basic and diluted income per share represents
historical net income available to common stockholders for Westbank and
Cargill combined on the assumption that Westbank and Cargill had been
combined for the periods presented on a pooling-of-interests basis,
divided by the number of basic weighted average shares (for basic income
per share) and diluted weighted average shares. Diluted income per share
includes the effect of potentially dilutive securities such as stock
options, as applicable, of Westbank Common Stock which would have been
issued and outstanding assuming the Merger had been completed at the
beginning of the period based on an Exchange ratio of 1.3008 shares of
Westbank Common Stock for each share of Cargill Common Stock.
(4) Reflects the adoption in 1997 of SFAS No. 128, "Earnings Per Share." Prior
periods have been restated.
(5) With the exception of end-of-period ratios, all ratios are based on
average daily balances.
(6) Selected financial ratios for the six months ended June 30, 1998 and 1997,
are presented on an annual basis.
-25-
<PAGE> 28
PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS (UNAUDITED)
The pro forma condensed combined balance sheet as of June 30, 1998, and
the related pro forma condensed combined statements of income for the six months
ended June 30, 1998 and 1997, and for the years ended December 31, 1997, 1996
and 1995 give effect to the exchange of 100% of the outstanding Cargill Common
Stock for Westbank Common Stock. The pro forma information is based on the
historical consolidated financial statements, including the notes thereto, of
Westbank that are incorporated by reference into this Proxy
Statement-Prospectus. See "Information Incorporated by Reference" and "Westbank
Selected Consolidated Financial Information" and the historical consolidated
financial statements of Cargill, including the notes thereto, included elsewhere
herein. See "Index to Cargill Consolidated Financial Statements" and "Cargill
Selected Consolidated Financial Information". The unaudited pro forma historical
combined income statement information for the years presented reflects Westbank
for its year ended December 31, combined with Cargill income statement
information for its fiscal year ended September 30, immediately preceding the
applicable Westbank year end. Financial information for the six months ended
June 30, 1998 and 1997 combine Westbank for such reporting periods with Cargill
interim results for the six months ended March 31, 1998 and 1997, respectively.
The pro forma information set forth below gives effect to the Merger
under the pooling-of-interests method of accounting. See "THE MERGER- Accounting
Treatment." The pro forma condensed combined statements of income give effect to
the Merger as if it had occurred at the beginning of each period presented. The
pro forma condensed combined balance sheets give effect to the Merger as if it
had occurred as of the balance sheet date. The pro forma combined per share data
gives effect to the assumed issuance of 360,080 shares of Westbank Common Stock,
based on an Exchange Ratio of 1.3008, which would result in 4,127,393 shares of
Westbank Common Stock outstanding following the Merger based upon June 30, 1998
pro forma information. See "Notes to Pro Forma Condensed Combined Financial
Statements (Unaudited)."
This pro forma information may not necessarily be indicative of the
operating results or financial position that would have actually occurred if the
Merger had been consummated at the beginning of each period presented, nor is it
necessarily indicative of future operating results or financial position. The
pro forma information does not give effect to the anticipated merger costs or to
the anticipated expense savings and revenue enhancements that could result from
the Merger or any other items of income or expense which may result from the
Merger. See "Notes to Pro Forma Condensed Combined Financial Statements
(Unaudited)."
-26-
<PAGE> 29
WESTBANK CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET(1)
AS OF JUNE 30, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
ADJUSTMENTS
WESTBANK CARGILL(*) DEBIT CREDIT COMBINED
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 26,229 $ 3,300 29,529
Investment securities
available for sale 28,446 2,549 30,995
Investment securities held
to maturity 33,097 5,122 38,219
Loans, net of allowance for
possible loan losses 253,384 33,877 287,261
Other assets 9,766 2,125 11,891
-------- -------- --------
Total assets $350,922 $ 46,973 $397,895
======== ======== ========
LIABILITIES
Deposits $304,652 $ 42,806 $347,458
Securities sold under
agreements to repurchase
and other borrowings 18,552 -- 18,552
Other liabilities 1,674 852 375(4c) 2,901
-------- -------- ------ --------
Total liabilities 324,878 43,658 375 368,911
SHAREHOLDERS' EQUITY(5) (6):
Common stock 7,535 3 8,255
Additional paid-in capital 9,748 1,700 $ 760(4AB) 717(4B) 10,688
Retained earnings 8,683 1,654 375(4C) 9,962
Accumulated other comprehensive
income 78 1 79
Treasury stock -- (43) 43(4A)
-------- -------- --------- --------- --------
Total shareholders' equity 26,044 3,315 1,135 760 28,984
-------- -------- --------- --------- --------
Total liabilities and
shareholders' equity $350,922 $ 46,973 $ 1,135 $ 1,135 $397,895
======== ======== ======== ======== ========
Leverage capital ratio 7.40% 7.06% 7.26%
Tier 1 risk based capital ratio 11.57 13.92 11.65
Total risk-based capital ratio 12.69 14.92 12.75
</TABLE>
(*) At March 31, 1998
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
-27-
<PAGE> 30
WESTBANK CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (1)
SIX MONTHS ENDED JUNE 30, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------
WESTBANK CARGILL(*) COMBINED
<S> <C> <C> <C>
Interest income:
Loans $ 10,131 $ 1,507 $ 11,638
Investment securities 1,826 231 2,057
Other 149 40 189
---------- ---------- ----------
Total interest income 12,106 1,778 13,884
---------- ---------- ----------
Interest expense:
Deposits 5,315 819 6,134
Borrowings 246 -- 246
---------- ---------- ----------
Total interest expense 5,561 819 6,380
---------- ---------- ----------
Net interest income 6,545 959 7,504
Provision for loan loss 19 22 41
---------- ---------- ----------
Net interest income after provision
for loan losses 6,526 937 7,463
---------- ---------- ----------
Non-interest income 1,206 90 1,296
Non-interest expense:
Salaries and employees benefits 2,455 349 2,804
Occupancy expense 420 106 526
Furniture and equipment expense 376 49 425
Other operating expense 1,662 321 1,983
---------- ---------- ----------
Total operating expenses 4,913 825 5,738
---------- ---------- ----------
Income before income taxes 2,819 202 3,021
Income taxes 1,095 88 1,183
---------- ---------- ----------
Net income(3): $ 1,724 $ 114 $ 1,838
========== ========== ==========
Income per share(2):
Basic $ .46 $ .42 $ .45
Diluted $ .45 $ .37 $ .43
Weighted average shares(2):
Basic 3,744,757 272,183 4,098,813
Diluted 3,849,885 305,150 4,246,824
</TABLE>
(*) Six months ended March 31, 1998
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
-28-
<PAGE> 31
WESTBANK CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME(1)
SIX MONTHS ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------
WESTBANK CARGILL (*) COMBINED
<S> <C> <C> <C>
Interest income:
Loans $ 9,512 $ 1,586 $ 11,098
Investment securities 1,462 169 1,631
Other 152 29 181
---------- ---------- ----------
Total interest income 11,126 1,784 12,910
---------- ---------- ----------
Interest expense:
Deposits 4,805 869 5,674
Borrowings 140 -- 140
---------- ---------- ----------
Total interest expense 4,945 869 5,814
---------- ---------- ----------
Net interest income 6,181 915 7,096
Provision for loan loss 190 42 232
---------- ---------- ----------
Net interest income after provision
for loan losses 5,991 873 6,864
---------- ---------- ----------
Non-interest income 991 132 1,123
Non-interest expense:
Salaries and employee benefits 2,267 364 2,631
Occupancy expense 446 108 554
Furniture and equipment expense 327 51 378
Other operating expense 1,576 321 1,897
---------- ---------- ----------
Total operating expenses 4,616 844 5,460
---------- ---------- ----------
Income before income taxes 2,366 161 2,527
Income taxes 992 50 1,042
---------- ---------- ----------
Net income(3): $ 1,374 $ 111 $ 1,485
========== ========== ==========
Income per share(2):
Basic $ .40 $ .43 $ .39
Diluted $ .39 $ .37 $ .38
Weighted average shares(2):
Basic 3,473,046 262,305 3,814,252
Diluted 3,543,085 304,189 3,938,774
</TABLE>
(*) Six months ended March 31, 1997
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
-29-
<PAGE> 32
WESTBANK CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (1)
YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------
WESTBANK CARGILL(*) COMBINED
<S> <C> <C> <C>
Interest income:
Loans $ 19,735 $ 3,158 $ 22,893
Investment securities 3,159 410 3,569
Other 262 -- 262
---------- ---------- ----------
Total interest income 23,156 3,568 26,724
---------- ---------- ----------
Interest expense:
Deposits 10,086 1,714 11,800
Borrowings 286 5 291
---------- ---------- ----------
Total interest expense 10,372 1,719 12,091
---------- ---------- ----------
Net interest income 12,784 1,849 14,633
Provision for loan loss 190 116 306
---------- ---------- ----------
Net interest income after
provision for loan losses 12,594 1,733 14,327
---------- ---------- ----------
Non-interest income 2,261 268 2,529
Non-interest expense:
Salaries and employee benefits 4,730 731 5,461
Occupancy expense 633 147 80
Furniture and equipment expense 653 133 786
Other operating expense 3,297 742 4,039
---------- ---------- ----------
Total operating expenses 9,313 1,753 11,066
---------- ---------- ----------
Income before income taxes 5,542 248 5,790
Income taxes 2,311 95 2,406
---------- ---------- ----------
Net income(3) $ 3,231 $ 153 $ 3,384
========== ========== ==========
Income per share(2):
Basic $ .93 $ .58 $ .88
Diluted $ .89 $ .54 $ .85
Weighted average shares(2):
Basic 3,487,160 262,569 3,828,710
Diluted 3,612,919 285,680 3,984,351
</TABLE>
(*) Year ended September 30, 1997
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
-30-
<PAGE> 33
WESTBANK CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (1)
YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------
WESTBANK CARGILL(*) COMBINED
<S> <C> <C> <C>
Interest income:
Loans $ 17,942 $ 3,069 $ 21,011
Investment securities 2,383 390 2,773
Other 275 -- 275
---------- ---------- ----------
Total interest income 20,600 3,459 24,059
---------- ---------- ----------
Interest expense:
Deposits 8,503 1,760 10,263
Borrowings 255 6 261
---------- ---------- ----------
Total interest expense 8,758 1,766 10,524
---------- ---------- ----------
Net interest income 11,842 1,693 13,535
Provision for loan loss 868 76 944
---------- ---------- ----------
Net interest income after
provision for loan loss 10,974 1,617 12,591
---------- ---------- ----------
Non-interest income 2,140 200 2,340
Non-interest expense:
Salaries and employee benefits 4,376 715 5,091
Occupancy expense 648 144 792
Furniture and equipment expense 618 137 755
Other operating expense 3,630 1,010 4,640
---------- ---------- ----------
Total operating expenses 9,272 2,006 11,278
---------- ---------- ----------
Income (loss) before income taxes (benefit) 3,842 (189) 3,653
Income taxes (benefit) 1,594 (78) 1,516
---------- ---------- ----------
Net income (loss)(3) $ 2,248 $ (111) $ 2,137
========== ========== ===========
Income loss per share(2):
Basic $ .68 $ (.42) .59
Diluted $ .66 $ (.42) $ .57
Weighted average shares(2):
Basic 3,285,093 262,305 3,626,299
Diluted 3,404,242 262,305 3,745,448
</TABLE>
(*) Year ended September 30, 1996
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
-31-
<PAGE> 34
WESTBANK CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (1)
YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------
WESTBANK CARGILL(*) COMBINED
<S> <C> <C> <C>
Interest income:
Loans $ 17,681 $ 2,805 $ 20,486
Investment securities 2,312 409 2,721
Other 268 -- 268
---------- ---------- ----------
Total interest income 20,261 3,214 23,475
---------- ---------- ----------
Interest Expense:
Deposits 8,269 1,602 9,871
Borrowings 271 3 274
---------- ---------- ----------
Total interest expense 8,540 1,605 10,145
---------- ---------- ----------
Net interest income 11,721 1,609 3,330
Provision for loan loss 2,690 217 2,907
---------- ---------- ----------
Net interest income after
provision for loan losses 9,031 1,392 10,423
---------- ---------- ----------
Non-interest income 2,917 187 3,104
Non-interest expense:
Salaries and employee benefits 3,845 597 4,442
Occupancy expense 513 106 619
Furniture and equipment expense 453 114 567
Other operating expense 3,704 637 4,341
---------- ---------- ----------
Total operating expenses 8,515 1,454 9,969
---------- ---------- ----------
Income before income taxes 3,433 125 3,558
Income taxes 1,080 52 1,132
---------- ---------- ----------
Net income (3) $ 2,353 $ 73 $ 2,426
========== ========== ==========
Income per share(2):
Basic $ .74 $ .28 $ .69
Diluted $ .72 $ .28 $ .67
Weighted average shares(2):
Basic 3,181,742 262,305 3,522,948
Diluted 3,271,875 262,305 3,613,081
</TABLE>
(*) Year ended September 30, 1995
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
-32-
<PAGE> 35
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(1) The unaudited pro forma condensed combined balance sheet was
prepared assuming that the Merger had been consummated as of June 30, 1998, and
the pooling-of-interests method had been applied in accounting for the Merger.
Pro forma condensed combined income statement information has been prepared
assuming that the Merger had been consummated as of the beginning of each period
presented. The unaudited pro forma historical combined income statement
information for the periods presented reflects Westbank's income statement
information for its fiscal year ended December 31, combined with Cargill's
income statement information for its fiscal year ended September 30, immediately
preceding the applicable Westbank year end. Financial information for the six
months ended June 30, 1998 and 1997 combine Westbank for such reporting periods
with Cargill interim results for the six months ended March 31, 1998 and 1997,
respectively.
(2) Pro forma shares of common stock are based on the number of
Westbank shares outstanding plus 360,080 of additional shares assumed to be
issued in the Merger in exchange for outstanding Cargill Common Stock based on
an Exchange Ratio of 1.3008, assuming the Merger had been completed at the
beginning of the period.
Westbank pro forma combined basic and diluted earnings per share
represents historical net income available to common stockholders for Westbank
and Cargill combined on the assumption that Westbank and Cargill had been
combined for the periods presented on a pooling-of-interests basis, divided by
the number of basic weighted average shares (for basic income per share) and
diluted weighted average shares. Diluted income per share includes the effect of
potentially dilutive securities such as stock options, as applicable, of
Westbank Common Stock which would have been issued and outstanding assuming the
Merger had been completed at the beginning of the period based on an Exchange
Ratio of 1.3008 shares of Westbank Common Stock for each share of Cargill Common
Stock. Per common share amounts assuming dilution were computed assuming the
exercise of stock options and repurchase by the respective companies of Common
Stock with the proceeds resulting from such exercise using the average market
price per share of Westbank Common Stock or Cargill Common Stock, as
appropriate, for the applicable period.
To the extent cash is paid to Cargill shareholders in lieu of
fractional shares or due to dissenting shareholders, cash, common stock
outstanding and common shareholders' equity would be reduced. The respective
managements of the parties expect that the cash to be issued at the time of
surrender of certificates will not be considered significant. Accordingly, all
fractional shares of Westbank Common Stock have been included in the pro forma
share data.
(3) The pro forma financial statements do not reflect payments for
anticipated merger costs (legal, accounting, tax, regulatory and severance) and
integration costs (conversion, promotional material, forms, etc), which are
estimated to be $375,000, net of taxes. The pro forma information also does not
reflect potential expense savings or revenue enhancements expected to be
realized subsequent to the consummation of the Merger.
(4) The following are pro forma adjustments reflected in the "Pro Forma
Adjustments" column of the Pro Forma Condensed Combined Balance Sheet
(Unaudited). (Dollar amounts are in thousands.)
(A) Represents the retirement of Cargill treasury stock.
Additional paid-in-capital....................$43
Treasury stock.....................................$43
(B) Represents the issuance of shares of Westbank Common
Stock in exchange for outstanding Cargill Common
Stock based on an assumed ratio of 1.3008.
Additional paid-in-capital..................$717
Common stock......................................$717
-33-
<PAGE> 36
(C) Represents the reduction of shareholders' equity for Merger
sscosts
Retained Earnings......................$375
Other Liabilities.......................$375
(5) Summary of Transaction
A summary of the pro forma entries above follows (dollar amounts are in
thousands):
<TABLE>
<CAPTION>
Shares Amount
<S> <C> <C>
Westbank Common Stock exchanged for outstanding
Cargill Common Stock (276,814 shares at 1.3008
Exchange Ratio) 360,080 @2.00 $720
Par value
Less par value of Cargill common stock ( 3)
-------
Subtotal 717
Retirement of Cargill treasury stock 7,349 @cost 43
------
Total decrease in additional paid-in capital $760
======
</TABLE>
(6) The authorized, issued and outstanding share information on June
30, 1998 of Westbank and Cargill, and on a combined basis assuming consummation
of the Merger, is as follows:
<TABLE>
<CAPTION>
CARGILL
COMMON SHARES WESTBANK CARGILL ADJUSTED COMBINED
<S> <C> <C> <C> <C>
Par value $ 2.00 $ 0.01 -- $ 2.00
Authorized 9,000,000 750,000 -- 9,000,000
Issued 3,767,313 284,163 (a) 360,080 (b) 4,127,393
Outstanding 3,767,313 276,814 360,080 (b) 4,127,393
CARGILL
PREFERRED SHARES WESTBANK CARGILL ADJUSTED COMBINED
Par value $ 5.00 -- -- $ 5.00
Authorized 100,000 250,000 -- 100,000
Issued -- -- -- --
Outstanding -- -- -- --
</TABLE>
(a) Prior to the retirement of 7,349 common shares of Cargill treasury
stock.
(b) Assumes exchange ratio of 1.3008.
-34-
<PAGE> 37
THE MEETING
MATTERS TO BE DISCUSSED AT THE SPECIAL MEETING
This Proxy Statement-Prospectus is being furnished to holders of shares
of Cargill Common Stock in connection with the solicitation of proxies from such
shareholders for use at the Special Meeting.
At the Special Meeting or any adjournments or postponements thereof,
holders of shares of Cargill Common Stock will be asked to approve and adopt the
Merger Agreement and the consummation of the transactions contemplated thereby,
including the Merger.
THE BOARD OF DIRECTORS OF CARGILL HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE MERGER.
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM
The Cargill Board has fixed the close of business on November 5, 1998
as the record date (the "Record Date"). Only the holders of record of shares of
Cargill Common Stock at the close of business on the Record Date will be
entitled to notice of and to vote at the Special Meeting and any adjournments or
postponements thereof. On the Record Date, _________ shares of Cargill Common
Stock were outstanding and entitled to vote. The presence in person or by proxy
of the holders of one-third of the issued and outstanding shares of Cargill
Common Stock entitled to vote is required to constitute a quorum at the Special
Meeting. Shares of Cargill Common Stock for which proxies or ballots have been
received but with respect to which holders of shares have abstained with respect
to the approval and adoption of the Merger Agreement (whether as a broker
non-vote or otherwise) will be counted as present for purposes of determining
the presence or absence of a quorum for the transaction of business at the
Special Meeting.
SOLICITATION OF PROXIES
Proxies in the form enclosed are being solicited by and on behalf of
the Cargill Board. Shareholders are requested to complete, date, sign and
promptly return the accompanying proxy card in the enclosed envelope. Shares
represented by a properly executed proxy received prior to the vote at the
Special Meeting and not revoked will be voted at the Special Meeting as directed
in the proxy. IF A PROXY IS SUBMITTED AND NO DIRECTIONS ARE GIVEN, THE PROXY
WILL BE VOTED FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY.
In addition to solicitation by use of the mails, Cargill may retain the
services of Chase Mellon Shareholder Services, a professional proxy solicitation
firm to solicit proxies at an anticipated cost of $3,500 plus reimbursement for
out-of-pocket expenses. Further, proxies may be solicited by
-35-
<PAGE> 38
directors, officers and employees of Cargill in person or by telephone, telegram
or other means of communication. Such directors, officers and employees will not
be additionally compensated, but may be reimbursed for out-of-pocket expenses in
connection with such solicitation. Arrangements will be made with custodians,
nominees and fiduciaries for forwarding of proxy solicitation materials to
beneficial owners of Cargill Common Stock held of record by such persons, and
Cargill may reimburse such custodians, nominees and fiduciaries for reasonable
expenses incurred in connection therewith.
The persons named as proxies by a Cargill shareholder may propose and
vote for one or more adjournments or postponements of the Special Meeting to
permit further solicitation of proxies in favor of the proposal to be considered
at the Special Meeting. A proxy voted against the Merger Agreement will not be
voted in favor of any adjournment or postponement of the Special Meeting.
A holder of record of Cargill Common Stock may revoke a proxy by filing
an instrument of revocation with the Secretary of Cargill. Such shareholder may
also revoke a proxy by filing a duly executed proxy bearing a later date, or by
appearing at the Special Meeting in person and notifying the Secretary at the
Special Meeting. Any shareholder of record attending the Special Meeting may
vote in person whether or not a proxy has been previously given, but the mere
presence (without notifying the Secretary) of a shareholder at the Special
Meeting will not constitute revocation of a previously given proxy.
REQUIRED VOTE
The affirmative vote of the holders of two-thirds (___________shares)
of the outstanding shares of Cargill Common Stock is required for approval of
the Merger Agreement and the transactions contemplated thereby. Abstentions and
broker non-votes will have the same effect as votes against the Merger
Agreement. Shareholders of Cargill are entitled to one vote at the Special
Meeting for each share of Cargill Common Stock held of record at the close of
business on the Record Date.
At the close of business on the Record Date, ____________ shares of
Cargill Common Stock were outstanding and entitled to vote. Cargill directors
and executive officers who beneficially own a total of [ ] shares of
Cargill Common Stock, representing approximately ____% of the shares of Cargill
Common Stock issued and outstanding on the Record Date, have entered into
agreements (the "Cargill Shareholders' Agreements"), pursuant to which such
shareholders have agreed to certain restrictions on their respective shares of
Cargill Common Stock. Specifically, such shareholders have agreed, with respect
to all presently owned or after-acquired stock, (a) to vote such stock in favor
of the Merger and against any other acquisition transaction with a party other
than Westbank or its affiliates, and (b) generally not to sell, assign,
transfer, encumber or otherwise dispose of such stock. The Cargill Shareholders'
Agreements will remain in effect until the earlier of the consummation of the
Merger or the termination of the Merger Agreement in accordance with its terms.
Assuming that all of the shares subject to the Cargill Shareholders' Agreements
are in fact voted in favor of the Merger Agreement, the vote of holders of
approximately ________ additional shares of Cargill Common Stock, representing
approximately ___% of the shares of Cargill Common Stock issued and outstanding
on the Record Date, will be required to approve and adopt the Merger Agreement
and the transactions contemplated thereby.
-36-
<PAGE> 39
SOLICITATION EXPENSES
Cargill will pay its own expenses in connection with the solicitation of
proxies.
BENEFICIAL OWNERSHIP OF CARGILL COMMON STOCK
The following table sets forth certain information regarding beneficial
ownership of Cargill Common Stock as of November 5, 1998 by (i) each person
known by Cargill to own beneficially more than 5% of Cargill Common Stock, (ii)
each director of Cargill, and (iii) all directors and executive officers of
Cargill as a group. The number of shares beneficially owned by such persons is
determined according to rules of the SEC, and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such rules,
beneficial ownership includes any shares as to which the individual or entity
has sole or shared voting power or investment power, and also any shares that
the individual or entity has the right to acquire within 60 days of November 5,
1998 through the exercise of an option, conversion feature or similar right.
Except as noted below, each holder has sole voting and investment power with
respect to shares of Cargill Common Stock listed as beneficially owned by such
person or entity.
<TABLE>
<CAPTION>
NAME AND ADDRESS
OF BENEFICIAL OWNER (1) SHARES BENEFICIALLY OWNED PERCENT OF CLASS(8)
- ----------------------- ------------------------- -------------------
<S> <C> <C>
Lawrence J. Bellerose
110 Church Street
Putnam, CT 06260-9500 [21,347] %
Philip H. McLaughlin & Edward B.
McLaughlin, Partners
The McLaughlin Family Ltd Partnership
Box 3363
Vero Beach, FL 32964-3363 [23,625]
Raymond P. Faucher, Sr. (Director,
President and Chief Executive Officer) (2) [23,375]
John J. Maher (Director) (3) [19,262]
H. Dexter Young (Director) (4) [16,502]
Frederick J. Witkowski (Vice President
and Director)(5) [15,948]
Daniel S. Rovero (Director) [14,406]
Shawn C. Donohue (Director) [1,014] *
Ellis H. Paine (Director) [ 531] *
----------- ----------
Total owned by all directors and executive
officers as a group (7 persons) (6) [ 91,018] %
============ ==========
</TABLE>
- -----------------
Less than 1%.
(1) Unless otherwise indicated, the address of each beneficial
owner is c/o Cargill, 163 Providence Street, Putnam, CT 06260.
(2) Includes 8,039 shares issuable upon exercise of options that
are exercisable within 60 days of the Record Date, 407 shares
held in the name of R&L Realty in which Mr. Faucher is a
partner and 5,391 shares owned individually by Mr. Faucher's
spouse. Mr. Faucher disclaims beneficial ownership of the
shares held by his spouse.
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<PAGE> 40
(3) Includes 11,465 shares issuable upon exercise of options that
are exercisable within 60 days of the Record Date.
(4) Includes 819 shares owned individually by Mr. Young's spouse.
Mr. Young disclaims beneficial ownership of the shares held by
his spouse.
(5) Includes 8,039 shares issuable upon exercise of options that
are exercisable within 60 days of the Record Date and 4,463
shares owned individually by Mr. Witkowski's spouse. Mr.
Witkowski disclaims beneficial ownership of the shares held by
his spouse.
(6) Included 27,543 shares issuable upon exercise of options that
are exercisable within 60 days of the Record Date.
(7) Percentages are based upon the [ ] shares of Cargill
Common Stock outstanding and entitled to vote on November 5,
1998.
APPRAISAL RIGHTS AND DISSENTING SHAREHOLDERS
Shareholders of Cargill who do not vote to approve and adopt the Merger
Agreement and who comply with the requirements of Section 262 of Title 8 of the
Delaware General Corporation Law (the "Dissenters' Rights Statute"), a copy of
which is attached to this Proxy Statement-Prospectus as Appendix D, will be
entitled to dissenters' rights. Shareholders of Westbank will not vote and have
no dissenters' rights in connection with the Merger.
If the Merger is consummated, a shareholder of Cargill who does not
vote in favor of the approval and adoption of the Merger Agreement, and who
follows the statutory provisions of the Dissenters' Rights Statute summarized
herein, may require Cargill to pay the fair value of his or her shares of
Cargill Common Stock, determined as provided in the Dissenters' Rights Statute.
A shareholder of Cargill who desires to pursue his or her dissenter'
rights must deliver to Cargill, BEFORE the taking of the vote on the Merger
Agreement, a written notice of intent to demand payment for his or her shares if
the Merger is effectuated. Notice of an intention to demand payment should be
addressed to the Secretary of Cargill. The shareholder must then not vote any
shares in favor of the approval and adoption of the Merger Agreement. A vote
against the approval and adoption of the Merger Agreement, whether by proxy or
in person at the Special Meeting, is not required to perfect a shareholder's
dissenters' rights, nor will a negative vote be considered a demand for payment
in and of itself without the prior delivery of the demand.
Only a holder of shares of Cargill Common Stock on the date of making
such written demand for appraisal who continuously holds such shares throughout
the Effective Time is entitled to seek appraisal. Demand for appraisal must be
executed by or for the shareholder of record, fully and correctly, as such
shareholder's name appears on their Cargill Common Stock certificates. If
Cargill Common Stock is owned of record in a fiduciary capacity, such as by a
trustee, guardian or custodian, the demand should be made in that capacity, and
if Cargill Common Stock is owned by record by more than one person, as in a
joint tenancy or tenancy in common, the demand should be made by or for all
owners of record. An authorized agent, including one or more joint owners, may
execute the demand for appraisal for a holder of record; however, such agent
must identify the record owner or owners and expressly disclose in such demand
that the agent is acting as agent for the record owner or owners of such shares.
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<PAGE> 41
A record holder, such as a broker who holds shares of Cargill Common
Stock as a nominee for beneficial owners, some of whom desire to demand
appraisal, must exercise appraisal rights on behalf of such beneficial owners
with respect to the shares of Cargill Common Stock held for such beneficial
owners. In such case, the written demand for appraisal should set forth the
number of shares of Cargill Common Stock covered by it. Unless a demand for
appraisal specifies a number of shares, such demand will be presumed to cover
all shares of Cargill Common Stock held in the name of such record owner.
BENEFICIAL OWNERS WHO ARE NOT RECORD OWNERS AND WHO INTEND TO EXERCISE APPRAISAL
RIGHTS SHOULD INSTRUCT THE RECORD OWNER TO COMPLY WITH THE STATUTORY
REQUIREMENTS WITH RESPECT TO THE EXERCISE OF APPRAISAL RIGHTS BEFORE THE DATE OF
THE SPECIAL MEETING.
Within ten (10) days after the Effective Time, Westbank is required to
send notice of the effectiveness of the Merger to each shareholder of Cargill
who prior to the Effective Time complied with the requirements of Section 262.
Within one hundred twenty (120) days after the Effective Time, Westbank
or any shareholder who has complied with the requirements of Section 262 may
file a petition in the Delaware Court of Chancery demanding a determination of
the fair value of the shares of Cargill Common Stock held by all shareholders
seeking appraisal. A dissenting shareholder must serve a copy of such a petition
on Westbank. If no petition is filed by either Westbank or a dissenting
shareholder within such one hundred twenty (120) day period, the rights of all
dissenting shareholders to appraisal shall cease. Cargill shareholders seeking
to exercise appraisal rights should not assume that Westbank will file a
petition with respect to the appraisal of the fair value of their shares or that
Westbank will initiate any negotiations with respect to the fair value of such
shares. Westbank is under no obligation to and has no present intention to take
any action in this regard. Accordingly, Westbank shareholders who wish to seek
appraisal of their shares should initiate all necessary action with respect to
the perfection of their appraisal rights within the time periods and in the
manner prescribed in Section 262. FAILURE TO FILE THE PETITION ON A TIMELY BASIS
WILL CAUSE THE SHAREHOLDER'S RIGHT TO AN APPRAISAL TO CEASE.
Within one hundred twenty (120) days after the Effective Time, any
shareholder who has complied with the provisions of Section 262 is entitled,
upon written request, to receive from Westbank a statement setting forth the
aggregate number of shares of Cargill Common Stock with respect to which demands
for appraisal have been received by Cargill and the number of holders of such
shares. Such statement must be mailed within ten (10) days after the written
request therefor has been received by Westbank or within ten (10) days after
expiration of the time for delivery of demands for appraisal under Section 262,
whichever is later.
The cost of the appraisal proceeding may be determined by the Delaware
Court of Chancery and assessed against the parties as the Court deems equitable
in the circumstances. Upon the application of a dissenting shareholder, the
court may order that all or a portion of the expenses incurred by any dissenting
shareholder in connection with the appraisal proceeding (including without
limitation reasonable attorneys' fees and the fees and expenses of experts) be
charged pro rata against the value of shares of Cargill Common Stock entitled to
appraisal. In the absence of such a determination or assessment, each party
bears its own expenses.
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Any shareholder who has fully demanded appraisal in compliance with
Section 262 will not, after the Effective Time, be entitled to receive payment
of dividends or other distributions on the Cargill Common Stock, except for
dividends or distributions payable to shareholders of record at a date prior to
the Effective Time.
A Cargill shareholder may withdraw a demand for appraisal and accept
the terms of the Merger at any time within sixty (60) days after the Effective
Time, or thereafter may withdraw such demand with the written approval of
Westbank. In the event an appraisal proceeding is properly instituted, such
proceeding may not be dismissed as to any shareholder without the approval of
the Delaware Court of Chancery, and any such approval may be conditioned on the
terms the Delaware Court of Chancery deems just.
IN VIEW OF THE COMPLEXITY OF THESE PROVISIONS OF DELAWARE GENERAL
CORPORATION LAW, ANY HOLDER OF THE CARGILL COMMON STOCK WHO IS CONSIDERING
EXERCISING APPRAISAL RIGHTS SHOULD CONSULT HIS OR HER LEGAL ADVISOR.
A Cargill shareholder who exercises dissenters' rights and receives
cash will recognize gain for federal income tax purposes, the tax rate on which
will depend upon the holding period for his or her Cargill Common Stock. The
exchange of shares for cash upon the exercise of dissenters' rights could be
treated as substantially equivalent to a dividend and, therefore, taxed as
ordinary income if the recipient of cash owns or constructively owns other
shares of Westbank Common Stock. See "THE MERGER--Certain Federal Income Tax
Consequences."
THE MERGER
GENERAL
This section of the Proxy Statement-Prospectus describes the material
terms and provisions of the proposed Merger, including the principal provisions
of the Merger Agreement, and related transactions. A copy of the Merger
Agreement is attached to this Proxy Statement-Prospectus as Appendix A. All
shareholders are urged to read the Merger Agreement in its entirety.
The Merger Agreement provides that, subject to the satisfaction or
waiver (where permissible) of certain conditions, which are described more fully
herein and therein, Cargill will be merged with and into Westbank. In connection
with the Merger, each outstanding share of Cargill Common Stock will be
converted into and become exchangeable for shares of Westbank Common Stock plus
cash in lieu of any fractional share of Westbank Common Stock (the "Exchange
Ratio"), as follows:
1. If the Westbank Market Value is greater than or equal to $13.07,
then 1.3008 fully paid and nonassessable shares of Westbank Common Stock will be
exchanged for one (1) share of Cargill Common Stock;
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<PAGE> 43
2. If the Westbank Market Value is less than $13.07 but greater than or
equal to $12.00, then the number of fully paid and nonassessable shares of
Westbank Common Stock (rounded to the nearest one ten-thousandth of a share) is
obtained by dividing (A) $17.00 per share by (B) the Westbank Market Value and
exchanging the resulting number with one (1) share of Cargill Common Stock; or
3. If the Westbank Market Value is less than $12.00, then 1.4167 fully
paid and nonassessable shares of Westbank Common Stock will be exchanged for one
(1) share of Cargill Common Stock. However, if Westbank's Market Value is less
than $12.00, the Board of Directors of Cargill may elect to, but is not required
to, terminate the Merger Agreement unless Westbank increases the exchange ratio
to (A) $17.00 per share divided by (B) the Westbank Market Value.
The Westbank Market Value is defined in the Merger Agreement as the
average of the closing prices of Westbank Common Stock on the NASDAQ National
Market System for each of the twenty (20) consecutive trading days ending on the
fifth trading day before the last required approval of a governmental entity is
obtained with respect to the transactions contemplated in the Merger Agreement,
without regard to any requisite waiting period in respect thereof, except if the
closing does not occur on or before the sixteenth day following the last
regulatory approval solely because of the non-expiration of waiting periods,
then it shall mean the date five (5) business days before the closing.
BACKGROUND OF THE MERGER
Like many Connecticut financial institutions, Cargill monitored the
consolidation of the banking industry during the 1990s. During 1997 and the
first half of 1998, Cargill focused on improving shareholder value as an
independent institution. However, in considering long-term objectives, the
Cargill Board noted that increasing industry consolidation and changes in
government regulation of interstate banking had significantly increased
competition within Cargill's market area.
In order to compete effectively in this environment, the Cargill Board
determined that it would be beneficial to expand the range of products and
services offered to Cargill's customers and to obtain the additional capital
resources that would enable it to do so. The Cargill Board discussed alternative
strategies to achieve these objectives, including the possibility of an
affiliation with another banking institution. The Board determined that an
affiliation, if properly structured, could not only enhance long-term
shareholder value by increasing the resources available to Cargill for expansion
of its franchise, but could also allow Cargill Bank to continue a form of
independent operation that would benefit its customers, suppliers, employees and
community. While its preference was for such a strategic alliance, the Cargill
Board recognized that it might also receive proposals, such as an offer to
acquire Cargill for cash, that would require the Board to determine whether the
interests of shareholders might be best served by a sale of Cargill.
Cargill engaged O&Co. in August, 1997 for professional advice in
identifying, developing and assessing potential strategic alliances with other
organizations. With the assistance of O&Co., the Cargill Board analyzed these
alternatives. In the fall of 1997, a confidential information
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memorandum was prepared by Cargill and O&Co., and a list of institutions that
might be expected to have some interest in a possible affiliation was developed.
By early 1998, O&Co. had contacted those institutions, several of whom requested
a copy of the confidential information memorandum. One such institution, first
contacted in October, 1997, requested additional information from Cargill and
continued to evaluate a possible transaction over the months that followed.
In January, 1998, while discussions with the first institution
continued, Westbank and Cargill signed a confidentiality agreement. Cargill's
confidential information memorandum and certain additional information were
furnished to Westbank, and O&Co. discussed Cargill's price expectations with
Westbank. In February, 1998, Westbank indicated to Cargill that it was not
interested in pursuing a transaction.
Later in February, the institution that first expressed interest sent
Cargill a non-binding letter of intent, suggesting a price per share for a
possible cash acquisition of Cargill and proposing to conduct a due diligence
review. At a meeting later that month, the Cargill Board considered that letter
of intent and rejected the price proposal as inadequate. Discussion with that
institution continued, however, and in early April, 1998 a revised letter of
intent was delivered to Cargill indicating interest in a cash acquisition at a
higher price per share than first proposed. This non-binding letter of intent
was subject to due diligence and negotiation, and it did not restrict Cargill's
consideration of other offers.
Late in April, 1998, Westbank's financial advisor, NECA, contacted
O&Co. to determine whether Cargill would be interested in reopening discussions.
O&Co. advised Westbank that discussions with another party were underway, and
provided current Cargill financial information to Westbank's financial advisor.
On May 1, 1998, O&Co. received a letter of intent from Westbank
indicating a proposed price for a stock transaction and requesting exclusivity
while Westbank conducted due diligence. At a May 8, 1998 meeting, the Cargill
Board decided to allow Westbank to conduct further due diligence as a means of
determining whether Westbank's interest was firm, but declined to enter into an
exclusivity agreement in light of the outstanding letter of intent with the
first institution. Following due diligence conducted in late May, Westbank
reaffirmed its interest in proceeding.
At a meeting on June 1, 1998, the Cargill Board discussed and compared
the two proposals. With the assistance of its legal and financial advisers, the
Cargill Board reviewed the risks and benefits of stock versus cash acquisitions,
the difference in structure of the two proposals and an analysis of price
considerations. The Cargill Board directed O&Co. to advise the first institution
that a subsequent offer implying a significantly higher price for Cargill than
their letter of intent had been received and was under consideration, and that a
further meeting of the Cargill Board would shortly be held to consider and act
on the pending proposals, and that shareholder value was still the primary
consideration and the first institution was of course free to enhance its offer
before the Cargill Board met again. The Cargill Board also authorized management
and Cargill's advisors to proceed to assess Westbank's proposal and make
appropriate investigations and analyses.
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<PAGE> 45
The next meeting of the Cargill Board was June 12, 1998. A draft of a
Merger Agreement prepared by Westbank's counsel was distributed and the
structure and terms of the transaction proposed by Westbank were described to
the Cargill Board by Cargill's counsel. The Cargill Board also reviewed with
counsel at this meeting a letter from the first institution asserting that
Cargill's failure to complete the negotiation of the transaction proposed by
that institution would be a breach of obligations arising under the letter of
intent. Upon advice of its counsel, the Cargill Board authorized a response to
the first institution to the effect that nothing in the letter of intent
restricted the ability of the Cargill Board to receive and consider other
proposals or abrogated the duty of the Cargill Board to pursue the transaction
it believed was in the best interests of shareholders. At the direction of the
Cargill Board, this response also set a deadline for the delivery of any
enhanced offer to Cargill. No enhanced offer was subsequently received from the
first institution.
As part of Westbank's ongoing review and consideration of strategic
alternatives, the Westbank Board regularly reviews the operational and
structural options available to Westbank to expand and strengthen its community
banking franchise and enhance long-term shareholder value, including
opportunities that may arise from time to time to acquire other banking and
thrift institutions. In response to O&Co.'s preliminary inquiry, Westbank
indicated that it would be interested in discussing further with Cargill the
prospects for a business combination involving the two companies. During May and
June 1998, Westbank and its advisers undertook further due diligence
investigations of Cargill, while Cargill and its advisers likewise undertook due
diligence investigations of Westbank. In addition, during this period,
Westbank's counsel distributed proposed forms of the Merger Agreement and
related documents, including the stock option agreement between Cargill and
Westbank (the "Stock Option Agreement"), to Cargill and its advisers, and
engaged in extensive discussions regarding the terms and provisions contained in
such documentation with Cargill's counsel.
Separate special meetings were held of the Cargill Board on July 14,
1998 and of the Westbank Board on July 15, 1998 to consider the proposed
definitive form of the Merger Agreement and related documents. At the Cargill
Board meeting, the Cargill Board reviewed the chronology of events to date and
the results of the due diligence on Westbank, and again considered the risks and
benefits of the strategic transaction proposed by Westbank as compared to the
cash offer previously received. The Cargill Board also reviewed the final terms
of the Merger with counsel, and was advised by O&Co. that, in its opinion, and
based on facts known to O&Co. at that time, the consideration to be paid by
Westbank in the Merger was fair, from a financial point of view, to Cargill's
shareholders as of that date, and O&Co. agreed to update its opinion to that
effect immediately prior to the circulation of proxy materials for the Special
Meeting. After discussion and consideration of the best interests of Cargill's
shareholders and other constituencies, including the factors described below
under "Recommendation of the Cargill Board and Reasons for the Merger", the
Cargill Board unanimously approved the Merger Agreement and related agreements,
including the Stock Option Agreement, and authorized the signing of the Merger
Agreement and the Stock Option Agreement on behalf of Cargill.
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<PAGE> 46
At the Westbank Board meeting, presentations were delivered by Westbank
senior management concerning the strategic rationale for the proposed
transaction and the results of Westbank's detailed due diligence investigation
of Cargill, as well as the course of the parties' negotiations on various
matters addressed by the Merger Agreement and related documents. In addition,
counsel viewed in detail with the Westbank Board the terms of the Merger
Agreement, Stock Option Agreement and related documentation. The Westbank Board
was also advised by NECA in writing that the consideration to be paid by
Westbank in the Merger was fair, from a financial point of view, to Westbank and
its shareholders. After discussion and consideration of the potential financial
and strategic benefits and risks of the proposed transaction, the Westbank Board
unanimously approved the Merger Agreement and related agreements, including the
Stock Option Agreement, and authorized Mr. Chase to sign the Merger Agreement,
the Stock Option Agreement, and the Cargill Shareholders' Agreement on behalf of
Westbank.
On the morning of July 15, 1998, the Merger Agreement and the Stock
Option Agreement were executed on behalf of Westbank and Cargill, respectively.
The executive officers and directors of Cargill executed and delivered the
Cargill Shareholders' Agreements.
RECOMMENDATION OF THE CARGILL BOARD AND REASONS FOR THE MERGER: THE BOARD OF
DIRECTORS OF CARGILL BELIEVES THAT THE MERGER IS FAIR AND IN THE BEST INTERESTS
OF CARGILL AND ITS SHAREHOLDERS. THE BOARD OF DIRECTORS OF CARGILL UNANIMOUSLY
RECOMMENDS THAT THE CARGILL SHAREHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
In reaching its determination that the Merger is in the best interests
of the Cargill shareholders, and recommending that the Cargill shareholders
approve the Merger, the Cargill Board consulted with Cargill management, as well
as its financial and legal advisers, and considered a number of factors. Without
assigning any relative or specific weights thereto, the following is a
discussion of the material factors considered by the Cargill Board in reaching
its determination:
(a) the amount and form of the consideration offered by Westbank in
relation to the estimated value of Cargill Common Stock, the Cargill Board's
belief that, of the alternatives available, the Merger offered the greatest
opportunity for long-term value to the Cargill shareholders, and the expectation
that the Merger will be a tax-free transaction to Cargill and its shareholders
to the extent they receive Westbank Common Stock in exchange for their shares;
(b) the market for the stock of financial institutions comparable to
Cargill and the reasonableness of the current value to Cargill shareholders of
the proposed Merger transaction relative to that market, including a comparison
of value computed as a multiple of earnings, a percentage of book value and a
premium on deposits;
(c) the fact that the current value to Cargill shareholders of the
proposed Merger reflects a premium for Cargill's Common Stock over the prices at
which it has traded in the market during the previous year;
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<PAGE> 47
(d) the market for Westbank Common Stock, including liquidity, the
reasonableness of current market pricing and potential price volatility;
(e) the fact that upon consummation of the proposed Merger Cargill's
current shareholders would own approximately 10% of Westbank's common stock and
would be in a position to benefit from future growth in the value of the
combined franchises;
(f) Westbank's business, results of operations, prospects and financial
condition and the historical and potential future value of the Westbank Common
Stock and dividends paid thereon;
(g) the potential operating efficiencies and financial strength the
Merger would provide to the combined Cargill-Westbank organization, its
customers and the communities it serves, and the immediate and long-term effect
that it would have on such organization's ability to compete for new business;
(h) the possible impact of the Merger on Cargill's customers and that,
following the Merger, the combined organization would be well situated to offer
Cargill's customers an expanded range of financial services;
(i) the conditions to the Merger and the risks to Cargill if the Merger
were not consummated, including that the termination of the Merger Agreement
might result in a decline in the market price of Cargill Common Stock and might
have other adverse operational consequences for Cargill;
(j) the fact that approval of the Merger Agreement requires the
affirmative vote of the holders of two-thirds of the shares of Cargill Common
Stock outstanding and entitled to vote and that the Cargill Board's decision to
approve the Merger Agreement would empower the shareholders as a group to decide
whether or not to accept Westbank's proposal to acquire Cargill; and
(k) O&Co.'s opinion that, subject to certain stated assumptions, the
consideration to be paid to the Cargill shareholders in connection with the
Merger is fair, from a financial point of view, to Cargill shareholders, and
that O&Co. would be able to reconfirm its written opinion to such effect to
accompany the Proxy Statement-Prospectus.
OPINIONS OF FINANCIAL ADVISERS
OPINION OF OSTROWSKI & COMPANY, INC.
O&Co. was retained by Cargill as its financial advisor to provide,
among other services, advice and assistance relating to the evaluation of
mergers and acquisitions pursuant to an engagement letter dated August 7, 1997
("O&Co. Engagement Letter"). Cargill selected O&Co. on the basis of its in-depth
knowledge of the bank and thrift industry, the qualifications, experience and
reputation of its personnel in the banking and investment communities, as well
as its experience in the valuation of bank and thrift institutions and their
securities in connection with mergers and acquisitions and other corporate
transactions.
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As part of the advisory services described above, the Board of
Directors of Cargill requested O&Co.'s opinion as to the fairness, from a
financial point of view, of the terms of the Merger Agreement to the holders of
Cargill Common Stock. In requesting O&Co.'s advice and opinion, Cargill's Board
of Directors did not give any special instructions to or impose any limitations
upon the scope of the investigation which O&Co. might wish to conduct to enable
it to give its opinion. On July 14, 1998, O&Co. delivered its opinion to the
Board of Directors of Cargill that, as of such date, the consideration to be
received by the holders of Cargill Common Stock was fair from a financial point
of view. On _________ __, 1998, O&Co. delivered to the Board of Directors of
Cargill another written opinion dated as of the date of the Proxy
Statement-Prospectus confirming its opinion of July 14, 1998.
THE FULL TEXT OF O&CO.'S FAIRNESS OPINION IS ATTACHED AS APPENDIX B TO
THIS PROXY STATEMENT-PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. THE
DESCRIPTION OF THE FAIRNESS OPINION SET FORTH HEREIN IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO APPENDIX B. HOLDERS OF CARGILL COMMON STOCK ARE URGED
TO READ THE OPINION IN ITS ENTIRETY FOR A DESCRIPTION OF THE PROCEDURES
FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND QUALIFICATIONS OF THE REVIEW
UNDERTAKEN BY O&CO. IN CONNECTION THEREWITH. O&CO.'S OPINION IS DIRECTED SOLELY
TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE TERMS OF THE MERGER
AGREEMENT AND DOES NOT CONSTITUTE ANY RECOMMENDATION TO THE BOARD OF DIRECTORS
OF CARGILL OR TO THE HOLDERS OF CARGILL COMMON STOCK WITH RESPECT TO ANY VOTE AT
THE SPECIAL MEETING.
In connection with providing its opinion, O&Co. examined and relied
upon, among other things: the Merger Agreement; annual reports to shareholders,
proxy statements and related audited financial statements for Cargill for each
of the three fiscal years ended September 30, 1995, 1996 and 1997; certain
unaudited interim financial reports for Cargill for the quarters ended December
31, 1997, March 31, 1998 and June 30, 1998; certain other financial information
for Cargill, including pro forma financial statements and management's estimates
relating to, among other things, earnings, asset quality, loan delinquencies and
capital; annual reports to shareholders, proxy statements and related audited
financial statements for Westbank for each of the three years ended December 31,
1995, 1996 and 1997; certain unaudited interim financial reports for Westbank
for the quarter ended March 31, 1998; certain other financial information for
Westbank, including pro forma financial statements and management's estimates
relating to, among other things, earnings, asset quality, loan delinquencies and
capital. O&Co. conducted discussions with executive management of Cargill and
Westbank concerning historical financial performance and conditions, market area
economic conditions, future business prospects and financial forecasts. O&Co.
also reviewed comparable financial, operating and market data for the banking
industry and selected peer groups; compared the terms of the Merger Agreement
with other bank and thrift merger and acquisition transactions; and considered
such additional financial and other information deemed relevant.
In preparing its opinion, O&Co. relied upon the accuracy, completeness
and fair presentation of all information supplied or otherwise made available to
it by, or on behalf of, Cargill and Westbank. O&Co. has not independently
verified such information or undertaken an independent
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evaluation or appraisal of the assets or liabilities of Cargill or Westbank, nor
was O&Co. furnished any such evaluations or appraisals. With respect to
forecasts of expected future financial performance, O&Co. has been advised that
they reflect the best currently available estimates and judgement of executive
management of Cargill and Westbank. O&Co.'s opinion is necessarily based upon
the information available to it and the market, economic and other conditions,
as they exist and can be evaluated, as of the date of the opinion.
In connection with providing its fairness opinion to the Board of
Directors of Cargill, O&Co. performed a variety of financial analyses. The
following is a summary of the material terms of such analyses but does not
purport to be a complete description of O&Co.'s analyses or presentations to the
Cargill Board of Directors. The preparation of a fairness opinion is a complex
process involving subjective judgments and does not necessarily lend itself to
partial analyses or summary description. O&Co. believes that its analyses 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 O&Co.'s
opinion.
In performing its analyses, O&Co. made numerous assumptions with
respect to industry performance, business and economic conditions and various
other matters, many of which may be more or less favorable than actual results.
Estimates of values of companies do not purport to be appraisals or necessarily
reflect the prices at which companies or their securities may actually be sold.
No company or transaction utilized in O&Co.'s analyses was identical to Cargill
or Westbank or to the terms of the Merger Agreement. Because such estimates are
inherently subject to uncertainty, O&Co. assumes no responsibility for their
accuracy.
Stock Trading History
O&Co. examined the average quarterly trading pricing trends for
community banks and thrifts headquartered in Connecticut, Maine, Massachusetts,
New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont
(collectively, the "Northeast") from the first quarter 1997 through the second
quarter 1998. During that time period, the average quarterly price/earnings
ratio for Northeast community bank stocks was between 14.6 times and 20.7 times
last twelve months earnings ("LTM earnings"), with a low of 14.6 times LTM
earnings for the first quarter of 1997 and a high of 21.4 times LTM earnings for
the first quarter of 1998. The quarterly average price/earnings ratio for
Northeast community thrift stocks was between 16.8 times and 19.2 times LTM
earnings over the same time period . The lowest quarterly average multiple for
thrift stocks was 16.8 times LTM earnings for the first quarter of 1997 and the
highest was 21.7 times LTM earnings for the third quarter of 1997.
The quarterly average of Northeast community bank stock prices measured
against book value for the same time period was between one hundred and seventy
eight percent (178%) and two hundred and forty nine percent (249%) of book
value, with a low of one hundred seventy eight percent (178%) for the first
quarter 1997 and a high of two hundred sixty four percent (264%) for the first
quarter of 1998. The quarterly average for Northeast community thrift stocks
over the same time period was between one hundred thirty four percent (134%) and
one hundred and eighty one percent (181%) of book value. The lowest value was
one hundred and thirty four percent (134%) for the first quarter of 1997; and
the highest value of one hundred ninety five percent (195%) was for the first
quarter of 1998.
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During the same time period, Westbank Common Stock, which is listed on
the NASDAQ National Market System, generally traded in the $10.00 to $15.00
range, or 13.6 to 15.1 times LTM earnings and 161% to 206% of book value. In the
early part of the period through the second quarter 1997, Westbank's stock
traded at the low end of the range, at prices at or below $10.00. Through the
first quarter 1998 , Westbank Common Stock rose steadily from the $10.00 range
to a high of $16.75. From early April 1998, the stock declined, generally
trading between $16.00 and $14.13. On July 13, 1998 Westbank Common Stock closed
at $14.13.
Cargill stock is relatively closely held, with the Board of Directors
holding approximately 32% of the outstanding shares of Cargill Common Stock.
Cargill Common Stock is not listed on any exchange and trades infrequently.
Therefore, meaningful trading market data for Cargill does not exist.
Contribution Analysis
O&Co. prepared a contribution analysis showing the percentage
contributed by Cargill to the combined company on a pro forma basis of assets,
deposits and equity at March 31, 1998. This analysis showed that Cargill
Shareholders would contribute 12.9 % of pro forma consolidated assets, 13.4% of
pro forma consolidated deposits and 11.6% of pro forma equity. Net income
contributions were considered based upon quarter ended March 31, 1998 results
annualized for Westbank, and six months ended March 31, 1998 results for Cargill
on an annualized basis. Cargill contributed 6.4% to consolidated pro forma net
income. Cargill Shareholders will receive approximately 10.5% of the pro forma
ownership of the combined company assuming an exchange ratio of 1.3008.
Comparable Company Analysis
O&Co. compared the financial condition and operating performance of
Cargill with a peer group of NASDAQ and exchange-listed financial institutions
headquartered in the Northeast with assets less than $105 million. Cargill
reported a return on average assets of 0.49%, and a return on average equity of
6.91%, based on six months ended March 31, 1998 results annualized, and an
equity to assets ratio of 7.06% as of March 31, 1998. Cargill's annualized
results for the six months ended March 31, 1998 were utilized because they were
considered to more appropriately reflect Cargill's recurring earnings potential.
Based on trailing twelve months earnings per share as of March 31, 1998, the
peer group's average return on average assets was 0 .65%; average return on
average equity was 5.91%, and its average equity to assets ratio was 12.24% as
of March 31, 1998. Cargill reported a somewhat lower return on assets than the
peer group and an above average return on equity as a result of its lower equity
to asset ratio.
O&Co. compared the financial condition and operating performance of
Westbank with a peer group of NASDAQ and exchange-listed banks and thrifts
headquartered in the Northeast with assets between $250 million and $350
million. Westbank reported a return on average assets of 1.12% and a return on
average equity of 15.20%, based on March 31, 1998 trailing twelve months
earnings per share, and an equity to assets ratio of 8.00% as of March 31, 1998.
The peer group had an average return on average assets of 1.00%, an average
return on average equity of 10.16% and an average equity to assets ratio of
10.17%. Westbank reported operating performance above the peer group and a lower
equity to assets ratio.
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O&Co. also compared the trading performance of Westbank with this peer
group. At July 13, 1998, Westbank's Common Stock price closed at $14.13, or 15.2
times earnings for the twelve months ended March 31, 1998, and 208% of reported
March 31, 1998 book value, compared to the peer group averages for these same
measures at closing on July 13, 1998 of 20.1 times and 193%, respectively.
Westbank's trading performance was below its peers on an earnings multiple basis
but above its peer on a book value basis.
Analysis of Selected Merger Transactions
O&Co. reviewed certain financial data, as of the date of the
announcement, for acquisitions of commercial banks and thrifts in the Northeast
announced between January 1997 and June 1998. O&Co. also reviewed acquisitions
of commercial banks and thrifts in Connecticut between January 1997 and June
1998. O&Co. calculated the average multiple of price to target's earnings for
trailing 12 months, the average percentage of price to book value and the
average premium (price in excess of reported equity) as a percentage of
deposits, on a quarterly basis beginning January 1, 1997 through June 30, 1998.
For transactions announced in the second quarter of 1998, the calculations
resulted in the following comparisons: (i) average price as a multiple to
earnings for Northeast banks of 22.9 times, Northeast thrifts of 27.5 times, and
Connecticut transactions of 25.1 times, compared with the value of the proposed
transaction of 27.0 times Cargill's 1998 earnings estimate; (ii) average price
as a percentage of book value for Northeast banks of 246%, Northeast thrifts of
260%, and Connecticut transactions of 257%, compared with the value of the
proposed transaction of 186% of Cargill's fully converted shareholders' equity;
(iii) average premium as a percentage of deposits for Northeast banks of 21.1%,
Northeast thrifts of 23.7%, and Connecticut transactions of 18.8%, compared with
the value of the proposed transaction of a premium of 6.7% of Cargill's
deposits.
Impact Analysis
O&Co. analyzed the changes in the amount of earnings per share and book
value represented by the issuance of 1.3008 shares of Westbank Common Stock for
each share of Cargill Common Stock on a fully-converted per share equivalent
basis. The analysis was based upon reported March 31, 1998 balance sheet data
for Cargill and Westbank and three months ended March 31, 1998 operating results
annualized for Westbank and six months ended March 31, 1998 operating results
annualized for Cargill.
O&Co. also analyzed certain per share values for Cargill Common Stock,
on a fully converted basis, on an independent basis as well as the equivalent
values based on the 1.3008 per share exchange ratio, as proposed in the Merger,
and the July 13, 1998 closing price for Westbank Common Stock of $14.13. The
estimated 1998 earnings per equivalent share of Cargill Common Stock was $1.09,
which was 60% greater than Cargill's estimated 1998 earnings per share on an
independent basis. Book value per equivalent share of Cargill Common Stock as of
March 31, 1998, was $8.93, 9% less than Cargill's book value per share as of the
same date on an independent basis. The annual cash dividends per equivalent
share of Cargill Common Stock was $.52. Cargill currently does not pay cash
dividends. The market value per equivalent share of Cargill Common Stock was
$18.37 based upon the July 13, 1998 closing price of $14.13 for Westbank Common
Stock.
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Discounted Cash Flow Analysis
O&Co. performed an analysis which estimated the future cash flows to
Cargill shareholders over a two year period under various circumstances,
assuming Cargill performed in accordance with the earnings forecasts of its
management. To approximate the terminal value of Cargill Common Stock at the end
of the two-year period, O&Co. applied price to earnings multiples ranging from
20.0 times to 30.0 times, which resulted in values that equated to percentages
of book value ranging from 151% to 227%. The terminal values were then
discounted to present values using discount rates ranging from 10.0% to 17.5%,
chosen to reflect assumptions regarding rates of return and risk premiums
required by holders or prospective holders of Cargill Common Stock. This
analysis indicated a range of present values per share of $11.08 to $20.25.
Remaining Independent Scenario
O&Co. discussed with Cargill's management and Board of Directors the
various expenses associated with remaining as an independent company while
achieving acceptable shareholder returns. In order to survive independently in a
highly competitive market, Cargill would have to broaden its product and service
offerings to attract and retain customers. This strategy would require a
near-term investment in Cargill through the attraction and retention of
additional qualified personnel and a substantial investment in technology.
Moreover, the potential benefit of new products and services is long-term with
no certainty as to the degree of success and Cargill's operating performance
would likely suffer in the short-term with adverse implications to shareholder
value.
CARGILL HAS AGREED TO PAY O&CO. FOR ADVISORY SERVICES AND, IN
CONNECTION WITH THE MERGER, AN ADVISORY FEE EQUAL TO 1.5% OF THE AGGREGATE VALUE
OF THE CONSIDERATION TO BE RECEIVED BY CARGILL SHAREHOLDERS, OR APPROXIMATELY
$103,000. CARGILL HAS MADE PAYMENTS TO O&CO. TOTALING $60,000 AS OF THE MAILING
OF THE PROXY STATEMENT-PROSPECTUS. PURSUANT TO THE O&CO. ENGAGEMENT LETTER,
CARGILL HAS ALSO AGREED TO REIMBURSE O&CO. FOR ITS REASONABLE OUT-OF-POCKET
EXPENSES, INCLUDING LEGAL FEES, INCURRED IN CONNECTION WITH ITS ENGAGEMENT AND
TO INDEMNIFY O&CO. AND ITS AFFILIATES AND THEIR RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS AND CONTROLLING PERSONS AGAINST CERTAIN EXPENSES AND
LIABILITIES.
OPINION OF NORTHEAST CAPITAL & ADVISORY, INC.
The obligation of Westbank to complete the Merger is subject to the
condition that Westbank receive a written opinion from NECA on or before the
date of the Agreement and updated in writing as of a date within five days of
the mailing of this Proxy Statement-Prospectus. The __________ __, 1998 fairness
opinion from NECA, which is attached hereto as Appendix C, states that as of the
date of such opinion, the consideration terms set forth in the Agreement are
fair to Westbank shareholders. The opinion does not address whether the Merger
will be fair to Westbank stockholders as of the Effective Time based on any
hypothetical Westbank Trading Price.
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NECA was selected by Westbank to act as its financial advisor in
connection with the Merger based upon NECA's qualifications, experience, and
reputation, as well as upon NECA's prior investment banking relationship and
general familiarity with Westbank. NECA, as part of its investment banking
business, is regularly 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.
In connection with NECA's engagement, Westbank requested that NECA
evaluate the fairness, from a financial point of view, to the shareholders of
Westbank of the Exchange Ratio in the proposed Merger. At the July 15, 1998
meeting of the Westbank Board, NECA delivered a written opinion to the Westbank
Board that, as of such date, the proposed Exchange Ratio in the Merger was fair
from a financial point of view to the Westbank stockholders (other than Cargill
and its affiliates). On ______ __, 1998, NECA delivered to the Westbank Board
another written opinion dated as of the date of this Proxy Statement-Prospectus
confirming its opinion of July 15, 1998.
The full text of the opinion of NECA dated as of the date of this Proxy
Statement-Prospectus, which sets forth, among other things, assumptions made,
procedures followed, matters considered and limits on the review undertaken by
NECA, is attached as Appendix C to this Proxy Statement-Prospectus. Holders of
Westbank Common Stock are urged to read the opinion in its entirety. NECA's
opinion is addressed to the Westbank Board and does not constitute a
recommendation to any Westbank Shareholder. The summary set forth in this Proxy
Statement-Prospectus of the opinion of NECA is qualified in its entirety by
reference to the full text of the opinion attached as Appendix C to this Proxy
Statement-Prospectus.
In connection with this opinion, NECA reviewed, among other things, the
Merger Agreement; the Annual Reports of Cargill for the three years ended
September 30, 1997; the Annual Report on Form 10-K of Westbank for the year
ending December 31, 1997; certain Quarterly Reports of Cargill and Westbank;
certain unaudited interim reports and certain press releases to the respective
shareholders of Westbank and Cargill; and financial information concerning the
business and operations of Westbank and Cargill furnished to NECA by their
respective managements. NECA also conducted discussions with members of the
senior managements of Westbank and Cargill regarding the past and current
business operations, regulatory relationships, financial condition and future
prospects of their respective companies. In addition, NECA reviewed the reported
price and trading activity of Cargill's and Westbank's Common Stock; compared
certain financial information for Westbank and Cargill with certain financial
and stock market 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 environment in particular; and
performed such other studies and analyses as NECA considered appropriate.
In conducting its review and arriving at its opinion, NECA assumed and
relied upon the accuracy and completeness of all financial and other information
supplied or otherwise made available to it and did not assume any responsibility
for any independent verification of such information. With respect to financial
forecasts (including projected cost savings, revenue
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enhancements, operating synergies and other possible operating and financial
benefits), NECA assumed and relied upon the senior management of Westbank and
Cargill as to the reasonableness and achievability of the financial and
operating forecasts and that they were reasonably prepared on bases reflecting
the best currently available estimates and judgments of management of Westbank
and Cargill as to the future financial performance of Westbank and Cargill,
respectively, and NECA assumed that such forecasts and projections would be
realized in the amounts and at the times contemplated thereby. NECA assumes no
responsibility for and expresses no view as to such forecasts and projections or
the assumptions on which they are based. NECA also assumed the aggregate
allowance for loan losses for Cargill and Westbank were adequate to cover such
losses. NECA did not make or obtain any evaluations or appraisals of the
property of Cargill or Westbank. NECA did, however, examine certain individual
credit files of Cargill and independently produced projections and operating
forecasts to assure themselves that the assumptions generated by Cargill and
Westbank senior management did not materially and adversely alter the adequacy
of the financial consideration offered by Westbank from a financial point of
view.
As a matter of policy, neither Westbank nor Cargill publicly disclose
internal management forecasts, projections or estimates of the type furnished to
NECA in connection with their analysis of the Merger, and such forecasts,
projections, and estimates were not prepared with a view towards public
disclosure. These forecasts, projections, and estimates were based on numerous
variables and assumptions which are inherently uncertain and which may not be
within the control of management, including without limitation, general
economic, regulatory and competitive positions. Accordingly, actual results
could vary materially from those set forth in such forecasts, projections, and
estimates.
NECA's opinions are predicated on the Merger receiving the tax,
regulatory and accounting treatment contemplated by the Merger Agreement,
including that the Merger would be recorded as a "pooling of interests" in
accordance with generally accepted accounting principles ("GAAP"). NECA's
opinions were necessarily based upon economic, market and other conditions as in
effect on, and the information made available to it as of, the date of such
opinions. No limitations were imposed by Westbank on the scope of NECA's
investigation or on the procedures followed by NECA in rendering its opinion.
In connection with rendering its opinion to the Westbank Board, NECA
performed a variety of financial analyses in support of its opinion which are
summarized below. The summary set forth below does not purport to be a complete
description of the analyses performed by NECA in this regard, although it
describes all material analyses performed by NECA. The preparation of a fairness
opinion involves various determinations as to the most appropriate and relevant
methods of financial analysis and the application of these methods to the
particular circumstances, and therefore such an opinion is not readily
susceptible to a partial analysis or summary description. Accordingly,
notwithstanding the separate factors summarized below, NECA believes that its
analyses must be considered in their entirety and that selecting portions of its
analyses and the factors considered by it, without consideration of all factors
and analyses, could create a misleading or incorrect view of the analyses and
the processes underlying NECA's opinions.
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NECA arrived at its opinion based on the results of all the analyses it
undertook assessed as a whole, and it did not draw conclusions from or with
regard to any one method of analysis. The fact that any specific analysis has
been referred to in the summary below is not meant to indicate that such
analysis was given more weight than any other analysis. With respect to the
comparable company analysis, and bank merger and acquisition transaction
analyses summarized below, no public company utilized as a comparison is
identical to Westbank or Cargill, no transaction is identical in nature or
rationale to the contemplated transaction between Westbank and Cargill, and such
analyses necessarily involve complex considerations and judgments concerning the
differences in financial and operating characteristics of the companies and
other factors that could affect the acquisition or public trading values of the
companies concerned. Estimates of values of companies or assets do not purport
to be appraisals or necessarily reflect the prices at which companies or their
securities actually may be sold.
NECA's opinions are directed to the Westbank Board and address only the
Exchange Ratio. They do not address the underlying business decision to proceed
with the Merger and do not constitute, nor should they be construed as, a
recommendation to any Westbank Stockholder on any other matter in connection
therewith.
In performing its analyses, NECA made numerous assumptions with respect
to industry performance, general business and economic conditions and other
matters, all of which are beyond the control of NECA, Westbank and Cargill. The
analyses performed by NECA are not necessarily indicative of actual values or
actual future results, which may be significantly more or less favorable than
suggested by such analyses. In addition, the analyses do not purport to be
appraisals or to reflect the prices at which any securities of Westbank or
Cargill may trade at the present time or at any time in the future. Such
analyses were prepared solely as part of NECA's analysis of the fairness of the
Exchange Ratio to the Westbank Stockholders (other than Cargill and its
affiliates) and were provided to the Westbank Board in connection with the
delivery of NECA's opinions.
The following is a summary of the material analyses presented by NECA
to the Westbank Board in connection with its July 15, 1998 opinion, which, as
indicated above, was confirmed as of the date hereof.
(a) Offer Valuation. NECA reviewed the terms of the proposed
transaction, including the Exchange Ratio and the aggregate transaction value.
NECA reviewed the implied value of the consideration offered based upon the
closing share price of Westbank Common Stock on July 14, 1998 (the last trading
day prior to the announcement of the Merger), which indicated that the implied
value of the consideration offered in the Westbank proposal was approximately
$18.37 per share of Cargill Common Stock, representing a total transaction value
of approximately $5.9 million based upon 341,350 fully diluted shares of Cargill
Common Stock outstanding, 64,536 of which are options at an average exercise
price of $5.4657, and which options' value is considered net of this exercise
price to compute the total transaction value. Based on the aggregate
consideration offered using the $18.37 proposed transaction price for Cargill
Common Stock, NECA calculated the multiples of proposed offer value to tangible
book value per share, proposed offer value to implied core deposit premium and
proposed offer value to Cargill's trailing 12
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month's earnings in the contemplated transaction. This analysis resulted in the
following multiples: a proposed offer value to fully diluted tangible book value
per share multiple of 1.57x; a proposed offer value to implied core deposit
premium multiple of 7.18%; and a proposed offer value to Cargill's trailing 12
months earnings of 31.99x.
(b) Pro Forma Merger Analysis. Based on projections provided by
Westbank and Cargill, NECA analyzed certain pro forma effects resulting from the
Merger. This analysis indicated that the transaction would be dilutive to
current earnings per share ("EPS") of Westbank Common Stock at the time of the
Merger (before the one-time charge associated with the Merger), and neutral to
slightly accretive in the year following the Merger.
(c) Contribution Analysis. NECA prepared a contribution analysis
showing the percentage contributed by Westbank to the combined company on a pro
forma basis of assets, deposits and equity at March 31, 1998. This analysis
showed that Westbank would contribute 87.1% of pro forma consolidated assets,
86.6% of pro forma consolidated deposits and 88.7% of pro forma consolidated
equity. Net income contributions were considered based upon quarter ended March
31, 1998 results. Westbank contributed 91.6% to consolidated pro forma net
income. Westbank Shareholders will receive approximately 89.6% of the pro forma
ownership of the combined company assuming an exchange ratio of 1.3008.
(d) Discounted Dividend Stream Analysis. Using a discounted dividend
stream analysis, NECA estimated the present value of the future streams of
after-tax cash flows that Cargill could produce on a stand-alone basis from 1998
through 2002 and distribute to stockholders ("Dividendable Net Income"). In this
analysis, NECA assumed, among other things, that Cargill performed in accordance
with the earnings forecasts provided to NECA by Cargill's senior management and,
assuming a 5% annual growth rate on deposits and an 8% to 12% annual growth rate
on loans, projected the after-tax cash flows. NECA calculated the sum of (i) the
terminal values per share of Cargill Common Stock based on an assumed multiple
of Cargill's projected 2002 net income of 18.6x plus (ii) the projected
1998-2002 five-year after-tax cash flows per share, in each case, discounted to
present values at an assumed discount rate of 15.0%. This discounted dividend
stream analysis indicated a reference range of $18.23 to $23.63 per share of
Cargill Common Stock.
(e) Analysis of Selected Acquisition Transactions. NECA reviewed
publicly available information regarding transactions involving the acquisition
of banks and thrifts in New England with total assets under $150 million which
had occurred since January 1, 1997. Based upon a review of these selected
acquisition transactions, NECA determined that the relevant range of tangible
book multiples were 170.7% to 182.1%, the relevant range of trailing 12 months
EPS multiples were 18.63x to 18.65x and the relevant range of tangible book
premium to core deposits multiple were 9.74% to 10.59%. NECA then calculated the
implied multiples for Cargill based on the proposed offer value, resulting in a
tangible book multiple of 157.2%, a trailing 12 months EPS multiple of 31.99x
(19.22x if compared to annualized March 1998 earnings) and a tangible book
premium to core deposits multiple of 7.18%. This analysis of selected
acquisition
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transactions indicated a reference range of $19.95 to $22.11 per share of
Cargill Common Stock.
No company or transaction used in the above analysis as a comparison is
identical to Westbank, Cargill or the contemplated transaction. Accordingly, an
analysis of the results of the foregoing necessarily involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the value
of the companies to which they are being compared. Mathematical analysis (such
as determining the mean or median) is not, in itself, a meaningful method of
using comparable company data.
(f) Comparable Companies Analysis. NECA reviewed and compared certain
financial information, ratios, and public market multiples relating to Westbank
to the publicly available corresponding data for a selected group of eleven
banks in New York and New England whose assets are $200 million to $500 million
with similar loan portfolio composition to Westbank which NECA deemed to be
relevant (collectively, the "Westbank Selected Companies").
Based on a review of such information for the Westbank Selected
Companies, NECA determined: (i) the relevant median for trailing 12 months EPS
multiple for the Westbank Selected Companies to be 19.75x, compared to 16.05x
for Westbank; (ii) the median tangible book value multiple for the Westbank
Selected Companies to be 224.6%, compared to 208.3% for Westbank; (iii) the
median market capitalization to deposits multiple for Westbank Selected
Companies to be 25.14%, compared to 19.05% for Westbank. This analysis of
selected measures indicated that Westbank's market capitalization appeared at a
discount relative to its peer group.
(g) Trading Activity. NECA analyzed the trading activity of Westbank
and Cargill Common Stock based on weekly data for the period between July 21,
1997 and July 14, 1998. Westbank Common Stock traded at a range of $9.38 to
$17.25 during this period, with an average volume of 27,241 shares per week.
Cargill Common Stock was extremely thinly traded. The last observable
transaction before announcement of the proposed Merger was on June 6, 1998 at a
price of $11.50 per share of Cargill Common Stock.
In connection with its opinion dated the date of this Proxy
Statement-Prospectus, NECA performed procedures to update, as necessary, certain
of the analyses described above and reviewed the assumptions on which such
analyses described above were based and the factors considered in connection
therewith. NECA did not perform any analyses in addition to those described in
updating its July 15, 1998 opinion. NECA has been retained by the Westbank Board
to act as financial advisor to Westbank with respect to the Merger and will
receive a fee for its services. NECA has in the past six years provided
financial advisory, investment banking and other services to Westbank and has
received customary fees for the rendering of such services. In addition, in the
ordinary course of its securities business, NECA or any of its affiliates may
trade debt and/or equity securities of Westbank and Cargill for its own account
and NECA, therefore, may from time to time hold a long or short position in such
securities.
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Westbank and NECA executed an engagement agreement dated May 22, 1998
providing for the retention by Westbank of NECA as its financial advisor. In
connection with the Cargill transaction, NECA is expected to receive a success
fee of $80,000 upon obtaining all necessary governmental and regulatory
approvals, which includes any fees due for a fairness opinion. Upon request by
Westbank, NECA rendered a fairness opinion to the Board of Directors of Westbank
for which NECA received a fee of $25,000, which is not subject to consummation
of the Merger. In addition, the engagement agreement provides that Westbank
reimburse NECA for all reasonable out-of-pocket expenses. Westbank has also
agreed to indemnify NECA and its officers, directors, agents and employees
against any losses, claims, damages, liabilities or expenses related to such
engagement.
EFFECTIVE TIME OF THE MERGER; CLOSING DATE
If the Merger Agreement is approved and adopted by the requisite vote
of Cargill shareholders, and the other conditions to the Merger are satisfied or
(where permissible) waived, the Merger will be consummated and become effective
upon the date (or a subsequent date not later than the opening of business the
next business day) when the Merger becomes effective as set forth in the
Articles of Merger as filed with the Secretary of the Commonwealth of
Massachusetts (the "Effective Time").
CONVERSION OF SHARES OF CARGILL COMMON STOCK PURSUANT TO THE MERGER
The "Average Closing Price" is defined as the average of the closing
bid prices of shares of Westbank Common Stock as reported on the NASDAQ National
Market System for the twenty consecutive trading days ending on the fifth
business day prior to the Effective Date. The "Merger Consideration" is defined
as the shares of Westbank Common Stock that holders of Cargill Common Stock are
entitled to receive under the Merger Agreement. The "Adjusted Exchange Ratio" is
defined as that number, rounded to the nearest thousandth, determined by
dividing $17.00 by the Average Closing Price. Each certificate which immediately
prior to the Effective Time represented outstanding shares of Cargill Common
Stock shall on and after the Effective Time be deemed for all purposes to
represent the Merger Consideration into which the shares of Cargill Common Stock
represented by such certificate shall have been converted.
At the Effective Time, automatically and without any action on the part
of the holder thereof, each share of Cargill Common Stock issued and outstanding
immediately prior to the Effective Time (other than (i) shares held by
dissenting shareholders) ("Dissenting Shares"), (ii) shares held directly or
indirectly by Westbank, other than shares held in a fiduciary capacity, and
(iii) any shares held as treasury stock by Cargill) will become and be converted
into shares of Westbank Common Stock. If the Average Closing Price is less than
$12.00 per share (the "Minimum Price"), Cargill will have the right to terminate
the Merger Agreement, unless Westbank elects, in its sole discretion, to adopt
as the Exchange Ratio the Adjusted Exchange Ratio. Assuming the Merger is
approved by the holders of Cargill Common Stock, the Cargill Board could
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elect to consummate the Merger without resoliciting Cargill shareholders if the
Average Closing Price were less than $12.00 and Westbank did not elect to adopt
the Adjusted Exchange Ratio, even though the calculated value of the shares of
Westbank Common Stock (based on the Average Closing Price) to be exchanged for
each share of Cargill Common Stock would be less than $17.00. In such a
situation, in considering whether to consummate the Merger without the
resolicitation of Cargill shareholders, the Cargill Board would take into
account, consistent with its fiduciary duties, all relevant facts and
circumstances that exist at such time, including, without limitation, the advice
of its financial advisers and legal counsel. The O&Co. fairness opinion included
with this Proxy Statement-Prospectus has been delivered and speaks as of the
date of this Proxy Statement-Prospectus. Consequently, if a decline of such
magnitude in the Average Closing Price were to occur and Westbank did not elect
to adopt the Adjusted Exchange Ratio, the Cargill Board could not under such
circumstances rely on O&Co.'s opinion unless it sought and received O&Co.'s
agreement that it could do so. Shareholder approval of the Merger Agreement and
each of the transactions contemplated thereby confers upon the Cargill Board the
power, consistent with its fiduciary duties, to elect to consummate the Merger
notwithstanding that the Average Closing Price may be less than $12.00 and
Westbank has not elected to adopt the Adjusted Exchange Ratio. Under such
circumstances, Cargill's shareholders would assume 100% of the market risk
associated with the price of Westbank Common Stock. See "THE MERGER-Conditions
to Consummation of the Merger" below.
As of the Effective Time, each share of Cargill Common Stock held
directly or indirectly by Westbank, other than shares held in a fiduciary
capacity, and shares held by Cargill as treasury stock will be canceled, retired
and cease to exist, and no payment shall be made with respect thereto.
CERTIFICATE EXCHANGE PROCEDURES
Certificates which represent shares of Cargill Common Stock that are
outstanding immediately prior to the Effective Time and are converted into the
Merger Consideration (the "Certificates"), shall, after the Effective Time, be
deemed to represent the Merger Consideration into which such shares have been
converted and shall be exchangeable by the holders thereof for new certificates
representing the shares of Westbank Common Stock into which such shares have
been converted.
In lieu of the issuance of fractional shares of Westbank Common Stock,
a payment in cash, without interest, will be made to the holders of Cargill
Common Stock in respect of any fractional share that would otherwise be
issuable. The payment in cash shall be equal to the product of the fractional
share multiplied by the Westbank Market Value Price (rounded up to the nearest
cent).
Upon surrender of a Certificate, together with a duly executed letter
of transmittal and any other required documents, the holder of such Certificate
shall be entitled to receive, in exchange therefor, as soon as practicable, a
certificate for the number of shares of Westbank Common Stock and/or a check for
the cash amount to which such holder is entitled, and such Certificate shall be
canceled.
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In the event any Certificate shall have been lost, stolen or destroyed,
upon receipt of appropriate evidence as to such loss, theft or destruction and
to the ownership of such Certificate by the person claiming such Certificate to
be lost, stolen or destroyed, and the receipt by Westbank of appropriate and
customary indemnification, Westbank will deliver in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration and any fractional
share payment.
If any Merger Consideration is to be issued in a name other than that
in which the Certificate surrendered in exchange therefor is registered, it
shall be a condition of the issuance thereof that the Certificate so surrendered
shall be properly endorsed (or accompanied by an appropriate instrument of
transfer) and otherwise in proper form for transfer and that the person
requesting such exchange shall pay to [___________________________](the
"Exchange Agent") in advance any transfer or other taxes required by reason of
the delivery of the Merger Consideration.
NOTE: HOLDERS OF CARGILL COMMON STOCK SHOULD NOT SURRENDER THEIR CERTIFICATES
UNTIL THEY RECEIVE WRITTEN INSTRUCTIONS FROM THE EXCHANGE AGENT.
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Merger Agreement, Cargill has agreed that, except with
the written consent of Westbank, prior to the Effective Time, it will conduct
its business in the ordinary course.
In addition, Cargill has agreed that, except as contemplated by the
Merger Agreement, prior to the Effective Time, it will not, directly or
indirectly, do any of the following without the prior written consent of
Westbank:
(a) change or waive any provision of its Charter or Bylaws;
(b) change the number of shares of its authorized or issued
capital stock (except for the issuance of Cargill Common Stock pursuant to the
exercise of outstanding stock options under the Cargill Stock Option Plans, as
contemplated by the Merger Agreement);
(c) issue or grant any option, warrant, call, commitment,
subscription, right to purchase or agreement of any character relating to the
authorized or issued capital stock of Cargill or Cargill Bank, or any securities
convertible into shares of such stock; except that Cargill may issue shares of
Cargill Common Stock or permit treasury shares to become outstanding to satisfy
presently outstanding options under and in accordance with the terms of the
Cargill Stock Option Plans;
(d) effect any recapitalization, reclassification, stock
dividend, stock split or like change in capitalization, or redeem, repurchase or
otherwise acquire any shares of its capital stock;
(e) declare or pay any dividends or other distributions with
respect to its capital stock;
(f) except in the ordinary course of business consistent with
past practice, incur
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any material liabilities or material obligations, whether directly or by way of
guaranty, including any obligation for borrowed money whether or not evidenced
by a note, bond, debenture or similar instrument (other than FHLB advances not
exceeding $500,000, or acquire any equity debt or other investment securities);
(g) make any capital expenditures in excess of $5,000
individually or $15,000 in the aggregate, other than pursuant to previously, as
defined in the Merger Agreement, disclosed binding commitments existing on the
date of the Merger Agreement;
(h) make or commit to make any commercial or commercial real
estate loan or loans to one borrower (including such borrower's related
interests) or purchase any loan or pool of loans or loan participation(s) in an
aggregate principal balance (or with an aggregate commitment) of $200,000 or
more;
(i) grant any increase in rates of compensation to its
employees, except merit increases in accordance with past practices and general
increases to employees as a class in accordance with past practice or as
required by law; grant any increase in rates of compensation to, or pay or agree
to pay any bonus or severance to, or provide any other new employee benefit or
incentive to its directors or to its officers who are currently covered by
employment or severance agreements with Cargill except for non-discretionary
payments required by such agreements and except for increases in officer
compensation rates by no more than 2.5% on an aggregate basis; enter into any
employment, severance or similar agreements or arrangements with any director or
employee or prospective employee; adopt or amend in any material respect or
terminate any employee benefit plan, pension plan or incentive plan except as
required by law or the terms of such plan or as provided in the Merger
Agreement, or permit the vesting of any material amount of benefits under any
such plan other than pursuant to the provisions thereof as in effect on the date
of the Merger Agreement; or make any contributions to Cargill's deferred
compensation plans, supplemental executive retirement plans, grantor trust,
defined benefit Pension Plan or 401(k) Plan other than contributions, based on
Cargill's accrual levels in effect for 1998 on the date of the Merger Agreement,
for the period ending on the Effective Time; make any cash bonus payments; or
hire or agree to hire any full or part time employees (except temporary
employees whose expectation of employment will not continue after the Effective
Time or non-officer personnel to serve as customer representatives, tellers, or
in similar non-management functions);
(j) make application for the opening or closing of any, or
open or close any, branch or automated banking facility or modify any lease or
agreement with respect to the same;
(k) make any equity investment or commitment to make such an
investment in real estate or in any real estate development project, other than
in connection with foreclosures, settlements in lieu of foreclosure or troubled
loan or debt restructurings in the ordinary course of business consistent with
customary banking practices;
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(l) except as the fiduciary duties of the Board of Directors
otherwise require (as determined in good faith upon the advice of legal
counsel), merge into, consolidate with, affiliate with, or be purchased or
acquired by, any other Person, as defined in the Merger Agreement, or permit any
other person to be merged, consolidated or affiliated with it or be purchased or
acquired by it, or, except to realize upon collateral in the ordinary course of
its business, acquire a significant portion of the assets of any other Person,
or sell a significant portion of its assets;
(m) make any material change in its accounting methods or
practices, except changes as may be required by GAAP or by regulatory
requirements;
(n) enter into any off-balance sheet transaction involving
interest rate and currency swaps, options and futures contracts, or any other
similar derivative transactions;
(o) make or agree to make any payments that would result,
either individually or in the aggregate, in the payment of an "excess parachute
payment" within the meaning of Section 280G of the Internal Revenue Code or that
would result, either individually or in the aggregate, in payments which would
be nondeductible pursuant to Section 162(m) of the Internal Revenue Code;
(p) take any action that would result in the representations
and warranties of Cargill contained in the Merger Agreement not being true and
correct on the date of the Merger Agreement or at any future date on or prior to
the Effective Time;
(q) incur in connection with the Merger Agreement and the
transactions contemplated therein, expenses including, but not limited to,
advisory, investment banking, legal, accounting, tax advisory, or similar fees
and costs in excess of reasonable and customary amounts;
(r) agree to do any of the foregoing.
Cargill has also agreed that, except as may be specifically required or
permitted pursuant to the Merger Agreement or specifically described therein or
in the accompanying disclosure schedule, it shall during the period from the
date of the Merger Agreement to the Effective Time, except with the written
consent of Westbank, operate its business, and will cause its subsidiary,
Cargill Bank to operate the businesses, only in the usual, regular and ordinary
course of business; use reasonable efforts to preserve intact its business
organization and assets and maintain its rights and franchises; and take no
action which would:
(i) materially adversely affect the ability of Westbank or
Cargill to obtain any necessary approvals of governmental authorities
required for the transactions contemplated in the Merger Agreement or
materially increase the period of time necessary to obtain such
approvals, or
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(ii) materially adversely affect its ability to perform its
covenants and agreements under the Merger Agreement. Cargill will
cooperate and take all reasonable actions within its control to cause
the Merger to qualify for "pooling of interests" accounting treatment
and as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code and to contest any applications filed or to be
filed by other entities to acquire control of or greater than 5%
interest in Cargill.
Cargill and Westbank have each also agreed that, except as may be
specifically required or permitted pursuant to the Merger Agreement or
specifically described therein or in the accompanying disclosure schedule, each
will:
(a) subject to any restrictions under applicable law or
regulation, promptly notify the other of any emergency or other change in the
normal course of its or its subsidiaries' businesses or in the operation of its
or its subsidiaries' properties and of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) if such emergency, change, complaint, investigation or hearing
would be material to its or its subsidiaries' assets, properties, liabilities,
business, results of operations, condition (financial or otherwise) or
prospects; and
(b) file all reports, applications and other documents
required to be filed by it with the Board of Governors of the Federal Reserve
System, the FDIC, the Massachusetts Board of Bank Incorporation (the "MBBI"),
the Connecticut Banking Commissioner and any other applicable governmental
agency or authority between the date of the Merger Agreement and the Effective
Time and shall furnish to the other copies of all such reports promptly after
the same are filed.
CONDITIONS TO CONSUMMATION OF THE MERGER
The respective obligations of Westbank and Cargill to consummate the
Merger are subject to satisfaction at or prior to the Effective Time of the
following conditions:
(a) The Merger Agreement and the transactions contemplated
thereby shall have been approved by the requisite vote of Cargill's
shareholders;
(b) All necessary approvals, authorizations and consents of
all governmental bodies of any court, administrative agency or commission or
other governmental authority or instrumentality required to consummate the
transactions contemplated by the Merger Agreement shall have been obtained and
shall remain in full force and effect and all statutory waiting periods in
respect thereof shall have expired;
(c) None of the parties to the Agreement shall be subject to
any order, injunction
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or decree issued by any court or agency of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger or any of the
other transactions contemplated by the Merger Agreement;
(d) No stop order suspending the effectiveness of the
Registration Statement registering the shares of Westbank Common Stock to be
issued in the Merger shall have been issued and no proceedings for that purpose
shall have been initiated or threatened by the United States Securities and
Exchange Commission ( "SEC"); and
(e) The parties shall have received an opinion that the Merger
will qualify as a reorganization under Section 368(a) of the Internal Revenue
Code.
Conditions to Westbank's Obligations. The obligation of Westbank to
effect the Merger and the transactions contemplated thereby is also subject to
the following conditions, any or all of which may be waived in whole or in part
by Westbank in its sole discretion:
(a) Westbank shall have received assurance that Cargill's
representations and warranties are true at the Closing Date and all of Cargill's
pre-closing obligations have been complied with;
(b) All required approvals of non-governmental third parties
that are the responsibility of Cargill to obtain shall have been obtained;
(c) Westbank shall have received a legal opinion from Shipman
& Goodwin LLP, Cargill's outside counsel, regarding certain corporate and other
matters as are customary in transactions of this type; and
(d) The cash consideration to be paid to dissenting
shareholders in the Merger is not in excess of ten percent (10%) of the total
consideration to be paid to the shareholders of Cargill.
Conditions to Cargill's Obligations. The obligation of Cargill to
effect the Merger and the other transactions contemplated in the Merger
Agreement is also subject to the satisfaction of the following conditions, any
or all of which may be waived by Cargill in its sole discretion:
(a) Cargill shall have received assurance that Westbank's
representations and warranties are true at the Effective Time and all of
Westbank's pre-closing obligations have been complied with;
(b) All required approvals of non-governmental third parties
that are the responsibility of Westbank to obtain shall have been obtained; and
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(c) Cargill shall have received a legal opinion from
Westbank's counsel, Cranmore, FitzGerald & Meaney regarding certain corporate
and other matters as are customary in transactions of this type.
TERMINATION
The Merger Agreement is subject to termination (i) by mutual agreement
of the parties, (ii) if the Merger has not been consummated on or before March
31, 1999, (iii) by either party if any required regulatory approval or the
approval of the shareholders of Cargill is not obtained or if consummation of
the transactions contemplated by the Merger Agreement is enjoined or otherwise
prohibited, (iv) by either party for a material breach of any representation,
warranty or covenant or other agreement contained in the Merger Agreement by the
other party, which breach is not cured after 30 days written notice thereof is
given to the party committing such breach, and (v) by Cargill if the Average
Closing Price is less than $12.00 per share, subject to Westbank's right to
elect to increase the number of shares of Westbank Common Stock issuable in the
Merger by using the Adjusted Exchange Ratio.
If either party terminates the Merger Agreement for reasons other than
as a result of a nonwillful breach or gross negligence of the other party,
neither party shall have any further liability under the Merger Agreement.
However, in the event of a party's gross negligence or willful breach, the
breaching party will remain liable for any and all damages, costs and expenses
sustained or incurred by the non-breaching party and will be liable to the
non-breaching party for damages up to $150,000 of out of pocket costs and
expenses. The payment of the costs and expenses is not an exclusive remedy but
is in addition to the options granted pursuant to the Stock Option Agreement.
AMENDMENT, EXTENSION AND WAIVER
At any time prior to the Effective Time, whether before or after the
approval of Cargill's shareholders, the parties may amend the Merger Agreement,
extend the time for the performance of any of the obligations or other acts of
any other party hereto, waive any inaccuracies in the representations and
warranties contained therein or in any document delivered pursuant thereto, or
waive compliance with any of the agreements or conditions with respect to
covenants of the parties or closing conditions of the Merger; provided, however,
that there may not be, without further approval of Cargill shareholders, to the
extent required by law, any amendment, extension or waiver of the Merger
Agreement which materially changes the amount or form of the consideration to be
delivered to the Cargill shareholders other than as may be expressly
contemplated by the Merger Agreement. The Merger Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
thereto. Any agreement on the part of any party 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.
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REGULATORY APPROVALS
The Merger and resultant acquisition by Westbank of Cargill are subject
to the prior approval of the Federal Reserve Bank of Boston (the "Reserve
Bank"), acting on delegated authority from the Board of Governors of Federal
Reserve System, under the Bank Holding Company Act of 1956, as amended (the
"BHCA"), and applicable regulations. The required application to the Reserve
Bank has been filed by Westbank. In reviewing the application, the Reserve Bank
must take into consideration, among other factors, the financial and managerial
resources and future prospects of the institutions and the convenience and needs
of the communities to be served. In addition, under the BHCA, the Merger may not
be consummated until the 30th day following the date of Reserve Bank approval of
the Merger, during which time the Department of Justice may challenge the Merger
on antitrust grounds. The commencement of an antitrust action during the waiting
period would stay the effectiveness of such approval unless a court specifically
orders otherwise.
The acquisition of Cargill by Westbank is also subject to the prior
approval of the MBBI, which must determine in connection with the application
that has been filed by Westbank that the Merger does not unreasonably affect
competition and that it promotes public convenience and advantage.
The Merger also is subject to the approval of the Commissioner of the
Connecticut Department of Banking (the "Banking Commissioner") pursuant to
Sections 36a-411, 36a-184 and 36a-34 of the Connecticut General Statutes. Under
applicable Connecticut law, in considering the proposed transaction, the Banking
Commissioner is required to determine whether (1) the laws of the home state of
such out-of-state holding company authorize under conditions no more restrictive
then those imposed by the State of Connecticut, as determined by the
Commissioner, a Connecticut holding company to acquire and retain direct or
indirect ownership or control of 10% or more of the voting stock of the
out-of-state holding company whose home state is such state; and (2) the
proposed transaction can reasonably be expected to produce benefits to the
public and whether such benefits clearly outweigh possible adverse effects,
including, but not limited to, an undue concentration of resources and decreased
or unfair competition. The Banking Commissioner shall not approve the
transaction, however, unless the Banking Commissioner considers whether: (i) the
investment and lending policies of the subsidiary bank to be acquired are
consistent with safe and sound banking practices and will benefit the economy of
the state; (ii) the services or proposed services of the subsidiary bank are
consistent with safe and sound banking practices and will benefit the economy of
the state; (iii) the out-of-state holding company has sufficient capital to
ensure, and agrees to ensure, that the subsidiary bank will comply with
applicable minimum capital requirements; (iv) the parent corporation has
sufficient managerial resources to operate the subsidiary bank in a safe and
sound manner; and (v) the proposed transaction will not substantially lessen
competition in the banking industry of the state. Any interstate transactions
shall be effected in accordance with laws applicable to activities conducted by
Connecticut holding companies. The Banking Commissioner shall not approve the
proposed transaction unless the Banking Commissioner finds, in accordance with
applicable regulations, that the out-of-state holding company's subsidiary bank
and the Connecticut subsidiary bank have a record of compliance with
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the requirements of the Community Reinvestment Act of 1977, 12 U.S.C. Section
2901 et seq., as from time to time amended, Section 36a-34 of the General
Statutes of Connecticut, as amended, and applicable consumer protection laws;
and the Connecticut subsidiary bank will provide adequate services to meet the
banking needs of all community residents, including low income residents and
moderate income residents, in accordance with a plan submitted by Westbank and
Cargill Bank.
Because the proposed transaction will be effected pursuant to a
transaction between a Connecticut holding company and an out-of-state holding
company, the Banking Commissioner in accordance with Section 36a-184 of the
Connecticut General Statutes must be informed of (1) the background and identity
of the acquiror; (2) the source and amount of funds or other consideration to be
used and any arrangements, agreements or understandings with the out-of-state
holding company; (3) full audited financial information for the preceding five
fiscal years, as well as, current (not later than 90 days prior to filing with
the Banking Commissioner) unaudited financial information; (4) any plans to
merge or consolidate or to make any material changes in the Connecticut holding
company's corporate structure or management; (5) the number of shares proposed
to be acquired, the terms of the offer and a statement as to the method by which
the fairness of the proposal was arrived at; (6) information with respect to any
contracts, arrangements or understandings with respect to the securities of the
Connecticut holding company; (7) information with respect to the purchase of
securities of the Connecticut holding company and out-of-state holding company
within the preceding twelve month period; (8) information regarding any
recommendations to purchase securities of either bank holding company within the
preceding twelve month period; (9) copies of all agreements regarding the
proposed transaction; and (10) any additional information the Banking
Commissioner may require for the protection of the depositors, security holders
of the Connecticut holding company or in the public interest. An application for
approval of the proposed transaction has been filed with the Banking
Commissioner.
Although there can be no assurances given that all regulatory approvals
will be received for the Merger and resultant acquisition by Westbank of
ownership and control of Cargill, the parties believe that all required
regulatory approvals will be obtained.
The parties are not aware of any other regulatory approvals or filings
that are required for consummation of the Merger, except as described above.
Should any other approvals or filings be required, it is presently contemplated
that such approvals or filings will be sought or made, as appropriate. There can
be no assurances given, however, that any other approvals, if required, will be
obtained.
The Merger will not be consummated unless all of the regulatory
approvals or other filings pertaining to the transactions contemplated by the
Merger Agreement, are obtained or made, as appropriate. See "THE
MERGER-Conditions to Consummation of the Merger" above.
EXPENSES
Each party will pay its own expenses in connection with the Merger,
subject to certain provisions to the contrary contained in the Merger Agreement.
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STOCK OPTION AGREEMENT
Simultaneously with the execution of the Merger Agreement, Westbank and
Cargill entered into the Stock Option Agreement. Pursuant to the Stock Option
Agreement, Cargill granted to Westbank an option (the "Option") to purchase,
subject to adjustment in certain events, up to 84,804 shares of Cargill Common
Stock at an exercise price of $12.00 per share, subject to adjustment if
additional shares of Cargill Common Stock are issued or become outstanding after
July 15, 1998 (the "Option Shares"). The Option becomes exercisable in whole or
in part, after the occurrence of both an Initial Triggering Event and a
Subsequent Triggering Event (each as defined below).
The term "Initial Triggering Event" means the occurrence at any time
after July 15, 1998 of: (i) the agreement by Cargill or any subsidiary thereof
to enter into, or the approval or acceptance by the Cargill Board of or
recommendation by the Cargill Board to Cargill's shareholders of any transaction
involving a merger or consolidation, a purchase, lease or other acquisition of
all or substantially all of the assets of Cargill or any significant subsidiary
of Cargill (except as contemplated by the Merger Agreement), or a purchase or
other acquisition of securities representing 10% or more of the voting power of
Cargill or any significant subsidiary of Cargill (each of the foregoing an
"Acquisition Transaction") without Westbank's prior written consent; (ii) the
acquisition by any person (other than Westbank, its subsidiaries and any Cargill
subsidiary acting in a fiduciary capacity) owning beneficially less than 10% of
the outstanding shares of Cargill Common Stock on July 15, 1998 of beneficial
ownership or the right to acquire beneficial ownership of 10% or more of the
outstanding shares of Cargill Common Stock; (iii) the making by any person,
other than Westbank or any subsidiary of Westbank, of a bona-fide proposal to
Cargill or its shareholders to engage in an Acquisition Transaction by public
announcement or written communication that shall be or become the subject of
public disclosure; (iv) the breach by Cargill after a proposal as described in
the preceding clause (iii) of certain covenants in the Merger Agreement, unless
remedied within an applicable notice period; (v) the filing by any person other
than Westbank or any subsidiary of Westbank, other than in connection with a
transaction to which Westbank has given its prior written consent, of an
application or notice with the Federal Reserve Board or other federal or state
bank regulatory authority, which application or notice has been accepted for
processing, for approval to engage in an Acquisition Transaction; or (vi)
Cargill or any subsidiary of Cargill shall have authorized, recommended,
proposed or publicly announced, without Westbank's prior written consent, its
intention to authorize, recommend or propose to engage in an Acquisition
Transaction with any person other than Westbank or any subsidiary of Westbank or
the Cargill Board shall, or announce its intent to, publicly withdraw or modify
in any manner adverse to Westbank, its recommendation that Cargill Shareholders
approve the transactions contemplated by the Merger Agreement.
The term "Subsequent Triggering Event" means either (i) the acquisition
after July 15, 1998 by any person of beneficial ownership of 15% or more of the
then outstanding Cargill Common Stock; or (ii) the occurrence of the Initial
Triggering Event described in subparagraph (i) of the foregoing paragraph,
except that, in respect of the purchase or other acquisition of securities of
Cargill or any significant subsidiary of Cargill, the percentage of voting power
represented by such
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securities shall be 10.01% rather than 10%.
The Option will expire upon the earliest of:
(i) the Effective Time of the Merger;
(ii) termination of the Merger Agreement in accordance with the
provisions thereof if such termination occurs prior to the
occurrence of an Initial Triggering Event; or
(iii) Eighteen months after the termination of the Merger Agreement
in accordance with the provisions thereof after the occurrence
of an Initial Triggering Event.
The Stock Option Agreement provides that Cargill shall promptly notify
Westbank in writing of the occurrence of any Initial Triggering Event or
Subsequent Triggering Event. If Westbank chooses to exercise the Option it shall
send Cargill written notice which shall include the total number of shares it
will purchase. Once Westbank tenders the applicable purchase price it shall be
deemed the holder of record of shares of Cargill Common Stock.
Notwithstanding the termination of the Merger Agreement, Westbank will
be entitled to purchase those Option Shares with respect to which it has
exercised the Option, in whole or in part, prior to the termination of the
Option upon (i) the consummation of any merger, consolidation or similar
transaction involving Cargill or any purchase, lease or other acquisition of all
or a substantial portion of the assets of Cargill other than an Acquisition
Transaction or (ii) the acquisition by any person of beneficial ownership of 50%
or more of the outstanding shares of Cargill Common Stock. Westbank may also by
written notice require Cargill to repurchase the unexercised Option in whole or
in part (to the extent not otherwise prohibited by applicable law or
regulations), at a purchase price intended to provide Westbank with the same
economic benefit as it would realize if it exercised the Option and subsequently
sold the Option Shares. Westbank may also by written notice require Cargill to
repurchase any Option Shares that it has acquired upon exercise of the Option
(to the extent not otherwise prohibited by applicable law or regulations). The
potential liability of such a repurchase to Cargill would be equal to the amount
by which the "market offer price" exceeds $12.00 per share multiplied by the
number of shares represented by the Option. The term "market offer price" is
defined within the Stock Option Agreement as the highest of: (i) the price per
share at which a tender offer or exchange offer has been made; (ii) the price
per share to be paid by any third party agreement with Cargill; (iii) the
highest closing price per share within a six-month period preceding notice of a
repurchase, or (iv) should a sale of all or a substantial portion of Cargill's
assets occur, the sum of the price paid for such assets and the current market
value of the remaining assets of Cargill divided by the number of shares of
Cargill Common Stock outstanding at the time of sale. Cargill anticipates that
it would fund any such repurchase of the unexercised Option or Option Shares out
of working capital.
The Stock Option Agreement additionally provides for substitute options
(the "Substitute Options") in an acquiring corporation or any controlling entity
of the acquiring corporation should
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Cargill enter into an agreement to (i) consolidate or merge not leaving Cargill
as the surviving corporation; (ii) permit a merger with Cargill and exchange
Cargill Common Stock for the stock or cash of any other property or (iii) the
sale or transfer of all or substantially all of its assets.
The Stock Option Agreement was required by Westbank as a condition to
its entering into the Merger Agreement, and is intended to increase the
likelihood that the Merger will be consummated in accordance with the terms of
the Merger Agreement. The Stock Option Agreement may have the effect of
discouraging persons who might now or prior to the Effective Time be interested
in acquiring all of or a significant interest in Cargill from considering or
proposing such an acquisition.
SHAREHOLDERS' AGREEMENTS
Cargill directors and executive officers, who own a total of [______]
shares of Cargill Common Stock, representing approximately ____% of the shares
of Cargill Common Stock issued and outstanding on the Record Date, have executed
the Cargill Shareholders' Agreements, pursuant to which such shareholders have
agreed to certain restrictions on their respective shares of Cargill Common
Stock. Specifically, such shareholders agreed, with respect to all presently
owned or after-acquired stock, (a) to vote such stock in favor of the Merger and
against any other merger or acquisition transaction with a party other than
Westbank or its affiliates, and (b) generally not to sell, assign, transfer,
encumber or otherwise dispose of such stock.
The Cargill Shareholders' Agreement shall remain in effect until the
earlier of the consummation of the Merger or the termination of the Merger
Agreement in accordance with its terms.
WESTBANK LETTER AGREEMENTS
The directors and executive officers of Westbank have executed Westbank
Letter Agreements pursuant to which such individuals have agreed not to dispose
of their shares of Westbank Common Stock in order to preserve the ability to
account for the transaction as a "pooling of interests".
NO SOLICITATION
Cargill and its officers, directors, employees, representatives and
agents will not, directly or indirectly, encourage, solicit, initiate or,
subject to the fiduciary obligations of the Cargill Board (as advised in writing
by outside counsel), participate in any discussions or negotiations with, or
provide any information to, any corporation, partnership, person or other entity
or group (other than Westbank 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 Cargill. However,
Cargill or the Cargill Board is not prohibited from taking and disclosing to
Cargill's shareholders a position with respect to a tender offer by a third
party pursuant to certain
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rules promulgated under the Securities Exchange Act of 1934, as amended or from
making such disclosure to Cargill's shareholders which, in the judgment of the
Cargill Board with the written advice of outside counsel, may be required under
applicable law. Cargill will immediately communicate to Westbank the terms of
any proposal, discussion, negotiation or inquiry and the identity of the party
making such proposal or inquiry. Any such communication shall be delivered no
less promptly than by telephone within twenty-four hours of Cargill's receipt of
any such proposal or inquiry or its receipt of any request for information from
the Federal Reserve Board, Department of Justice or any other governmental
agency or authority with respect to any transaction described in the first
sentence above.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Following the consummation of the Merger, Cargill Bank will maintain
its separate corporate existence, but will become a wholly-owned subsidiary of
Westbank. Cargill Bank's corporate headquarters will continue to be located in
Putnam, Connecticut. The management and boards of directors of Westbank is not
expected to change. Donald R. Chase, President and Chief Executive Officer and a
director of Westbank, will join the Cargill Bank Board, and a current director
of Cargill will join the Westbank Board. In addition, such other individuals as
may be designated by Westbank will be asked to serve on the Cargill Bank Board
to constitute a majority of the Cargill Bank Board of Directors and a new Chief
Executive Officer for Cargill will be appointed by Westbank to replace Robert G.
Eggleston, Jr. who resigned in October 1998.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Merger Agreement provides that the provisions with respect to
indemnification existing in favor of, and all limitations on the personal
liability of, any director, officer or other employee of Cargill or Cargill Bank
contained in the Cargill's Certificate of Incorporation and Bylaws and Cargill
Bank's Charter and Bylaws on the date of the Merger Agreement with respect to
matters occurring prior to the Effective Time shall survive the Merger. Westbank
has agreed to use all reasonable efforts to cause to be maintained in effect for
a period of not less than three years from the Effective Time the current
policies of the directors' and officers' liability insurance of Cargill (or
substitute policies of at least the same coverage with terms and conditions that
are not less favorable than those presently maintained by Cargill), with respect
to matters occurring at or prior to the Effective Time.
EMPLOYMENT OBLIGATIONS
Westbank will provide the employees of Cargill and its affiliates who
are so employed at the Effective Time with employee benefits, consistent with
industry practice, as Westbank in its sole discretion may determine. Following
the Effective Time, Westbank will honor in accordance with its terms the
deferred compensation plans, and the Cargill Employee Stock Ownership Plan which
was terminated in 1995 (collectively the "Cargill Benefit Plans") disclosed to
Westbank under the Merger Agreement, between Cargill and any director, officer
or employee thereof, and all provisions for benefits or other amounts earned or
accrued through the Effective Time under Cargill Benefit Plans.
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CARGILL STOCK OPTIONS
At the Effective Time, each then outstanding employee stock option to
purchase Cargill Common Stock ("Cargill Stock Options") pursuant to the Cargill
stock option plans (collectively, the "Cargill Stock Option Plans") will be
assumed by Westbank. Each Cargill Stock Option so assumed by Westbank shall
continue to have, and be subject to, the same terms and conditions set forth in
the Cargill Stock Option Plans immediately prior to the Effective Time, except
that (i) such Cargill Stock Options shall be exercisable for that number of
whole shares of Westbank Common Stock equal to the product of the number of
shares of Cargill Common Stock covered by the Cargill Stock Option multiplied by
the Exchange Ratio, provided that any fractional share of Westbank Common Stock
resulting from such multiplication shall be rounded up to the nearest share; and
(ii) the exercise price per share of Westbank Common Stock shall be equal to the
exercise price per share of Cargill Common Stock of such Cargill Stock Option,
divided by the Exchange Ratio, provided that such exercise price shall be
rounded down to the nearest cent.
RESALE OF WESTBANK COMMON STOCK
The shares of Westbank Common Stock to be issued pursuant to the Merger
Agreement have been registered under the Securities Act of 1933, as amended by
means of the registration statement of which this Proxy Statement-Prospectus
forms a part. Accordingly, such shares should be freely transferable under the
Securities Act, except for shares issued to persons who are affiliates of
Cargill at the time of the Special Meeting and persons who are affiliates of
Westbank at the time of such proposed transfer. Such persons will generally be
able to resell such shares only pursuant to an effective registration statement
under the Securities Act or pursuant to a statutory or regulatory exemption or
"safe harbor" from the registration requirements of the Securities Act.
Affiliates of a person are other persons who control, are controlled by, or are
under common control with the person. The affiliates of a corporation are
generally thought to include its executive officers, directors and significant
(i.e., 10% or more) shareholders.
Affiliates of Westbank who wish to dispose of shares of Westbank Common
Stock acquired in the Merger may utilize the "safe harbor" provided by Rule 144
promulgated under the Securities Act ("Rule 144"). Rule 144 permits, among other
things, the resale of such shares if certain conditions are met. These
conditions include the requirement that Westbank have filed all reports required
of it under the Exchange Act for the past 12 months, a limitation on the number
of shares sold by the affiliate in any three-month period, and a restriction on
the manner in which the sale is made. In most cases, a notice of proposed sale
must also be filed with the SEC.
Persons who are affiliates of Cargill at the time of the Special
Meeting and are not affiliates of Westbank at the time of a proposed resale may
utilize the resale provisions of Rule 145 promulgated under the Securities Act
("Rule 145"). During the year following the Effective Time, such resale would be
subject to the satisfaction of the conditions imposed under Rule 144 which are
described above, other than the notice of proposed sale. After such one-year
period, only the condition relating to Westbank's Exchange Act reports is
applied and, after two years, Rule 145 would impose no restriction on
dispositions by persons who were not affiliates of Westbank for at least three
months preceding the proposed disposition.
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This Proxy Statement-Prospectus does not cover the resale of any shares
of Westbank Common Stock to be issued in the Merger. Westbank is not obligated
to file a registration statement under the Securities Act to facilitate resale
of any such shares.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material U.S. federal income
tax consequences of the Merger, including certain consequences to shareholders
of Cargill who are citizens or residents of the United States and who hold their
shares as capital assets. It does not discuss all aspects of federal income
taxation that may be relevant to a particular Cargill shareholder in light of
his or her personal circumstances (for example, a Cargill shareholder who
acquired his or her shares of Cargill Common Stock pursuant to the exercise of
employee stock options or otherwise as compensation), or to Cargill shareholders
subject to special federal income tax treatment (such as insurance companies,
regulated investment companies, dealers in securities, certain retirement plans,
financial institutions, tax exempt organizations, persons subject to the
alternative minimum tax, persons who hold Cargill Common Stock as part of a
hedging or conversion transaction or foreign persons). In addition, this summary
does not address any aspects of state, local, foreign or other tax laws that may
be relevant to holders of Cargill Common Stock.
It is the policy of the Internal Revenue Service ("IRS") not to rule
directly on the tax status of transactions such as the Merger, and no such
ruling will be sought. Each of Westbank's and Cargill's respective obligations
to effect the Merger is conditioned upon its receipt from legal counsel of an
opinion dated as of the Closing Date, in form and substance reasonably
satisfactory to it, substantially to the effect that for federal income tax
purposes the Merger constitutes a reorganization within the meaning of Section
368 of the Internal Revenue Code (noting, however, that the nontaxability of the
shareholders of Cargill resulting from such reorganization does not extend to
cash received in lieu of a fractional share interest in Westbank Common Stock or
cash received by dissenting shareholders, if any). Such opinions are not binding
on the IRS and would not, in any event, prevent the IRS from challenging the
tax-free nature of the Merger under the Internal Revenue Code.
As noted above, Cargill's obligation to effect the Merger is
conditional on delivery of an opinion of legal counsel, or other tax advisor,
based upon certain customary representations and warranties set forth therein,
substantially to the effect that for federal income tax purposes the Merger
constitutes a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code. If the receipt of such opinion were waived and if the
material federal income tax consequences to Cargill shareholders were materially
different from those set forth below, Cargill would resolicit the approval of
its shareholders before it proceeded with the Merger. Based on such opinion, and
subject to the foregoing, the material federal income tax consequences to
holders of Cargill Common Stock would be as set forth below.
No gain or loss will be recognized by Westbank, Park West Bank, Cargill
or Cargill Bank by reason of the Merger.
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No gain or loss will be recognized by Cargill shareholders upon receipt
of Westbank Common Stock in exchange for their Cargill Common Stock, except that
a holder of Cargill Common Stock who receives cash in lieu of a fractional share
of Westbank Common Stock will recognize gain or loss equal to the difference
between the amount of such cash and the tax basis allocated to such
shareholder's fractional share of Westbank Common Stock.
The tax basis of the Westbank Common Stock received by a Cargill
shareholder will be the same as the aggregate tax basis of such shareholder's
Cargill Common Stock exchanged therefor, decreased by any cash received in lieu
of fractional shares.
The holding period of the Westbank Common Stock in the hands of a
Cargill shareholder will include the holding period of such shareholder's
Cargill Common Stock exchanged therefor, provided that such Cargill Common Stock
is held as a capital asset at the Effective Time.
A Cargill shareholder who exercises dissenters' rights and receives
cash will recognize gain for federal income tax purposes, the tax rate on which
will depend upon the holding period for his or her Cargill Common Stock. The
exchange of shares for cash upon the exercise of dissenters' rights could be
treated as substantially equivalent to a dividend and, therefore, taxed as
ordinary income if the recipient of cash owns or constructively owns other
shares of Westbank Common Stock. Shares owned by spouses, children,
grandchildren, parents and other relatives and by entities that are 50% owned by
a shareholder are generally treated as constructively owned by that shareholder.
THE FOREGOING DISCUSSION IS BASED ON CURRENTLY EXISTING PROVISIONS OF
THE INTERNAL REVENUE CODE, EXISTING AND PROPOSED U.S. TREASURY REGULATIONS
THEREUNDER AND CURRENT ADMINISTRATIVE RULINGS AND COURT DECISIONS. ALL OF THE
FOREGOING ARE SUBJECT TO CHANGE AND ANY SUCH CHANGE COULD AFFECT THE CONTINUING
VALIDITY OF THIS DISCUSSION. CARGILL SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISERS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO THEM,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a "pooling
of interests" transaction under GAAP. Under the pooling of interests method of
accounting, the recorded assets and liabilities of the separate companies
generally become the recorded assets and liabilities of the combined
corporation. The assets of the constituent entities are recorded on the
resulting corporation's books at their historical cost.
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INFORMATION REGARDING WESTBANK
Westbank is a bank holding company established as a Massachusetts
corporation in 1983 and is registered under the Bank Holding Company Act of
1956, as amended, with its principal asset being the stock of Park West Bank.
Substantially all operating income and net income of Westbank are presently
accounted for by Park West Bank. Park West Bank is chartered as a state bank and
trust company by the Commonwealth of Massachusetts, is a member of the FDIC and
is subject to regulation by the Massachusetts Commissioner of Banks and the
FDIC. A full range of retail banking services is furnished to individuals,
businesses, and nonprofit organizations through twelve banking offices located
in Hampden County. Such services include a wide range of checking and savings
accounts, loans, safe deposit facilities, and automated teller machines at
selected branch locations. Park West Bank also provides lending, depository and
related financial services to commercial, industrial, financial, and
governmental customers. In the lending area, these include short and long term
loans and revolving credit arrangements, letters of credit, inventory and
accounts receivable financing, real estate construction lending, and mortgage
loans.
Park West Bank also operates a Trust Department providing services
normally associated with holding property in a fiduciary or agency capacity. The
value of the property held by the Trust Department at June 30, 1998 amounted to
$115,895,000 and is not included in the accompanying financial statements
because such items are not assets of Park West Bank.
As of June 30, 1998, Westbank and its subsidiaries had the equivalent
of 119 full time employees and staff.
Westbank's banking, real estate activity and trust services are
competitive with other Massachusetts financial institutions. Its service area is
in Western Massachusetts, primarily Hampden County. Westbank's competitors
include other commercial banks, mutual savings banks, savings and loan
association, credit unions, consumer finance companies, loan offices, money
market funds, and other financial organizations.
Competition for trust services by major commercial banks is high, with
continuing efforts by those banks to solicit new business. The Trust Department
prides itself as one of the few remaining corporate fiduciaries providing
personal services locally. Insurance companies, mutual savings banks, investment
counseling firms, and other business firms and individuals also offer active
competition for such business.
The principal executive offices of Westbank are located at 225 Park
Avenue, West Springfield, Massachusetts 01090-0149. Its telephone number is
(413) 747-1400. For more information about Westbank, reference is made to
Westbank's most recent annual report on Form 10-K, as amended, and subsequent
quarterly reports on Form 10-Q, which are incorporated herein by reference. See
"WHERE YOU CAN FIND MORE INFORMATION" and "INFORMATION INCORPORATED BY
REFERENCE."
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INFORMATION REGARDING CARGILL
Cargill is a unitary savings and loan holding company established as a
Delaware Corporation in 1988 with its principal asset being the stock of Cargill
Bank. Cargill Bank of Connecticut (now known as Cargill Bank) was chartered as a
mutual savings and loan association in February 1916, and converted to a stock
form in February, 1988. Cargill was formed in September 1989 as a result of the
reorganization of Cargill Bank to a stock holding company form. Neither Cargill
nor Cargill Bank has never been involved in any mergers or acquisitions other
than the formation of the Cargill Bank.
The business of Cargill Bank is to attract deposits from the general
public and to make loans secured by mortgages on residential and other real
estate, enabling borrowers to purchase, refinance, construct or improve
property. In addition, Cargill Bank makes consumer loans and holds investment
securities. Cargill Bank's market area is in the northeastern part of
Connecticut and is made up primarily of the towns of Putnam, Woodstock, Pomfret,
Thompson, Killingly and Eastford. Cargill Bank operates three offices, the main
office in Putnam and branch offices in Quinebaug, which is part of Thompson, and
Woodstock. Cargill Bank's market area, although predominantly rural in
character, is only 30 miles south of Worcester, Massachusetts. The region in
which Cargill Bank operates also is centrally located between Boston,
Massachusetts, Providence Rhode Island and Hartford, Connecticut. Over 95% of
Cargill Bank's mortgage loans are secured by real property located in
Connecticut. The principal executive offices of Cargill is located at 163
Providence Street, Putnam, Connecticut. Its telephone number is (860) 963-2265.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF CARGILL
CARGILL'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS IS DESIGNED TO PROVIDE A BETTER UNDERSTANDING OF THE
SIGNIFICANT CHANGES AND TRENDS RELATED TO CARGILL'S FINANCIAL CONDITION, RESULTS
OF OPERATIONS, LIQUIDITY AND CAPITAL RESOURCES. THE DISCUSSION SHOULD BE READ IN
CONJUNCTION WITH THE FINANCIAL STATEMENTS OF CARGILL ELSEWHERE IN THIS PROXY
STATEMENT-PROSPECTUS.
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The following financial review presents an analysis of Cargill's
results of operations for each of the periods presented. Cargill has not engaged
in any business apart from owning Cargill Bank. Accordingly, the following
discussion and analysis of the financial condition and results of operations
refers to Cargill Bank. The discussion and analysis of the financial condition
and health of operations is based on Cargill's consolidated statements of
financial condition, and the related consolidated statements of operations,
changes in stockholders' equity, cash flows and the notes to these consolidated
financial statements. These statements, including the Report of Independent
Auditors, should be read together with Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Cargill Bank's revenues are derived principally from interest earned on
loans and, to a lesser extent, from interest earned on interest-bearing deposits
and investments. The operations of the Cargill Bank, and the thrift industry in
general, are influenced significantly by general economic conditions and by
policies of financial institution regulatory agencies, including the Office of
the Comptroller of the Currency ("OCC"),OTS, FDIC and the Connecticut Department
of Banking. Cargill Bank's cost of funds is influenced by interest rates on
competing investments and general market interest rates. Lending activities are
affected by the demand for real estate and other types of loans, which in turn
is affected by the interest rates at which such financing may be offered.
Cargill Bank's net income depends to a significant degree upon its net
interest income, which is the difference between the interest income earned on
its interest-earning assets and the interest expense paid on its
interest-bearing liabilities. Cargill Bank, like other thrift institutions, is
subject to interest rate risk to the degree that its interest-bearing
liabilities mature or reprice at different times, or on a different basis, than
its interest-earning assets.
YEAR ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
Cargill Bank's assets continue to be comprised primarily of mortgage
loans (mostly 1-4 family, owner occupied) with maturities of up to 30 years.
Such assets were historically fixed rate and funded with low-cost, stable
deposit accounts. Beginning in the late 1970s and continuing through this date,
interest rate volatility has made the market sensitive to this type of
fixed-rate loan product. In response to this market trend, Cargill Bank has
moved toward originating a greater percentage of adjustable rate mortgage loans.
As of September 30, 1997, the adjustable mortgage loans represented 75.5% of the
total loan portfolio.
The 1997 fiscal year produced an increase in capital from $2,971,000 to
$3,167,000. The net increase in capital of $196,000 was a result of net income
for the fiscal year of $153,000, the net effect of a former director exercising
his stock options, and the net effect of Cargill Bank adjusting the value of
investments "Available-for-Sale". Assets also rose from $46,894,000 to
$47,302,000. There was a decrease in non-performing assets classification
attributable to the continued resolution of such assets throughout the year
ended September 30, 1997. Almost all of these loans are secured by 1 - 4 family
properties.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") imposes significant regulatory restrictions and requirements on
banking institutions insured by the FDIC and their holding companies. FDICIA
established capital categories into which financial institutions are placed
based on capital level. Each capital category establishes different degrees of
regulatory restrictions which can apply to a financial institution. As of
September 30, 1997, Cargill Bank's capital was at a level that placed Cargill
Bank in the "well capitalized" category as defined by FDICIA.
FDICIA imposes a variety of other restrictions and requirements on
insured banks. These include significant regulatory reporting requirements such
as insuring that a system of risk-based deposit insurance premiums and civil
money penalties for inaccurate deposit reporting exists. In addition, FDICIA
imposes a system of regulatory standards for financial institutions and holding
company operations, detailed truth in savings disclosure requirements, and
restrictions on activities authorized by state law but not authorized for
national financial institutions.
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COMPONENTS OF CAPITAL
The following table presents Cargill's components of capital as of
September 30. The table also presents the ratio of capital to total assets.
<TABLE>
<CAPTION>
(Dollars in thousands) 1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Stockholders' equity
Common stock $ 3 $ 3 $ 3
Additional paid-in-capital 1,653 1,634 1,624
Retained earnings 1,668 1,602 1,789
Unrealized gain (loss) on securities
available for sale (1) -- --
Treasury stock (156) (268) (333)
------- ------- -------
Total Capital $ 3,167 $ 2,971 $ 3,083
======= ======= =======
Ratio of capital to total assets 6.69 % 6.34 % 6.73 %
</TABLE>
The regulatory risk-based capital requirements take into account the
different risk categories of banking organizations by assigning risk weights to
assets and the credit equivalent amounts of off-balance sheet exposures. In
addition, capital is divided into two tiers. For Cargill Bank, Tier 1 includes
the common stockholders' equity. Total capital includes Tier 1 items as well as
Tier 2 or Supplementary Capital. Included in Cargill's Tier 2 capital is the
allowance for loan losses. Net unrealized gains (losses) on securities available
for sale are not included for regulatory capital purposes.
The following are the risk-based capital ratios for Cargill and Cargill Bank at
September 30:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Tier 1 risk-based capital (minimum required 4%)
- Cargill 12.5 % 11.6 % 12.6 %
- Bank 12.2 11.5 12.5
Total risk-based capital (minimum required 8%)
- Cargill 13.4 12.3 13.4
- Bank 13.1 12.2 13.0
</TABLE>
DISCUSSION OF MARKET RISK
Market risk is the loss due to adverse changes in market prices and
rates. The management of this risk, coupled with directives to build shareholder
value and profitability, is an integral part of Cargill's overall operating
strategy. Cargill's approach to risk management, primarily interest rate risk
management, is quite basic and concentrates on fundamental strategies to
restructure the balance sheet and composition of assets and liabilities. Since
Cargill does not utilize interest rate futures, swaps or options transactions,
its asset/liability profile is not complex. It reflects a simple approach to
managing risk through the use of fixed and adjustable rate loans, rate
insensitive checking accounts as well as a combination of fixed and variable
rate deposit products. Bank policy includes required limits on the sensitivity
of net interest income under various interest rate scenarios.
Cargill Bank seeks to control its interest rate risk exposure in a
manner that will allow for adequate levels of earnings and capital over a range
of possible interest rate environments. Cargill Bank has adopted formal policies
and practices to monitor and manage interest rate risk exposure. As part of this
effort Cargill Bank actively manages interest rate risk through the use of a
simulation model which measures the sensitivity of future net interest income to
changes in interest rates. In addition, Cargill Bank regularly monitors interest
rate sensitivity through gap analysis, which measures the terms to maturity or
next repricing date of interest-earning assets and interest-bearing liabilities.
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On a quarterly basis, an interest rate risk exposure compliance report
is prepared and presented to Cargill Bank's Board of Directors. This report
presents an analysis of the expected change in net interest income resulting
from an increase or decrease in the level of interest rates. All changes are
measured as percentage changes from the projected net interest income in the
flat rate scenario. The calculated estimates of change in net interest income
are compared to current limits established by management and approved by the
Board of Directors. The following is a summary of the interest rate exposure
report as of September 30, 1997:
<TABLE>
<CAPTION>
Change in Interest Rates Percentage Change in
(in Basis Points) Net Interest Income
<S> <C>
+200 12.72%
Level 0.00%
-200 (17.20)%
</TABLE>
The model utilized to create the report presented above makes various
estimates at each level of interest rate change regarding cash flows from
principal repayments on loans and mortgage-backed securities and/or call
activity on investment securities. Actual results could differ significantly
from these estimates which would result in significant differences in the
calculated projected change.
In order to reduce the exposure to interest rate fluctuations, Cargill
Bank has developed strategies to manage its liquidity, shorten the effective
maturities of certain interest-earning assets and increase the effective
maturities of certain interest-bearing liabilities. Cargill Bank has focused its
residential lending on a combination of fixed and adjustable rate mortgages.
Commercial loans, commercial mortgages and consumer lending focus on adjustable
and short term loans. Cargill Bank also attempts to maintain and/or increase its
savings and transaction accounts which are considered relatively insensitive to
changes in interest rates.
Cargill Bank also measures sensitivity to changes in interest rates
using interest rate sensitivity gap analysis which is the difference between the
cash flow amounts of interest-sensitive assets and liabilities that will be
refinanced (or repriced) during a given period. For example, if the asset amount
to be repriced exceeds the corresponding liability amount for a certain day,
month, year, or longer period, the institution is in an asset-sensitive gap
position. In this situation, net interest income would increase if market
interest rates rose or decrease if market interest rates fell. If,
alternatively, more liabilities than assets will reprice, the institution is in
a liability-sensitive position. Accordingly, net interest income would decline
when rates rose and increase when rates fell. Also, these examples assume that
interest-rate changes for assets and liabilities are of the same magnitude,
whereas actual interest-rate changes generally differ in magnitude for assets
and liabilities.
The following table sets forth the distribution of the repricing of
Cargill Bank's earning assets and interest bearing liabilities as of September
30, 1997, the interest rate sensitivity gap, (i.e., interest rate sensitive
assets less interest rate sensitive liabilities), the cumulative interest rate
sensitivity gap, the interest rate sensitivity gap ratio and the cumulative
interest rate sensitivity gap ratio. The table also sets forth the time periods
in which earning assets and interest-bearing liabilities will mature or may
reprice in accordance with their contractual terms. However, the table does not
necessarily indicate the impact of general interest rate movements on the net
interest margin since the repricing of various categories of assets and
liabilities is subject to competitive pressures and the needs of Cargill Bank's
customers. In addition, various assets and liabilities indicated as repricing
within the same period may in fact reprice at different times within such period
and at different rates.
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<TABLE>
<CAPTION>
Over
Three Three One Year Over
Months Months to to Five Five
(Dollars in Thousands) or Less A Year Years Years Total
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
EARNING ASSETS
Securities including mortgage-backed
securities and Federal Home Loan
Bank Stock $ 339 $ -- $ 1,197 $ 4,184 $ 5,720
Interest bearing cash 1,986 -- -- -- 1,986
Loans 252 22,608 1,468 11,773 36,101
-------- -------- -------- -------- --------
2,577 22,608 2,665 15,957 43,807
INTEREST BEARING LIABILITIES
Savings deposits -- 1,075 9,677 -- 10,752
NOW accounts -- 717 6,457 -- 7,174
Money market accounts 510 -- -- -- 510
Negotiated rate certificates 589 -- -- -- 589
Other time deposits 4,410 8,119 8,755 1,006 22,290
Borrowed funds -- -- -- -- --
-------- -------- -------- -------- --------
$ 5,509 $ 9,911 $ 24,889 $ 1,006 $ 41,315
======== ======== ======== ======== ========
Interest Rate
Sensitivity Gap $ (2,932) $ 12,697 $(22,224) $ 14,951 $ 2,492
Cumulative Interest Rate
Sensitivity Gap $ (2,932) $ 9,765 $(12,459) $ 2,492
Interest rate
Sensitivity Gap Ratio (6.69)% 28.98% (50.73)% 34.91% 5.69%
Cumulative Interest Rate
Sensitivity Gap Ratio (6.69)% 22.29% (28.44)% 5.69%
</TABLE>
DISCUSSION OF MARKET RISK
The presentation of a run off and repricing of savings accounts and NOW
accounts is based on Cargill Bank's historical experience with $1,075,000 and
$717,000, respectively, included in the three month to one year category and the
remainder placed in the one to five year category of the interest bearing
liabilities.
Cargill seeks to manage the mix of asset and liability maturities to
control the effect of changes in the general level of interest rates on net
interest income. In periods of rising interest rates, Cargill's negative
interest rate sensitivity gap as to earning assets and interest-bearing
liabilities maturing in less than one year may cause a diminuation of Cargill's
income; correspondingly, in periods of declining interest rates, a negative
interest rate sensitivity gap may provide additional income. Except for its
effect on the general level of interest rates, inflation does not have a
material impact on Cargill's earnings due to the rate of variability and
short-term maturities of its earning assets.
-78-
<PAGE> 81
DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY -
INTEREST RATES AND INTEREST DIFFERENTIAL
The following table presents the condensed average balance sheets for
September 30, 1997, 1996 and 1995. The total dollar amount of interest income
from earning assets and the resultant yields are calculated on a taxable
equivalent basis. The interest paid on interest-bearing liabilities, expressed
both in dollars and rates, is shown in the table:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------- --------------------------------- -----------------------------
Average Average Average
Interest Yield/ Interest Yield/ Interest Yield/
Average Income/ Rate Average Income/ Rate Average Income/ Rate
(Dollars in Thousands) Balance Expense Paid Balance Expense Paid Balance Expense Paid
--------- -------- ------- --------- --------- ------- -------- -------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Securities:
U.S. Treasury $ 105 $ 6 5.70% $ 790 $ 56 7.05% $ 1,317 $ 76 5.81%
Federal agencies 2,596 206 7.93 1,419 121 8.56 - - -
Other securities 2,028 132 6.52 1,693 120 7.09 2,341 156 6.66
--------- -------- ------- --------- --------- ------- -------- -------- ----
Total securities 4,729 344 6.83 3,902 297 7.62 3,658 232 6.35
--------- -------- ------- --------- --------- ------- -------- -------- ----
Interest- bearing cash and
temporary investments 1,252 66 5.28 1,739 93 5.42 3,188 177 5.54
--------- -------- ------- --------- --------- ------- -------- -------- ----
Loans (a):
Commercial 683 54 7.85 693 66 9.58 628 60 9.56
Real estate 36,092 3,036 8.41 35,734 2,930 8.20 33,380 2,665 7.98
Consumer 762 68 8.99 798 73 9.11 852 80 9.35
--------- -------- ------- --------- --------- ------- -------- -------- ----
Total loans 37,537 3,158 8.41 37,225 3,069 8.24 34,860 2,805 8.05
--------- -------- ------- --------- --------- ------- -------- -------- ----
Total earning assets 43,518 3,568 8.20% 42,866 3,459 8.07% 41,706 3,214 7.71%
--------- -------- ------ --------- --------- ----- -------- -------- -----
Allowance for loan losses (212) (194) (164)
Cash and due from banks 1,112 1,037 814
Other assets 3,147 3,220 2,296
--------- --------- --------
Total assets $ 47,565 $ 46,929 $ 44,652
========= ========= =========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest-bearing deposits:
Savings $ 9,960 $ 224 2.25% $ 10,130 $ 229 2.26% $ 10,670 $ 240 2.26%
Money market 507 12 2.34 490 11 2.33 581 13 2.25
Negotiated rate
certificates 496 28 5.63 504 27 5.35 351 19 5.39
Other time deposits 31,456 1,450 4.61 30,806 1,493 4.84 28,562 1,330 4.66
Borrowed funds 76 5 5.72 111 6 5.99 44 3 6.02
--------- -------- ------- --------- --------- ------ -------- -------- ----
Total interest-bearing
liabilities 42,495 1,719 4.04 42,041 1,766 4.20 40,208 1,605 3.99
-------- ------- --------- ------ -------- -----
Noninterest-bearing
demand deposits 1,346 1,078 945
Other liabilities 577 594 513
Stockholders' equity 3,147 3,216 2,986
--------- --------- --------
Total liabilities and
stockholders' equity $ 47,565 $ 46,929 $ 44,652
========= ========= ========
Interest income $ 1,849 $ 1,693 $ 1,609
======== ========= ========
Yield spread 4.16% 3.87% 3.72%
===== ====== =====
Net Yield on earning assets 4.25% 3.96% 3.75%
===== ====== =====
</TABLE>
- ------------------------------------
(a) Average loan balances above include non-accrual loans. When a loan is
placed in non-accrual status, interest income is recorded to the extent
actually received in cash or is applied to reduce principal.
-79-
<PAGE> 82
During 1997, the yield spread increased to 4.16% from 3.87% in 1996, up
29 basis points. Cargill's net interest margin increased during 1997 to 4.25%
from 3.96% in 1996, a increase of 29 basis points.
During 1996, the yield spread increased to 3.87% from 3.72% in 1995,
and up 15 basis points. Cargill's net interest margin increased during 1996 to
3.96% from 3.75% in 1995, up 15 basis points. The section titled Rate/Volume
Analysis further describes the change in yields.
RATE/VOLUME ANALYSIS OF INTEREST MARGIN ON EARNING ASSETS
The dollar amounts of interest income and interest expense fluctuate
depending upon changes in interest rates and upon changes in amounts (volume) of
Cargill's interest-earning assets and interest-bearing liabilities. Changes
attributable to (i) changes in volume (changes in average outstanding balances
multiplied by the prior period's rate), (ii) changes in rate (changes in average
interest rate multiplied by the prior period's volume), and (iii) changes in
rate/volume (changes in rate times the change in volume that were allocated
proportionately to the changes in volume and the changes in rate) were as
follows:
<TABLE>
<CAPTION>
1997 Compared with 1996 1996 Compared with 1995
----------------------------------------------------- -------------------------------------------------
(Dollars in Thousands) Increase *Due to Increase * Due to
1997 1996 (Decrease) Volume Rate 1996 1995 (Decrease) Volume Rate
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Earned:
Securities:
U.S. Treasury $ 6 $ 56 $ (50) $ (47) $ (3) $ 56 $ 76 $ (20) $ (34) $ 14
Federal agencies 206 121 85 68 17 121 -- 121 121 --
Other securities 132 120 12 22 (10) 120 156 (36) (45) 9
Interest-bearing cash 66 93 (27) (26) (1) 93 177 (84) (80) (4)
Loans:
Commercial 54 66 (12) (1) (11) 66 60 6 6 --
Real estate 3,036 2,930 106 30 76 2,930 2,665 265 192 73
Consumer 68 73 (5) (4) (1) 73 80 (7) (5) (2)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
3,568 3,459 109 42 67 3,459 3,214 245 155 90
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Interest expense:
Savings 224 229 (5) (1) (4) 229 240 (11) (11) --
Money market 12 11 1 -- 1 11 13 (2) (2) --
Negotiated rate
certificates 28 27 1 1 -- 27 19 8 8 --
Other time deposits 1,450 1,493 (43) 30 (73) 1,493 1,330 163 108 55
Borrowed funds 5 6 (1) -- (1) 6 3 3 3 --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
1,719 1,766 (47) 30 (77) 1,766 1,605 161 106 55
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
$ 1,849 $ 1,693 $ 156 $ 12 $ 144 $ 1,693 $ 1,609 $ 84 $ 49 $ 35
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
Net interest income for 1997 increased to $1,849,000 up 9% from
$1,693,000 in 1996. A 2% increase in average earning assets and a 13 basis point
increase in average rate of return resulted in an increase in volume of $42,000
and a increase in rate of $67,000. An increase of 1% in average interest bearing
liabilities and a 16 basis point decrease in average rate of interest paid
contributed to an increase in volume of $30,000 and a decrease in rate of
$77,000.
Net interest income for 1996 increased to $1,693,000 up 5% from
$1,609,000 in 1995. An increase of 8% in average earning assets and a 36 basis
point increase in average rate of return resulted in an increase in volume of
$155,000 and a increase in rate of $90,000. An increase of 5% in average
interest bearing liabilities and a 21 basis point increase in average rate of
interest paid contributed to an increase in volume of $106,000 and a increase in
rate of $55,000.
LIQUIDITY
Liquidity management requires close scrutiny of the mix and
maturity of deposits and borrowings and short-term investments. Cash and due
from banks, interest bearing deposits, investment securities and mortgage-backed
securities, as compared to deposits, are used by Cargill to compute its
liquidity on a daily basis as adjusted for regulatory purposes. Cargill is
subject to Regulation D of the Federal Reserve Bank
-80-
<PAGE> 83
(FRB), which requires depository institutions to maintain reserve balances on
deposit with the FRB based on certain average depositor balances. Cargill is in
compliance with Regulation D. Management of Cargill believes that its current
liquidity is sufficient to meet current and anticipated funding needs.
The following is a summary of the cash flow provided (used) by
operating, investing and financial activities for the years ended September 30
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(Dollar amounts in thousands)
<S> <C> <C> <C>
Operating activities $ 666 $ 314 $ 446
Investing activities 591 (1,851) (4,688)
Financing activities 134 963 3,942
------- ------- -------
Total increase (decrease)
in cash and cash
equivalent $ 1,391 $ (574) $ (300)
======= ======= =======
</TABLE>
INVESTMENT PORTFOLIO
Refer to Note 2 in the Notes to Consolidated Financial Statements
included herein which covers the maturity distribution and market values at
September 30, 1997 of the securities portfolio. The following table shows the
amortized cost (in thousands) of Cargill's securities held to maturity at
September 30:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
U.S. Government obligations $ -- $ 700 $1,298
Federal agency obligations 2,846 2,499 --
Mortgage-backed securities 2,154 1,604 1,598
Other debt securities 99 99 1,186
------ ------ ------
Amortized cost $5,099 $4,902 $4,082
====== ====== ======
</TABLE>
The following is a summary of purchases, sales and maturities of
investments for the years ended September 30
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
(Dollar amounts in thousands)
<S> <C> <C> <C>
Held to maturity
Purchases $2,008 $3,044 $1,681
Maturities 1,855 2,229 1,644
Available for sale
Purchases 585 -- --
Sales and maturities 324 -- --
</TABLE>
The following table shows the fair value (in thousands) of Cargill's
securities available for sale at September 30, 1997. There were no securities
available for sale in 1996 or 1995.
<TABLE>
<CAPTION>
1997
----
<S> <C>
Mortgage-backed securities $ 283
Gross unrealized (gain) loss on
securities available for sale 1
-----------
Amortized cost $ 284
===========
</TABLE>
-81-
<PAGE> 84
The following table shows weighted average yields and maturity
distribution of debt securities at September 30, 1997:
<TABLE>
<CAPTION>
1 to 5 Years 5 to 10 Years After 10 Years Total
------------------ ------------------ -------------------- --------------------
Weighted Weighted Weighted Weighted
Average Carrying Average Carrying Average Carrying Average Carrying
Yield Value Yield Value Yield Value Yield Value
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Federal agency
obligations 6.73% $1,149 7.13% $1,247 7.22% $ 450 6.96% $2,846
Mortgage-backed
securities 6.08 98 6.40 732 6.89 1,607 6.71 2,437
Other 5.73 99 -- -- -- -- 5.73 99
------ ------ ------ ------ ------ ------ ------ ------
Total debt securities 6.61% $1,346 6.86% $1,979 6.92% $2,057 6.82% $5.382
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
The weighted average yield has been computed by divided annualized
interest income, including the accretion of discount and the amortization of
premiums, by the book value of securities outstanding.
LOAN PORTFOLIO
The following table sets forth the classification (in thousands)
of Cargill's loans by major category at September 30:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Commercial $ 630 $ 630 $ 734 $ 498 $ 72
----------- ----------- ----------- ----------- -----------
Real estate:
Construction 90 591 976 383 381
Residential (1-4 family) 29,730 30,115 29,866 27,549 27,951
Residential (5 or more) 602 626 711 411 347
Commercial properties 4,196 4,245 3,493 3,011 2,381
----------- ----------- ----------- ----------- -----------
Total real estate 34,618 35,577 35,046 31,344 31,060
----------- ----------- ----------- ----------- -----------
Consumer 657 850 805 857 849
----------- ----------- ----------- ----------- -----------
Gross loans 35,905 37,057 36,585 32,709 31,981
Deferred loan origination fees-net of costs 52 83 105 106 128
----------- ----------- ----------- ----------- -----------
Total loans 35,853 36,974 36,480 32,603 31,853
----------- ----------- ----------- ----------- -----------
Allowance for loan losses 209 218 217 77 39
----------- ----------- ----------- ----------- -----------
Net loans $ 35,644 $ 36,756 $ 36,263 $ 32,526 $ 31,814
=========== =========== =========== =========== ===========
</TABLE>
Cargill's loan portfolio is not concentrated within a single
industry nor a group of related industries, however, underlying collateral
values are dependent upon market fluctuations in the Northeastern Connecticut
area. The aggregate amount of loans to executive officers, directors and
organizations with which they are associated amounted to $343,000 or 10.8% of
stockholders' equity as of September 30, 1997 compared to $390,000 or 13.1% as
of September 30, 1996.
The following table provides the maturity distribution and
sensitivity to changes in interest rates of commercial loans and commercial real
estate construction loans at September 30, 1997:
<TABLE>
<CAPTION>
12 Months After
(Dollars in Thousands) or Less 5 Years Total
----------- ----------- -----------
<S> <C> <C> <C>
Commercial $ 502 $ 75 $ 577
Commercial real estate-construction 53 - 53
----------- ----------- -----------
Other real estate construction 37 - 37
Totals $ 592 $ 75 $ 667
=========== =========== ===========
</TABLE>
-82-
<PAGE> 85
All of the commercial loans which mature beyond one year have
fixed rates.
In the normal course of business, various commitments and
contingent liabilities are outstanding, such as guarantees, standby letters of
credit, commitments to extend credit and various financial instruments with
off-balance-sheet risk that are not reflected in the financial statements. The
most significant of these are commitments to grant loans and commitments to
advance funds under existing loan agreements which were $76,000 and none,
respectively, at September 30, 1997 and $479,000 and $201,000, respectively, in
1996. See further discussion in Note 12 to the Consolidated Financial
Statements.
LOAN LOSS EXPERIENCE
The provision for loan losses is an amount added to the allowance
against which loan losses are charged. The provision for loan losses is
dependent on actual net write-offs and an evaluation as to the collectibility of
the loan portfolio taking into consideration such factors as the financial
condition of individual borrowers, historical loss experience with respect to
various portfolio segments, current and near term economic conditions, and the
size of the portfolio. Based on these reviews, the allowance for loan losses at
September 30, 1997, is deemed to be adequate by management. In the determination
of the allowance for loan losses management obtains independent appraisals for a
significant number of properties.
The following table sets forth the historical relationship among
the average amount of loans outstanding, the allowance for loan losses,
provision for loan losses charged to operating expenses, losses charged off,
recoveries and selected ratios:
<TABLE>
<CAPTION>
(Dollars in Thousands) 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at beginning of year $ 218 $ 217 $ 77 $ 39 $ 33
Provision charged to expense 116 76 217 55 14
----------- ----------- ----------- ----------- -----------
334 293 294 94 47
----------- ----------- ----------- ----------- -----------
Charge-offs:
Loans secured by real estate 57 57 51 14 6
Construction/land development - - 12 - -
Commercial and industrial loans 60 7 11 - -
Consumer loans 10 12 3 5 2
----------- ----------- ----------- ----------- -----------
127 76 77 19 8
Recoveries:
Consumer loans 2 1 - 2 -
----------- ----------- ----------- ----------- -------
Net charge-offs 125 75 77 17 8
----------- ----------- ----------- ----------- -----------
Balance at end of year $ 209 $ 218 $ 217 $ 77 $ 39
=========== =========== =========== =========== ===========
Average loans outstanding $ 37,537 $ 37,224 $ 34,861 $ 32,170 $ 31,254
=========== =========== =========== =========== ===========
Net charge-offs as a percentage of
average loans .33% .20% .22% .05% .02%
Net charge-offs as a percentage of
the allowance at beginning of year 57.47% 34.39% 100.59% 44.01% 23.94%
Allowance as a percentage of total loans
at September 30 .58% .59% .60% .24% .12%
Allowance as a percentage of non-performing
at September 30 34.56% 27.33% 54.48% 15.78% 219.98%
</TABLE>
-83-
<PAGE> 86
Allocation of the balance as of September 30 of the allowance for
loan losses applicable to:
<TABLE>
<CAPTION>
(Dollars in Thousands) 1997 1996 1995 1994 1993
------------------ ----------------- -------------------- ------------------ ------------------
% of % of % of % of % of
Loans to Loans to Loans to Loans to Loans to
Total Total Total Total Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans secured by
real estate $118 .33% $181 .49% $181 .49% $ 67 .20% $ 34 .10%
Construction/land
development 4 .01 3 .01 6 .02 -- -- 1 --
Commercial and
industrial loans 82 .23 29 .08 25 .07 8 .03 3 .02
Consumer loans 5 .01 5 .01 5 .02 2 .01 1 --
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
$209 .58% $218 .59% $217 .60% $ 77 .24% $ 39 .12%
==== ==== ==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
The approach Cargill uses in determining the adequacy of the
allowance for loan losses is the combination of a target reserve and general
reserve allocation. Quarterly, based on an internal review of the loan
portfolio, Cargill Bank identifies required reserve allocations targeted to
recognized problem loans that, in the opinion of management, have potential loss
exposure or questions relative to the adequacy of the collateral on these same
loans. The general reserve allocations are based on loss exposure and historical
results.
NON-PERFORMING ASSETS
LOANS
Loans on which interest and principal payments are 90 days or more
past due are placed on a non-accrual basis (earlier if deemed appropriate) and
all interest accrued to that date is reversed. For the fiscal year ended
September 30, 1995 and earlier years, interest income on loans 90 days or more
past due continued to accrue when management determined that the collectibility
of principal and interest was not reasonably considered in doubt. When this
change was made in 1996, it did not have a material effect on the financial
statements . The following table sets forth information with regard to
non-performing loans as of the end of each year indicated:
<TABLE>
<CAPTION>
(Dollars in Thousands) 1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Loans on a non-accrual basis $ 606 $ 799 $ 398 $ 488 $ 18
======= ======= ======= ======= =======
Non-accrual loans as a percentage of
total net loans outstanding 1.70% 2.17% 1.10% 1.50% 0.06%
Non-accrual loans as a percentage of
of total assets 1.28% 1.70% 0.87% 1.18% 0.05%
Loans contractually past due 90
days or more and still accruing $ -- $ -- $ 226 $ 710 $ 268
</TABLE>
The gross amount of interest that would have been accrued at the
original contract rate on loans on a non-accrual basis (in thousands) was $20,
$62, $35, $9 and $2 for 1997, 1996, 1995, 1994 and 1993, respectively. The
decrease in non-accrual loans from 1996 is attributable to the continued
resolution of non-performing loans throughout 1997.
-84-
<PAGE> 87
Cargill Bank measures impairment of commercial loans by using the
present value of expected future cash flows discounted at the loan's effective
interest rate. Commercial real estate loans are generally measured based on the
fair value of the underlying collateral. Small balance homogenous loans,
including residential real estate and consumer loans, are collectively evaluated
for impairment based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a practical expedient,
at the loan's observable market price or the fair value of the collateral if the
loan is collateral dependent.
Cargill Bank evaluates each impaired loan to determine the
appropriate income recognition practice. Generally, income is recorded only on a
cash basis for impaired loans. Interest income recognized during 1997 and 1996
on impaired loans was not significant. At September 30, 1997 and 1996, the
recorded investment in impaired loans was $848,000 and $768,000 respectively,
for which no additional specific allowance for loan losses was recorded. For the
twelve months ended September 30, 1997, the average recorded investment in
impaired loans was $808,000 compared to $623,000 for year end 1996.
RESTRUCTURED LOANS
A restructured loan is one for which Cargill Bank has modified the
contractual terms to provide a reduction in the rate of interest and, in most
instances, an extension of payments of principal or interest or both because of
a deterioration in the financial position of the borrower. Restructured loans
modified prior to October 1, 1995 which are performing in accordance with their
new terms are not included in non-accrual loans unless concern exists as to the
ultimate collection of principal or interest and are not considered to be
impaired. Those entered into after October 1, 1995 are considered to be impaired
as described in Note 1 to the financial statements. Restructured loans, which
are classified as accruing loans, amounted to $334,000 in 1995, $180,000 in
1994, and $100,000 in 1993. The following is an analysis of interest income
related to restructured loans which are classified as accruing loans:
<TABLE>
<CAPTION>
Year Ended September 30,
(Dollars in Thousands) 1995 1994 1993
----------- ----------- -------
<S> <C> <C> <C>
Interest income that would have been recognized if the
loans had been current at original contract rates $ 26 $ 15 $ 9
Amount recognized as interest income 26 15 9
----------- ----------- -----------
Reduced interest income $ None $ None $ None
=========== =========== ===========
</TABLE>
OTHER REAL ESTATE OWNED
The following table sets forth information regarding other real
estate owned at September 30:
<TABLE>
<CAPTION>
(Dollars in Thousands) 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
Other real estate owned - net $ 204 $ 294 $ 274 $ 181 $ 97
Other real estate owned as a
percentage of total assets 0.43 % 0.63 % 0.60 % 0.44 % 0.25 %
</TABLE>
DEPOSITS
The following table sets forth the average amounts of various
classifications of deposits:
<TABLE>
<CAPTION>
1997 1996 1995
(Dollars in Thousands) Amount Rate Amount Rate Amount Rate
----------- ------- ---------- ------ ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Savings $ 9,960 2.25% $ 10,130 2.26% $ 10,670 2.26%
Money market 507 2.34 490 2.33 581 2.25
Negotiated rate certificates 496 5.63 504 5.35 351 5.39
Other time deposits 31,456 4.61 30,806 4.84 28,562 4.66
42,419 4.04 41,930 4.20 40,164 3.99
Noninterest-bearing demand
deposits 1,346 1,078 945
----------- ----------- -----------
$ 43,765 $ 43,008 $ 41,109
=========== =========== ===========
</TABLE>
-85-
<PAGE> 88
Certificates of deposits of $100,000 and over at September 30, 1997 had the
following maturities:
<TABLE>
<CAPTION>
3 Months 3 to 6 6 to 12 1 Year to
(Dollars in Thousands) or Less Months Months 5 Years Total
----------- ----------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C>
Totals $ 1,114 $ 118 $ 640 $ 898 $ 2,770
=========== =========== ========== =========== ===========
</TABLE>
RETURN ON EQUITY AND ASSETS
Cargill's return on average equity and assets for each of the
years ended September 30, were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- --------
<S> <C> <C> <C>
Return on average total assets 0.32 % (0.24) % 0.17 %
Return on average stockholders' equity 4.86 % (3.46) % 2.44 %
Average stockholders' equity to average total assets 6.62 % 6.85 % 6.69 %
Dividend payout ratio 5% stock 5% stock 5% stock
</TABLE>
BORROWINGS
The following table summarizes borrowings from the Federal Home
Loan Bank of Boston. Average interest rates during each year were computed by
dividing total interest expense by the average amount borrowed:
<TABLE>
<CAPTION>
(Dollars in Thousands) 1997 1996 1995
----------- ---------- --------
<S> <C> <C> <C>
Balance at year end $ - $ 500 $ 500
Average amount outstanding 76 111 44
Maximum amount outstanding at any month-end 500 500 500
Average interest rate for the year 5.72 % 5.99 % 6.02 %
Average interest rate on year-end balance - 5.46 % 5.84 %
</TABLE>
STATEMENTS OF INCOME
In the following sections of Management's Discussion and Analysis
of the Statements of Income, the comparative results of 1997, 1996 and 1995 will
be covered in greater detail. The principal earning assets of the holding
company consist of a savings and loan association, Cargill Bank. Noteworthy are
the effects of sources of income from earning assets and expense of
interest-bearing liabilities. Presented below is a comparative summary of
percentages of increases and decreases for each of the three years ended
September 30, 1997. The significant changes are discussed in the analysis that
follows the summary.
<TABLE>
<CAPTION>
1997 1996
Over Over
(Dollars in Thousands) 1997 1996 1995 1996 1995
----------- ----------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
Net interest income $ 1,849 $ 1,693 $ 1,609 9.2 % 5.2 %
Provision for loan losses 116 76 217 52.6 % (64.0)%
Non-interest income 268 200 187 34.0 % 6.9 %
Non-interest expense 1,753 2,006 1,454 (12.6) % 38.0 %
Income taxes (benefit) 95 (78) 52 221.8 % (250.0)%
----------- ----------- ---------- ---------- -------
Net Income (Loss) $ 153 $ (111) $ 73 237.8 % (252.1)%
=========== =========== ========== =========== =======
</TABLE>
INTEREST INCOME
Cargill's earning assets include a diverse portfolio of interest
earning instruments ranging from Cargill's core business of loan extensions to
interest-bearing securities and mortgage-backed securities. These earning assets
are financed through a combination of interest-bearing and interest-free
sources.
-86-
<PAGE> 89
Total interest income for 1997 amounted to $3,568,000 as compared
to $3,459,000 for 1996 and $3,214,000 for 1995. For 1997 this represents an
increase of $109,000 or 3.1% over 1996, while interest income increased by
$245,000 or 7.6% in 1996 versus 1995. The increase in 1997 is the result of an
increase in average earning assets of $652,000 or 1.5% along with an increase of
13 basis points in average earning interest rate. The increase in 1996 over 1995
is the result of an increase in average earning assets of $245,000 combined with
a 36 basis point increase in average earning interest rate.
INTEREST EXPENSE
Interest expense for 1997 on deposits and borrowings amounted to
$1,719,000 as compared to $1,766,000 in 1996 and $1,605,000 for 1995. Interest
expense decreased by $47,000 or 3% during 1997 compared to 1996 and 1996
interest expense increased by $161,000 or 10% versus 1995. The 1997 increase is
the result of an increase of average interest bearing liabilities of $454,000
and a 16 basis point decrease in the average rate of interest paid compared to
1996. The increase in interest expense during 1996 versus 1995 is the result of
an increase of average interest bearing liabilities of $1,833,000, combined with
a increase of 21 basis points on the average interest rate paid.
NET INTEREST INCOME
Net interest income, the most significant component of earnings,
is the amount by which the interest generated by assets exceeds the interest
expense on liabilities.
Cargill's management analyzes its performance by utilizing the
concepts of interest rate spread and net yield on earning assets. The interest
rate spread represents the difference between the yield on earning assets and
interest paid on interest-bearing liabilities. The net yield on earning assets
is the difference between the rate of interest on earning assets and the
effective rate paid on all funds, interest-bearing liabilities, as well as
interest-free sources (primarily demand deposits and stockholders' equity).
The following table sets forth Cargill's net interest income on a
taxable equivalent basis:
<TABLE>
<CAPTION>
(Dollars in Thousands) 1997 1996 1995
----------- ---------- -----------
<S> <C> <C> <C>
Total interest income $ 3,568 $ 3,459 $ 3,214
Total interest expense 1,719 1,766 1,605
----------- ---------- -----------
Net interest income $ 1,849 $ 1,693 $ 1,609
=========== ========== ===========
</TABLE>
The Rate/Volume Analysis of Interest Margin on Earning Assets
section includes and sets forth each major category of interest earning assets
and interest bearing liabilities which result in net interest income.
PROVISION FOR LOAN LOSSES
The 1997 provision for loan losses totaled $116,000 compared with
$76,000 in 1996, a increase of 53%. During 1996, the provision decreased by
$141,000 versus 1995 representing a decrease of 65%. A full discussion appears
previously under the headings of Loan Loss Experience.
NON-INTEREST INCOME
Income from sources other than interest was $268,000 in 1997, an
increase of $68,000 from the prior year and a increase of $81,000 versus 1995.
Non-interest income for 1997 reflects an increase in services on deposit
accounts and other non-interest income of $30,000 and increases from the gain on
sale of investments of $40,000 compared to 1996.
-87-
<PAGE> 90
NON-INTEREST EXPENSE
The components of non-interest operating expenses at September 30
are as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands) 1997 1996 1995
----------- ---------- -----------
<S> <C> <C> <C>
Salaries and benefits $ 731 $ 715 $ 597
Occupancy 147 144 106
Other real estate owned expenses and provision 158 130 20
Deposit insurance 53 382 93
Other non-interest expense 664 635 638
----------- ---------- -----------
$ 1,753 $ 2,006 $ 1,454
=========== ========== ===========
</TABLE>
Overall non-interest expense decreased during 1997 by $253,000
versus 1996 and increased $299,000 compared to 1995. During 1997, salaries and
benefits increased by $16,000 attributable to overall corporate growth during
1997. Occupancy remained level with 1996. Deposit insurance expense decreased
during 1997 due to the nonrecurrence of an additional deposit insurance expense
of $272,000 that Cargill Bank recorded for the year ended September 30, 1996 as
a result of legislation passed by Congress that imposed a one-time assessment.
Finally, other non-interest expense increased in 1997 by $29,000, also the
result of overall 1997 growth.
INCOME TAXES
For the year ended September 30, 1997 Cargill recorded a tax
expense of $95,000 compared to 1996, when the Corporation recorded a tax benefit
of $78,000. The higher tax expense for 1997 was the result of higher pre-tax
earnings during 1997.
NET INCOME
The net income for 1997 of $153,000 or $.58 per share basic and
$.54 per share diluted, is based on a weighted average of 262,569 basic and
285,680 diluted shares outstanding, compared with a net loss for 1996 or
$111,000 or $.42 per share basic and diluted based on a weighted average shares
of 262,305 basic and diluted. 1995 earnings was $73,000 or $.28 per share basic
and diluted and based on weighted average shares of 249,570 basic and diluted.
ACCOUNTING CHANGES
In 1997, the Financing Accounting Standards Board issued a Statement of
Financial Accounting Standards SFAS No. 130, Reporting Comprehensive Income,
which establishes standards for reporting and displaying of comprehensive income
and SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, which establishes standards for the way public companies report
information about operating segments in both interim and annual financial
statements and related disclosures. Cargill has not determined what, if any,
impact SFAS No. 131, will have on the operating segments reported nor the
related disclosures. SFAS No. 130 was adopted by Cargill on financial statements
that begin after December 15, 1997 and SFAS No. 131 will be effective for
Cargill's 1999 fiscal year.
YEAR 2000 COSTS
Mindful of the need to sustain the integrity of its computer
system as the Year 2000 approaches, Cargill has taken steps to ensure that all
systems are ready to operate accurately on and beyond the Year 2000. Cargill
fully understands the need to prevent disruption of computer and technical
systems, and Cargill is committed to providing its customers with high quality
service.
Cargill has designed its plan to address its Year 2000 concerns
based upon guidance from the Federal Financial Institutions Examining Council.
In addition, the OTS and the Connecticut State Banking Department monitors
Cargill's preparation for the Year 2000 on periodic basis.
Cargill relies on an outside service bureau for almost all of its
data processing.
-88-
<PAGE> 91
Cargill's current state of readiness is that its equipment has
been tested and new equipment (data transmission equipment and teller machines)
has been ordered where necessary. Monitoring of the outside service bureau's
compliance continues on an ongoing basis and additional testing is scheduled for
early 1999 when Cargill's new equipment will be in place. At that time, Cargill
and the service bureau will advance the date on their equipment and run a series
of tests in insure both software and controlling hardware is functioning
properly.
To date, Cargill has incurred approximately $2,000 in Year 2000
related expenses and has estimated that capital expenditures related to the Year
2000 issue will total approximately $210,000.
Cargill's assessment of the risks of the Year 2000 compliance is
forward looking information. As such, it is subject to risks and uncertainties
that could cause actual results to differ materially from the
projected results discussed herein.
NINE MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
CHANGES IN FINANCIAL CONDITION
Total consolidated assets amounted to $47,908,000 on June 30,
1998, compared to $47,302,000 on September 30, 1997. As of June 30, 1998 and
September 30, 1997, earning assets amounted to, respectively, $44,890,000 or 95%
of total assets, and $43,755,000 or 93% of total assets. Earning assets
increased slightly during the first nine months of 1998 as a result of Cargill
Bank's overall level of growth.
CHANGES IN RESULTS OF OPERATIONS
For the nine months ended June 30, 1998, net income was $209,000
compared to $112,000 for the same period during 1997. Included in the results
for the nine months ended June 30, 1997 is a gain on the sale of securities
available for sale totaling $40,000.
An overall increase in net interest income reflects a decrease in
volume and increase in interest rates on earning assets and a decrease in volume
and rates on interest-bearing deposits. Further analysis is provided in sections
on net interest revenue and supporting schedules.
ALLOWANCE FOR LOAN LOSSES AND NON-PERFORMING ASSETS
Cargill recorded a provision for loan losses of $22,000 in the
nine months ended June 30, 1998 compared to $117,000 for the same period in
1997. Loans written off against the allowance for loan losses after recoveries
amounted to $7,000 of net recoveries for the nine months ended June 30, 1998.
The allowance for loan losses at June 30, 1998 totaled $238,000 or
.69% of total loans, as compared to $209,000 or .58% at September 30, 1997.
Non-performing past due loans at June 30, 1998 aggregated $472,000
or 1.37% of total loans compared to $606,000 or 1.68% at September 30, 1997. The
percentage of non-performing and past due loans compared to total assets on
those same dates, respectively, amounted to 1.09% and 1.69%.
Other real estate owned at June 30, 1998 totaled $44,000 and
stands at 0.09% to total assets at the end of the current period.
Management has made every effort to recognize all circumstances
known at this time which could affect the collectibility of loans and has
reflected these in the provision for loan losses, the write down of other real
estate owned and impaired loans to fair value and other loans (watch list)
monitored by management, the charge-off of loans and the balance in the
allowance for loan losses. Management believes that the provision for the
current fiscal period and the balance in the allowance for loan losses are
adequate based on results provided by the loan grading system and circumstances
known at this time.
NET INTEREST INCOME
Cargill's earning assets include a diverse portfolio of earning
instruments ranging from Cargill Bank's core business of loan extensions to
interest-bearing securities. These earning assets are financed through a
combination of interest-bearing and interest-free sources.
-89-
<PAGE> 92
Net interest income, the most significant component of earnings,
is the amount by which the interest generated by assets exceeds the interest
expense on liabilities.
The management of Cargill analyzes its performance by utilizing
the concepts of interest rate spread and net yield on earning assets. The
interest rate spread represents the difference between the yield on earning
assets and interest on earning assets and the effective rate paid on all funds -
interest-bearing liabilities, as well as interest-free sources (primarily demand
deposits and shareholders' equity).
The balances and rates derived for the analysis of net interest
income presented on the following pages reflect the consolidated assets and
liabilities of Cargill's principal earning subsidiary, Cargill Bank.
<TABLE>
<CAPTION>
Nine Months Ended
(Dollar amounts in thousands) 6-30-98 6-30-97
----------- -----------
<S> <C> <C>
Interest and dividend income $ 2,666 $ 2,675
Interest expense 1,229 1,293
----------- -----------
Net interest income $ 1,437 $ 1,382
=========== ===========
</TABLE>
INTEREST RATE SPREAD AND NET YIELD ON EARNING ASSETS
<TABLE>
<CAPTION>
Nine Months Ended June 30,
1998 1997
----------------------------------------------------------------
(Dollar amounts in thousands) Average Average
Balance Rate Balance Rate
------------- --------- ------------- ------------
<S> <C> <C> <C> <C>
Earning Assets $ 43,896 8.10 % $ 43,877 8.13 %
============= =============
Interest-bearing liabilities $ 41,895 3.91 $ 42,638 4.04
---------- -------------
Interest rate spread 4.19 % 4.09 %
========== =============
Interest-free resources used to
fund earning assets 2,001 1,239
------------- -------------
Total Sources of Funds $ 43,896 3.73 % $ 43,877 3.93 %
============= ========== ============= =============
Net Yield on Earning Assets 4.36 % 4.20 %
========== =============
</TABLE>
CHANGES IN NET INTEREST INCOME
<TABLE>
<CAPTION>
Nine Months Ended 6-30-98
o v e r
Nine Months Ended 6-30-97
Change Due to
(Dollar amounts in thousands) Volume Rate Total
------------- ------------- ---------
<S> <C> <C> <C>
Interest Income:
Loans $ (194) $ 43 $ (151)
Securities 134 (6) 128
Short-term deposits 13 1 14
------------- ------------- -------------
Total Interest Earned (47) 38 (9)
-------------- ------------- -------------
Interest Expense:
Interest bearing deposits (20) (41) (61)
Other borrowed funds (5) 2 (3)
-------------- ------------- -------------
Total Interest Expense (25) (39) (64)
------------- ------------- -------------
Net Interest Income $ (22) $ 77 $ 55
============== ============= =============
</TABLE>
-90-
<PAGE> 93
For the nine month period ended June 30, 1998 net interest income
increased by $55,000 compared with the same period of 1997.
Average earning assets increased by $378,000 during the first nine
months of 1998. The average earning base was $43,896,000 compared to $43,877,000
in the same period last year.
OPERATING EXPENSES
The components of total operating expenses for the periods and
their percentage of gross income are as follows:
<TABLE>
<CAPTION>
Nine Months Ended
------------------------------------------------------------
6-30-98 6-30-97
------------------------------ -------------------------
(Dollar amounts in thousands) Amount Percent Amount Percent
------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Salaries and benefits $ 508 19.06 % $ 543 20.30 %
Other non-interest expense 520 19.50 602 22.50
Occupancy - net 158 5.93 157 5.87
------------- ------------- ----------- -----------
Total Operating Expense $ 1,186 44.49 % $ 1,302 48.67 %
============= ============= =========== ===========
</TABLE>
Operating expense decreased by approximately $116,000 during the
nine months ended June 30, 1998 as compared with the same period in 1997. This
was primarily the result of decreases in expenses related to foreclosed real
estate, and in salaries and benefits.
CAPITAL RATIOS
<TABLE>
6-30-98 9-30-97
------- --------
<S> <C> <C>
Ratio of "Tier 1" leverage capital to total
assets to end of period
- Cargill 7.11 % 6.74 %
- Bank only 6.96 % 6.60 %
</TABLE>
Regulatory risk-based capital requirements take into account the
different risk categories of financial institutions by assigning risk weights to
assets and the credit equivalent amounts of off-balance sheet exposures.
In addition, capital is divided into two tiers. For Cargill, Tier
1 includes the common stockholders' equity. Total capital includes Tier 1 items,
as well as Tier 2, or supplementary capital. Included in Cargill's Tier 2
capital is a portion of the allowance for loan losses. Net unrealized gains
(losses) on securities available for sale are not included for regulatory
capital purposes.
The following are risk-based capital ratios for Cargill and Cargill Bank at June
30, 1998:
Tier 1 Risk Based Capital (minimum required 4.00%)
- Cargill 14.39 %
- Bank 14.08 %
Total Risk Based Capital (minimum required 8.00%)
- Cargill 15.40 %
- Bank 15.09 %
As of June 30, 1998 and September 30, 1997 Cargill was considered
well capitalized.
-91-
<PAGE> 94
INTEREST RATE SENSITIVITY
The following table sets forth the distribution of the repricing
of Cargill's earning assets and interest bearing liabilities as of June 30,
1998.
<TABLE>
<CAPTION>
Three Over Three Over One Over
Months Months to Year to Five
or Less One Year Five Years Years Total
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Earning Assets $ 6,188 $ 16,327 $ 5,002 $ 17,373 $ 44,890
Interest Bearing
Liabilities 6,921 10,644 24,296 -- 41,861
-------- -------- -------- -------- --------
Interest Rate
Sensitivity Gap $ (733) $ 5,683 $(19,294) $ 17,373 $ 3,029
======== ======== ======== ======== ========
Cumulative Interest
Rate Sensitivity Gap $ (733) $ 4,950 $(14,344) $ 3,029
Interest Rate
Sensitivity Gap Ratio (1.63)% 12.66% (42.98)% 38.70% 6.75%
Cumulative Interest
Rate Sensitivity
Gap Ratio 1.63 % 11.03% (31.95)% 6.75%
</TABLE>
LIQUIDITY
Cash and due from banks, investment securities, mortgage-backed
securities and loans available for sale, as compared to deposits and short term
liabilities, are used by Cargill to compute its liquidity on a daily basis. At
June 30, 1998, Cargill's ratio of such assets to total deposits and borrowed
funds was 26.99%.
The following is a summary of the cash flow provided (used) by
operating, investing and financing activities for the nine months ended June 30
<TABLE>
<CAPTION>
1997 1997
---- ----
<S> <C> <C>
(Dollar amounts in thousands)
Operating activities $819 $380
Investing activities (2,002) 268
Financing activities 355 402
------ -----
Total increase (decrease) in
cash and cash equivalent $(828) $1,050
--- -----
</TABLE>
-92-
<PAGE> 95
PROVISION AND ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
Nine Months Ended
(Dollar amounts in thousands) 6-30-98 6-30-97
-------------- -------------
<S> <C> <C>
Balance at beginning of period $ 209 $ 218
Provision charged to expense 22 117
------------- -------------
231 335
Charge-offs:
Loans secured by real estate - 35
Commercial and industrial loans - 60
Consumer loans 2 8
------------- -------------
2 103
Recoveries:
Loans secured by real estate 5 -
Consumer loans 4 1
------------- -------------
9 1
Net charge-offs (recoveries) to: (7) 102
------------- -------------
Balance at end of period $ 238 $ 233
============= =============
Net charge-offs (recoveries) to:
Average loans (0.02 %) 0.27 %
Loans at end of period (0.02 %) 0.27 %
Allowance for loan losses (3.03 %) 43.83 %
Allowance for loan losses as a percentage of:
Average loans 0.69 % 0.62 %
Loans at end of period 0.69 % 0.62 %
</TABLE>
Management makes regular evaluations of the loan portfolio to
determine the adequacy of the level of the allowance for loan losses. Numerous
factors are considered in the evaluation, including a review of certain
borrowers' current financial status and credit standing, available collateral,
loss experience in relation to outstanding loans, the overall loan portfolio
quality, management's judgement regarding prevailing and anticipated economic
conditions, and other relevant factors.
NON-ACCRUAL LOANS
<TABLE>
<CAPTION>
(Dollar amounts in thousands) 6-30-98 3-31-98 12-31-97 9-30-97 6-30-97
<S> <C> <C> <C> <C> <C>
Non-accrual loans:
Loans secured by real estate $ 417 $ 395 $ 669 $ 446 $ 312
Construction/land development -- -- -- 37 37
Commercial and industrial loans 55 116 134 118 131
Consumer loans -- -- 4 5 38
----------- ----------- ----------- ----------- -----------
$ 472 $ 511 $ 807 $ 606 $ 518
=========== ----------- ----------- ----------- -----------
Non-accrual loans as a percentage
of total loans 1.37 % 1.49 % 2.29 % 1.70 % 1.39 %
=========== =========== =========== =========== ===========
Allowance for loan losses as a
percentage of non-accrual loans 50.44 % 46.57 % 27.88 % 34.49 % 44.98 %
=========== =========== =========== =========== ===========
Other real estate owned - net $ 44 $ 241 $ 203 $ 204 $ 302
=========== =========== ----------- =========== ===========
Total non-performing assets $ 516 $ 752 $ 1,010 $ 810 $ 820
=========== =========== =========== =========== ===========
Non-performing assets as a percentage
of total assets 1.08 % 1.60 % 2.12 % 1.71 % 1.73 %
=========== =========== =========== =========== ===========
</TABLE>
-93-
<PAGE> 96
YEAR TO DATE AVERAGE BALANCES
INTEREST EARNED - INTEREST EXPENSE
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
(Dollar amounts in thousands) June 30, 1998 June 30, 1997
Balance Interest Rate Balance Interest Rate
----------- ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Overnight investments $ 1,555 $ 62 5.32 % $ 1,215 $ 48 5.27 %
Securities 7,595 376 6.60 4,881 248 6.77
Loans 34,746 2,228 8.55 37,781 2,379 8.40
----------- ----------- ----------- ----------- ----------- ---------
Total earning assets $ 43,896 $ 2,666 8.10 % $ 43,877 $ 2,675 8.13 %
----------- ----------- ----------- ----------- ---------
Loan loss allowance (230) (210)
All other assets 3,261 3,932
----------- -----------
TOTAL ASSETS $ 46,927 $ 47,599
=========== ===========
Liabilities and Equity:
Interest bearing deposits $ 41,880 $ 1,228 3.91 % $ 42,537 $ 1,289 4.04 %
Borrowed funds 15 1 8.89 101 4 5.28
----------- ----------- ----------- ----------- ----------- ---------
Total interest bearing
liabilities 41,895 $ 1,229 3.91 42,638 $ 1,293 4.04
----------- ----------- ----------- ----------- ---------
Interest rate spread 4.19 % 4.09 %
=========== =========
Demand deposits 1,107 1,264
Other liabilities 631 558
Shareholders' equity 3,294 3,139
----------- -----------
Total Liabilities and Equity $ 46,927 $ 47,599
=========== ===========
Net Interest Income $ 1,437 $ 915
=========== ===========
Interest earned/earning assets 8.10 % 8.09 %
Interest expense/earning assets 3.73 3.93
----------- ----------
NET YIELD ON EARNING ASSETS 4.36% 4.20%
=========== ===========
</TABLE>
-94-
<PAGE> 97
INDEX TO FINANCIAL STATEMENTS OF CARGILL
Consolidated Financial Statements for the years ended September 30, 1997, 1996
and 1995:
<TABLE>
<S> <C>
Report of Independent Auditors.......................................................................F-1
Consolidated Statements of Financial Condition...................................................... F-2
Consolidated Statements of Operations .............................................................. F-3
Consolidated Statements of Changes in Stockholders' Equity ......................................... F-4
Consolidated Statements of Cash Flows........................................................... F-5 - 6
Notes to Consolidated Financial Statements..................................................... F-7 - 29
Condensed Consolidated Financial Statements for the nine months ended June 30,
1998 and 1997 (Unaudited):
Condensed Consolidated Statements of Financial Condition........................................... F-30
Condensed Consolidated Statements of Income ....................................................... F-31
Condensed Consolidated Statements of Comprehensive Income ....................................... F-32
Condensed Consolidated Statements of Stockholders' Equity ......................................... F-33
Condensed Consolidated Statements of Cash Flow .................................................... F-34
Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . .. F-35-36
</TABLE>
-95-
<PAGE> 98
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
Cargill Bancorp, Inc.
We have audited the consolidated statements of financial condition of Cargill
Bancorp, Inc. and subsidiary as of September 30, 1997 and 1996, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the years ended September 30, 1997, 1996 and 1995. These consolidated
financial statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Cargill Bancorp,
Inc. and subsidiary as of September 30, 1997 and 1996, and the results of its
operations and its cash flows for the years ended September 30, 1997, 1996 and
1995 in conformity with generally accepted accounting principles.
/s/ SNYDER & HALLER, P.C.
Hartford, Connecticut
October 31, 1997, except
for Note 14 as to which the
date is January 26, 1998
F-1
<PAGE> 99
CARGILL BANCORP, INC.
Consolidated Statements of Financial Condition
(Dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
September 30, 1997 September 30, 1996
-------- --------
<S> <C> <C>
ASSETS
Cash and due from banks:
Non-interest bearing $ 1,180 $ 1,156
Interest bearing 1,986 619
-------- --------
Total cash and cash equivalents 3,166 1,775
-------- --------
Investment securities available for sale 283 --
Investment securities held to maturity
(fair value of $5,116 in 1997 and
$4,891 in 1998) 5,099 4,902
-------- --------
Total securities 5,382 4,902
-------- --------
Stock of Federal Home Loan Bank
of Boston at cost 339 331
Loans $ 35,853 $ 36,974
Mortgage loans held-for-sale 195 273
Allowance for loan losses (209) (218)
-------- --------
Net-loans 35,839 37,029
Bank premises and equipment 1,427 1,498
Accrued interest receivable 272 291
Other assets 877 1,068
-------- --------
TOTAL ASSETS $ 47,302 $ 46,894
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 1,087 $ 1,023
Interest bearing 42,032 41,500
-------- --------
Total deposits 43,119 42,523
Federal Home Loan Bank borrowing -- 500
Other liabilities 1,016 900
-------- --------
Total liabilities 44,135 43,923
-------- --------
Stockholders' equity:
Common stock - $.01 par value
Authorized - 750,000 shares
Issued - 284,163 shares 3 3
Paid in capital 1,653 1,634
Retained earnings 1,668 1,602
Accumulated other comprehensive
income (1) --
Treasury stock, at cost; 26,936 shares in 1997
and 46,366 shares in 1996 (156) (268)
-------- --------
Total stockholders' equity 3,167 2,971
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 47,302 $ 46,894
======== ========
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE> 100
CARGILL BANCORP, INC.
Consolidated Statements of Operations
(Dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
Year Ended September 30,
1997 1996 1995
------------- ------------- ------------
<S> <C> <C> <C>
Interest income
Loans $ 3,158 $ 3,069 $ 2,805
Investment securities and
other interest-earning assets 410 390 409
------------- ------------- -------------
Total interest income 3,568 3,459 3,214
Interest expense
Deposits and escrow 1,714 1,760 1,602
Borrowed funds 5 6 3
------------- ------------- -------------
Total interest expense 1,719 1,766 1,605
------------- ------------- -------------
Net interest income 1,849 1,693 1,609
Provision for loan losses 116 76 217
------------- ------------- -------------
Net interest income after
provision for loan losses 1,733 1,617 1,392
------------- ------------- -------------
Other noninterest income
Customers service fees 139 151 141
Net gain (loss) on sale of mortgages 3 5 (1)
Net gain on sale of investments 40 - -
Other income 86 44 47
------------- ------------- -------------
Total other noninterest income 268 200 187
------------- ------------- -------------
Other noninterest expense
Salaries and employee benefits 731 715 597
Occupancy expenses 147 144 106
Data processing 97 96 87
Equipment expense 133 137 114
Advertising 36 37 44
Deposit insurance 53 382 93
Loss on foreclosed real estate 158 130 20
Other expense 398 365 393
------------- ------------- -------------
Total other noninterest expense 1,753 2,006 1,454
------------- ------------- -------------
Income (loss) before provision for
income taxes (benefit) 248 (189) 125
Provision for income taxes (benefit) 95 (78) 52
------------- ------------- -------------
NET INCOME (LOSS) $ 153 $ (111) $ 73
============= ============= =============
Basic income (loss) per share $ .58 $ (.42) $ .28
============= ============= =============
Diluted income (loss) per share $ .54 $ (.42) $ .28
============= ============= =============
Weighted average shares outstanding
- Basic 262,569 262,305 262,305
- Dilutive option shares 23,111 - -
------------- ------------- -------------
- Diluted 285,680 262,305 262,305
============= ============= =============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 101
CARGILL BANCORP, INC.
Consolidated Statements of Changes in Stockholders' Equity
(Dollars in thousands)
<TABLE>
<CAPTION>
Accumulated
Other
Common Paid-in Retained Comprehen- Treasury
Stock Capital Earnings sive Income Stock Total
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1994 $ 3 $ 1,624 $ 1,779 $ -- $ (395) $ 3,011
Net income -- -- 73 -- -- 73
Stock dividend - 5% -- -- (63) -- 62 (1)
------- ------- ------- ------- ------- -------
Balance at September 30, 1995 3 1,624 1,789 -- (333) 3,083
Net loss -- -- (111) -- -- (111)
Stock dividend - 5% -- 10 (76) -- 65 (1)
------- ------- ------- ------- ------- -------
Balance at September 30, 1996 3 1,634 1,602 -- (268) 2,971
Net income -- -- 153 -- -- 153
Stock dividend - 5% -- 19 (87) -- 68 --
Stock options exercised -- -- -- -- 44 44
Change in accumulated
other comprehensive
income -- -- -- (1) -- (1)
------- ------- ------- ------- ------- -------
BALANCE AT SEPTEMBER 30, 1997 $ 3 $ 1,653 $ 1,668 $ (1) $ (156) $ 3,167
======= ======= ======= ======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 102
CARGILL BANCORP, INC.
Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended September 30,
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 153 $ (111) $ 73
Adjustments to reconcile net income
(loss) to net cash provided (used)
by operating activities:
Provision for loan losses 116 76 217
Provision for loss on foreclosed
real estate 80 111 7
Provision for depreciation and
amortization 119 125 85
Amortization of discounts and premiums
on investment securities (2) (5) (12)
Provision for deferred income taxes 90 (93) (50)
Net loss (gain) on sale of foreclosed real estate 58 (3) (10)
Net loss (gain) on sale of mortgages (3) (5) 1
Realized gain on sale of investments (40) -- --
Net change in:
Accrued income receivable 18 (9) (64)
Deferred loan fees (31) (22) (1)
Other assets 76 (72) (169)
Other liabilities 32 322 369
------- ------- -------
Net cash provided by operating activities 666 314 446
------- ------- -------
INVESTING ACTIVITIES
Proceeds from sales and maturities of:
Available-for-sale securities 324 -- --
Held-to-maturity securities (maturities only) 1,855 2,229 1,644
Purchase of:
Available-for-sale securities (585) -- --
Held-to-maturity securities (2,008) (3,044) (1,681)
Purchase of stock of Federal Home
Loan Bank of Boston (8) (25) (5)
Loan originations net of principal payments (523) (2,221) (4,618)
Purchases of loans -- (350) --
Proceeds from sales of mortgages 958 1,592 295
Improvements to foreclosed real estate (48) (12) (76)
Proceeds from sale of foreclosed
real estate 673 49 355
Purchase of premises and equipment (47) (69) (602)
------- ------- -------
Net cash provided (used) by
investing activities 591 (1,851) (4,688)
------- ------- -------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 103
CARGILL BANCORP, INC.
Consolidated Statements of Cash Flows
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended September 30,
---------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
FINANCING ACTIVITIES
Net change in time deposits $ (473) $ 98 $ 3,693
Net change in savings
deposit and escrow accounts 1,064 866 (250)
Advance from Federal Home
Loan Bank of Boston -- 500 500
Repayment of Advance from Federal
Home Loan Bank of Boston (500) (500) --
Cash paid on stock dividend (1) (1) (1)
Proceeds from exercise of common
stock options 44 -- --
------- ------- -------
Net cash provided by
financing activities 134 963 3,942
------- ------- -------
Increase (decrease) in cash and
cash equivalents 1,391 (574) (300)
------- ------- -------
Cash and cash equivalents at
beginning of year 1,775 2,349 2,649
------- ------- -------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 3,166 $ 1,775 $ 2,349
======= ======= =======
SUPPLEMENTAL DISCLOSURES
Non-cash investing activities
Transfer of loans to
foreclosed real estate $ 672 $ 165 $ 422
Cash paid during the year for
Interest expense $ 1,719 $ 1,767 $ 1,604
Income taxes 2 44 43
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 104
CARGILL BANCORP, INC.
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cargill Bancorp, Inc. (the "Corporation") is a savings and loan holding company
for Cargill Bank (the "Bank").
Business
Cargill Bank provides a full range of personal banking services to individual
and small business customers located primarily in Putnam, Connecticut and the
immediate surrounding vicinity. The Bank is subject to competition from other
financial institutions throughout the region. The Bank is also subject to the
regulations of certain state and federal agencies and undergoes periodic
examinations by those regulatory authorities.
Basis of presentation
The accounting and reporting policies of the Corporation and its subsidiary,
Cargill Bank conform to generally accepted accounting principles and to general
practices within the thrift industry.
In preparing the financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the date of the balance sheet, and income and expenses for the period. Actual
results could differ from those estimates.
Material estimates that are particularly susceptible to significant change in
the near-term relate to the determination of the reserve for losses on loans and
the valuation of real estate acquired in connection with foreclosure or in
satisfaction of loans. While management uses available information to recognize
losses on loans and foreclosed real estate, future additions to the allowance
may be necessary based on changes in economic conditions, particularly in
Connecticut.
Principles of consolidation
The accompanying consolidated financial statements include the accounts of the
Corporation and its wholly-owned subsidiary, Cargill Bank. All significant
intercompany accounts and transactions have been eliminated in the
consolidation.
Cash and cash equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash and
amounts due from depository institutions, and interest-bearing deposits.
F-7
<PAGE> 105
CARGILL BANCORP, INC.
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment securities
Management determines the appropriate classification of a security at the time
of purchase. If management has the intent and the Bank has the ability at the
time of purchase to hold debt securities until maturity, they are classified as
held-to-maturity. These securities are carried at historical cost adjusted for
the amortization of premiums and accretion of discounts, which are recognized as
adjustments to interest income.
Securities to be held for indefinite periods of time are classified as
available-for-sale and are carried at fair value with unrealized gains and
losses reported as a separate component of stockholders' equity, net of
estimated income taxes.
Securities that are bought and held principally for the purpose of selling are
classified as trading and reported at fair value, with unrealized gains and
losses included in earnings. The Bank does not hold any investment securities
for the purpose of trading.
Gains or losses on the sales of securities are recognized at trade date
utilizing the specific identification method.
Loans receivable and allowance for loan losses
Loans receivable are stated at unpaid principal balance less loans in process,
deferred loan fees, and allowances for loan losses.
Uncollected interest on loans receivable is accrued as earned based on rates
applied to principal amounts outstanding. Recognition of income on the accrual
basis is discontinued when there is sufficient question as to the collectibility
of the interest. In these cases, the interest previously accrued to income is
reversed, and the loans are placed on the cash basis.
F-8
<PAGE> 106
CARGILL BANCORP, INC.
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Loans receivable and allowance for loan losses
Loan origination fees and certain direct loan origination costs are being
deferred and the net amount amortized on a level-yield basis as an adjustment to
the related loan yield over its contractual life. Unamortized net fees are
recognized upon early repayment of the loans.
The allowance for loan losses is established by a provision charged to earnings
and is maintained at a level considered adequate to provide for potential loan
losses based on management's evaluation of known and inherent risks in the loan
portfolio. When a loan or portion of a loan is considered uncollectible, it is
charged against the allowance for loan losses. Recoveries of loans previously
charged-off are credited to the allowance when collected.
Management makes regular evaluations of the loan portfolio to determine the
adequacy of the level of the allowance for loan losses. Numerous factors are
considered in the evaluation, including a review of certain borrowers' current
financial status and credit standing, available collateral, loss experience in
relation to outstanding loans, the overall loan portfolio quality, management's
judgement regarding prevailing and anticipated economic conditions, and other
relevant factors.
In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Bank's allowance for loan losses.
Such agencies may require the Bank to recognize additions to the allowance based
on their judgements about information available to them at the time of their
examination.
The Bank implemented SFAS No. 114, "Accounting by Creditors for Impairment of a
Loan" as amended by SFAS No. 118 during 1996. These statements require some loan
impairments to be measured using a present value of expected cash flows. The
adoption of SFAS No. 114 and No. 118 did not have any material effects on the
Bank's financial position or results of operations.
Loans held-for-sale
Mortgage loans originated and intended for sale in the secondary market are
carried at the lower of cost or estimated fair value in the aggregate.
F-9
<PAGE> 107
CARGILL BANCORP, INC.
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Foreclosed real estate
Real estate properties acquired through loan foreclosure and other partial or
total satisfaction of problem loans are carried at the lower of fair value or
the related loan balance at the date of foreclosure. Valuations are periodically
performed by management and an allowance for losses is established if the
carrying value of a property subsequently exceeds its fair value less estimated
disposal costs. Losses arising at the time of acquisition of such properties are
charged against the allowance for loan losses. Subsequent write-downs in the
carrying value and expenses incurred to maintain the properties are charged to
expense.
Premises and equipment
Premises and equipment are stated at cost less accumulated depreciation computed
on the straight-line method at rates based on estimated useful lives.
Expenditures for replacements or major improvements are capitalized.
Expenditures for normal maintenance and repairs are charged to expense as
incurred. Upon the sale or retirement of premises and equipment, the cost and
accumulated depreciation are removed from the respective accounts and any gain
or loss is included in income.
Computation of fair values
The calculation of fair value estimates of financial instruments is dependent
upon certain subjective assumptions and involves significant uncertainties.
Changes in assumptions could significantly affect the estimates. These estimates
do not reflect any possible tax ramifications, estimated transaction costs or
any premium or discount that could result from offering the Bank's entire
holdings of a particular financial instrument.
The following methods and assumptions were utilized by the Bank in estimating
the fair values of its on-balance sheet financial instruments at September 30,
1997 and 1996:
Cash and cash equivalents - The carrying amounts reported in the statement of
financial condition approximate these assets' fair value.
Investment securities - Fair values for investment securities are based on
quoted market prices where available. If quoted market prices are not available,
fair values are based on market prices for comparable instruments.
Stock in Federal Home Loan Bank of Boston - Fair value approximates the carrying
amount. If redeemed, the Bank will receive an amount equal to the par value of
the stock.
F-10
<PAGE> 108
CARGILL BANCORP, INC.
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Computation of fair values - (Continued)
Loans receivable - For variable rate loans that reprice frequently and without
significant change in credit risk, fair values are based on carrying values. The
fair value of other loans are estimated using discounted cash flow analyses
using interest rates currently being offered for loans with similar terms to
borrowers of similar credit quality. The fair value of nonaccrual loans was
estimated using the estimated fair values of the underlying collateral.
Accrued income receivable - The carrying value of accrued income receivable
approximates fair value.
Deposits liabilities - The fair values of non-interest-bearing demand and
savings deposits are, by definition, equal to the amount payable on demand at
the reporting date, i.e., their carrying amounts. Fair values for time
certificates of deposit are estimated using a discounted cash flow technique
that applies interest rates currently being offered to a schedule of aggregated
expected monthly maturities on time deposits.
Advances from Federal Home Loan Bank of Boston - Fair values are estimated using
discounted cash flow analyses based on the Bank's current incremental borrowing
rates for similar types of borrowing arrangements.
Income taxes
The Bank accounts for certain income and expense items differently for financial
reporting purposes than for income tax purposes. Provisions for deferred taxes
are being made in recognition of these temporary differences.
F-11
<PAGE> 109
CARGILL BANCORP, INC.
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Reclassification
Prior years' financial statements have been reclassified to conform with changes
in the current financial statement presentation.
2. INVESTMENT SECURITIES
The carrying amounts and quoted fair values of investment securities at
September 30, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
------------------- -------------------
(Dollars in thousands) Carrying Fair Carrying Fair
Amount Value Amount Value
------ ------ ------ ------
<S> <C> <C> <C> <C>
Available-for-sale $ 283 $ 283 $ -- $ --
Held-to-maturity 5,099 5,116 4,902 4,891
------ ------ ------ ------
$5,382 $5,399 $4,902 $4,891
====== ====== ====== ======
</TABLE>
No held-to-maturity securities were sold during 1997, 1996 or 1995. There were
no securities available for sale in 1996 or 1995. During 1997, proceeds from the
sale of available-for-sale securities totaled $324,000 with gross gains of
$41,000 and gross losses of $1,000.
Investments in Available-for-Sale Securities
Investments in available-for-sale securities at September 30, 1997 are carried
at fair value on the balance sheet and are summarized as follows:
<TABLE>
<CAPTION>
1997
-------------------------------------------
(Dollars in thousands) Amortized Estimated
Cost Gross Unrealized Market
Basis Gain Loss Value
----- ---- ---- -----
<S> <C> <C> <C> <C>
Mortgage-backed
securities $284 $ -- $ 1 $283
==== ==== ==== ====
</TABLE>
There were no investments in available-for-sale securities at September 30,
1996.
F-12
<PAGE> 110
CARGILL BANCORP, INC.
Notes to Consolidated Financial Statements
2. INVESTMENT SECURITIES
Investments in Securities Held-to-Maturity
Unrealized gains and losses on securities held-to-maturity at September 30, are
summarized as follows:
<TABLE>
<CAPTION>
1997
------------------------------------
(Dollars in thousands) Amortized Estimated
Cost Gross Unrealized Market
Basis Gain Loss Value
------ ------ ------ ------
<S> <C> <C> <C> <C>
United States Government
and Agency Obligations:
Due after one year
through five years $1,299 $ 1 $ 4 $1,296
Due after five years
through ten years 1,247 3 2 1,248
Due after ten years 300 -- 6 294
------ ------ ------ ------
2,846 4 12 2,838
Certificates of Deposits
Due after one year
through five years 99 -- -- 99
Mortgage-backed securities 2,154 34 9 2,179
------ ------ ------ ------
Total Held-to-Maturity Securities $5,099 $ 38 $ 21 $5,116
====== ====== ====== ======
<CAPTION>
1996
------------------------------------
(Dollars in thousands) Amortized Estimated
Cost Gross Unrealized Market
Basis Gain Loss Value
------ ------ ------ ------
<S> <C> <C> <C> <C>
United States Government
and Agency Obligations:
Due in less than one year $ 700 $ 2 $ -- $ 702
Due after one year
through five years 1,549 1 13 1,537
Due after five years
through ten years 650 1 13 638
Due after ten years 300 -- 14 286
------ ------ ------ ------
3,199 4 40 3,163
Certificates of Deposits:
Due after one year
through five years 99 -- -- 99
Mortgage-backed securities 1,604 39 14 1,629
------ ------ ------ ------
Total Held-to-Maturity Securities $4,902 $ 43 $ 54 $4,891
====== ====== ====== ======
</TABLE>
F-13
<PAGE> 111
CARGILL BANCORP, INC.
Notes to Consolidated Financial Statements
3. LOANS
A summary of loans receivable is as follows:
<TABLE>
<CAPTION>
September 30,
-----------------------
(Dollars in thousands) 1997 1996
-------- --------
<S> <C> <C>
Mortgage loans
Residential $ 28,418 $ 28,420
Construction 53 866
Participation - residential 1,491 1,988
Second mortgage 721 623
Commercial property and land 3,935 3,881
-------- --------
34,618 35,778
Less:
Undisbursed proceeds of
loans in process -- (201)
-------- --------
Total mortgage loans 34,618 35,577
Other loans
Home improvement 28 65
Secured by deposit account 252 249
Personal loans 377 536
Commercial loans 630 630
-------- --------
Total other loans 1,287 1,480
Deduct:
Deferred loan fees (52) (83)
Allowance for loan losses (209) (218)
-------- --------
Total loans $ 35,644 $ 36,756
======== ========
Weighted average interest rate at September 30 8.46% 8.29 %
</TABLE>
The Bank's lending activities are conducted principally within northeastern
Connecticut. The Bank's investment in loans includes both adjustable and fixed
rate loans. At September 30, the composition of the Bank's investment in loans
is as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) Fixed Rate
-------------------------------------------------------
Term to Maturity 1997 1996
------------------------ ------- -------
<S> <C> <C> <C> <C>
1 Mo. - 1 Yr. $ 353 $ 606
1 Yr. - 3 Yrs. 310 500
3 Yrs. - 5 Yrs. 469 588
5 Yrs. - 10 Yrs. 1,087 1,672
10 Yrs. - 20 Yrs. 4,808 4,085
20 Yrs. - 30 Yrs. 1,987 2,149
------- -------
$ 9,014 $ 9,600
======= =======
</TABLE>
F-14
<PAGE> 112
CARGILL BANCORP, INC.
Notes to Consolidated Financial Statements
3. LOANS
Variable rate loans totaled $26,892,000 and $27,458,000 at September 30, 1997
and 1996 respectively. The adjustable rate loans, which reprice annually, have
interest rate adjustment limitations and are generally indexed to one year
treasury bills.
In addition, the Bank services loans for other financial institutions and
agencies. These loans are originated by the Bank and then sold. The Bank
continues to service these loans and remits the payments received to the
purchasing institution. The amounts of these loans were $4,917,000 and
$5,349,000 at September 30, 1997 and 1996 respectively.
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) Year Ended September 30,
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Balance at beginning of year $ 218 $ 217 $ 77
Provision charged to income 116 76 217
Loan charge offs (127) (76) (78)
Recoveries 2 1 1
----- ----- -----
Balance at end of year $ 209 $ 218 $ 217
===== ===== =====
</TABLE>
Nonaccrual loans totaled $606,000 and $799,000 at September 30, 1997 and 1996,
respectively. The amount of income that was contractually due but not recognized
on these loans totaled $19,000 and $62,000 for the years ended September 30,
1997 and 1996, respectively. At September 30, 1997 there were no outstanding
commitments to lend to borrowers with loans on which the accrual of interest has
been discontinued.
At September 30, 1997 the recorded investment in loans that are considered to be
impaired under SFAS No. 114 was $849,000 of which $346,000 were on a nonaccrual
basis. The allowance for loan losses related to these impaired investments was
$97,000. At September 30, 1996, these loans totaled $768,000 of which $219,000
were on a nonaccrual basis.
In the ordinary course of business, the Bank makes loans to directors, executive
officers and employees.
The activity of loans to directors and officers follows:
<TABLE>
<CAPTION>
Year Ended September 30,
(Dollars in thousands) 1997 1996
----- -----
<S> <C> <C>
Balance at beginning of period $ 390 $ 454
Additions 56 16
Payments (103) (80)
----- -----
Balance at end of period $ 343 $ 390
===== =====
</TABLE>
F-15
<PAGE> 113
CARGILL BANCORP, INC.
Notes to Consolidated Financial Statements
4. PREMISES AND EQUIPMENT
At September 30, cost, accumulated depreciation estimated lives and net book
value of premises and equipment were as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) Estimated
1997 1996 Lives
------ ------ ---------
<S> <C> <C> <C>
Buildings $ 984 $ 972 15-40 yrs
Capital lease building 263 263 15 yrs
Leasehold improvements 118 118 10-15 yrs
Land 158 158 --
Furniture and equipment 730 695 3-15 yrs
------ ------
Total cost 2,253 2,206
Less accumulated depreciation 826 708
------ ------
Premises and equipment, net $1,427 $1,498
====== ======
</TABLE>
In the statements of operations, office occupancy and equipment expenses include
depreciation of $119,000, $125,000 and $85,000 for the years ended September 30,
1997, 1996 and 1995 respectively.
In June of 1995 the Bank entered into a capital lease arrangement for its new
branch office. The lease has a 15 year term. Expenses of $37,000 and $38,000
relating to this lease are included in the statement of operations for the year
ended September 30, 1997 and 1996, respectively. Future rent expense may
increase based on the prime interest rate but cannot fall below the future
minimum lease payments listed below.
Future minimum lease payments are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
<S> <C> <C>
Year ending September 30, 1998 $ 37
1999 42
2000 42
2001 42
2002 42
2003 and thereafter 320
------
Total future minimum
lease payments $ 525
======
</TABLE>
F-16
<PAGE> 114
CARGILL BANCORP, INC.
Notes to Consolidated Financial Statements
5. DEPOSITS
A summary of deposit accounts at September 30, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) September 30, 1997 September 30, 1996
--------------- ---------------
Average Average
Rate Balance Rate Balance
---- ------- ---- -------
<S> <C> <C> <C> <C>
Negotiable order of withdrawal 2.08% $ 7,174 2.05% $ 6,121
Regular savings 2.28 10,682 2.30 10,905
Clubs 2.25 69 2.25 65
Insured money market 2.35 510 2.35 465
Demand deposits -- 1,087 -- 1,093
Commercial checking 1.35 718 1.35 522
---- ------- ---- -------
2.06 20,240 2.06 19,171
---- ------- ---- -------
Time deposits, with remaining maturities:
One year 13,118 14,276
Over one year through two years 4,031 2,577
Over two years through three years 3,495 2,013
Over three years through four years 1,230 3,209
Over four years through five years 1,005 1,277
------- -------
5.55 22,879 5.59 23,352
---- ------- ---- -------
3.91% $43,119 4.00% $42,523
==== ======= ==== =======
</TABLE>
The aggregate amount of individual time deposits of $100,000 or more at
September 30, 1997 and 1996 was approximately $4,939,000 and $4,064,000,
respectively.
Interest expense on deposits and escrow by type of account was as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Negotiable order of withdrawal,
regular savings, clubs
and escrow accounts $ 400 $ 381 $ 381
Money market 12 12 13
Time deposits 1,302 1,367 1,208
------ ------ ------
Total interest expense
on deposits and escrow $1,714 $1,760 $1,602
====== ====== ======
</TABLE>
F-17
<PAGE> 115
CARGILL BANCORP, INC.
Notes to Consolidated Financial Statements
6. ADVANCES FROM FEDERAL HOME LOAN BANK OF BOSTON
As of September 30, 1996 the Bank had a $500,000 advance from the Federal Home
Loan Bank of Boston. The advance matured October 15, 1996 and had an interest
rate of 5.46%. There are no advances outstanding at September 30, 1997.
7. INCOME TAXES
The Corporation and the Bank file consolidated federal income tax returns. The
Corporation uses the asset and liability approach for financial accounting and
reporting for income taxes.
The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) Year Ended September 30,
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Current
Federal $ -- $ 4 $ 69
State 5 11 33
----- ----- -----
5 15 102
----- ----- -----
Deferred
Federal 67 (65) (36)
State 23 (28) (14)
----- ----- -----
90 (93) (50)
----- ----- -----
Provision for income taxes (benefit) $ 95 $ (78) $ 52
===== ===== =====
</TABLE>
Deferred income taxes reflect the impact of "temporary differences" between the
amount of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws and regulations. Deferred income taxes result
primarily from the Corporation's practice of preparing income tax returns on the
cash basis of accounting while the financial statements are prepared on the
accrual basis of accounting. Other items are loan fee recognition and
depreciation expense.
F-18
<PAGE> 116
CARGILL BANCORP, INC.
Notes to Consolidated Financial Statements
7. INCOME TAXES
The sources of differences resulting in a deferred income tax provision
(benefit) and the effect of each is as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) Year Ended September 30,
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Cash basis method of accounting
for tax purposes $ 77 $(116) $ 7
Loan fees deferred for financial
reporting purposes 13 9 1
Reserve for loan losses (10) (7) (60)
Accelerated tax depreciation
expense 10 21 2
----- ----- -----
Total $ 90 $ (93) $ (50)
===== ===== =====
</TABLE>
The following is a summary of the difference between the tax at statutory rates
and the tax at effective rates:
<TABLE>
<CAPTION>
Year Ended September 30,
(Dollars in thousands) 1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Tax (benefit) on income at statutory rates $ 84 $(64) $ 42
Tax effect of:
State tax net of federal
income tax benefit 19 (17) 13
Other items, net (8) 3 (3)
---- ---- ----
Provision for income tax (benefit) $ 95 $(78) $ 52
==== ==== ====
</TABLE>
Federal and state income taxes receivable and payable included in the balance
sheet are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) September 30,
1997 1996
----- -----
<S> <C> <C>
Current tax receivable $ 12 $ 54
===== =====
Deferred tax:
Receivable $ 160 $ 262
Payable (307) (319)
----- -----
$(147) $ (57)
===== =====
</TABLE>
F-19
<PAGE> 117
CARGILL BANCORP, INC.
Notes to Consolidated Financial Statements
7. INCOME TAXES
The components of deferred taxes included in the balance sheet at September 30,
are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
1997 1996
---- ----
<S> <C> <C>
Deferred Tax Receivable:
Reserve for loan losses $ 86 $ 76
Deferred income for books previously taxed 22 35
Accrued expenses on books not deducted for tax 52 151
---- ----
$160 $262
==== ====
Deferred Tax Payable:
Depreciation $164 $162
Earned income not yet taxed 112 121
Tax bad debt reserves -- 2
Expenses deducted for tax but
not for books 31 34
---- ----
$307 $319
==== ====
</TABLE>
The Corporation's accounting policies require a valuation allowance against
deferred tax assets if, based on the weight of available evidence, it is more
likely than not, that some or all of the deferred tax assets will not be
realized. The Corporation believes that all deferred tax assets will be realized
in the future and that no valuation allowance is necessary.
8. STOCKHOLDERS' EQUITY
Cargill Bancorp has 750,000 shares of $.01 par value common stock authorized.
Additionally, 250,000 shares of no-par value preferred stock is authorized, of
which none is issued and outstanding at September 30, 1997.
Retained earnings at September 30, 1997 include $458,000 which is set aside in
accordance with existing provisions of the Internal Revenue Code to absorb
losses on loans. If in the future this amount were used for any other purposes,
a tax liability could be incurred. It is not anticipated that such amount will
be made available for dividends or that a tax thereon will be imposed.
F-20
<PAGE> 118
CARGILL BANCORP, INC.
Notes to Consolidated Financial Statements
8. STOCKHOLDERS' EQUITY
Prior to its acquisition by the Corporation, the Bank converted from a state
chartered mutual savings and loan association to a state chartered stock savings
and loan association. At the time of conversion, the Bank established a
liquidation account in an amount equal to the Bank's net worth. In the event of
a complete liquidation of the Bank (and only in such event) each eligible
account holder will be entitled to receive a liquidation distribution from the
liquidation account before any liquidation distribution may be made with respect
to capital stock. The balance in the liquidation account at September 30, 1997
was $107,000.
The Bank may not declare or pay a cash dividend on or purchase any of its stock
if the effect would be to reduce the net worth of the Bank below either the
amount of the liquidation account or the capital requirements of its regulators.
9. REGULATORY MATTERS
Regulatory Capital
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory--and possibly additional discretionary--actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weighting, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of September 30, 1997, that the
Bank meets all capital adequacy requirements to which it is subject.
As of September 30, 1997, the most recent notification from the Office of Thrift
Supervision categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized
the Bank must maintain minimum total risk-based, Tier I risk based, Tier I
leverage and tangible equity ratios as set forth in the table. There are no
conditions or events since that notification that management believes have
changed the institution's category.
F-21
<PAGE> 119
CARGILL BANCORP, INC.
Notes to Consolidated Financial Statements
9. REGULATORY MATTERS
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
--------------- -------------- ---------------
(Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
AS OF SEPTEMBER 30, 1997
Total Risk - Based Capital
(to Risk Weighted Assets)
- Cargill $ 3,377 13.3% $ 2,022 >= 8.0% $ 2,528 >= 10.0%
- Bank $ 3,317 13.1% $ 2,022 >= 8.0% $ 2,528 >= 10.0%
Tier I Risk - Based Capital
(to Risk Weighted Assets)
- Cargill $ 3,168 12.4% $ 1,011 >= 4.0% $ 1,517 >= 6.0%
- Bank $ 3,108 12.2% $ 1,011 >= 4.0% $ 1,517 >= 6.0%
Tier I Leverage Capital
(to Adjusted Tangible Assets)
- Cargill $ 3,168 6.7% $ 1,880 >= 4.0% $ 2,350 >= 5.0%
- Bank $ 3,108 6.6% $ 1,880 >= 4.0% $ 2,350 >= 5.0%
Tangible Equity Capital
(to Adjusted Tangible Assets)
- Cargill $ 3,168 6.7% $ 705 >= 1.5% Not Required
- Bank $ 3,108 6.6% $ 705 >= 1.5% Not Required
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
---------------- --------------- ---------------
(Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
AS OF SEPTEMBER 30, 1996
Total Risk - Based Capital
(to Risk Weighted Assets)
- Cargill $ 3,155 12.3% $ 2,057 >= 8.0% $ 2,571 >= 10.0%
- Bank $ 3,140 12.2% $ 2,057 >= 8.0% $ 2,571 >= 10.0%
Tier I Risk - Based Capital
(to Risk Weighted Assets)
- Cargill $ 2,971 11.6% $ 1,029 >= 4.0% $ 1,543 >= 6.0%
- Bank $ 2,956 11.5% $ 1,029 >= 4.0% $ 1,543 >= 6.0%
Tier I Leverage Capital
(to Adjusted Tangible Assets)
- Cargill $ 2,971 6.3% $ 1,876 >= 4.0% $ 2,345 >= 5.0%
- Bank $ 2,956 6.3% $ 1,876 >= 4.0% $ 2,345 >= 5.0%
Tangible Equity Capital
(to Adjusted Tangible Assets)
- Cargill $ 2,971 6.3% $ 704 >= 1.5% Not Required
- Bank $ 2,956 6.3% $ 704 >= 1.5% Not Required
</TABLE>
The Bank's capital under generally accepted accounting principles (GAAP) is in
agreement with the capital reported to its regulators.
F-22
<PAGE> 120
CARGILL BANCORP, INC.
Notes to Consolidated Financial Statements
9. REGULATORY MATTERS
Recapitalization of Deposit Insurance Fund
The Bank is a member of the Savings Association Insurance Fund or
"SAIF". The SAIF was established by the Federal Deposit Insurance Corporation to
insure the depositors of member savings associations and to finance the
resolution of failed institutions. Prior to 1997, the SAIF was undercapitalized
and Congress passed legislation to recapitalize the SAIF through a special
one-time assessment on the assessable deposits of member institutions. As a
result on September 30, 1996, the date the legislation was enacted, the Bank
recorded additional expense of $272,000.
10. STOCK OPTIONS
Cargill Bancorp, Inc. has stock option plans that provide for the
granting of options to officers, key employees and directors to purchase common
stock of the Corporation at a price not less than the fair market value of the
Corporation's stock on the date of grant. Options under the plans that have not
been issued totaled 7,104. Options that are fully vested and exercisable, were
as follows:
<TABLE>
<CAPTION>
Weighted
Average
Shares Exercise Price
------ --------------
<S> <C> <C>
Outstanding at October 1, 1995 97,902 $5.37
Expired or canceled (7,010) 4.94
------
Outstanding at September 30, 1996 90,892 5.40
Exercised (8,039) 5.49
------
Outstanding at September 30, 1997 82,853 5.39
======
</TABLE>
11. RETIREMENT PLANS
The Bank participates in a multi-employer defined benefit pension plan
covering substantially all employees who qualify as to age and length of
service. Prior to 1995, the Bank had a defined benefit plan which has been
terminated. Total pension expense was $3,064 and $12,511 in the year ended
September 30, 1997 and 1995, respectively. There was no expense during 1996.
F-23
<PAGE> 121
CARGILL BANCORP, INC.
Notes to Consolidated Financial Statements
12. FINANCIAL INSTRUMENTS
Prior to 1996, the Holding Company provided an Employee Stock Ownership Plan
(ESOP) with 401(k) provisions. Contributions to the ESOP and the shares
purchased by the ESOP were allocated to the participants on the basis of
compensation. Participants become fully vested after completion of seven years
of service. The Bank made contributions to employee accounts by matching 25% of
the participant's elected salary deferral up to a maximum of 4% of salary.
Participating employees are fully vested in both their salary deferral and any
employer matching contributions. The ESOP portion of the 401(k) plan described
above was terminated as of September 30, 1995. The Bank is currently reviewing
the remaining plan.
The Bank is party to financial instruments with off-balance sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit. These commitments
involve, to varying degrees, elements of credit and interest rate risk in excess
of the amount recognized in the balance sheet.
The contractual amounts of outstanding commitments as of September 30, 1997 and
1996 were as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1997 1996
---- ----
<S> <C> <C>
Unadvanced construction loans $-- $201
Loan commitments 76 479
</TABLE>
The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit is
represented by the contractual amount of those instruments. The Bank uses the
same credit policies in making commitments and conditional obligations as it
does for on-balance sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
are principally collateralized by mortgages on real estate, generally have fixed
expiration dates or other termination clauses and may require payment of fees.
Since commitments may expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements.
The Bank evaluates each customer's creditworthiness on a case-by-case basis. The
amount of collateral obtained if deemed necessary by the Bank upon extension of
credit is based on management's credit evaluation of the counterparty.
Collateral held is primarily residential property.
Management does not anticipate any material losses as a result of these
commitments.
F-24
<PAGE> 122
CARGILL BANCORP, INC.
Notes to Consolidated Financial Statements
12. FINANCIAL INSTRUMENTS
The estimated fair value of the Bank's financial instruments follows:
<TABLE>
<CAPTION>
(Dollars in thousands) September 30, 1997 September 30, 1996
-----------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
<S> <C> <C> <C> <C>
Financial assets
Cash and cash equivalents $ 3,166 $ 3,166 $ 1,775 $ 1,775
Investment securities 5,382 5,398 4,902 4,891
Stock in FHLBB 339 339 331 331
Loans receivable 35,644 35,625 36,756 36,917
Loans held-for-sale 195 199 273 278
Accrued income receivable 272 272 291 291
Financial liabilities
Deposits 43,119 43,325 42,523 42,560
Advances from FHLBB -- -- 500 500
Mortgagors' escrow accounts 155 155 161 161
</TABLE>
13. INCOME PER SHARE
As discussed in Note 14, the Corporation adopted SFAS No. 128, "Earnings Per
Share" which was effective for financial statements issued for periods ending
after December 15, 1997 but requires the retroactive restatement of prior years'
earnings per share amounts. The statement establishes standards for the
computation and presentation of earnings per share (EPS). It simplifies the
computation of EPS by replacing the presentation of primary EPS with a
presentation of basic EPS. The statement also requires the dual presentation of
basic and diluted EPS on the face of the income statement. Diluted EPS is
computed similarly to fully diluted EPS pursuant to APB Opinion No. 15, the
prior practice.
F-25
<PAGE> 123
CARGILL BANCORP, INC.
Notes to Consolidated Financial Statements
13. INCOME PER SHARE
Earnings per share have been computed on the basis of the following for the
years ended September 30:
<TABLE>
<CAPTION>
1997 1996 1995
------------------- --------------------- -------------------
Income/ Income/ Income/
Shares EPS Shares EPS Shares EPS
------ --- ------ --- ------ ---
<S> <C> <C> <C> <C> <C> <C>
Income (loss) available to
common stockholders $153,000 $(111,000) $ 73,000
======== ========= ========
BASIC EARNINGS (LOSS) PER SHARE:
Average common shares
outstanding 262,569 $.58 262,305 $(.42) 262,305 $.28
==== ====
EFFECT OF DILUTIVE SECURITIES:
Stock option plans 23,111 -- --
------- ------- -------
DILUTED EARNINGS (LOSS) PER SHARE:
Average common shares and
assumed conversions 285,680 $.54 262,305 $(.42) 262,305 $.28
======== ==== ========= ==== ======== ====
</TABLE>
14. SUBSEQUENT EVENTS
The Corporation issued a 5% stock dividend on January 26, 1998. Accordingly, all
per share data and stock options outstanding are adjusted to reflect the effect
of the stock dividend.
Also, the Corporation adopted Statement of Financial Accounting Standards, SFAS
No. 128 which was effective for financial statements issued for periods ending
after December 15, 1997. The effect of this standard is discussed in Note 13.
F-26
<PAGE> 124
CARGILL BANCORP, INC.
Notes to Consolidated Financial Statements
15. SUMMARY OF UNAUDITED QUARTERLY FINANCIAL INFORMATION - (UNAUDITED)
<TABLE>
<CAPTION>
(Dollars in thousands, except per share amounts)
1997 1996
------------------------------------------ -----------------------------------------------
Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
---- ---- ---- ---- ------ ---- ---- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $854 $891 $916 $907 $3,568 $884 $866 $ 854 $ 855 $ 3,459
Interest expense 424 436 429 430 1,719 456 445 446 419 1,766
---- ---- ---- ---- ------ ---- ---- ----- ----- -------
Net interest income 430 455 487 477 1,849 428 421 408 436 1,693
Provision for loan
losses 31 10 75 -- 116 23 6 24 23 76
Non-interest income 109 53 54 52 268 55 59 55 31 200
Non-interest expense 407 437 461 448 1,753 406 437 453 710 2,006
---- ---- ---- ---- ------ ---- ---- ----- ----- -------
Income (loss) before
income taxes (benefit) 101 61 5 81 248 54 37 (14) (266) (189)
Income taxes (benefit) 30 20 5 40 95 21 15 (13) (101) (78)
---- ---- ---- ---- ------ ---- ---- ----- ----- -------
NET INCOME (LOSS) $ 71 $ 41 $ -- $ 41 $ 153 $ 33 $ 22 $ (1) $ (165) $ (111)
==== ==== ==== ==== ====== ==== ==== ===== ===== =======
Income (loss) per share
- Basic $.27 $.16 $ -- $.15 $ .58 $.13 $.08 $ -- $(.63) $ (.42)
- Diluted $.25 $.14 $ -- $.15 $ .54 $.13 $.08 $ -- $(.63) $ (.42)
</TABLE>
F-27
<PAGE> 125
CARGILL BANCORP, INC.
Notes to Consolidated Financial Statements
16. CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
(Dollars in thousands) September 30,
-----------------------
1997 1996
------- -------
<S> <C> <C>
BALANCE SHEETS
Assets
Cash $ 56 $ 23
Investment in subsidiary 3,106 2,955
Other assets 5 4
------- -------
Total assets $ 3,167 $ 2,982
======= =======
Liabilities $ -- $ 11
Stockholders' equity
Preferred stock - none
Common stock 3 3
Additional paid-in capital 1,653 1,634
Retained earnings 1,667 1,602
Treasury stock (156) (268)
------- -------
Stockholders' equity 3,167 2,971
------- -------
Total liabilities and stockholders' equity $ 3,167 $ 2,982
======= =======
</TABLE>
<TABLE>
<CAPTION>
September 30,
--------------------------------
1997 1996 1995
----- ----- ----
<S> <C> <C> <C>
STATEMENTS OF INCOME
Dividend from subsidiary $ 30 $ 30 $ 25
Other income (expense) - net (30) (26) (45)
----- ----- ----
Income (loss) before taxes and
undistributed income of subsidiaries -- 4 (20)
Income tax benefit 2 2 13
Undistributed income (loss) of subsidiaries 151 (117) 80
----- ----- ----
Net income (loss) $ 153 $(111) $ 73
===== ===== ====
</TABLE>
F-28
<PAGE> 126
CARGILL BANCORP, INC.
Notes to Consolidated Financial Statements
16. CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS
(Continued)
<TABLE>
<CAPTION>
(Dollars in thousands) September 30,
--------------------------------
1997 1996 1995
----- ----- ----
<S> <C> <C> <C>
STATEMENT OF CASH FLOWS
Cash flows from operating activities:
Net income (loss) $ 153 $(111) $ 73
Operating activities:
Equity in (income) loss of subsidiaries (151) 117 (80)
(Increase) decrease in other assets (1) 5 5
Increase (decrease) in other liabilities (11) 11 --
----- ----- ----
Net cash provided (used) by operating activities (10) 22 (2)
----- ----- ----
Cash flows from financing activities:
Proceeds from stock options exercised 44 -- --
Dividends paid (1) (1) (1)
----- ----- ----
Net cash (used in) provided by financing
activities 43 (1) (1)
----- ----- ----
Net increase (decrease) in cash and
cash equivalents 33 21 (3)
Cash and cash equivalents at the beginning
of the year 23 2 5
----- ----- ----
Cash and cash equivalents at the end of
the year $ 56 $ 23 $ 2
===== ===== ====
</TABLE>
F-29
<PAGE> 127
Cargill Bancorp, Inc.
Condensed Consolidated Statements of Financial Condition
(Dollar amounts in thousands, except for share amounts)
<TABLE>
<CAPTION>
June 30, 1998 September 30, 1997
------------- ------------------
ASSETS (Unaudited)
<S> <C> <C>
Cash and due from banks:
Non-interest bearing $ 1,450 $ 1,180
Interest bearing 888 1,986
-------- --------
Total cash and cash equivalents 2,338 3,166
-------- --------
Investment securities available for sale 2,584 621
Investment securities held to maturity
(fair value of $6,980 in 1998 and
$5,116 in 1997) 7,127 5,099
-------- --------
Total securities 9,711 5,720
-------- --------
Loans $ 34,005 $ 35,854
Mortgage loans held-for-sale 194 195
Allowance for loan losses (238) (209)
-------- --------
Net-loans 33,961 35,840
Bank premises and equipment 1,349 1,427
Accrued interest receivable 333 272
Other assets 216 877
-------- --------
TOTAL ASSETS $ 47,908 $ 47,302
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 1,176 $ 1,087
Interest bearing 41,266 42,032
-------- --------
Total deposits 42,442 43,119
Federal Home Loan Bank borrowing 1,000 --
Other liabilities 1,055 1,016
-------- --------
Total liabilities 44,497 44,135
-------- --------
Stockholders' equity:
Common stock - $.01 par value
Authorized - 750,000 shares
Issued - 284,163 shares 3 3
Additional paid in capital 1,700 1,653
Retained earnings 1,749 1,668
Accumulated other comprehensive income (loss) 2 (1)
Treasury stock, at cost: 7,349 shares in 1998 and
26,936 shares in 1997 (43) (156)
-------- --------
Total stockholders' equity 3,411 3,167
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 47,908 $ 47,302
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-30
<PAGE> 128
CARGILL BANCORP, INC.
Condensed Consolidated Statements of Income
Nine Months Ended June 30,
(Unaudited)
(Dollar amounts in thousands, except share amounts)
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Income:
Interest and fees on loans $ 2,228 $ 2,379
Interest and dividend income on securities 376 248
Interest on short-term deposits 62 48
-------- --------
Total interest and dividend income 2,666 2,675
Interest expense, primarily on deposits 1,229 1,293
-------- --------
Net interest income 1,437 1,382
Provision for loan losses 22 117
-------- --------
Net interest income after provision for loan losses 1,415 1,265
-------- --------
Gain on securities available for sale -- 40
Other non-interest income 138 164
-------- --------
Total non-interest income 138 204
-------- --------
Non-interest expense:
Salaries and benefits 508 543
Other non-interest expense 520 602
Occupancy - net 158 157
-------- --------
Total non-interest expense 1,186 1,302
-------- --------
Income before income taxes 367 167
Income taxes 158 55
-------- --------
Net Income $ 209 $ 112
======== ========
Income per share:
- Basic $ 0.76 $ 0.43
- Diluted $ 0.68 $ 0.36
Weighted average shares outstanding:
- Basic 273,727 262,305
- Dilutive option shares 34,649 43,966
-------- --------
- Diluted 308,376 306,271
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-31
<PAGE> 129
CARGILL BANCORP, INC.
Condensed Consolidated Statements of Comprehensive Income
Nine Months Ended June 30,
(Unaudited)
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
1998 1997
---- -----
<S> <C> <C>
Net Income $209 $ 112
---- -----
Other comprehensive income:
Unrealized gain (loss) on securities available for sale,
net of income taxes 3 (1)
---- -----
Other comprehensive income (loss) $ 3 $ (1)
---- -----
Comprehensive Income $212 $ 111
==== =====
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-32
<PAGE> 130
CARGILL BANCORP, INC.
Condensed Consolidated Statements of Stockholders'
Equity Year ended September 30, 1997 and Nine Months
ended June 30, 1998
(1998 Unaudited)
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Accumulated
Other
Additional Comprehensive
Common Paid in Retained Income Treasury
Stock Capital Earnings (Loss) Stock Total
-- ------- ------- --- ----- -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1996 $3 $ 1,634 $ 1,602 $-- $(268) $ 2,971
Net income - -- 153 -- -- 153
Shares issued:
Stock dividend - 5% - 19 (87) -- 68 --
Stock options exercised - -- -- -- 44 44
Other comprehensive
income (loss) - -- -- (1) -- (1)
-- ------- ------- --- ----- -------
BALANCE AT SEPTEMBER 30, 1997 3 1,653 1,668 (1) (156) 3,167
Net income - -- 209 -- -- 209
Shares issued:
Stock dividend - 5% - 54 (128) -- 74 --
Stock options exercised - (7) -- -- 39 32
Other comprehensive
income (loss) - -- -- 3 -- 3
-- ------- ------- --- ----- -------
BALANCE AT JUNE 30, 1998 $3 $ 1,700 $ 1,749 $ 2 $ (43) $ 3,411
== ======= ======= === ===== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-33
<PAGE> 131
CARGILL BANCORP, INC.
Condensed Consolidated Statements of Cash Flows
Nine Months ended June 30, 1998 and 1997
(Unaudited)
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Operating activities:
Net income $ 209 $ 112
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 22 117
Depreciation and amortization 85 87
Provision for other real estate owned -- 91
Changes in assets and liabilities:
(Increase) decrease in accrued interest receivable (61) 15
Realized gain on sale of securities -- (40)
Realized (gain) loss on sale of other real estate owned 26 --
Realized (gain) loss on sale of equipment -- --
Increase (decrease) in interest payable on deposits (3) (5)
(Increase) decrease in other assets 501 (10)
Increase (decrease) in other liabilities 40 13
------- -------
Net cash provided by operating activities 819 380
------- -------
Investing activities:
Investments and mortgage-backed securities:
Held to maturity:
Purchases (3,999) (1,220)
Proceeds from maturities and principal payments 1,975 1,061
Available for sale:
Purchases (2,911) --
Proceeds from sales -- 324
Proceeds from maturities and principal payments 953 --
Purchases of premises and equipment (11) (32)
Net (increase) decrease in loans 1,692 (439)
Improvements on other real estate owned (8) (42)
Proceeds from sale of other real estate owned 307 616
------- -------
Net cash provided by (used in) investing activities (2,002) 268
------- -------
Financing activities:
Increase (decrease) in Federal Home Loan borrowings 1,000 (500)
Net (increase) decrease in deposits (677) 903
Proceeds from exercise of stock options and stock purchase plan 33 --
Dividends paid (1) (1)
------- -------
Net cash provided by financing activities 355 402
------- -------
Increase (decrease) in cash and cash equivalents (828) 1,050
Cash and cash equivalents at beginning of period 3,166 1,775
------- -------
Cash and cash equivalents at end of period $ 2,338 $ 2,825
======= =======
Cash paid during the period:
Interest on deposits and other borrowings $ 1,232 $ 1,298
Income taxes 5 2
Transfers of loans to other real estate owned 164 672
Sales of other real estate owned financed by the Bank 147 446
</TABLE>
See notes to consolidated financial statements.
F-34
<PAGE> 132
CARGILL BANCORP, INC.
Notes to Condensed Consolidated Financial Statements
Nine Months Ended June 30, 1998 and June 30, 1997
NOTE A - GENERAL INFORMATION
Cargill Bancorp, Inc. ("Cargill") is a savings and loan holding company
for Cargill Bank (the "Bank"). Substantially all operating income and net income
of Cargill are presently accounted for by the Bank.
NOTE B - CURRENT OPERATING ENVIRONMENT
Cargill Bank operates three offices in Putnam, Thompson, and Woodstock,
Connecticut. A full range of personal banking services are furnished to
individuals, and small businesses. The Bank's primary source of revenue is
derived from providing loans to customers, predominately located in Northeastern
Connecticut.
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
imposes significant regulatory restrictions and requirements on thrift
institutions insured by the FDIC and their holding companies. FDICIA established
capital categories into which financial institutions are placed based on capital
level. Each capital category establishes different degrees of regulatory
restrictions which can apply to a financial institution. As of June 30, 1998,
the Bank's capital was at a level that placed the Bank in the "well capitalized"
category as defined by FDICIA.
NOTE C - MERGER AGREEMENT WITH WESTBANK CORPORATION
On July 15, 1998, Cargill entered into an agreement with Westbank
Corporation ("Westbank"), whereby Westbank will acquire the outstanding stock of
Cargill Bancorp, Inc.
Under the terms of the agreement, Cargill will be merged into Westbank. Each
share of Cargill Bancorp common stock will be exchanged for 1.3008 shares of
Westbank common stock, provided that the average closing price of Westbank's
common stock during the 20-day pricing period ending five days before the last
regulatory approval is obtained is greater than or equal to $13.07. If
Westbank's average closing price is less than $13.07 but greater than or equal
to $12.00, then Cargill Bancorp shareholders will received shares of Westbank
common stock having a value of $17.00 per share. Cargill Bancorp has certain
rights to terminate the agreement if Westbank's average closing price is below
$12.00 per share unless Westbank agrees to deliver shares of Westbank common
stock having a value of $17.00 in exchange for each share of Cargill Bancorp
common stock.
The merger is subject to approval of Cargill's shareholders and the receipt of
regulatory approval.
F-35
<PAGE> 133
CARGILL BANCORP, INC.
Notes to Condensed Consolidated Financial Statements - (Continued)
Nine Months Ended June 30, 1998 and June 30, 1997
NOTE D - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements for
the nine months ended June 30, 1998 and 1997 have been prepared in accordance
with generally accepted accounting principles for interim information and with
instructions for Form 10-Q. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine month period
ended June 30, 1998, are not necessarily indicative of the results that may be
expected for the year ending September 30, 1998.
For further information, please refer to the Cargill Bancorp's Consolidated
Financial Statements and footnotes thereto for the year ended September 30,
1997.
NOTE E - COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, there are outstanding commitments and
contingent liabilities, such as commitments to extend credit and undisbursed
balances of construction loans. As of June 30, 1998 loan commitments were
$700,000 and undisbursed balances of construction loans were $106,000.
NOTE F - STOCKHOLDERS' EQUITY
The Bank is subject to leverage capital ratio requirements as established
by its Federal regulator, the Office of Thrift Supervision ("OTS"). The Bank's
leverage capital ratio as of June 30, 1998 and September 30, 1997 was 6.96% and
6.30%, respectively. In addition, the OTS has established risk-based capital
requirements for insured institutions of 4.00% Tier 1 risk-based capital and
8.00% total risk-based capital. The Bank's risk-based capital at June 30, 1998,
Tier 1 was 14.08% and total risk-based capital was 15.09%, which meets the OTS's
criteria for a well-capitalized financial institution.
F-36
<PAGE> 134
DESCRIPTION OF WESTBANK CAPITAL STOCK
As of November __, 1998, the capital stock of Westbank consisted of
9,000,000 authorized shares, par value $2.00 per share, of which (__) shares of
Westbank Common Stock were issued and outstanding (exclusive of treasury
shares), and 100,000 authorized shares, par value $5.00 per share of Westbank
preferred stock, none of which are outstanding. Westbank Common Stock is traded
on the NASDAQ National Market System under the trading symbol "WBKC." Shares of
Westbank Common Stock may be issued from time to time, in such amount and
proportions and for such consideration as may be fixed by the Westbank Board. No
holder of Westbank Common Stock has any preemptive or preferential right to
purchase or to subscribe for any shares of capital stock or other securities
which may be issued by Westbank. Westbank Common Stock has no redemption or
sinking fund provisions applicable thereto and has no conversion rights.
The outstanding shares of Westbank Common Stock are fully paid and
nonassessable.
LIQUIDATION. In the event of any liquidation, dissolution or winding up of
Westbank, whether voluntary or involuntary, the holders of Westbank Common Stock
are entitled to receive, on a share-for-share basis, any assets or funds of
Westbank which are distributable to the holders of Westbank Common Stock upon
such events, subject to the prior rights of creditors of Westbank and the
holders of outstanding shares of Westbank preferred stock, if any.
VOTING. The holders of Westbank Common Stock are entitled to one vote for
each share in all matters voted upon by the shareholders of Westbank. The shares
of Westbank Common Stock do not have cumulative voting rights; consequently, the
holders of a majority in interest of Westbank Common Stock can conceivably elect
all of the directors of Westbank 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 Westbank Board.
DIVIDENDS. When and if dividends, payable as cash, stock or other
property, are declared by the Westbank Board out of funds legally available
therefor, the holders of Westbank Common Stock are entitled to share equally,
share for share, in such dividends.
The Federal Reserve Board has authority to prohibit bank holding companies
from paying dividends if such payment would constitute 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.
Westbank's ability to pay dividends is dependent upon the flow of dividend
income to it from its subsidiaries, which may be affected or limited by
regulatory restrictions imposed by federal or state bank regulatory agencies. At
June
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30, 1998, Park West Bank had available approximately $4,000,000 for payment of
dividends to Westbank under applicable Massachusetts statutory limitations.
PREFERRED STOCK PURCHASE RIGHTS. On November 19, 1997, the Board of
Directors of Westbank adopted an Amended and Restated Shareholder Rights
Agreement (the "Rights Agreement"). The following description of the terms of
the Rights Agreement does not purport to be complete and is qualified in its
entirety by reference to the Rights Agreement. See "WHERE YOU CAN FIND MORE
INFORMATION" and "INFORMATION INCORPORATED BY REFERENCE."
Pursuant to the terms of the Rights Agreement, the Board of Directors
declared a dividend distribution of one Preferred Stock Purchase Right (a
"Right") for each outstanding share of Common Stock of Westbank to stockholders
of record as of the close of business on December 3, 1997 (the "December 3, 1997
Record Date"). In addition, one Right will automatically attach to each share
of Westbank Common Stock issued between the December 3, 1997 Record Date and the
Distribution Date (as hereinafter defined). Each Right entitles the registered
holder thereof to purchase from Westbank a unit consisting of one ten-thousandth
of a share (a Unit) of Series A Junior Participating Cumulative Preferred
Stock, par value $5.00 per share (the Preferred Stock), at a cash exercise
price of $60.00 per Unit (the Exercise Price), subject to adjustment.
Initially, the Rights are not exercisable and are attached to and trade
with all outstanding shares of Westbank Common Stock outstanding as of, and
issued subsequent to, the December 3, 1997 Record Date. The Rights will separate
from the Westbank Common Stock and will become exercisable upon the earliest of
(i) the close of business on the tenth calendar day following the first public
announcement that a person or group of affiliated or associated persons has
acquired beneficial ownership of 15% or more of the outstanding shares of
Westbank Common Stock (an Acquiring Person) (the date of said announcement
being referred to as the Stock Acquisition Date), (ii) the close of business on
the tenth business day (or such other day as the Board of Directors may
determine) following the commencement of a tender offer or exchange offer that
would result upon its consummation in a person or group becoming the beneficial
owner of 15% or more of the outstanding shares of Westbank Common Stock or (iii)
the determination by the Board of Directors that any person is an Adverse Person
(the earliest of such dates being herein referred to as the Distribution Date).
The Board of Directors may declare a person to be an Adverse Person after
a determination that such person, alone or together with its affiliates and
associates, has become the beneficial owner of 10% or more of the outstanding
shares of Westbank Common Stock and a determination by the Board of Directors,
after reasonable inquiry and investigation, including such consultation, if any,
with such persons as the directors shall deem appropriate, that (a) such
beneficial ownership by such person is intended to cause, is reasonably likely
to cause or will cause Westbank to repurchase the Westbank Common Stock
beneficially owned by such person or to cause pressure on Westbank to take
action or enter into a transaction or series of transactions which would provide
such person with short-term financial gain under circumstances where the Board
of Directors
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determines that the best long-term interests of Westbank and its shareholders,
but for the actions and possible actions of such person, would not be served by
taking such action or entering into such transaction or series of transactions
at that time or (b) such beneficial ownership is causing, or is reasonably
likely to cause, a material adverse impact (including, but not limited to,
impairment of relationships with customers or impairment of Westbank ability to
maintain its competitive position) on the business or prospects of Westbank. No
delay or failure by the Board of Directors to declare a person to be an Adverse
Person shall in any way waive or otherwise affect the power of the Board of
Directors subsequently to declare a person an Adverse Person. In the event that
the Board of Directors should at any time determine, upon reasonable inquiry and
investigation, including consultation with such persons as the Board of
Directors shall deem appropriate, that such person has not met or complied with
any condition specified by the Board of Directors, the Board of Directors may at
any time thereafter declare the person to be an Adverse Person.
Until the Distribution Date (or earlier redemption, exchange or expiration
of the Rights), (a) the Rights will be evidenced by the Westbank Common Stock
certificates and will be transferred with and only with such Westbank Common
Stock certificates, (b) new Westbank Common Stock certificates issued after the
December 3, 1997 Record Date will contain a notation incorporating the Rights
Agreement by reference, and (c) the surrender for transfer of any certificates
for common stock will also constitute the transfer of the Rights associated with
the Westbank Common Stock represented by such certificate.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on November 19, 2007, unless previously redeemed or
exchanged by Westbank as described below.
As soon as practicable after the Distribution Date, Right Certificates
will be mailed to holders of record of Westbank Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Right
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, only shares of Westbank Common Stock issued prior to the
Distribution Date will be issued with Rights.
In the event that a Stock Acquisition Date occurs or the Board of
Directors determines that a person is an Adverse Person, proper provision will
be made so that each holder of a Right (other than an Acquiring Person, an
Adverse Person or their associates or affiliates, whose Rights shall become null
and void) will thereafter have the right to receive upon exercise that number of
Units of Preferred Stock of Westbank having a market value of two times the
exercise price of the Right (such right being referred to as the Subscription
Right).
In the event that, at any time following the Stock Acquisition Date, (i)
the Company consolidates with, or merges with and into, any other person, and
Westbank is not the continuing or surviving corporation, (ii) any person
consolidates with the Company, or merges with and into Westbank and Westbank is
the continuing or surviving corporation of such merger and, in connection with
such merger, all or part of the shares of Westbank Common Stock are changed into
or exchanged for stock or other securities of any other person or cash or any
other property, or (iii) 50% or more of Westbank's assets or earning power is
sold, mortgaged or otherwise transferred, each holder of a Right shall
thereafter have the right to receive, upon exercise, Westbank Common
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Stock of the acquiring company having a market value equal to two times the
exercise price of the Right (such right being referred to as the Merger Right).
The holder of a Right will continue to have the Merger Right whether or not such
holder has exercised the Subscription Right. Rights that are or were
beneficially owned by an Acquiring Person or an Adverse Person may (under
certain circumstances specified in the Rights Agreement) become null and void.
At any time after the Stock Acquisition Date occurs or the Board of
Directors determines that a person is an Adverse Person, the Board of Directors
may, at its option, exchange all or any part of the then outstanding and
exercisable Rights for shares of Westbank Common Stock or Units of Preferred
Stock at an exchange ratio of one share of Westbank Common Stock or one Unit of
Preferred Stock per Right.
Notwithstanding the foregoing, the Board of Directors generally will not
be empowered to effect such exchange at any time after any person becomes the
beneficial owner of 50% or more of the Westbank Common Stock.
The Exercise Price payable, and the number of Units of Preferred Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Stock, (ii) if holders of the Preferred Stock are granted certain rights or
warrants to subscribe for Preferred Stock or convertible securities at less than
the current market price of the Preferred Stock, or (iii) upon the distribution
to holders of the Preferred Stock of evidences of indebtedness or assets
(excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no adjustment in the Exercise Price will be
required until cumulative adjustments amount to at least 1% of the Exercise
Price. The Company is not obligated to issue fractional Units. If Westbank
elects not to issue fractional Units, in lieu thereof an adjustment in cash will
be made based on the fair market value of the Preferred Stock on the last
trading date prior to the date of exercise. Any of the provisions of the Rights
Agreement may be amended by the Board of Directors of Westbank at any time prior
to the Distribution Date.
The Rights may be redeemed in whole, but not in part, at a price of $0.001
per Right (payable in cash, Westbank Common Stock or other consideration deemed
appropriate by the Board of Directors) by the Board of Directors only until the
earliest of (i) the date on which a person is declared to be an Adverse Person,
(ii) the close of business on the tenth calendar day after the Stock Acquisition
Date, or (iii) the expiration date of the Rights Agreement. Immediately upon the
action of the Board of Directors ordering redemption of the Rights, the Rights
will terminate and thereafter the only right of the holders of Rights will be to
receive the redemption price.
The Rights Agreement may be amended by the Board of Directors in its
sole discretion until the Distribution Date. After the Distribution Date, the
Board of Directors may, subject to certain limitations set forth in the Rights
Agreement, amend the Rights Agreement only to cure any ambiguity, defect or
inconsistency, to shorten or lengthen any time period, or to make changes that
do not adversely affect the interests of Rights holders (excluding the interests
of an Acquiring Person, an Adverse Person or their associates or affiliates). In
addition, the Board of Directors may
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at any time prior to such time as any person becomes an Acquiring Person amend
the Rights Agreement to lower the threshold at which a person becomes an
Acquiring Person to not less than the greater of (i) the sum of .001% and the
largest percentage of the outstanding Westbank Common Stock then owned by any
person and (ii) 10%.
Until a Right is exercised, the holder will have no rights as a
stockholder of Westbank (beyond those as an existing shareholder), including the
right to vote or to receive dividends. While the distribution of the Rights will
not be taxable to shareholders or to Westbank, shareholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Units, other securities of Westbank, other consideration or for
Westbank Common Stock of an acquiring company.
PREFERRED STOCK. Under the Westbank Articles, the Westbank Board is
authorized, without further shareholder action, to provide for the issuance of
the Westbank Preferred Stock, in one or more series, with such designations,
dividend rates, special or relative rights in the event of liquidation,
distribution or sale of assets or dissolution or winding up of Westbank, sinking
fund provisions, redemption or purchase account provisions, conversion
provisions, and voting rights as shall be set forth as and when established by
the Westbank Board.
COMPARISON OF THE RIGHTS OF HOLDERS OF WESTBANK
COMMON STOCK AND CARGILL BANK
At the Effective Time, the shareholders of Cargill, except those
shareholders exercising dissenters' rights, will become shareholders of
Westbank. As shareholders of Cargill, their rights are presently governed by
Delaware law and the Cargill Certificate of Incorporation (the "Cargill
Certificate") and the Cargill Bylaws (the "Cargill Bylaws"). As shareholders of
Westbank, their rights will be governed by Massachusetts law, the Westbank
Articles and the Westbank Bylaws (the "Westbank Bylaws"). The following
discussion summarizes the material differences between the rights of holders of
Cargill Common Stock and holders of Westbank Common Stock and differences
between the charters and bylaws of Cargill and Westbank. This summary does not
purport to be complete and is qualified in its entirety by reference to the
Cargill Certificate, the Cargill Bylaws, the Westbank Articles and the Westbank
Bylaws and the relevant provisions of Delaware and Massachusetts law.
SPECIAL MEETINGS OF SHAREHOLDERS
CARGILL. Delaware law provides that special meetings of shareholders may
be called by the board of directors or by such person or persons as may be
authorized by the corporation's certificate of incorporation or bylaws. The
Cargill Bylaws provide that special meetings may only be called by the President
of Cargill, or a majority of the Board of Directors of Cargill.
WESTBANK. Massachusetts law provides that special meetings of shareholders
may be called by the president or the directors or upon written application to
the clerk of the corporation by the holders of at least 10% of all shares
entitled to vote at the meeting, provided that, unless otherwise provided in its
articles of organization or bylaws, a corporation with a class of voting stock
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registered pursuant to the Exchange Act need not hold such meeting except upon
the demand of holders of not less than 40% of such shares.
The Westbank Bylaws provide that Westbank's Board may call special
meetings of shareholders. Moreover, the Westbank Bylaws provide that special
meetings shall be called by the clerk of Westbank upon written application of
shareholders holding at least 662/3% in interest of the capital stock entitled
to vote at the meeting or such lesser percentage permitted at law.
INSPECTION RIGHTS
CARGILL. Under Delaware law, shareholders have the right to inspect the
corporation's stock ledger, stockholder list and other books and records upon
the demonstration of a proper purpose. Directors have the right to examine the
corporation's stock ledger, list of stockholders, and other books and records
for any purpose reasonably related to their position.
WESTBANK. Under Massachusetts law, shareholders have the right to inspect
a corporation's articles of organization, bylaws, records of incorporators' and
shareholders' meetings upon the demonstration of a proper purpose.
ACTION BY CONSENT OF SHAREHOLDERS
CARGILL. Under Delaware law, unless the certificate of incorporation
provides otherwise, any action required or permitted at a meeting may be taken
without a meeting, without notice, or vote, if written consent is signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize such action at a meeting. The Cargill
Certificate does not contain a provision regarding action by consent of
shareholders.
WESTBANK. Under Massachusetts law, unless the articles of organization
provide otherwise, any action to be taken by shareholders may be taken without a
meeting, without prior notice, and without a vote, if the shareholders consent
unanimously in writing to the action. The Westbank Bylaws provide that any
action required or permitted to be taken by shareholders may be effected by a
unanimous consent in writing.
PREEMPTIVE RIGHTS
CARGILL. Under Delaware law, shareholders do not generally have a
preemptive right to acquire the corporation's unissued shares except to the
extent provided in its certificate of incorporation. The Cargill Certificate
provides that shareholders do not have preemptive rights.
WESTBANK. Unless otherwise provided in the corporation's articles,
Massachusetts law does not grant any preemptive rights. The Westbank Articles
provide that shareholders do not have preemptive rights.
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DIVIDENDS AND REPURCHASES OF STOCK
CARGILL. Under Delaware law, a corporation may, unless otherwise
restricted by its certificate of incorporation, pay dividends in cash, property
or shares of capital stock out of surplus or, if no surplus exists, out of net
profits for the fiscal year in which declared or out of net profits for the
preceding fiscal year (provided that such payment will not reduce capital below
the amount of capital represented by classes of stock having a preference upon
distribution of assets).
Under Delaware law, a corporation may repurchase or redeem its shares only
out of surplus and only if such purchase does not impair capital. However, a
corporation may redeem preferred stock out of capital if such shares will be
retired upon redemption and the stated capital of the corporation is thereupon
reduced in accordance with Delaware law.
WESTBANK. Under Massachusetts law, the payment of dividends and the
redemption or repurchase of a corporation's stock are generally permissible, if
such actions do not violate the corporation's articles of organization, provided
that the corporation is not insolvent or rendered insolvent by the action.
CLASSIFICATION OF THE BOARD OF DIRECTORS
CARGILL. Under Delaware law, a corporation's certificate of incorporation
may provide for staggering the terms of directors by dividing the total number
of directors into one, two or three groups, with each group containing
approximately the same percentage of the total, as near as may be. The Cargill
Certificate provides for such staggering and the Cargill Board is divided into
three classes.
WESTBANK. Massachusetts law requires classification of the board of
directors of any Massachusetts corporation having a class of voting stock
registered under the Exchange Act, as does Westbank, into three classes, unless
the corporation has affirmatively elected in accordance with the applicable
statutory requirements to be exempt from such statutory director classification
requirement. Westbank has made no such election, and, to the contrary, the
Westbank Articles provide that the Westbank Board is to be divided into three
classes, with the directors in each class being elected for staggered three-year
terms.
REMOVAL OF DIRECTORS
CARGILL. Under Delaware law, unless the certificate of incorporation
provides otherwise, in the case of a corporation whose board is classified,
shareholders may remove a director only for cause. The Cargill Certificate does
not address removal of directors. The Cargill Bylaws provide that directors may
be removed for cause and then only by an affirmative vote of a majority of the
total votes eligible to be cast by shareholders at a meeting called expressly
for that purpose.
WESTBANK. Under Massachusetts law, unless the articles of organization or
bylaws provide otherwise, shareholders may by a majority vote generally remove
directors with or without cause and directors may by a majority vote generally
remove directors for cause. The Westbank Bylaws
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provide that, any director may be removed from office with or without cause by
majority of directors in office.
VACANCIES ON THE BOARD OF DIRECTORS
CARGILL. Under Delaware law, unless the certificate of incorporation
provides otherwise, vacancies on the board of directors, including a vacancy
resulting from an increase in the number of directors, may be filled by a
majority of the remaining directors. If the directors remaining in office
constitute less than a quorum of the board of directors, they may fill the
vacancy by the affirmative vote of a majority of the remaining directors. The
Cargill Bylaws provide that vacancies created by an increase in the number of
directors shall be filled, for the unexpired term, by the concurring vote of a
majority of directors then in office, whether or not a quorum, and any director
so chosen shall hold office for the remainder of the term until their successor
is elected or purified.
WESTBANK. The Westbank Bylaws permit vacancies (other than a vacancy
caused by the death, resignation or removal of a director elected by preferred
stock shareholders) unless and until filled by the stockholders, may be filled
by a majority of the directors present at any meeting of directors at which a
quorum is present.
EXCULPATION OF DIRECTORS
CARGILL. Under Delaware law, the certificate of incorporation of a
corporation may contain a provision eliminating or limiting the personal
liability of a director to the corporation or its shareholders for monetary
damages for breaches of fiduciary duty except where such exculpation is
expressly prohibited. In Delaware, a director is not exculpated from liability
under provisions of Delaware law relating to unlawful stock purchases or
redemptions. In addition, this limitation cannot apply to liability of a
director (1) for any breach of the director's duty of loyalty to the corporation
or its shareholders; (2) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law; or (3) for any transaction
from which the director derived an improper personal benefit. The Cargill
Certificate does not contain such a provision.
WESTBANK. Massachusetts law permits, and the Westbank Articles provide,
that no director shall be personally liable to Westbank or its shareholders for
monetary damages for breaches of fiduciary duty except where such exculpation is
expressly prohibited. In Massachusetts, a director is not exculpated from
liability under provisions of Massachusetts law relating to unlawful payments of
dividends and unlawful stock purchases or redemptions. In addition, the Westbank
Articles provide that the this limitation cannot apply to liability of a
director (i) for breach of the director's duty of loyalty to the corporation or
its shareholders, (ii) for acts and omissions not in good faith or which involve
intentional misconduct or knowing violation of law; or (iii) for any transaction
from which the director derived an improper personal benefit.
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INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of Westbank,
Westbank has been advised that in the opinion of the SEC such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Westbank in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, Westbank will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
CARGILL. Under Delaware law, a corporation may indemnify a director,
officer, employee or agent against liability if that person conducted himself in
good faith and with the reasonable belief that his conduct in his official
capacity with the corporation was in the best interests of the corporation or
that his conduct in any other case was not opposed to its best interests. The
Cargill Bylaws provide that each person made or threatened to be made a party in
any proceeding by reason of the fact that he or she was a director, officer,
employee or agent of Cargill shall be indemnified and held harmless by Cargill
against all expense, liability and loss reasonably incurred by such indemnitee
in connection with such proceeding, provided that such indemnitee shall have
acted in good faith in the reasonable belief that such action was in, or not
opposed to, the best interests of Cargill.
WESTBANK. Massachusetts law generally permits indemnification of directors
and officers for expenses incurred by them by reason of their position with the
corporation, if the director or officer has acted in good faith and with the
reasonable belief that his conduct was in the best interests of the corporation.
The Westbank Bylaws provide that each person made a party in any proceeding by
reason of the fact that he or she was a director, officer, employee or agent of
Westbank shall be indemnified by Westbank against all expense and liability
reasonably incurred by such indemnitee in connection with such proceeding,
provided that such indemnitee shall undertake to repay such payment if he shall
be adjudicated to be not entitled to indemnification.
MERGERS, SHARE EXCHANGES OR ASSET SALES; ANTI-TAKEOVER PROVISIONS OF STATE LAW
CARGILL. Delaware law generally requires that any merger, consolidation,
or sale of substantially all the assets of a corporation be approved by a vote
of the holders of a majority of all outstanding shares entitled to vote thereon.
The Cargill Certificate provides that any Business Combination (as defined
below) involving Cargill and an Interested Shareholder (generally a person
owning 10% or more of Cargill's Common Stock) must be approved by the holders of
at least 75% of the outstanding shares of Cargill's voting stock and the holders
of at least a majority of the voting stock, voting together as a single class,
excluding the number of shares owned or controlled by the Interested Shareholder
(the "Voting Requirement"), at a duly constituted meeting of shareholders called
expressly for such
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purpose. Such affirmative vote shall be in addition to and not in lieu of any
other vote required under applicable law and is required notwithstanding the
fact that no vote may be required or that a lesser percentage may be specified
by law. The Voting Requirement does not apply and the affirmative vote of only a
majority of Cargill's voting stock is required, if (i) the Business Combination
is approved by an affirmative vote of a majority of both the continuing
directors then in office and (ii) certain "fair price" and other criteria are
met.
As defined in the Cargill Certificate, a "Business Combination" includes,
among other things (i) any merger or consolidation of Cargill or any subsidiary
with an Interested Shareholder or affiliate thereof, (ii) the sale, lease,
exchange, mortgage, pledge, transfer or other disposition by Cargill of assets
having a fair market value of $1,000,000 or more to or with an Interested
Shareholder or an affiliate thereof, (iii) the issuance or transfer by Cargill
or any subsidiary (in one transaction or a series of transactions) of any
securities of Cargill or any subsidiary to an Interested Shareholder or any
affiliate thereof in exchange for cash, securities or other property (or a
combination thereof) having an aggregate fair market value of $1,000,000 or
more, (iv) the adoption of a plan or proposal for the liquidation or dissolution
of Cargill proposed by or on behalf of an Interested Shareholder or an affiliate
thereof, and (v) any transaction that has the effect, directly or indirectly, of
increasing the proportionate share of any class of equity or convertible
securities of Cargill or any subsidiary that is beneficially owned by an
Interested Shareholder or any affiliate thereof.
WESTBANK. Massachusetts law requires the approval of the directors and the
vote of the holders of a majority of the outstanding stock entitled to vote
thereon for the merger of the corporation into any other corporation, although
the certificate of incorporation may require a higher shareholder vote.
The Westbank Articles provide that any Subject Transaction (as defined
below) involving Westbank and a receiving entity must be approved by the holders
of at least 75% of the outstanding shares of Westbank's voting stock (the
"Voting Requirement") voting together as a single class at a duly constituted
meeting of shareholders called expressly for such purpose.
As defined in the Westbank Articles, a "Subject Transaction" includes,
among other things (i) any merger or consolidation of Westbank or any subsidiary
with a Receiving Entity, (ii) the sale, lease, exchange, transfer or,
distribution of all or substantially all or a substantial portion of Westbank or
its subsidiaries with a Receiving Entity, (iii) the issuance by Westbank or any
subsidiary of any securities rights, warrants or options of Westbank or any
subsidiary to any stockholder other than by stock dividend declared and paid to
all stockholders established by Westbank, (iv) the adoption of a plan or
proposal for the liquidation or dissolution of Westbank or any subsidiary, and
(v) any transaction that has the effect, directly or indirectly, of increasing
the proportionate share of any class of stock of Westbank or any subsidiary.
Massachusetts Anti-Takeover Laws. Chapter 110D of the Massachusetts
General Laws covers "control share acquisitions" affecting corporations
incorporated in Massachusetts that have at least 200 shareholders and possess
certain statutory indicia reflecting additional substantial ties to
Massachusetts (as is the case with Westbank). Chapter 110D limits the voting
rights of shares held by persons who have acquired 20% or more of the voting
power of the target corporation.
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Under this statute, shares acquired in a control share acquisition retain the
same voting rights as all other shares of the same class or series only to the
extent authorized by a vote of the majority of all shares entitled to vote for
the election of directors, excluding such acquired shares. A corporation that is
otherwise subject to Chapter 110D may expressly provide in its articles of
organization or bylaws that the statute does not apply. Westbank has not
included any such "opt out" provision in either the Westbank Articles or
Westbank Bylaws.
Chapter 110F of the Massachusetts General Laws provides that if any
acquiror buys 5% or more of a target company's stock, where the target company
has at least 200 shareholders and possesses certain statutory indicia reflecting
substantial ties or nexus to Massachusetts (as is the case with Westbank),
without the prior approval of the target company's board of directors, such
acquiror generally may not, for a period of three years, (i) complete the
acquisition of the target company through a merger, (ii) pledge or sell any
assets of the target company or (iii) engage in other self-dealing transactions
with the target company. The prior board of directors approval requirement does
not apply if the acquirer buys at least 90% of the target company's outstanding
stock in the transaction in which it crosses the 5% threshold or if the
acquirer, after crossing the threshold, obtains the approval of the target
company's board of directors and two-thirds of the target company's stock held
by persons other than the acquirer. A corporation that would otherwise be
covered by Chapter 110F may expressly provide in its articles of organization
that the statute does not apply. The Westbank Articles do not contain any such
"opt out" provision.
AMENDMENTS TO CHARTER
CARGILL. Under Delaware law, amendments to a certificate of incorporation
require the approval of the directors and the vote of the holders of a majority
of the outstanding stock and a majority of each class of stock outstanding and
entitled to vote thereon as a class, unless the certificate of incorporation
requires a greater proportion. The Cargill Certificate provides that no
amendment, addition, alteration, change or repeal of the Cargill Certificate
shall be made unless the same is first proposed by the board of directors and
thereafter approved by a majority of shareholders unless a higher vote is
required by the Cargill Certificate or by law.
WESTBANK. Massachusetts law requires a class vote when, among other
things, an amendment will adversely affect the powers, preferences or special
rights of a class of stock. Pursuant to the Westbank Articles, no amendment,
addition, alteration, change or repeal of the Westbank Articles shall be made,
unless the same is first adopted by the affirmative vote of a majority of the
board of directors of Westbank then in office, and thereafter approved by the
shareholders by not less than two-thirds of the total votes eligible to be cast
at a duly constituted meeting, or, in the case of certain provisions of Article
6 of the Westbank Articles, by not less than seventy five percent (75%) of the
total votes eligible to be cast at a duly constituted meeting.
AMENDMENTS TO BYLAWS
CARGILL. Delaware law provides that shareholders may amend a corporation's
bylaws unless the certificate of incorporation reserves that power to the
directors of the corporation. The Cargill Bylaws permit the directors to amend
the Cargill Bylaws by a two-thirds vote of the directors in office. The Cargill
Bylaws also permit shareholders to amend the Cargill Bylaws by two-thirds of the
total votes eligible to be cast at a duly constituted meeting.
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WESTBANK. Under Massachusetts law, the power to adopt, amend or repeal
bylaws lies in shareholders entitled to vote; provided, however, that if
authorized by the corporation's articles of organization, the bylaws may confer
the power to adopt, amend or repeal bylaws upon the directors. The Westbank
Bylaws provide that its bylaws may be amended by the affirmative vote of a
majority of the directors unless a higher vote or shareholder vote is required
by law, the Westbank Articles or the Westbank Bylaws. In addition, the Westbank
Bylaws provide that they may be amended by shareholders by two-thirds of the
total votes eligible to be cast at a duly constituted meeting.
DISSENTERS' APPRAISAL RIGHTS
CARGILL. Generally, Delaware law permits a shareholder to obtain fair
value for his shares in the event of, among others, consummation of a merger to
which the corporation is a party, that requires a shareholder vote, provided
that the shareholder follows the requirements of the Dissenters' Rights Statute.
A shareholder wishing to assert dissenters' rights must deliver to the
corporation, before the vote at the shareholders' meeting pursuant to which
corporate action creating dissenters' rights takes place, written notice of his
intent to demand payment for his shares if the proposed action is taken and such
shareholder must not vote his shares in favor of the proposed action. Failure to
follow both these steps prevents a shareholder from asserting dissenters'
rights. Cargill shareholders may exercise dissenters' rights in connection with
the Merger. See "THE MEETING-- Appraisal Rights and Dissenting Shareholders."
WESTBANK. Under Massachusetts law, appraisal rights are available in
connection with certain statutory mergers or consolidations, but are not
available to holders of shares of stock of a corporation which is to be the
surviving corporation if no vote of its shareholders is required to approve the
merger. Because the number of shares to be issued by Westbank to Cargill
shareholders will not exceed fifteen percent (15%) of Westbank's total
outstanding Common Stock immediately prior to the Effective Time, holders of
Westbank Common Stock will not vote on the Merger and therefore do not have
appraisal rights with respect to the Merger.
SHAREHOLDERS RIGHTS PLAN
CARGILL. Cargill has no shareholders rights plan.
WESTBANK. Westbank has distributed to each holder of Westbank Common Stock
one Right for each outstanding share of Westbank Common Stock. The Rights
entitle the shareholder to certain rights in the event of certain transactions
involving Westbank. See "DESCRIPTION OF WESTBANK CAPITAL STOCK."
LEGAL MATTERS
The validity of the shares of Westbank Common Stock to be issued in the
Merger will be passed upon by Cranmore, FitzGerald & Meaney, of Hartford,
Connecticut. Certain legal matters relating to the Merger, including the
tax-free nature of the Merger, will be passed upon, for the parties, by
Cranmore, FitzGerald & Meaney of Hartford, Connecticut and certain legal matters
will be passed upon for Cargill by the law firm of Shipman & Goodwin LLP of
Hartford, CT.
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EXPERTS
The consolidated financial statements of Westbank Corporation at December
31, 1997 and 1996 and for each of the three years in the period ended December
31, 1997, incorporated by reference in the Proxy Statement-Prospectus, have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report thereon incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
The consolidated financial statements of Cargill included in this Proxy
Statement-Prospectus have been certified by Snyder & Haller, P.C. , independent
certified public accountants, given on the authority of that firm as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Westbank files annual, quarterly and special reports, proxy statements and
other information with the SEC, and Cargill does not file such reports,
statements and other information. You may read and copy any reports, statements
or other information filed by Westbank at the SEC's public reference rooms in
Washington, D.C., New York, New York or Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms.
Westbank's SEC filings are also available to the public from commercial document
retrieval services and at the web site maintained by the SEC at
"http://www.sec.gov."
Westbank filed a Registration Statement on Form S-4 to register with the
SEC the Westbank Common Stock to be issued to Cargill shareholders in the
Merger. This Proxy Statement-Prospectus is a part of that Registration Statement
and constitutes a prospectus of Westbank in addition to being a proxy statement
of Cargill for the special meeting. As allowed by SEC rules, this Proxy
Statement-Prospectus does not contain all the information you can find in the
Registration Statement or the exhibits to the Registration Statement.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" information into this
Proxy Statement-Prospectus, which means that we can disclose important
information to you by referring you to another document filed separately with
the SEC by Westbank. The information incorporated by reference is deemed to be
part of this Proxy Statement-Prospectus, except for any information superseded
by information in this Proxy Statement-Prospectus. This Proxy
Statement-Prospectus incorporates by reference the documents set forth below
that we have previously filed with the SEC. These documents contain important
information about our company and its finances.
<TABLE>
<CAPTION>
WESTBANK SEC FILINGS (FILE NO. 0-12784) PERIODS
- ------------------------------------- -------
<S> <C>
Annual Report on Form 10-K, as amended Year ended December 31, 1997
Quarterly Reports on Form 10-Q Quarters ended March 31, 1998 and
June 30, 1988
</TABLE>
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<TABLE>
<S> <C>
Current Report on Form 8-K Filed on July 15, 1998
The description of Westbank's Right Filed on November 24, 1997
Agreement governing the terms of
Westbank's Shareholders' Rights Agreement
contained in its Registration Statement on
Form 8-A
Westbank's Amended and Restated Shareholder Filed on November 24, 1997
Rights Agreement dated November 19, 1997,
between Westbank and State Street Bank and
Trust Company, as Rights Agent filed as
Exhibit 1 to its Registration Statement on
Form 8-A
</TABLE>
If you are a shareholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us or the SEC.
Documents incorporated by reference are available from us without charge,
excluding all exhibits unless we have specifically incorporated by reference an
exhibit in this Proxy Statement-Prospectus. Shareholders may obtain documents
incorporated by reference in this Proxy Statement-Prospectus by requesting them
in writing or by telephone from John M. Lilly, at Westbank, (413) 747-1400, 225
Park Avenue, P.O. Box 149, West Springfield, MA 01090-0149.
If you would like to request documents from us, please do so by December
__, 1998 to receive them before the Special Meeting.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROXY STATEMENT-PROSPECTUS TO VOTE ON THE MERGER. WE HAVE NOT AUTHORIZED
ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED
IN THIS PROXY STATEMENT-PROSPECTUS. THIS PROXY STATEMENT-PROSPECTUS IS DATED
NOVEMBER __, 1998. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS
PROXY STATEMENT-PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN SUCH DATE, AND
NEITHER THE MAILING OF THIS PROXY STATEMENT-PROSPECTUS TO SHAREHOLDERS NOR THE
ISSUANCE OF WESTBANK COMMON STOCK IN THE MERGER SHALL CREATE ANY IMPLICATION TO
THE CONTRARY.
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Appendix A
AFFILIATION AND MERGER AGREEMENT
AMONG
WESTBANK CORPORATION
PARK WEST BANK AND TRUST COMPANY
AND
CARGILL BANCORP, INC.
CARGILL BANK
JULY 15, 1998
<PAGE> 149
TABLE OF CONTENTS
ARTICLE I - CERTAIN DEFINITIONS
1.1 Certain Definitions..........................................1
ARTICLE II - THE MERGER
2.1 The Merger...................................................5
2.2 Effective Time...............................................5
2.3 Charter and Bylaws of Surviving Corporation..................5
2.4 Directors and Officers of Surviving Corporation .............6
2.5 Additional Director of Surviving Corporation.................6
2.6 Directors of Cargill Bank....................................6
2.7 Additional Actions...........................................6
2.8 Effects of the Merger........................................6
2.9 Possible Alternative Structures .............................6
ARTICLE III - CONVERSION OF SHARES
3.1 Conversion Shares ...........................................7
3.2 Employee Stock Options ......................................8
3.3 Dissenting Shares ...........................................9
3.4 Surrender of Shares; Stock Transfer Books ...................9
3.5 Reservation of Shares of Westbank Common Stock..............10
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF CARGILL AND CARGILL BANK
4.1 Capital Structure ..........................................11
4.2 Organization, Standing and Authority of Cargill.............11
4.3 Ownership of Cargill .......................................11
4.4 Organization, Standing and Authority of Cargill Bank .......11
4.5 Authorized and Effective Agreement..........................12
4.6 Securities Documents and Regulatory Reports ................13
4.7 Financial Statements .......................................13
4.8 Material Adverse Change ....................................14
4.9 Environmental Matters ......................................14
4.10 Tax Matters.................................................14
4.11 Legal Proceedings...........................................15
4.12 Compliance with Laws .......................................15
4.13 Certain Information .......................................16
4.14 Employee Benefit Plans......................................16
4.15 Certain Contracts ..........................................17
4.16 Brokers and Finders Fees....................................18
4.17 Insurance ..................................................18
4.18 Loan Portfolio .............................................18
4.19 Properties..................................................19
4.20 Labor ......................................................19
4.21 Required Vote; Inapplicability of Anti-takover Statutes and
Prior Agreements.........................................19
4.22 Material Interests of Certain Persons.......................19
4.23 Certain Transactions .......................................20
4.24 Disclosures ................................................20
4.25 Disclosure Schedule.........................................20
4.26 Ownership of Westbank.......................................20
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ARTICLE V - REPRESENTATIONS AND WARRANTIES OF WESTBANK AND PARK WEST BANK
5.1 Capital Structure ..........................................20
5.2 Organization, Standing and Authority of Westbank............20
5.3 Ownership of the Westbank Subsidiaries .....................21
5.4 Organization, Standing and Authority of the Westbank
Subsidiaries .............................................21
5.5 Authorized and Effective Agreement..........................21
5.6 Regulatory Reports .........................................22
5.7 Financial Statements .......................................23
5.8 Material Adverse Change.....................................23
5.9 Environmental Matters ......................................23
5.10 Tax Matters ................................................24
5.11 Legal Proceedings ..........................................24
5.12 Compliance with Laws .......................................24
5.13 Certain Information .......................................25
5.14 Employee Benefit Plans......................................25
5.15 Certain Contracts ..........................................26
5.16 Brokers and Finders Fees ...................................26
5.17 Insurance ..................................................26
5.18 Loan Portfolio..............................................26
5.19 Properties .................................................27
5.20 Labor ......................................................27
5.21 No Required Vote; Inapplicability of Anti-takeover Statutes
and Prior Agreements.....................................27
5.22 Ownership of Cargill Common Stock ..........................27
5.23 Certain Transactions........................................27
5.24 Disclosures ................................................27
5.25 Disclosure Schedule ........................................28
ARTICLE VI - COVENANTS OF CARGILL
6.1 Conduct of Business.........................................28
6.2 Current Information.........................................30
6.3 Access to Properties and Records ...........................30
6.4 Financial and Other Statements .............................31
6.5 Disclosure Supplements .....................................31
6.6 Consents and Approvals of Third Parties ....................31
6.7 All Reasonable Efforts .....................................31
6.8 Failure to Fulfill Conditions ..............................31
6.9 No Solicitation ............................................31
6.10 Restrictions on Sale of Cargill Common Stock................32
ARTICLE VII - COVENANTS OF WESTBANK
7.1 Conduct of Business ........................................32
7.2 Current Information.........................................33
7.3 Access to Properties and Records............................33
7.4 Financial and Other Statements..............................33
7.5 Disclosure Supplements .....................................34
7.6 Consents and Approvals of Third Parties ....................34
7.7 All Reasonable Efforts .....................................34
7.8 Failure to Fulfill Conditions ..............................34
7.9 Employee Benefits ..........................................34
7.10 Directors and Officers Indemnification and Insurance .......35
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7.11 Restrictions on Sale of Westbank Common Stock...............36
7.12 Stock Listing...............................................36
7.13 Publication of Combined Financial Results...................36
ARTICLE VIII - REGULATORY AND OTHER MATTERS
8.1 Special Meetings of Shareholders............................36
8.2 Registration Statement; Prospectus and Proxy Statement......37
8.3 Regulatory Approvals........................................38
ARTICLE IX - CLOSING CONDITIONS
9.1 Conditions to Each Party's Obligations under this
Agreement................................................38
9.2 Conditions to the Obligations of Park West Bank and
Westbank under this Agreement............................39
9.3 Conditions to the Obligations of Cargill under this
Agreement ...............................................40
ARTICLE X - THE CLOSING
10.1 Time and Place..............................................41
10.2 Deliveries at the Closing...................................41
ARTICLE XI - TERMINATION, AMENDMENT AND WAIVER
11.1 Termination ................................................41
11.2 Effect of Termination ......................................43
11.3 Non-Exclusivity of Remedy...................................43
11.4 Amendment, Extension and Waiver.............................43
ARTICLE XII - MISCELLANEOUS
12.1 Confidentiality ............................................44
12.2 Public Announcements .......................................44
12.3 Survival....................................................44
12.4 Notices ....................................................44
12.5 Parties in Interest ........................................45
12.6 Complete Agreement..........................................45
12.7 Counterparts ...............................................45
12.8 Severability ..............................................45
12.9 Governing Law...............................................45
12.10 Interpretation .............................................46
EXHIBITS
Exhibit A - Shareholders' Voting Agreements
Exhibit B-1 - Opinion of Ostrowski & Company, Inc.
Exhibit B-2 - Opinion of Northeast Capital & Advisory, Inc.
Exhibit C - Stock Option Agreement
Exhibit D - Letter Agreements
Exhibit E-1 - Opinion of Shipman & Goodwin, LLP
Exhibit E-2 - Opinion of Cranmore, FitzGerald & Meaney
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AFFILIATION AND MERGER AGREEMENT
AFFILIATION AND MERGER AGREEMENT ("Agreement"), dated as of July 15,
1998, by and among: Westbank Corporation, a Massachusetts corporation
("Westbank"); Park West Bank and Trust Company, a Massachusetts chartered
commercial bank ("Park West Bank"); Cargill Bancorp, Inc., a Delaware
corporation ("Cargill"), and Cargill Bank, a Connecticut-chartered stock savings
and loan association ("Cargill Bank").
WHEREAS, the Boards of Directors of Westbank, Park West Bank and the
Boards of Directors of Cargill and Cargill Bank have determined that it is in
the best interests of their respective organizations and their stockholders to
consummate, and have approved, the business combination transactions provided
for herein, in which, subject to the terms and conditions set forth herein,
Cargill shall merge (the "Merger") with and into Westbank, with Westbank as the
surviving corporation of the Merger; and
WHEREAS, as a condition to this Agreement, Westbank and certain of the
officers and directors of and Cargill Bank are entering into voting agreements
in the form attached hereto as Exhibit A; and
WHEREAS, the Boards of Directors of Cargill and Westbank have each
received an opinion dated as of the date of this Agreement from their respective
financial advisers to the effect that as of the date hereof, the Merger
Consideration to be received by the stockholders of Cargill and Westbank,
respectively, pursuant to the Agreement is fair to such stockholders from a
financial point of view, copies of which are attached as Exhibit B1 and B2; and
WHEREAS, as a condition to, and simultaneous with, the execution of
this Agreement, Cargill and Westbank are entering into the Stock Option
Agreement in the form attached hereto as Exhibit C; and
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Merger and to prescribe certain conditions
to the Merger; and
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements herein contained, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
have the following meanings (unless the context otherwise requires, both here
and throughout this Agreement, references to Articles and Sections refer to
Articles and Sections of this Agreement).
"Acquisition Transaction" shall have the meaning set forth in Section
6.9 hereof.
"Bank Commissioner" shall mean the Commissioner of Banks of the
Commonwealth of Massachusetts, unless reference is made to the Connecticut
Banking Commissioner.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"BIF" means the Bank Insurance Fund administered by the FDIC or any
successor thereto.
"Cargill Bank" shall mean Cargill Bank, a Connecticut-chartered stock
savings and loan association and a wholly-owned subsidiary of Cargill.
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"Cargill Common Stock" or "Shares" shall mean the common stock, par
value $0.01 per share, of Cargill.
"Cargill Employee Plans" shall have the meaning set forth in Section
4.14.1 hereof.
"Cargill Financial Statements" shall mean (i) the audited consolidated
balance sheets (including related notes and schedules, if any) of Cargill as of
September 30, 1997, 1996, and 1995 and the consolidated statements of
operations, changes in stockholders' equity and cash flows (including related
notes and schedules, if any) of Cargill for each of the three years ended
September 30, 1997, 1996, and 1995 as filed by Cargill with its stockholders and
supervisory agencies, and (ii) the unaudited consolidated statements of
financial condition of Cargill or Cargill Bank (including related notes and
schedules, if any) and consolidated balance sheets, changes in stockholders'
equity and cash flows (including related notes and schedules, if any) of Cargill
or Cargill Bank included in the Documents filed by Cargill or Cargill Bank with
respect to the quarterly and annual periods ended subsequent to September 30,
1997.
"Cargill Options" shall mean options to purchase shares of Cargill
Common Stock granted pursuant to the Cargill Option Plans as otherwise
Previously Disclosed.
"Cargill Option Plans" shall mean the following stock option plans of
Cargill, as amended and as in effect as of the date hereof: The Cargill Bank
1987 Stock Option Plan and The Cargill Bank 1992 Non-Qualified Stock Option
Plan.
"Cargill Preferred Stock" shall mean the shares of preferred stock,
$0.01 par value, of Cargill
"Certificate" shall have the meaning set forth in Section 3.4 hereof.
"Closing Date" shall have the meaning set forth in Section 2.2 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Depositors Insurance Fund" shall mean the Depositors Insurance Fund of
the Mutual Savings Central Fund, Inc.
"Determination Date" shall have the meaning set forth in Section 11.1.7
hereof.
"Disclosure Schedule" shall mean a written, signed disclosure schedule
delivered from the disclosing party to the other party specifically referring to
the appropriate section of this Agreement and describing in reasonable detail
the matters contained therein,
"Dissenting Shares" shall have the meaning set forth in Section 3.3
hereof.
"DOJ" shall mean the United States Department of Justice.
"Effective Date" shall mean the date on which the Effective Time
occurs.
"Effective Time" shall mean the date and time specified pursuant to
Section 2.2 hereof as the effective time of the Merger.
"Environmental Claim" means any written notice from any Governmental
Entity or third party alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup
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costs, governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on, or resulting from the
presence, or release into the environment, of any Materials of Environmental
Concern.
"Environmental Laws" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any governmental
entity relating to (1) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource), and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Materials of Environment Concern.
The term Environmental Law includes without limitation (1) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
Subsection 9601, et seq; the Resource Conservation and Recovery Act, as amended,
42 U.S.C. Subsection 6901, et seq; the Clean Air Act, as amended, 42 U.S.C.
Subsection 7401, et seq; the Federal Water Pollution Control Act, as amended, 33
U.S.C. Subsection 1251, et seq; the Toxic Substances Control Act, as amended, 15
U.S.C. Subsection 9601, et seq; the Emergency Planning and Community Right to
Know Act, 42 U.S.C. Subsection 1101, et seq; the Safe Drinking Water Act, 42
U.S.C. Subsection 300f, et seq; and all comparable state and local laws, and (2)
any common law (including without limitation common law that may impose strict
liability) that may impose liability or obligations for injuries or damages due
to, or threatened as a result of, the presence of or exposure to any Materials
of Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Agent" shall have the meaning set forth in Section 3.4.1
hereof.
"Exchange Ratio" shall have the meaning set forth in Section 3.1.1
hereof.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FHLB" shall mean Federal Home Loan Bank.
"FRB" means the Board of Governors of the Federal Reserve System or any
successor thereto.
"Governmental Entity" shall mean any federal or state court,
administrative agency or commission or other governmental authority or
instrumentality.
"MBCL" shall mean the Massachusetts Business Corporation Law, as
amended.
"MHPF" shall mean the Massachusetts Housing Partnership Fund.
"Massachusetts Board" shall mean the Massachusetts Board of Bank
Incorporation.
"Material Adverse Effect" shall mean, with respect to Westbank or
Cargill, respectively, any effect that (i) is material and adverse to the
financial condition, results of operations or business of Westbank and its
Subsidiaries taken as a whole or Cargill and its Subsidiaries taken as a whole,
respectively, or (ii) materially impairs the ability of either Cargill, on the
one hand, or Westbank, on the other hand, to consummate the transactions
contemplated by this Agreement; provided that "Material Adverse Effect"
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shall not be deemed to include the impact of (a) changes in laws and regulations
particularly affecting banks, (b) changes in GAAP or regulatory accounting
principles generally applicable to financial institutions and their holding
companies, (c) actions and omissions of a party (or any of its Subsidiaries)
taken with the prior written consent of the other party, (d) changes in interest
rates, (e) the direct effects of compliance with this Agreement on the operating
performance of the parties including expenses incurred by the parties hereto in
consummating the transactions contemplated by this Agreement.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products, and any other
materials regulated under Environmental Laws.
"Merger" shall mean the merger of Cargill with and into Westbank
pursuant to the terms hereof.
"Merger Consideration" shall have the meaning set forth in Section
3.1.1 hereof.
"OTS" shall mean the Office of Thrift Supervision.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Park West Bank Common Stock" shall mean the common stock of Park West
Bank.
"Park West Bank and Trust Company" shall mean Park West Bank, a
Massachusetts-chartered commercial bank which is a wholly-owned subsidiary of
Westbank.
"Previously Disclosed" shall mean disclosed in a Disclosure Schedule
dated on or prior to the date hereof.
"Prospectus and Proxy Statement" shall mean the proxy statements, as
amended or supplemented, to be delivered to shareholders of Cargill in
connection with the solicitation of their approval of this Agreement and the
transactions contemplated hereby.
"Rights" shall mean warrants, options, rights, convertible securities,
stock appreciation rights and other arrangements or commitments which obligate
an entity to issue or dispose of any of its capital stock or other ownership
interests or which provide for compensation based on the equity appreciation of
its capital stock.
"SAIF" means the Savings Association Insurance Fund administered by the
FDIC or any successor thereto.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, offering circulars,
proxy statements, registration statements and all similar documents filed, or
required to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended, and the rules and
regulations of the SEC promulgated thereunder.
"Subsidiary" shall have the meanings set forth in Rule 1-02 of
Regulation S-X of the SEC.
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"Surviving Corporation" shall have the meaning set forth in Section 2.1
hereof.
"Termination Date" shall have the meaning set forth in Section 11.1
hereof.
"Westbank Acquisition" shall have the meaning set forth in Section
3.1.1.B hereof.
"Westbank Common Stock" shall mean the common stock par value $2.00 per
share of Westbank.
"Westbank Corporation" shall mean the bank holding company for Park
West Bank.
"Westbank Employee Plans" shall have the meaning set forth in Section
5.14.1 hereof.
"Westbank Financial Statements" shall mean (i) the audited consolidated
balance sheets (including related notes and schedules, if any) of Westbank as of
December 31, 1997, 1996, and 1995 and the consolidated statements of operations,
changes in stockholders' equity and cash flows (including related notes and
schedules, if any) of Westbank for each of the three years ended December 31,
1997, 1996, and 1995 as filed by Westbank in its Securities Documents, and (ii)
the unaudited consolidated statements of financial condition of Westbank
(including related notes and schedules, if any) and consolidated balance sheets,
changes in stockholders' equity and cash flows (including related notes and
schedules, if any) of Westbank included in the Securities Documents filed by
Westbank with respect to the quarterly and annual periods ended subsequent to
December 31, 1997.
"Westbank Market Value" shall have the meaning set forth in Section
3.1.1.A hereof.
"Westbank Stock Option" means the stock option granted to Westbank to
acquire shares of Cargill common stock, a copy of which is attached as Exhibit C
to this agreement.
Other terms used herein are defined in the preamble and elsewhere in
this Agreement.
ARTICLE II
THE MERGER
2.1 THE MERGER. As promptly as practicable following the satisfaction
or waiver of the conditions to the parties' respective obligations hereunder,
and subject to the terms and conditions of this Agreement, at the Effective
Time: (a) Cargill shall be merged with and into Westbank with Westbank as the
surviving corporation (the "Surviving Corporation"); and (b) the separate
existence of Cargill shall cease and all of the rights, privileges, powers,
franchises, properties, assets, liabilities and obligations of Cargill shall be
vested in and assumed by Westbank.
2.2 EFFECTIVE TIME. The Merger shall be effected by the filing of
Articles of Merger with the Secretary of The Commonwealth of Massachusetts in
accordance with Massachusetts law to become effective on the day of the closing
("Closing Date") provided for in Article X hereof (the "Closing"). The term
"Effective Time" shall mean the time on the Closing Date (or a subsequent date
not later than the opening of business on the next business day) when the Merger
becomes effective as set forth in the Articles of Merger.
2.3 CHARTER AND BYLAWS OF SURVIVING CORPORATION. The Articles of
Organization and By-laws of the Surviving Corporation shall be the Articles of
Organization, as amended, and By-laws of Westbank as in effect immediately prior
to the Effective Time, until thereafter amended as provided therein and by
applicable law.
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2.4 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION. The Directors of
Westbank immediately prior to the Effective Time shall be the Directors of the
Surviving Corporation, each to hold office in accordance with the Articles of
Organization and By-Laws of the Surviving Corporation. The officers of Westbank
immediately prior to the Effective Time shall be the officers of Surviving
Corporation, in each case until their respective successors are duly elected or
appointed and qualified.
2.5 ADDITIONAL DIRECTOR OF SURVIVING CORPORATION. One of the current
directors of Cargill (to be designated by Westbank after consultation with
Cargill) shall be appointed to the Board of Directors of the Surviving
Corporation at the annual meeting of stockholders of Westbank following the
Closing Date;
2.6 DIRECTORS OF CARGILL BANK. The Directors of Cargill Bank following
the Effective Time shall include those directors of Cargill Bank immediately
prior to the Effective Time, who wish to continue to serve as directors of
Cargill Bank, and such other individuals as may be designated by Westbank.
2.7 ADDITIONAL ACTIONS. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any further assignments
or assurances in law or any other acts are necessary or desirable (a) to vest,
perfect or confirm, of record or otherwise, in Surviving Corporation, title to
and possession of any property or right of Cargill acquired or to be acquired by
reason of, or as a result of, the Merger, or (b) otherwise to carry out the
purposes of this Agreement, Cargill and its proper officers and directors shall
be deemed to have granted to Surviving Corporation an irrevocable power of
attorney to execute and deliver all such proper deeds, assignments and
assurances in law and to do all acts necessary or proper to vest, perfect or
confirm title to and possession of such property or rights in Surviving
Corporation and otherwise to carry out the purposes of this Agreement; and the
proper officers and directors of Surviving Corporation are fully authorized in
the name of Cargill or otherwise to take any and all such action.
2.8 EFFECTS OF THE MERGER. At and after the Effective Time, the Merger
shall have the effects set forth in Chapter 156B, Section 80 of the General Laws
of The Commonwealth of Massachusetts, as amended and in Section 252 of the
Delaware General Corporation law.
2.9 POSSIBLE ALTERNATIVE STRUCTURES. Notwithstanding anything to the
contrary contained in this Agreement, prior to the Effective Time, Westbank
shall be entitled to revise the structure of the Merger, and the other
transactions contemplated hereby, provided, that (i) there are no adverse
federal or state income tax consequences to Cargill and its stockholders as a
result of the modification; (ii) the consideration to be paid to the holders of
Cargill Common Stock under this Agreement is not thereby changed in kind or
reduced in amount; (iii) there are no material adverse changes to the benefits
and other arrangements provided to or on behalf of Cargill's directors, officers
and other employees; and (iv) such modification will not delay materially or
jeopardize receipt of any required regulatory approvals or other consents and
approvals relating to the consummation of the Merger. Westbank, Park West Bank,
Cargill and Cargill Bank agree to appropriately amend this Agreement and any
related documents in order to reflect any such revised structure.
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ARTICLE III
CONVERSION OF SHARES
3.1 CONVERSION SHARES. At the Effective Time, by virtue of the Merger
and without any action on the part of Westbank, Park West Bank, Cargill, Cargill
Bank or the holders of any of the shares of Cargill Common Stock (shares of
Cargill Common Stock being hereinafter collectively referred to as "Shares"):
3.1.1 Each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares to be canceled pursuant to Section 3.1.2
and any Dissenting Shares (as hereinafter defined)) shall be canceled and shall
be converted automatically into and be exchangeable for shares of Westbank
Common Stock in accordance with the Exchange Ratio as set forth below (rounded
to the nearest ten thousandth of a share):
3.1.1.A As used herein, the term "Westbank Market Value" shall mean the
average of the closing prices of Westbank Common Stock on the Nasdaq National
Market System for each of the twenty (20) consecutive trading days ending on the
fifth trading day before the Determination Date as defined in Section 11.1.7. As
used herein, the term "Exchange Ratio" shall mean the number of shares of
Westbank Common Stock to be received for each share of Cargill Common Stock and
the term "Merger Consideration" shall mean the number of shares of Westbank
Common Stock represented by the Exchange Ratio together with any cash for
fractional shares, as applicable.
3.1.1.B
(a) For purposes of this Merger, the Exchange Ratio shall be:
(i) if the Westbank Market Value is greater than or equal to
$13.07, then 1.3008 fully paid and nonassessable shares of Westbank Common
Stock;
(ii) If the Westbank Market Value is less than $13.07 but
greater than or equal to $12.00, then the number of fully paid and nonassessable
shares of Westbank Common Stock (rounded to the nearest one ten-thousandth)
obtained by dividing (A) $17.00 per share by (B) the Westbank Market Value; and
(iii) if the Westbank Market Value is less than $12.00, then
1.4167 fully paid and non-assessable shares of Westbank Common Stock, subject to
adjustment as provided in Section 11.1.7 of this Agreement.
(b) In the event that before the Effective Time an announcement is made
with respect to a business combination involving the acquisition of Westbank or
a substantial portion of its assets (a "Westbank Acquisition") by another
company or person, Westbank covenants and agrees that such Westbank Acquisition
shall not be consummated prior to the Merger and the transactions contemplated
by this Agreement.
3.1.2 Each Share held in the treasury of Cargill and each Share owned
beneficially by Westbank, Park West Bank or by any direct or indirect
consolidated subsidiary of any of them immediately prior to the Effective Time
(other than in a fiduciary capacity) shall be canceled without any conversion
thereof and no payment or distribution shall be made with respect thereto.
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3.1.3 Each share of Westbank Common Stock issued and outstanding
immediately prior to the Effective Time shall remain an issued and outstanding
share of Westbank Common Stock following the Effective Time
3.1.4. If the holders of Westbank Common Stock shall have received or
shall have become entitled to receive, without payment therefor, during the
period commencing on the date hereof and ending with the Effective Date,
additional shares of common stock or other securities for their stock by way of
a stock split, stock dividend, reclassification, combination of shares of
similar corporate rearrangement ("Stock Adjustment"), then the amount of
Westbank Common Stock to be exchanged on the Effective Date for Cargill Common
Stock or kind of securities of Westbank shall be proportionately adjusted to
take into account such Stock Adjustment. In addition, the Westbank Market Value
shall be proportionately adjusted to compensate for any such Stock Adjustment.
3.1.5. Notwithstanding any term or provision hereof, no fractional
shares of Westbank Common Stock, and no certificates or script therefor, or
other evidence of ownership thereof, will be issued in exchange for any shares
of Cargill Common Stock; no dividend or distribution with respect to Westbank
Common Stock shall be payable on or with respect to any fractional share
interests; and no such fractional share interest shall entitle the owner thereof
to vote or to any other rights of a shareholder of Westbank. In lieu of such
fractional share interest, any holder of Cargill Common Stock who would
otherwise be entitled to a fractional share of Westbank Common Stock will, upon
surrender of his certificate or certificates representing Cargill Common Stock
outstanding immediately prior to the Effective Date, be paid the applicable cash
value of such fractional share interest, which shall be equal to the product of
the fraction multiplied by the Westbank Market Value. For the purposes of
determining any such fractional share interests, all shares of Cargill Common
Stock owned by a Cargill shareholder shall be combined so as to calculate the
maximum number of whole shares of Westbank Common Stock issuable to such Cargill
shareholder.
3.2 EMPLOYEE STOCK OPTIONS. On the Effective Date, each then
outstanding stock option to purchase Cargill Common Stock ("Cargill Stock
Options") pursuant to the stock option plans identified in Cargill Disclosure
Schedules to this Agreement (collectively, the "Cargill Stock Option Plans")
will be assumed by Westbank. Each Cargill Stock Option so assumed by Westbank
under this Agreement shall continue to have, and be subject to, the same terms
and conditions set forth in the Cargill Stock Option Plans immediately prior to
the Effective Date, except that (i) such Cargill Stock Options shall be
exercisable for that number of whole shares of Westbank Common Stock equal to
the product of the number of shares of Cargill Common Stock covered by the
Cargill Stock Option multiplied by the Exchange Ratio, provided that any
fractional share of Westbank Common Stock resulting from such multiplication
shall be rounded up to the nearest share; and (ii) the exercise price per share
of Westbank Common Stock shall be equal to the exercise price per share of
Cargill Common Stock of such Cargill Stock Option, divided by the Exchange
Ratio, provided that such exercise price shall be rounded down to the nearest
cent. It is the intention of the parties that the Cargill Stock Options assumed
by Westbank qualify following the Effective Date as incentive stock options as
defined in Section 422A of the Internal Revenue Code of 1989, as amended to the
extent that the Cargill Stock Options qualified as incentive stock options
immediately prior to the Effective Date. Promptly following the Effective Date,
Westbank shall reserve for issuance such number of shares of Westbank Common
Stock as shall be necessary to be issued pursuant to the exercise of the options
assumed by Westbank pursuant to this Section 3.2, and Westbank shall file a
registration statement on Form S-8 to register the shares of Westbank Common
Stock issuable in connection therewith. Cargill hereby represents and warrants
to Westbank that the maximum number of Shares subject to issuance pursuant to
the exercise of stock options issued and outstanding under the Cargill Stock
Option Plans is not and shall not be at or prior to the Effective Date more than
64,536.
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3.3 DISSENTING SHARES.
3.3.1 Notwithstanding anything in this Agreement to the contrary and
unless otherwise provided by applicable law, Shares that are issued and
outstanding immediately prior to the Effective Time and that are owned by
stockholders who have properly perfected their rights of appraisal within the
meaning of Title 8 of Section 262 of Delaware General Corporation Law (the
"Dissenting Shares"), shall not be converted into the right to receive the
Merger Consideration, unless and until such stockholders shall have failed to
perfect or shall have effectively withdrawn or lost their right of payment under
applicable law, but, instead, the holders thereof shall be entitled to an
appraisal by the Court of Chancery of the fair value of such Dissenting Shares
in accordance with the provisions of Title 8 of Section 262 of Delaware General
Corporation Law. If any such holder shall have failed to perfect or shall have
effectively withdrawn or lost such right of appraisal, each Share held by such
stockholder shall thereupon be deemed to have been converted into the right to
receive and become exchangeable for, at the Effective Time, the Merger
Consideration in the manner provided in Section 3.1.1 hereof.
3.3.2 Cargill shall give Westbank (i) prompt notice of any demands for
appraisal filed pursuant to Title 8 of Section 262 of Delaware General
Corporation Law, received by it, withdrawals of such demands, and any other
instruments served in connection with such demands pursuant to the Delaware
General Corporation Law and received by it and (ii) the opportunity to direct
all negotiations and proceedings with respect to demands under Delaware General
Corporation Law consistent with the obligations thereunder. Neither party shall,
except with the prior written consent of the other party, (x) make any payment
with respect to any such demand, (y) offer to settle or settle any such demand
or (z) waive any failure to timely deliver a written demand in accordance with
the Delaware General Corporation Law.
3.4 SURRENDER OF SHARES; STOCK TRANSFER BOOKS.
3.4.1 Prior to the Effective Time, Westbank shall designate an exchange
agent (the "Exchange Agent"), reasonably acceptable to Cargill, to act as agent
for the holders of Shares in connection with the Merger. After the Effective
Time, holders of certificates representing outstanding Shares, upon surrender of
such certificates to the Exchange Agent, shall be entitled to receive the shares
of Westbank and or funds to which holders of Shares shall become entitled
pursuant to Section 3.1. Immediately prior to the Effective Time, Westbank shall
deposit, or cause to be deposited, with the Exchange Agent, for the benefit of
the holders of certificates evidencing such Shares (the "Certificates"), for
exchange in accordance with this Article III, such amount of shares of Westbank
Common Stock and cash as is sufficient to pay the aggregate Merger Consideration
which holders of Shares are entitled to receive in exchange for outstanding
Shares.
3.4.2 Promptly after the Effective Time (but in no event more than
three business days thereafter), Westbank shall cause to be mailed to each
person who was, at the Effective Time, a holder of record of Shares entitled to
receive the Merger Consideration a form of letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Shares shall pass, only upon proper delivery of the Shares to the Exchange
Agent) and instructions for use in effecting the surrender of the Shares
pursuant to such letter of transmittal. Cargill shall have the right to review
the letter of transmittal, the instructions and any accompanying letter. Upon
surrender to the Exchange Agent of a Share, together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be required pursuant to
such instructions, the holder of such Share shall be entitled to receive in
exchange therefor the Merger Consideration for each Share formerly evidenced by
such Share, and such Share shall then be canceled. No interest shall accrue or
be paid for the period following the Effective Time on the Merger Consideration
payable upon the surrender of any
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Share for the benefit of the holder of such Share. Until surrendered as provided
in this Section 3.4.2, each outstanding share which, before the Effective Date,
represented Shares will be deemed for all corporate purposes to represent the
number of whole shares of Westbank Common Stock into which the Shares were
converted and the right to receive cash in lieu of fractional shares. However,
until such outstanding shares formerly representing Cargill Shares are so
surrendered, no dividend or distribution payable to such holders of record of
Westbank Common Stock shall be paid to any such holder of such outstanding
shares, but upon surrender of such outstanding shares by such holder there shall
be paid to such holder the amount of any dividends or distribution, without
interest, theretofore paid with respect to such whole shares of Westbank Common
Stock, but not paid to such holder, and which dividends or distribution had a
record date occurring on or after the Effective Date and the amount of any cash,
without interest, payable to such holder in lieu of fractional shares pursuant
to Section 3.1 hereof. If payment of the Merger Consideration is to be made to a
person other than the person in whose name the surrendered Share is registered
on the stock transfer books of Cargill, it shall be a condition of payment that
the Share so surrendered shall be endorsed properly or otherwise be in proper
form for transfer and that the person requesting such payment shall have paid
all transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Share
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such taxes either have been paid or are not applicable.
3.4.3 At any time following the twelfth month after the Effective Time,
Westbank shall be entitled to require the Exchange Agent to deliver to it any
stock certificates representing shares of Westbank Common Stock or funds which
had been made available to the Exchange Agent and not disbursed to holders of
Shares (including, without limitation, all interest and other income received by
the Exchange Agent in respect of all funds made available to it), and thereafter
such holders shall be entitled to look to Westbank (subject to abandoned
property, escheat and other similar laws) with respect to any Merger
Consideration that may be payable upon due surrender of the Shares held by them.
Notwithstanding the foregoing, neither Westbank nor Park West Bank nor the
Exchange Agent shall be liable to any holder of a Share for any Merger
Consideration delivered in respect of such Share to a public official pursuant
to any abandoned property, escheat or other similar law.
3.4.4 At the close of business on the Effective Date, the stock
transfer books of Cargill shall be closed and thereafter there shall be no
further registration of transfers of Shares on the records of Cargill. From and
after the Effective Time, the holders of Shares outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to such Shares
except as otherwise provided herein or by applicable law.
3.4.5 In the event any Share shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such Share
to be lost, stolen or destroyed and, if required by Westbank, upon the posting
by such person of a bond in such amount as Westbank or Park West Bank may
reasonably direct as indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed Certificate, the cash representing the Merger
Consideration deliverable in respect thereof pursuant to this Agreement.
3.5 RESERVATION OF SHARES OF WESTBANK COMMON STOCK. Westbank has
available and shall reserve for issuance a sufficient number of authorized but
unissued shares of its common stock for the purpose of issuing shares of
Westbank Common Stock to the Cargill shareholders in accordance with this
Article III.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF CARGILL AND CARGILL BANK
Cargill and Cargill Bank hereby represent and warrant to Westbank and
Park West Bank as follows:
4.1 CAPITAL STRUCTURE. The authorized capital stock of Cargill consists
of 750,000 shares of Cargill Common Stock, $0.01 par value per share, and
250,000 shares of Cargill Preferred Stock, $0.01 par value. As of the date of
this Agreement, 284,163 shares of Cargill Common Stock are issued and
outstanding, 7,349 shares of Cargill Common Stock are directly or indirectly
held by Cargill as treasury stock and no shares of Cargill Preferred Stock are
issued and outstanding. All outstanding shares of Cargill Common Stock have been
duly authorized and validly issued and are fully paid and nonassessable, and
none of the outstanding shares of Cargill Common Stock has been issued in
violation of the preemptive rights of any person, firm or entity. Except for
Cargill Options to acquire not more than 64,536 shares of Cargill Common Stock,
a schedule of which has been Previously Disclosed, there are no Rights
authorized, issued or outstanding with respect to or relating to the capital
stock of Cargill
4.2 ORGANIZATION, STANDING AND AUTHORITY OF CARGILL. Cargill is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware with full corporate power and authority to own or lease
all of its properties and assets and to carry on its business as now conducted
and is duly licensed or qualified to do business and is in good standing in each
jurisdiction in which its ownership or leasing of property or the conduct of its
business requires such licensing or qualification, except where the failure to
be so licensed, qualified or in good standing would not have a Material Adverse
Effect on Cargill. Cargill is duly registered as a unitary savings and loan
holding company with the OTS. Cargill has heretofore delivered to Westbank true
and complete copies of the Certificate of Incorporation and Bylaws of Cargill as
in effect as of the date hereof.
4.3 OWNERSHIP OF CARGILL. Cargill Bank is the sole direct or indirect
subsidiary of Cargill. Cargill has Previously Disclosed the name, jurisdiction
of incorporation and percentage ownership of each direct or indirect Cargill
Subsidiary. Except for (x) capital stock of the Cargill Subsidiaries, (y)
securities and other interests held in a fiduciary capacity and beneficially
owned by third parties or taken in consideration of debts previously contracted,
and (z) securities and other interests which are Previously Disclosed, Cargill
does not own or have the right or obligation to acquire, directly or indirectly,
any outstanding capital stock or other voting securities or ownership interests
of any corporation, bank, savings association, partnership, joint venture or
other organization, other than investment securities representing not more than
1% of any entity. The outstanding shares of capital stock or other ownership
interests of each Cargill Subsidiary have been duly authorized and validly
issued, are fully paid and nonassessable, and are directly or indirectly owned
by Cargill free and clear of all liens, claims, encumbrances, charges, pledges,
restrictions or rights of third parties of any kind whatsoever. No Rights are
authorized, issued or outstanding with respect to the capital stock or other
ownership interests of the Cargill Subsidiaries and there are no agreements,
understandings or commitments relating to the right of Cargill to vote or to
dispose of such capital stock or other ownership interests.
4.4 ORGANIZATION, STANDING AND AUTHORITY OF CARGILL BANK. Each of the
Cargill Subsidiaries is a bank, corporation or partnership duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is organized. Each of the Cargill Subsidiaries (i) has full power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted, and (ii) is duly licensed or qualified to do business
and is in good standing in each
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jurisdiction in which its ownership or leasing of property or the conduct of its
business requires such qualification, except where the failure to be so
licensed, qualified or in good standing would not have a Material Adverse Effect
on Cargill. The deposit accounts of Cargill Bank are insured by the SAIF, to the
maximum extent permitted by the FDIA.
Cargill Bank has paid all deposit insurance premiums and assessments
required by the FDIC including the payment in full of all special assessments to
SAIF. Cargill has heretofore delivered or made available to Westbank true and
complete copies of the Charter and Bylaws of Cargill Bank as in effect as of the
date hereof.
4.5 AUTHORIZED AND EFFECTIVE AGREEMENT.
4.5.1 Cargill has all requisite corporate power and authority to enter
into this Agreement, including the Stock Option Agreement attached as Exhibit C
hereto, and (subject to receipt of all necessary approvals of Governmental
Entities and the approval of Cargill's shareholders of this Agreement) to
perform all of its obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action in respect thereof
on the part of Cargill, except for the approval of this Agreement by Cargill's
shareholders. This Agreement has been duly and validly executed and delivered by
Cargill and constitutes the legal, valid and binding obligations of Cargill,
enforceable against Cargill in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
4.5.2 Except as Previously Disclosed, neither the execution and
delivery of this Agreement, nor consummation of the transactions contemplated
hereby, nor compliance by Cargill with any of the provisions hereof (i) does or
will conflict with or result in a breach of any provisions of the Articles of
Incorporation or Bylaws of Cargill or the equivalent documents of any Cargill
Subsidiary, (ii) violate, conflict with or result in a breach of any term,
condition or provision of, or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or give
rise to any right of termination, cancellation or acceleration with respect to,
or result in the creation of any lien, charge or encumbrance upon any property
or asset of Cargill or any Cargill Subsidiary pursuant to, any material note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Cargill or any Cargill Subsidiary is a party,
or by which any of their respective properties or assets may be bound or
affected, or (iii) subject to receipt of all required governmental and
shareholder approvals, violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Cargill or any Cargill Subsidiary.
4.5.3 Except for (i) the filing of applications and notices with, and
the consents and approvals of, as applicable, the FRB, the FDIC, the
Massachusetts Board, the MHPF, the Bank Commissioner, the Connecticut Banking
Commissioner and the Office of the Thrift Supervision, (ii) the filing of the
Prospectus and Proxy Statement with the SEC, (iii) the approval of this
Agreement by the requisite vote of the shareholders of Cargill, (iv) the filing
of Articles of Merger with the Secretary of the Commonwealth of Massachusetts
pursuant to the MBCL in connection with the Merger, (v) the filing of (a) a
certificate of merger or consolidation and (b) a consent to service of process
with the Secretary of State of the State of Delaware pursuant to Section 252 of
the Delaware General Corporation law, and (vi) review of the Merger by the DOJ
under federal antitrust laws, and except for such filings, registrations,
consents or approvals which are Previously Disclosed, no consents or approvals
of or filings or registrations with any Governmental Entity or with any third
party are necessary on the part of Cargill or Cargill Bank in connection with
the execution and delivery by Cargill of this Agreement and the consummation by
Cargill of the transactions contemplated hereby.
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4.5.4 As of the date hereof, neither Cargill nor Cargill Bank is aware
of any reasons relating to Cargill or Cargill Bank (including without limitation
Community Reinvestment Act compliance) (a) why all consents and approvals shall
not be procured from all regulatory agencies having jurisdiction over the
transactions contemplated by this Agreement as shall be necessary for (i)
consummation of the transactions contemplated by this Agreement, (ii) the
continuation by Westbank after the Effective Time of the business of each of
Westbank and Cargill as such business is carried on immediately prior to the
Effective Time, free of any conditions or requirements which, in the reasonable
opinion of Cargill, could have a Material Adverse Effect on Westbank or Cargill
or materially impair the value of Cargill and Cargill Bank to Westbank, or (b)
except as Previously Disclosed, which may prevent the transaction contemplated
hereby, including the Merger, from qualifying for pooling of interests
accounting treatment or as a reorganization within the meaning of Section 368(a)
of the Code.
4.6 SECURITIES DOCUMENTS AND REGULATORY REPORTS
4.6.1 Since January 1, 1993, Cargill has timely filed (as applicable)
all securities documents required by the Securities Laws and such documents
complied in all material respects with the Securities Laws and did not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
4.6.2 Since January 1, 1993, each of Cargill and Cargill Bank has duly
filed with the FRB, the Connecticut Banking Commissioner, the OTS, the FDIC and
any other applicable federal or state banking authority, as the case may be, in
correct form the reports required to be filed under applicable laws and
regulations and such reports were in all material respects complete and accurate
and in compliance with the requirements of applicable laws and regulations.
Except as Previously Disclosed, in connection with the most recent examinations
of Cargill and Cargill Bank by the FRB, the Connecticut Banking Commissioner,
OTS and the FDIC, neither Cargill nor Cargill Bank was required to correct or
change any action, procedure or proceeding which Cargill or Cargill Bank
believes has not been corrected or changed as required as of the date hereof in
all material respects.
4.7 FINANCIAL STATEMENTS
4.7.1 Cargill has previously delivered or made available to Westbank
accurate and complete copies of the Cargill Financial Statements, which, in the
case of the consolidated statements of financial condition of Cargill as of
September 30, 1997, 1996 and 1995 and the consolidated statements of operations,
shareholders' equity and cash flows of Cargill for each of the three years ended
September 30, 1997, 1996, and 1995 are accompanied by the audit reports of
Snyder & Haller, P.C., independent public accountants with respect to Cargill.
The Cargill Financial Statements referred to herein, as well as the Cargill
Financial Statements to be delivered pursuant to Section 6.4 hereof, fairly
present or will fairly present, as the case may be, the consolidated financial
condition of Cargill or Cargill Bank, as the case may be, as of the respective
dates set forth therein, and the consolidated results of operations,
shareholders' equity and cash flows of Cargill for the respective periods or as
of the respective dates set forth therein.
4.7.2 Each of the Cargill Financial Statements referred to in Section
4.7.1 has been or will be, as the case may be, prepared in accordance with
generally accepted accounting principles consistently applied during the periods
involved, except as stated therein. The audits of Cargill and the Cargill
Subsidiaries have been conducted in all material respects in accordance with
generally accepted auditing standards. The books and records of Cargill and the
Cargill Subsidiaries are being maintained in material compliance with applicable
legal and accounting requirements, and such books and records accurately reflect
in all material respects all dealings and transactions in respect of the
business, assets, liabilities and affairs of Cargill and its Subsidiaries. The
minute books of Cargill and each of its Subsidiaries contain
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complete and accurate records of all meetings and other corporate actions
authorized at such meetings held or taken since January 1, 1993 to date of its
stockholders and Board of Directors.
4.7.3 Except and to the extent (i) reflected, disclosed or provided for
in the consolidated statement of financial condition of Cargill as of September
30, 1997 (including related notes) and (ii) of liabilities incurred since
September 30, 1997 in the ordinary course of business, neither Cargill nor any
Cargill Subsidiary has any liabilities, whether absolute, accrued, contingent or
otherwise, material to the financial condition, results of operations or
business of Cargill on a consolidated basis.
4.8 MATERIAL ADVERSE CHANGE. Since September 30, 1997 (i) Cargill and
its Subsidiaries have conducted their respective businesses in the ordinary and
usual course and (ii) no event has occurred or circumstance arisen that,
individually or in the aggregate, has had or is reasonably likely to have a
Material Adverse Effect on Cargill.
4.9 ENVIRONMENTAL MATTERS. Except as Previously Disclosed:
4.9.1 To the best of Cargill's knowledge, Cargill and its Subsidiaries
are in material compliance with all Environmental Laws. Neither Cargill nor any
Cargill Subsidiary has received any communication alleging that Cargill or any
Cargill Subsidiary is not in such compliance and, to the best knowledge of
Cargill, there are no present circumstances that would prevent or interfere with
the continuation of such compliance.
4.9.2 To the best of Cargill's knowledge, none of the properties
presently or formerly owned, leased or operated by Cargill or a Cargill
Subsidiary, or in which Cargill or any Cargill Subsidiary has a lien or other
security interest, has been or is in material violation of or materially liable
under any Environmental Law.
4.9.3 To the best of Cargill's knowledge, there are no past or present
actions, activities, circumstances, conditions, events or incidents that could
reasonably form the basis of any material Environmental Claim or other claim or
action or governmental investigation that could result in the imposition of any
material liability arising under any Environmental Law against Cargill or a
Cargill Subsidiary or against any person or entity whose liability for any
Environmental Claim Cargill or a Cargill Subsidiary has or may have retained or
assumed either contractually or by operation of law.
4.9.4 Neither Cargill nor any Cargill Subsidiary have conducted any
environmental studies during the past five years with respect to any properties
owned by Cargill or a Cargill Subsidiary.
4.10 TAX MATTERS
4.10.1 Cargill and its Subsidiaries have timely filed all federal,
state and local (and, if applicable, foreign) income, franchise, bank, excise,
real property, personal property and other tax returns required by applicable
law to be filed by them (including, without limitation, estimated tax returns,
income tax returns, information returns and withholding and employment tax
returns) and have paid, or where payment is not required to have been made, have
set up an adequate reserve or accrual for the payment of, all material taxes
required to be paid in respect of the periods covered by such returns and, as of
the Effective Time, will have paid, or where payment is not required to have
been made, will have set up an adequate reserve or accrual for the payment of,
all material taxes for any subsequent periods ending on or prior to the
Effective Time. Neither Cargill nor a Cargill Subsidiary will have any material
liability for any such taxes in excess of the amounts so paid or reserves or
accruals so established.
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4.10.2 All federal, state and local (and, if applicable, foreign)
income, franchise, bank, excise, real property, personal property and other tax
returns filed by Cargill and its Subsidiaries are complete and accurate in all
material respects. Neither Cargill nor any Cargill Subsidiary is delinquent in
the payment of any tax, assessment or governmental charge or, except as
Previously Disclosed, has requested any extension of time within which to file
any tax returns in respect of any fiscal year or portion thereof which have not
since been filed. Except as Previously Disclosed, the federal, state and local
income tax returns of Cargill and its Subsidiaries have been examined by the
applicable tax authorities (or are closed to examination due to the expiration
of the applicable statute of limitations) and no deficiencies for any tax,
assessment or governmental charge have been proposed, asserted or assessed
(tentatively or otherwise) against Cargill or a Cargill Subsidiary as a result
of such examinations or otherwise which have not been settled and paid. There
are currently no agreements in effect with respect to Cargill or a Cargill
Subsidiary to extend the period of limitations for the assessment or collection
of any tax. As of the date hereof, no audit, examination or deficiency or refund
litigation with respect to such return is pending or, to the best of Cargill's
knowledge, threatened.
4.10.3 Except as Previously Disclosed, neither Cargill nor any Cargill
Subsidiary (i) is a party to any agreement providing for the allocation or
sharing of taxes, (ii) is required to include in income any adjustment pursuant
to Section 481(a) of the Code by reason of a voluntary change in accounting
method initiated by Cargill or a Cargill Subsidiary (nor does Cargill have any
knowledge that the Internal Revenue Service has proposed any such adjustment or
change of accounting method) or (iii) has filed a consent pursuant to Section
341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply.
4.11 LEGAL PROCEEDINGS Except as Previously Disclosed, there are no
actions, suits, claims, governmental investigations or proceedings instituted,
pending or, to the best knowledge of the senior officers and directors of
Cargill or any Cargill Subsidiary, threatened against Cargill or a Cargill
Subsidiary or against any asset, interest or right of Cargill or a Cargill
Subsidiary, or against any officer, director or employee of any of them, and
neither Cargill nor a Cargill Subsidiary is a party to any order, judgment or
decree.
4.12 COMPLIANCE WITH LAWS
4.12.1 Each of Cargill and the Cargill Subsidiaries has all permits,
licenses, certificates of authority, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local and foreign
governmental or regulatory bodies that are required in order to permit it to
carry on its business as it is presently being conducted and the absence of
which could reasonably be expected to have a Material Adverse Effect on Cargill;
all such permits, licenses, certificates of authority, orders and approvals are
in full force and effect; and to the best knowledge of Cargill, no suspension or
cancellation of any of the same is threatened.
4.12.2 Neither Cargill nor a Cargill Subsidiary is in violation of its
respective Articles of Incorporation, Charter or Bylaws, or of any applicable
federal, state or local law or ordinance or any order, rule or regulation of any
federal, state, local or other governmental agency or body (including, without
limitation, all banking (including without limitation all regulatory capital
requirements), securities, municipal securities, safety, health, environmental,
zoning, anti-discrimination, antitrust, and wage and hour laws, ordinances,
orders, rules and regulations), or in default with respect to any order, writ,
injunction or decree of any court, or in default under any order, license,
regulation or demand of any governmental agency, any of which violations or
defaults could reasonably be expected to have a Material Adverse Effect on
Cargill; and neither Cargill nor a Cargill Subsidiary has received any notice or
communication from any federal, state or local governmental authority asserting
that Cargill or a Cargill Subsidiary is in violation of any of the foregoing
which could reasonably be expected to have a Material Adverse Effect on Cargill.
Neither Cargill nor a Cargill Subsidiary is currently subject to any regulatory
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or supervisory cease and desist order, agreement, written directive, memorandum
of understanding or written commitment (other than those of general
applicability to all banks and holding companies thereof), and neither of them
has received any written communication requesting that it enter into any of the
foregoing, except as disclosed in Schedule 4.12.2, which consists of Board
Resolutions, no regulatory agency has initiated any formal or informal
proceeding or, taken any formal or informal supervisory action to the best
knowledge of Cargill, investigation into the business or operations of Cargill
or any of the Cargill Subsidiaries since prior to September 30, 1992. Cargill
has not received any objection from any regulatory agency to Cargill's response
to any violation, criticism or exception with respect to any report or statement
relating to any examinations of Cargill or any of the Cargill Subsidiaries.
4.13 CERTAIN INFORMATION None of the information relating to Cargill
and its Subsidiaries supplied or to be supplied for inclusion or incorporation
by reference in the Prospectus and Proxy Statement, as of the date(s) such
Prospectus and Proxy Statement is mailed to shareholders of Cargill and up to
and including the date(s) of the meeting(s) of shareholders to which such
Prospectus and Proxy Statement relates, will contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, provided that information as of a later date shall be deemed to
modify information as of an earlier date. Any Prospectus and Proxy Statement
mailed by Cargill to its shareholders in connection with the meeting(s) of
shareholders at which this Agreement will be considered by such shareholders
will comply as to form in all material respects with the Exchange Act and the
rules and regulations promulgated thereunder.
4.14 EMPLOYEE BENEFIT PLANS
4.14.1 Cargill has Previously Disclosed all stock option, employee
stock purchase and stock bonus plans, qualified pension or profit-sharing plans,
any deferred compensation, consultant, bonus or group insurance contract or any
other incentive, health and welfare or employee benefit plan or agreement
maintained for the benefit of employees or former employees of Cargill or any
Cargill Subsidiary (the "Cargill Employee Plans"), whether written or oral, and
Cargill has previously furnished or made available to Westbank accurate and
complete copies of the same together with (i) the most recent actuarial and
financial reports prepared with respect to any qualified plans, (ii) the most
recent annual reports filed with any governmental agency, and (iii) all rulings
and determination letters and any open requests for rulings or letters that
pertain to any qualified plan.
4.14.2 None of Cargill, any Cargill Subsidiary, any pension plan
maintained by either of them and qualified under Section 401 of the Code or, to
the best of Cargill's knowledge, any fiduciary of such plan has incurred any
material liability to the PBGC or the Internal Revenue Service with respect to
such plan. To the best of Cargill's knowledge, no reportable event under Section
4043(b) of ERISA has occurred with respect to any such pension plan.
4.14.3 Neither Cargill nor any Cargill Subsidiary participates in or
has incurred any liability under Section 4201 of ERISA for a complete or partial
withdrawal from a multi-employer plan (as such term is defined in ERISA).
4.14.4 A favorable determination letter has been applied for from the
Internal Revenue Service with respect to the Financial Institutions Retirement
Fund as adopted by Cargill Bank, which is an "employee pension benefit plan" (as
defined in Section 3(2) of ERISA) (a "Cargill Pension Plan") which is intended
to qualify under Section 401 of the Code to the effect that such plan is
qualified under Section 401 of the Code and the trust associated with such
employee pension plan is tax exempt under Section 501 of the Code. No such
letter has yet been issued by the IRS, but there has been no indication from the
IRS that a favorable determination letter will be withheld or that Cargill
Bank's request will be denied.
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Neither Cargill nor any Cargill Subsidiary has any liability under any such plan
that is not reflected on the consolidated statement of financial condition of
Cargill at September 30, 1997 included in the Cargill Financial Statements,
other than liabilities incurred in the ordinary course of business in connection
therewith subsequent to the date thereof.
4.14.5 To the best of Cargill's knowledge, no prohibited transaction
(which shall mean any transaction prohibited by Section 406 of ERISA and not
exempt under Section 408 of ERISA or Section 4975 of the Code) has occurred with
respect to any Cargill Employee Plan which would result in the imposition,
directly or indirectly, of a material excise tax under Section 4975 of the Code
or otherwise have a Material Adverse Effect on Cargill.
4.14.6 Full payment has been made (or proper accruals have been
established) of all contributions which are required for periods prior to the
date hereof, and full payment will be so made (or proper accruals will be so
established) of all contributions which are required for periods after the date
hereof and prior to the Effective Time, under the terms of each Cargill Employee
Plan or ERISA; to the best of Cargill's knowledge, no accumulated funding
deficiency (as defined in Section 302 of ERISA or Section 412 of the Code),
whether or not waived, exists with respect to any Cargill Pension Plan, and
there is no "unfunded current liability" (as defined in Section 412 of the Code)
with respect to any Cargill Pension Plan.
4.14.7 To the best of Cargill's knowledge, the Cargill Employee Plans
have been operated in compliance in all material respects with the applicable
provisions of ERISA, the Code, all regulations, rulings and announcements
promulgated or issued thereunder and all other applicable governmental laws and
regulations.
4.14.8 There are no pending or, to the best knowledge of Cargill,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of the Cargill Employee Plans or any trust related thereto or any
fiduciary thereof.
4.14.9 Neither Cargill nor Westbank will be required to make a Pension
Payment as a result of the Merger. The term "Pension Payment" shall mean the
amount, if any, for which Cargill or its successor is or would be liable in
connection with a Cargill Pension Plan.
4.15 CERTAIN CONTRACTS
4.15.1 Except as Previously Disclosed, neither Cargill nor a Cargill
Subsidiary is a party to, is bound or affected by, receives, or is obligated to
pay, benefits under:
(a) any agreement, arrangement or commitment, including
without limitation any agreement, indenture or other instrument, relating to the
borrowing of money by Cargill or a Cargill Subsidiary (other than in the case of
Cargill Bank deposits, FHLB advances, federal funds purchased and securities
sold under agreements to repurchase in the ordinary course of business) or the
guarantee by Cargill or a Cargill Subsidiary of any obligation, other than by
Cargill Bank in the ordinary course of its banking business;
(b) any agreement or commitment relating to the employment of
a consultant or the employment, election or retention in office of any present
or former director, officer or employee of Cargill or a Cargill Subsidiary;
(c) any agreement, arrangement or understanding pursuant to
which any payment (whether of severance pay or otherwise) became or may become
due to any director, officer or employee
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of Cargill or a Cargill Subsidiary upon execution of this Agreement or upon or
following consummation of the transactions contemplated by this Agreement
(either alone or in connection with the occurrence of any additional acts or
events);
(d) any agreement, arrangement or understanding pursuant to
which Cargill or a Cargill Subsidiary is obligated to indemnify any director,
officer, employee or agent of Cargill or a Cargill Subsidiary;
(e) any agreement, arrangement or understanding to which
Cargill or a Cargill Subsidiary is a party or by which any of the same is bound
which limits the freedom of Cargill or a Cargill Subsidiary to compete in any
line of business or with any person;
(f) any assistance agreement, supervisory agreement,
memorandum of understanding, board resolution, consent order, cease and desist
order or condition of any regulatory order or decree with or by the Connecticut
Bank Commissioner, the FDIC, the OTS, the FRB or any other regulatory agency;
(g) any agreement (other than any agreement with a banking
customer for the provision of banking services entered into by any Cargill
Subsidiary in the ordinary course of business) that involves a payment or series
of payments of more than $10,000 in any one year from or to Cargill or any
Cargill Subsidiary (unless such agreement is cancelable by Cargill upon payment
of a termination fee of not more than $10,000); or
(h) any other agreement, arrangement or understanding which
would be required to be filed as an exhibit to the Cargill's Annual Report under
the Exchange Act (if Cargill were subject to such reporting obligations) and
which has not been so filed.
4.15.2 Neither Cargill nor any Cargill Subsidiary is in material
default or non-compliance under any contract, agreement, commitment,
arrangement, lease, insurance policy or other instrument to which it is a party
or by which its assets, business or operations may be bound or affected, whether
entered into in the ordinary course of business or otherwise and whether written
or oral, and there has not occurred any event that with the lapse of time or the
giving of notice, or both, would constitute such a material default or
non-compliance.
4.16 BROKERS AND FINDERS FEES. Except as Previously Disclosed, neither
Cargill nor any Cargill Subsidiary nor any of their respective directors,
officers or employees, has employed any broker or finder or incurred any
liability for any broker or finder fees or commissions in connection with the
transactions contemplated hereby.
4.17 INSURANCE. Each of Cargill and its Subsidiaries is insured for
reasonable amounts with financially sound and reputable insurance companies
against such risks as companies engaged in a similar business would, in
accordance with good business practice, customarily be insured and has
maintained all insurance required by applicable laws and regulations. Cargill
has Previously Disclosed all policies of insurance maintained by it or a Cargill
Subsidiary as of the date hereof and any claims thereunder in excess of $25,000
since October 1, 1995. Neither Cargill nor any Cargill Subsidiary has received
any notice of termination of any such insurance coverage or material increase in
the premiums therefor or has any reason to believe that any such insurance
coverage will be terminated or the premiums therefor materially increased.
4.18 LOAN PORTFOLIO. Cargill has Previously Disclosed all of the loans
in original principal amount excess of $25,000 of Cargill or any Cargill
Subsidiary that as of the date of this Agreement are classified by Cargill or
any Bank Regulator as "Special Mention", "Substandard", "Doubtful", "Loss" or
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"Classified," together with the aggregate principal amount of and accrued and
unpaid interest on such all loans by category, it being understood that no
representation is being made that the FDIC, the OTS, the Connecticut Bank
Commissioner or any other Bank Regulator would agree with the loan
classifications of Cargill.
4.19 PROPERTIES. All real and personal property owned by Cargill or its
Subsidiaries or presently used by any of them in its respective business is in
an adequate condition (ordinary wear and tear excepted) and is sufficient to
carry on the business of Cargill and its Subsidiaries in the ordinary course of
business consistent with their past practices. Cargill has good and marketable
title free and clear of all liens, encumbrances, charges, defaults or equities
(other than equities of redemption under applicable foreclosure laws) to all of
the material properties and assets, real and personal, reflected on the
consolidated statement of financial condition of Cargill as of September 30,
1997 included in the Cargill Financial Statements or acquired after such date,
except (i) liens for current taxes not yet due or payable (ii) pledges to secure
deposits and other liens incurred in the ordinary course of its banking
business, (iii) such imperfections of title, easements and encumbrances, if any,
as are not material in character, amount or extent and (iv) as reflected on the
consolidated statement of financial condition of Cargill as of September 30,
1997 included in the Cargill Financial Statements. All real and personal
property which is material to Cargill's business on a consolidated basis and
leased or licensed by Cargill or a Cargill Subsidiary is held pursuant to leases
or licenses which are valid, enforceable and assumable by Westbank in accordance
with their respective terms and no such real property lease will terminate or
lapse prior to or at, the Effective Time.
4.20 LABOR. No work stoppage involving Cargill or a Cargill Subsidiary
is pending or, to the best knowledge of Cargill, threatened. Neither Cargill nor
a Cargill Subsidiary is involved in, or threatened with or affected by, any
labor dispute, arbitration, lawsuit or administrative proceeding involving the
employees of Cargill or a Cargill Subsidiary which could have a Material Adverse
Effect on Cargill. Employees of Cargill and the Cargill Subsidiaries are not
represented by any labor union nor are any collective bargaining agreements
otherwise in effect with respect to such employees, and to the best of Cargill's
knowledge, there have been no efforts to unionize or organize any employees of
Cargill or any of the Cargill Subsidiaries during the past five years.
4.21 REQUIRED VOTE; INAPPLICABILITY OF ANTI-TAKEOVER STATUTES AND PRIOR
AGREEMENTS
4.21.1 The affirmative vote of the holders of a majority of the issued
and outstanding shares of Cargill Common Stock is necessary to approve this
Agreement and the transactions contemplated hereby on behalf of Cargill.
4.21.2 The Board of Directors of Cargill has taken all necessary action
prior to the date of this Agreement in connection with the approval of the
execution, delivery and performance of this Agreement and the other transactions
contemplated hereby, including without limitation approval by the unanimous
affirmative vote of the members of Cargill's Board and unanimous affirmative
vote of the non-employee directors of Cargill's Board. The provisions of Section
203 of the Delaware General Corporation law as they relate to Cargill are
inapplicable to this Agreement and the transactions contemplated hereby.
4.22 MATERIAL INTERESTS OF CERTAIN PERSONS. Except as Previously
Disclosed, to the knowledge of Cargill, no officer or director of Cargill, or
any "associate" (as such term is defined in Rule 14a-1 under the Exchange Act)
of any such officer or director, (i) has any material interest in any material
contract or property (real or personal), tangible or intangible, used in or
pertaining to the business of Cargill or any of the Cargill Subsidiaries or (ii)
is indebted to, or has the right under a line of credit to borrow from, Cargill
or any Cargill Subsidiary in an amount exceeding $50,000.
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4.23 CERTAIN TRANSACTIONS. Since December 31, 1996, neither Cargill nor
any Cargill Subsidiary has been a party to any material off-balance-sheet
transactions involving interest rate and currency swaps, options and futures
contracts, or any other similar derivative transactions, except as Previously
Disclosed.
4.24 DISCLOSURES. None of the representations and warranties of Cargill
or any of the written information or documents furnished or to be furnished by
Cargill to Westbank in connection with or pursuant to this Agreement or the
consummation of the transactions contemplated hereby, when considered as a
whole, contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact required to be stated or necessary
to make any such information or document, in light of the circumstances, not
misleading.
4.25 DISCLOSURE SCHEDULE. The Cargill Disclosure Schedule sets forth,
among other things, disclosures with respect to or exceptions to Cargill's
representations and warranties in this Article IV. The mere inclusion of an
exception in the Cargill Disclosure Schedule shall not be deemed an admission by
Cargill that such exception represents a material fact, event or circumstance.
4.26 OWNERSHIP OF WESTBANK. As of the date hereof, neither Cargill nor,
to its best knowledge, any of its affiliates or associates (as such terms are
defined under the Exchange Act), (i) beneficially own, directly or indirectly,
or (ii) are parties to any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of, in each case, shares of
Westbank Common Stock which in the aggregate represent 5% or more of the
outstanding shares of Westbank Common Stock (other than shares held in a
fiduciary capacity and beneficially owned by third parties, shares taken in
consideration of debts previously contracted).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WESTBANK
AND PARK WEST BANK
Westbank and Park West Bank hereby represent and warrant to Cargill as
follows:
5.1 CAPITAL STRUCTURE. The authorized capital stock of Westbank
consists of 9,000,000 shares of Westbank Common Stock $2.00 par value, of which
3,766,844 shares are outstanding issued, fully paid and non assessable, and
100,000 shares of Westbank Preferred Stock, $5.00 per value, of which no shares
are outstanding. None of the outstanding shares of Westbank Common Stock have
been issued in violation of the preemptive rights of any person, firm or entity.
Except for Westbank Options to acquire not more than 244,430 shares of Westbank
Common Stock, a schedule of which has been Previously Disclosed and 12,000
shares of Westbank Preferred Stock which have reserved for issuance upon the
exercise of rights, pursuant to the Amended and Restated Shareholder Rights Plan
adopted by the Board of Directors of Westbank on November 19, 1997, a copy of
which has been Previously Disclosed, there are no Rights authorized, issued or
outstanding with respect to or relating to the capital stock of Westbank. All
shares of Westbank Common Stock to be issued in exchange for Shares upon
consummation of the Merger, when issued in accordance with this Agreement, will
be, and all of the issued and outstanding shares of Westbank are duly
authorized, validly issued, fully paid and nonassessable. At the Effective Time,
the authorized capital stock of Westbank will consist of 9,000,000 shares of
Westbank Common Stock $2.00 par value and 100,000 shares of Westbank Preferred
Stock $5.00 par value.
5.2 ORGANIZATION, STANDING AND AUTHORITY OF WESTBANK. Westbank is a
bank holding company duly organized, validly existing and in good standing under
the laws of The Commonwealth of Massachusetts with full corporate power and
authority to own or lease all of its properties and assets and to carry on its
business and will be duly licensed or qualified to do business and
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will be in good standing in each jurisdiction in which its ownership or leasing
of property or the conduct of its business requires such licensing or
qualification, except where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect on Westbank. Westbank is duly
registered as a bank holding company under the BHCA and the regulations of the
FRB thereunder. Westbank has heretofore delivered to Cargill true and complete
copies of the Articles of Organization and Bylaws of Park West Bank and of
Westbank as of the date hereof.
5.3 OWNERSHIP OF THE WESTBANK SUBSIDIARIES. Westbank and Park West Bank
have Previously Disclosed each direct or indirect Subsidiary of Westbank and
Park West Bank ("Westbank Subsidiary"). The outstanding shares of capital stock
of each Westbank Subsidiary have been duly authorized and validly issued, are
fully paid and nonassessable and are directly or indirectly owned by Westbank
free and clear of all liens, claims, encumbrances, charges, pledges,
restrictions or rights of third parties of any kind whatsoever. No Rights are
authorized, issued or outstanding with respect to the capital stock or other
ownership interests of any Westbank Subsidiary and there are no agreements,
understandings or commitments relating to the right of Westbank to vote or to
dispose of said shares or other ownership interests.
5.4 ORGANIZATION, STANDING AND AUTHORITY OF THE WESTBANK SUBSIDIARIES.
Each of Westbank and the Westbank Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is organized. Each of the Westbank and the Westbank Subsidiaries (i)
has full power and authority to own or lease all of its properties and assets
and to carry on its business as now conducted, and (ii) is duly licensed or
qualified to do business and is in good standing in each jurisdiction in which
its ownership or leasing of property or the conduct of its business requires
such qualification, except where the failure to be so licensed, qualified or in
good standing would not have a Material Adverse Effect on West Bank. The deposit
accounts of Park West Bank are insured by the BIF, to the maximum extent
permitted by the FDIA. Park West Bank has paid all premiums and assessments
required by the FDIC.
5.5 AUTHORIZED AND EFFECTIVE AGREEMENT.
5.5.1 Westbank and Park West Bank have all requisite corporate power
and authority to enter into this Agreement and (subject to receipt of all
necessary governmental approvals) to perform all of its obligations under this
Agreement. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been or will be (with respect to
Westbank) duly and validly authorized by all necessary corporate action in
respect thereof on the part of Westbank and Park West Bank. This Agreement has
been or will be ( with respect to Westbank) duly and validly executed and
delivered by Park West Bank and Westbank and, assuming due authorization,
execution and delivery by Cargill, constitutes or will constitute (with respect
to Westbank) a legal, valid and binding obligation of Park West Bank and
Westbank which is enforceable against Park West Bank and Westbank in accordance
with its terms, subject, as to enforceability, to bankruptcy, insolvency and
other laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
5.5.2 Neither the execution and delivery of this Agreement, nor
consummation of the transactions contemplated hereby nor compliance by Westbank
or Park West Bank with any of the provisions hereof (i) does or will conflict
with or result in a breach of any provisions of the Articles of Organization or
Bylaws of Westbank or Park West Bank or the equivalent documents of any Westbank
Subsidiary, (ii) violate, conflict with or result in a breach of any term,
condition or provision of, or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or give
rise to any right of termination, cancellation or acceleration with respect to,
or result in the creation of any lien, charge or encumbrance upon any property
or asset of Westbank or Park West Bank or any Westbank Subsidiary pursuant to,
any material note, bond, mortgage, indenture, deed of trust,
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license, lease, agreement or other instrument or obligation to which Westbank or
Park West Bank or any Westbank Subsidiary is a party, or by which any of their
respective properties or assets may be bound or affected, or (iii) subject to
receipt of all required governmental approvals, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Westbank or Park
West Bank or any Westbank Subsidiary.
5.5.3 Except for (i) the filing of applications and notices with, and
the consents and approvals of, as applicable, the FRB, the FDIC, the
Massachusetts Board, the MHPF, the Bank Commissioner, the Connecticut Bank
Commissioner and the OTS, (ii) the filing and effectiveness of a Form S-4
Registration Statement (which shall include the Prospectus and Proxy Statement)
with the SEC, (iii) compliance with applicable state securities or "blue sky"
laws, (iv) the filing of Articles of Merger with the Secretary of State of the
Commonwealth of Massachusetts pursuant to the MBCL in connection with the Merger
and (v) the filing of (A) a certificate of merger or consolidation and (B) a
consent to service of process with the Secretary of State of the State of
Delaware pursuant to Section 252 of the Delaware General Corporation law; (vi)
review of the Merger by the DOJ under federal antitrust laws, and except for
such filings, registrations, consents or approvals as are Previously Disclosed,
no consents or approvals of or filings or registrations with any Governmental
Entity or with any third party are necessary on the part of Park West Bank and
Westbank or any Westbank Subsidiary in connection with the execution and
delivery by Park West Bank and Westbank of this Agreement and the consummation
by Park West Bank and Westbank of the transactions contemplated hereby.
5.5.4 As of the date hereof, Westbank and Park West Bank are not aware
of any reasons relating to Westbank or Park West Bank or any of its Subsidiaries
(including without limitation Community Reinvestment Act compliance) (a) why all
consents and approvals shall not be procured from all regulatory agencies having
jurisdiction over the transactions contemplated by this Agreement as shall be
necessary for (i) consummation of the transactions contemplated by this
Agreement and (ii) the continuation by Westbank and Park West Bank after the
Effective Time of the business of each of Westbank, Park West Bank or Cargill as
such business is carried on immediately prior to the Effective Time, free of any
conditions or requirements which, in the reasonable opinion of Westbank or Park
West Bank, could have a Material Adverse Effect on Westbank, Park West Bank,
Cargill or Cargill Bank or materially impair the value of Cargill and Cargill
Bank to Westbank or (b) which may prevent the transactions contemplated hereby,
including the Merger, from qualifying for pooling of interests accounting
treatment or as a reorganization within the meaning of Section 368(a) of the
Code.
5.6 REGULATORY REPORTS
5.6.1 Since January 1, 1993, Westbank has timely filed (as applicable)
all Securities Documents required by the Securities Laws and such Securities
Documents complied in all material respects with the Securities Laws and did not
contain any untrue statement of a material fact or omit to state any 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.
5.6.2 Since January 1, 1993, Westbank has duly filed with the FRB, the
FDIC, and the Bank Commissioner, as the case may be, in correct form the reports
required to be filed under applicable laws and regulations and such reports were
in all material respects complete and accurate and in compliance with the
requirements of applicable laws and regulations. In connection with the most
recent examinations of Westbank by the FDIC or the Bank Commissioner, Westbank
was not required to correct or change any action, procedure or proceeding which
Westbank believes has not been corrected or changed as required as of the date
hereof in all material respects.
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5.7 FINANCIAL STATEMENTS
5.7.1 Westbank has previously delivered or made available to Cargill
accurate and complete copies of the Westbank Financial Statements which, in the
case of the consolidated statements of financial condition of Westbank as of
December 31, 1997, 1996 and 1995, and the consolidated statements of operations,
shareholders' equity and cash flows for each of the three years ended December
31, 1997, 1996 and 1995 are accompanied by the audit reports of Deloitte &
Touche, LLP, independent public accountants with respect to Westbank. The
Westbank Financial Statements referred to herein, as well as the Westbank and
the Westbank Financial Statements to be delivered pursuant to Section 7.4
hereof, fairly present or will fairly present, as the case may be, the
consolidated financial condition of Westbank and Park West Bank as of the
respective dates set forth therein, and the consolidated results of operations,
shareholders' equity and cash flows of Westbank and Park West Bank for the
respective periods or as of the respective dates set forth therein.
5.7.2 Each of the Westbank and Park West Bank Financial Statements
referred to in Section 5.7.1 has been or will be, as the case may be, prepared
in accordance with generally accepted accounting principles consistently applied
during the periods involved, except as stated therein. The audits of Westbank
and the Westbank Subsidiaries have been conducted in all material respects in
accordance with generally accepted auditing standards. The books and records of
Westbank and the Westbank Subsidiaries are being maintained in material
compliance with applicable legal and accounting requirements, and all such books
and records accurately reflect in all material respects all dealings and
transactions in respect of the business, assets, liabilities and affairs of
Westbank and the Westbank Subsidiaries. The minute books of Westbank and each of
its subsidiaries contain complete and accurate records of all meetings and other
corporate actions authorized at such meetings held or taken since January 1,
1993 to date of its stockholders and Board of Directors.
5.7.3 Except as Previously Disclosed, and to the extent (i) reflected,
disclosed or provided for in the consolidated statement of financial condition
of Westbank as of December 31, 1997 (including related notes) and (ii) of
liabilities incurred since December 31, 1997 in the ordinary course of business,
neither Westbank nor any Westbank Subsidiary has any liabilities, whether
absolute, accrued, contingent or otherwise, material to the financial condition,
results of operations or business of Westbank on a consolidated basis.
5.8 MATERIAL ADVERSE CHANGE. Since December 31, 1997, (i) Westbank and
its Subsidiaries have conducted their respective businesses in the ordinary and
usual course (excluding the incurrence of expenses in connection with this
Agreement, and excluding the transactions contemplated hereby) and (ii) no event
has occurred or circumstance arisen that, individually or in the aggregate, has
had or is reasonably likely to have a Material Adverse Effect on Westbank.
5.9 ENVIRONMENTAL MATTERS. Except as Previously Disclosed:
5.9.1 To the best of Westbank's knowledge, Westbank and the Westbank
Subsidiaries are in material compliance with all Environmental Laws. Neither
Westbank nor any Westbank Subsidiary has received any communication alleging
that Westbank or any Westbank Subsidiary is not in such compliance and, to the
best knowledge of Westbank, there are no present circumstances that would
prevent or interfere with the continuation of such compliance.
5.9.2 To the best of Westbank's knowledge, none of the properties
owned, leased or operated by Westbank or the Westbank Subsidiaries, or in which
Westbank or any Westbank Subsidiary has a lien or other security interest, has
been or is in violation of or liable under any Environmental Law.
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5.9.3 To the best of Westbank's knowledge, there are no past or present
actions, activities, circumstances, conditions, events or incidents that could
reasonably form the basis of any material Environmental Claim or other claim or
action or governmental investigation that could result in the imposition of any
liability arising under any Environmental Law against Westbank or any Westbank
Subsidiary or against any person or entity whose liability for any Environmental
Claim Westbank or any Westbank Subsidiary has or may have retained or assumed
either contractually or by operation of law.
5.10 TAX MATTERS. Westbank and the Westbank Subsidiaries have timely
filed all federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
required by applicable law to be filed by them (including, without limitation,
estimated tax returns, income tax returns, information returns and withholding
and employment tax returns) and have paid, or where payment is not required to
have been made, have set up an adequate reserve or accrual for the payment of,
all material taxes required to be paid in respect of the periods covered by such
returns and, as of the Effective Time, will have paid, or where payment is not
required to have been made, will have set up an adequate reserve or accrual for
the payment of, all material taxes for any subsequent periods ending on or prior
to the Effective Time. Neither Westbank nor any of the Westbank Subsidiaries
will have any material liability for any such taxes in excess of the amounts so
paid or reserves or accruals so established. As of the date hereof, no audit,
examination or deficiency or refund litigation with respect to any federal,
state and local (and, if applicable, foreign) income, franchise, bank, excise,
real property, personal property and other tax returns filed by Westbank and the
Westbank Subsidiaries is pending or, to the best of Westbank's knowledge,
threatened.
5.11 LEGAL PROCEEDINGS. Except as Previously Disclosed, there are no
actions, suits, claims, governmental investigations or proceedings instituted,
pending or, to the best knowledge of the senior officers and directors of
Westbank or any Westbank Subsidiary, threatened against Westbank or any Westbank
Subsidiary or against any asset, interest or right of Westbank or any Westbank
Subsidiary, or against any officer, director or employee of any of them, and
neither Westbank nor any Westbank Subsidiary is a party to any order, judgment
or decree.
5.12 COMPLIANCE WITH LAWS.
5.12.1 Each of Westbank and each of the Westbank Subsidiaries has and
Westbank will have all permits, licenses, certificates of authority, orders and
approvals of, and has made all filings, applications and registrations with,
federal, state, local and foreign governmental or regulatory bodies that are
required in order to permit it to carry on its business as it is presently being
conducted and the absence of which could reasonably be expected to have a
Material Adverse Effect on Westbank; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect; and to the best
knowledge of Westbank, no suspension or cancellation of any of the same is
threatened.
5.12.2 Neither Westbank nor any of the Westbank Subsidiaries is in
violation of its respective Articles of Organization, Charter or other
chartering instrument or Bylaws, or of any applicable federal, state or local
law or ordinance or any order, rule or regulation of any federal, state, local
or other governmental agency or body (including, without limitation, all banking
(including without limitation all regulatory capital requirements), securities,
municipal securities, safety, health, environmental, zoning,
anti-discrimination, antitrust, and wage and hour laws, ordinances, orders,
rules and regulations), or in default with respect to any order, writ,
injunction or decree of any court, or in default under any order, license,
regulation or demand of any governmental agency, any of which violations or
defaults could reasonably be expected to have a Material Adverse Effect on
Westbank; and neither Westbank nor any Westbank Subsidiary has received any
notice or communication from any federal, state or local governmental authority
asserting that Westbank or any Westbank Subsidiary is in violation of any of the
foregoing which could reasonably be expected to have a Material Adverse Effect
on Westbank. Neither
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Westbank nor any Westbank Subsidiary is subject to any regulatory or supervisory
cease and desist order, agreement, written directive, memorandum of
understanding or written commitment (other than those of general applicability
to all banks or holding companies thereof), and none of them has received any
written communication requesting that it enter into any of the foregoing. Except
as Previously Disclosed, no regulatory agency has initiated any proceeding or,
to the best knowledge of Westbank, investigation into the business or operations
of Westbank or any of the Westbank Subsidiaries since prior to December 31,
1992. Westbank has not received any objection from any regulatory agency to
Westbank's response to any violation, criticism or exception with respect to any
report or statement relating to any examinations of Park West Bank or any of the
Westbank Subsidiaries.
5.13 CERTAIN INFORMATION None of the information relating to Westbank,
Park West Bank and the Westbank Subsidiaries to be included or incorporated by
reference in the Registration Statement at the time it becomes effective and in
the Prospectus and Proxy Statement, as of the date(s) such Prospectus and Proxy
Statement is mailed to shareholders of Cargill to and including the date(s) of
the meetings of shareholders to which such Prospectus and Proxy Statement
relates, will contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided that
information as of a later date shall be deemed to modify information as of an
earlier date. The Registration Statement at the time it becomes effective and
the Prospectus and Proxy Statement when mailed by Cargill to its shareholders in
connection with the meeting of shareholders at which this Agreement will be
considered by such shareholders will comply as to form in all material respect
with the Securities Act of 1933, and applicable provisions of the Exchange Act
and the rules and regulations promulgated thereunder.
5.14 EMPLOYEE BENEFIT PLANS
5.14.1 Westbank has Previously Disclosed all stock option, employee
stock purchase and stock bonus plans, qualified pension or profit-sharing plans,
any deferred compensation, bonus or group insurance contract or any other
incentive, health and welfare or employee benefit plan or agreement maintained
for the benefit of employees or former employees of Westbank or any Westbank
Subsidiary (the "Westbank Employee Plans"), whether written or oral.
5.14.2 None of Westbank, any Westbank Subsidiary, any pension plan
maintained by any of them and qualified under Section 401 of the Code or, to the
best of Westbank's knowledge, any fiduciary of such plan has incurred any
material liability to the PBGC or the Internal Revenue Service with respect to
any employees of Westbank or any Westbank Subsidiary. To the best of Westbank's
knowledge, no reportable event under Section 4043(b) of ERISA has occurred with
respect to any such pension plan.
5.14.3 Neither Westbank nor any Westbank Subsidiary participates in or
has incurred any liability under Section 4201 of ERISA for a complete or partial
withdrawal from a multi-employer plan (as such term is defined in ERISA).
5.14.4 A favorable determination letter has been issued by the Internal
Revenue Service with respect to each Westbank Employee Plan which is an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA) (a
"Westbank Pension Plan") which is intended to qualify under Section 401 of the
Code to the effect that such plan is qualified under Section 401 of the Code and
the trust associated with such employee pension plan is tax exempt under Section
501 of the Code. No such letter has been revoked or, to the best of Westbank's
knowledge, is threatened to be revoked and Westbank does not know of any ground
on which such revocation may be based. Neither Westbank nor any Westbank
Subsidiary has any liability under any such plan that is not reflected on the
consolidated statement of financial condition of Westbank at December 31, 1997
included in the Westbank Financial Statements,
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other than liabilities incurred in the ordinary course of business in connection
therewith subsequent to the date thereof.
5.14.5 To the best of Westbank's knowledge, no prohibited transaction
(which shall mean any transaction prohibited by Section 406 of ERISA and not
exempt under Section 408 of ERISA or Section 4975 of the Code) has occurred with
respect to any Westbank Employee Plan which would result in the imposition,
directly or indirectly, of a material excise tax under Section 4975 of the Code
or otherwise have a Material Adverse Effect on Westbank.
5.14.6 Full payment has been made (or proper accruals have been
established) of all contributions which are required for periods prior to the
date hereof, and full payment will be so made (or proper accruals will be so
established) of all contributions which are required for periods after the date
hereof and prior to the Effective Time, under the terms of each Westbank
Employee Plan or ERISA; to the best of Westbank's knowledge, no accumulated
funding deficiency (as defined in Section 302 of ERISA or Section 412 of the
Code), whether or not waived, exists with respect to any Westbank Pension Plan,
and there is no "unfunded current liability" (as defined in Section 412 of the
Code) with respect to any Westbank Pension Plan.
5.14.7 To the best of Westbank's knowledge, Westbank Employee Plans
have been operated in compliance in all material respects with the applicable
provisions of ERISA, the Code, all regulations, rulings and announcements
promulgated or issued thereunder and all other applicable governmental laws and
regulations.
5.14.8 There are no pending or, to the best knowledge of Westbank,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of the Westbank Employee Plans or any trust related thereto or any
fiduciary thereof.
5.15 CERTAIN CONTRACTS. Neither Westbank nor any Westbank Subsidiary is
in material default or in non-compliance under any contract, agreement,
commitment, arrangement, lease, insurance policy or other instrument to which it
is a party or by which its assets, business or operations may be bound or
affected, whether entered into in the ordinary course of business or otherwise
and whether written or oral, and there has not occurred any event that with the
lapse of time or the giving of notice, or both, would constitute such a default
or non-compliance.
5.16 BROKERS AND FINDERS FEES. Except as Previously Disclosed, neither
Westbank nor any Westbank Subsidiary, nor any of their respective directors,
officers or employees, has employed any broker or finder or incurred any
liability for any broker or finder fees or commissions in connection with the
transactions contemplated hereby.
5.17 INSURANCE. Westbank and each Westbank Subsidiary is insured for
reasonable amounts with financially sound and reputable insurance companies
against such risks as companies engaged in a similar business would, in
accordance with good business practice, customarily be insured and has
maintained all insurance required by applicable laws and regulations.
5.18 LOAN PORTFOLIO. Westbank has Previously Disclosed all of the loans
in original principal amount in excess of $100,000 of Westbank or any Westbank
Subsidiary that as of the date of this Agreement are classified by Westbank or
any Bank Regulator as "Special Mention", "Substandard", "Doubtful", "Loss" or
"Classified," together with the aggregate principal amount of and accrued and
unpaid interest on all such loans by category, it being understood that no
representation is being made that the FDIC, the Bank Commissioner or any other
Bank Regulator would necessarily agree with the loan classifications of
Westbank.
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5.19 PROPERTIES. All property real and personal owned by Westbank or
any Westbank Subsidiary or presently used by any of them in its respective
business is in an adequate condition (ordinary wear and tear excepted) and is
sufficient to carry on its business in the ordinary course of business
consistent with their past practices. Westbank has good and marketable title
free and clear of all liens, encumbrances, charges, defaults or equities (other
than equities of redemption under applicable foreclosure laws) to all of the
material properties and assets, real and personal, reflected on the consolidated
statement of financial condition of Westbank as of December 31, 1997 included in
the Westbank Financial Statements or acquired after such date, except (i) liens
for current taxes not yet due or payable (ii) pledges to secure deposits and
other liens incurred in the ordinary course of its banking business, (iii) such
imperfections of title, easements and encumbrances, if any, as are not material
in character, amount or extent and (iv) as reflected on the consolidated
statement of financial condition of Westbank as of December 31, 1997 included in
the Westbank Financial Statements. All real and personal property which is
material to Westbank's business on a consolidated basis and leased or licensed
by Westbank or any Westbank Subsidiary is held pursuant to leases or licenses
which are valid and enforceable in accordance with their respective terms and no
such real property lease will terminate or lapse prior to the Effective Time.
5.20 LABOR. No work stoppage involving Westbank or any Westbank
Subsidiary is pending or, to the best knowledge of Westbank, threatened. Neither
Westbank nor any Westbank Subsidiary is involved in, or threatened with or
affected by, any labor dispute, arbitration, lawsuit or administrative
proceeding involving its employees which could have a Material Adverse Effect on
Westbank. Employees of Westbank and the Westbank Subsidiaries are not
represented by any labor union nor are any collective bargaining agreements
otherwise in effect with respect to such employees, and to the best of
Westbank's knowledge, there have been no efforts to unionize or organize any
employees of Westbank or any Westbank Subsidiary during the past five years.
5.21 NO REQUIRED VOTE; INAPPLICABILITY OF ANTI-TAKEOVER STATUTES AND
PRIOR AGREEMENTS
5.21.1 No vote of the holders of the issued and outstanding shares of
Westbank is necessary to approve this Agreement and the transactions
contemplated hereby on behalf of Westbank.
5.21.2 No "fair price," "moratorium," "control share acquisition" or
other form of anti-takeover statute or regulation, is applicable to this
Agreement and the transactions contemplated hereby.
5.22 OWNERSHIP OF CARGILL COMMON STOCK. As of the date hereof, neither
Westbank nor, to its best knowledge, any of its affiliates or associates (as
such terms are defined under the Exchange Act), (i) beneficially own, directly
or indirectly, or (ii) are parties to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of, in
each case, shares of Cargill Common Stock which in the aggregate represent 5% or
more of the outstanding shares of Cargill Common Stock (other than shares held
in a fiduciary capacity and beneficially owned by third parties, or shares taken
in consideration of debts previously contracted).
5.23 CERTAIN TRANSACTIONS. Since December 31, 1997, neither Westbank
nor any Westbank Subsidiary has been a party to any material off-balance-sheet
transactions involving interest rate and currency swaps, options and futures
contracts, or any other similar derivative transactions, except as Previously
Disclosed.
5.24 DISCLOSURES. None of the representations and warranties of
Westbank or any of the written information or documents furnished or to be
furnished by Westbank to Cargill in connection with or pursuant to this
Agreement or the consummation of the transactions contemplated hereby, when
considered as a whole, contains or will contain any untrue statement of a
material fact, or omits or will
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omit to state any material fact required to be stated or necessary to make any
such information or document, in light of the circumstances, not misleading.
5.25 DISCLOSURE SCHEDULE. The Westbank Disclosure Schedule sets forth,
among other things, disclosures with respect to or exceptions to Westbank's
representations and warranties in this Article V. The mere inclusion of an
exception in the Westbank Disclosure Schedule shall not be deemed an admission
by Westbank that such exception represents a material fact, event or
circumstance.
ARTICLE VI
COVENANTS OF CARGILL
6.1 CONDUCT OF BUSINESS.
6.1.1 AFFIRMATIVE COVENANTS. During the period from the date of this
Agreement to the Effective Time, except with the written consent of Westbank,
Cargill will operate its business, and it will cause each of the Cargill
Subsidiaries to operate its business, only in the usual, regular and ordinary
course of business; use reasonable efforts to preserve intact its business
organization and assets and maintain its rights and franchises; and take no
action which would (i) materially adversely affect the ability of Westbank or
Cargill to obtain any necessary approvals of governmental authorities required
for the transactions contemplated hereby or materially increase the period of
time necessary to obtain such approvals, or (ii) materially adversely affect its
ability to perform its covenants and agreements under this Agreement. Cargill
will cooperate and take all reasonable actions within its control to cause the
Merger to qualify for "pooling of interests" accounting treatment and as a
reorganization within the meaning of Section 368(a) of the Code and to contest
any applications filed or to be filed by other entities to acquire control of or
greater than 5% interest in Cargill.
6.1.2 NEGATIVE COVENANTS. Cargill agrees that from the date of this
Agreement to the Effective Time, except as otherwise specifically permitted or
required by this Agreement, or consented to by Westbank in writing (which
consent shall not be unreasonably withheld), Cargill will not, and will cause
each of the Cargill Subsidiaries not to:
(a) change or waive any provision of their Charter or By-laws;
(b) change the number of shares of its authorized or issued
capital stock (except for the issuance of Cargill Common Stock pursuant to the
exercise of outstanding stock options under the Cargill Stock Option Plans, as
contemplated by Section 4.1 hereof);
(c) issue or grant any option, warrant, call, commitment,
subscription, right to purchase or agreement of any character relating to the
authorized or issued capital stock of Cargill or any of the Cargill
Subsidiaries, or any securities convertible into shares of such stock; except
that Cargill may issue shares of Cargill Common Stock or permit treasury shares
to become outstanding to satisfy presently outstanding options under and in
accordance with the terms of the Cargill Stock Option Plans;
(d) effect any recapitalization, reclassification, stock
dividend, stock split or like change in capitalization, or redeem, repurchase or
otherwise acquire any shares of its capital stock;
(e) declare or pay any dividends or other distributions with
respect to its capital stock;
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(f) except in the ordinary course of business consistent with
past practice, incur any material liabilities or material obligations, whether
directly or by way of guaranty, including any obligation for borrowed money
whether or not evidenced by a note, bond, debenture or similar instrument (other
than FHLB advances not exceeding $500,000, or acquire any equity, debt, or other
investment securities;
(g) make any capital expenditures in excess of $5,000
individually or $15,000 in the aggregate, other than pursuant to Previously
Disclosed binding commitments existing on the date hereof;
(h) make or commit to make any commercial or commercial real
estate loan or loans to one borrower (including such borrower's related
interests) or purchase any loan or pool of loans or loan participation(s) in an
aggregate principal balance (or with an aggregate commitment) of $200,000 or
more;
(i) grant any increase in rates of compensation to its
employees, except merit increases in accordance with past practices and general
increases to employees as a class in accordance with past practice or as
required by law; grant any increase in rates of compensation to, or pay or agree
to pay any bonus or severance to, or provide any other new employee benefit or
incentive to its directors or to its officers who are currently covered by
employment or severance agreements with Cargill except for non-discretionary
payments required by such agreements and except for increases in officer
compensation rates by no more than 2.5% on an aggregate basis; enter into any
employment, severance or similar agreements or arrangements with any director or
employee or prospective employee; adopt or amend in any material respect or
terminate any employee benefit plan, pension plan or incentive plan except as
required by law or the terms of such plan or as provided in Section 6.1.2, or
permit the vesting of any material amount of benefits under any such plan other
than pursuant to the provisions thereof as in effect on the date of this
Agreement; or make any contributions to Cargill's deferred compensation plans,
supplemental executive retirement plans, grantor trust, defined benefit Pension
Plan or 401(k) Plan; other than contributions, based on Cargill's accrual levels
in effect for 1998 on the date of this Agreement, for the period ending on the
Effective Time; or make any cash bonus payments; or hire or agree to hire any
full or part time employees (except temporary employees whose expectation of
employment will not continue after the Effective Time or non-officer personnel
to serve as customer representatives, tellers, or in similar non-management
functions);
(j) make application for the opening or closing of any, or
open or close any, branch or automated banking facility or modify any lease or
agreement with respect to same;
(k) make any equity investment or commitment to make such an
investment in real estate or in any real estate development project, other than
in connection with foreclosures, settlements in lieu of foreclosure or troubled
loan or debt restructurings in the ordinary course of business consistent with
customary banking practices;
(l) except as the fiduciary duties of the Board of Directors
otherwise requires (as determined in good faith upon the advice of legal
counsel), merge into, consolidate with, affiliate with, or be purchased or
acquired by, any other Person, or permit any other to be merged, consolidated or
affiliated with it or be purchased or acquired by it, or, except to realize upon
collateral in the ordinary course of its business, acquire a significant portion
of the assets of any other Person, or sell a significant portion of its assets;
(m) make any material change in its accounting methods or
practices, except changes as may be required by GAAP or by regulatory
requirements;
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(n) enter into any off-balance sheet transaction involving
interest rate and currency swaps, options and futures contracts, or any other
similar derivative transactions;
(o) make or agree to make any payments that would result,
either individually or in the aggregate, in the payment of an "excess parachute
payment" within the meaning of Section 280G of the Code or that would result,
either individually or in the aggregate, in payments which would be
nondeductible pursuant to Section 162(m) of the Code;
(p) take any action that would result in the representations
and warranties of Cargill contained in this Agreement not being true and correct
on the date of this Agreement or at any future date on or prior to the Effective
Date;
(q) incur in connection with this Agreement and the
transactions contemplated herein, expenses including, but not limited to,
advisory, investment banking, legal, accounting, tax advisory, or similar fees
and costs in excess of reasonable and customary amounts;
(r) agree to do any of the foregoing.
6.2 CURRENT INFORMATION. During the period from the date of this
Agreement to the Effective Time, Cargill will cause one or more of its
representatives to confer with representatives of Westbank and report the
general status of its ongoing operations at such times as Westbank may
reasonably request. Cargill will promptly notify Westbank of any material change
in the normal course of its business or in the operation of its properties and,
to the extent permitted by applicable law, of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated), or the institution or the threat of material litigation involving
Cargill. Cargill will also provide Westbank such information with respect to
such events as Westbank may reasonably request from time to time. As soon as
reasonably available, but in no event more than 45 days after the end of each
calendar quarter ending after the date of this Agreement (other than the last
quarter of each fiscal year ending December 31), Cargill will deliver to
Westbank its quarterly report, and, as soon as reasonably available, but in no
event more than 90 days after the end of each fiscal year, Cargill will deliver
to Westbank its Annual Report. Within 25 days after the end of each month,
Cargill will deliver to Westbank a consolidated balance sheet and a consolidated
statement of operations, without related notes, for such month.
6.3 ACCESS TO PROPERTIES AND RECORDS. Cargill shall permit Westbank
reasonable access upon reasonable notice to its properties and those of the
Cargill Subsidiaries, and shall disclose and make available to Westbank during
normal business hours all of its books, papers and records relating to the
assets, stock ownership, properties, operations, obligations and liabilities,
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, litigation files, plans affecting employees, and
any other business activities or prospects in which Westbank may have a
reasonable interest; provided, however, that Cargill shall not be required to
take any action that would provide access to or to disclose information where
such access or disclosure would violate or prejudice the rights or business
interests or confidences of any customer or other person or would result in the
waiver by it of the privilege protecting communications between it and any of
its counsel. Cargill shall provide and shall request its auditors to provide
Westbank with such historical financial information regarding it (and related
audit reports and consents) as Westbank may reasonably request for securities
disclosure purposes.
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6.4 FINANCIAL AND OTHER STATEMENTS.
6.4.1 Promptly upon receipt thereof, Cargill will furnish to Westbank
copies of each annual, interim or special audit of the books of Cargill and the
Cargill Subsidiaries made by its independent accountants and copies of all
internal control reports submitted to Cargill by such accountants in connection
with each annual, interim or special audit of the books of Cargill and the
Cargill Subsidiaries made by such accountants.
6.4.2 As soon as practicable, Cargill will furnish to Westbank copies
of all such financial statements and reports as it or any Subsidiary shall send
to its stockholders, the SEC, the Connecticut Banking Commissioner, the FDIC or
any other regulatory authority, except as legally prohibited thereby.
6.4.3 Cargill will advise Westbank promptly of the receipt of any
examination report of any federal or state regulatory or examination authority
with respect to the condition or activities of Cargill or any of the Cargill
Subsidiaries.
6.4.4 With reasonable promptness, Cargill will furnish to Westbank such
additional financial data as Westbank may reasonably request, including without
limitation, detailed monthly financial statements and loan reports.
6.5 DISCLOSURE SUPPLEMENTS. From time to time prior to the Effective
Time, Cargill will promptly supplement or amend the Disclosure Schedules
delivered in connection herewith pursuant to Article IV with respect to any
material 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 Schedules which has been rendered inaccurate thereby. No supplement or
amendment to such Schedules shall have any effect for the purpose of determining
satisfaction of the conditions set forth in Article IX.
6.6 CONSENTS AND APPROVALS OF THIRD PARTIES. Cargill shall use all
reasonable efforts to obtain as soon as practicable all consents and approvals
of any other Persons necessary or desirable for the consummation of the
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing, Cargill may, with the prior consent of Westbank, which shall not
be unreasonably withheld utilize the services of a professional proxy soliciting
firm to help obtain the shareholder vote required to be obtained by it
hereunder.
6.7 ALL REASONABLE EFFORTS. Subject to the terms and conditions herein
provided, Cargill agrees to use all reasonable efforts to take, or cause to be
taken, all corporate or other 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.
6.8 FAILURE TO FULFILL CONDITIONS. In the event that Cargill determines
that a condition to its obligation to complete the Merger cannot be fulfilled
and that it will not waive that condition, it will promptly notify Westbank.
6.9 NO SOLICITATION. Unless and until this Agreement shall have been
properly terminated by either party pursuant to Section 11.1 hereof, neither
Cargill nor any of its subsidiaries shall (and Cargill and Cargill Bank shall
use all commercially reasonable efforts to cause its representatives, including,
but not limited to, investment bankers, attorneys and accountants, not to),
directly or indirectly, encourage, solicit, initiate or participate in any
discussions or negotiations with, or, provide any information to, any
corporation, partnership, person or other entity or group (other than Westbank
and
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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 Cargill or Cargill Bank (an "Acquisition
Transaction"); provided, however that Cargill and its representatives shall be
permitted to participate in discussions or negotiations with, or provide
information to, any other corporation, partnership, person or other entity or
group with respect to an Acquisition Transaction if the Board of Directors of
Cargill determines (in good faith upon the advice of outside counsel) that their
fiduciary duties require them to do so. Notwithstanding the foregoing, nothing
contained in this Section 6.9 shall prohibit Cargill or its Board of Directors
from taking and disclosing to Cargill's stockholders a position with respect to
a tender offer by a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated
under the Exchange Act or from making such disclosure to Cargill's stockholders
which, in the judgment of the Board of Directors (upon the advice of counsel),
may be required under applicable law or is necessary in order to comply with its
fiduciary obligations. Cargill will immediately communicate to Westbank 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 Cargill's receipt of any such proposal or inquiry)
or its receipt of any request for information from the FRB, the DOJ, or any
other governmental agency or authority with respect to a proposed Acquisition
Transaction. Cargill shall continue to consult with Westbank after receipt of
such proposal or commencement of such discussion or negotiation relating to an
Acquisition Transaction, and will not take any action with respect to such
proposed Acquisition Transaction except after reasonable consultation with
Westbank.
6.10 RESTRICTIONS ON SALE OF CARGILL COMMON STOCK. Cargill shall cause
each director, executive officer and other person who is an "affiliate" (for
purposes of Rule 145 under the Securities Act and for purposes of qualifying the
Merger for "pooling of interests" accounting treatment) of such party to deliver
to Westbank, effective on the date of this Agreement, written agreements in the
form attached hereto as Exhibit A, providing that such person will not sell,
pledge, transfer or otherwise dispose of any shares of Cargill Common Stock,
held by such "affiliate" and, in the case of the "affiliates" of Cargill, the
shares of Westbank Common Stock to be received by such "affiliate" in the
Merger: (1) otherwise than in compliance with the applicable provisions of the
Securities Act and the rules and regulations thereunder; and (2) unless the
Merger does not qualify for "pooling of interests" accounting treatment, during
the period commencing 30 days prior to consummation of the Merger and ending at
the time of the publication of financial results covering at least thirty days
of combined operations of Cargill and Westbank.
ARTICLE VII
COVENANTS OF WESTBANK
7.1 CONDUCT OF BUSINESS. During the period from the date of this
Agreement to the Effective Time, except with the written consent of Cargill and
except as provided below, Westbank will take no action which would (i)
materially adversely affect the ability of Westbank or Cargill to obtain any
necessary approvals of governmental authorities required for the transactions
contemplated hereby or materially increase the period of time necessary to
obtain such approvals, or (ii) materially adversely affect its ability to
perform its covenants and agreements under this Agreement, or (iii) result in
the representations and warranties of Westbank contained in this Agreement not
being true and correct on the date of this Agreement or at any future date on or
prior to the Closing Date; provided that nothing herein contained shall preclude
Westbank from taking any action Previously Disclosed. Westbank will cooperate
and take all reasonable actions within its control to cause the Merger to
qualify for "pooling of interests" accounting treatment and as a reorganization
within the meaning of Section 368(a) of the Code.
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7.2 CURRENT INFORMATION. During the period from the date of this
Agreement to the Effective Time, Westbank will cause one or more of its
representatives to confer with representatives of Cargill and report the general
status of its ongoing operations at such times as Cargill may reasonably
request. Westbank will promptly notify Cargill of any material change in the
normal course of its business or in the operation of its properties and, to the
extent permitted by applicable law, of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated), or the institution or the threat of material litigation involving
Westbank. Westbank will also provide Cargill such information with respect to
such events as Cargill may reasonably request from time to time. As soon as
reasonably available, but in no event more than 45 days after the end of each
calendar quarter ending after the date of this Agreement (other than the last
quarter of each fiscal year ending December 31), the Westbank will deliver to
Cargill a consolidated balance sheet and a consolidated statement of operations,
without related notes, for such quarter prepared in accordance with generally
accepted accounting principles, and within 25 days after the end of each month,
Westbank will deliver to Cargill a consolidated balance sheet and a consolidated
statement of operations, without related notes, for such month prepared in
accordance with generally accepted accounting principles.
7.3 ACCESS TO PROPERTIES AND RECORDS. Westbank shall permit Cargill
reasonable access upon reasonable notice to its properties and those of its
subsidiaries, and shall disclose and make available to Cargill during normal
business hours all of its books, papers and records relating to the assets,
stock ownership, properties, operations, obligations and liabilities, 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, litigation files, plans affecting employees, and any other
business activities or prospects in which Cargill may have a reasonable
interest; provided, however, that Westbank shall not be required to take any
action that would provide access to or to disclose information where such access
or disclosure would violate or prejudice the rights or business interests or
confidences of any customer or other person or would result in the waiver by it
of the privilege protecting communications between it and any of its counsel.
7.4 FINANCIAL AND OTHER STATEMENTS.
7.4.1 Promptly upon receipt thereof, Westbank will furnish to Cargill
copies of each annual, interim or special audit of the books of Westbank and its
subsidiaries made by its independent accountants and copies of all internal
control reports submitted to Westbank by such accountants in connection with
each annual, interim or special audit of the books of Westbank and its
subsidiaries made by such accountants.
7.4.2 As soon as practicable, Westbank will furnish to Cargill copies
of all such financial statements and reports as it or any Subsidiary shall send
to the Bank Commissioner, the FDIC, the FRB the Connecticut Banking
Commissioner, the OTS or any other regulatory authority, except as legally
prohibited thereby.
7.4.3 Westbank will advise Cargill promptly of the receipt of any
examination report of any federal or state regulatory or examination authority
with respect to the condition or activities of Westbank or any of its
subsidiaries.
7.4.4 With reasonable promptness, Westbank will furnish to Cargill such
additional financial data as Cargill may reasonably request, including without
limitation, detailed monthly financial statements and loan reports.
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7.5 DISCLOSURE SUPPLEMENTS. From time to time prior to the Effective
Time, Westbank will promptly supplement or amend the Disclosure Schedules
delivered in connection herewith pursuant to Article V with respect to any
material 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 Schedules or which is necessary to correct any information in
such Schedules which has been rendered inaccurate thereby. No supplement or
amendment to such Schedules shall have any effect for the purpose of determining
satisfaction of the conditions set forth in Article IX.
7.6 CONSENTS AND APPROVALS OF THIRD PARTIES. Westbank shall use all
reasonable efforts to obtain as soon as practicable all consents and approvals
of any other Persons necessary or desirable for the consummation of the
transactions contemplated by this Agreement.
7.7 ALL REASONABLE EFFORTS. Subject to the terms and conditions herein
provided, Westbank agrees to use all reasonable 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.
7.8 FAILURE TO FULFILL CONDITIONS. In the event that Westbank
determines that a condition to its obligation to complete the Merger cannot be
fulfilled and that it will not waive that condition, it will promptly notify
Cargill.
7.9 EMPLOYEE BENEFITS
7.9.1 While it is the intention of Westbank to offer employment to each
of the current employees of Cargill and its Subsidiaries, nothing in this
Agreement shall give any employee of Cargill or its Subsidiaries a right to
continuing employment with Westbank or any Subsidiary thereof after the
Effective Time.
7.9.2 As soon as practicable after the Effective Time, Westbank shall
provide or cause to be provided to all employees of Cargill and any Cargill
Subsidiary who remain employed by Westbank or any Westbank Subsidiary after the
Effective Time with employee benefits which, in the aggregate, are no less
favorable than those generally afforded in the banking industry to other
employees, holding similar positions.
7.9.3 Cargill has Previously Disclosed to Westbank certain employment
and change of control agreements, and deferred compensation plans as
Supplemental Retirement Plans (collectively, "Benefit Agreements") and the
Cargill Employee Stock Ownership Plan ("ESOP") which was terminated in 1995.
Following the Effective Time, Westbank shall honor or cause its Subsidiaries to
honor in accordance with their terms all such Previously Disclosed Benefit
Agreements and assume or cause its Subsidiaries to assume all duties,
liabilities and obligations under such agreements and arrangements. Westbank
agrees that (i) the consummation of the transactions contemplated hereby
constitutes a "Change in Control" as defined in the Benefit Agreements, and (ii)
Cargill's President who is the only employee who is a party to an employment
agreement with Cargill will be deemed to have suffered a material change in his
responsibilities and supervision as of the Effective Time, it being understood
that Westbank shall assume the employment agreement with the President of
Cargill and agrees to extend the term of such agreement until March 31, 2000.
Notwithstanding anything to the contrary contained in this Agreement, in no
event shall any party to this Agreement take any action or make any payments
that would result, either individually or in the aggregate, in the payment of an
"excess parachute payment" within the meaning of Section 280G of the Code or
that would result, either individually or in the aggregate, in payments that
would be nondeductible pursuant to Section 162(m) of the Code.
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7.10 DIRECTORS AND OFFICERS INDEMNIFICATION AND INSURANCE.
7.10.1 With regard to the Cargill Directors who continue to serve on
the Cargill Bank Board of Directors as well as those directors who elect to
terminate their service as directors, Westbank shall maintain, in effect for
three years from the Effective Time, the current directors' and officers'
liability insurance policies maintained by Cargill (provided, that Westbank may
substitute therefor policies of at least the same coverage containing terms and
conditions which are not materially less favorable) with respect to matters
occurring prior to the Effective Time; provided, however, that in no event shall
Westbank be required to expend pursuant to this Section 7.10.1 more than $30,000
in the aggregate. In connection with the foregoing, Cargill agrees to provide
such insurer or substitute insurer with such representations as such insurer may
request with respect to the reporting of any prior claims.
7.10.2 From and after the Effective Time, Westbank shall indemnify,
defend and hold harmless each person who is now, or who has been at any time
before the date hereof or who becomes before the Effective Time, an officer or
director of Cargill or the Cargill Subsidiaries or any of their respective
subsidiaries (the "Indemnified Parties") against all losses, claims, damages,
costs, expenses (including attorney's fees), liabilities or judgments or amounts
that are paid in settlement (which settlement shall require the prior written
consent of Westbank, which consent shall not be unreasonably withheld) of or in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, or administrative (each a "Claim"), in which an Indemnified
Party is, or is threatened to be made, a party or witness in whole or in part on
or arising in whole or in part out of the fact that such person is or was a
director, officer or employee of Cargill or any of its subsidiaries if such
Claim pertains to any matter of fact arising, existing or occurring before the
Effective Time (including, without limitation, the Merger and the other
transactions contemplated hereby), regardless of whether such Claim is asserted
or claimed before, or at or after, the Effective Time (the "Indemnified
Liabilities"), to the fullest extent permitted under applicable state or federal
law in effect as of the date hereof or as amended applicable to a time before
the Effective Time and under Cargill's and Cargill Bank's Articles of
Organization or Charter and By-Laws. Westbank shall pay expenses in advance of
the final disposition of any such action or proceeding to each Indemnified Party
to the full extent permitted by applicable state or federal law in effect as of
the date hereof or as amended applicable to a time before the Effective Time
upon receipt of an undertaking to repay such advance payments if he shall be
adjudicated or determined to be not entitled to indemnification in the manner
set forth below.
Any Indemnified Party wishing to claim indemnification under this
Section 7.10.2 upon learning of any Claim, shall notify Westbank (but the
failure so to notify Westbank shall not relieve it from any liability which it
may have under this Section 7.10.2, except to the extent such failure materially
prejudices Westbank) and shall deliver to Westbank the undertaking referred to
in the previous sentence. In the event of any such Claim (whether arising before
or after the Effective Time) (1) Westbank shall have the right to assume the
defense thereof (in which event the Indemnified Parties will cooperate in the
defense of any such matter) and upon such assumption Westbank shall not be
liable to any Indemnified Party for any legal expenses of other counsel or any
other expenses subsequently incurred by any Indemnified Party in connection with
the defense thereof, except that if Westbank elects not to assume such defense,
or counsel for the Indemnified Parties reasonably advises the Indemnified
Parties that there are or may be (whether or not any have yet actually arisen)
issues which raise conflicts of interest between Westbank and the Indemnified
Parties, the Indemnified Parties may retain counsel reasonably satisfactory to
them, and Westbank shall pay the reasonable fees and expenses of such counsel
for the Indemnified Parties, (2) Westbank shall be obligated pursuant to this
paragraph to pay for only one firm of counsel for all Indemnified Parties whose
reasonable fees and expenses shall be paid promptly as statements are received,
(3) Westbank shall not be liable for any settlement effected without its prior
written consent (which consent shall not be unreasonably withheld) and (4) no
Indemnified Party shall be entitled to indemnification hereunder with respect to
a matter as to which (x) he shall have been adjudicated in any
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proceeding not to have acted in good faith in the reasonable belief that his
action was in the best interests of Cargill or any Subsidiary, or (y) in the
event that a proceeding is compromised or settled so as to impose any liability
or obligation upon an Indemnified Party, if there is a determination that with
respect to said matter said Indemnified Party did not act in good faith in the
reasonable belief that his action was in the best interests of Cargill or any
Subsidiary. The determination shall be made by directors of Westbank who were
formerly directors of Cargill and who are not involved in such proceeding a
committee of three disinterested former Cargill Directors chosen by all of the
disinterested former Cargill Directors for the purpose of making such
determination or by independent legal counsel acceptable to both Westbank and a
majority of the disinterested former Cargill Directors.
7.10.3 In the event that either Westbank or any of its successors or
assigns (i) consolidates with or merges into any other entity and shall not be
the continuing or surviving bank or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then, and in each such case, proper provision shall be made so that the
successors and assigns of Westbank shall assume the obligations set forth in
this Section 7.10.
7.10.4 The obligations of Westbank provided under this Section 7.10 are
intended to be enforceable against Westbank directly by the Indemnified Parties
and shall be binding on all respective successors and permitted assigns of
Westbank.
7.11 RESTRICTIONS ON SALE OF WESTBANK COMMON STOCK. Westbank shall
cause each director, executive officer and other person who is an
"affiliate"(for purposes of qualifying the Merger for "pooling of interests"
accounting treatment) of such party to deliver, as soon as practicable after the
date of this Agreement, and prior to the date of the Cargill Shareholders
Meeting, written agreements in the form attached hereto as Exhibit D, providing
that such person will not sell, pledge, transfer or otherwise dispose of any
shares of Westbank Common Stock, held by such "affiliate" and, in the case of
the "affiliates" of Westbank, the shares of Westbank Common Stock to be received
by such "affiliate" in the Merger; unless the Merger does not qualify for
"pooling of interests" accounting treatment, during the period commencing 30
days prior to consummation of the Merger and ending at the time of the
publication of financial results covering at least thirty days of combined
operations of Westbank and Cargill.
7.12 STOCK LISTING. Westbank Common Stock is listed on the Nasdaq
National Market System under the symbol "WBKC." Westbank agrees to use all
reasonable efforts to continue to qualify for listing on the Nasdaq National
Market System (or such other national securities exchange on which the shares of
Westbank Common Stock shall be listed as of the Effective Time), subject to
official notice of issuance, the shares of Westbank Common Stock to be issued in
the Merger.
7.13 PUBLICATION OF COMBINED FINANCIAL RESULTS. Westbank, as the
Surviving Corporation shall publish no later than 30 days after the end of the
first month which includes at least 30 days of post-Merger combined operations,
combined sales and net income figures and any other financial information
necessary as contemplated by and in accordance with the terms of SEC Accounting
Series Release No. 135 and any related accounting rules.
ARTICLE VIII
REGULATORY AND OTHER MATTERS
8.1 SPECIAL MEETINGS OF SHAREHOLDERS. Cargill will (i) as promptly as
practicable, take all steps necessary to duly call, give notice of, convene and
hold a meeting of its stockholders (the "Stockholders Meeting") for the purpose
of approving this Agreement and the Merger, and for such other purposes as may
be, in each party's reasonable judgment, necessary or desirable, (ii) except to
the extent
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legally required for the proper discharge of the fiduciary duties of the Board
of Directors of Cargill under applicable law, as advised in writing by legal
counsel, recommend to its stockholders the approval of the aforementioned
matters to be submitted by it to its stockholders, and (iii) cooperate and
consult with Westbank with respect to each of the foregoing matters.
8.2 REGISTRATION STATEMENT; PROSPECTUS AND PROXY STATEMENT
8.2.1 For the purposes (i) of registering the Westbank Common Stock to
be issued to holders of Cargill Common Stock in connection with the Merger with
the SEC and with applicable state securities authorities, and (ii) of holding
the shareholders' meeting referenced in Section 8.1, the parties hereto shall
cooperate in the preparation of an appropriate registration statement (such
registration statement, together with all and any amendments and supplements
thereto, being herein referred to as the "Registration Statement"), including
the prospectus/proxy statement satisfying all applicable requirements of
applicable state laws, and of the Securities Act of 1933 and the rules and
regulations thereunder (such prospectus/proxy statement, together with any and
all amendments or supplements thereto, being herein referred to as the
"Prospectus and Proxy Statement").
8.2.2 Westbank and Park West Bank shall furnish such information
concerning themselves and their Subsidiaries as is necessary in order to cause
the Prospectus and Proxy Statement, insofar as it relates to such corporations,
to comply with Section 8.2.1 hereof. Westbank and Park West Bank agree promptly
to advise Cargill if at any time prior to the shareholders' meeting any
information provided by Westbank or Park West Bank in the Prospectus and Proxy
Statement becomes incorrect or incomplete in any material respect and to provide
the information needed to correct such inaccuracy or omission. Westbank or Park
West Bank shall promptly file such supplemental information as may be necessary
in order to cause such Prospectus and Proxy Statement, insofar as it relates to
Westbank or Park West Bank and their Subsidiaries, to comply with Section 8.2.1.
8.2.3 Cargill shall furnish Westbank or Park West Bank with such
information concerning Cargill and the Cargill Subsidiaries as is necessary in
order to cause the Prospectus and Proxy Statement, insofar as it relates to such
corporations, to comply with Section 8.2.1 hereof. Cargill agrees promptly to
advise Westbank if at any time prior to the shareholders' meeting any
information provided by Cargill in the Prospectus and Proxy Statement becomes
incorrect or incomplete in any material respect and to provide the information
needed to correct such inaccuracy or omission. Cargill shall furnish Westbank or
Park West Bank with such supplemental information as may be necessary in order
to cause the Prospectus and Proxy Statement, insofar as it relates to Cargill
and the Cargill Subsidiaries, to comply with Section 8.2.1.
8.2.4 Westbank shall promptly file the Registration Statement with the
SEC and applicable state securities agencies. Westbank shall use all reasonable
efforts to cause the Registration Statement to become effective under the
Securities Act of 1933 and applicable state securities laws at the earliest
practicable date. Cargill authorizes Westbank to utilize in the Registration
Statement the information concerning Cargill and the Cargill Subsidiaries
provided to Westbank for the purpose of inclusion in the Prospectus and Proxy
Statement. Cargill shall have the right to review and comment on the form of
proxy statement included in the Registration Statement. Westbank shall advise
Cargill promptly when the Registration Statement has become effective and of any
supplements or amendments thereto, and Westbank shall furnish Cargill with
copies of all such documents. Prior to the Effective Time or the termination of
this Agreement, each party shall consult with the other with respect to any
material (other than the Prospectus and Proxy Statement) that might constitute a
"prospectus" relating to the Merger within the meaning of the Securities Act of
1933.
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8.3 REGULATORY APPROVALS. Each of Cargill and Westbank and Park West
Bank will cooperate with the other and use all reasonable efforts to promptly
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, including without limitation the Merger. Cargill
and Westbank will furnish each other and each other's counsel with all
information concerning themselves, their subsidiaries, directors, officers and
stockholders and such other matters as may be necessary or advisable in
connection with any application, petition or any other statement or application
made by or on behalf of Cargill or Westbank to any governmental body in
connection with the Merger, and the transactions contemplated by this Agreement.
Cargill and Westbank shall have the right to review and approve in advance all
characterizations of the information relating to Westbank or Cargill, as the
case may be, and any of their respective subsidiaries, which appear in any
filing made in connection with the transactions contemplated by this Agreement
with any governmental body. In addition, Cargill and Westbank shall each furnish
to the other for review a copy of each such filing made in connection with the
transactions contemplated by this Agreement with any governmental body prior to
its filing.
ARTICLE IX
CLOSING CONDITIONS
9.1 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:
9.1.1 STOCKHOLDER APPROVAL. This Agreement and the transactions
contemplated hereby shall have been approved in accordance with applicable law,
Articles of Organization, By-laws and NASD policy by the requisite vote of the
stockholders of Cargill.
9.1.2 INJUNCTIONS. None of the parties hereto 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.
9.1.3 REGULATORY APPROVALS. All necessary approvals, authorizations and
consents of all governmental bodies required to consummate the transactions
contemplated by this Agreement shall have been obtained and shall remain in full
force and effect and all waiting periods relating to such approvals,
authorizations or consents shall have expired; and no such approval,
authorization or consent shall include any condition or requirement, not
reasonably foreseen as of the date of this Agreement or otherwise addressed on
or prior to the date hereof, that would, in the good faith reasonable judgment
of the Board of Directors of Westbank and Cargill, materially and adversely
affect the business, operations, financial condition, property or assets of the
combined enterprise or of Cargill or Cargill Bank or otherwise materially impair
the value of Cargill or Cargill Bank to Westbank.
9.1.4 TAX OPINION. Receipt of an opinion of legal counsel, or other tax
advisor reasonably acceptable to the parties, or a private letter ruling from
the Internal Revenue Service, in the form and content reasonably satisfactory to
the parties hereto, and upon which Cargill shareholders may rely, subject to
standard representations and assumptions, to the effect that for federal income
tax purposes:
(i) The Merger will qualify as a "reorganization"
under Section 368(a) of the Code.
(ii) No gain or loss will be recognized by Westbank,
Park West Bank, Cargill or Cargill Bank by reason of the Merger.
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(iii) No gain or loss will be recognized by any
Cargill shareholder except those who elect to exercise dissenters' rights
(except in connection with the receipt of cash in lieu of a fractional share of
Westbank Common Stock) upon the exchange of Cargill Common Stock for Westbank
Common Stock in the Merger.
(iv) The basis of the Westbank Common Stock received
by a Cargill shareholder who exchanges Cargill Common Stock for Westbank Common
Stock will be the same as the basis of the Cargill Common Stock surrendered in
exchange therefor (subject to any adjustments required as the result of receipt
of cash in lieu of a fractional share of Westbank Common Stock).
(v) The holding period of the Westbank Common Stock
received by a Cargill shareholder receiving Westbank Common Stock will include
the period during which the Cargill Common Stock surrendered in exchange
therefore was held (provided that such Common Stock of such Cargill shareholder
was held as a capital asset at the Effective Time).
(vi) Cash received by a Cargill shareholder in lieu
of a fractional share interest of Westbank Common Stock will be treated as
having been received as a distribution in full payment in exchange for the
fractional share interest of Westbank Common Stock which he would otherwise be
entitled to receive and will qualify as capital gain or loss (assuming the
Cargill stock was a capital asset in his hands at the Effective Time).
9.1.5 REGISTRATION STATEMENT. The Registration Statement shall have
been declared effective and shall not be subject to a stop order of the SEC and,
if the offer and sale of Westbank's Common Stock in the Merger pursuant to this
Agreement is subject to the blue sky laws of any state, shall not be subject to
a stop order of any state securities commissioner.
9.2 CONDITIONS TO THE OBLIGATIONS OF PARK WEST BANK AND WESTBANK UNDER
THIS AGREEMENT. The obligations of Park West Bank and Westbank under this
Agreement shall be further subject to the satisfaction, at or prior to the
Effective Time, of the following conditions:
9.2.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Cargill set forth in Article IV hereof shall be true and correct
in all material respects as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date (or on the date when made in
the case of any representation and warranty which specifically relates to an
earlier date), except as otherwise contemplated by this Agreement or consented
to in writing by Park West Bank; provided, however, that (i) in determining
whether or not the condition contained in this Section 9.2.1 shall be satisfied,
no effect shall be given to any exceptions in such representations and
warranties relating to materiality or Material Adverse Effect and (ii) the
condition contained in this Section 9.2.1 shall be deemed to be satisfied unless
the failure of such representations and warranties to be so true and correct
constitute, individually or in the aggregate, a Material Adverse Effect on
Cargill and the Cargill Subsidiaries, taken as a whole; and Cargill shall have
delivered to Park West Bank a certificate of Cargill to such effect signed by
the Chief Executive Officer and the Chief Financial Officer of Cargill as of the
Effective Time.
9.2.2 AGREEMENTS AND COVENANTS. Cargill shall have performed in all
material respects all obligations and complied in all material respects with all
agreements or covenants of Cargill to be performed or complied with by it at or
prior to the Effective Time under this Agreement, except to the extent that any
failure to perform or comply shall not individually, or in the aggregate, have a
Material Adverse Effect on Cargill and the Cargill Subsidiaries, taken as a
whole, or materially adversely affect consummation of the Merger and other
transactions contemplated hereby, and Park West Bank shall have
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received a certificate signed on behalf of Cargill by the Chief Executive
Officer and Chief Financial Officer of Cargill to such effect dated as of the
Effective Time.
9.2.3 PERMITS, AUTHORIZATIONS, ETC. Cargill and the Cargill
Subsidiaries shall have obtained any and all material permits, authorizations,
consents, waivers, clearances or approvals required for the lawful consummation
of the Merger by Cargill, the failure to obtain which would have a Material
Adverse Effect on Cargill and the Cargill Subsidiaries, taken as a whole.
9.2.4 LEGAL OPINION. Westbank shall have received an opinion, dated the
Closing Date, from Shipman and Goodwin LLP, counsel to Cargill, in the form
attached hereto as Exhibit E-1.
9.2.5 OFFICERS CERTIFICATES. Cargill will furnish Westbank with such
certificates of its officers or others and such other documents to evidence
fulfillment of the conditions set forth in this Section 9.2 as Westbank may
reasonably request.
9.2.6 PAYMENT TO DISSENTING SHAREHOLDERS. The cash consideration to be
paid to dissenting shareholders in the Merger as a percentage of the total
consideration to be paid to the shareholders of Cargill shall not exceed 10%.
9.3 CONDITIONS TO THE OBLIGATIONS OF CARGILL UNDER THIS AGREEMENT. The
obligations of Cargill under this Agreement shall be further subject to the
satisfaction, at or prior to the Effective Time, of the following conditions:
9.3.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Westbank and Park West Bank set forth in Article V hereof shall be
true and correct in all material respects as of the date of this Agreement and
as of the Closing Date as though made on and as of the Closing Date (or on the
date when made in the case of any representation and warranty which specifically
relates to an earlier date), except as otherwise contemplated by this Agreement
or consented to in writing by Cargill; provided, however, that (i) in
determining whether or not the condition contained in this Section 9.3.1 shall
be satisfied, no effect shall be given to any exceptions in such representations
and warranties relating to materiality or Material Adverse Effect and (ii) the
condition contained in this Section 9.3.1 shall be deemed to be satisfied unless
the failure of such representations and warranties to be so true and correct
constitute, individually or in the aggregate, a Material Adverse Effect on
Westbank and its Subsidiaries; and Westbank shall have delivered to Cargill a
certificate of Westbank to such effect signed by the Chief Executive Officer and
the Chief Financial Officer of Westbank as of the Effective Time;
9.3.2 AGREEMENTS AND COVENANTS. Westbank shall have performed in all
material respects all obligations and complied in all material respects with all
agreements or covenants of Westbank to be performed or complied with by it at or
prior to the Effective Time under this Agreement except to the extent that any
failure to perform or comply shall not individually, or in the aggregate, have a
Material Adverse Effect on Westbank and the Westbank Subsidiaries, taken as a
whole, or materially adversely affect consummation of the Merger and other
transactions contemplated hereby, and Cargill shall have received a certificate
signed on behalf of Westbank by the Chief Executive Officer and Chief Financial
Officer of Westbank to such effect dated as of the Effective Time.
9.3.3 PERMITS, AUTHORIZATIONS, ETC. Westbank and its subsidiaries shall
have obtained any and all material permits, authorizations, consents, waivers,
clearances or approvals required for the lawful consummation of the Merger by
Westbank and the Bank Merger by Park West Bank, the failure to obtain which
would have a Material Adverse Effect on Westbank and its subsidiaries, taken as
a whole.
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9.3.4 LEGAL OPINION. Cargill shall have received an opinion from
Cranmore, FitzGerald & Meaney, counsel to Westbank, dated the Closing Date, in
the form attached hereto as Exhibit E-2.
9.3.5 PAYMENT OF MERGER CONSIDERATION. Westbank shall have delivered to
the Exchange Agent on or before the Closing Date a certificate for the aggregate
number of whole shares of Westbank Common Stock to be issued in the Merger and
immediately available funds to be paid to holders of fractional shares of the
Cargill common stock pursuant to Article III of this Agreement and the Exchange
Agent shall provide Cargill with a certificate evidencing such delivery.
9.3.6 OFFICERS CERTIFICATES. Westbank will furnish Cargill with such
certificates of its officers or others and such other documents to evidence
fulfillment of the conditions set forth in this Section 9.3 as Cargill may
reasonably request.
ARTICLE X
THE CLOSING
10.1 TIME AND PLACE. Subject to the provisions of Articles IX and XI
hereof, the Closing of the transactions contemplated hereby shall take place at
the Main Office of Westbank, 225 Park Avenue, West Springfield, Massachusetts at
10:00 a.m. on a date specified by Westbank at least three business days prior to
such date. The Closing Date shall be as soon as practicable after the receipt of
the last required approval for the Merger and the expiration of the last of all
required waiting periods under such approvals, or at such other place, date or
time as Westbank and Cargill may mutually agree upon.
10.2 DELIVERIES AT THE CLOSING. At the Closing there shall be delivered
to Westbank and Cargill the opinions, certificates, and other documents and
instruments required to be delivered under Article IX hereof.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of the Merger by the
stockholders of Cargill:
11.1.1 At any time by the mutual written agreement of Westbank and
Cargill;
11.1.2 By either Cargill or Westbank (provided, that the terminating
party is not then in material breach of any representation, warranty, covenant
or other agreement contained herein) if there shall have been a material breach
of any of the representations or warranties set forth in this Agreement on the
part of the other party, which breach by its nature cannot be cured prior to the
Effective Time or within 30 business days after written notice by Westbank to
Cargill (or by Cargill to Westbank) of such breach (for purposes of this Section
11.1.2 a material breach shall be deemed to be a breach which has, either
individually or in the aggregate, a Material Adverse Effect on the party making
such representations or warranties (provided, that no effect shall be given to
any qualification relating to materiality or a Material Adverse Effect in such
representations and warranties) or a Material Adverse Effect on the business,
operations, financial condition, property or assets of the combined enterprise
or which materially adversely affects consummation of the Merger and the other
transactions contemplated hereby);
11.1.3 By either Cargill or Westbank (provided, that the terminating
party is not then in material breach of any representation, warranty, covenant
or other agreement contained herein) if there shall have been a material failure
to perform or comply with any of the covenants or agreements set forth in this
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Agreement on the part of the other party, which failure shall not have been
cured within 30 business days after written notice by Westbank to Cargill (or by
Cargill to Westbank) of such failure (for purposes of this Section 11.1.3 a
material failure to perform or comply shall be deemed to be a failure which has,
either individually or in the aggregate, a Material Adverse Effect on the party
so failing or on the business, operations, financial condition, property or
assets of the combined enterprise or which materially adversely affects
consummation of the Merger and the other transactions contemplated hereby;
11.1.4 At the election of either Westbank or Cargill, if the Closing
shall not have occurred on or before March 31, 1999 (the "Termination Date"), or
such later date as shall have been agreed to in writing by Westbank and Cargill;
provided, that no party may terminate this Agreement pursuant to this Section
11.1.4 if the failure of the Closing to have occurred on or before said date was
due to such party's breach of any of its obligations under this Agreement;
11.1.5 By either Cargill or Westbank if the stockholders of Cargill
shall have voted at its stockholders meeting on the transactions contemplated by
this Agreement and such vote shall not have been sufficient to approve such
transactions;
11.1.6 By either Cargill or Westbank (i) if final action has been taken
by a regulatory authority whose approval is required in connection with this
Agreement and the transactions contemplated hereby, which final action (x) has
become unappealable and (y) does not approve this Agreement or the transactions
contemplated hereby, or (ii) if any court of competent jurisdiction or other
governmental authority shall have issued an order, decree, ruling or taken any
other action restraining, enjoining or otherwise prohibiting the Merger and such
order, decree, ruling or other action shall have become final and nonappealable;
11.1.7 By Cargill, if its Board of Directors so determines by a vote of
a majority of the members of its entire Board, on the Determination Date, if the
Westbank Market Value shall be less than $12.00 per share, subject, however, to
the following: If Cargill elects to exercise its termination right pursuant to
this Section 11.1.7, it shall give written notice to Westbank during the
three-day period commencing with its receipt of such notice, Westbank shall have
the option to increase the Merger Consideration by adjusting the Exchange Ratio
(calculated to the nearest one ten-thousandth) to equal the number obtained by
dividing (A) $17.00 per share by (B) the Westbank Market Value. If Westbank so
elects within such three-day period, it shall give prompt written notice to
Cargill of such election and the revised Exchange Ratio, whereupon no
termination shall have occurred pursuant to this Section 11.1.7 and this
Agreement shall remain in effect in accordance with its terms (except as the
Exchange Ratio shall have been so modified).
For purposes of this Agreement, the following terms shall have the
meanings indicated:
"Westbank Market Value" shall mean the average of the closing
prices of a share of Westbank Common Stock on the Nasdaq Stock Market's
National Market during the period of 20 consecutive trading days ending
on the fifth trading day prior to the Determination Date, rounded to
the nearest whole cent.
"Determination Date" shall mean the date on which the last
required approval of a governmental entity is obtained with respect to
the Merger without regard to any requisite waiting period in respect
thereof, except if the Effective Date does not occur on or before the
sixteenth day following the last regulatory approval solely because of
the non- expiration of waiting periods, then it shall mean the date
five business days before the Effective Date.
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11.2 EFFECT OF TERMINATION.
11.2.1 In the event of termination of this Agreement pursuant to any
provision of Section 11.1, this Agreement shall forthwith become void and have
no further force, except that the provisions of any Section which, by its terms,
relates to post-termination rights or obligations, shall survive such
termination of this Agreement and remain in full force and effect.
11.2.2 If this Agreement is terminated, expenses and damages of the
parties hereto shall be determined as follows:
(a) Termination of this Agreement pursuant to Section 11.1
(other than termination pursuant to Sections 11.1.2 and 11.1.3 as a result of a
willful breach or gross negligence by a party hereto) shall be without
liability, cost or expense on the part of any party to the other.
(b) In the event of a termination of this Agreement pursuant
to Section 11.1.2 or 11.1.3 hereof resulting from the willful conduct or gross
negligence of a party, such party shall be obligated to reimburse the other
party for up to $150,000 of out-of-pocket costs and expenses, including, without
limitation, reasonable legal, accounting and investment banking fees and
expenses, incurred by such other party in connection with the entering into of
this Agreement and the carrying out of any and all acts contemplated hereunder
(collectively referred to as "Costs"). The payment of Costs is not an exclusive
remedy, but is in addition to the Options to be granted pursuant to the Stock
Option Agreement attached as Exhibit C, any other rights or remedies available
to the parties hereto at law or in equity or as is contemplated herein.
11.2.3 Except as provided in Sections 11.2.2, whether or not the Merger
is consummated, all Costs incurred in connection with this Agreement and the
transactions contemplated hereby shall be borne by the party incurring such
costs and expenses.
11.2.4 In no event shall any officer, agent or director of Cargill, any
Cargill Subsidiary, Westbank or any Westbank Subsidiary, be personally liable
thereunder for any default by any party in any of its obligations hereunder
unless any such default was intentionally caused by such officer, agent or
director.
11.3 NON-EXCLUSIVITY OF REMEDY. Notwithstanding anything to the
contrary set forth in this Agreement or in the Stock Option Agreement attached
as Exhibit C, the parties may pursue any remedy at law or in equity in the event
of termination for any reasons which involve wilful misconduct or gross
negligence.
11.4 AMENDMENT, EXTENSION AND WAIVER. Subject to applicable law, at any
time prior to the Effective Time (whether before or after approval thereof by
the stockholders of Cargill), the parties hereto 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 herein;
provided, however, that after any approval of this Agreement and the
transactions contemplated hereby by the stockholders of Cargill, there may not
be, without further approval of such stockholders, any amendment of this
Agreement which reduces the amount or changes the form of consideration to be
delivered to Cargill's stockholders pursuant to 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
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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 XII
MISCELLANEOUS
12.1 CONFIDENTIALITY. Except as specifically set forth herein, Westbank
and Cargill agree to be bound by the terms of the Confidentiality Agreements
previously executed by the parties hereto, which Agreements are hereby
incorporated herein by reference. The parties hereto agree that such
Confidentiality Agreements shall continue in accordance with their respective
terms, notwithstanding the termination of this Agreement.
12.2 PUBLIC ANNOUNCEMENTS. Cargill and Westbank shall cooperate with
each other in the development and distribution of all news releases and other
public information disclosures with respect to this Agreement, except as may be
otherwise required by law, and neither Cargill nor Westbank shall issue any
joint news releases with respect to this Agreement unless such news releases
have been mutually agreed upon by the parties hereto, except as required by law.
12.3 SURVIVAL. All representations, warranties and covenants in this
Agreement or in any instrument delivered pursuant hereto or thereto shall expire
on, and be terminated and extinguished at, the Effective Date other than
covenants that by their terms are to survive or be performed after the Effective
Date.
12.4 NOTICES. All notices or other communications hereunder shall be in
writing and shall be deemed given if delivered by receipted hand delivery or
mailed by prepaid registered or certified mail (return receipt requested) or by
cable, telegram, telex or fax addressed as follows:
If to Cargill or Cargill Bank, to:
Cargill Bancorp, Inc.
163 Providence Street
P.O. Box 431
Putnam, CT 06260-0431
Attn: Robert G. Eggleston
Secretary
Telephone: (860) 963-2265
Facsimile: (860) 928-9398
With required copies to :
Shipman & Goodwin, LLP
One American Row
Hartford, CT 06103-2819
Attn: Leslie L. Davenport, Esq.
Telephone: (860) 251-5918
Facsimile: (860) 251-5999
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If to Westbank or to Park West Bank, to:
Westbank Corporation
225 Park Avenue
P.O. Box 149
West Springfield, MA 01090-0149
Attn: Donald R. Chase
President and Chief Executive Officer
Telephone: (413) 747-1400
Facsimile: (413) 747-1468
With required copies to:
Cranmore, FitzGerald & Meaney
49 Wethersfield Avenue
Hartford, CT 06114
Attn: J.J. Cranmore, Esq.
Telephone: (860) 522-9100
Facsimile: (860) 522-3379
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.
12.5 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 party, and that (except as
otherwise expressly provided in this Agreement or as is contemplated in Sections
7.9 and 7.10 of this Agreement) nothing in this Agreement is intended to confer
upon any other Person any rights or remedies under or by reason of this
Agreement.
12.6 COMPLETE AGREEMENT. This Agreement, including the Exhibits and
Disclosure Schedules hereto and the documents and other writings referred to
herein or therein or delivered pursuant hereto or thereto, contains the entire
agreement and understanding of the parties with respect to its subject matter.
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 and understandings
(other than the Confidentiality Agreements referred to in Section 12.1 hereof)
between the parties, both written and oral, with respect to its subject matter.
12.7 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.
12.8 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 reasonable efforts to substitute a valid, legal and
enforceable provision which, insofar as practical, implements the purposes and
intents of this Agreement.
12.9 GOVERNING LAW. This Agreement shall be governed by the laws of
Massachusetts, without giving effect to its principles of conflicts of laws.
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12.10 INTERPRETATION. When a reference is made in this Agreement to
Sections or Exhibits, such reference shall be to a Section of or Exhibit/ to
this Agreement unless otherwise indicated. The recitals hereto constitute an
integral part of this Agreement. References to Sections include subsections,
which are part of the related Section (e.g., a section numbered "Section 5.5.1"
would be part of "Section 5.5" and references to "Section 5.5" would also refer
to material contained in the subsection described as "Section 5.5.1"). The table
of contents, index and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". The phrases "the date of this Agreement", "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to the date set forth in the Recitals to this Agreement.
THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, Westbank, Park West Bank, Cargill and Cargill Bank
have caused this Agreement to be executed under seal by their duly authorized
officers as of the date first set forth above.
WESTBANK CORPORATION
[SEAL] By:
/s/ Donald R. Chase
----------------------------------
Donald R. Chase
President and CEO
PARK WEST BANK AND TRUST COMPANY
[SEAL]
By:
/s/ Donald R. Chase
----------------------------------
Donald R. Chase
President and CEO
CARGILL BANCORP, INC.
[SEAL] By:
/s/ Raymond P. Faucher, Sr.
----------------------------------
Raymond P. Faucher, Sr.
President and CEO
CARGILL BANK
[SEAL] By:
/s/ Robert G. Eggleston, Jr.
----------------------------------
Robert G. Eggleston, Jr.
President and CEO
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Exhibit A
Form of Shareholders' Voting Agreement
July 14, 1998
PERSONAL AND CONFIDENTIAL
Board of Directors
Westbank Corporation
225 Park Avenue
West Springfield, MA 01089-3326
Ladies and Gentlemen:
Westbank Corporation ("Westbank") and Cargill Bancorp, Inc. ("Cargill")
desire to enter into an Affiliation and Merger Agreement dated July 15, 1998
("Agreement"), pursuant to which, subject to the terms and conditions set forth
therein, (a) Cargill will merge with and into Westbank with Westbank being the
surviving corporation to the merger, and (b) shareholders of Cargill will
receive common stock of Westbank in exchange for common stock of Cargill
outstanding on the closing date (the foregoing, collectively, referred to herein
as the "Merger").
Westbank has required, as a condition to its execution and delivery to
Cargill of the Agreement, that the undersigned, being directors or executive
officers of Cargill along with their spouses, execute and deliver to Westbank
this Letter Agreement.
Each of the undersigned, in his or her capacity as a shareholder of
Cargill only, in order to induce Westbank to execute and deliver to Cargill the
Agreement, hereby irrevocably:
(a) Agrees to be present (in person or by proxy) at all
meetings of shareholders of Cargill called to vote for approval of the
Merger so that all shares of common stock of Cargill then owned by the
undersigned will be counted for the purpose of determining the presence
of a quorum at such meetings and to vote all such shares (i) in favor
of approval and adoption of the Agreement and the transactions
contemplated thereby (including any amendments or modifications of the
terms thereof approved by the Board of Directors of Cargill), and (ii)
against approval or adoption of any other merger, business combination,
recapitalization, partial liquidation or similar transaction involving
Cargill;
(b) Agrees not to vote or execute any written consent to
rescind or amend in any manner any prior vote or written consent, as a
shareholder of Cargill, to approve or adopt the Agreement;
<PAGE> 200
(c) Agrees to use reasonable best efforts to cause the Merger
to be consummated;
(d) Agrees not to sell, transfer or otherwise dispose of any
common stock of Cargill on or prior to the record date for the meeting
of Cargill shareholders to vote on the Merger;
(e) Agrees not to solicit, initiate or engage in any
negotiations or discussions with any party other than Westbank with
respect to any offer, sale, transfer or other disposition of, any
shares of common stock of Cargill now or hereafter owned by the
undersigned;
(f) Agrees not to offer, sell, transfer or otherwise dispose
of any shares of common stock of Westbank received in the Merger,
except (i) at such time as a registration statement under the
Securities Act of 1933, as amended ("Securities Act") covering sales of
such Westbank common stock is effective and a prospectus is made
available under the Securities Act; (ii) within the limits, and in
accordance with the applicable provisions of, Rule 145(d) under the
Securities Act, or (iii) in a transaction which, in the opinion of
counsel satisfactory to Westbank or as described in a "no-action" or
interpretive letter from the staff of the Securities and Exchange
Commission ("SEC"), is not required to be registered under the
Securities Act; and acknowledges and agrees that Westbank is under no
obligation to register the sale, transfer or other disposition of
Westbank common stock by the undersigned or on behalf of the
undersigned, or to take any other action necessary to make an exemption
from registration available;
(g) Notwithstanding the foregoing, agrees not to sell, or in
any other way reduce the risk of the undersigned relative to, any
shares of common stock of Cargill or of common stock of Westbank,
during the period commencing thirty days prior to the effective date of
the Merger and ending on the date on which financial results covering
at least thirty days of post-Merger combined operations of Westbank and
Cargill have been published within the meaning of Section 201.01 of the
SEC's Codification of Financial Reporting Policies and the SEC's Staff
Accounting Bulletin No. 65;
(h) Agrees that Westbank shall not be bound by any attempted
sale of any shares of Westbank common stock, and Westbank's transfer
agent shall be given an appropriate stop transfer order and shall not
be required to register any such attempted sale, unless the sale has
been effected in compliance with the terms of this Letter Agreement;
and further agrees that the certificate representing shares of Westbank
common stock owned by the undersigned may be endorsed with a
restrictive legend consistent with the terms of this Letter Agreement;
<PAGE> 201
(i) Represents that the undersigned has disclosed all shares
of Cargill common stock he or she owns and agrees to use his or her
best efforts to have the beneficial owner of any shares of Cargill
common stock owned or acquired from the date hereof through the period
referred to in subparagraph (g) by (i) his or her spouse; (ii) any of
his or her relatives or relatives of his or her spouse occupying his or
her home; (iii) any trust or estate in which he or she, his or her
spouse, or any such relatives owns at least 10% beneficial interest or
of which any of them serves as trustee, executor or in any similar
capacity; and (iv) any corporation or other organization in which the
undersigned, any affiliate of the undersigned, his or her spouse, or
any such relative owns at least 10% of any class of equity securities
or of the equity interest enter into a Letter Agreement substantially
in the form of this Letter Agreement with respect to such shares;
(j) Represents that the undersigned has no plan or intention
to sell, exchange, or otherwise dispose of any shares of common stock
of Westbank to be received in the Merger prior to expiration of the
time period referred to in subparagraph (g) hereof; and
(k) Represents that the undersigned has the capacity to enter
into this Letter Agreement and that it is a valid and binding
obligation enforceable against the undersigned in accordance with its
terms, subject to bankruptcy, insolvency and other laws affecting
creditors' rights and general equitable principles.
The obligations set forth herein shall terminate concurrently with any
termination of the Agreement.
This Letter Agreement may be executed in two or more counterparts, each
of which shall be deemed to constitute an original, but all of which together
shall constitute one and the same Letter Agreement.
The undersigned intend to be legally bound hereby.
Sincerely,
<PAGE> 202
Exhibit B-1
July 14, 1998
Board of Directors
Cargill Bancorp, Inc.
163 Providence Street
Putnam, CT 06405
Members of the Board:
You have requested our opinion as to the fairness, from a financial
point of view, of the terms of an Agreement and Plan of Merger dated July 14,
1998 (the "Merger Agreement"), by and among Westbank Corporation. ("Westbank")
and its principal subsidiary Parkwest Bank and Trust Company, and Cargill
Bancorp, Inc. ("Cargill") and its principal subsidiary Cargill Bank, to the
holders of Cargill Common Stock, $.01 par value, ("Cargill Common Stock").
Pursuant to the terms of the Merger Agreement, Cargill will be acquired
by Westbank through the merger of Cargill with and into Westbank (the "Merger").
The Merger Agreement provides that each outstanding share of Cargill Common
Stock shall be converted automatically into and be exchangeable for shares of
Westbank common stock in accordance with the Exchange Ratio (rounded to the
nearest ten thousandth of a share). The Exchange Ratio shall be (i) if the
Westbank Market Value is greater than or equal to $13.07, then 1.3008 fully paid
and nonassessable shares of Westbank common stock; (ii) if the Westbank Market
Value is less than $13.07 but greater than or equal to $12.00, then the number
of fully paid and nonassessable shares of Westbank common stock obtained by
dividing (A) $17.00 per share by (B) the Westbank Market Value; and (iii) if
Westbank Market Value is less than $12.00, then 1.4167 fully paid and
nonassessable shares of Westbank common stock , subject to adjustment as
provided in the in Section 11.1.7 of the Agreement.
In connection with executing the Merger Agreement, Cargill entered into
an Option Agreement dated July 14, 1998 ("the Option Agreement"), pursuant to
which Cargill has granted Westbank an option to acquire up to 84,804 fully paid
and nonassessable shares of Cargill Common Stock at a price of $12.00 per share;
provided further that in no event shall the number of shares of Cargill Common
Stock for which this Option is exercisable exceed 19.9% of the Cargill's issued
and outstanding shares of common stock after giving effect to any shares subject
to or issued pursuant to the Option Agreement. Westbank may exercise this option
upon the occurrence of certain events specified in the Option Agreement.
<PAGE> 203
Board of Directors
Cargill Bancorp, Inc.
July 14, 1998
Page 2
Ostrowski & Company, Inc., as part of its bank and thrift advisory
business, is regularly engaged in the valuation of financial institutions and
their securities in connection with mergers and acquisitions and other corporate
purposes. We are familiar with Cargill and have received and will receive fees
from Cargill for issuing an opinion as to the fairness, from a financial point
of view, of the terms of the proposed transaction as set forth in the Merger
Agreement.
In connection with providing this opinion, we have examined and relied
upon, among other things: the Merger Agreement; annual reports to shareholders,
proxy statements and related audited financial statements for Cargill for each
of the three fiscal years ended September 30, 1995, 1996 and 1997; certain
unaudited interim financial reports for Cargill for the quarters ended December
31, 1997 March 31, 1998 and June 30, 1998, certain other financial information
for Cargill, including proforma financial statements and management's estimates
relating to, among other things, earnings, asset quality, loan delinquencies and
capital; annual reports to shareholders, proxy statements and related audited
financial statements for Westbank for each of the three fiscal years ended
December 31, 1995, 1996 and 1997; certain unaudited interim financial reports
for Westbank for the quarter ended March 31, 1998, certain other financial
information for Westbank, including proforma financial statements and
management's estimates relating to, among other things, earnings, asset quality,
loan delinquencies and capital. We have conducted discussions with executive
management of Cargill and Westbank concerning historical financial performance
and condition, market area economic conditions, future business prospects and
financial forecasts. We have reviewed comparable financial, operating and market
data for the banking industry and selected peer groups; compared the terms of
the Merger Agreement with other bank and thrift merger and acquisition
transactions; and have considered such additional financial and other
information deemed relevant.
In preparing our opinion, we have relied upon the accuracy,
completeness and fair presentation of all information supplied or otherwise made
available to us by, or on behalf of, Cargill and Westbank. We have not
independently verified such information or undertaken an independent evaluation
or appraisal of the assets or liabilities of Cargill or Westbank, nor have we
been furnished any such evaluations or appraisals. With respect to forecasts of
expected future financial performance, we have been advised that they reflect
the best currently available estimates and judgement of the executive
management. This opinion is necessarily based upon the information available to
us and the market, economic and other conditions, as they exist and can be
evaluated, as of the date of this letter.
<PAGE> 204
Board of Directors
Cargill Bancorp, Inc.
July 14, 1998
Page 3
This opinion is directed solely to the fairness, from a financial point
of view, of the terms of the Merger Agreement to Cargill Shareholders and does
not constitute a recommendation to any Cargill Shareholder as to how such
Cargill Shareholder should vote with respect to the Merger Agreement.
In reliance upon and subject to the foregoing, it is our opinion that
as of the date hereof, the terms of the Merger Agreement are fair, from a
financial point of view, to Cargill Shareholders.
Very truly yours,
/s/ Ostrowski & Company, Inc.
OSTROWSKI & COMPANY, INC.
<PAGE> 205
Exhibit B-2
July 15, 1998
The Board of Directors
Westbank Corporation
225 Park Avenue
West Springfield, MA 01089
Members of the Board:
You have requested our opinion as to the fairness, from a financial
point of view, to the shareholders of Westbank Corporation ("Westbank") of the
Exchange Ratio (as defined below) in the proposed merger (the "Merger") of
Cargill Bancorp, Inc. ("Cargill"), with and into Westbank, pursuant to the
Affiliation and Merger Agreement (the "Merger Agreement") dated July 15, 1998.
Under the terms of, and subject to certain conditions as defined in the
Merger Agreement, each issued and outstanding share of common stock, $0.01 par
value, of Cargill, except for any dissenting shares and except for any shares
held by Westbank will be entitled to receive Merger Consideration payable in
shares of common stock, $2.00 par value per share, of Westbank Corporation
("Westbank Common Stock"). The Merger Consideration will be based on the average
of the closing prices per share of Westbank Common Stock during the twenty
consecutive trading day period ending on the fifth trading day immediately
preceding the Determination Date (the "Westbank Market Value"). The exchange
ratio will be equal to 1.3008 shares of Westbank Common Stock, subject to the
adjustments described below (the "Exchange Ratio").
If the Westbank Market Value is greater than $13.07, then Cargill
shareholders shall receive an Exchange Ratio of 1.3008 shares of Westbank Common
Stock for each share of Cargill stock. If the Westbank Market Value is less than
$13.07 but greater than or equal to $12.00, then Cargill shareholders shall
receive an Exchange Ratio equal to $17.00 divided by the Westbank Market Value.
If the Westbank Market Value is less than $12.00, then Cargill shall have the
right to terminate the Merger, provided however, that Westbank shall have the
option to increase the Exchange Ratio above 1.4167 as provided in the Merger
Agreement.
Northeast Capital & Advisory, Inc., as part of its investment banking
business, is regularly 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 are familiar with Westbank, having acted as its financial
advisor in connection with, and having participated in certain areas of the
negotiations leading to, the Merger Agreement. We also have provided investment
banking services to Westbank since 1989.
<PAGE> 206
Westbank Corporation
Fairness Opinion Letter
Page - 2
In connection with this opinion, we have reviewed, among other things,
the Merger Agreement; the Annual Reports of Cargill for the three years ended
September 30, 1997; the Annual Report to Shareholders on Form 10-K of Westbank
for the year ending December 31, 1997; certain Quarterly Reports of Cargill and
Westbank; certain unaudited interim reports and certain press releases to the
respective shareholders of Westbank and Cargill; and financial information
concerning the business and operations of Westbank and Cargill furnished to us
by their respective managements. We also have conducted discussions with members
of the senior managements of Westbank and Cargill regarding the past and current
business operations, regulatory relationships, financial condition and future
prospects of their respective companies. In addition, we have reviewed the
reported price and trading activity of Cargill's and Westbank's common stock;
compared certain financial information for Westbank and Cargill with certain
financial and stock market 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 environment in
particular; and performed such other studies and analyses as we considered
appropriate.
In conducting our review and arriving at our opinion, we relied upon
and assumed the accuracy and completeness of all of the financial and other
information provided to us or publicly available and we have not attempted
independently to verify such information. We have generally relied upon the
management of Westbank and Cargill as to the reasonableness and achievability of
the financial and operating forecasts and projections (and the assumptions and
bases therefor) provided to us, and we have generally assumed that such
forecasts and projections reflect the best currently available estimates and
judgments of such managements and that such forecasts and projections will
generally be realized in the amounts and in the time periods currently estimated
by such managements. We have also assumed that the aggregate allowance for loan
losses for Westbank and Cargill is adequate to cover such losses. We have not
made nor obtained any evaluations or appraisals of the property of Westbank and
Cargill. We have, however, independently examined certain individual loan credit
files of Cargill and independently produced projections and operating forecasts
to assure ourselves that the assumptions generated by management of Westbank and
Cargill in their projections and forecasts do not materially and adversely alter
the adequacy of the financial consideration being exchanged by Westbank
shareholders, from a financial point of view. Finally, you have informed us
that, while not a condition to the transaction, the Merger is intended to be
accounted for as a pooling of interests transaction under generally accepted
accounting principles.
In conducting our analysis and arriving at our opinion as expressed
herein, we have considered such financial and other factors as we have deemed
appropriate in the circumstances. We have also taken into account our assessment
of general economic, market and financial conditions, our experience in other
transactions, and our knowledge of the banking industry in general. In rendering
our opinion, we have assumed that in the course of obtaining the necessary
regulatory approvals for the Merger, no conditions will be imposed that will
have a material adverse effect on the contemplated benefits of the Merger to
Westbank. Our opinion is based upon information, conditions and projections as
they exist and can be evaluated on the date hereof.
<PAGE> 207
Westbank Corporation
Fairness Opinion Letter
Page - 3
Based upon and subject to the foregoing, it is our opinion that the
Exchange Ratio of the Merger as provided and described in the Merger Agreement
is fair, from a financial point of view, to Westbank and its shareholders.
Very truly yours,
/s/ Northeast Capital & Advisory, Inc.
NORTHEAST CAPITAL & ADVISORY, INC.
ALL:gkk
<PAGE> 208
Exhibit C
STOCK OPTION AGREEMENT
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated July 15, 1998, between
CARGILL BANCORP, INC. ("Issuer") and
WESTBANK CORPORATION ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Affiliation and Merger
Agreement of even date herewith (the "Merger Agreement"), which agreement has
been executed by the parties hereto immediately prior to this Agreement; and
WHEREAS, as a condition to Grantee's entering into the Merger Agreement
and in consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 84,804
fully paid and nonassessable shares of Issuer's Common Stock ("Common Stock"),
at a price of $12.00 per share (the "Option Price"); provided further that in no
event shall the number of shares of Common Stock for which this Option is
exercisable exceed 19.9% of the Issuer's issued and outstanding shares of Common
Stock after giving effect to any shares subject to or issued pursuant to the
Option or other employee stock options. The number of shares of Common Stock
that may be received upon the exercise of the Option and the Option Price are
subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued
or otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement), the number of shares of Common Stock subject to the
Option shall be increased so that, after such issuance, it equals 19.9% of the
number of shares of Common Stock then issued and outstanding giving effect to
any shares subject or issued pursuant to the Option or other employee stock
options. Nothing contained in this Section 1(b) or elsewhere in this Agreement
shall be deemed to authorize Issuer or Grantee to breach any provision of the
Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, and from time to time, if, but only if, both an Initial
Triggering Event (as hereinafter defined) and a Subsequent Triggering Event (as
hereinafter defined) shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined), provided that the Holder shall have
sent the written notice of such exercise (as provided in subsection (e) of this
Section 2) within 90 days following such Subsequent Triggering Event. Each of
the following shall be an Exercise Termination Event: (i) the Effective Time of
the Merger; (ii) termination of the Merger Agreement in accordance with the
provisions thereof if such termination occurs prior to the occurrence of an
Initial Triggering Event except a termination by Grantee pursuant to Section
11.1.2 or 11.1.3 of the Merger Agreement (unless the breach by Issuer giving
rise to such right of termination is non-volitional); or (iii) the passage of
eighteen months after termination of the Merger Agreement if such termination
follows the occurrence of an Initial Triggering Event or is a
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<PAGE> 209
termination by Grantee pursuant to Section 11.1.2 or 11.1.3 of the Merger
Agreement (unless the breach by Issuer giving rise to such right of termination
is non-volitional) (provided that if an Initial Triggering Event continues or
occurs beyond such termination and prior to the passage of such month period,
the Exercise Termination Event shall be eighteen months from the expiration of
the Last Triggering Event but in no event more than eighteen months after such
termination). The "Last Triggering Event" shall mean the last Initial Triggering
Event to expire. The term "Holder" shall mean the holder or holders of the
Option.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an "Issuer
Subsidiary"), without having received Grantee's prior written consent,
shall have entered into an agreement to engage in an Acquisition
Transaction (as hereinafter defined) with any person (the term "person"
for purposes of this Agreement having the meaning assigned thereto in
Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934,
as amended (the "1934 Act"),and the rules and regulations thereunder)
other than Grantee or any of its Subsidiaries (each a "Grantee
Subsidiary") or the Board of Directors of Issuer shall have recommended
that the stockholders of Issuer approve or accept any Acquisition
Transaction. For purposes of this Agreement,"Acquisition Transaction"
shall mean (w) a merger or consolidation, or any similar transaction,
involving Issuer or any Significant Subsidiary (as defined in Rule 1-02
of Regulation S-X promulgated by the Securities and Exchange Commission
(the "SEC")) of Issuer, (x) a purchase, lease or other acquisition of
all or a substantial portion of the assets of Issuer or any Significant
Subsidiary of Issuer, (y) a purchase or other acquisition (including by
way of merger, consolidation, share exchange or otherwise) of
securities representing 10% or more of the voting power of Issuer or
any Significant Subsidiary of Issuer, or (z) any substantially similar
transaction; provided, however, that in no event shall any (i) merger,
consolidation or similar transaction involving Issuer or any
Significant Subsidiary in which the voting securities of Issuer
outstanding immediately prior thereto continue to represent (by either
remaining outstanding or being converted into the voting securities of
the surviving entity of any such transaction) at least 80% of the
combined voting power of the voting securities of the Issuer or the
surviving entity outstanding immediately after the consummation of such
merger, consolidation, or similar transaction, or (ii) any merger,
consolidation, purchase or similar transaction involving only the
Issuer and one or more of its Subsidiaries or involving only any two or
more of such Subsidiaries, be deemed to be an Acquisition Transaction,
provided any such transaction is not entered into in violation of the
terms of the Merger Agreement;
(ii) Issuer or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized, recommended,
proposed or publicly announced its intention to authorize, recommend or
propose, to engage in an Acquisition Transaction with any person other
than Grantee or a Grantee Subsidiary, or the Board of Directors of
Issuer shall have publicly withdrawn or modified, or publicly announced
its intent to withdraw or modify, in any manner adverse to Grantee, its
recommendation that the stockholders of Issuer approve the transactions
contemplated by the Merger Agreement;
(iii) Any person other than Grantee, any Grantee Subsidiary or
any Issuer Subsidiary acting in a fiduciary capacity in the ordinary
course of its business shall have acquired beneficial ownership or the
right to acquire beneficial ownership of 10% or more of the outstanding
shares of Common Stock (the term "beneficial ownership" for purposes of
this Option Agreement having the meaning assigned thereto in Section
13(d) of the 1934 Act, and the rules and regulations thereunder);
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<PAGE> 210
(iv) Any person other than Grantee or any Grantee Subsidiary
shall have made a bona fide proposal to Issuer or its stockholders by
public announcement or written communication that is or becomes the
subject of public disclosure to engage in an Acquisition Transaction;
(v) After an overture is made by a third party to Issuer or
its stockholders to engage in an Acquisition Transaction, Issuer shall
have breached any covenant or obligation contained in the Merger
Agreement and such breach (x) would entitle Grantee to terminate the
Merger Agreement and (y) shall not have been cured prior to the Notice
Date (as defined below); or
(vi) Any person other than Grantee or any Grantee Subsidiary,
other than in connection with a transaction to which Grantee has given
its prior written consent, shall have filed (or in the case of an
application which is filed prior to the execution of this Stock Option
Agreement, the failure to have said application withdrawn or denied
within thirty days) an application or notice with the Federal Reserve
Board, or other federal or state bank regulatory authority, which
application or notice has been accepted for processing, for approval to
engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of
15% or more of the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described
in clause (i) of subsection (b) of this Section 2, except that the
percentage referred to in clause (y) shall be 10.01%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 30 business days from the Notice Date
for the closing of such purchase (the "Closing Date"); provided that if prior
notification to or approval of the Federal Reserve Board or any other regulatory
agency is required in connection with such purchase, the Holder shall promptly
file the required notice or application for approval and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer, provided that
failure or refusal of Issuer to designate such a bank account shall not preclude
the Holder from exercising the Option.
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<PAGE> 211
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder, and the Holder
shall deliver to Issuer a copy of this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing hereunder may
be endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement between the registered holder
hereof and Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such agreement is on file
at the principal office of Issuer and will be provided to the holder
hereof without charge upon receipt by Issuer of a written request
therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions to this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference; and (iii) the legend shall be removed
in its entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may be
required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all premerger notification, reporting and waiting
period requirements specified in 15 U.S.C. Section 18a and regulations
promulgated thereunder and (y) in the event, under the Bank Holding Company Act
of 1956, as amended (the "BHCA"), or the Change in Bank Control Act of 1978, as
amended, or any state banking law, prior approval of or notice to the Federal
Reserve Board or to any state regulatory authority is necessary before the
Option may be exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the Federal Reserve
Board or such state regulatory authority as they may require) in order to permit
the Holder to exercise the Option and Issuer duly and effectively to issue
shares of Common Stock pursuant hereto; and (iv) promptly to take all action
provided herein to protect the rights of the Holder against dilution.
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4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common
Stock that are purchasable upon exercise of the Option pursuant to Section 1 of
this Agreement, the number of shares of Common Stock purchasable upon the
exercise of the Option and the Option Price shall be subject to adjustment from
time to time as provided in this Section 5. In the event of any change in, or
distributions in respect of, the Common Stock by reason of stock dividends,
split-ups, mergers, recapitalization, combinations, subdivisions, conversions,
exchanges of shares, distributions on or in respect of the Common Stock that
would be prohibited under the terms of the Merger Agreement, or the like, the
type and number of shares of Common Stock purchasable upon exercise hereof and
the Option Price shall be appropriately adjusted in such manner as shall fully
preserve the economic benefits provided hereunder and proper provision shall be
made in any agreement governing any such transaction to provide for such proper
adjustment and the full satisfaction of the Issuer's obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, Issuer shall, at the request of Grantee
deliver within 90 days of such Subsequent Triggering Event (whether on its own
behalf or on behalf of any subsequent holder of this Option (or part thereof) or
any of the shares of Common Stock issued pursuant hereto), promptly prepare,
file and keep current a shelf registration statement under the 1933 Act covering
this Option and any shares issued and issuable pursuant to this Option and shall
use its reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition of
this Option and any shares of Common Stock issued upon total or partial exercise
of this Option ("Option Shares") in accordance with any plan of disposition
requested by Grantee. Issuer will use its reasonable best efforts to cause such
registration statement first to become effective and then to remain effective
for such period not in excess of 180 days from the day such registration
statement first becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Grantee shall have the
right to demand only one such registration. The foregoing notwithstanding, if,
at the time of any request by Grantee for registration of the Option or Option
Shares as provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none, the
sole underwriter or underwriters, of such offering the inclusion of the Holder's
Option or Option Shares would interfere with the successful marketing of the
shares of Common Stock offered by Issuer, the number of Option Shares otherwise
to be covered in the registration statement contemplated hereby may be reduced;
and provided, however, that after any such required reduction the number of
Option Shares to be included in such offering for the account of the Holder
shall constitute at least 25% of the total number of shares to be sold by the
Holder and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then the Issuer shall file a registration statement for the
balance as promptly as practical and no reduction shall thereafter occur. Each
such Holder shall provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. If requested by
any such Holder in connection with such registration, Issuer shall become a
party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of representations,
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warranties, indemnities and other agreements customarily included in such
underwriting agreements for the Issuer. Upon receiving any request under this
Section 6 from any Holder, Issuer agrees to send a copy thereof to any other
person known to Issuer to be entitled to registration rights under this Section
6, in each case by promptly mailing the same, postage prepaid, to the address of
record of the persons entitled to receive such copies. Notwithstanding anything
to the contrary contained herein, in no event shall Issuer be obligated to
effect more than one registration pursuant to this Section 6 by reason of the
fact that there shall be more than one Grantee as a result of any assignment or
division of this Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase Event (as
defined below), (i) following a request of the Holder, delivered prior to an
Exercise Termination Event, Issuer (or any successor thereto) shall repurchase
the Option from the Holder at a price (the "Option Repurchase Price") equal to
the amount by which (A) the market/offer price (as defined below) exceeds (B)
the Option Price, multiplied by the number of shares for which this Option may
then be exercised and (ii) at the request of the owner of Option Shares from
time to time (the "Owner"), delivered within 90 days of such occurrence (or such
later period as provided in Section 10), Issuer shall repurchase such number of
the Option Shares from the Owner as the Owner shall designate at a price (the
"Option Share Repurchase Price") equal to the market/offer price multiplied by
the number of Option Shares so designated. The term "market/offer price" shall
mean the highest of (i) the price per share of Common Stock at which a tender
offer or exchange offer therefor has been made, (ii) the price per share of
Common Stock to be paid by any third party pursuant to an agreement with Issuer,
(iii) the highest closing price for shares of Common Stock within the six-month
period immediately preceding the date the Holder gives notice of the required
repurchase of this Option or the Owner gives notice of the required repurchase
of Option Shares, as the case may be, or (iv) in the event of a sale of all or a
substantial portion of Issuer's assets, the sum of the price paid in such sale
for such assets and the current market value of the remaining assets of Issuer
as determined by a nationally recognized investment banking firm selected by the
Holder or the Owner, as the case may be, divided by the number of shares of
Common Stock of Issuer outstanding at the time of such sale. In determining the
market/offer price, the value of consideration other than cash shall be
determined by a nationally recognized investment banking firm selected by the
Holder or Owner, as the case may be and reasonably acceptable to the Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and any Option Shares pursuant
to this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7, with the latter to occur within (x) five business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto and (y) the time that is
immediately prior to the occurrence of a Repurchase Event, Issuer shall deliver
or cause to be delivered to the Holder the Option Repurchase Price and/or to the
Owner the Option Share Repurchase Price therefor or the portion thereof that
Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full, Issuer
shall immediately so notify the Holder and/or the Owner and thereafter deliver
or cause to be delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the Option Share
Repurchase Price, respectively, that it is no longer prohibited from delivering,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
notice of repurchase pursuant to paragraph (b) of this Section 7 is prohibited
under applicable law or regulation from delivering to the Holder and/or the
Owner, as appropriate, the Option Repurchase Price and the Option Share
Repurchase Price, respectively, in full (and Issuer hereby undertakes to use its
best
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efforts to obtain all required regulatory and legal approvals and to file any
required notices as promptly as practicable in order to accomplish such
repurchase), the Holder or Owner may revoke its notice of repurchase of the
Option or the Option Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, Issuer shall promptly (i) deliver to the Holder
and/or the Owner, as appropriate, that portion of the Option Repurchase Price or
the Option Share Repurchase Price that Issuer is not prohibited from delivering;
and (ii) deliver, as appropriate, either (A) to the Holder, a new Stock Option
Agreement evidencing the right of the Holder to purchase that number of shares
of Common Stock obtained by multiplying the number of shares of Common Stock for
which the surrendered Stock Option Agreement was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of which is
the Option Repurchase Price less the portion thereof theretofore delivered to
the Holder and the denominator of which is the Option Repurchase Price, or (B)
to the Owner, a certificate for the Option Shares it is then so prohibited from
repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall be deemed
to have occurred (i) upon the consummation of any merger, consolidation or
similar transaction involving Issuer or any purchase, lease or other acquisition
of all or a substantial portion of the assets of Issuer, other than any such
transaction which would not constitute an Acquisition Transaction pursuant to
the proviso to Section 2(b)(i) hereof or (ii) upon the acquisition by any person
of beneficial ownership of 50% or more of the then outstanding shares of Common
Stock, provided that no such event shall constitute a Repurchase Event unless a
Subsequent Triggering Event shall have occurred prior to an Exercise Termination
Event. The parties hereto agree that Issuer's obligations to repurchase the
Option or Option Shares under this Section 7 shall not terminate upon the
occurrence of an Exercise Termination Event unless no Subsequent Triggering
Event shall have occurred prior to the occurrence of an Exercise Termination
Event.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or one of its Subsidiaries, and shall not be the continuing
or surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge into Issuer and
Issuer shall be the continuing or surviving corporation, but, in connection with
such merger, the then outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other person or cash or any
other property or the then outstanding shares of Common Stock shall after such
merger represent less than 50% of the outstanding voting shares and voting share
equivalents of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of its
Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if
other than Issuer), (ii) Issuer in a merger in which Issuer is the
continuing or surviving person, and (iii) the transferee of all or
substantially all of Issuer's assets.
(2) "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(3) "Assigned Value" shall mean the market/offer price, as
defined in Section 7.
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<PAGE> 215
(4) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately
preceding the consolidation, merger or sale in question, but in no
event higher than the closing price of the shares of Substitute Common
Stock on the day preceding such consolidation, merger or sale; provided
that if Issuer is the issuer of the Substitute Option, the Average
Price shall be computed with respect to a share of common stock issued
by the person merging into Issuer or by any company which controls or
is controlled by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to the Holder. The issuer of the Substitute Option shall
also enter into an agreement with the then Holder or Holders of the Substitute
Option in substantially the same form as this Agreement, which shall be
applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value multiplied
by the number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of the Substitute
Option per share of Substitute Common Stock shall then be equal to the Option
Price multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock for which the Option is then exercisable and the
denominator of which shall be the number of shares of Substitute Common Stock
for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to the Acquiring
Corporation.
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase Price")
equal to (x) the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by
the number of shares of Substitute Common Stock for which the Substitute Option
may then be exercised plus (y) Grantee's Out-of-Pocket Expenses (to the extent
not previously reimbursed), and at the request of the owner (the "Substitute
Share Owner") of shares of Substitute Common Stock (the "Substitute Shares"),
the Substitute Option Issuer shall repurchase the Substitute Shares at a price
(the "Substitute Share Repurchase Price") equal to (x) the Highest Closing Price
multiplied by the number of Substitute Shares so designated plus (y) Grantee's
Out-of-Pocket Expenses (to the extent not previously reimbursed). The term
"Highest Closing Price" shall mean the highest closing price for shares of
Substitute Common Stock within the six-month period immediately preceding the
date the Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
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<PAGE> 216
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective right to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable, and in any event within five business
days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase Price
and/or to the Substitute Share Owner the Substitute Share Repurchase Price
therefor or the portion thereof which the Substitute Option Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation from repurchasing the Substitute Option and/or the
Substitute Shares in part or in full, the Substitute Option Issuer shall
immediately so notify the Substitute Option Holder and/or the Substitute Share
Owner and thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the
portion of the Substitute Share Repurchase Price, respectively, which it is no
longer prohibited from delivering, within five business days after the date on
which the Substitute Option Issuer is no longer so prohibited; provided,
however, that if the Substitute Option Issuer is at any time after delivery of a
notice of repurchase pursuant to subsection (b) of this Section 9 prohibited
under applicable law or regulation from delivering to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price, respectively, in
full (and the Substitute Option Issuer shall use its best efforts to receive all
required regulatory and legal approvals as promptly as practicable in order to
accomplish such repurchase), the Substitute Option Holder or Substitute Share
Owner may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, the Substitute Option Issuer shall promptly (i)
deliver to the Substitute Option Holder or Substitute Share Owner, as
appropriate, that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Option Shares it is then so prohibited
from repurchasing.
10. The 90-day period for exercise of certain rights under Sections 2,
6, 7 and 13 shall be extended: (i) to the extent necessary to obtain all
regulatory approvals for the exercise of such rights, and for the expiration of
all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute
and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
and validly authorized by the Board of Directors of Issuer and no other
corporate proceedings on the
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<PAGE> 217
part of Issuer are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has been
duly and validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times from
the date hereof through the termination of this Agreement in accordance
with its terms will have reserved for issuance upon the exercise of the
Option, that number of shares of Common Stock equal to the maximum
number of shares of Common Stock at any time and from time to time
issuable hereunder, and all such shares, upon issuance pursuant hereto,
will be duly authorized, validly issued, fully paid, nonassessable, and
will be delivered free and clear of all claims, liens, encumbrance and
security interests and not subject to any preemptive rights.
(c) Issuer has taken all action so that the entering into of
this Option Agreement, the acquisition of shares of Common Stock
hereunder and the other transactions contemplated hereby do not and
will not result in the grant of any rights to any person.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to
enter into this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Grantee. This Agreement has
been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or
other securities acquired by Grantee upon exercise of the Option will
not be, acquired with a view to the public distribution thereof and
will not be transferred or otherwise disposed of except in a
transaction registered or exempt from registration under the Securities
Act.
13. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except
that in the event a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express provisions hereof,
may assign in whole or in part its rights and obligations hereunder within 90
days following such Subsequent Triggering Event (or such later period as
provided in Section 10); provided, however, that until the date 15 days
following the date on which the Federal Reserve Board approves an application by
Grantee under the BHCA to acquire the shares of Common Stock subject to the
Option, Grantee may not assign its rights under the Option except in (i) a
widely dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares of
Issuer, (iii) an assignment to a single party (e.g., a broker or investment
banker) for the purpose of conducting a widely dispersed public distribution on
Grantee's behalf, or (iv) any other manner approved by the Federal Reserve
Board.
14. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including without limitation making application to list the
shares of Common Stock issuable hereunder on the American Stock Exchange or
Nasdaq on official notice of issuance and applying to the Federal Reserve Board
under the BHCA for approval to acquire the shares issuable hereunder, but
Grantee shall not be obligated to apply to state banking authorities for
approval to acquire the shares of Common Stock issuable hereunder until such
time, if ever, as it deems appropriate to do so.
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<PAGE> 218
15. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
16. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5
hereof), it is the express intention of Issuer to allow the Holder to acquire or
to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
18. This Agreement shall be governed by and construed in accordance
with the laws of the State of Connecticut, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
19. 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.
20. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
21. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
22. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
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<PAGE> 219
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
WITNESSES: CARGILL BANCORP, INC
_______________________________________
Name: By: _______________________________
Raymond P. Faucher, Sr.
_______________________________________ Its: President and Chief
Name: Executive Officer Duly
Authorized
WESTBANK CORPORATION
_______________________________________
Name: By: _______________________________
Donald R. Chase
_______________________________________ Its: President and Chief
Name: Executive Officer Duly
Authorized
STATE OF CONNECTICUT )
) ss.: PUTNAM
COUNTY OF WINDHAM )
On this ____ day of July, 1998, before me, the undersigned, personally
appeared Raymond P. Faucher, Sr., who acknowledged himself to be the President
and Chief Executive Officer of Cargill Bancorp Inc., and that he as such
President and Chief Executive Officer, being authorized so to do, executed the
foregoing instrument for the purposes therein contained by signing his name.
In Witness Whereof, I hereunto set my hand.
___________________________________________
Commissioner of the Superior Court/Notary
Public My Commission Expires:
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<PAGE> 220
COMMONWEALTH OF MASSACHUSETTS )
) ss.: WEST SPRINGFIELD
COUNTY OF HAMPDEN )
On this __th day of July, 1998, before me, the undersigned, personally
appeared Donald R. Chase, who acknowledged himself to be the President and Chief
Executive Officer of Westbank Corporation, and that he as such President and
Chief Executive Officer, being authorized so to do, executed the foregoing
instrument for the purposes therein contained by signing his name.
In Witness Whereof, I hereunto set my hand.
________________________________________________
Commissioner of the Superior Court/Notary Public
My Commission Expires
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<PAGE> 221
Exhibit D
Form of Letter Agreement
July 24 1998
Westbank Corporation
225 Park Avenue
West Springfield, MA 01089-3326
Gentlemen:
I have been advised that I might be considered to be an "affiliate" of
Westbank Corporation for purposes of generally accepted accounting principles as
such term relates to pooling of interests accounting treatment for certain
business combinations under generally accepted accounting principles and the
interpretations of the Securities and Exchange Commission (the "SEC") or its
staff, including, without limitation, Section 201.01 of the SEC's Codification
of Financial Reporting Policies and the SEC's Staff Accounting Bulletin No. 65.
Neither my entering into this letter agreement, nor anything contained herein,
shall be deemed an admission on my part that I am such an "affiliate".
Westbank Corporation, a Massachusetts corporation ("Westbank"), and its
subsidiary Park West Bank and Trust Company, a Massachusetts chartered state
bank and trust company have entered into an Affiliation and Merger Agreement
with Cargill Bancorp, Inc., a Delaware corporation ("Cargill") and its
subsidiary Cargill Bank, a Connecticut chartered stock savings and loan
association dated on or about the date hereof (the "Merger Agreement"),
providing for among other things, the merger (the "Merger") of Cargill with and
into Westbank with Westbank being the surviving corporation in the Merger. Upon
consummation of the Merger, Shareholders of Cargill will receive shares of
common stock, par value $2.00 per share, in exchange for all of their shares of
common stock of Cargill. This agreement is hereinafter referred to as the
"Letter Agreement".
I represent and warrant to, and agree with, Westbank as follows:
1. I have read this Letter Agreement and the Merger Agreement
and have discussed their requirements and other applicable limitations upon my
ability to sell, pledge, transfer or otherwise dispose of shares of Westbank
Common Stock, to the extent I felt necessary, with my counsel or counsel for
Westbank.
2. I hereby agree that (a) without the consent of Westbank if
prior to the Effective Date of the Merger, or (b) without the consent of
Westbank if subsequent to the Effective Date of the Merger, (i) I will not sell
or otherwise reduce my risk relative to any shares of Westbank Common Stock
during the period of thirty (30) days prior to the effective date of the Merger,
and (ii) I will not sell or otherwise reduce my risk relative to any shares of
Westbank
<PAGE> 222
Westbank Corporation
July 24, 1998
Page 2
Common Stock until financial results covering at least thirty (30) days of
combined operations have been published following the effective date of the
Merger.
I agree that, if I desire to dispose of any shares of Westbank Common
Stock owned by me after the date of this Letter Agreement and prior to the
release of financial results covering at least thirty (30) days of combined
operations have been published following the effective date of the Merger, I
will affirmatively inquire of Westbank through its counsel, Cranmore, FitzGerald
& Meaney, if prior to the effective date of the Merger, whether I may so dispose
of said shares of Westbank Common Stock, or counsel for Westbank following the
effective date of Merger whether I may so dispose of shares of Westbank Common
Stock, without violating the requirements of this Letter Agreement. I will
dispose of said shares only if such inquiry is answered in the affirmative by
the written response of said counsel.
It is understood and agreed that this Letter Agreement shall terminate
and be of no further force and effect if the Merger Agreement is terminated. It
is also understood and agreed that this Letter Agreement shall terminate and be
of no further force and effect at such time as (i) financial results covering at
least thirty (30) days of combined operations following the effective date of
the Merger have been published, or (ii) delivery by the undersigned to Westbank
of a copy of a letter from the staff of the SEC, or an opinion of counsel in
form and substance reasonably satisfactory to Westbank, or other evidence
reasonably satisfactory to Westbank, to the effect that a transfer of my shares
of Westbank Common Stock will not violate or any of the rules and regulations of
the SEC.
This Letter Agreement shall be binding on my heirs, legal
representatives and successors.
Very truly yours,
<PAGE> 223
Exhibit E-1
FORM OF OPINION OF COUNSEL - SHIPMAN & GOODWIN, L.L.P.
(a) Cargill Bancorp, Inc. is validly existing under the laws of the
State of Delaware and is duly registered as a bank holding company under the
BHCA. Cargill Bank is validly existing under the laws of the State of
Connecticut.
(b) The authorized capital stock of Cargill Bancorp, Inc. consists of
750,000 shares of Cargill Bancorp, Inc. Common Stock and 250,000 shares of
Cargill Bancorp, Inc. Preferred Stock. All of the outstanding shares of Cargill
Bancorp, Inc. Common Stock have been duly authorized and are nonassessable, and
the shareholders of Cargill Bancorp, Inc. have no preemptive rights with respect
to any shares of capital stock of Cargill Bancorp, Inc. All of the outstanding
shares of capital stock of Cargill Bank have been duly authorized and are
nonassessable, and, to the actual knowledge of such counsel, are directly or
indirectly owned by Cargill Bancorp, Inc. free and clear of all liens, claims,
encumbrances, charges, restrictions or rights of third parties of any kind
whatsoever.
(c) The Affiliation and Merger dated as of July 15, 1998 (the
"Agreement") has been duly authorized, executed and delivered by Cargill
Bancorp, Inc. and Cargill Bank and, assuming due authorization, execution and
delivery by Westbank Corporation and Park West Bank and Trust Company,
constitutes a valid and binding obligation of Cargill Bancorp, Inc. and Cargill
Bank enforceable in accordance with its terms, except that the enforceability of
the obligations of Cargill Bancorp, Inc. and Cargill Bank may be limited by (i)
bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the
rights of creditors; (ii) equitable principles limiting the right to obtain
specific performance or other similar equitable relief; and (iii) considerations
of public policy.
(d) Cargill Bancorp, Inc. and Cargill Bank have all requisite corporate
power and authority to execute and deliver the Agreement and to consummate the
Merger. All corporate actions required to be taken by Cargill Bancorp, Inc. and
Cargill Bank by law and their respective Charters and Bylaws to authorize the
execution and delivery of the Agreement and consummation of the Merger have been
taken.
(e) All consents or approvals of or filings or registrations with any
federal or state banking agency which are necessary to be obtained by Cargill
Bancorp, Inc. and Cargill Bank to permit the execution of the Agreement and
consummation of the Merger have been obtained.
(f) Neither the execution of the Agreement nor consummation of the
Merger will (i) conflict with or result in a breach of any provision of the
Charter or Bylaws or similar governing instruments, of Cargill Bancorp, Inc. or
any of its Subsidiaries; (ii) constitute a breach of or default under, or give
rise to a right of termination, cancellation or acceleration with respect to,
specified agreements listed in Disclosure Schedules except as described in the
Cargill Disclosure Schedule ___, or (iii) violate any Connecticut banking or
Delaware corporate law or federal banking law of the United States binding upon
Cargill Bancorp, Inc. or any of its Subsidiaries, or any order, writ, injunction
or decree of which we have actual knowledge to which Cargill Bancorp, Inc. or
any of its Subsidiaries, is subject.
<PAGE> 224
(g) We do not have actual knowledge of any actions, suits or
proceedings pending or threatened against Cargill Bancorp, Inc. or any of its
Subsidiaries, at law or in equity, before any court or governmental body which
in any manner challenges or seeks to prevent, enjoin, alter or materially delay
consummation of the Merger.
In rendering their opinion, such counsel may rely, to the extent such
counsel deems such reliance necessary or appropriate, upon certificates of
governmental officials, certificates or opinions of other counsel to Cargill
Bancorp, Inc. or a Cargill Bancorp, Inc. Subsidiary reasonably satisfactory to
Westbank Corporation and, as to matters of fact, certificates of officers of
Cargill Bancorp, Inc. or a Cargill Bancorp, Inc. Subsidiary. The opinion of such
counsel need refer only to matters of Delaware, Connecticut and federal law and
may add other qualifications and explanations of the basis of their opinion as
may be reasonably acceptable to Westbank Corporation.
Counsel may expressly exclude any opinions as to choice of law and
anti-trust matters and may add such other qualifications and explanations of the
basis of its opinions as are consistent with the Legal Opinion Accord prepared
by the Section of Business Law of the American Bar Association.
<PAGE> 225
Exhibit E-2
FORM OF OPINION OF COUNSEL - CRANMORE, FITZGERALD & MEANEY
(a) Westbank Corporation is validly existing under the laws of the
Commonwealth of Massachusetts, and Westbank Corporation is duly registered as a
bank holding company under the Bank Holding Company Act.
(b) Park West Bank and Trust Company is a validly existing
Massachusetts chartered state bank and trust company.
(c) The authorized capital stock of Westbank Corporation consists of
9,000,000 shares of Westbank Corporation Common Stock and 100,000 shares of
Westbank Corporation Preferred Stock. All of the outstanding shares of Westbank
Corporation Common Stock have been duly authorized and are nonassessable. None
of the outstanding shares of Westbank Corporation Common Stock has been issued
in violation of the preemptive rights of any person, firm or entity. All of the
outstanding shares of capital stock of Park West Bank and Trust Company and each
other Westbank Corporation Subsidiary have been duly authorized and are
nonassessable, and, to the actual knowledge of such counsel, are directly or
indirectly owned by Westbank Corporation free and clear of all liens, claims,
encumbrances, charges, restrictions or rights of third parties of any kind
whatsoever.
(d) The Agreement has been duly authorized, executed and delivered by
Westbank Corporation and Park West Bank and Trust Company and, assuming due
authorization, execution and delivery by Westbank Corporation and Park West Bank
and Trust Company, constitutes a valid and binding obligation of Westbank
Corporation and Park West Bank and Trust Company enforceable in accordance with
its terms, except that the enforceability of the obligations of Westbank
Corporation and Park West Bank and Trust Company may be limited by (i)
bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the
rights of creditors, (ii) equitable principles limiting the right to obtain
specific performance or other similar equitable relief and (iii) considerations
of public policy.
(e) Westbank Corporation and Park West Bank and Trust Company have all
requisite corporate power and authority to execute and deliver the Agreement and
to consummate the Merger. All corporate actions required to be taken by Westbank
Corporation and Park West Bank and Trust Company by law and their respective
Charters and Bylaws to authorize the execution and delivery of the Agreement and
consummation of the Merger and the Stock Option Agreement have been taken.
(f) All consents or approvals of or filings or registrations with any
federal or state banking agency which are necessary to be obtained by Westbank
Corporation and Park West Bank and Trust Company to permit the execution of the
Agreement and consummation of the Merger have been obtained.
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<PAGE> 226
(g) Neither the execution of the Agreement nor consummation of the
Merger will (i) conflict with or result in a breach of any provision of the
Charter or Bylaws or similar governing instruments, of Westbank Corporation or
any of its Subsidiaries, (ii) constitute a breach of or default under, or give
rise to a right of termination, cancellation or acceleration with respect to,
any agreements involving Westbank Corporation or its Subsidiary listed in
Disclosure Schedules except as described in the Westbank Disclosure Schedules,
or (iii) violate any Massachusetts banking or corporate law or federal banking
law of the United States binding upon Westbank Corporation or any of its
Subsidiaries, or any order, writ, injunction or decree of which we have actual
knowledge to which Westbank Corporation or any of its Subsidiaries, is subject.
(h) We do not have actual knowledge of any actions, suits or
proceedings pending or threatened against Westbank Corporation or any
Subsidiary, at law or in equity, before any court or governmental body which in
any manner challenges or seeks to prevent, enjoin, alter or materially delay
consummation of the Merger.
In rendering their opinion, such counsel may rely, to the extent such
counsel deems such reliance necessary or appropriate, upon certificates of
governmental officials, certificates or opinions of other counsel to Westbank
Corporation or a Westbank Corporation Subsidiary reasonably satisfactory to
Westbank Corporation and, as to matters of fact, certificates of officers of
Westbank Corporation or a Westbank Corporation Subsidiary. The opinion of such
counsel need refer only to matters of Massachusetts and federal law and may add
other qualifications and explanations of the basis of their opinion.
Counsel may expressly exclude any opinions as to choice of law and
anti-trust matters and may add such other qualifications and explanations of the
basis of its opinions as are consistent with the Legal Opinion Accord prepared
by the Section of Business Law of the American Bar Association.
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Appendix D
DELAWARE GENERAL CORPORATION LAW
SECTION 262. APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to the provisions of
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with the provisions of subsection (d) of this Section and
who has neither voted in favor of the merger or consolidation nor consented
thereto in writing pursuant to Section 228 of this Chapter shall be entitled to
an appraisal by the Court of Chancery of the fair value or his shares of stock
under the circumstances described in subsections (b) and (c) of this Section. As
used in this Section, the word "stockholder" means a holder of record of stock
in a stock corporation and also a member of record of a non-stock corporation;
the words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a non-stock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Sections 251, 252, 254, 257, 258, or 263 of this Chapter;
(1) provided, however, that no appraisal rights under this Section
shall be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or (ii) held of record by more than
2,000 holders; and further provided that no appraisal rights shall be available
for any shares of stock of the constituent corporation surviving a merger if the
merger did not require for its approval the vote of the holders of the surviving
corporation as provided in subsection (f) of Section 251 of this Chapter.
(2) Notwithstanding the provisions of subsection (b) (1) of this
Section, appraisal rights under this Section shall be available for the shares
of any class or series of stock of a constituent corporation if the holders
thereof are required by the terms of an agreement of merger or consolidation
pursuant to Sections 251, 252, 254, 257, 258, 263 and 264 of this Chapter to
accept for such stock anything except (i) shares of stock of the corporation
surviving or resulting from such merger or consolidation, or depository receipts
in respect thereof; (ii) shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or held of record by more than 2,000 holders; (iii)
cash in lieu of fractional shares or fractional depository receipts described in
the foregoing clauses (i) and (ii); or (iv) any combination of the shares of
stock, depository receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing clauses (i), (ii) and (iii) of
this subsection.
<PAGE> 228
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this Chapter is not owned by
the parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this Section shall be available for the shares of
any class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this Section, including those set forth in subsection (d) and
(e), shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this Section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsections (b) and (c) hereof that appraisal rights are available for any or
all of the shares of the constituent corporations, and shall include in such
notice a copy of this Section. Each stockholder electing to demand the appraisal
of his shares shall deliver to the corporation, before the taking of the vote on
the merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to demand
the appraisal of his shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to take such action
must do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent corporation who
has complied with the provisions of this subsection and has not voted in favor
of or consented to the merger or consolidation of the date that the merger or
consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to Section 228
or Section 253 of this Chapter, the surviving or resulting corporation, either
before the effective date of the merger or consolidation or within 10 days
thereafter, shall notify each of the stockholders entitled to appraisal rights
or the effective date of the merger or consolidation and that appraisal rights
are available for any or all of the shares of the constituent corporation, and
shall include in such notice a copy of this Section. The notice shall be sent by
certified or registered mail, return receipt requested, addressed to the
stockholder at his address as it appears on the records of the corporation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of notice, demand in writing from the surviving or resulting corporation
the appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares.
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<PAGE> 229
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with the provisions of subsections (a) and (d) hereof and who is
otherwise entitled to appraisal rights, may file a petition in the Court of
Chancery demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within 60 days after
the effective date of the merger or consolidation, any stockholder shall have
the right to withdraw his demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date or
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving, or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by one or more publications at
least one week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with the provisions of this Section and who have
become entitled to appraisal rights. The Court may require the stockholders who
have demanded an appraisal for their shares and who hold stock represented by
certificates to submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal proceedings and if any
stockholder fails to comply with such direction, the Court may dismiss the
proceedings as to such stockholder.
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<PAGE> 230
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determinating, the fair
rate of interest, the Court may consider all relevant factors, including the
rate of interest which the surviving or resulting corporation would have had to
pay to borrow money during the pendency of the proceeding. Upon application by
the surviving or resulting corporation or by any stockholder entitled to
participate in the appraisal proceeding, the Court may, in its discretion,
permit discovery or other pretrial proceedings and may proceed to trial upon the
appraisal prior to the final determination of the stockholder entitled to an
appraisal. Any stockholder whose name appears on the list filed by the surviving
or resulting corporation pursuant to subsection (f) of this Section and who has
submitted his certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that he is not entitled to appraisal rights under this Section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest. if any, by the surviving or resulting, corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be made to each such stockholder, in the case of
holders of uncertified stock forthwith, and in the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any other state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts, to be charged pro rata against the value of all of
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded his appraisal rights as provided in subsection
(d) of this Section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this Section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this Section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
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<PAGE> 231
(1) The shares of the surviving or resulting corporation into which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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<PAGE> 232
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 67 of Chapter 156B of the Massachusetts General Laws, the
Massachusetts Business Corporation Law (the "MBCL") provides, in effect, that a
corporation may indemnify any person made a party to any action by reason of the
fact that he is or was a director, officer, employee or agent of the corporation
against, in the case of a nonderivative action, judgments, fines, amounts paid
in settlement and reasonable expenses (including attorney's fees) incurred by
him as a result of such action, and in the case of a derivative action, against
expenses (including attorney's fees), if in either type of action he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation. This indemnification does not apply, in a
derivative action, to matters as to which it is adjudged that the director,
officer, employee or agent is liable to the corporation, unless upon court order
it is determined that, despite such adjudication of liability, but in view of
all the circumstances of the case, he is fairly and reasonable entitled to
indemnity for expenses, and, in a nonderivative action, to any criminal
proceeding in which such person had reasonable cause to believe his conduct was
unlawful.
Article V, Section 9 of Westbank's Bylaws provides that Westbank shall
indemnify each person who is or was an officer, director, employee or agent of
Westbank against all liabilities and expenses reasonably incurred by such
indemnitee in connection with such proceeding, provided that such indemnitee
shall undertake to repay such payment if he shall be adjudicated to be not
entitled to indemnification.
ITEM 21. EXHIBIT AND FINANCIAL STATEMENTS SCHEDULES
The exhibit and financial statement schedules filed as a part of this
Registration Statement are as follows:
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
Location
- --------
<S> <C>
2.1 Affiliation and Merger Agreement among
Westbank Corporation, Park West Bank and Trust
Company, Cargill Bancorp, Inc. and Cargill Bank
dated July 15, 1998 (Included as Appendix A to the
Proxy Statement-Prospectus)
2.2 Stock Option Agreement dated July 15, 1998;
form included as Exhibit C to the Affiliation
and Merger Agreement (See Exhibit 2.1 above)
</TABLE>
<PAGE> 233
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
Location
- --------
<S> <C> <C>
3.1 Articles of Organization of Westbank Corporation *
3.2 Bylaws of Westbank Corporation (E-1)
5 Opinion of Cranmore, FitzGerald &
Meaney regarding legality of securities
being registered *
8.1 Opinion of Cranmore, FitzGerald & Meaney regarding
certain federal income tax consequences *
21 Subsidiaries of the Registrant (Exhibit is incorporated by
reference to Exhibit 21 to Westbank's Annual Report on
Form 10-K, as amended, for the year ended December 31,
1997)
23.1 Consent of Cranmore, FitzGerald & Meaney (E-2)
23.2 Consent of Shipman & Goodwin LLP (E-3)
23.3 Consent of Deloitte & Touche LLP (E-4)
23.4 Consent of Synder & Haller, P.C. (E-5)
23.5 Consent of Northeast Capital & Advisory, Inc. (E-6)
23.6 Consent of Ostrowski & Company, Inc. (E-7)
99.1 Form of Proxy for the Special Meeting
of Shareholders of Cargill Bancorp, Inc. (E-8)
</TABLE>
* To be furnished by Amendment
(b) Financial Statement Schedules.
No financial statement schedules are filed because the required
information is not applicable, is incorporated by reference, or is included in
the consolidated financial statements or related notes.
<PAGE> 234
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes as follows:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement; and
(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 (a) (1) (i) and (a) (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 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 purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) 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 which respect to reofferings by
persons who may be deemed underwriters, in addition to the information
called for by the other Items of the applicable form.
(4) That every prospectus (i) that is filed pursuant to paragraph (3)
immediately preceding, or (ii) that purports to meet the requirements
of Section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
<PAGE> 235
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.
(5) That, for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(6) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(7) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the questions whether
such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 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 or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
<PAGE> 236
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in West Springfield,
Commonwealth of Massachusetts on September 28, 1998.
WESTBANK CORPORATION
By: /s/ Donald R. Chase
----------------------------------
Donald R. Chase
Its President and
Chief Executive Officer
Pursuant to the requirement of the Securities Exchange Act of 1933, this
Registration Statement has been following persons in the capacities and on the
dates indicated:
/s/ Roland O. Archambault /s/ Mark A. Beauregard
- -------------------------------- ----------------------------------
Roland O. Archambault Mark A. Beauregard
Director Director
September 28, 1998 September 28, 1998
/s/ David R. Chamberland /s/ Donald R. Chase
- -------------------------------- ----------------------------------
David R. Chamberland Donald R. Chase
Director President, Chief Executive Officer
September 28, 1998 and Director
September 28, 1998
/s/ Ernest N. Laflamme, Jr.
- -------------------------------- ----------------------------------
Leroy F. Jarrett Ernest N. Laflamme, Jr.
Director Vice Chairman of the Board and
Director
September 28, 1998
/s/ Robert J. Perlak
- -------------------------------- ----------------------------------
Paul J. McKenna Robert J. Perlak
Director Corporate Clerk and Director
September 28, 1998
/s/ George R. Sullivan /s/ James E. Tremble
- -------------------------------- ----------------------------------
George R. Sullivan James E. Tremble
Director Director
September 28, 1998 September 28, 1998
/s/ Alfred C. Whitaker /s/ John M. Lilly
- -------------------------------- ----------------------------------
Alfred C. Whitaker John M. Lilly
Chairman of the Board and Director Treasurer and Chief Financial
September 28, 1998 Officer
September 28, 1998
<PAGE> 1
EXHIBIT 3.2
WESTBANK CORPORATION
WEST SPRINGFIELD, MASSACHUSETTS
BY-LAWS
Dated 11/15/83
Amended 3/30/89
Amended 11/29/89
Amended 09/20/90
Amended 02/21/91
Amended 01/21/98
<PAGE> 2
WESTBANK CORPORATION
BY-LAWS
ARTICLE I - STOCKHOLDERS
1. Place of Meeting. All meetings of stockholders shall be held within
Massachusetts unless the Articles of Organization permit the holding of
stockholder meetings outside Massachusetts, in which event such meetings may be
held either within or without Massachusetts. Meetings of stockholders shall be
held at the principal office of the Corporation unless a different place is
fixed by the Directors or the President and stated in the notice of the meeting.
2. Annual Meeting. The annual meeting of stockholders shall be held on
the third Wednesday of April in each year (or if that be a legal holiday in the
place where the meeting is to be held, on the next succeeding full business
day) at 10 o'clock A.M., unless a different hour is fixed by the Directors or
the President and stated in the notice of the meeting. The purposes for which
the annual meeting is to be held, in addition to those prescribed by law, by
the Articles of Organization or by these By-Laws, may be specified by the
Directors or the President. If no annual meeting is held in accordance with the
foregoing provisions, a special meeting may be held in lieu thereof and any
action taken at such meeting shall have the same effect as if taken at the
annual meeting.
2A. Matters to be Considered at an Annual Meeting. At any annual meeting
of stockholders or any special meeting in lieu of annual meeting of
stockholders (the "Annual Meeting"), only such business shall be conducted, and
only such proposals shall be acted upon, as shall have been properly brought
before such Annual Meeting. To be considered as properly brought before an
Annual Meeting, business must be: (a) specified in the notice of meeting, (b)
otherwise properly brought before the meeting by, or at the direction of, the
Board of Directors, or (c) otherwise properly brought before the meeting by any
holder of record (both as of the time notice of such proposal is given by the
stockholder as set forth below and as of the record date for the Annual Meeting
in question) of any shares of capital stock of the Corporation entitled to vote
at such Annual Meeting who complies with the requirements set forth in this
By-Law.
In addition to any other applicable requirements, for business to be
properly brought before an Annual Meeting by a stockholder of record of any
shares of capital stock entitled to vote at such Annual Meeting, such
stockholder shall: (i) give timely notice as required by this By-Law to the
Clerk of the Corporation and (ii) be present at such meeting, either in person
or by a representative. For Annual Meetings, a stockholder's notice shall be
timely if delivered to, or mailed to and received by, the Corporation at its
principal executive office not less than 75 days nor more than 120 days prior
to the anniversary date of the immediately preceding Annual Meeting (the
"Anniversary Date"); provided, however, that in the event the Annual Meeting is
scheduled to be held on a date more than 30 days before the Anniversary Date or
more than 60 days after the Anniversary Date, a
<PAGE> 3
stockholder's notice shall be timely if delivered to, or mailed to and received
by, the Corporation at its principal executive office not later than the close
of business on the later of (A) the 75th day prior to the scheduled date of such
Annual Meeting or (B) the 15th day following the day on which public
announcement of the date of such Annual Meeting is first made by the
Corporation.
For purposes of these By-Laws, "public announcement" shall mean: (i)
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service, (ii) a report or other document filed
publicly with the Securities and Exchange Commission (including, without
limitation, a Form 8-K), or (iii) a letter or report sent to stockholders of
record of the Corporation at the time of the mailing of such letter or report.
A stockholder's notice to the Clerk shall set forth as to each matter
proposed to be brought before an Annual Meeting: (i) a brief description of the
business the stockholder desires to bring before such Annual Meeting and the
reasons for conducting such business at such Annual Meeting, (ii) the name and
address, as they appear on the Corporation's stock transfer books, of the
stockholder proposing such business, (iii) the class and number of shares of the
Corporation's capital stock beneficially owned by the stockholder proposing such
business, (iv) the names and addresses of the beneficial owners, if any, of any
capital stock of the Corporation registered in such stockholder's name on such
books, and the class and number of shares of the Corporation's capital stock
beneficially owned by such beneficial owners, (v) the names and addresses of
other stockholders known by the stockholder proposing such business to support
such proposal, and the class and number of shares of the Corporation's capital
stock beneficially owned by such other stockholders, and (vi) any material
interest of the stockholder proposing to bring such business before such meeting
(or any other stockholders known to be supporting such proposal) in such
proposal.
If the Board of Directors or a designated committee thereof determines that
any stockholder proposal was not made in a timely fashion in accordance with the
provisions of this By-Law or that the information provided in a stockholder's
notice does not satisfy the information requirements of this By-Law in any
material respect, such proposal shall not be presented for action at the Annual
Meeting in question. If neither the Board of Directors nor such committee makes
a determination as to the validity of any stockholder proposal in the manner set
forth above, the presiding officer of the Annual Meeting shall determine whether
the stockholder proposal was made in accordance with the terms of this By-Law.
If the presiding officer determines that any stockholder proposal was not made
in a timely fashion in accordance with the provisions of this By-Law or that the
information provided in a stockholder's notice does not satisfy the information
requirements of this By-Law in any material respect, such proposal shall not be
presented for action at the Annual Meeting in question. If the Board of
Directors, a designated committee thereof or the presiding officer determines
that a stockholder proposal was made in accordance with the requirements of this
By-Law, the presiding officer shall so declare at the Annual Meeting and ballots
shall be provided for use at the meeting with respect to such proposal.
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Notwithstanding the foregoing provisions of this By-Law, a stockholder
shall also comply with all applicable requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and regulations
thereunder with respect to the matters set forth in this By-Law and nothing in
this By-Law shall be deemed to affect any rights of stockholders to request
inclusion of proposals in the Corporation's proxy statement pursuant to Rule
14a-8 under the Exchange Act.
3. Special Meetings. Special meetings of stockholders may be called by the
Board of Directors. Special meetings shall be called by the Clerk or in case of
the death, absence, incapacity or refusal of the Clerk, by any other officer,
upon written application of one or more stockholders who hold at least (i)
66 2/3% in interest of the capital stock entitled to vote at such meeting or
(ii) such lesser percentage, if any, as shall be determined to be the maximum
percentage which the Corporation is permitted by applicable law to establish for
the call of such a meeting. Application to a court pursuant to Section 34(b) of
Chapter 156B of the General Laws of the Commonwealth of Massachusetts requesting
the call of a special meeting of stockholders because none of the officers is
able and willing to call such a meeting may be made only by stockholders who
hold at least (i) 66 2/3% in interest of the capital stock entitled to vote at
such meeting or (ii) such lesser percentage, if any, as shall be determined to
be the maximum percentage which the Corporation is permitted by applicable law
to establish for the call of such a meeting. The hour, date and place of any
special meeting and the record date for determining the stockholders having the
right to notice of and to vote at such meeting shall be determined by the Board
of Directors or the President. At a special meeting of stockholders, only such
business shall be conducted, and only such proposals shall be acted upon, as
shall have been stated in the written notice of the special meeting and
otherwise properly brought before the special meeting.
4. Notice of Meetings. A written notice of every meeting of stockholders,
stating the place, date and hour thereof, and the purposes for which the meeting
is to be held, shall be given by the Clerk or an Assistant Clerk or other
officer at least seven days before the meeting to each stockholder entitled to
vote thereat and to each stockholder who, by law, by the Articles of
Organization or by these By-Laws, is entitled to such notice, by leaving such
notice with him or at his residence or usual place of business, or by mailing it
postage prepaid and addressed to him at his address as it appears upon the books
of the Corporation. Such notice shall be deemed to be delivered when hand
delivered to such address or deposited in the mail so addressed, with postage
prepaid. Whenever any notice is required to be given to a stockholder by law, by
the Articles of Organization or by these By-Laws, no such notice need be given
if a written waiver of notice, executed before or after the meeting by the
stockholder or his attorney thereunto duly authorized, is filed with the records
of the meeting, if communication with such stockholder is unlawful, or if such
stockholder attends such meeting, unless such attendance was for the express
purpose of objecting at the beginning of the meeting because the meeting was not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any annual or special meeting of stockholders need be specified in
any written waiver of notice.
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5. Quorum. Unless the Articles of Organization or the provisions of law
otherwise require, a majority in interest of all stock issued, outstanding and
entitled to vote on any matter shall constitute a quorum with respect to that
matter, except that if two or more classes of stock are outstanding and entitled
to vote as separate classes, then in the case of each such class a quorum shall
consist of a majority in interest of the stock of that class issued, outstanding
and entitled to vote. If a quorum is not present, a majority in interest of the
stockholders present or the presiding officer may adjourn the meeting from time
to time and the meeting may be held as adjourned without further notice other
than an announcement at the meeting at which the adjournment is taken of the
hour, date and place to which the meeting is adjourned. At such adjourned
meeting at which a quorum is present, any business may be transacted which might
have been transacted at the meeting as originally noticed. The stockholders
present at a duly constituted meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum.
6. Adjournments; Rescheduling of Meetings. The Board of Directors may
postpone and reschedule any previously scheduled annual or special meeting of
stockholders, and a record date with respect thereto, regardless of whether any
notice or public disclosure with respect to any such meeting or record date has
been sent or made pursuant to Section 2A of this Article I or Section 4 of
Article II hereof or otherwise. In no event shall the public announcement of an
adjournment, postponement or rescheduling of any previously scheduled Annual
Meeting of stockholders commence a new time period for the giving of a
stockholder's notice under Section 2A of Article I and Section 4 of Article II
of these By-Laws.
When any meeting is convened, the presiding officer may adjourn the meeting
if (a) no quorum is present for the transaction of business, (b) the Board of
Directors determines that adjournment is necessary or appropriate to enable the
stockholders to consider fully information which the Board of Directors
determines has not been made sufficiently or timely available to stockholders,
or (c) the Board of Directors determines that adjournment is otherwise in the
best interests of the Corporation. When any Annual Meeting or special meeting of
stockholders is adjourned to another hour, date or place, notice need not be
given of the adjourned meeting other than an announcement at the meeting at
which the adjournment is taken of the hour, date and place to which the meeting
is adjourned.
7. Voting and Proxies. Each stockholder shall have one vote for each share
of stock entitled to vote held by him of record according to the records of the
Corporation and a proportionate vote for a fractional share so held by him,
unless otherwise provided by the Articles of Organization. Stockholders may vote
either in person or by written proxy dated not more than six months before the
meeting named therein. Notwithstanding the preceding sentence, a proxy coupled
with an interest sufficient in law to support an irrevocable power, including,
without limitation, an interest in the shares or in the Corporation generally,
may be made irrevocable if it so provides, need not specify the meeting to which
it relates, and shall be valid and enforceable until the interest terminates, or
for such shorter period as may be specified in the proxy. Proxies shall be filed
with
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the Clerk of the meeting, or of any adjournment thereof, before being voted.
Except as otherwise limited therein, proxies shall entitle the persons named
therein to vote at any adjournment of such meeting, but shall not be valid
after final adjournment of such meeting. A proxy with respect to stock held in
the name of two or more persons shall be valid if executed by one of them,
unless at or prior to exercise of the proxy the Corporation receives a specific
written notice to the contrary from any one of them. A proxy purporting to be
executed by or on behalf of a stockholder shall be deemed valid unless
challenged at or prior to its exercise.
8. Action at Meeting. When a quorum is present, the holders of a
majority of the stock present or represented and voting on a matter (or if
entitled to vote as separate classes, then in the case of each class, the
holders of a majority of the stock of that class present or represented and
voting on a matter), shall decide any matter to be voted on by the stockholders
except where a larger vote is required by law, by the Articles of Organization
or by these By-Laws. Any election by stockholders shall be determined by a
plurality of the votes cast by the stockholders entitled to vote at the
election, except where a greater vote is required by law, by the Articles of
Organization or by these By-Laws. No ballot shall be required for such election
unless requested by a stockholder present or represented at the meeting and
entitled to vote in the election. The Corporation shall not directly or
indirectly vote any share of its stock.
9. Action Without a Meeting. Any action required or permitted to be
taken at a meeting of the stockholders may be taken without a meeting if all
the stockholders (including any actions or powers reserved to the shareholders
under these By-Laws) entitled to vote on a matter consent to the action in
writing and the written consents are filed with the records of the meeting of
stockholders. Each such consent shall be treated for all purposes as a vote at
the meeting. The procedures set forth in Section 10 of this Article I and
Section 3 of Article IV shall apply to shareholder action taken without a
meeting in connection with this Section.
10. Voting Procedures and Inspectors of Elections. In advance of any
meeting of stockholders, the Board of Directors may appoint one or more
inspectors to act at an annual or special meeting of stockholders and make a
written report thereon. Any inspector may, but need not, be an officer,
employee or agent of the Corporation. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of inspector with strict impartiality and according to the best of his
or her ability. The inspector(s) shall (i) ascertain the number of shares
outstanding and the voting power of each, (ii) determine the shares represented
at a meeting and the validity of proxies and ballots, (iii) count all votes and
ballots, (iv) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspectors, and
(v) certify their determination of the number of shares represented at the
meeting, and their count of all votes and ballots. The inspector(s) may appoint
or retain other persons or entities to assist the inspector(s) in the
performance of the duties of the inspector(s). The presiding officer may review
all determinations made by the inspector(s), and in so doing the presiding
officer shall be entitled to exercise his sole judgment and discretion and
he shall not be bound by any
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<PAGE> 7
determinations made by the inspector(s). All determinations by the inspector(s)
and, if applicable, the presiding officer shall be subject to further review by
any court of competent jurisdiction.
The Board of Directors may remove the inspector(s) at any time. The officer
presiding at any annual or special meeting of stockholders may remove the
inspector(s) at any time during such meeting.
11. Presiding Officer. The Chairman or, in his absence, the President or,
in his absence, such other officer, shall preside at all annual or special
meetings of stockholders and shall have the power, among other things, to
adjourn such meetings at any time and from time to time in accordance with the
provisions of Sections 5 and 6 of this Article I. The order of business and all
other matters of procedure at any meeting of the stockholders shall be
determined by the presiding officer.
12. Control Share Acquisition. The provisions of Chapter 110D of the
General Laws of the Commonwealth of Massachusetts ("Chapter 110D"), as it may be
amended from time to time, shall not apply to "control share acquisitions" of
the Corporation within the meaning of Chapter 110D.
ARTICLE II - DIRECTORS
1. Powers. The business of the Corporation shall be managed by a Board of
Directors which may exercise all the powers of the Corporation except as
otherwise provided by law, by the Articles of Organization or by these By-Laws.
In the event of a vacancy in the Board of Directors, the remaining Directors,
except as otherwise provided by law, by the Articles of Organization or by
these By-Laws, may exercise the powers of the full Board until the vacancy is
filled. In particular, and without limiting the generality of the foregoing,
the Directors may at any time issue all or from time to time any part of the
unissued capital stock of the Corporation from time to time authorized under
the Articles of Organization and may determine, subject to any requirements of
law, the consideration for which stock is to be issued and the manner of
allocating such consideration between capital and surplus.
2. Election and Eligibility. (a) A Board of Directors of such number as
shall be fixed by resolution duly adopted from time to time by the Board of
Directors, shall be elected by the stockholders at the annual meeting. The
Directors shall hold office in the manner provided in the Articles of
Organization. Unless waived by the affirmative vote of at least two-thirds of
the stockholders or two-thirds of the Directors then in office, no person shall
be eligible to be a director of the Corporation unless such person: (1) is not,
and has not been for a period of at least six (6) months prior to the date of
his election, an officer or director of any bank (other than a subsidiary of
the Corporation) any bank holding company (as defined in Section 2 of the Bank
Holding Company Act of 1956, as amended) or any company in competition with the
Corporation or any subsidiary thereof; and (2) has been a United States citizen
for at least six (6) months.
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Amended 3/30/89 and 11/29/89
In the event that the Corporation shall issue preferred stock and if so
provided by the Articles of Organization, or the resolutions or votes adopted
by the Board of Directors providing for the issue of such series, the holders
of the preferred stock of the Corporation may enlarge the Board of Directors by
the addition of Directors as provided therein. Any vacancy in the number of
directors so elected shall be filled only by the affirmative vote of the
holders of preferred stock of the Corporation.
3. Vacancies. Any vacancy in the Board of Directors (other than a vacancy
caused by the death, resignation, or removal of a Director elected by holders
of preferred stock of the Corporation) including a vacancy resulting from the
enlargement of the Board, unless and until filled by the stockholders, may be
filled by a majority of the Directors present at any meeting of the Directors
at which a quorum is present.
Should a Director resign, be removed from office or die, and should the
remaining Directors fail to fill the vacancy within forty-five (45) days of the
effective date of the resignation or removal, or within forty-five (45) days of
the death of the director, then the total number of Directors shall
automatically be decreased by the number of unfilled vacancies.
4. Director Nominations. Nominations of candidates for election as
Directors of the Corporation at any Annual Meeting may be made only (a) by, or
at the direction of, a majority of the Board of Directors or (b) by any holder
of record (both as of the time notice of such nomination is given by the
stockholder as set forth below and as of the record date for the Annual Meeting
in question) of any shares of the capital stock of the Corporation entitled to
vote at such Annual Meeting who complies with the timing, informational and
other requirements set forth in this By-Law. Any stockholder who has complied
with the timing, informational and other requirements set forth in this By-Law
and who seeks to make such a nomination, or his, her or its representative,
must be present in person at the Annual Meeting. Only persons nominated in
accordance with the procedures set forth in this By-Law shall be eligible for
election as Directors at an Annual Meeting.
Nominations, other than those made by, or at the direction of, the Board of
Directors, shall be made pursuant to timely notice in writing to the Clerk of
the Corporation as set forth in this By-Law. For Annual Meetings, a
stockholder's notice shall be timely if delivered to, or mailed to and received
by, the Corporation at its principal executive office not less than 75 days nor
more than 120 days prior to the Anniversary Date; provided, however, that in the
event the Annual Meeting is scheduled to be held on a date more than 30 days
before the Anniversary Date or more than 60 days after the Anniversary Date, a
stockholder's notice shall be timely if delivered to, or mailed and received by,
the Corporation at its principal executive office not later than the close of
business on the later of (i) the 75th day prior to the scheduled date of such
Annual Meeting or (ii) the 15th day following the day on which public
announcement of the date of such Annual Meeting is first made by the
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<PAGE> 9
Corporation.
A stockholder's notice to the Clerk shall set forth as to each person whom
the stockholder proposes to nominate for election or re-election as a Director
(i) the name, age, business address and residence address of such person, (ii)
the principal occupation or employment of such person, (iii) the class and
number of shares of the Corporation's capital stock which are beneficially owned
by such person on the date of such stockholder notice, and (iv) the consent of
each nominee to serve as a Director if elected. A stockholder's notice to the
Clerk shall further set forth as to the stockholder giving such notice (i) the
name and address, as they appear on the Corporation's stock transfer books, of
such stockholder and of the beneficial owners (if any) of the Corporation's
capital stock registered in such stockholder's name and the name and address of
other stockholders known by such stockholder to be supporting such nominee(s),
(ii) the class and number of shares of the Corporation's capital stock which are
held of record, beneficially owned or represented by proxy by such stockholder
and by any other stockholders known by such stockholder to be supporting such
nominee(s) on the record date for the Annual Meeting in question (if such date
shall then have been made publicly available) and on the date of such
stockholder's notice, and (iii) a description of all arrangements or
understandings between such stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by such stockholder.
If the Board of Directors or a designated committee thereof determines
that any stockholder nomination was not made in accordance with the terms of
this By-Law or that the information provided in a stockholder's notice does not
satisfy the informational requirements of this By-Law in any material respect,
then such nomination shall not be considered at the Annual Meeting in question.
If neither the Board of Directors nor such committee makes a determination as
to whether a nomination was made in accordance with the provisions of this
By-Law, the presiding officer of the Annual Meeting shall determine whether a
nomination was made in accordance with such provisions. If the presiding
officer determines that any stockholder nomination was not made in accordance
with the terms of this By-Law or that the information provided in a
stockholder's notice does not satisfy the informational requirements of this
By-Law in any material respect, then such nomination shall not be considered at
the Annual Meeting in question. If the Board of Directors, a designated
committee thereof or the presiding officer determines that a nomination was
made in accordance with the terms of this By-Law, the presiding officer shall
so declare at the Annual Meeting and ballots shall be provided for use at the
meeting with respect to such nominee.
Notwithstanding anything to the contrary in the second sentence of the
second paragraph of this By-Law, in the event that the number of Directors to
be elected to the Board of Directors of the Corporation is increased and there
is no public announcement by the Corporation naming all of the nominees for
director or specifying the size of the increased Board of Directors at least 75
days prior to the Anniversary Date, a stockholder's notice required by this
By-Law shall also be considered timely, but only with respect to nominees for
any new positions created by such increase, if such
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<PAGE> 10
notice shall be delivered to, or mailed to and received by, the Corporation at
its principal executive office not later than the close of business on the 15th
day following the day on which such public announcement is first made by the
Corporation.
No person shall be elected by the stockholders as a Director of the
Corporation unless nominated in accordance with the procedures set forth in this
By-Law. Election of Directors at the Annual Meeting need not be by written
ballot, unless otherwise provided by the Board of Directors or presiding officer
at such Annual Meeting. If written ballots are to be used, ballots bearing the
names of all the persons who have been nominated for election as Directors at
the Annual Meeting in accordance with the procedures set forth in this Section
shall be provided for use at the Annual Meeting.
Amended 03/30/89 and 11/29/89
5. Tenure.
(a) Except as otherwise provided by law, by the Articles of Organization
or by these By-Laws, each Director shall serve until his successor is elected
and qualified or until his earlier resignation, removal from office or death.
(b) The Board of Directors shall be divided into three classes: Class 1,
Class 2 and Class 3, which shall be as nearly equal in number as possible. Each
Director shall serve for a term ending on the date of the third annual meeting
of Stockholders following the annual meeting at which such Director was elected
or, if the Director was not elected at an annual meeting, until the end of the
term of the class to which he was elected; provided, however, that each initial
Director in Class 1 shall hold office until the annual meeting of Stockholders
in 1985; each initial Director in Class 2 shall hold office until the annual
meeting of Stockholders in 1986; and each initial Director in Class 3 shall hold
office until the annual meeting of Stockholders in 1987.
In the event of any increase or decrease in the authorized number of
Directors, (1) each Director then serving as such shall nevertheless continue
as a Director of the class of which he is a member until the expiration of his
current term, or his earlier resignation, removal from office or death, and
(2) the newly-created or eliminated directorships resulting from such increase
or decrease shall be apportioned by the Board of Directors among the three
classes of Directors so as to maintain such classes as nearly equal as
possible.
(c) Any Director may resign by delivering his written resignation to the
Corporation at its principal office or to the President or Clerk. Such
resignation shall be effective upon receipt unless it is specified at some other
time or upon the happening of some other event.
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6. Removal.
(a) Removal by Directors. A Director may be removed, with or without
cause, by vote of a majority of the Directors then in office.
(b) Removal by Stockholders. Stockholders may remove a Director only with
cause and only by the affirmative vote of at least two-thirds (or such other
percentage required by the Articles of Organization, these By-Laws or applicable
law, but in no case less than the maximum percentage which the Corporation is
permitted by applicable law to establish for the removal of a Director by
stockholders) of the total votes which would be eligible to be cast by
stockholders in the election of such Director.
For purposes of this Section 6, "cause," with respect to the removal of any
Director shall mean only (i) conviction of a felony, (ii) declaration of unsound
mind by order of court, (iii) gross dereliction of duty, (iv) commission of any
action involving moral turpitude, or (v) commission of an action which
constitutes intentional misconduct or a knowing violation of law if such action
in either event results both in an improper substantial personal benefit and a
material injury to the Corporation. A Director may be removed for cause only
after reasonable notice and opportunity to be heard before the body proposing
removal.
7. Meetings. Regular meetings of the Directors may be held without call or
notice at such places, within or without Massachusetts, and at such times as the
Directors may from time to time determine, provided that any Director who is
absent when such determination is made shall be given notice of the
determination. A regular meeting of the Directors may be held without a call or
notice at the same place as the annual meeting of stockholders, or the special
meeting held in lieu thereof, following such meeting of stockholders.
Special meetings of the Directors may be held at any time and place, within
or without Massachusetts, designated in a call by the President, Treasurer or
one or more Directors.
Unless otherwise provided by law or the Articles of Organization, members
of the Board of Directors may participate in a meeting of the Board of Directors
by means of a conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each other at the
same time. Participation by such means shall constitute presence in person at a
meeting.
8. Notice of Special Meetings. Notice of all special meetings of the
Directors shall be given to each Director by the Secretary, by the Clerk, or
Assistant Clerk, or in case of the death, absence, incapacity or refusal of such
person, by the officer or one of the Directors calling the meeting. Notice shall
be given to each Director in person or by telephone or by telegram sent to his
business or home address at least forty-eight hours in advance of the meeting,
or by written notice mailed to
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his business or home address at least seventy-two hours in advance of the
meeting. Notice need not be given to any Director if a written waiver of notice,
executed by him before or after the meeting, is filed with the records of the
meeting, or to any Director who attends the meeting without protesting prior
thereto or at its commencement the lack of notice to him. A notice or waiver of
notice of a Directors' meeting need not specify the purpose of the meeting.
9. Quorum. At any meeting of the Directors, a majority of the Directors
then in office shall constitute a quorum. Less than a quorum may adjourn any
meeting from time to time without further notice.
10. Action at Meeting. At any meeting of the Directors at which a quorum is
present, the vote of a majority of those present, unless a different vote is
specified by law, by the Articles of Organization or by these By-Laws, shall be
sufficient to take any action.
11. Action by Consent. Any action required or permitted to be taken at any
meeting of the Directors may be taken without a meeting if all the Directors
consent to the action in writing and the written consents are filed with the
records of the Directors' meeting. Each such consent shall be treated for all
purposes as a vote at a meeting.
12. Committees. The Directors may by vote of a majority of the Directors
then in office, elect from their number an Executive committee or other
committees and may by like vote delegate thereto some or all of their powers
except those which by law, by the Articles of Organization or by these By-Laws
they are prohibited from delegating. Except as the Directors may otherwise
determine, any such committee may make rules for the conduct of its business,
but unless otherwise provided by the Directors or in such rules, its business
shall be conducted as nearly as may be in the same manner as is provided by
these By-Laws for the Directors. All members of such committees shall hold such
offices at the pleasure of the Board of Directors. The Board of Directors by
vote of a majority of the Directors then in office may abolish any such
committee at any time. Any committee to which the Board of Directors delegates
any of its powers or duties shall keep records of its meetings and shall report
its action to the Board of Directors. The Board of Directors shall have power to
rescind any action of any committee, but no such rescission shall have
retroactive effect.
13. Amendment of Certain Sections. Sections (3), (5(b)) and (13) of this
Article II may not be altered, amended or repealed except by the affirmative
vote of at least seventy-five percent (75%) of the shares of each class of the
stock of the Corporation outstanding and entitled to vote. Sections 2, 4, 5(a),
5(c) and 6 of this Article II may not be altered, amended or repealed except by
the affirmative vote of at least sixty-six and two thirds percent (66-2/3%) of
the total number of Directors then in office or by an affirmative vote of at
least sixty-six and two-thirds percent (66-2/3%) of the shares of each class of
stock of the Corporation outstanding and entitled to vote.
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Amended 09/20/90
ARTICLE III -- OFFICERS
1. Enumeration. The officers of the Corporation shall consist of a Chairman
of the Board, a President, a Treasurer, a Clerk, and such other officers,
including a Vice Chairman of the Board, one or more vice Presidents (including
one or more Executive Vice Presidents), Assistant Treasurers, and Assistant
Clerks as the Directors may determine.
2. Election. The Chairman of the Board, President, Treasurer and Clerk
shall be elected annually by the Directors at their first meeting following the
annual meeting of stockholders. Other officers may be appointed by the Directors
at such meeting or at any other meeting.
3. Qualification. The President shall be a Director. No officer need be a
stockholder. Any two or more offices may be held by the same person, provided
that the President and Clerk shall not be the same person. The Clerk shall be a
resident of Massachusetts unless the Corporation has a resident agent appointed
for the purpose of service of process. Any officer may be required by the
Directors to give bond for the faithful performance of his duties to the
Corporation in such amount and with such sureties as the Directors may
determine.
4. Tenure. Except as otherwise provided by law, by the Articles of
Organization or by these By-Laws, the Chairman of the Board, President,
Treasurer and Clerk shall hold office until the first meeting of the Directors
following the annual meeting of stockholders and thereafter until his successor
is chosen and qualified; and all other officers shall hold office until the
first meeting of the Directors following the annual meeting of stockholders and
until their successors are chosen and qualified, or for such shorter term as the
Board of Directors may fix at the time such officers are chosen. Any officer may
resign by delivering his written resignation to the Corporation at its principal
office or to the President or Clerk and such resignation shall be effective upon
receipt unless it is specified to be effective at some other time or upon the
happening of some other event.
5. Removal. The Directors may remove any officer with or without cause by a
vote of a majority of the entire number of Directors then in office, provided
that an officer may be removed for cause only after reasonable notice and
opportunity to be heard by the Board of Directors prior to action thereon.
6. Chairman of the Board. The Chairman of the Board shall preside at all
meetings of the Directors and the Stockholders and shall have such other powers
and duties as are usually vested in the office of Chairman of the Board or as
may be vested in him by the Board of Directors.
7. President. Unless otherwise provided by the Board of Directors, the
President shall be the chief executive officer of the Corporation and shall,
subject to the direction of the Directors, have
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<PAGE> 14
general supervision and control of its business. The President, in the absence
of the Chairman of the Board, shall preside at all meetings of stockholders and
Directors.
8. Vice Presidents. The Executive Vice President, or if there shall be no
Executive Vice President, the Vice Presidents in the order determined by the
Directors, shall, in the absence or disability of the President, perform the
duties and exercise the powers of the President and shall perform such other
duties and shall have such other powers as the Directors may from time to time
prescribe.
9. Treasurer and Assistant Treasurers. The Treasurer shall, subject to the
direction of the Directors, have general charge of the financial affairs of the
Corporation and shall cause to be kept accurate books of account. He shall have
custody of all funds, securities and valuable documents of the Corporation,
except as the Directors may otherwise provide.
The Assistant Treasurer, or if there shall be more than one, the Assistant
Treasurers in the order determined by the Directors, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and shall have such other powers
as the Directors may from time to time prescribe.
10. Clerk and Assistant Clerks. The Clerk shall keep a record of the
meetings of stockholders. Unless a Transfer Agent is appointed, the Clerk shall
keep or cause to be kept in Massachusetts, at the principal office of the
Corporation or at his office, the stock and transfer records of the Corporation,
in which are contained the names of all stockholders and the record address, and
the amount of stock held by each.
If there is no Secretary or Assistant Secretary, the Clerk shall keep a
record of the meetings of the Directors.
The Assistant Clerk, or if there shall be more than one, the Assistant
Clerks in the order determined by the Directors, shall, in the absence or
disability of the Clerk, perform the duties and exercise the powers of the Clerk
and shall perform such other duties and shall have such other powers as the
Directors may from time to time prescribe.
11. Other Powers and Duties. Each officer shall, subject to these By-Laws,
have in addition to the duties and powers specifically set forth in these
By-Laws, such duties and powers as are customarily incident to his office, and
such duties and powers as the Directors may from time to time designate.
12. Salaries. The salaries and other compensation of officers, agents and
employees of the Corporation shall be fixed from time to time by or under
authority of the Board of Directors. No
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<PAGE> 15
officer shall be prevented from receiving a salary or other compensation by
reason of the fact that such person is also a Director of the Corporation.
ARTICLE IV - CAPITAL STOCK
1. Certificate of Stock. Each stockholder shall be entitled to a
certificate of the capital stock of the Corporation in such form as may be
prescribed from time to time by the Directors. However, the Board of Directors
may provide that such stock be uncertificated. The certificate, if any, shall be
signed by the President, or a Vice President, and by the Treasurer or an
Assistant Treasurer, but when a certificate is counter-signed by a transfer
agent or a registrar, other than a Director, officer or employee of the
Corporation, such signature may be a facsimile. In case any officer who has
signed or whose facsimile signature has been placed upon such certificate shall
have ceased to be such officer before such certificate is issued, it may be
issued by the Corporation with the same effect as if he were such officer at the
time of its issue.
Every certificate for shares of stock which are subject to any restriction
on transfer pursuant to the Articles of Organization, the By-Laws or any
agreement to which the Corporation is a party, shall have conspicuously noted on
the face or back of the certificate either the full text of the restriction or a
statement of the existence of such restrictions and a statement that the
Corporation will furnish a copy thereof to the holder of such certificate upon
written request and without charge. Every certificate issued when the
Corporation is authorized to issue more than one class or series of stock shall
set forth on its face or back either the full text of the preferences, voting
powers, qualifications and special and relative rights of the shares of each
class and series authorized to be issued or a statement of the existence of such
preferences, powers, qualifications and rights and a statement that the
Corporation will furnish a copy thereof to the holder of such certificate upon
written request and without charge.
2. Transfers. Subject to the, restrictions, if any, stated or noted on the
stock certificates, shares of stock may be transferred on the books of the
Corporation by the surrender to the Corporation or its Transfer Agent of the
certificate therefore properly endorsed or accompanied by a written assignment
and power of attorney properly executed, with necessary transfer stamps affixed,
and with such proof of the authenticity of signature as the Corporation or its
Transfer Agent may reasonably require. Except as may be otherwise required by
law, by the Articles of Organization or by these By-Laws, the Corporation shall
be entitled to treat the record holder of stock as shown on its books as the
owner of such stock for all purposes, including the payment of dividends and the
right to vote with respect thereto, regardless of any transfer, pledge or other
disposition of such stock until the shares have been transferred on the books of
the Corporation in accordance with the requirements of these By-Laws.
It shall be the duty of each stockholder to notify the Corporation of his
post office address and of his taxpayer identification number.
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<PAGE> 16
3. Record Date. The Directors may fix in advance a time not more than
sixty days preceding the date of any meeting of stockholders or the date for the
payment of any dividend or the making of any distribution to stockholders or the
last day on which the consent or dissent of stockholders may be effectively
expressed for any purpose, as the record date of determining the stockholders
having the right to notice of and to vote at such meeting, and any adjournment
thereof, or the right to receive such dividend or distribution or the right to
give such consent or dissent. In such case, only stockholders of record on such
record date shall have such right, notwithstanding any transfer of stock on the
books of the Corporation after the record date. Without fixing such record date
the Directors may for any of such purposes close the transfer books for all or
any part of such period.
If no record date is fixed and the transfer books are not closed, the
record date for determining the stockholders having the right to notice of or
to vote at a meeting of stockholders shall be at the close of business on the
date next preceding the day on which notice is given, and the record date for
determining the stockholders for any other purpose shall be at the close of
business on the day on which the Board of Directors acts with respect thereto.
4. Replacement of Certificates. In case of the alleged loss or
destruction or the mutilation of a certificate of stock, a duplicate
certificate may be issued in place thereof, upon such terms as the Directors
may prescribe, including the presentation of reasonable evidence of such loss,
destruction or mutilation and the giving of such indemnity as the Directors may
require for the protection of the Corporation or any transfer agent or
registrar.
5. Issue of Capital Stock. The Board of Directors shall have the
authority to issue or reserve for issue from time to time the whole or any part
of the capital stock of the Corporation which may be authorized from time to
time, to such persons or organizations, for such consideration, whether cash,
property, services or expenses and on such terms as the Board of Directors may
determine, including without limitation the granting of options, warrants, or
conversion or other rights to subscribe to said capital stock. Pursuant to
Section 12 of Article II, the Board of Directors may, if permitted by law,
delegate some or all of its authority under this Section 5 to one or more
committees of Directors.
ARTICLE V - MISCELLANEOUS PROVISIONS
1. Fiscal Year. Except as from time to time otherwise determined by
the Directors, the fiscal year of the Corporation shall be the calendar year.
2. Seal. The seal of the Corporation shall, subject to alteration by
the Directors, bear its name, the word "Massachusetts", and the year of its
incorporation.
3. Execution of Instruments. All checks, deeds, leases, transfers,
contracts, bonds, notes and other obligations authorized to be executed by an
officer of the Corporation on its behalf shall be
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<PAGE> 17
signed by the President or the Treasurer except as the Directors may generally
or in particular cases otherwise determine.
4. Voting of Securities. Except as the Directors may otherwise
designate, the President or Treasurer may waive notice of, and act as, or
appoint any person or persons to act as, proxy or attorney-in-fact for this
Corporation (with or without power of substitution) at, any meeting of
stockholders or shareholders of any other corporation or organization, the
securities of which may be held by this Corporation.
5. Corporate Records. The original, or attested copies, of the Articles
of Organization, By-Laws and records of all meetings of the incorporators and
stockholders, and the Stock and transfer records, which shall contain the names
of all stockholders and the record address and the amount of stock held by
each, shall be kept in Massachusetts at the principal office of the
Corporation, or at the office of its Transfer Agent or of the Clerk. The stock
and transfer records, which shall contain the names of all stockholders and the
record address and the amount of stock held by each, shall be kept at the
principal office of the Corporation in Massachusetts, or at an office of its
Transfer Agent or Clerk. Said copies and records need not all be kept in the
same office. They shall be available at all reasonable times to the inspection
of any stockholder for any proper purpose, but not to secure a list of
stockholders for the purpose of selling said list or copies thereof or of using
the same for a purpose other than in the interest of the applicant, as a
stockholder, relative to the affairs of the Corporation.
6. Evidence of Authority. A certificate by the Clerk or an Assistant
Clerk, or a Temporary Clerk, as to any action taken by the stockholders,
Directors, Executive Committee, or any officer or representative of the
Corporation shall as to all persons who rely thereon in good faith be
conclusive evidence of such action.
7. Articles of Organization. All references in these By-Laws to the
Articles of Organization shall be deemed to refer to the Articles of
Organization of the Corporation, as amended and in effect from time to time.
8. Transactions with Interested Parties. In the absence of fraud, no
contract or other transaction between this Corporation and any other corporation
or any firm, association, partnership or person shall be affected or invalidated
by the fact that any Director or officer of this Corporation is pecuniarily or
otherwise interested in or is a director, member or officer of such other
corporation or of such firm, association or partnership or is a party to or is
pecuniarily or otherwise interested in such contract or other transaction or is
in any way connected with any person or persons, firm, association, partnership,
or corporation pecuniarily or otherwise interested therein; provided that the
fact that he individually or as a director, member or officer of such
corporation, firm, association or partnership is such a party or is so
interested shall be disclosed to or shall have been known by the Board of
Directors or a majority of such members thereof as shall be present at a meeting
of the
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<PAGE> 18
Board of Directors at which action upon any such contract or transaction shall
be taken; any Director may be counted in determining the existence of a quorum
and may vote at any meeting of the Board of Directors of this Corporation for
the purpose of authorizing any such contract or transaction with like force and
effect as if he were not so interested, or were not a director, member or
officer of such other corporation, firm, association or partnership, provided
that any vote with respect to such contract or transaction must be adopted by a
majority of the Directors then in office who have no interest in such contract
or transaction.
9. Indemnification. The Corporation shall indemnify each person (and his
heirs, executors, administrators, or other legal representatives) who is, or
shall have been, a Director, officer, employee or agent of the Corporation or
any person who is serving, or shall serve as a Director, officer, employee or
agent of another organization in which the Corporation owns shares or of which
it is a creditor, against all liabilities and expenses (including judgments,
fines, penalties and attorneys' fees and all amounts paid, other than to the
Corporation or such other organization, in compromise or settlement) reasonably
incurred by any such Director, officer, or person in connection with, or arising
out of, any action, suit or proceeding in which any such Director, officer, or
person may be a party defendant or with which he may be threatened or otherwise
involved, directly or indirectly, by reason of his being or having been a
Director or officer of the Corporation or such other organization, except in
relation to matters as to which any such Director, officer, or person shall be
finally adjudged (other than by consent) in such action, suit or proceeding not
to have acted in good-faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Corporation or such other organization,
and, with respect to any criminal action or proceeding he had no reasonable
cause to believe his conduct was unlawful; provided, however, that indemnity
shall not be made with respect to any such amounts paid in compromise or
settlement or by consent, unless the Board of Directors shall have determined in
good faith that the Director, officer or person making such compromise,
settlement, or consent acted, in connection with the matter or matters out of
which such compromise, settlement or consent arose, in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation or such other organization, and, with respect to any criminal
action or proceeding that he had no reasonable cause to believe his conduct was
unlawful. Such indemnification may include payment by the Corporation of
expenses in defending a civil or criminal action or proceeding in advance of the
final disposition of such action or proceeding upon receipt of any undertaking
by the person indemnified to repay such payment if he shall be adjudicated to be
not entitled to indemnification under this section.
The foregoing right to indemnification shall not be exclusive of any other
rights to which any such Director, officer or person is entitled under any
agreement, vote of stockholders, statute, or as a matter of law, or otherwise.
The provisions of this section are separable, and if any provision or portion
hereof shall for any reason be held inapplicable, illegal or ineffective, this
shall not affect any right of indemnification existing otherwise than under
this section.
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<PAGE> 19
10. Stock in Other Corporations. Except as the Directors may otherwise
designate, the President or Treasurer may waive notice of, and appoint any
person or persons to act as proxy or attorney in fact for the Corporation (with
or without power of substitution) at any meeting of stockholders or
shareholders of any other corporation or organization, the securities of which
may be held by this Corporation.
11. Severability. If any term or provision of these By-Laws, or the
application thereof to any person or circumstance or period of time, shall to
any extent be invalid or unenforceable, the remainder of the By-Laws shall be
valid and enforceable to the fullest extent permitted by law.
ARTICLE VI - AMENDMENTS
1. Amendment by Directors. Except with respect to any provisions of these
By-Laws which by law, the Articles of Organization or these By-Laws require
action by the stockholders, these By-Laws may be amended or repealed by the
affirmative vote of a majority of the Directors then in office. Not later than
the time of giving notice of the annual meeting of stockholders next following
the amending or repealing by the Directors of any By-Law, notice thereof
stating the substance of such change shall be given to all stockholders
entitled to vote on amending the By-Laws.
2. Amendment by Stockholders. These By-Laws may be amended or repealed at
any annual meeting of stockholders, or special meeting of stockholders called
for such purpose, by the affirmative vote of at least two-thirds of the total
votes eligible to be cast on such amendment or repeal by holders of voting
stock, voting together as a single class; provided, however, that if the Board
of Directors recommends that stockholders approve such amendment or repeal at
such meeting of stockholders, such amendment or repeal shall only require the
affirmative vote of a majority of the total votes eligible to be cast on such
amendment or repeal by holders of voting stock, voting together as a single
class. Notwithstanding the foregoing, no shareholder approval shall be required
unless mandated by the Articles of Organization, these By-Laws, or other
applicable law.
A true record,
ATTEST: , Clerk
----------------------------
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<PAGE> 1
EXHIBIT 23.1
Consent of Cranmore, FitzGerald & Meaney
We hereby consent to the reference to this firm under the caption
"Legal Matters" in the Registration Statement on Form S-4 of Westbank
Corporation.
/s/ Cranmore, FitzGerald & Meaney
CRANMORE, FITZGERALD & MEANEY
September 30, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF SHIPMAN & GOODWIN LLP
We hereby consent to the reference to this firm under the caption "Legal
Matters" in the Registration Statement on Form S-4 of Westbank Corporation. In
giving this consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the rules and regulations of the Securities and Exchange
Commission.
/s/ Shipman & Goodwin LLP
-------------------------
Shipman & Goodwin LLP
September 30, 1998
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in this Registration
Statement of Westbank Corporation (the "Company") on Form S-4 of our report
dated February 6, 1998 incorporated by reference in the Company's 1997 Annual
Report on Form 10-K and appearing in the Company's 1997 Annual Report to
Shareholders and to the reference to us under the heading "Experts" in the Proxy
Statement-Prospectus, which is part of this Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Hartford, CT
September 30, 1998
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Cargill Bancorp, Inc.
Putnam, Connecticut
We hereby consent to the use of our report to the Board of Directors
and Stockholders of Cargill Bancorp, Inc. dated October 31, 1997, except for
Note 14 as to which the date is January 26, 1998 in the Registration Statement
(Form S-4), of Westbank Corporation and the reference to us in the section of
the Registration Statement designated "Experts."
/s/ Snyder & Haller
SNYDER & HALLER
Hartford, Connecticut
September 30, 1998
<PAGE> 1
EXHIBIT 23.5
CONSENT OF NORTHEAST CAPITAL & ADVISORY, INC.
September 30, 1998
We consent to the inclusion of the opinion of our firm dated July 15, 1998
included in the Registration Statement on Form S-4 of Westbank Corporation and
to all references to our firm in or made a part of such Registration Statement.
/s/ Northeast Capital & Advisory, Inc.
NORTHEAST CAPITAL & ADVISORY, INC.
Albany, New York
September 30, 1998
<PAGE> 1
EXHIBIT 23.6
CONSENT OF OSTROWSKI & COMPANY, INC.
September 30, 1998
Ostrowski & Company, Inc. hereby consents to the inclusion of its
fairness opinion dated July 14, 1998 (the "Opinion") in the Registration
Statement of Westbank Corporation (the "Registration Statement"). In addition,
Ostrowski & Company, Inc. also consents to the inclusion of the related
discussion of the Opinion in the Registration Statement.
/s/ Ostrowski & Company, Inc.
OSTROWSKI & COMPANY, INC.
<PAGE> 1
EXHIBIT 99.1
CARGILL BANCORP, INC.
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 16, 1998
THIS PROXY SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned, revoking all proxies, hereby appoint(s) Raymond P. Faucher, Sr.
and Howard Stanton, III, and each of them, with full power of substitution, as
proxies to represent and vote as designated herein, all shares of stock of
Cargill Bancorp, Inc. (the "Company") which the undersigned would be entitled to
vote if personally present at the Special Meeting of Shareholders of the Company
to be held at the Heritage Road Cafe, 5 Heritage Road, Putnam, Connecticut, on
December 16, 1998 at 10:00 a.m., local time, and at any adjournment thereof.
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder(s). IF NO DIRECTION IS GIVEN,
THIS PROXY WILL BE VOTED FOR PROPOSAL 1. The undersigned may revoke this proxy
at any time before it is voted by executing and delivering to the Company a
proxy bearing a later date, by delivering a written notice to the Secretary of
the Company stating that the proxy is revoked, or by voting in person at the
meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND RETURN THIS PROXY IN THE ACCOMPANYING ENVELOPE AS SOON
AS POSSIBLE.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING AND ANY ADJOURNMENT THEREOF.
FOLD AND DETACH HERE
<PAGE> 2
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER(S). IF NO OTHER INDICATION IS MADE, THE PROXIES SHALL
VOTE "FOR" PROPOSAL NUMBER 1.
Please mark your votes as indicated in this example.
X
1.To approve and adopt the Affiliation and Merger Agreement, dated as of July
15, 1998 (the "Merger Agreement"), by and among Cargill Bancorp, Inc.
("Cargill"), Cargill Bank, Park West Bank and Trust Company and
Westbank Corporation ("Westbank") and the
transactions contemplated thereby,
including the Merger of Cargill with and into
Westbank upon the terms and subject to the
conditions set forth in the Merger Agreement.
MARK HERE IF YOU PLAN TO
ATTEND THE MEETING
MARK HERE FOR ADDRESS CHANGE
AND NOTE AT LEFT
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 1.
FOR A A
G B
A S
I T
N A
S I
T N
Dated: ,___________________________________
1998
_______________________________________
_______________________________________
Signature
Signature if held jointly
NOTE: PLEASE SIGN EXACTLY AS NAME
APPEARS HEREON. WHEN SHARES ARE HELD
BY JOINT OWNERS, BOTH SHOULD SIGN.
WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL
CORPORATE NAME BY AUTHORIZED
OFFICER, GIVING FULL TITLE. IF A
PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED
PERSON, GIVING FULL TITLE.
FOLD AND DETACH HERE
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