<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
--------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
UNION BANKSHARES COMPANY
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: Common
stock, par value $1.00 per share, of Mid-Coast Bancorp, Inc., a Delaware
corporation (the "Common Stock").
(2) Aggregate number of securities to which transaction applies: 753,727
shares of Common Stock and options to purchase 5,426 shares of Common
Stock.
(3) Per unit price or underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined): $15.875 per share in
cash-out merger plus 0.(1)
(4) Proposed maximum aggregate value of transaction: $12,051,553.(1)
(5) Total fee paid: $2,410.31(1)
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
--------------------------------------------------------------------------------
(1) The aggregate value of the transaction from which the fee paid is calculated
represents payment in full of the per share cash merger consideration of
$15.875 for each of 753,727 shares of Common Stock and options to purchase
5,426 shares of Common Stock. However, under the terms of the Merger
Agreement, each holder of an option to purchase Common Stock shall only be
entitled to receive a cash payment equal to the excess of (i) $15.875
multiplied by the number of shares of Common Stock subject to the options
less (ii) the aggregate exercise price for shares of Common Stock subject to
the options, less any applicable taxes. In addition, up to approximately
9,850 unawarded shares of Common Stock remaining in the Mid-Coast Bancorp,
Inc. Recognition and Retention Plan will be cancelled at the effective date
of the Merger. As a result, the actual aggregate value of the transaction
may be lower.
<PAGE> 2
MID-COAST [UNION BANKSHARES LOGO]
BANCORP, INC.
JOINT PROXY STATEMENT
FOR THE SPECIAL MEETINGS OF STOCKHOLDERS OF
MID-COAST BANCORP, INC. AND UNION BANKSHARES COMPANY
PROPOSED MERGER
To the Stockholders of Mid-Coast Bancorp, Inc.
and Union Bankshares Company:
The board of directors of Mid-Coast Bancorp, Inc., a savings and loan
holding company headquartered in Waldoboro, Maine, and Union Bankshares Company,
a bank holding company headquartered in Ellsworth, Maine, have unanimously
approved a merger agreement that provides for the merger of Mid-Coast into Union
Bankshares as more fully described in the joint proxy statement.
As a result of the proposed merger, The Waldoboro Bank, F.S.B., a federally
chartered savings bank and Mid-Coast's wholly owned subsidiary, will be merged
with Union Trust Company, a Maine chartered trust company which is a wholly
owned subsidiary of Union Bankshares, through the execution of a subsidiary
merger agreement.
If the proposed merger is completed, Mid-Coast stockholders will receive
$15.875 in cash for each share of Mid-Coast common stock owned by them. The
approximate cash value of the transaction is $11.9 million based on
approximately 753,727 shares of Mid-Coast common stock outstanding and 5,426
options to purchase Mid-Coast common stock which will be exchanged for cash.
Mid-Coast common stock is traded on The Nasdaq SmallCap Market, under the
symbol "MCBN." The closing price of Mid-Coast common stock on June 23, 2000 was
$15.00.
Mid-Coast stockholders are cordially invited to attend a special meeting of
Mid-Coast stockholders which will be held on August 3, 2000 at 3:00 p.m., local
time, at the Samoset Resort, located at 220 Warrenton Street, Rockport, Maine
04856. At the Mid-Coast special meeting, Mid-Coast stockholders will be asked to
approve the merger agreement governing the proposed merger. The merger cannot be
completed unless the holders of a majority of the issued and outstanding shares
of Mid-Coast common stock approve it.
Union Bankshares stockholders are cordially invited to attend a special
meeting of Union Bankshares stockholders which will be held on August 3, 2000 at
11:00 a.m., local time, at White Birches Restaurant, Route 1, Hancock, Maine. At
the Union Bankshares special meeting, Union Bankshares stockholders will be
asked to approve the merger agreement governing the proposed merger. The merger
cannot be completed unless the holders of 67 percent of the issued and
outstanding shares of Union Bankshares common stock approve it.
<TABLE>
<S> <C>
Sincerely yours, Sincerely yours,
Mid-Coast Bancorp, Inc. Union Bankshares Company
/s/ Wesley E. Richardson /s/ Peter A. Blyberg
Wesley E. Richardson Peter A. Blyberg
President and Chief Executive Officer President and Chief Executive Officer
</TABLE>
The date of this joint proxy statement is June 27, 2000. It is first being
mailed on or about June 29, 2000.
LOGO
<PAGE> 3
The principal executive offices of Mid-Coast and Union Bankshares are as
follows:
<TABLE>
<S> <C>
Mid-Coast Bancorp, Inc. Union Bankshares Company
1768 Atlantic Highway 66 Main Street
Waldoboro, Maine 04572 Ellsworth, Maine 04605
Telephone: 207-832-7521 Telephone: 207-667-2504
</TABLE>
<PAGE> 4
UNION BANKSHARES COMPANY
66 MAIN STREET
ELLSWORTH, MAINE 04605
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS OF
UNION BANKSHARES COMPANY
TO BE HELD ON AUGUST 3, 2000
Union Bankshares Company will hold a special meeting of stockholders at
White Birches Restaurant, in Hancock, Maine, at 11:00 a.m., local time, on
August 3, 2000, to vote on:
(1) The Merger Agreement. The Amended and Restated Agreement and Plan of
Merger, dated June 20, 2000, by and among Mid-Coast Bancorp, Inc.,
Union Bankshares Company and UBC Acquisition Company, Inc. (the "Merger
Agreement"), and the transactions contemplated by the Merger Agreement.
In connection with the Merger Agreement, Mid-Coast will be merged with
UBC Acquisition Company, a wholly-owned subsidiary of Union Bankshares
and then subsequently merged directly with and into Union Bankshares.
The Waldoboro Bank, F.S.B., a federal savings bank and wholly owned
subsidiary of Mid-Coast, will be merged with and into Union Trust
Company, a Maine chartered trust company and wholly-owned subsidiary of
Union Bankshares.
(2) Other Business. Any other matters that properly come before the
special meeting, or any adjournments or postponements of the special
meeting.
Record holders of Union Bankshares common stock at the close of business on
June 21, 2000, will receive notice of and may vote at the special meeting,
including any adjournments or postponements. The approval of the holders of 67
percent of the issued and outstanding Union Bankshares common stock is required
to approve the Merger Agreement.
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the special
meeting, please take the time to vote by completing and mailing the enclosed
proxy card. If you sign, date and mail your proxy card without indicating how
you want to vote, we will vote your proxy in favor of the Merger Agreement. If
you do not return your card or attend and vote at the special meeting the effect
will be a vote against the Merger Agreement.
Should you have any questions or require assistance, please call Peter
Blyberg at (207) 667-2504.
By Order of the Board of Directors
/S/ Sally J. Hutchins
Sally J. Hutchins
Clerk
June 27, 2000
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF
THE MERGER AGREEMENT.
<PAGE> 5
MID-COAST BANCORP, INC.
1768 ATLANTIC HIGHWAY
WALDOBORO, MAINE 04572
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS OF
MID-COAST BANCORP, INC.
TO BE HELD ON AUGUST 3, 2000.
Mid-Coast Bancorp, Inc. will hold a special meeting of stockholders at the
Samoset Resort, located at 220 Warrenton Street, Rockport, Maine 04856, at 3:00
p.m., local time, on August 3, 2000, to vote on:
(1) The Merger Agreement. The Amended and Restated Agreement and Plan of
Merger, dated June 20, 2000, by and among Mid-Coast Bancorp, Inc.,
Union Bankshares Company and UBC Acquisition Company, Inc. (the "Merger
Agreement"), and the transactions contemplated by the Merger Agreement.
In connection with the Merger Agreement, Mid-Coast will be merged with
UBC Acquisition Company, a wholly-owned subsidiary of Union Bankshares
and then subsequently merged with and into Union Bankshares. The
Waldoboro Bank, F.S.B., a federal savings bank and wholly owned
subsidiary of Mid-Coast, will be merged with and into Union Trust
Company, a Maine chartered trust company and wholly-owned subsidiary of
Union Bankshares.
(2) Other Business. Any other matters that properly come before the
special meeting, or any adjournments or postponements of the special
meeting.
Record holders of Mid-Coast common stock at the close of business on June
15, 2000, will receive notice of and may vote at the special meeting, including
any adjournments or postponements. The approval of the holders of a majority of
the outstanding shares of Mid-Coast common stock is required to approve the
Merger Agreement.
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the special
meeting, please take the time to vote by completing and mailing the enclosed
proxy card. If you sign, date and mail your proxy card without indicating how
you want to vote, we will vote your proxy in favor of the Merger Agreement. If
you do not return your card or attend and vote in favor at the special meeting,
the effect will be a vote against the Merger Agreement.
Should you have any questions or require assistance, please call Wesley
Richardson at (207) 832-7521.
By Order of the Board of Directors
/s/ Robert E. Carter, Jr.
Robert E. Carter, Jr.
Senior Vice President, Chief
Operations Officer
and Secretary
June 27, 2000
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF
THE MERGER AGREEMENT.
<PAGE> 6
PLEASE NOTE
No one has been authorized to provide Mid-Coast stockholders or Union
Bankshares stockholders with any information other than the information included
in this joint proxy statement and the documents that are referred to in this
joint proxy statement. Stockholders of Mid-Coast or Union Bankshares should not
rely on other information as being authorized by Mid-Coast or Union Bankshares.
This joint proxy statement has been prepared as of June 27, 2000. There may
be changes in the affairs of Union Bankshares or Mid-Coast since that date which
are not reflected in this document.
As used in this joint proxy statement, the terms "Mid-Coast" and "Union
Bankshares" refer to Mid-Coast Bancorp, Inc. and Union Bankshares Company,
respectively, and, where the context requires, to Mid-Coast and Union Bankshares
and their respective subsidiaries. There is also a Glossary of other defined
terms, located on page 7 immediately after the Questions and Answers, for your
reference.
HOW TO OBTAIN ADDITIONAL INFORMATION
THIS JOINT PROXY STATEMENT INCORPORATES IMPORTANT BUSINESS AND FINANCIAL
INFORMATION ABOUT UNION BANKSHARES AND MID-COST THAT MAY NOT BE INCLUDED IN OR
DELIVERED WITH THIS DOCUMENT. THIS INFORMATION IS DESCRIBED ON PAGE 62 UNDER
"WHERE YOU CAN FIND MORE INFORMATION." YOU CAN OBTAIN FREE COPIES OF THIS
INFORMATION BY WRITING OR CALLING:
<TABLE>
<S> <C>
Mr. Peter A. Blyberg, Mr. Wesley E. Richardson,
President and CEO President and CEO
Union Bankshares Company Mid-Coast Bancorp, Inc.
66 Main Street 1768 Atlantic Highway
Ellsworth, Maine 04605 Waldoboro, Maine 04572
Telephone: (207) 667-2504 Telephone: (207) 832-7521
</TABLE>
IN ORDER TO OBTAIN TIMELY DELIVERY OF THE DOCUMENTS, YOU MUST REQUEST THE
INFORMATION BY JULY 27, 2000.
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY TERM SHEET.......................................... 1
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 5
GLOSSARY OF DEFINED TERMS................................... 7
A WARNING ABOUT FORWARD-LOOKING STATEMENTS.................. 8
SPECIAL MEETINGS OF STOCKHOLDERS............................ 9
Purpose................................................... 9
Date, Place, and Time..................................... 9
Record Date, Voting Rights, Required Vote, and
Revocability of Proxies................................ 9
Solicitation of Proxies................................... 11
Appraisal Rights.......................................... 12
PARTIES TO THE MERGER....................................... 15
Business of Mid-Coast Bancorp, Inc........................ 15
Business of Union Bankshares Company...................... 16
THE MERGER.................................................. 16
The Merger................................................ 16
Background for the Merger................................. 16
Reasons for the Merger and Board Recommendations.......... 19
Opinion of Mid-Coast's Financial Advisor.................. 21
Opinion of Union Bankshares' Financial Advisor............ 25
What Mid-Coast Stockholders Will Receive in the Merger.... 30
Financing................................................. 30
Interests of Certain Persons in the Merger................ 31
Risk Factors for Union Bankshares Stockholders............ 32
Procedures for Exchange of Certificates................... 32
Effective Time of the Merger.............................. 33
Material Federal Income Tax Consequences.................. 33
Regulatory Matters........................................ 34
Accounting Treatment...................................... 35
Effect of the Merger on Mid-Coast Stock Options and Stock
Awards................................................. 35
Conditions to Completion of the Merger.................... 35
Waiver, Amendment and Termination......................... 36
Conduct of Business Pending the Merger.................... 38
Other Acquisition Proposals............................... 38
Expenses and Fees......................................... 38
Representations and Warranties............................ 38
THE OPTION AGREEMENT........................................ 39
General................................................... 39
Effect of the Option Agreement............................ 39
Terms of the Option Agreement............................. 39
Repurchase of the Option.................................. 40
Registration Rights....................................... 40
</TABLE>
i
<PAGE> 8
<TABLE>
<S> <C>
Profit Limitation......................................... 40
Adjustment................................................ 41
Regulatory Matters........................................ 41
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA........ 42
PRO FORMA CONDENSED COMBINING FINANCIAL INFORMATION......... 49
CERTAIN REGULATORY CONSIDERATIONS........................... 54
Certain Restrictions on Activities of Bank Holding
Companies.............................................. 54
Certain Transactions by Bank Holding Companies and Their
Affiliates............................................. 55
Payment of Dividends...................................... 56
Regulation of Waldoboro and Union Trust................... 56
FDIC Insurance Assessments................................ 58
Minimum Capital Requirements and Prompt Corrective
Action................................................. 58
Other Aspects of Federal and State Law.................... 59
Government Policies and Legislative and Regulatory
Proposals.............................................. 60
REGULATORY DEVELOPMENTS..................................... 60
OTHER MATTERS............................................... 60
STOCKHOLDER PROPOSALS....................................... 61
WHERE YOU CAN FIND MORE INFORMATION......................... 62
</TABLE>
ii
<PAGE> 9
APPENDICES
Appendix A -- Amended and Restated Agreement and Plan of Merger, dated June 20,
2000, by and among Mid-Coast Bancorp, Inc., Union Bankshares
Company and UBC Acquisition Company, Inc.
Appendix B -- Amended and Restated Agreement and Plan of Merger, dated June 20,
2000, by and between The Waldoboro Bank, F.S.B. and Union Trust
Company
Appendix C -- Opinion of Trident Securities, a division of McDonald Investments,
Inc.
Appendix D -- Opinion of New England Business Advisors, Inc.
Appendix E -- Option Agreement dated March 27, 2000 by and between Union
Bankshares Company and Mid-Coast Bancorp, Inc.
Appendix F -- Delaware General Corporation Law Section 262
iii
<PAGE> 10
SUMMARY TERM SHEET
This summary term sheet highlights selected information from this joint
proxy statement and may not contain all of the information that is important to
you. You should carefully read this entire document and the other documents we
refer to in this document. These will give you a more complete description of
the transaction we are proposing. We have included page references in this
summary term sheet to direct you to other places in this joint proxy statement
where you can find a more complete description of the topics we discuss below.
THE COMPANIES (page 15) - Union Bankshares Company, a Maine
corporation, is a registered bank holding
company headquartered in Ellsworth, Maine.
Through its subsidiary bank, Union Trust
Company, Union Bankshares provides a
diversified range of financial services and
has 11 branches throughout Washington and
Hancock counties in Maine.
- Mid-Coast Bancorp, Inc., a Delaware
corporation, is a savings and loan holding
company headquartered in Waldoboro, Maine.
Mid-Coast operates through its subsidiary
bank, The Waldoboro Bank, F.S.B., and has
four branches in the mid-coast region of
Maine.
PLACE AND TIME OF SPECIAL
MEETING OF
STOCKHOLDERS (page 9) - Mid-Coast will hold a special meeting of
stockholders at 3:00 p.m., local time, on
August 3, 2000 at the Samoset Resort, in
Rockport, Maine.
- Union Bankshares will hold a special meeting
of stockholders at 11:00 a.m., local time, on
August 3, 2000 at White Birches Restaurant,
in Hancock, Maine.
MATTERS TO BE VOTED UPON AT
THE
SPECIAL MEETING (page 9) - Approval of the Merger Agreement; and
- Any other items that may be submitted to a
vote at the special meeting or any
adjournment or postponement thereof.
REASONS FOR THE MERGER (page
19) - We believe that the business potential for
the combination of Mid-Coast and Union
Bankshares exceeds what Mid-Coast or Union
Bankshares could accomplish by themselves. In
addition, we believe that the combined
companies will be stronger than either
Mid-Coast or Union Bankshares on a
stand-alone basis as the products and
services available to Mid-Coast and Union
Bankshares customers will be expanded. We
also anticipate that the combined resources
and capital of Mid-Coast and Union Bankshares
will better allow Union Bankshares, as the
surviving corporation in the Merger, to more
effectively compete in the changing and
competitive financial services industry.
SOME MATERIAL TERMS OF THE
MERGER
AGREEMENT (page 16) - Mid-Coast will first merge with a newly
formed wholly-owned subsidiary of Union
Bankshares and become a subsidiary of Union
Bankshares. Immediately thereafter, Mid-Coast
will merge up and into Union Bankshares and
Union Bankshares will be the surviving
corporation;
- Waldoboro will merge with and into Union
Trust with Union Trust as the surviving
entity;
- Following the Merger, two directors of
Mid-Coast will serve on the board of
directors for Union Bankshares; and
- If the Merger is not completed on or before
December 31, 2000, the board of directors of
either Mid-Coast or Union Bankshares
1
<PAGE> 11
may terminate the Merger Agreement and abandon the Merger provided that the
failure to complete the Merger by that date is not due to any breach of the
terminating party's representations or obligations under the Merger Agreement.
BOARD RECOMMENDATIONS (page
19) - Both boards of directors of Union Bankshares
and Mid-Coast have unanimously approved the
Merger Agreement and unanimously recommend
that Union Bankshares and Mid-Coast
stockholders vote "For" the proposal.
EFFECTIVE DATE OF THE MERGER
(page 33) - The Merger will be effective when a
certificate of merger filed on behalf of
Mid-Coast and Acquisition Company with the
Delaware Secretary of State becomes
effective.
MERGER CONSIDERATION TO BE
RECEIVED
BY MID-COAST STOCKHOLDERS
(page 30) - Mid-Coast stockholders will receive $15.875
in cash for each share of Mid-Coast common
stock that they own.
EXCHANGE OF STOCK CERTIFICATES
(page 32) - Mid-Coast stockholders should not send in
stock certificates until they receive a
letter and instructions from the Exchange
Agent on how to surrender Mid-Coast stock
certificates.
- Union Bankshares stockholders will not
exchange their shares of Union Bankshares
common stock and should not send in their
stock certificates.
NO FINANCING REQUIREMENT (page
30) - Union Bankshares will pay the aggregate Cash
Merger Consideration of $15.875 per share,
estimated to be $11.9 million, out of cash
available to it. Such cash may be generated
by Union Bankshares from a combination of
cash reserves or sales of securities. Union
Bankshares may seek to obtain financing from
a third party but such financing is not
required in order for Union Bankshares to
complete the Merger or pay the full amount of
the Cash Merger Consideration.
MID-COAST STOCK OPTIONS AND
STOCK
AWARDS (page 35) - Mid-Coast's stock option plan and its
Recognition and Retention Plan will terminate
on the effective date of the Merger.
- Stock options to purchase Mid-Coast common
stock and awards made pursuant to Mid-Coast's
Recognition and Retention Plan will become
immediately vested and holders of these
options and awards will receive a cash
payment in accordance with the calculation
presented in the Merger Agreement.
VOTE REQUIRED (page 9) - Approval of the Merger Agreement requires:
-- the affirmative vote of 67 percent of the
outstanding shares of Union Bankshares
common stock; and
-- the affirmative vote of a majority of the
outstanding shares of Mid-Coast common
stock.
ABSTENTION OR NON-VOTE (page
9) - Any abstention, non-voting of shares or
"broker non-vote" will have the same effect
as a vote "Against" approval of the Merger
Agreement.
RECORD DATE AND VOTING RIGHTS
(page 9) - Union Bankshares' board of directors has
fixed June 21, 2000 as the record date for
determining those Union Bankshares
stockholders who are entitled to notice of
and to vote at the Union Bankshares special
meeting.
2
<PAGE> 12
- Mid-Coast's board of directors has fixed June
15, 2000 as the record date for determining
those Mid-Coast stockholders who are entitled
to notice of and to vote at the Mid-Coast
special meeting.
- Mid-Coast and Union Bankshares stockholders
will be entitled to one vote for each share
of Mid-Coast or Union Bankshares common stock
held by them.
SHARES HELD BY BROKERS (page
9) - Brokers who hold shares in "street name" for
customers who are the beneficial owners of
these shares may not give a proxy to vote
those shares to approve the Merger Agreement
without specific instructions from their
customers.
APPRAISAL RIGHTS (page 12) - If we complete the Merger, Mid-Coast
stockholders who disagree with the Merger
Agreement have the right to receive the
appraised value of their shares in the Merger
if they satisfy certain requirements of
Delaware law.
- Union Bankshares stockholders do not have
appraisal rights with respect to the Merger.
ACCOUNTING TREATMENT (page 35) - Union Bankshares intends to account for the
Merger as a "purchase" for accounting and
financial reporting purposes.
TAX TREATMENT (page 33) - The Merger will be a taxable transaction to
Mid-Coast stockholders for federal income tax
purposes. Each Mid-Coast stockholder should
consult his or her own tax advisors to
determine the effect of the Merger under
federal, state, local, and foreign tax laws.
REGULATORY APPROVALS (page 34) - The Merger and the Subsidiary Merger must be
approved by the Board of Governors of the
Federal Reserve System and prior notice of
the Subsidiary Merger must be provided to the
Office of Thrift Supervision. The U.S.
Department of Justice may also review the
Merger's impact on competition. In addition,
state regulatory authorities, including the
Bureau of Banking of the Department of
Professional and Financial Regulation of the
State of Maine, will need to approve the
Merger and the Subsidiary Merger before the
transactions can be completed.
- We have filed or will file all the regulatory
applications or notices with these state and
federal regulatory authorities. There can be
no assurance that regulatory approvals
received will not contain a condition or
requirement that causes the approvals to fail
to satisfy the conditions set forth in the
Merger Agreement.
INTERESTS OF INSIDERS (page
31) - A number of Mid-Coast directors and executive
officers may have interests in the Merger
that are different from, or in addition to,
their interests as stockholders.
- Some Mid-Coast stock benefit plans provide
for accelerated vesting of stock options and
awards made under its Recognition and
Retention Plan and some interests arise from
provisions of the Merger Agreement relating
to appointments to the Union Bankshares board
of directors, director and officer
indemnification and insurance, and employment
arrangements and benefits after the Merger.
3
<PAGE> 13
- The Mid-Coast and Union Bankshares boards of
directors were aware of these interests and
considered them in approving and recommending
the Merger.
- In connection with the Merger Agreement,
Wesley E. Richardson, President and Chief
Executive Officer of Mid-Coast, will resign
and will receive a severance payment of
approximately $300,000.
OPINION OF FINANCIAL ADVISORS
(page 21) - Mid-Coast received the opinion of its
financial advisor, Trident Securities, a
division of McDonald Investments Inc., to the
effect that as of the date of this joint
proxy statement the payment of $15.875 for
each share of Mid-Coast common stock was fair
to stockholders of Mid-Coast.
- Union Bankshares received the opinion of its
financial advisor, New England Business
Advisors, Inc., to the effect that as of the
date of this joint proxy statement the
payment of $15.875 for each share of
Mid-Coast common stock was fair to
stockholders of Union Bankshares.
- We have attached a copy of these opinions as
Appendices C and D, respectively, to this
joint proxy statement.
AMENDMENT OR TERMINATION OF
THE
MERGER AGREEMENT (page 36) - Union Bankshares and Mid-Coast may mutually
agree to terminate the Merger Agreement and
elect not to complete the Merger at any time
before the effective date of the Merger.
- The parties may also terminate the Merger if
other circumstances occur which are described
in Article 11 of the Merger Agreement,
attached to this joint proxy statement as
Appendix A, including the failure to complete
the Merger by December 31, 2000.
- The Merger Agreement may be amended by the
written agreement of Mid-Coast and Union
Bankshares. After stockholder approval is
obtained, however, certain amendments to the
Merger Agreement may require further
stockholder approval.
OTHER ACQUISITION PROPOSALS
AND THE
OPTION AGREEMENT (page 39) - Mid-Coast has agreed that it will not
encourage or entertain any discussions or
negotiations with other parties with respect
to the possible acquisition of Mid-Coast or
Waldoboro, except as permitted by the Merger
Agreement.
- Mid-Coast has granted Union Bankshares an
option to purchase up to 149,960 shares of
Mid-Coast common stock at $6.00 per share
under certain circumstances if the Merger is
not completed and a third party attempts to
acquire Mid-Coast. That amount of shares is
equal to 19.9% of the Mid-Coast common stock.
ADDITIONAL INFORMATION (page
62) - We have included a description of where you
can find more information about Union
Bankshares and Mid-Coast in this joint proxy
statement.
4
<PAGE> 14
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT AM I BEING ASKED TO VOTE UPON?
A: If you are a Mid-Coast stockholder, you are being asked to approve the
Merger Agreement, which provides for the merger of Mid-Coast into Acquisition
Company, a wholly-owned subsidiary of Union Bankshares. Subsequently Acquisition
Company will be merged up and into Union Bankshares. If we complete the Merger,
you will receive $15.875 per share of Mid-Coast common stock owned by you if you
send your stock certificates at the requested time and in accordance with the
instructions that will be provided to you. After the Merger, Mid-Coast's
subsidiary, Waldoboro, will be merged into Union Trust, Union Bankshares'
subsidiary. Approval of the Merger Agreement requires the vote of a majority of
all outstanding shares of Mid-Coast's common stock.
If you are a Union Bankshares stockholder, we are asking you to approve the
Merger Agreement. Approval of the Merger Agreement requires the vote of 67
percent of all outstanding shares of Union Bankshares' common stock.
Q: WHAT SHOULD I DO NOW?
A: After carefully reading and considering information in this joint proxy
statement, indicate on your proxy card how you want to vote, and sign, date, and
mail it in the enclosed envelope as soon as possible, so that your shares will
be represented at your meeting.
If you sign, date, and send in your proxy but you do not indicate how you
want to vote, your proxy will be voted in favor of the proposal to approve and
adopt the Merger Agreement, whether you are a Union Bankshares stockholder or
Mid-Coast stockholder.
If you do not sign and send in your proxy or attend and vote at the special
meeting, it will have the effect of a vote against the Merger Agreement.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: This depends. Your broker will vote your shares of Mid-Coast common
stock or Union Bankshares common stock, as applicable, but only if you provide
instructions on how to vote. You should instruct your broker how to vote your
shares, following the directions your broker provides.
If you do not provide instructions to your broker, your shares will not be
voted and this will have the effect of voting against the Merger Agreement.
Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. Just send in a later-dated, signed proxy card or a written notice
of revocation before the special meeting, or attend the special meeting and vote
in person. However, attendance at the special meeting by a stockholder who has
executed and delivered a proxy will not in and of itself constitute a revocation
of such proxy.
Q: IF I AM A MID-COAST STOCKHOLDER, SHOULD I SEND IN MY MID-COAST STOCK
CERTIFICATES NOW?
A: No. The Exchange Agent hired by Union Bankshares will send Mid-Coast
stockholders written instructions for exchanging Mid-Coast common stock
certificates for the Cash Merger Consideration of $15.875 per share.
Union Bankshares stockholders will not be exchanging their certificates.
Q: IF I AM A MID-COAST STOCKHOLDER MAY I DISSENT FROM THE MERGER AND SEEK AN
APPRAISAL OF THE FAIR VALUE OF MY SHARES?
A: Yes. If you are a Mid-Coast stockholder and you choose to dissent from
the Merger you are entitled to appraisal of your shares of Mid-Coast common
stock under Delaware law. To exercise your appraisal rights you must strictly
comply with the procedures in Section 262 of the Delaware General Corporation
Law. If you do not strictly comply with these procedures you will lose your
appraisal rights. We have attached a copy of
5
<PAGE> 15
Section 262 of the Delaware General Corporation Law as Appendix F. See also
"Appraisal Rights" on page 12. If you seek appraisal rights, the appraised value
of your shares may be more or less than the consideration to be paid by Union
Bankshares in the Merger.
Union Bankshares stockholders do not have appraisal rights under Maine law
in connection with the Merger.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working toward completing the Merger as quickly as possible. If
the Merger Agreement is approved and other conditions to the Merger are
satisfied, we expect to complete the Merger during the third calendar quarter of
the year 2000.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER?
A: The Merger may be a taxable transaction to holders of Mid-Coast common
stock for federal income tax purposes. A brief review of the possible tax
consequences to holders of Mid-Coast common stock is set forth under the heading
"The Merger -- Material Federal Income Tax Consequences." Holders of Mid-Coast
common stock should consult their own tax advisors as to the tax effect in
particular circumstances.
Q: WHAT OTHER MATTERS MAY BE VOTED ON AT THE UNION BANKSHARES SPECIAL MEETING?
A: In addition to voting on the Merger Agreement, you may be asked to vote
upon any other matters that may properly come before the special meeting or any
adjournment or postponement of the special meeting if Union Bankshares fails to
receive enough votes to approve the Merger Agreement. However, we are not aware
of any matters that will be voted upon at the special meeting other than the
approval of the Merger Agreement.
Q: WHAT OTHER MATTERS MAY BE VOTED ON AT THE MID-COAST SPECIAL MEETING?
A: In addition to voting on the Merger Agreement, you may be asked to vote
upon any other matters that may properly come before the special meeting or any
adjournment or postponement of the special meeting if Mid-Coast fails to receive
enough votes to approve the Merger Agreement. However, we are not aware of any
matters that will be voted upon at the special meeting other than the approval
of the Merger Agreement.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you want additional copies of this document, or if you want to ask
any questions about the Merger, you should contact:
If you are a Mid-Coast stockholder:
Mr. Wesley Richardson, President and CEO
Mid-Coast Bancorp, Inc.
1768 Atlantic Highway
Waldoboro, Maine 04572
Telephone: (207) 832-7521
If you are a Union Bankshares stockholder:
Mr. Peter Blyberg, President and CEO
Union Bankshares Company
66 Main Street
Ellsworth, Maine 04605
Telephone: (207) 667-2504
6
<PAGE> 16
GLOSSARY OF DEFINED TERMS
As used in this joint proxy statement, the following terms shall have the
following meanings:
"Acquisition Company" shall mean UBC Acquisition Company, Inc., a
Delaware corporation and wholly-owned subsidiary of Union Bankshares.
"Cash Merger Consideration" shall mean $15.875 per share of Mid-Coast
common stock.
"Exchange Agent" shall mean the entity engaged by Union Bankshares to
act as agent for the exchange of Mid-Coast common stock for the Cash Merger
Consideration.
"Merger" shall mean the merger of Mid-Coast into Acquisition Company,
and subsequently up and into Union Bankshares under the terms of the Merger
Agreement together with the other transactions contemplated by the Merger
Agreement.
"Merger Agreement" shall mean the Amended and Restated Agreement and
Plan of Merger dated June 20, 2000, by and among Mid-Coast, Union
Bankshares and Acquisition Company, and any amendments thereto, in the form
of Appendix A hereto. References to Articles, Sections, Schedules and the
like refer to the Articles, Sections, Schedules and the like of the Merger
Agreement unless otherwise indicated.
"Mid-Coast" means Mid-Coast Bancorp, Inc., a corporation duly
chartered, organized, and existing under and pursuant to the laws of the
State of Delaware; maintaining its principal place of business at 1768
Atlantic Highway, Waldoboro, Maine 04572.
"Option Agreement" means the Option Agreement dated March 27, 2000, by
and between Mid-Coast and Union Bankshares, and any amendments thereto, in
the form of Appendix E hereto.
"Proxy Solicitation Agent" shall mean the entity engaged by Union
Bankshares to act as agent for the solicitation of proxies from Union
Bankshares stockholders.
"Subsidiary Merger" shall mean the Merger of Waldoboro with and into
Union Trust as contemplated in the Merger Agreement and the Subsidiary
Merger Agreement.
"Subsidiary Merger Agreement" means the Amended and Restated Agreement
and Plan of Merger dated June 20, 2000 by and between Union Trust and
Waldoboro in the form of Appendix B hereto.
"Union Bankshares" means Union Bankshares Company, a corporation duly
chartered, organized and existing under and pursuant to the laws of the
State of Maine; maintaining its principal place of business at 66 Main
Street, Ellsworth, Maine 04605.
"Union Trust" means Union Trust Company, a Maine banking corporation,
duly chartered, organized and existing under and pursuant to the laws of
the State of Maine and maintaining its principal place of business at 66
Main Street, Ellsworth, Maine 04605 and a member of the Federal Reserve
System.
"Waldoboro" means The Waldoboro Bank, F.S.B., a federally chartered
savings bank, organized and existing under and pursuant to the laws of the
United States of America and maintaining its principal place of business
and registered address at 1768 Atlantic Highway, Waldoboro, Maine 04572,
and its subsidiary, First Waldoboro Corporation.
7
<PAGE> 17
A WARNING ABOUT FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements about Union Bankshares
and Mid-Coast following the Merger. These statements can be identified by our
use of words like "expect," "may," "could," "intend," "project," "estimate" or
"anticipate." These forward-looking statements reflect our current views, but
they are based on assumptions and are subject to risks, uncertainties and other
factors. In addition, these statements speak only as of the date of this joint
proxy statement. These factors include the following:
(1) we may not fully realize the expected cost savings from the Merger;
(2) deposit attrition, customer loss, or revenue loss following the Merger
may be greater than we expect;
(3) competitive pressure in the banking industry may increase
significantly;
(4) costs or difficulties related to the integration of the businesses of
Union Bankshares and Mid-Coast may be greater than we expect;
(5) changes in the interest rate environment may reduce margins;
(6) general economic conditions, either nationally or regionally, may be
less favorable than we expect, resulting in, among other things,
credit quality deteriorating;
(7) changes may occur in the regulatory environment;
(8) changes may occur in business conditions and inflation;
(9) changes may occur in the securities markets; and
(10) disruptions of the operations of Union Bankshares, Mid-Coast, or any
of their subsidiaries, or any other governmental or private entity may
occur as a result of the "Year 2000 Problem."
8
<PAGE> 18
SPECIAL MEETINGS OF STOCKHOLDERS
PURPOSE
Mid-Coast
Union Bankshares and Mid-Coast are furnishing this joint proxy statement to
holders of Mid-Coast common stock in connection with the proxy solicitation by
Mid-Coast's board of directors. The Mid-Coast board of directors will use the
proxies at the special meeting of stockholders of Mid-Coast to be held on August
3, 2000, and at any adjournments.
At the Mid-Coast special meeting, holders of Mid-Coast common stock will be
asked to vote upon a proposal to approve the Merger Agreement attached to this
joint proxy statement as Appendix A. Pursuant to the Merger Agreement, Mid-Coast
will merge with a wholly-owned subsidiary of Union Bankshares and immediately
thereafter Mid-Coast shall be merged up and into Union Bankshares. Union
Bankshares will be the surviving corporation in the Merger. Each outstanding
share of Mid-Coast common stock will be exchanged for $15.875 in cash. After the
Merger, Waldoboro will be merged with and into Union Trust, which will be the
surviving subsidiary pursuant to the Subsidiary Merger Agreement attached to
this joint proxy statement as Appendix B.
Union Bankshares
Union Bankshares and Mid-Coast are furnishing this joint proxy statement to
holders of Union Bankshares common stock in connection with the proxy
solicitation by Union Bankshares' board of directors. The Union Bankshares board
of directors will use the proxies at the Union Bankshares special meeting to be
held on August 3, 2000, and at any adjournments.
At the Union Bankshares special meeting, holders of Union Bankshares common
stock will be asked to vote upon a proposal to approve Merger Agreement attached
to this joint proxy statement as Appendix A. Pursuant to the Merger Agreement,
Mid-Coast will merge with a wholly-owned subsidiary of Union Bankshares and
immediately thereafter Mid-Coast shall be merged up and into Union Bankshares.
Union Bankshares will be the surviving corporation in the Merger. Each
outstanding share of Mid-Coast common stock will be exchanged for $15.875 in
cash. After the Merger, Waldoboro will be merged with and into Union Trust,
which will be the surviving subsidiary pursuant to the Subsidiary Merger
Agreement attached to this joint proxy statement as Appendix B.
DATE, PLACE, AND TIME
Mid-Coast
The special meeting of Mid-Coast stockholders will be held at the Samoset
Resort in Rockport, Maine, at 3:00 p.m., local time, on August 3, 2000.
Union Bankshares
The special meeting of Union Bankshares stockholders will be held at the
White Birches Restaurant, in Hancock, Maine at 11:00 a.m., local time, on August
3, 2000.
RECORD DATE, VOTING RIGHTS, REQUIRED VOTE, AND REVOCABILITY OF PROXIES
Mid-Coast
If you owned Mid-Coast common stock at the close of business on June 15,
2000, the record date, you are entitled to notice and to vote at the Mid-Coast
special meeting. On the Mid-Coast record date, there were 753,727 shares of
Mid-Coast common stock issued and outstanding held by approximately 395 holders
of record.
At the Mid-Coast special meeting, Mid-Coast stockholders will have one vote
for each share of Mid-Coast common stock owned on the Mid-Coast record date. The
holders of one-third of the outstanding shares
9
<PAGE> 19
of Mid-Coast common stock entitled to vote on a matter at the Mid-Coast special
meeting must be present in order for a quorum to exist at the Mid-Coast special
meeting.
Approval of the Merger Agreement requires the affirmative vote of a
majority of the outstanding shares of Mid-Coast common stock entitled to be cast
at the Mid-Coast special meeting.
Brokers who hold shares in street name for customers who are the beneficial
owners of such shares may not give a proxy to vote those shares to approve the
Merger Agreement without specific instructions from their customers. ANY
ABSTENTION, NON-VOTING SHARE OR "BROKER NON-VOTE" WILL HAVE THE SAME EFFECT AS A
VOTE "AGAINST" THE APPROVAL OF THE MERGER AGREEMENT.
Properly executed proxies that Mid-Coast receives before the vote at the
Mid-Coast special meeting that are not revoked will be voted in accordance with
the instructions indicated on the proxies. IF NO INSTRUCTIONS ARE INDICATED,
SUCH PROXIES WILL BE VOTED FOR THE PROPOSAL TO APPROVE THE MERGER AGREEMENT, AND
THE PROXY HOLDER MAY VOTE THE PROXY IN ITS DISCRETION AS TO ANY OTHER MATTER
WHICH MAY COME PROPERLY BEFORE THE MID-COAST SPECIAL MEETING. IF NECESSARY, THE
PROXY HOLDERS MAY VOTE IN FAVOR OF A PROPOSAL TO ADJOURN THE MID-COAST SPECIAL
MEETING IN ORDER TO PERMIT FURTHER SOLICITATION OF PROXIES IF THERE ARE NOT
SUFFICIENT VOTES TO APPROVE THE PROPOSAL AT THE TIME OF THE MID-COAST SPECIAL
MEETING. HOWEVER, NO PROXY HOLDER MAY VOTE ANY PROXIES VOTED AGAINST APPROVAL OF
THE MERGER AGREEMENT IN FAVOR OF A PROPOSAL TO ADJOURN THE MID-COAST SPECIAL
MEETING.
A Mid-Coast stockholder who has given a proxy solicited by Mid-Coast's
board of directors may revoke it at any time prior to its exercise at the
Mid-Coast special meeting by:
- giving written notice of revocation to the Secretary of Mid-Coast;
- properly submitting to Mid-Coast a duly executed proxy bearing a later
date; or
- attending the Mid-Coast special meeting and voting in person.
All written notices of revocation and other communications with respect to
revocation of proxies should be sent to: Mid-Coast Bancorp, Inc., 1768 Atlantic
Highway, Waldoboro, Maine 04572, Attention: Corporate Secretary.
On the Mid-Coast record date, Mid-Coast's directors and executive officers,
including their immediate family members and affiliated entities owned 153,949
shares or approximately 20.4% of the outstanding shares of Mid-Coast common
stock, or approximately 40.9% of the shares required to approve the Merger
Agreement. This number does not include shares subject to options to purchase
Mid-Coast common stock. We expect that the directors and executive officers of
Mid-Coast will vote their shares in favor of the Merger Agreement.
A list of Mid-Coast stockholders entitled to vote at the special meeting
will be available for inspection at Mid-Coast's main office during regular
business hours at least 10 days before the special meeting, as well as at the
special meeting.
Union Bankshares
If you owned Union Bankshares common stock at the close of business on June
21, 2000, the record date, you are entitled to notice and to vote at the
Mid-Coast special meeting. On the Union Bankshares record date, there were
577,466 shares of Union Bankshares common stock issued and outstanding held by
approximately 729 holders of record.
At the Union Bankshares special meeting, Union Bankshares stockholders will
have one vote for each share of Union Bankshares common stock owned on the Union
Bankshares record date. The holders of a majority of the outstanding shares of
Union Bankshares common stock entitled to vote at the Union Bankshares special
meeting must be present in order for a quorum to exist at the Union Bankshares
special meeting.
10
<PAGE> 20
Approval of the Merger requires the affirmative vote of 67 percent of the
issued and outstanding shares of Union Bankshares common stock.
Brokers who hold shares in street name for customers who are the beneficial
owners of such shares may not give a proxy to vote those shares without specific
instructions from their customers. ANY ABSTENTION, NON-VOTING SHARE OR "BROKER
NON-VOTE" WILL HAVE THE SAME EFFECT AS A VOTE "AGAINST" THE APPROVAL OF THE
MERGER AGREEMENT.
Properly executed proxies that Union Bankshares receives before the vote at
the Union Bankshares special meeting that are not revoked will be voted in
accordance with the instructions indicated on the proxies. IF NO INSTRUCTIONS
ARE INDICATED, SUCH PROXIES WILL BE VOTED FOR THE PROPOSAL TO APPROVE THE MERGER
AGREEMENT, AND THE PROXY HOLDER MAY VOTE THE PROXY IN ITS DISCRETION AS TO ANY
OTHER MATTER WHICH MAY COME PROPERLY BEFORE THE UNION BANKSHARES SPECIAL
MEETING. IF NECESSARY, THE PROXY HOLDERS MAY VOTE IN FAVOR OF A PROPOSAL TO
ADJOURN THE UNION BANKSHARES SPECIAL MEETING IN ORDER TO PERMIT FURTHER
SOLICITATION OF PROXIES IF THERE ARE NOT SUFFICIENT VOTES TO APPROVE THE
PROPOSAL AT THE TIME OF THE UNION BANKSHARES SPECIAL MEETING. HOWEVER, NO PROXY
HOLDER WILL VOTE ANY PROXIES VOTED AGAINST APPROVAL OF THE MERGER AGREEMENT IN
FAVOR OF A PROPOSAL TO ADJOURN THE UNION BANKSHARES SPECIAL MEETING.
A Union Bankshares stockholder who has given a proxy solicited by Union
Bankshares' board of directors may revoke it at any time prior to its exercise
at the Union Bankshares special meeting by:
- giving written notice of revocation to the Secretary of Union Bankshares;
- properly submitting to Union Bankshares a duly executed proxy bearing a
later date; or
- attending the Union Bankshares special meeting and voting in person.
All written notices of revocation and other communications with respect to
revocation of proxies should be sent to: Union Bankshares Company, 66 Main
Street, Ellsworth, Maine 04605, Attention: Sally J. Hutchins, Clerk.
On the Union Bankshares record date, Union Bankshares' directors and
executive officers, including their immediate family members and affiliated
entities owned 52,834 shares, or approximately 9.2% of the outstanding shares of
Union Bankshares common stock, or approximately 13.7% of the shares required to
approve the Merger Agreement. This number does not include shares subject to
options to purchase Union Bankshares common stock. We expect that the directors
and executive officers of Union Bankshares will vote their shares in favor of
the Merger Agreement.
A list of Union Bankshares stockholders entitled to vote at the special
meeting will be available for inspection at Union Bankshares' main office during
regular business hours at least 10 days before the special meeting, as well as
at the special meeting.
SOLICITATION OF PROXIES
Mid-Coast
Directors, officers and employees of Mid-Coast may solicit proxies by mail,
in person, or by telephone or telegraph. They will receive no additional
compensation for such services. Mid-Coast may also make arrangements with
brokerage firms and other custodians, nominees, and fiduciaries, if any, for the
forwarding of solicitation materials to the beneficial owners of Mid-Coast
common stock held of record by such persons. Mid-Coast will reimburse any such
brokers, custodians, nominees, and fiduciaries for the reasonable out-of-pocket
expenses incurred by them for such services. Mid-Coast will pay its own expenses
in connection with the Merger, except as otherwise set forth in this Merger
Agreement. See "The Merger -- Expenses and Fees."
Union Bankshares; Proxy Solicitation Agent
Directors, officers and employees of Union Bankshares may solicit proxies
by mail, in person, or by telephone or telegraph. They will receive no
additional compensation for such services. Union Bankshares has
11
<PAGE> 21
retained Corporate Investor Communications, Inc. ("CIC") to act as its proxy
solicitation agent in connection with the Union Bankshares special meeting. The
estimated fee for the services of CIC is $4,500. Union Bankshares must also pay
and reimburse CIC for other costs including the costs of telephoning brokers,
mailing materials to brokers and other items associated with their services as
proxy solicitation agent. Union Bankshares and CIC may also make arrangements
with brokerage firms and other custodians, nominees, and fiduciaries, if any,
for the forwarding of solicitation materials to the beneficial owners of Union
Bankshares common stock held of record by such persons. Union Bankshares will
reimburse any such brokers, custodians, nominees, and fiduciaries for the
reasonable out-of-pocket expenses incurred by them for such services. Union
Bankshares will pay its own expenses in connection with the Merger, except as
otherwise set forth in the Merger Agreement. See "The Merger -- Expenses and
Fees."
APPRAISAL RIGHTS
Mid-Coast
General
Stockholders of a corporation that is proposing to merge or consolidate
with another entity are sometimes entitled under relevant state laws to
appraisal or dissenters' rights in connection with the proposed transaction
depending on the circumstances. This right generally confers on stockholders who
oppose a merger or the consideration to be received in a merger the right to
receive, in lieu of the consideration being offered in the merger, the fair
value for their shares as determined in a judicial appraisal proceeding.
Union Bankshares stockholders do not have dissenters' appraisal rights in
connection with the Merger under Maine law. Mid-Coast stockholders, however, as
stockholders of a Delaware corporation, are entitled to dissenters' appraisal
rights in connection with the Merger under Delaware law.
Appraisal rights for Mid-Coast stockholders
Under the Delaware General Corporation Law ("DGCL"), if Mid-Coast
stockholders do not wish to accept the cash payment of $15.875 for each share of
Mid-Coast common stock that they own in accordance with the Merger Agreement,
they have the right to dissent from the Merger and to seek an appraisal of, and
to be paid the fair value, exclusive of any value arising from the
accomplishment or expectation of the Merger, for the shares of Mid-Coast common
stock held by them, provided that they comply with the provisions of Section 262
of the DGCL.
Holders of Mid-Coast common stock who are entitled to vote on approval of
the Merger Agreement that do not vote in favor of the Merger Agreement and who
otherwise comply with the applicable statutory procedures will be entitled to
appraisal rights under Section 262 of the DGCL. To perfect their appraisal
rights, Mid-Coast stockholders must strictly comply with the procedures in
Section 262 of the DGCL. Failure to strictly comply with these procedures will
result in the loss of appraisal rights.
The following is a summary of the material provisions of Section 262 of the
DGCL. The full text of Section 262 is reprinted as Appendix F to this joint
proxy statement. You should read Appendix F in its entirety. All references in
this summary to a "stockholder" are to the record holder of the shares of
Mid-Coast common stock and on the record date. A person having a beneficial
interest in shares that are held in "street name" or otherwise held of record in
the name of another person, such as a broker or nominee, is responsible for
ensuring that a demand for appraisal is made by the record holder and must act
promptly to cause the record holder to properly follow the steps summarized
below in a timely manner to exercise whatever appraisal rights the beneficial
owner may have.
We must provide Mid-Coast stockholders notice
Under Section 262 of the DGCL, since we are submitting the Merger Agreement
for approval at the special meeting of Mid-Coast stockholders, Mid-Coast must
notify, not less than 20 days prior to the special meeting, each of its
stockholders who was a stockholder on the record date for the special meeting,
that appraisal rights are available, and must include in such notice a copy of
Section 262 of the DGCL. This joint
12
<PAGE> 22
proxy statement constitutes notice to the holders of shares of Mid-Coast common
stock for which appraisal rights are available.
You must perfect your appraisal rights
To perfect appraisal rights under Section 262 of the DGCL, with respect to
his or her shares of Mid-Coast common stock, a Mid-Coast stockholder:
- must not vote for the adoption of the Merger Agreement or consent thereto
in writing, including the returning of a signed proxy without indicating
any voting instructions as to the proposal; and
- must deliver to Mid-Coast a written demand for appraisal of his or her
shares of Mid-Coast common stock before the vote on the proposal to adopt
the Merger Agreement.
A written demand for appraisal must reasonably inform Mid-Coast of the
identity of the Mid-Coast stockholder and his or her intent to demand appraisal
of his or her shares of Mid-Coast common stock. This written demand for
appraisal must be separate from any proxy or vote in person against or
abstaining from the adoption of the Merger Agreement. A PROXY OR VOTE IN PERSON
AGAINST THE ADOPTION OF THE MERGER AGREEMENT WILL NOT, IN AND OF ITSELF,
CONSTITUTE A DEMAND FOR APPRAISAL.
A Mid-Coast stockholder wishing to assert appraisal rights must be the
record holder of his or her shares of Mid-Coast common stock on the date the
written demand for appraisal is made. Only a holder of record of shares of
Mid-Coast common stock is entitled to assert appraisal rights for the shares of
Mid-Coast common stock registered in that holder's name. In addition, to
preserve his or her appraisal rights, a Mid-Coast stockholder must continue to
hold his or her shares until the completion of the Merger. Accordingly, a Mid-
Coast stockholder who is the record holder of shares of Mid-Coast common stock
on the date the written demand for appraisal is made, but who subsequently
transfers shares prior to the completion of the Merger, will lose any right to
appraisal in respect of those shares.
Only a record holder of shares of Mid-Coast common stock for which
appraisal rights are available is entitled to assert appraisal rights for the
shares registered in that holder's name. A demand for appraisal should be
executed by or on behalf of the record holder, fully and correctly, as this
holder's name appears on this holder's stock certificates. If the shares of
Mid-Coast common stock for which appraisal rights are available are owned of
record in a fiduciary capacity, for example by a trustee, guardian or custodian,
execution of the demand should be made in that capacity, and if these shares are
owned of record by more than one owner as in a joint tenancy or tenancy in
common, the demand should be executed by or on behalf of all joint owners. An
authorized agent, including one or more joint owners, may execute a demand for
appraisal on behalf of a holder of record. The agent, however, must identify the
record owner or owners and expressly disclose the fact that, in executing the
demand, the agent is agent for such owner or officers.
A record holder of Mid-Coast common stock that is a broker who holds shares
for which appraisal rights are available as nominee for several beneficial
owners may exercise appraisal rights with respect to these shares for which
appraisal rights are available held for one or more beneficial owners while not
exercising these rights with respect to the shares held for other beneficial
owners. In such case, the written demand should set forth the number of shares
for which appraisal rights are available and is being sought. When no number of
shares of Mid-Coast common stock for which appraisal rights are available is
expressly mentioned, the demand will be presumed to cover all the shares in
brokerage accounts or other nominee forms and those who wish to exercise
appraisal rights under Section 262 of the DGCL are urged to consult with their
brokers to determine the appropriate procedures for the making of a demand for
appraisal by such a nominee.
All written demands for appraisal must be mailed or delivered to:
Mid-Coast Bancorp, Inc.
1768 Atlantic Highway
Waldoboro, ME 04572
Attention: Corporate Secretary
13
<PAGE> 23
or should be delivered to the secretary at the Mid-Coast special meeting prior
to the vote on the Merger Agreement.
We must provide notice to each Mid-Coast stockholder that has properly
asserted appraisal rights
Within ten days after the completion of the Merger, Union Bankshares, as
the surviving company, will notify each Mid-Coast stockholder that has properly
asserted appraisal rights under Section 262 of the DGCL, and that has not voted
in favor of the Merger Agreement, of the date the Merger became effective.
A petition must be filed in the Delaware Chancery Court
Within 120 days after the completion of the Merger, but not thereafter,
Union Bankshares, as the surviving company, or any Mid-Coast stockholder who has
complied with the statutory requirements summarized above may file a petition in
the Delaware Chancery Court demanding a determination of the fair value of the
shares that are entitled to appraisal rights. Neither Mid-Coast nor Union
Bankshares is under any obligation to and has no present intention to file a
petition with respect to the appraisal of the fair value of the shares that are
entitled to appraisal rights. Accordingly, it will be the obligation of
Mid-Coast stockholders wishing to assert appraisal rights to initiate all
necessary action to perfect their appraisal rights within the time prescribed in
Section 262 of the DGCL.
Mid-Coast stockholders may request information
Within 120 days after the completion of the Merger, any Mid-Coast
stockholder that has complied with the requirements for exercise of appraisal
rights will be entitled, upon written request, to receive from Union Bankshares,
as the surviving company, a statement presenting the aggregate number of shares
of Mid-Coast common stock not voted in favor of adoption of the Merger Agreement
and with respect to which demands for appraisal have been received and the
aggregate number of holders of these shares. These statements must be mailed
within ten days after a written request for the information has been received by
Union Bankshares, or within ten days after expiration of the period for delivery
of demands for appraisal under Section 262 of the DGCL, whichever is later.
A court will determine those Mid-Coast stockholders entitled to appraisal
rights, as well as the fair value of the Mid-Coast common stock and any
allocation of expenses
If a petition for an appraisal is timely filed and a copy served upon Union
Bankshares, as the surviving company, Union Bankshares will then be obligated
within 20 days to file with the Delaware Register in Chancery a list containing
the names and addresses of the Mid-Coast stockholders who have demanded
appraisal of their shares of Mid-Coast common stock and with whom agreements as
to the value of their shares have not been reached. After notice to the
Mid-Coast stockholders as required by the Delaware Court of Chancery, the
Delaware Court of Chancery may conduct a hearing on such petition to determine
those Mid-Coast stockholders entitled to appraisal rights. The Delaware Court of
Chancery may require the Mid-Coast stockholders who demanded appraisal rights of
their shares of Mid-Coast common stock to submit their stock certificates to the
Delaware Register in Chancery for notation of the pendency of the appraisal
proceeding. If any Mid-Coast stockholder fails to comply, the Delaware Court of
Chancery may dismiss the proceedings as to that Mid-Coast stockholder.
After determining which Mid-Coast stockholders are entitled to appraisal,
the Delaware Court of Chancery will appraise the "fair value" of their shares of
Mid-Coast common stock, excluding any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value.
MID-COAST STOCKHOLDERS CONSIDERING THE EXERCISE OF APPRAISAL RIGHTS SHOULD
BE AWARE THAT THE FAIR VALUE OF THEIR SHARES OF MID-COAST COMMON STOCK AS
DETERMINED UNDER SECTION 262 OF THE DGCL COULD BE MORE THAN, THE SAME AS OR LESS
THAN THE VALUE OF THE CASH MERGER CONSIDERATION THEY WOULD RECEIVE PURSUANT TO
THE MERGER AGREEMENT IF THEY DID NOT SEEK APPRAISAL OF THEIR SHARES OF MID-COAST
COMMON STOCK AND THAT INVESTMENT BANKING OPINIONS AS TO FAIRNESS FROM A
FINANCIAL POINT OF VIEW ARE NOT NECESSARILY OPINIONS AS TO
14
<PAGE> 24
THE FAIR VALUE UNDER SECTION 262 OF THE DGCL. The Delaware Supreme Court has
stated, however, that "proof of value by any techniques or methods that are
generally considered acceptable in the financial community and otherwise
admissible in court" should be considered in the appraisal proceedings. The
Delaware Chancery Court will determine the amount of interest, if any, to be
paid upon the amounts to be received by Mid-Coast stockholders whose appraisal
shares have been appraised.
In addition, the costs of the action may be determined by the Delaware
Chancery Court and taxed upon the parties as the Delaware Chancery Court deems
equitable. The Delaware Chancery Court may also order that all or a portion of
the expenses incurred by any stockholder in connection with an appraisal,
including, without limitation, reasonable attorneys' fees and the fees and
expenses of experts utilized in the appraisal proceeding, be charged pro rata
against the value of all of the appraisal shares entitled to appraisal.
You may withdraw your demand for appraisal
At any time within 60 days after the completion of the Merger, any
Mid-Coast stockholder will have the right to withdraw his or her demand for
appraisal and to accept the cash amount of $15.875 for each share of common
stock that they own in accordance with the terms of the Merger Agreement. After
this period, a Mid-Coast stockholder may withdraw his or her demand for
appraisal only with the written consent of Mid-Coast. No petition timely filed
in the Delaware Court of Chancery demanding appraisal will be dismissed as to
any Mid-Coast stockholder without the approval of the Delaware Court of
Chancery, which may be conditioned on terms the Delaware Court of Chancery deems
just.
No right to vote appraisal shares or receive dividends or distribution on
appraisal shares
Any holder of shares of Mid-Coast common stock for which appraisal rights
are available that has duly demanded an appraisal in compliance with Section 262
of the DGCL will not, after the consummation of the Merger, be entitled to vote
these shares subject to such demand for any purpose or be entitled to the
payment of dividends or other distributions on those shares, except dividends or
other distributions payable to holders of record of these shares as of a record
date prior to the completion of the Merger.
Union Bankshares
Union Bankshares stockholders will not have dissenters' appraisal rights
with respect to the Merger.
PARTIES TO THE MERGER
BUSINESS OF MID-COAST BANCORP, INC.
Mid-Coast, a Delaware corporation, is a registered savings and loan holding
company. On March 31, 2000, Mid-Coast had total consolidated assets of
approximately $82.5 million, total consolidated loans of approximately $62.3
million, total consolidated deposits of approximately $59.6 million, and total
consolidated stockholders' equity of approximately $5.6 million.
Mid-Coast conducts its business activities through Waldoboro, its banking
subsidiary. Through Waldoboro, Mid-Coast offers a broad range of financial
services throughout the mid-coast region of Maine. Waldoboro has four branches
in Maine. Waldoboro's business strategy is to operate as a well-capitalized and
profitable community bank dedicated to financing loans secured by residential
and commercial real estate, enabling borrowers to refinance, construct or
improve property. Waldoboro has implemented this strategy by: (i) closely
monitoring the needs of customers and providing quality service; (ii)
originating residential mortgage loans, construction loans, commercial real
estate loans, consumer loans, and by offering checking accounts and other
financial services and products; (iii) focusing on expanding the volume of
Waldoboro's commercial real estate and commercial lending activities to serve
the needs of the small business community; and (iv) focusing on expanding the
volume of Waldoboro's mortgage loan servicing portfolio.
The principal executive offices of Mid-Coast are located at 1768 Atlantic
Highway, Waldoboro, Maine 04572, and its telephone number at such address is
(207) 832-7521. Additional information with respect to
15
<PAGE> 25
Mid-Coast and its subsidiaries is included in documents incorporated by
reference in this joint proxy statement. See "Where You Can Find More
Information."
BUSINESS OF UNION BANKSHARES COMPANY
Union Bankshares, a Maine corporation, is a registered bank holding
company. On March 31, 2000, Union Bankshares had total consolidated assets of
approximately $255.6 million, total consolidated loans of approximately $126.8
million, total consolidated deposits of approximately $182.9 million, and total
consolidated stockholders' equity of approximately $27.5 million.
Union Bankshares conducts its business activities through its only
subsidiary, Union Trust Company, a full-service community bank. Through its 11
branches and 12 ATMs, Union Trust serves the financial needs of individuals,
businesses, municipalities and nonprofit organizations in eastern Maine. Union
Trust offers a wide variety of financial services with competitive interest
rates, helpful staff, and quick, local decision-making to meet the needs of the
communities it serves. The Trust and Investment Services department of Union
Trust provides a broad range of investment options to help meet the needs of its
customers, including estate planning, investment management and custody, and
retirement planning and employee benefits services.
The principal executive offices of Union Bankshares are located at 66 Main
Street, Ellsworth, Maine 04605, and its telephone number at such address is
(207) 667-2504. Additional information with respect to Union Bankshares and its
subsidiaries is included in documents incorporated by reference in this joint
proxy statement. See "Where You Can Find More Information."
THE MERGER
The following information describes material aspects of the Merger. This
description does not provide a complete description of all the terms and
conditions of the Merger Agreement, the Subsidiary Merger Agreement or the
Option Agreement. It is qualified in its entirety by the Appendices attached to
this joint proxy statement, including the text of the Merger Agreement, the
Subsidiary Merger Agreement and the Option Agreement, which are attached as
Appendices A, B and E, respectively, to this joint proxy statement. The
Appendices, including the Merger Agreement, are incorporated herein by
reference. You are urged to read the Appendices in their entirety.
THE MERGER
The Merger Agreement provides for the acquisition of Mid-Coast by Union
Bankshares pursuant to the Merger of Mid-Coast with Acquisition Company, a
wholly-owned subsidiary of Union Bankshares formed solely to effect the Merger.
Immediately thereafter Mid-Coast will be merged up and into Union Bankshares.
Union Bankshares will be the surviving corporation and will continue its
existence under the laws of Maine. The articles of incorporation and bylaws of
Union Bankshares will be the articles of incorporation and bylaws of the
surviving corporation. After the Merger, Waldoboro will be merged with and into
Union Trust. Union Trust will be the surviving subsidiary.
BACKGROUND FOR THE MERGER
Mid-Coast
Since Mid-Coast's conversion to stock form in 1989, management of Mid-Coast
has focused its principal attention on increasing its core business of
originating residential and commercial mortgages and offering a full range of
retail deposit and loan services through four branch offices. In recent years,
Mid-Coast has continued this growth strategy through (i) expansion of commercial
loans, commercial real estate loans and commercial transactional deposit
relationships; and (ii) expansion of market share in mid-coast Maine through the
opening of two branch offices in Belfast and Jefferson, Maine. As a means to
increase stockholder value, the board of directors of Mid-Coast has implemented
various initiatives in the past two years to increase stockholder value,
including increasing its semi-annual cash dividend and paying periodic stock
dividends.
16
<PAGE> 26
The Mid-Coast board of directors has also regularly evaluated Mid-Coast's
corporate strategy in view of its capital position and market conditions,
including the economic and regulatory environment, the consolidation process in
the depository institution industry and the sharp increase in the numbers of
acquisitions of thrifts, including the prices paid in such acquisitions.
On January 13, 1998, the Mid-Coast board of directors met at its regular
board meeting to explore various strategic options with Trident Securities, a
division of McDonald Investments, Inc. ("Trident"), its financial advisor,
including:
- Mid-Coast's prospects as an independent financial institution pursuing
internal expansion;
- an analysis of potential acquirors for Mid-Coast; and
- an analysis of the state of the market.
Over the next year, the Mid-Coast board of directors, at various times,
continued to evaluate its strategic options in light of market conditions and
other merger and acquisition activity in the banking market.
On June 22, 1999, at a board of directors meeting, the Mid-Coast board
evaluated a presentation by Trident involving the state of the market and recent
thrift mergers and acquisitions in Maine and the surrounding states.
On July 28, 1999, at the annual meeting of the board of directors of
Mid-Coast, the Mid-Coast board evaluated Mid-Coast's prospects as an independent
financial institution; strategic alternatives available to Mid-Coast; and the
feasibility of a sale of Mid-Coast. The board thoroughly considered these
matters with Trident, senior management and Mid-Coast's special legal counsel
Thacher Proffitt & Wood. After a thorough discussion, by resolution, the board
of directors determined to explore a potential business affiliation with a
Maine-based financial institution.
On November 16, 1999, the board of directors met with Trident and its
special legal counsel to again explore the strategic options of remaining
independent or pursuing a possible affiliation with another financial
institution. By resolution, the Mid-Coast board of directors determined that
Trident would pursue potential merger opportunities for Mid-Coast, as well as
continue to explore other strategic options.
The Mid-Coast board also authorized Trident to prepare a memorandum for
review by a number of interested parties containing selected public and
nonpublic information regarding Mid-Coast. After finalizing a list of potential
contacts, Trident contacted the interested parties in late November 1999.
Following the initial contact, interested financial institutions executed
confidentiality agreements and reviewed the confidential memorandum regarding
Mid-Coast.
On December 28, 1999, Trident met with the Mid-Coast board to advise them
of the status of the strategic option review and process, including the
possibility of pursuing one or more expressions of interest, two of which
involved all cash offers and a third which involved a combination of stock and
cash. One of the three expressions of interest was from Union Bankshares. The
Mid-Coast board thoroughly reviewed data prepared by Trident with respect to
Mid-Coast, selected thrift mergers and acquisitions, the terms of the
expressions of interest, and financial and other data regarding the thrift
acquisition and other matters. After careful consideration, the board voted to
proceed with the Union Bankshares offer as the sole company with which Mid-Coast
would pursue merger negotiations.
Union Bankshares conducted a due diligence review of Mid-Coast from January
15-17, 2000.
On January 20, 2000, Union Bankshares submitted a revised bid proposal to
Mid-Coast. During this time, negotiations between the parties continued. After
increasing the revised bid proposal to $15.875, Mid-Coast and Union Bankshares
continued to negotiate the social and operational terms of the proposed merger.
During the following weeks, the parties made progress on the negotiations
regarding the terms of the Merger Agreement and the Option Agreement. The
representatives and advisers for both parties met and spoke on numerous
occasions throughout this period discussing the transaction and the related
documentation and negotiated the terms of the definitive Merger Agreement.
17
<PAGE> 27
On March 27, 2000, the Mid-Coast board of directors held a special meeting
with its financial advisor and special legal counsel to review the terms of the
Merger Agreement and other acquisition documents. As financial advisor, Trident
analyzed the financial factors related to the Merger and rendered its opinion
that the Cash Merger Consideration was fair, from a financial point of view, to
the Mid-Coast stockholders. Upon a thorough review of the Merger Agreement and
the Option Agreement with its advisors, the Mid-Coast board of directors
unanimously approved the terms of the Merger Agreement and the Option Agreement
as being in the best interests of Mid-Coast and its stockholders and authorized
the execution of the agreements.
On March 27, 2000, Union Bankshares and Mid-Coast executed a definitive
Merger Agreement and released a press release.
Union Bankshares
As part of its efforts to broaden its community banking franchises and
enhance stockholder value, Union Bankshares' management conducted a series of
planning sessions during the winter of 1998 and into the summer of 1999. These
sessions involved the management and members of the board of directors of Union
Bankshares and sought to lay the foundation for the long term future of its
subsidiary bank, Union Trust, as a community based financial institution. As
part of this process, Union Bankshares adopted a strategy of balancing growth
and profitability while seeking to broaden the Union Trust's franchise from a
geographic and a services perspective. Geographic areas with similar
demographics, similar economic factors and higher growth rates were analyzed and
the mid-coast region was singled out as the most promising area. Mid-Coast, with
its subsidiary Waldoboro, was identified as one of the institutions which fit
the profile from a business perspective.
In November of 1999, Union Bankshares was approached by Trident to
determine its interest in participating in a managed auction for Mid-Coast.
Union Bankshares' management based its response upon the results of the
strategic plan developed during its planning sessions. Peter Blyberg, President
and CEO of Union Bankshares and Union Trust, reviewed the possibilities of a bid
with the executive committee of the board of directors on December 1, 1999. The
executive committee decided to proceed with preparing a proposal, subject to
final approval of the board of directors. New England Business Advisors ("NEBA")
was retained to help evaluate the bid proposal from a financial and business
point of view and Peabody & Arnold LLP was retained to act as Union Bankshares'
legal counsel. On December 8, 1999, the executive committee met to further
discuss and review Union Bankshares' bid proposal.
December 12, 1999, at a regularly scheduled meeting of the board of
directors of Union Bankshares, Mr. Blyberg presented the proposed bid together
with representatives from NEBA. He also reviewed current trends in bank mergers
and acquisitions, the business case for the acquisition and pricing information
on recent bank mergers and acquisitions. The board of directors approved the bid
proposal and accordingly the offer was submitted to Mid-Coast on December 20,
1999.
On December 29, 1999, Trident informed Mr. Blyberg that Union Bankshares'
bid proposal had been accepted and that Mid-Coast was prepared to negotiate with
Union Bankshares subject to due diligence, leading toward a definitive
acquisition agreement. On January 12, 2000, at a regular meeting of the board of
directors of Union Bankshares, the board of directors reviewed the status of the
process, reviewed the scope of due diligence and confirmed management's strategy
for proceeding.
Union Bankshares conducted its due diligence review of Mid-Coast from
January 15-17, 2000. NEBA assisted in conducting the financial due diligence.
Berry, Dunn, McNeil & Parker, LLC ("Berry Dunn"), the independent auditors for
Union Bankshares, advised Union Bankshares on financial and accounting issues
related to the due diligence.
On January 14, 2000, Mr. Blyberg met with Mr. Richardson to discuss the
potential combined business prospects, to review the markets served by Waldoboro
and to discuss where the best opportunities lay for future growth.
On January 20, 2000, following its due diligence review of Mid-Coast, Union
Bankshares revised its original bid and resubmitted its bid proposal to Trident.
During the weeks of January 24 and January 31, 2000,
18
<PAGE> 28
there were a number of discussions between management of Union Bankshares and
Mid-Coast regarding the terms of the Merger Agreement and the Option Agreement.
The representatives and advisors for Mid-Coast and Union Bankshares met and
spoke on numerous occasions throughout this period to discuss the transaction
and the related documentation and to further negotiate the terms of the Merger
Agreement and the Option Agreement.
On February 9, 2000, Mr. Blyberg reviewed with the board of directors the
status of the discussions held with Mid-Coast and reviewed the major outstanding
issues. On February 10, 2000, Mr. Blyberg, together with John Lynch, Executive
Vice President of Union Bankshares, met with Mr. Samuel Cohen, Chairman of the
board of directors of Mid-Coast, and Mr. Richardson. Agreement was reached on
numerous issues. Discussion continued during the weekend of February 12 and
February 13, 2000 which led to an understanding on, February 14, 2000 to conduct
a level one environmental site assessment of Waldoboro's Rockland branch, prior
to formal board of directors votes on the Merger Agreement. On February 15,
2000, Union Bankshares' board of directors met to review the status of the
transaction, the role and responsibilities of the board of directors in a merger
and acquisition scenario and the pro forma financials. The board of directors
also discussed the transaction with the financial advisors. Numerous questions
were asked about different elements of the deal. The environmental issues were
discussed and the decision to move ahead reaffirmed.
The next several weeks were devoted to hiring an environmental consultant,
defining the scope of the engagement and performing the actual site assessment
and documentation reviews. On March 8, 2000, the final report was submitted by
Wright Pierce, the consultant firm hired by Mid-Coast, concerning the site
assessment and environmental documentation review of Mid-Coast's Rockland
Branch. Woodard & Curran, an environmental engineering firm hired by Union
Bankshares, reviewed the files at the Maine Department of Environmental
Protection ("MDEP") and the Wright Pierce report. A letter was subsequently
obtained from the MDEP indicating that "The Waldoboro Bank and future owners
would not be held liable for the costs of any additional clean-up required for
contamination remaining." In addition, Mid-Coast has committed to obtain before
closing an environmental insurance policy which will protect the parties from
any liability arising from existing or new environmental contamination at the
Rockland branch.
During the week of March 20, 2000, the last details of the Merger Agreement
were negotiated and finalized. On March 27, 2000, the board of directors of
Union Bankshares met at a special meeting to review the terms of the Merger
Agreement and related agreements. At this meeting, NEBA reviewed the financial
elements of the transaction and Peabody & Arnold reviewed outstanding legal
items and answered questions about the proposed Merger. NEBA rendered its
opinion that the Cash Merger Consideration was fair, from a financial point of
view, to Union Bankshares' stockholders. The board of directors then voted by
unanimous consent to approve the transaction and authorize execution of the
Merger Agreement, and the Option Agreement, having determined that the Merger
was in the best interests of the Union Bankshares stockholders.
Following the adjournment of the meeting Mr. Blyberg called Mr. Richardson
to inform him of Union Bankshares' vote to approve the Merger.
On March 27, 2000, Union Bankshares and Mid-Coast executed a definitive
Merger Agreement and released a press release announcing the proposed Merger.
REASONS FOR THE MERGER AND BOARD RECOMMENDATIONS
Mid-Coast
Mid-Coast's board of directors has determined that the Merger is in the
best interests of Mid-Coast and the Mid-Coast stockholders and has unanimously
approved the Merger Agreement.
The terms of the Merger Agreement, including the Cash Merger Consideration
of $15.875 per share of Mid-Coast common stock, were the result of arm's length
negotiation between Mid-Coast and Union Bankshares. Mid-Coast consulted with its
special legal counsel, Thacher Proffitt & Wood, and its financial advisor,
Trident, during the negotiations. The Mid-Coast board of directors believes that
the Merger is fair and in the best interests of the stockholders of Mid-Coast.
The Mid-Coast board of directors considered various
19
<PAGE> 29
factors in determining that the Merger was fair and in the best interests of
Mid-Coast and its stockholders. The Mid-Coast board of directors did not assign
any specific weights to the factors considered. Among other things, the
Mid-Coast board of directors considered:
- Favorable Cash Premium. The Mid-Coast board of directors believes that
the premium presented by the consideration offered to Mid-Coast's
stockholders in relation to the current trading price of Mid-Coast's
common stock is favorable to the Mid-Coast stockholders.
- Impact of Merger. The Mid-Coast board of directors believes that the
probable impact of the Merger on the customers and the communities served
by Mid-Coast and Union Bankshares will be minimal. The Mid-Coast board of
directors also considered Union Bankshares' willingness to retain
Mid-Coast's employees and provide certain benefits to these employees.
- Expanded Products and Services. The Mid-Coast board of directors
believes that the combination will allow for the potential for expansion
of products and services that may be offered to the customers of Union
Bankshares and Mid-Coast.
- Competitive Environment and Regulatory Considerations. The Mid-Coast
board of directors considered the increasingly competitive environment in
which financial institutions operate and the uncertain economic
regulatory and legal environment affecting financial institutions such as
Mid-Coast.
- Financial Institution Consolidation. The Mid-Coast board of directors
considered the increasing consolidation of financial institutions which
has resulted in fewer potential acquirors for Mid-Coast.
- Improved Business Capabilities. The Mid-Coast board of directors
believes that the combined institution will have the ability to meet the
needs of Waldoboro's larger customers, due to the availability of a
higher legal lending limit, and the probability of expanded products and
services.
- Opinion of Trident. The Mid-Coast board of directors also relied upon
the opinion of Trident that the Cash Merger Consideration is fair from a
financial point of view to Mid-Coast's stockholders.
- Merger of Two Maine Community Banks. The Mid-Coast board of directors
also considered the fact that Mid-Coast will be combining with a
Maine-based financial institution and that two Mid-Coast directors will
continue to serve on the board of directors of the combined institution.
THE FOREGOING DISCUSSION OF THE INFORMATION AND FACTORS CONSIDERED BY
MID-COAST'S BOARD OF DIRECTORS IS NOT INTENDED TO BE EXHAUSTIVE, BUT CONSTITUTES
ALL MATERIAL FACTORS CONSIDERED BY MID-COAST'S BOARD OF DIRECTORS. IN VIEW OF
THE VARIETY OF FACTORS CONSIDERED IN CONNECTION WITH ITS EVALUATION OF THE
MERGER, MID-COAST'S BOARD OF DIRECTORS DID NOT FIND IT PRACTICABLE TO, AND DID
NOT, QUANTIFY OR OTHERWISE ATTEMPT TO ASSIGN RELATIVE WEIGHTS TO THE SPECIFIC
FACTORS CONSIDERED IN REACHING ITS DETERMINATION AND INDIVIDUAL DIRECTORS MAY
HAVE GIVEN DIFFERENT WEIGHT TO DIFFERENT FACTORS. IN CONSIDERING AND APPROVING
THE MERGER, MID-COAST'S BOARD OF DIRECTORS RELIED UPON INFORMATION AND ANALYSIS
PREPARED BY MANAGEMENT AND BY TRIDENT.
Mid-Coast's board of directors has unanimously approved the Merger
Agreement and believes that the Merger is in the best interests of Mid-Coast and
its stockholders. MID-COAST'S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR"
APPROVAL OF THE MERGER AGREEMENT.
Union Bankshares
Union Bankshares' board of directors has determined that the Merger is in
the best interests of Union Bankshares and the Union Bankshares stockholders and
has unanimously approved the Merger Agreement.
The board of directors of Union Bankshares in reaching its decision
considered a number of factors:
- Expanded Market Presence. The Union Bankshares board of directors
believes that because the markets served by Union Bankshares and
Mid-Coast share many of the same demographic and economic
characteristics, there is an opportunity to build upon a
community-banking-oriented business model which would appeal to customers
in the mid-coast region. The population served by the new institution
would be about twice that currently served in Union Bankshares market
area. By expanding
20
<PAGE> 30
the geographic reach of the institution, the bank should diversify some
of the risks inherent in serving a limited geographic market.
- Anticipated Synergies and Cost Savings. The Union Bankshares board of
directors believes that Union Bankshares and its stockholders should be
able to realize benefits from operational cost savings in information
technology, professional fees and check processing as well as leveraging
existing management skills in a larger institution.
- Complementary Businesses. The Union Bankshares board of directors
believes that the combination allows Union Bankshares to complement
Mid-Coast's existing strength in consumer mortgages with a stronger
commercial business focus as well as trust and investment services and
Internet banking. The complementary nature of the businesses allows for
increased focus and efforts on businesses which are deemed critical
strategic efforts by both banks without having to reconcile competing
priorities. Union Bankshares believes that Mid-Coast shares a similar
vision of fostering community-based financial services to these markets.
- Improved Business Capabilities. The Union Bankshares board of directors
believes that the combined corporation will be able to draw upon the
management skills of both Union Bankshares and Mid-Coast. This
strengthening of management will enhance Union Bankshares ability to
provide a broad range of financial services throughout the market area
and put the combined institution in a stronger position to meet the
evolving demands of the banking and financial services industry.
- Terms of the Merger Agreement. The Union Bankshares board of directors
believes that the terms and conditions of the Merger Agreement are
favorable to Union Bankshares stockholders.
- The Opinion of NEBA. The Union Bankshares board of directors also relied
upon the opinion, analysis and presentations of NEBA as described below
that the price of $15.875 per share of Mid-Coast common stock is fair to
Union Bankshares stockholders, from a financial point of view.
The Union Bankshares board of directors also considered potentially
negative factors which could develop. (See "-- Risk Factors for Union Bankshares
Stockholders" on page 32.)
These factors include the significant transaction costs, the management
time and effort involved in making the Merger work, the possibility that the
potential benefits might not be fully realized and the need for stockholder and
regulatory approval. The Union Bankshares board of directors did not believe
that the potential negative factors were sufficient to outweigh the advantages.
THE FOREGOING DISCUSSION OF THE INFORMATION AND FACTORS CONSIDERED BY UNION
BANKSHARES' BOARD OF DIRECTORS IS NOT INTENDED TO BE EXHAUSTIVE, BUT INCLUDES
ALL MATERIAL FACTORS CONSIDERED BY UNION BANKSHARES' BOARD OF DIRECTORS. IN
REACHING ITS DETERMINATION TO APPROVE THE MERGER AND THE MERGER AGREEMENT, UNION
BANKSHARES' BOARD OF DIRECTORS DID NOT ASSIGN ANY RELATIVE OR SPECIFIC WEIGHTS
TO THE FOREGOING FACTORS, AND INDIVIDUAL DIRECTORS MAY HAVE GIVEN DIFFERING
WEIGHTS TO DIFFERENT FACTORS.
After deliberating with respect to the Merger and the other transactions
contemplated by the Merger Agreement, and considering, among other things, the
matters discussed above and the opinion of NEBA referred to above, Union
Bankshares' board of directors determined that the Merger would be in the best
interests of the Union Bankshares stockholders and unanimously approved the
Merger Agreement. UNION BANKSHARES' BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
"FOR" APPROVAL OF THE MERGER AGREEMENT.
OPINION OF MID-COAST'S FINANCIAL ADVISOR
Acquisition -- General
Pursuant to an engagement letter dated September 20, 1999 between Mid-Coast
and Trident Securities, a division of McDonald Investments Inc., Mid-Coast
retained Trident to act as its financial advisor in connection with a possible
merger and related matters. As part of its engagement, Trident agreed, if
requested by Mid-Coast, to render an opinion with respect to the fairness, from
a financial point of view, to the holders of Mid-Coast common stock, of the Cash
Merger Consideration as set forth in the Merger Agreement. Trident is
21
<PAGE> 31
a nationally recognized specialist in the financial services industry, in
general, and in thrifts in particular. Trident is regularly engaged in
evaluations of similar businesses and in advising institutions with regard to
mergers and acquisitions, as well as raising debt and equity capital for such
institutions. Mid-Coast selected Trident as its financial advisor based upon
Trident's qualifications, expertise and reputation in such capacity.
Trident delivered a written opinion, dated March 27, 2000, that the Cash
Merger Consideration was fair to Mid-Coast stockholders, from a financial point
of view, as of the date of such opinion. Trident updated its March 27, 2000
opinion as of the date of this document. No limitations were imposed by
Mid-Coast on Trident with respect to the investigations made or the procedures
followed in rendering its opinion.
THE FULL TEXT OF TRIDENT'S WRITTEN OPINION TO THE MID-COAST BOARD OF
DIRECTORS, DATED JUNE 27, 2000, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS
CONSIDERED AND EXTENT OF REVIEW BY TRIDENT, IS ATTACHED AS APPENDIX C AND IS
INCORPORATED HEREIN BY REFERENCE. IT SHOULD BE READ CAREFULLY AND IN ITS
ENTIRETY IN CONJUNCTION WITH THIS DOCUMENT. THE FOLLOWING SUMMARY OF TRIDENT'S
OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE
OPINION. TRIDENT'S OPINION IS ADDRESSED TO THE MID-COAST BOARD OF DIRECTORS AND
DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER OF MID-COAST AS TO HOW
SUCH STOCKHOLDER SHOULD VOTE AT THE MID-COAST SPECIAL MEETING DESCRIBED IN THIS
DOCUMENT.
Trident, in connection with rendering its opinion:
- reviewed Mid-Coast's Annual Reports to Shareholders and Annual Reports on
Form 10-KSB for each of the years ended March 31, 2000, March 31, 1999
and March 31, 1998, including the audited financial statements contained
therein; and Mid-Coast's Quarterly Reports on Forms 10-QSB for the three
month periods ended December 31, 1999, June 30, 1999 and September 30,
1999.
- reviewed Union Bankshares' Annual Reports to Shareholders and Annual
Reports on Form 10-K for the years ended December 31, 1999 and December
31, 1998, including the audited financial statements contained therein;
and Union Bankshares' Quarterly Report on Form 10-Q for the three month
period ended March 31, 2000.
- reviewed certain other public and non-public information, primarily
financial in nature, relating to the respective businesses, earnings,
assets and prospects of Mid-Coast and Union Bankshares provided to
Trident or publicly available;
- participated in meetings and telephone conferences with members of senior
management of Mid-Coast concerning the financial condition, business,
assets, financial forecasts and prospects of the company, as well as
other matters Trident believed relevant to its inquiry;
- reviewed certain stock market information for the Mid-Coast common stock
and compared it with similar information for certain companies, the
securities of which are publicly traded;
- compared the results of operations and financial condition of Mid-Coast
with that of certain companies which Trident deemed to be relevant for
purposes of its opinion;
- reviewed the financial terms, to the extent publicly available, of
certain acquisition transactions which Trident deemed to be relevant for
purposes of this opinion;
- reviewed the Merger Agreement and its schedules and exhibits and certain
related documents; and
- performed such other reviews and analyses as Trident deemed appropriate.
The oral and written opinions provided by Trident to Mid-Coast were
necessarily based upon economic, monetary, financial market and other relevant
conditions as of the dates thereof.
In connection with its review and arriving at its opinion, Trident relied
upon the accuracy and completeness of the financial information and other
pertinent information provided by Mid-Coast and Union Bankshares to Trident for
purposes of rendering its opinion. Trident did not assume any obligation to
independently verify any of the provided information as being complete and
accurate in all material respects. With regard to the financial forecasts
established and developed for Mid-Coast and Union Bankshares with
22
<PAGE> 32
the input of their respective managements, as well as projections of cost
savings, revenue enhancements and operating synergies, Trident assumed that
these materials had been reasonably prepared on bases reflecting the best
available estimates and judgments of Mid-Coast and Union Bankshares as to the
future performance of the separate and combined entities and that the
projections provided a reasonable basis upon which Trident could formulate its
opinion. Neither Mid-Coast nor Union Bankshares publicly discloses such internal
management projections of the type utilized by Trident in connection with
Trident's role as financial advisor to Mid-Coast. Therefore, such projections
cannot be assumed to have been prepared with a view towards public disclosure.
The projections were based upon numerous variables and assumptions that are
inherently uncertain, including, among others, factors relative to the general
economic and competitive conditions facing Mid-Coast and Union Bankshares.
Accordingly, actual results could vary significantly from those set forth in the
respective projections.
Trident does not claim to be an expert in the evaluation of loan portfolios
or the allowance for loan losses with respect thereto and therefore assumes that
such allowances for Mid-Coast are adequate to cover such losses. In addition,
Trident does not assume responsibility for the review of individual credit files
and did not make an independent evaluation, appraisal or physical inspection of
the assets or individual properties of Mid-Coast, nor was Trident provided with
such appraisals. Furthermore, Trident assumes that the Merger will be
consummated in accordance with the terms set forth in the Merger Agreement,
without any waiver of any material terms or conditions by Mid-Coast, and that
obtaining the necessary regulatory approvals for the Merger will not have an
adverse effect on either separate institution or the combined entity. Moreover,
in each analysis that involves per share data for Mid-Coast, Trident adjusted
the data to reflect full dilution, i.e., the effect of the exercise of
outstanding options utilizing the treasury stock method. In particular, Trident
assumes that the Merger will be recorded as a "purchase" in accordance with
generally accepted accounting principles.
In connection with rendering its opinion to the Mid-Coast board of
directors, Trident performed a variety of financial and comparative analyses,
which are briefly summarized below. Such summary of analyses does not purport to
be a complete description of the analyses performed by Trident. Moreover,
Trident believes that these analyses must be considered as a whole and that
selecting portions of such analyses and the factors considered by it, without
considering all such analyses and factors, could create an incomplete
understanding of the scope of the process underlying the analyses and, more
importantly, the opinion derived from them. The preparation of a financial
advisor's opinion is a complex process involving subjective judgments and is not
necessarily susceptible to partial analyses or a summary description of such
analyses. In its full analysis, Trident also included assumptions with respect
to general economic, financial market and other financial conditions.
Furthermore, Trident drew from its past experience in similar transactions, as
well as its experience in the valuation of securities and its general knowledge
of the banking industry as a whole. Any estimates in Trident's analyses were not
necessarily indicative of actual future results or values, which may
significantly diverge more or less favorably from such estimates. Estimates of
company valuations do not purport to be appraisals nor to necessarily reflect
the prices at which companies or their respective securities actually may be
sold. None of the analyses performed by Trident were assigned a greater
significance by Trident than any other in deriving its opinion.
Comparable Transaction Analysis
Trident reviewed and compared actual information for groups of comparable
pending (through March 20, 2000) and completed transactions (since January 1,
1998) it deemed pertinent to an analysis of the Merger. The acquisition price
was compared to the average and median ratios of (i) price to last 12 months
earnings, (ii) price to tangible book value, (iii) capital adjusted price to
tangible book value, (iv) tangible book value premium to core deposit ratio
("TBV Prem./Core Deposits"), and (v) transaction premium to current trading
price for each of the following 11 comparable transaction groups:
- all recent thrift acquisitions in the United States announced within the
preceding 12 months ("All Recent Median");
- all thrift acquisitions in the United States announced within the
preceding 90 days ("Last 90 Days Median");
23
<PAGE> 33
- all pending thrift acquisitions in the United States that have been
announced but have yet to close ("All Pending Median");
- all New England thrift acquisitions announced within the preceding 12
months ("New England Recent Median");
- all Maine thrift acquisitions announced within the preceding 12 months
("Maine Recent Median");
- all thrift acquisitions in the United States announced within the
preceding 12 months involving acquired thrifts with assets of $50-$100
million ("Assets $50mm-$100mm Median");
- all thrift acquisitions in the United States announced within the
preceding 12 months with a total deal size of $5-$20 million ("Deal Size
$5mm-$20mm Median");
- all thrift acquisitions in the United States announced within the
preceding 12 months involving acquired thrifts with returns on average
assets of 50bp-75bp ("ROAA 50bp-75bp Median");
- all thrift acquisitions in the United States announced within the
preceding 12 months involving acquired thrifts with returns on average
equity of 6%-9% ("ROAE 6%-9% Median");
- all thrift acquisitions in the United States announced within the
preceding 12 months involving acquired thrifts with tangible capital of
6%-8% ("Tangible Capital 6%-8% Median"); and
- Guideline thrift acquisitions announced since January 1, 1998 involving
acquired thrifts with asset sizes, capital levels, and returns on average
equity similar to Mid-Coast ("Guideline Median").
The following table represents a summary analysis of the comparable
transactions analyzed by Trident based on the announced transaction values:
<TABLE>
<CAPTION>
MEDIAN PRICE TO CAPITAL TBV
--------------- ADJ. PRICE/ PREM.(3)/ PREMIUM
NUMBER LTM TANG. TANG. CORE TRADING
OF TRANS. EPS(2) BOOK BOOK DEPOSITS PRICE(4)
--------- ------ ----- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
All Recent Median............... 71 24.0x 152.3% 185.6% 10.2% 38.5%
Last 90 Days Median............. 18 30.5x 153.8% 175.8% 11.1% 59.0%
All Pending Median.............. 37 26.6x 160.4% 185.7% 11.0% 35.0%
New England Recent Median....... 3 16.1x 220.2% 248.3% 17.2% 29.8%
Maine Recent Median............. 1 15.5x 224.0% 244.7% 15.0% 47.3%
Assets $50mm-$100mm Median...... 10 22.0x 140.9% 175.7% 9.1% 65.7%
Deal Size $5mm-$20mm Median..... 19 23.4x 156.7% 175.7% 7.2% 48.3%
ROAA 50bp-75bp Median........... 17 27.9x 141.3% 166.1% 8.0% 39.0%
ROAE 6%-9% Median............... 17 25.4x 157.9% 173.0% 8.8% 33.2%
Tangible Capital 6%-8% Median... 13 23.9x 184.0% 208.2% 11.3% 51.3%
Guideline Median................ 8 23.2x 183.2% 204.7% 9.9% 47.3%
Mid-Coast(1).................... 27.4x 213.7% 218.8% 13.3% 164.6%
</TABLE>
---------------
(1) Mid-Coast pricing data based on per share consideration of $15.875
(2) Last 12 months earnings per share
(3) Tangible book value premium
(4) Based on Mid-Coast's closing stock price on March 24, 2000
The value of the transaction indicates that the offer made to Mid-Coast
falls within the range of similar transactions, represented by the comparable
groups, based on multiples of price to last 12 months earnings, price to
tangible book values, capital adjusted price to tangible book values, and
tangible book value premium to core deposits. Additionally, the transaction
produces a premium to trading price that is well above the premiums of the
comparable groups. When compared to the Guideline Median comparable group, the
transaction is valued higher by all methods of comparison used.
24
<PAGE> 34
As based on the aforementioned analyses and Trident's experience with
numerous mergers involving thrift institutions, the value to Mid-Coast
stockholders is fair from a financial point of view.
NO COMPANY USED AS A COMPARISON IN THE ABOVE ANALYSES IS IDENTICAL TO
MID-COAST, UNION BANKSHARES OR THE COMBINED ENTITY AND NO OTHER TRANSACTION IS
IDENTICAL TO THE MERGER. ACCORDINGLY, AN ANALYSIS OF THE RESULTS OF THE
FOREGOING IS NOT PURELY MATHEMATICAL; RATHER, SUCH ANALYSES INVOLVE COMPLEX
CONSIDERATIONS AND JUDGMENTS CONCERNING DIFFERENCES IN FINANCIAL MARKET AND
OPERATING CHARACTERISTICS OF THE COMPANIES AND OTHER FACTORS THAT COULD AFFECT
THE PUBLIC TRADING VOLUME OF THE COMPANIES TO WHICH MID-COAST, UNION BANKSHARES
AND THE COMBINED ENTITY ARE BEING COMPARED.
IN CONNECTION WITH DELIVERY OF ITS OPINION DATED AS OF THE DATE OF THIS
JOINT PROXY STATEMENT, TRIDENT PERFORMED PROCEDURES TO UPDATE, AS NECESSARY,
CERTAIN OF THE ANALYSES DESCRIBED ABOVE AND REVIEWED THE ASSUMPTIONS ON WHICH
THE ANALYSES DESCRIBED ABOVE WERE BASED AND THE FACTORS CONSIDERED IN CONNECTION
THEREWITH. TRIDENT DID NOT PERFORM ANY ANALYSES IN ADDITION TO THOSE DESCRIBED
ABOVE IN UPDATING THE OPINION.
For its financial advisory services provided to Mid-Coast, Trident has been
paid fees of $50,000 to date and will be paid an additional fee that will amount
to 2.0% of the aggregate consideration received by Mid-Coast stockholders (less
the $50,000 previously paid) at the time of closing of the merger. In addition,
Mid-Coast has agreed to reimburse Trident for all reasonable out-of-pocket
expenses, incurred by it on Mid-Coast's behalf, and to indemnify Trident against
certain liabilities, including any which may arise under the federal securities
laws.
Trident is a member of all principal securities exchanges in the United
States and in the conduct of its broker-dealer activities may have from time to
time purchased securities from, and sold securities to, Mid-Coast and/or Union
Bankshares. As a market maker, Trident may also have purchased and sold the
securities of Mid-Coast and/or Union Bankshares for Trident's own account and
for the accounts of its customers.
OPINION OF UNION BANKSHARES' FINANCIAL ADVISOR
Union Bankshares retained New England Business Advisors, Inc. ("NEBA") to
act as its financial advisor in connection with the Merger. NEBA is a bank
advisory firm that provides strategic planning, financial management and merger
and acquisition services to banks and thrifts throughout New England. NEBA was
retained by Union Bankshares to analyze, structure, negotiate and effect a
transaction with Mid-Coast. Union Bankshares selected NEBA because of its
experience with mergers and acquisitions within the state of Maine and its
knowledge of both Union Trust and Waldoboro, their managements and operations.
Union Trust has been a client of NEBA since 1994. NEBA has worked with
Union Trust's management and board of directors to develop its annual strategic
and business plans, measure and control interest rate risk in its balance sheet,
produce financial modeling and develop a human resources management and
administration process.
Waldoboro retained NEBA in 1998 to implement a marketing plan and to assist
with improving financial modeling. The contract for these services was completed
in the first quarter of 1999. NEBA has not worked with Waldoboro since
completing the initial assignments and has no present professional relationship
with Waldoboro.
NEBA advised Union Bankshares with respect to the pricing and other terms
and conditions of the Merger. The final pricing of the Merger was determined by
the board of directors of Union Bankshares, based on recommendations from the
management of Union Bankshares at meetings of the board of directors held on
February 15, 2000 and March 27, 2000. NEBA rendered its written opinion to the
board of directors that, as of March 27, 2000 and subject to the assumptions,
factors and limitations set forth in the opinion, the Cash Merger Consideration
of $15.875 per share to be paid by Union Bankshares to Mid-Coast's stockholders
is fair to Union Bankshares and Union Bankshares stockholders from a financial
point of view. The board of directors imposed no limitations upon NEBA with
respect to the investigations made or procedures followed by it in arriving at
its opinion.
25
<PAGE> 35
The full text of NEBA's opinion, which sets forth assumptions made, matters
considered and the scope of the review undertaken by NEBA, is attached as
Appendix D to this joint proxy statement. Union Bankshares stockholders are
urged to read the attached NEBA opinion in its entirety before deciding how to
vote on the Merger Agreement. The NEBA opinion is directed only to the board of
directors of Union Bankshares and relates only to the financial fairness of the
Cash Merger Consideration. The NEBA opinion does not constitute a recommendation
to any stockholder as to how such Union Bankshares stockholder should vote at
the Union Bankshares special meeting. The summary of the NEBA opinion set forth
in this joint proxy statement is qualified in its entirety by reference to the
full text of the NEBA opinion.
In connection with its opinion, NEBA reviewed the following documents and
other information:
- The Merger Agreement and related documents;
- Union Bankshares' Annual Reports to Stockholders and Annual Reports on
Form 10-K for the years ended December 31, 1998 and 1997 and Union
Bankshares' Quarterly Reports on Form 10-Q for the periods ended
September 30, 1999, June 30, 1999 and March 31, 1999;
- Mid-Coast's Annual Reports to Stockholders and Annual Reports on Form
10-KSB for the years ended March 31, 1999, 1998 and 1997 and Mid-Coast's
Quarterly Reports on Form 10-QSB for the periods ended December 31, 1999,
September 30, 1999, June 30, 1999 and December 31, 1998;
- Certain operating and financial information provided to NEBA by the
managements of Union Trust and Waldoboro relating to their business and
prospects;
- The views of senior management of both Union Trust and Waldoboro of their
past and current business operations, results thereof, financial
condition and future prospects, including any operating efficiencies and
synergies that may arise from the Merger;
- A comparison, prepared by NEBA, of certain financial information for
Waldoboro with similar information for certain other thrifts that NEBA
considered comparable to Waldoboro;
- The financial terms of certain recent business combinations within the
New England banking industry;
- The banking environment in the state of Maine, based on information
published by the Federal Reserve Bank of Boston, and the economic
environment in the mid-coast Maine marketplace, based on information from
the U.S. Census Bureau;
- The potential pro forma impact of the Merger on Union Bankshares'
financial condition, operating results and earnings per share figures;
and
- Such other information, financial studies, analyses and investigations of
financial, economic and market criteria as NEBA deemed appropriate.
In connection with its review, NEBA relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information regarding Mid-Coast and its subsidiaries provided to NEBA by
Mid-Coast and its representatives. NEBA is not an expert in evaluating loan and
lease portfolios for purposes of assessing the adequacy of the allowances for
losses. Therefore, NEBA has not assumed any responsibility for making an
independent evaluation of the adequacy of the allowance for loan losses set
forth in the balance sheet of Mid-Coast at December 31, 1999, and NEBA assumed
such allowances were adequate and complied fully with applicable law, regulatory
policy, sound banking practice, and the policies of the SEC as of the date of
such balance sheets. NEBA reviewed certain operating forecasts and financial
projections provided by Mid-Coast and Union Bankshares. NEBA assumed that such
forecasts and projections reflected the best currently available estimates and
judgments of Mid-Coast's management. As part of the advisory services provided
to Union Bankshares and Union Trust, NEBA assisted Union Trust management in the
preparation of its financial forecasts and projections. In certain instances,
for the purposes of its analyses, NEBA made adjustments to Mid-Coast's forecasts
and projections which, in NEBA's judgment, were appropriate under the
circumstances. Union Trust and Waldoboro do not publicly disclose internal
management projections of the type used by NEBA in connection with the review of
the Merger. Such projections were not prepared with a view towards public
disclosure. The projections were based on
26
<PAGE> 36
numerous variables and assumptions which are inherently uncertain, including,
without limitation, factors related to general economic and competitive
conditions. Accordingly, actual results could vary significantly from those set
forth in such projections.
NEBA was not retained to, nor did it make any independent evaluation or
appraisal of, the assets or liabilities of Mid-Coast or its subsidiaries. NEBA
also assumed that the Merger in all respects is, and will be, undertaken and
consummated in compliance with all laws and regulations that are applicable to
Union Bankshares and Mid-Coast.
The preparation of a fairness opinion on a transaction such as the proposed
Merger involves various determinations as to the most appropriate and relevant
methods of financial analysis and the application of those methods to the
particular circumstances. Therefore, NEBA's opinion is not readily susceptible
to summary description. In arriving at its opinion, NEBA performed a variety of
financial analyses. NEBA believes that its analyses must be considered as a
whole and the consideration of portions of such analyses and the factors
considered therein, or any one method of analysis, without considering all
factors and analyses, could create an incomplete view of the analyses and the
process underlying NEBA's opinion. No one method of analysis was assigned a
greater significance than any other.
In its analyses, NEBA made numerous assumptions with respect to industry
performance, general business and economic conditions, and other matters, many
of which are beyond the control of Union Bankshares or Mid-Coast. Any estimates
contained in NEBA's analyses are not necessarily indicative of future results or
values, which may be significantly more or less favorable than such estimates.
Estimates of values of companies do not purport to be appraisals nor do they
necessarily reflect the prices at which such companies or their securities may
actually be sold.
NEBA's opinion is based solely upon the information available to it and the
economic, market and other circumstances, as they existed on March 27, 2000.
NEBA did not and does not express any opinion as to the price or range of prices
at which the Union Bankshares common stock might trade subsequent to the Merger.
Events occurring after March 27, 2000 could materially affect the assumptions
and conclusions contained in NEBA's opinion. NEBA has not undertaken to reaffirm
or revise its opinion or otherwise comment upon any events occurring after the
date of this joint proxy statement.
The following is a brief summary of the material analyses and procedures
performed by NEBA in the course of preparing its opinion. The summary does not
purport to be a complete description of NEBA's analyses.
Analysis of Peer New England Thrifts.
NEBA compared the financial data for Waldoboro as of June 30, 1999 to a
peer group of five selected thrifts located in Maine and New Hampshire with
assets between $50 million and $150 million for which information was available.
NEBA deemed this group to be generally comparable to Waldoboro.
27
<PAGE> 37
The following table compares selected statistics of Waldoboro with the
average ratios for the five selected thrifts comprising the peer group and with
Union Trust as of June 30, 1999, annualized:
<TABLE>
<CAPTION>
PEER UNION
WALDOBORO AVERAGE TRUST
--------- --------- ---------
PERCENTAGES
<S> <C> <C> <C>
Tier 1 Capital..................................... 7.45% 10.21% 11.50%
Non-Performing Loans/Loan.......................... 0.24 1.08 0.10
Loan Loss Reserves/Loans........................... 0.73 0.61 2.08
Total Loans/Total Assets........................... 80.00 75.00 48.00
Residential Real Estate Loans/Total Loans.......... 64.00 80.00 37.00
Other Real Estate Loans/Total Loans................ 19.00 10.00 32.00
Real Estate Loans/Total Loans...................... 83.00 90.00 69.00
Consumer Loans/Total Loans......................... 10.00 9.00 9.00
Commercial & Industrial/Total Loans................ 7.00 1.00 22.00
Non-Interest Income/Average Assets................. 0.70 0.36 1.45
Non-Interest Expense/Average Assets................ 3.06 2.51 3.42
Net Interest Margin................................ 3.45 3.27 4.10
Return on Average Assets........................... 0.66 0.68 1.40
Return on Average Equity........................... 8.88 7.15 12.20
</TABLE>
NEBA noted the following points concerning these ratios:
- Tier 1 capital: Waldoboro has experienced substantial asset growth since
its fiscal year ended March 31, 1997. Much of this asset growth is in the
form of real estate loans, a byproduct of the booming economy in
mid-coast Maine. Waldoboro's assets have grown faster that its capital,
thus reducing its Tier 1 capital ratio relative to its peers.
- Non-performing loans/total loans: Waldoboro's non-performing loan ratio,
which is a key indicator of asset quality, compares favorably at 0.24% to
its peers at 1.08%. NEBA infers from this ratio that Waldoboro's asset
quality is excellent.
- Loan loss reserves/total loans: Loan loss reserves allow a bank/thrift to
absorb losses from the loan portfolio without impacting current earnings.
Waldoboro's higher loan loss reserve ratio (0.73%) as compared to its
peers (0.64%) provides more protection against a disruption in earnings
as a result of unanticipated loan losses. This higher loan loss reserve
reflects Waldoboro's diversification into commercial and commercial real
estate lending.
- Total loans/total assets: Waldoboro's higher loan-to-asset ratio of 80%
as compared to its peers at 75% is indicative of the healthy loan demand
in the mid-coast Maine market. Loans generally have higher yields than
investment and generate more income.
- Residential real estate loans/total loans: Waldoboro's lower percentage
of residential real estate loans to total loans (64%) compared to its
peers (80%) is indicative of Waldoboro's efforts to diversify its loan
portfolio and its strategy of selling residential real estate loans into
the secondary mortgage market.
- Other real estate loans/total loans: Waldoboro's higher percentage of
other real estate loans to total loans (19%) compared to its peers (10%)
represents Waldoboro's efforts to diversify its loan portfolio. It also
represents additional credit risk since this type of loan has a higher
historical loan loss experience.
- Commercial & industrial loans/total loans: Waldoboro's participation in
this type of lending at 7% is substantially greater than its peers at 1%.
This is another example of Waldoboro's efforts to diversify its loan
portfolio. A higher percentage of this type of loan also means higher
credit risk in the loan portfolio.
28
<PAGE> 38
- Non-interest income/average assets: Waldoboro's higher percentage (0.70%)
compared to its peers (0.36%) reflects Waldoboro's mortgage banking
activities. Waldoboro sells residential mortgage loans into the secondary
mortgage market and books loan origination and servicing fees as income.
- Non-interest expense/average assets: This is a measurement of the
operating expenses of the thrift/bank in relation to its assets. The
lower the ratio, the more efficient the institution. Waldoboro has a
ratio of 3.06% as compared to its peers at 2.51%, which means that
Waldoboro incurs $3.06 in expense for every $100 in assets while its
peers incur expense of only $2.51. This higher cost of operation is
directly attributable to the number and relatively small deposit bases in
Waldoboro's branches as compared to its peers.
- Net interest margin: This ratio measures the thrift/bank's earnings from
its core business, which is taking in deposits and making loans.
Waldoboro's net interest margin of 3.45% is stronger than its peers at
3.27% as a result of its loan-to-asset ratio and the diversity of its
loan portfolio.
- Return on average assets: This ratio measures how effectively and
efficiently Waldoboro invests its assets. Waldoboro's marginally lower
return on average assets of 0.66% as compared to its peers at 0.68% is a
result of its high operating expenses, which have totally offset its
higher income. Waldoboro is effective in choosing higher-yielding assets
but is not efficient in generating those assets.
- Return on average equity: Return on average equity measures how effective
the thrift/bank is in employing its equity to generate earnings.
Waldoboro's return on average equity (8.88%) is higher than its peers
(7.15%) as a result of Waldoboro doing a better job in leveraging its
capital (generating more assets and income for each dollar of equity).
Analysis of Selected Transactions.
NEBA compared this transaction with that of a group of three transactions
announced since April 1, 1998 and for which pricing data pertaining to the
transactions was publicly available. NEBA deemed these companies to be generally
comparable to Mid-Coast. Two of the transactions occurred in 1999 in the state
of Maine, with an average transaction value of approximately $25 million,
compared to the proposed Cash Merger Consideration of approximately $12 million.
The third transaction occurred in the state of New Hampshire in 1998. The
following table compares selected statistics of Mid-Coast with the average
ratios for the acquired companies in these transactions:
<TABLE>
<CAPTION>
PRICE/BOOK PRICE/EARNINGS
VALUE (%) (LTM) PRICE/ASSETS PRICE/DEPOSITS
---------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
Mid-Coast............................. 188.00* 27.32x 15.58 20.88
Comparable Transactions (Average)..... 244.20** 21.34x 21.96 29.86
</TABLE>
---------------
* Projected book value at completion.
** At completion
An analysis of the comparable data shows that the price being paid for
Mid-Coast compares more favorably to similar transactions as a percentage of
book value at completion, assets and deposits, but compares less favorably as a
multiple of earnings (LTM). NEBA believes that the growth through branching
strategy followed by Mid-Coast has resulted in depressing earnings over the last
two years. Mid-Coast's income is projected to increase as these branches grow
and become less of a drain on earnings. NEBA believes that Mid-Coast's earnings
will be higher on a going-forward basis.
NEBA also believes that a higher premium is justified based on the present
and future growth opportunities for Union Trust's services in the mid-coast
Maine market.
No company or transaction used in the preceding Analysis of Peer New
England Thrifts and Analysis of Selected Transactions sections is identical to
Union Bankshares, Mid-Coast or the Merger. Accordingly, an analysis of the
results of the foregoing is not mathematical; rather it involves complex
considerations and
29
<PAGE> 39
judgments concerning differences in the financial and operating characteristics
of the companies involved and market areas in which the companies operate.
Impact Analysis.
In addition to the above analyses, NEBA further analyzed the Merger in
terms of its effect on Union Bankshares' 2000 through 2002 projected earnings
per share and projected tangible book value per share, assuming that the Merger
would be consummated on June 30, 2000, as compared with Union Bankshares on a
stand-alone basis. These projections are based upon certain assumptions,
including cost savings and other synergies from the Merger, and certain assumed
growth rates.
- For the fiscal year ending December 31, 2000, the Merger would have no
impact on projected earnings per share and would be dilutive to projected
tangible book value per share by approximately 22%.
- For the fiscal year ending December 31, 2001, the Merger would be
accretive to projected earnings per share by approximately 13% and
dilutive to projected tangible book value per share by approximately 17%.
- For the fiscal year ending December 31, 2002, the Merger would be
accretive to projected earnings per share by approximately 14% and
dilutive to projected tangible book value per share by approximately 13%.
These forward-looking projections may be affected by many factors beyond
the control of Union Bankshares and/or Mid-Coast, including the future direction
of interest rates, economic conditions in the companies' marketplaces, the
actual amount and timing of cost savings achieved through the Merger, the actual
level of revenue enhancements brought about through the Merger, future
regulatory changes and various other factors. The actual results may vary from
the projected results and the variations may be material.
In connection with NEBA's updated opinion dated as of the date of this
joint proxy statement and contained as Appendix D, NEBA confirmed the
appropriateness of its reliance on the analyses used to render its March 27,
2000 opinion by performing procedures to update certain of such analyses and by
reviewing the assumptions and conclusions contained in the opinion.
With regard to NEBA's services in connection with the Merger, Union will
pay NEBA a transaction fee of approximately $85,000. This fee includes other
services rendered by NEBA in connection with this transaction, including
preparation of certain regulatory filings. In addition, Union Bankshares has
agreed to reimburse NEBA for its reasonable out-of-pocket expenses. Union
Bankshares has also agreed to indemnify NEBA and certain related persons against
certain liabilities including liabilities under federal securities laws,
incurred in connection with its services. The amounts of NEBA's fees were
determined by negotiation between Union Bankshares and NEBA.
NEBA does not provide published investment analyses of Union Bankshares or
Mid-Coast, and NEBA does not make a market in Union Bankshares common stock or
Mid-Coast common stock.
WHAT MID-COAST STOCKHOLDERS WILL RECEIVE IN THE MERGER
If we complete the Merger, each Mid-Coast stockholder will receive $15.875
in cash for each share of Mid-Coast common stock held by such stockholder at the
date the Merger is completed.
FINANCING
Union Bankshares will pay the aggregate Cash Merger Consideration of
$15.875 per share, estimated to be $12.0 million, out of cash available to it.
Such cash may be generated by Union Bankshares from a combination of cash
reserves or sales of securities. As an alternative, Union Bankshares may obtain
financing from a third party, however, such financing is not required in order
for Union Bankshares to complete the Merger or pay the full amount of the Cash
Merger Consideration.
30
<PAGE> 40
INTERESTS OF CERTAIN PERSONS IN THE MERGER
General
Certain members of Mid-Coast's management and board of directors may be
deemed to have certain interests in the Merger that are in addition to their
interests as stockholders of Mid-Coast generally. Mid-Coast's board of directors
was aware of these interests and considered them, among other matters, in
approving the Merger Agreement.
Termination Agreement with Wesley E. Richardson
In connection with the Merger Agreement, Mr. Richardson will sign and
deliver a termination agreement pursuant to which Mr. Richardson will receive a
severance payment in the approximate amount of $300,000. The termination
agreement and the payment of the severance amount generally reflects certain
employment and severance arrangements which Mr. Richardson currently has with
Mid-Coast. As of the effective date of the Merger, Mr. Richardson will no longer
be an employee of Mid-Coast nor will he become an employee of Union Bankshares.
In addition, for a period starting from the date of signing the termination
agreement with Union Bankshares until three years after its effective date, Mr.
Richardson will not serve as an employee, a five percent shareholder, a
director, a consultant or an advisor to, an agent of, or a contractor in any
capacity with any bank, savings bank, savings association, trust company,
financial institution or other similar business enterprise which competes with
Union Trust within the areas of Waldo, Knox and Lincoln counties of Maine. The
terms of his termination agreement with Union Bankshares also provide that for a
period from the signing of such agreement until three years after its effective
date, Mr. Richardson may not initiate any action with any employee of Union
Trust to leave his or her employment with Union Trust.
Employee Benefits and Employment
Employees of Mid-Coast who become employees of Union Bankshares, including
certain officers of Mid-Coast, shall be entitled to participate in the Union
Bankshares employee benefit plans which may, in some circumstances, reflect the
participation, vesting and benefit accrual established under Mid-Coast's or
Waldoboro's respective benefit plans. In addition, employees of Mid-Coast or
Waldoboro who become employees of Union Bankshares or Union Trust will
participate in Union Bankshares or Union Trust respective group health plans and
will receive credit for deductibles and co-payments made by such employees under
the health plans maintained by Mid-Coast or Waldoboro prior to the effective
date of the Merger. Such health care coverage shall be extended to former
employees of Mid-Coast or Waldoboro with no waiting period and Union Bankshares
will use its best efforts to provide that such coverage will be without any
exclusions for pre-existing conditions.
Upon the effective date of the Merger, Union Bankshares and/or Union Trust,
as appropriate, shall retain and employ each officer and employee (other than
Mr. Richardson) employed by Mid-Coast or Waldoboro as of the effective date of
the Merger for a period of one year from such effective date, and will not
reduce the base salary or base wages of such employees during this one year
period. However, such employees may be terminated for cause, as defined in the
Merger Agreement and shall be subject to the employment terms, conditions,
policies and rules applicable to other employees of Union Bankshares and/or
Union Trust and the terms, conditions, policies and rules relating to vacation
benefits, sick leave, and other plans and benefits available to other Union
Bankshares and Union Trust employees, except as such terms, conditions, policies
and rules may be modified by the Merger Agreement.
Indemnification; Directors and Officers Insurance
For a period of six years after the completion of the Merger, Union
Bankshares has agreed to indemnify the present and former directors, officers
and employees of Mid-Coast and Waldoboro against certain liabilities arising out
of actions or omissions occurring at or prior to the time the effective date of
the Merger to the full extent permitted under Delaware law, and Mid-Coast's
Certificate of Incorporation and Bylaws. Union
31
<PAGE> 41
Bankshares has also agreed to maintain in effect for a period of not less than
four years after completion of the Merger, "tail" directors' and officers'
liability insurance policy for those directors and officers of Mid-Coast covered
under Mid Coast's director and officer liability insurance at the time of the
Merger.
RISK FACTORS FOR UNION BANKSHARES STOCKHOLDERS
If the Merger Agreement is approved and all other conditions to the Merger
are either satisfied or waived, Union Bankshares will be obligated to pay the
aggregate Cash Merger Consideration of $15.875 per share, estimated to be
approximately $11.9 million. The Merger involves the integration of two
companies that have previously operated independently. Successful integration of
Mid-Coast's operations will depend primarily on Union Bankshares' ability to
consolidate operations, systems and procedures and to eliminate redundancies and
costs. Union Bankshares may not be able to integrate the operations of Mid-Coast
and Waldoboro without encountering difficulties including, without limitation:
- the loss of key employees and customers;
- the disruption of the businesses;
- possible inconsistencies in standards, control procedures and policies;
- unexpected problems with costs, operations, personnel, technology or
credit; and
- the assimilation of new operations, sites and personnel could divert
resources from regular banking operations.
Accordingly, there are risks and uncertainties that bear on Union
Bankshares' future financial results that may cause Union Bankshares' future
earnings and financial condition to be less than Union Bankshares' expectations.
Some of the risks and uncertainties relate to economic conditions generally
and would affect other financial institutions in similar ways. These aspects are
discussed above under the heading "A Warning About Forward-Looking Statements"
on page 8. This risk factors section addresses particular risks and
uncertainties that are specific to Union Bankshares.
Further, although Union Bankshares anticipates cost savings as a result of
the Merger to be meaningful, Union Bankshares may be unable to fully realize any
of the potential cost savings expected. In addition, any cost savings which are
realized may be offset by losses in revenues or other changes to earnings.
PROCEDURES FOR EXCHANGE OF CERTIFICATES
Promptly after the Merger is completed, each former Mid-Coast stockholder
will be mailed a letter of transmittal and instructions by the Exchange Agent
for the exchange of the certificates representing shares of Mid-Coast common
stock for the Cash Merger Consideration of $15.875 per share.
Mid-Coast stockholders should not send in certificates until they receive a
letter of transmittal and instructions from the Exchange Agent.
After Mid-Coast stockholders surrender to the Exchange Agent, certificates
for Mid-Coast common stock with a properly completed letter of transmittal, the
Exchange Agent will mail such stockholders checks representing the Cash Merger
Consideration of $15.875 per share. Union Bankshares will not be obligated to
deliver the Cash Merger Consideration to any former Mid-Coast stockholder, until
such stockholder has surrendered his or her Mid-Coast common stock certificates
to the Exchange Agent.
Union Bankshares will not be liable to any former holder of Mid-Coast
common stock for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws. In addition, any portion
of the Cash Merger Consideration which remains unclaimed after six months after
the effective date of the Merger will be delivered to Union Bankshares, and any
former stockholders of Mid-Coast may look only to Union Bankshares for payment
of the Cash Merger Consideration.
32
<PAGE> 42
If a certificate for Mid-Coast common stock has been lost, stolen or
destroyed, the Exchange Agent will issue the Cash Merger Consideration of
$15.875 per share properly payable in accordance with the Merger Agreement upon
receipt of appropriate evidence as to loss, theft or destruction, and
appropriate evidence as to the ownership of such certificate by the claimant.
When authorizing payment in exchange for any lost certificate, the person to
whom the Cash Merger Consideration is to be issued must give Exchange Agent a
bond or otherwise indemnify the Exchange Agent in a manner satisfactory to the
Exchange Agent against any claim that may be made against the Exchange Agent or
Union Bankshares with respect to the certificate alleged to have been lost,
stolen, or destroyed.
At the time the Merger becomes effective, the stock transfer books of
Mid-Coast will be closed to Mid-Coast's stockholders and no transfer of shares
of Mid-Coast common stock by any stockholder will thereafter be made or
recognized. If certificates for shares of Mid-Coast common stock are presented
for transfer after the Merger becomes effective, they will be canceled and
exchanged for a check for the Cash Merger Consideration to which such holder is
entitled.
EFFECTIVE TIME OF THE MERGER
Subject to the conditions of the Merger Agreement, the Merger will become
effective as specified in the certificate of merger to be filed with the
Secretary of State in Delaware with respect to Mid-Coast and the Acquisition
Company. Union Bankshares and Mid-Coast have agreed that they will use
reasonable efforts to cause the Merger to become effective on Union Trust's last
business day of the month during which all applicable statutory and regulatory
waiting periods have expired and the approval of Mid-Coast stockholders and
Union Bankshares stockholders has been obtained.
Union Bankshares and Mid-Coast anticipate that the Merger will become
effective during the third quarter of 2000. However, it is possible that factors
outside of the control of the parties could require us to complete the Merger at
a later time.
Union Bankshares and Mid-Coast cannot assure you that the necessary
stockholder and regulatory approvals of the Merger will be obtained or that
other conditions to consummation of the Merger can or will be satisfied. Either
Mid-Coast's or Union Bankshares' board of directors may terminate the Merger
Agreement if the Merger is not completed by December 31, 2000, unless it is not
or cannot be completed because of a material breach of the Merger Agreement by
the party seeking termination. See "-- Conditions to Completion of the Merger"
and "-- Waiver, Amendment and Termination."
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the principal federal income tax consequences
of the Merger is based upon the provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), the regulations thereunder, judicial authority,
administrative rulings and practice as of the date hereof. The following
discussion does not address the federal income tax consequences to special
classes of taxpayers, including, without limitation, persons who are not
citizens or residents of the United States, foreign corporations, tax exempt
entities and persons who acquired their shares of common stock pursuant to the
exercise of an employee option or otherwise as compensation.
The cancellation of shares of Mid-Coast common stock in exchange for the
Cash Merger Consideration of $15.875 per share pursuant to the Merger will be a
taxable transaction to the holders of the Mid-Coast common stock for federal
income tax purposes and may also be a taxable transaction under applicable
state, local and other tax laws.
In general, a holder of Mid-Coast common stock who receives the Cash Merger
Consideration of $15.875 per share will recognize gain or loss equal to the
difference between the adjusted tax basis of his or her shares of Mid-Coast
common stock and the amount of cash received in exchange for the shares. The
gain or loss will be capital gain or loss if, as should be the case for most
holders of Mid-Coast common stock, the shares are capital assets in the hands of
the stockholder and will be long-term capital gain or loss if the holding period
for the Mid-Coast common stock is more than one year. In addition, a stockholder
may be required to allocate the
33
<PAGE> 43
adjusted tax basis of his or her shares of Mid-Coast common stock to the receipt
of the Cash Merger Consideration of $15.875 per share to determine the actual
gain or loss with respect to the receipt of the consideration.
Each holder of Mid-Coast common stock who receives the Cash Merger
Consideration of $15.875 per share will, in general, be required to provide to
the Exchange Agent a social security or other taxpayer identification number, or
in certain instances other information, in order to avoid "back-up withholding"
requirements which might otherwise apply under the Code. Any person who does not
furnish this information may be subject to a penalty imposed by the Internal
Revenue Service.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE DOES NOT NECESSARILY SET
FORTH ALL OF THE TAX CONSEQUENCES OF THE MERGER THAT MAY BE RELEVANT TO ALL
MID-COAST STOCKHOLDERS IN ALL CIRCUMSTANCES. STOCKHOLDERS SHOULD THEREFORE
CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE
MERGER, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL OR OTHER TAX LAWS.
REGULATORY MATTERS
Union Bankshares and Mid-Coast have filed (or will promptly file) all
applications and notices and have taken (or will promptly take) other
appropriate action with respect to any requisite approvals or other action of
any government authority. The Merger Agreement provides that the obligation of
each of Union Bankshares and Mid-Coast to complete the Merger is conditioned
upon the receipt of all requisite regulatory approvals, including the approvals
of the Federal Reserve Board ("FRB") and the Bureau of Banking of the Department
of Professional and Financial Regulation of the State of Maine ("Bureau of
Banking").
The Merger and the Subsidiary Merger must be approved by the FRB and prior
notice of the Subsidiary Merger must be provided to the Office of Thrift
Supervision. The U.S. Department of Justice (the "DOJ") may also review the
Merger's impact on competition. In addition, state regulatory authorities,
including the Bureau of Banking, will need to approve the Merger and the
Subsidiary Merger before the transactions can be completed.
There can be no assurance that any governmental agency will approve or take
any required action with respect to the Merger and the Subsidiary Merger, if
such approvals are received or action is taken, there can be no assurance as to
the date of such approvals or action, that such approvals or action will not be
conditioned upon matters that would cause the parties to mutually consent to
abandon the Merger or that no action will be brought challenging such approvals
or action, including a challenge by the DOJ or, if such a challenge is made, the
result thereof.
In determining whether to approve the Merger, the FRB will consider whether
the acquisition can reasonably be expected to produce benefits to the public,
such as greater convenience, increased competition, and gains in efficiency,
that outweigh possible adverse effects, such as undue concentration of
resources, decreased or unfair competition, conflicts of interest, and unsound
banking practices. In addition, the FRB evaluates the financial and managerial
resources of Union Bankshares, including its subsidiaries, and Mid-Coast, the
effect of the proposed transaction on these resources, and the management
expertise, internal control and risk-management systems, and capital of Union
Bankshares. The FRB may impose conditions on any approval, including conditions
to address permissibility, financial, managerial, safety and soundness,
competition, compliance, conflicts of interest, or other concerns to ensure that
approval is consistent with the statutory requirements of the Bank Holding
Company Act of 1956, as amended. The Bureau of Banking will consider similar
factors in reviewing the application. Certain additional relevant information is
provided under "Certain Regulatory Considerations."
Union Bankshares and Mid-Coast are not aware of any governmental approvals
or actions that may be required for completion of the Merger other than as
described above. Should any other approval or action be required, Union
Bankshares and Mid-Coast currently contemplate that such approval or action
would be sought.
The Merger cannot proceed in the absence of the requisite regulatory
approvals. There can be no assurance that the regulatory approvals will be
obtained or as to the dates of any such approvals. Also, there
34
<PAGE> 44
can be no assurance that the DOJ or other governmental authorities will not
challenge the Merger or if such a challenge is made, as to the result thereof.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for by the purchase
method of accounting. Under purchase accounting , the total purchase price is
allocated to the tangible and intangible assets and liabilities of Mid-Coast
based upon their respective fair values as of the closing date.
EFFECT OF THE MERGER ON MID-COAST STOCK OPTIONS AND STOCK AWARDS
Stock Options
Mid-Coast currently maintains a stock option plan pursuant to which options
to purchase Mid-Coast common stock have been granted from time to time to
employees of Mid-Coast and Waldoboro. The holders of outstanding exercisable
stock options as of the effective date of the Merger shall be entitled to
receive a cash payment equal to the excess of (i) the Cash Merger Consideration
of $15.875 per share of Mid-Coast common stock multiplied by the number of
shares of Mid-Coast common stock subject to the stock option(s) less (ii) the
aggregate exercise price for shares of Mid-Coast common stock subject to the
stock option(s), less any applicable taxes. As of the effective date of the
Merger the stock options will no longer be exercisable for shares of Mid-Coast
common stock nor will they be assumed by Union Bankshares or exercisable for
Union Bankshares common stock. As of the date of this joint proxy statement,
there are approximately 5,426 stock options outstanding.
Restricted Stock Awards
Mid-Coast currently maintains the Mid-Coast Bancorp, Inc. Recognition and
Retention Plan (the "Retention Plan") pursuant to which Mid-Coast grants
restricted stock awards of Mid-Coast common stock to employees and outside
directors of Mid-Coast and Waldoboro. In connection with the Merger, the
Retention Plan and related trust shall be terminated at or prior to the
effective date of the Merger. All stock awards outstanding under the Retention
Plan shall become immediately and fully vested prior to the effective date of
the Merger in accordance with the terms of the Retention Plan. Each holder of a
stock award shall be entitled to receive the Cash Merger Consideration of
$15.875 per share in accordance with the terms of the Merger Agreement. Any
unawarded shares in the Retention Plan at the effective date of the Merger will
be automatically canceled. As of the date of this joint proxy statement, there
are approximately 11,718 stock awards outstanding.
CONDITIONS TO COMPLETION OF THE MERGER
Union Bankshares and Mid-Coast are required to complete the Merger only
after the satisfaction of various conditions. These conditions include the
following:
- the holders of a majority of the outstanding shares of Mid-Coast common
stock must approve the Merger Agreement;
- the holders of 67 percent of the outstanding shares of Union Bankshares
common stock must approve the Merger Agreement;
- Union Bankshares and Mid-Coast must receive certain required regulatory
approvals;
- the representations and warranties of Mid-Coast and Union Bankshares as
set forth in the Merger Agreement must be accurate according to the
standards set forth in the Merger Agreement as of the date of the signing
of the Merger Agreement and as of the effective date;
- Mid-Coast and Union Bankshares must perform all agreements and comply
with all covenants set forth in the Merger Agreement;
35
<PAGE> 45
- Union Bankshares and Mid-Coast must receive all other consents from third
parties that may be required to complete the Merger;
- there must not be any law or order or any action taken by any court,
governmental, or regulatory authority of competent jurisdiction
prohibiting or restricting the Merger or making it illegal;
- Union Bankshares shall receive an opinion from counsel to Mid-Coast
covering certain legal matters in connection with the Merger;
- Mid-Coast shall receive an opinion from counsel to Union Bankshares
covering certain legal matters in connection with the Merger;
- the Option Agreement shall be signed and delivered by Mid-Coast;
- the termination agreement of Mr. Richardson shall be signed and delivered
by Mr. Richardson, Mid-Coast and Union Bankshares;
- the Subsidiary Merger Agreement shall be signed and delivered by Union
Trust and Waldoboro;
- Mid-Coast shall have purchased environmental insurance on behalf of
Mid-Coast and Union Bankshares providing coverage for a period of ten
years with respect to certain potential liabilities at the Mid-Coast
Rockland branch location; and
- certain other conditions must be satisfied, including the receipt of
various certificates from the officers of Mid-Coast and Union Bankshares
certifying to the matters set forth above.
We cannot assure you as to when or if all of the conditions to the Merger
can or will be satisfied or waived by the party permitted to do so. If the
Merger is not effected on or before December 31, 2000, the board of directors of
either Mid-Coast or Union Bankshares may terminate the Merger Agreement and
abandon the Merger unless the Merger Agreement cannot be consummated due to a
breach of that party's representations or obligations under the Merger
Agreement. See "-- Waiver, Amendment and Termination."
WAIVER, AMENDMENT AND TERMINATION
Waiver or Amendment
Any provision of the Merger Agreement may be amended or waived prior to
closing by an agreement in writing signed between the parties, to the extent
permitted by applicable law, except that, after approval of the Mid-Coast
stockholders is obtained at its special meeting, no amendment may be made that
requires further approval by such stockholders, or after approval of the Union
Bankshares stockholders is obtained at its special meeting, no amendments may be
made in a manner adverse to Union Bankshares stockholders without the requisite
approval of the holders of the issued and outstanding shares of Union Bankshares
common stock entitled to vote on that matter.
Termination
The Merger Agreement may be terminated under any of the following
circumstances:
(1) the Merger Agreement may be terminated by the mutual consent of Union
Bankshares and Mid-Coast.
(2) the Merger Agreement may be terminated by either Union Bankshares or
Mid-Coast if:
- approval or consent of any regulatory authorities required for
completion of the merger is denied by final nonappealable action of
such authority;
- any stockholder approval required under the Merger Agreement is not
obtained;
- if a material breach by or failure to perform on the part of a party
of any representation, warranty, covenant or agreement contained in
the Merger Agreement has occurred and cannot be or has not been cured
within 30 days after the giving of written notice of such breach by
the other party
36
<PAGE> 46
(provided the other party is not in material breach) such that the
conditions for closing set forth in the Merger Agreement would not
then be satisfied by the breaching party;
- the Merger has not been completed by December 31, 2000; provided,
however, that the right to terminate the Merger Agreement will not be
available to any party whose breach of any obligation under the
Merger Agreement has been the cause of or resulted in the failure of
the Merger to occur on or before December 31, 2000;
- any of the conditions precedent to the obligations of the parties to
complete the Merger or the Subsidiary Merger cannot be satisfied or
fulfilled by December 31, 2000; provided, however that the
terminating party is not then in material breach of any
representation, warranty, covenant, or other agreement in the Merger
Agreement;
- the board of directors of Mid-Coast authorizes, recommends, publicly
proposes or announces an intention to authorize, recommend or propose
to Mid-Coast stockholders, or has entered into an agreement with a
third party to effect an alternative acquisition proposal, or if, a
tender offer or exchange offer for 25% or more of the outstanding
shares of Mid-Coast common stock is commenced and the board of
directors of Mid-Coast recommends that the stockholders of Mid-Coast
tender their shares in such tender or exchange offer, provided that
Mid-Coast will not be entitled to exercise these termination rights
unless (a) any action of the board of directors of Mid-Coast is taken
in good faith after consultation with and consideration of the advice
of its outside counsel and financial advisors, and (b) has complied
with its other obligations in the Merger Agreement; or
(3) The Merger Agreement may be terminated by Union Bankshares:
- if the Mid-Coast board of directors withdraws, modifies or changes
its approval of the Merger Agreement, the Option Agreement, the
Subsidiary Merger Agreement or the Merger in a manner adverse to
Union Bankshares, provided that Union Bankshares is not then in
material breach of the Merger Agreement;
- if holders of 20% or more of the holders of the outstanding common
stock of Mid-Coast exercise statutory appraisal rights under Delaware
law; or
- if, in the opinion of its environmental consultant that any of the
"Phase I" site assessments conducted pursuant to the Merger Agreement
reveals the presence of any condition at any Mid-Coast property which
creates or has the potential to create an environmental liability on
the part of any of the parties (referred to as an "environmental
condition") and where such environmental liability would be in excess
of $25,000 as a result of any one or a combination of the following:
(i) further investigation of the environmental condition, as needed,
or any remediation activities, as needed, in the reasonable
opinion of Union Bankshares, its counsel or environmental
consultants, including a "Phase II" site assessment;
(ii) obtaining environmental insurance for coverage of all
liabilities related to the environmental condition on terms and
conditions satisfactory to Union Bankshares in its reasonable
discretion; and
(iii) diminution in value of the effected property owned by Mid-Coast
as a result of the presence of the "environmental condition" as
compared to the fair market value of such property in the
absence of such environmental condition. The diminution will be
determined by a licensed appraisal firm that is mutually
acceptable to Mid-Coast and will also include in the diminution
value, among other things, the reasonable fees and expenses of
consultants, engineers, contractors, appraisal firms and
attorneys.
(4) The Merger Agreement may be terminated by Mid-Coast at any time prior
to the Union Bankshares special meeting if the Union Bankshares board
of directors withdraws, modifies or changes its
37
<PAGE> 47
approval of the Merger Agreement in a manner adverse to Mid-Coast,
provided that Mid-Coast is not then in material breach of the Merger
Agreement.
If the Merger is terminated, the Merger Agreement will become void and have
no effect, except that certain provisions of the Merger Agreement and the Option
Agreement, including those relating to the obligations to bear certain expenses,
maintain the confidentiality of certain information obtained and of Mid-Coast to
issue and sell shares of its common stock to Union Bankshares, will survive.
TERMINATION OF THE MERGER AGREEMENT WILL NOT RELIEVE ANY BREACHING PARTY FROM
LIABILITY FOR ANY UNCURED WILLFUL BREACH OF A REPRESENTATION, WARRANTY,
COVENANT, OR AGREEMENT. THE OPTION AGREEMENT IS GOVERNED BY ITS OWN TERMS AS TO
ITS TERMINATION. See "-- Expenses and Fees" and "The Option Agreement."
CONDUCT OF BUSINESS PENDING THE MERGER
The Merger Agreement obligates Mid-Coast to conduct its business only in
the usual, regular, and ordinary course before the Merger becomes effective and
imposes certain limitations on the operations of Mid-Coast and its banking
subsidiary, Waldoboro. These items are listed in Article 5 of the Merger
Agreement which is attached as Appendix A to this joint proxy statement. The
Merger Agreement authorizes Mid-Coast to declare and pay regular semi-annual
dividends on the Mid-Coast common stock at a rate of $.10 per share with usual
record and payment dates which conform to past practices.
Union Bankshares and Mid-Coast have also agreed not to take any action that
would (i) materially adversely affect their ability to obtain any consents
required for the Merger, or (ii) materially adversely affect their ability to
perform their covenants and agreements under the Merger Agreement.
OTHER ACQUISITION PROPOSALS
In accordance with the terms of the Merger Agreement, neither Mid-Coast nor
Waldoboro shall authorize or knowingly permit any of their officers, directors,
employees, representatives or agents to directly or indirectly, encourage or
solicit or hold any discussions or negotiations with any third parties
concerning any potential merger, consolidation, sale of substantial assets, sale
of shares of capital stock or similar transactions involving Mid-Coast or
Waldoboro. Mid-Coast and Waldoboro may only engage in such activities as
permitted by the Merger Agreement or as required by law to avoid any breach of
the fiduciary duties and obligations of Mid-Coast's board of directors.
EXPENSES AND FEES
All expenses incurred in connection with the Merger Agreement and the
related transactions are to be paid by the party incurring the expenses,
provided that printing expenses in connection with printing of this joint proxy
statement and registration fees in connection with the filing of this joint
proxy statement are to be shared equally.
REPRESENTATIONS AND WARRANTIES
In connection with the Merger, Mid-Coast and Union Bankshares have made to
each other representations and warranties which are customary in transactions
such as the Merger. These representations and warranties can be found in the
Merger Agreement attached to this joint proxy statement as Appendix A.
38
<PAGE> 48
THE OPTION AGREEMENT
The following summary of the Option Agreement dated March 27, 2000 entered
into by Mid-Coast and Union Bankshares is qualified by reference to the complete
text of the agreement, which is incorporated by reference and attached as
Appendix E to this joint proxy statement.
GENERAL
As an inducement and a condition to Union Bankshares entering into the
Merger Agreement, Union Bankshares required that Mid-Coast enter into an Option
Agreement, which allows Union Bankshares, under certain circumstances, to
purchase up to 149,960 shares of Mid-Coast common stock (representing
approximately 19.9% of Mid-Coast's issued and outstanding common stock) at an
exercise price of $6.00 per share, subject to adjustment so that in no event may
Union Bankshares acquire shares of Mid-Coast common stock representing more than
19.9% of the issued and outstanding shares of such stock. Under the Option
Agreement, Union Bankshares' total profit resulting from the exercise of the
option may not exceed $800,000. The option may only be exercised upon the
occurrence of certain events which are described below.
EFFECT OF THE OPTION AGREEMENT
Mid-Coast and Union Bankshares entered into the Option Agreement to
increase the likelihood that the Merger will be completed in accordance with its
terms. The Option Agreement may have the effect of discouraging persons who
might be interested in acquiring all or a significant interest in Mid-Coast even
if such persons were prepared to pay a higher price per share of Mid-Coast
common stock than the value per share contemplated by the Merger Agreement. The
acquisition by a third party of Mid-Coast or a significant interest in Mid-Coast
or a significant portion of its consolidated assets, or an agreement to do so,
could cause the option to become exercisable and significantly increase the cost
of the acquisition to a potential acquiror. Such increased costs might
discourage a potential acquiror from considering or proposing an acquisition or
might result in a potential acquiror proposing to pay a lower per share price to
acquire Mid-Coast than it might otherwise have proposed to pay.
TERMS OF THE OPTION AGREEMENT
If Union Bankshares is not in material breach of the Option Agreement or
the Merger Agreement and if no injunction or other court order against delivery
of the shares covered by the option is in effect, Union Bankshares may exercise
the option, in whole or in part, at any time and from time to time, upon the
occurrence of a "purchase event" as defined below. A "purchase event" means any
of the following events or transactions:
(1) without Union Bankshares' prior written consent, Mid-Coast or its
subsidiary takes certain actions, including authorizing, recommending
or proposing, or failing to publicly oppose, or entering into an
agreement with any third party to effect (a) a merger, consolidation or
similar transaction involving Mid-Coast or any significant subsidiary,
(b) the purchase, lease or other acquisition of all or a substantial
portion of the assets of Mid-Coast or any significant subsidiary or (c)
a purchase or other acquisition of securities representing 10% or more
of the voting power of Mid-Coast or any significant subsidiary (each an
"acquisition transaction");
(2) without Union Bankshares' prior written consent, Mid-Coast or its
subsidiary authorizes, recommends, proposes or publicly announces its
intention to authorize, recommend or propose to engage in an
"acquisition transaction" with any third party, or the board of
directors of Mid-Coast publicly withdraws or modifies, or publicly
announces its intention to withdraw or modify in any manner adverse to
Union Bankshares, Mid-Coast's recommendation that the stockholders of
Mid-Coast approve the transactions contemplated by the Merger
Agreement;
(3) the stockholders of Mid-Coast fail to approve and adopt the Merger
Agreement and the Merger at the special meeting of Mid-Coast, or
Mid-Coast fails to hold a special meeting if prior to such meeting, a
third party has made a proposal to Mid-Coast or its stockholders by
public announcement
39
<PAGE> 49
or written communication that is or becomes the subject of public disclosure to
engage in an "acquisition transaction;"
(4) any third party acquires or obtains the right to acquire beneficial
ownership of 10% or more of the outstanding shares of common stock of
Mid-Coast;
(5) a third party makes a bona fide proposal to Mid-Coast or its
stockholders by public announcement or written communication that is or
becomes the subject of public disclosure to engage in an "acquisition
transaction;"
(6) after an overture is made by a third party to Mid-Coast or its
stockholders to engage in an "acquisition transaction," Mid-Coast
breaches its obligation contained in the Merger Agreement which has not
been cured to the satisfaction of Union Bankshares; or
(7) a third party without the prior written consent of Union Bankshares or
its subsidiary files an application or notice with a federal or state
governmental authority for approval to engage in an "acquisition
transaction."
The option will terminate upon the earliest to occur of:
(1) the completion of the Merger;
(2) eight months after the occurrence of a "purchase event;"
(3) termination of the Merger Agreement in accordance with its terms except
for any termination resulting from a material breach of the Merger
Agreement by Mid-Coast of its representations, warranties or covenants,
or the failure of the stockholders of Mid-Coast to approve the Merger
Agreement; or
(4) December 31, 2000.
REPURCHASE OF THE OPTION
The Option Agreement provides that Mid-Coast is required to repurchase the
option if requested to do so by Union Bankshares or a subsequent holder of the
option. Such a request can only be made after the occurrence of a "purchase
event" and prior to the termination of the Option Agreement. The repurchase
price will be equal to the amount by which (i) the market/offer price, as
described in detail in the Option Agreement, exceeds (ii) exercise price of the
option, multiplied by the number of shares for which the Mid-Coast option may
then be exercised. 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 option holder and reasonably acceptable
to both Mid-Coast and Union Bankshares.
REGISTRATION RIGHTS
Mid-Coast has agreed to grant Union Bankshares customary rights to require
registration by Mid-Coast of option shares for sale by Union Bankshares pursuant
to the Option Agreement as applicable.
PROFIT LIMITATION
The Option Agreement provides that, notwithstanding any other provision of
that agreement, Union Bankshares' total profit will not exceed $800,000 in the
aggregate. If Union Bankshares' total profit otherwise would exceed that amount,
Union Bankshares, at its sole discretion, may (a) reduce the number of shares of
Mid-Coast common stock subject to the option, (b) deliver to Mid-Coast for
cancellation option shares previously acquired by Union Bankshares, (c) pay cash
to Mid-Coast, (d) increase the per share exercise price, or (e) any combination
of the foregoing so that Union Bankshares' actually realized total profit does
not exceed $800,000 after taking into account the foregoing actions.
40
<PAGE> 50
ADJUSTMENT
The Option Agreement provides for the adjustment to be the number of shares
and the exercise price of the option upon the occurrence of certain changes to
the capital structure of Mid-Coast or certain other events or transactions.
REGULATORY MATTERS
Some rights and obligations of Mid-Coast and Union Bankshares under the
Option Agreement are subject to receipt of required regulatory approvals,
including the FRB and the Bureau of Banking for approval to acquire the
outstanding shares of Mid-Coast common stock pursuant to the option. See
"Certain Regulatory Considerations."
41
<PAGE> 51
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following tables set forth the selected unaudited pro forma combined
financial information of Union Bankshares giving effect to the Merger and should
be read in conjunction with and are qualified in their entirety by, the
historical financial statements and notes of Union Bankshares and Mid-Coast and
the accompanying unaudited pro forma condensed consolidated financial statements
and notes for the surviving corporations presented on pages 49 through 53. The
Union Bankshares and Mid-Coast combined results of operations give effect to
Union Bankshares' proposed acquisition of Mid-Coast under the purchase method of
accounting, as if such transaction had been completed as of January 1, 1999. The
pro forma amounts are not necessarily indicative of results that will be
obtained on a combined basis. The pro forma amounts have not been adjusted to
reflect any of the improvements in operating efficiencies that the surviving
corporation anticipates will occur as a result of the Merger.
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED *YEAR ENDED
MARCH 31, 2000 DECEMBER 31, 1999
------------------ -----------------
<S> <C> <C>
STATEMENT OF INCOME:
Interest Income........................................... $ 5,883 $ 22,888
Interest Expense........................................ 2,551 9,967
-------- --------
Net Interest Income.................................. 3,332 12,921
Provision for Loan Losses............................... 53 278
-------- --------
Net Interest Income After Provision for Loan
Losses............................................. 3,279 12,643
Non-interest income..................................... 815 3,903
Non-interest expenses................................... 2,947 11,742
-------- --------
Income before Provision for Income Taxes............. 1,147 4,804
Income Tax expense...................................... 374 1,570
-------- --------
Net Income........................................... $ 773 $ 3,234
======== ========
STATEMENT OF CONDITION:
Assets.................................................. $335,809 $332,048
Loans................................................... 188,625 187,970
Allowance for Loan Losses............................... (2,618) (2,629)
Investments............................................. 104,959 107,398
Deposits................................................ 242,485 250,662
Borrowings.............................................. 60,322 47,702
Stockholder's Equity.................................... 27,489 27,644
PER SHARE:
Earnings per share...................................... $ 1.34 $ 5.59
Book value per share.................................... $ 47.55 $ 47.82
Dividends per share..................................... $ 0.50 $ 2.09
Weighted average shares outstanding..................... 578,165 578,086
SELECTED FINANCIAL PERCENTAGES:
Return on average stockholders' equity.................. 2.42% 8.74%
Return on average total assets.......................... 0.23 0.90
Net interest rate spread................................ 4.30 4.38
Net interest margin..................................... 4.39 4.40
Net charge-off to average loans......................... 0.004% 0.003%
</TABLE>
42
<PAGE> 52
<TABLE>
<CAPTION>
THREE MONTHS ENDED *YEAR ENDED
MARCH 31, 2000 DECEMBER 31, 1999
------------------ -----------------
<S> <C> <C>
Non-performing loans to total loans....................... 1.115% 0.468%
Allowance for loan losses to total loans................ 1.39 1.39
Total capital to risk weighted assets................... 17.73 17.50
Tier 1 capital to risk weighted assets.................. 16.49 16.25
Tier 1 capital to average assets........................ 9.43 9.34
Dividend payout ratio................................... 37.26% 37.70%
</TABLE>
---------------
* Represents the results of operations of Union Bankshares for the year ended
December 31, 1999 and the results of operations for Mid-Coast for the fiscal
year ended March 31, 2000. Information presented on the balance sheet for
Mid-Coast and Union Bankshares is as of December 31, 1999.
43
<PAGE> 53
Set forth below are summary selected consolidated financial and operating
data for Union Bankshares as of and for the period indicated on a historical
basis. This financial information has been derived from Union Bankshares' Annual
Reports on Form 10-K for the years ended December 31, 1995 through December 31,
1999 and from Union Bankshares' Quarterly Reports on Form 10-Q for the three
months ended March 31, 2000 and 1999. This information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the audited consolidated financial statements,
including the notes thereto, of Union Bankshares, which are incorporated by
reference herein. See "Where You Can Find More Information."
UNION BANKSHARES COMPANY SUMMARY SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
-------------------- --------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME:
Interest Income...... $ 4,432 $ 4,262 $ 17,265 $ 17,101 $ 16,186 $ 14,768 $ 13,855
Interest Expense..... 1,800 1,750 7,096 7,174 6,734 5,631 5,052
-------- -------- -------- -------- -------- -------- --------
Net Interest
Income........... 2,632 2,512 10,169 9,927 9,452 9,137 8,803
Provision for Loan
Losses............. 30 65 200 285 120 120 30
-------- -------- -------- -------- -------- -------- --------
Net Interest Income
After Provision
for Loan
Losses........... 2,602 2,447 9,969 9,642 9,332 9,017 8,773
Non-interest
income............. 696 1,056 3,426 3,155 2,608 2,207 1,989
Non-interest
expenses........... 2,141 1,989 8,663 8,413 8,016 7,723 7,459
-------- -------- -------- -------- -------- -------- --------
Income before
Provision for
Income Taxes..... 1,157 1,514 4,732 4,384 3,924 3,501 3,303
Income Tax expense... 330 470 1,377 1,294 1,224 1,049 885
-------- -------- -------- -------- -------- -------- --------
Net Income......... $ 827 $ 1,044 $ 3,355 $ 3,090 $ 2,700 $ 2,452 $ 2,418
======== ======== ======== ======== ======== ======== ========
STATEMENT OF CONDITION:
Assets............... $255,577 $244,087 $257,850 $251,195 $222,560 $202,066 $191,353
Loans................ 126,841 115,733 127,596 110,376 107,038 100,969 93,040
Allowance for Loan
Losses............. (2,618) (2,472) (2,629) (2,435) (2,213) (2,084) (1,878)
Investments.......... 105,284 116,115 107,509 111,304 96,065 81,568 76,578
Deposits............. 182,852 179,702 192,848 188,029 177,386 166,445 164,481
Advances from Federal
Home Loan Bank..... 28,451 22,706 18,451 20,451 9,273 6,173 110
Other Borrowed
Funds.............. 11,760 7,534 13,140 8,966 5,691 2,384 877
Stockholders'
Equity............. 27,489 28,991 29,771 27,577 25,565 23,885 22,227
PER SHARE:
Earnings per share... $ 1.43 $ 1.81 $ 5.80 $ 5.34 $ 4.66 $ 4.22 $ 4.17
Book value per
share.............. $ 51.50 $ 48.13 $ 51.50 $ 47.69 $ 44.13 $ 41.14 $ 38.30
Dividends per
share.............. $ 0.50 $ 0.50 $ 1.82 $ 1.64 $ 1.52 $ 1.39 $ 1.30
Weighted average
shares
outstanding........ 578,165 578,380 578,086 578,211 579,368 580,621 580,362
</TABLE>
44
<PAGE> 54
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
-------------------- --------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL
PERCENTAGES:
Return on average
stockholders'
equity............. 2.8% 2.8% 11.7% 11.6% 10.9% 10.6% 11.4%
Return on average
total assets....... 0.33% 0.42% 1.3% 1.3% 1.3% 1.2% 1.3%
Return on average
earning assets..... 0.36% 0.34% 1.4% 1.4% 1.4% 1.4% 1.4%
Net interest rate
spread............. 3.9% 4.0% 3.9% 4.0% 4.2% 4.6% 4.8%
Net interest
margin............. 4.6% 4.7% 4.6% 4.7% 4.9% 5.2% 5.4%
Net charge-offs
(recoveries) to
average loans
ratio.............. 0.003 0.002 0.004 0.058 (0.009) (0.09) 0.09
Non-performing loans
to total loans
ratio.............. 0.015 0.006 0.006 0.005 0.007 0.007 0.007
Allowance for loan
losses to total
loans.............. 2.06% 2.14% 2.06% 2.21% 2.07% 2.06% 2.02%
Total capital to risk
weighted assets.... 21.8% 22.5% 21.2% 21.6% 21.8% 22.0% 23.7%
Tier 1 capital to
risk weighted
assets............. 20.5% 21.2% 20.0% 20.4% 21.2% 20.7% 22.4%
Tier 1 capital to
average assets..... 11.7% 11.4% 11.2% 10.7% 11.4% 11.8% 12.1%
Dividend payout
ratio.............. 35.0% 27.7% 33.0% 31.2% 32.8% 32.9% 31.3%
</TABLE>
45
<PAGE> 55
Set forth below are summary selected consolidated financial and operating
data for Mid-Coast as of and for the period indicated on a historical basis.
This financial information has been derived from Mid-Coast's Annual Reports on
Form 10-KSB for the years ended March 31, 1996 through March 31, 2000. This
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the audited
consolidated financial statements, including the notes thereto, of Mid-Coast
which are incorporated by reference herein. See "Where You Can Find More
Information."
MID-COAST BANCORP, INC. SUMMARY SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-----------------------------------------------
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME:
Interest Income............................ $ 5,623 $ 5,230 $ 4,918 $ 4,589 $ 4,390
Interest Expense........................... 2,871 2,815 2,623 2,437 2,485
------- ------- ------- ------- -------
Net Interest Income..................... 2,752 2,415 2,295 2,152 1,905
Provision for Loan Losses.................. 78 68 73 87 62
------- ------- ------- ------- -------
Net Interest Income After Provision for
Loan Losses........................... 2,674 2,347 2,222 2,065 1,843
Non-interest income........................ 477 461 303 235 183
Non-interest expenses...................... 2,438 2,408 1,810 1,913 1,565
------- ------- ------- ------- -------
Income before Provision for Income
Taxes................................. 713 400 715 387 461
Income Tax expense......................... 250 142 239 144 157
------- ------- ------- ------- -------
Net Income.............................. $ 463 $ 258 $ 476 $ 243 $ 304
======= ======= ======= ======= =======
STATEMENT OF CONDITION:
Assets..................................... $82,464 $70,771 $63,015 $58,925 $54,362
Loans...................................... 62,266 56,369 50,561 49,274 42,687
Allowance for Loan Losses.................. 482 404 347 295 221
Investments................................ 10,330 8,231 6,192 4,479 6,433
Deposits................................... 59,633 52,415 45,171 42,181 41,817
Advances from Federal Home Loan Bank....... 16,715 12,715 12,190 11,440 7,465
Other Borrowed Funds....................... -- -- -- -- --
Stockholders' Equity....................... 5,627 5,374 5,341 5,076 4,926
PER SHARE:
Basic Earnings per share................... $ 0.62 $ 0.35 $ 0.64 $ 0.33 $ 0.42
Diluted Earnings per share................. $ 0.62 $ 0.35 $ 0.64 $ 0.32 $ 0.41
Book value per share....................... $ 7.47 $ 7.15 $ 7.14 $ 6.96 $ 6.83
Dividends per share........................ $ 0.19 $ 0.19 $ 0.16 $ 0.16 $ 0.14
Weighted average shares outstanding........ 742,920 739,922 737,826 724,421 717,135
SELECTED FINANCIAL PERCENTAGES:
Return on average stockholders' equity..... 8.5% 5.0% 9.1% 4.7% 6.3%
Return on average total assets............. 0.6% 0.4% 0.8% 0.4% 0.6%
Return on average earning assets........... 0.7% 0.4% 0.8% 0.5% 0.6%
Net interest rate spread................... 3.6% 3.4% 3.6% 3.7% 3.3%
Net interest margin........................ 3.9% 3.8% 4.0% 4.1% 3.7%
Net charge-offs (recoveries) to average
loans ratio............................. 0.000 0.002 0.043 0.028 0.055
Non-performing loans to total loans
ratio................................... 0.21 0.25 0.58 0.29 0.88
</TABLE>
46
<PAGE> 56
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-----------------------------------------------
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Allowance for loan losses to total loans... 0.77% 0.72% 0.69% 0.60% 0.52%
Total capital to risk weighted assets...... 12.7% 13.5% 14.8% 15.1% 16.9%
Tier 1 capital to risk weighted assets..... 11.7% 12.5% 13.9% 14.2% 16.1%
Tier 1 capital to average assets........... 6.8% 7.4% 8.1% 8.9% 9.1%
Dividend payout ratio...................... 32.3% 54.2% 25.6% 48.3% 35.3%
</TABLE>
47
<PAGE> 57
We have summarized below the per common share combined information for
Union Bankshares and Mid-Coast on a historical and pro forma combined and pro
forma equivalent basis. The pro forma information gives effect to the Merger
accounted for under the purchase method of accounting. You should read this
information in conjunction with our historical financial statements and related
notes contained in the reports and other information that we have filed with the
Securities and Exchange Commission ("SEC"). See "Where You Can Find More
Information." You should also read this information in conjunction with the pro
forma combined financial information set forth under the heading "Unaudited Pro
Forma Financial Statements." You should not rely on pro forma information as
being indicative of the historical results that we would have had or the future
results that we will achieve after the Merger.
COMPARATIVE PER COMMON SHARE DATA
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 2000 DECEMBER 31, 1999
------------------ -----------------
<S> <C> <C>
NET INCOME PER SHARE:
Basic:
Union Bankshares
Historical......................................... $1.43 $5.80
Pro forma combined for the merger(1)............... 1.34 5.59
Mid-Coast
Historical......................................... 0.12 0.62
Pro forma combined for the merger.................. n/a n/a
NET INCOME PER SHARE:
Diluted:
Mid-Coast
Historical......................................... 0.12 0.62
Pro forma combined for the merger.................. n/a n/a
CASH DIVIDENDS PER COMMON SHARE:
Union Bankshares
Historical........................................... 0.50 1.82
Pro forma combined for the merger(1)................. 0.50 2.09
Mid-Coast
Historical........................................... 0.00 0.19
Pro forma combined for the merger.................... n/a n/a
BOOK VALUE PER COMMON SHARE:
Union Bankshares
Historical........................................... 51.50 51.50
Pro forma combined for the merger(1)................. 47.55 47.82
Mid-Coast
Historical........................................... 7.57 7.47
Pro forma combined for the merger.................... n/a n/a
</TABLE>
---------------
(1) Pro forma combined amounts reflect the proposed merger as if the merger had
occurred at the beginning of such period.
48
<PAGE> 58
PRO FORMA CONDENSED COMBINING FINANCIAL INFORMATION
The unaudited pro forma combining statement of operations of Union
Bankshares for the fiscal year ended December 31, 1999 and the three-month
period ended March 31, 2000 (the "Pro Forma Statements of Operations"), and the
unaudited pro forma combining balance sheet of Union Bankshares as of March 31,
2000 (the "Pro Forma Balance Sheet" and, together with the Pro Forma Statements
of Operations, the "Pro Forma Financial Statements"), have been prepared to
illustrate the estimated effect of Union Bankshares' acquisition of Mid-Coast.
The Pro Forma Financial Statements do not reflect any anticipated cost savings
from the acquisition, or any synergies that are anticipated to result from the
acquisition, and there can be no assurance that any such cost savings or
synergies will occur. The Pro Forma Statements of Operations give pro forma
effect to the acquisition as if it had occurred on January 1, 1999. The Pro
Forma Balance Sheet gives pro forma effect to the acquisition as if it had
occurred on March 31, 2000. The Pro Forma Financial Statements do not purport to
be indicative of the results of operations or financial position of Union
Bankshares that would have actually been obtained had such transactions been
completed as of the assumed dates and for the period presented, or which may be
obtained in the future. The pro forma adjustments are described in the
accompanying notes and are based upon available information and certain
assumptions that Union Bankshares believes are reasonable. The Pro Forma
Financial Statements should be read in conjunction with the separate historical
consolidated financial statements of Union Bankshares and Mid-Coast and the
notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" incorporated by reference in this joint proxy
statement.
A preliminary allocation of the purchase price has been made to major
categories of assets and liabilities in the accompanying Pro Forma Financial
Statements based on available information. The actual allocation of purchase
price and the resulting effect on income from operations may differ
significantly from the pro forma amounts included herein. These pro forma
adjustments represent Union Bankshares' preliminary determination of purchase
accounting adjustments and are based upon available information and certain
assumptions that Union Bankshares believes to be reasonable. Consequently, the
amounts reflected in the Pro Forma Financial Statements are subject to change,
and the final amounts may differ substantially. For information regarding the
uncertainty of assumptions, estimates and expectations reflected herein, see "A
Warning About Forward-Looking Statements" on page 8.
49
<PAGE> 59
UNION BANKSHARES COMPANY
AND
MID-COAST BANCORP, INC.
UNAUDITED PRO FORMA COMBINING BALANCE SHEETS
MARCH 31, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
MID-
UNION COAST
BANKSHARES BANCORP, PRO FORMA PRO FORMA
COMPANY INC. ADJUSTMENTS COMBINED
---------- -------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS:
Cash, due from banks..................... $ 9,748 $ 2,228(1) $10,145 $ 12,026
(1) 3,395
(1) (11,938)
(1) (1,552)
Federal Funds sold....................... 41 5,385 5,426
Securities............................... 104,774 10,330(2) (10,145) 104,959
Loans.................................... 126,841 62,266(11) (482) 188,625
Allowance for loan losses................ (2,618) (482)(11) 482 (2,618)
Mortgages held for sale.................. 511 -- 511
Intangible assets........................ -- --(6) 5,488 7,363
(7) 1,552
(8) 323
Other Assets............................. 16,280 2,737(3) 500 19,517
-------- ------- ------- --------
Total Assets..................... $255,577 $82,464 $(2,232) $335,809
======== ======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing................... 21,105 4,034 25,139
Interest-bearing...................... 161,747 55,599 217,346
-------- ------- --------
Total Deposits........................ 182,852 59,633 242,485
Borrowings from Federal Home Loan Bank... 28,451 16,715(4) 3,395 48,561
Other borrowed funds..................... 11,760 -- 11,760
Accrued interest and other liabilities... 5,025 489 5,514
-------- ------- ------- --------
Total Liabilities................ 228,088 76,837 3,395 308,320
STOCKHOLDERS' EQUITY:
Common Stock............................. 7,280 753(5) (753) 7,280
Surplus.................................. 3,964 1,755(5) (1,755) 3,964
Retained Earnings........................ 19,374 3,438(5) (3,438) 19,374
Accumulated other comprehensive loss..... (2,873) (139)(5) 139 (2,873)
Unearned Compensation -- Bank Recognition
and Retention Plan.................... -- (180)(5) 180 --
Treasury stock, at cost.................. (256) -- -- (256)
-------- ------- ------- --------
Total stockholders' equity....... 27,489 5,627 (5,627) 27,489
-------- ------- ------- --------
Total liabilities and
stockholders' equity........... $255,577 $82,464 $(2,232) $335,809
======== ======= ======= ========
</TABLE>
50
<PAGE> 60
UNION BANKSHARES COMPANY
AND
MID-COAST BANCORP, INC.
UNAUDITED PRO FORMA COMBINING STATEMENT OF INCOME
FOR THREE MONTHS ENDED MARCH 31, 2000
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
UNION MID-COAST
BANKSHARES BANCORP, PRO FORMA PRO FORMA
COMPANY INC. ADJUSTMENTS COMBINED
---------- --------- ----------- ----------------
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans............ $ 2,690 $ 1,277 $ 3,967
Interest on securities................ 1,735 156 1,891
Other................................. 7 18 25
------- ------- -------
Total Interest Income......... 4,432 1,451 5,883
Interest Expense
Interest on deposits.................. 1,356 537 1,893
Interest on other borrowings.......... 444 214(12) 45 703
------- ------- ----- -------
Total Interest Expense........ 1,800 751 45 2,596
------- ------- ----- -------
Net Interest Income........... 2,632 700 (45) 3,287
Provision for Loan Losses............... 30 23 53
------- ------- ----- -------
Net Interest Income after
provision for loan losses... 2,602 677 (45) 3,234
------- ------- ----- -------
Other Income
Net security (losses)................. (25) -- (25)
Service Charges on deposits
Accounts........................... 208 62 270
Visa income........................... 137 -- 137
Loan fees............................. 62 20 82
Gain on Sale of Loans................. -- 28 28
Trust fees............................ 252 -- 252
Other................................. 62 9 71
------- ------- -------
Total other income............ 696 119 815
------- ------- -------
Total Income.................. 3,298 796 (45) 4,049
Operating Expenses
Salaries and employee benefits........ 1,130 303 1,433
Net occupancy......................... 145 59 204
Other................................. 866 283(6) 92 1,265
(8) 26
(8) 12
(9) (44)
(10) 30
------- ------- ----- -------
Total operating expenses...... 2,141 645 116 2,902
------- ------- ----- -------
Income before income taxes.... 1,157 151 (161) 1,147
Income taxes............................ 330 58(13) (14) 374
------- ------- ----- -------
Net Income............................ $ 827 $ 93 $(147) $ 773
======= ======= ===== =======
Per Share Data
Basic Earnings per share.............. $ 1.43 $ 0.13 $ 1.34
Diluted earnings per share............ n/a $ 0.12 n/a
Weighted average number of shares
outstanding........................ 578,165 742,552 578,165
</TABLE>
51
<PAGE> 61
UNION BANKSHARES COMPANY
AND
MID-COAST BANCORP, INC.
UNAUDITED PRO FORMA COMBINING STATEMENT OF INCOME
FOR TWELVE MONTHS ENDED DECEMBER 31, 1999*
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
UNION MID-COAST
BANKSHARES BANCORP, PRO FORMA PRO FORMA
COMPANY INC. ADJUSTMENTS COMBINED
---------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans.................. $10,032 $ 4,947 $14,979
Interest on securities...................... 6,939 452 7,391
Other....................................... 294 224 518
------- ------- -------
Total Interest Income............... 17,265 5,623 22,888
Interest Expense
Interest on deposits........................ 5,594 2,135 7,729
Interest on other borrowings................ 1,502 736(12) 178 2,416
------- ------- ----- -------
Total Interest Expense.............. 7,096 2,871 178 10,145
------- ------- ----- -------
Net Interest Income................. 10,169 2,752 (178) 12,743
Provision for Loan Losses..................... 200 78 278
------- ------- ----- -------
Net Interest Income after provision
for loan losses................... 9,969 2,674 (178) 12,465
------- ------- ----- -------
Other Income
Net security gains (losses)................. (16) -- (16)
Service Charges on deposits Accounts........ 314 245 559
Visa income................................. 712 -- 712
Loan fees................................... 514 69 583
Gain on Sale of Loans....................... 58 132 190
Trust fees.................................. 907 -- 907
Gain on other real estate owned............. 154 -- 154
Other....................................... 783 31 814
------- ------- ----- -------
Total other income.................. 3,426 477 -- 3,903
------- ------- ----- -------
Total Income........................ 13,395 3,151 (178) 16,368
Operating Expenses
Salaries and employee benefits.............. 4,355 1,134 5,489
Net occupancy............................... 975 396 1,371
Other....................................... 3,333 908(6) 369 4,704
(7) 104
(8) 46
(9) (177)
(10) 121
------- ------- ----- -------
Total operating expenses............ 8,663 2,438 463 11,564
------- ------- ----- -------
Income before income taxes.......... 4,732 713 (641) 4,804
Income taxes.................................. 1,377 250(13) (57) 1,570
------- ------- ----- -------
Net Income.......................... $ 3,355 $ 463 $(584) $ 3,234
======= ======= ===== =======
Per Share Data
Basic Earnings per share.................... $ 5.80 $ 0.62 $ 5.59
Diluted earnings per share.................. n/a $ 0.62 n/a
Weighted average number of shares
outstanding.............................. 578,086 742,920 578,086
</TABLE>
---------------
* The results of operations of Union Bankshares represent the year ended
December 31, 1999 and the results of operations of Mid-Coast represent the
fiscal year ended March 31, 2000.
52
<PAGE> 62
FOOTNOTES TO UNAUDITED PRO FORMA COMBINING FINANCIAL STATEMENTS:
The Pro Forma Statement of Operations assumes that the acquisition occurred
on January 1, 1999. For purposes of the Pro Forma Statement of Operations for
the year ended December 31, 1999, Union Bankshares' historical statement of
operations for the year ended December 31, 1999 was combined with Mid-Coast's
historical statement of operations for the year ended March 31, 2000. For
purposes of the Pro Forma Statement of Operations for the three-month period
ended March 31, 2000, Union Bankshares' historical statement of operations for
the three-month period ended March 31, 2000 was combined with Mid-Coast's
historical statement of operations for the three-month period ended March 31,
2000.
The acquisition of Mid-Coast will be accounted for under the purchase
method of accounting. Under purchase accounting, the total purchase price is
allocated to the tangible and intangible assets and liabilities of Mid-Coast
based on their respective fair values as of the closing date based upon
valuations and other studies. The actual allocation of purchase price and the
resulting effect on income from operations may differ from the pro forma amounts
included herein.
(1) Reflects adjustments to cash for the liquidation of Mid-Coast's
investment securities available-for-sale and for borrowings. Cash is
used to purchase 753,727 shares (less unawarded shares remaining under
the Retention Plan as of the closing) of Mid-Coast at $15.875 per share
and to pay acquisition expenses of approximately $1,552,000.
(2) Reflects liquidation of Mid-Coast's investment securities
available-for-sale and certificates of deposit. Fair value of
securities available-for-sale was reflected in Mid-Coast's books prior
to acquisition and becomes the new cost basis after acquisition,
eliminating the net unrealized loss on securities available-for-sale
from equity. The reduction of interest income as a result of the sale
of securities in not reflected in the pro forma results of operation.
(3) Appraisals of bank-owned land, buildings, and equipment are estimated
to exceed carrying values by $500,000.
(4) Reflects borrowings of approximately $3,396,000 at an average interest
rate of 5.25%.
(5) Elimination of Mid-Coast's pre-combination capital stock, surplus,
retained earnings, unrealized loss on available-for-sale securities,
and unearned compensation on the Retention Plan.
(6) Reflects the purchase price in excess of the fair value of net assets
acquired, net of deferred tax on fair value adjustment to assets.
Goodwill is amortized straight-line over 15 years.
(7) Reflects costs directly related to the acquisition. Acquisition costs
include Merger transaction expenses, service contract terminations and
employment contracts. Costs are amortized straight-line over 15 years.
(8) Reflects an identifiable value of $323,000 attributable to the deposit
base. The core deposit intangible is amortized straight-line over 7
years.
(9) Eliminates the depreciation expense reflected on the books of
Mid-Coast.
(10) Record depreciation expense on bank premises and equipment acquired on
a straight-line basis over their estimated useful lives ranging from 5
to 40 years.
(11) The carrying basis of Mid-Coast's net loans approximates fair value.
(12) Reflects interest on borrowings at an average rate of 5.25%.
(13) Related income tax expense on pro forma adjustments.
53
<PAGE> 63
CERTAIN REGULATORY CONSIDERATIONS
Union Bankshares is a bank holding company registered with the Federal
Reserve Board ("FRB") under the Bank Holding Company Act of 1956, as amended
(the "BHCA"). As a result, Union Bankshares and its non-bank subsidiaries are
subject to the supervision, examination and reporting requirements of the BHCA
and the regulations of the FRB. Union Bankshares is also considered a Maine
financial institution holding company for purposes of the laws of the State of
Maine and, as such, is subject to the jurisdiction of the Bureau of Banking.
Union Trust is subject to regulation, supervision and examination by the
Bureau of Banking. In addition, because Union Trust is a member of the Federal
Reserve System, it is subject to regulation, supervision and examination by the
FRB. Waldoboro is a federal savings association chartered, regulated and
supervised by the Office of Thrift Supervision ("OTS"). If the Merger is
consummated, Waldoboro is expected to continue to exist as a separate
institution controlled by Union Bankshares for approximately 60 days after
consummation of the Merger, and then is expected to be merged into Union Trust,
with Union Trust as the surviving entity. Both Union Trust and Waldoboro are
also subject to regulation and supervision by other federal and state Regulatory
Authorities, including the Federal Deposit Insurance Corporation ("FDIC") which
insures deposits of commercial banks such as Union Trust as well as savings
banks such as Waldoboro.
Set forth below is a brief description of certain laws and regulations that
affect Union Bankshares and/or its subsidiaries. The description of certain laws
and regulations below and elsewhere in this joint proxy statement does not
purport to be complete and is qualified in its entirety by reference to
applicable laws and regulations, and to the discussion below at page 60 under
the heading "Regulatory Developments."
CERTAIN RESTRICTIONS ON ACTIVITIES OF BANK HOLDING COMPANIES
The BHCA imposes significant restrictions on the activities of bank holding
companies. Bank holding companies are required to obtain the prior approval of
the FRB before they may: (i) acquire direct or indirect ownership or control of
more than 5% of any class of the voting securities of any bank; (ii) acquire all
or substantially all of the assets of any bank; or (iii) merge or consolidate
with any other bank holding company.
The FRB generally may not approve any transaction that would result in a
monopoly or that would further a combination or conspiracy to monopolize banking
in the United States. The FRB also may not approve a transaction that could
substantially lessen competition in any section of the country, that would tend
to create a monopoly in any section of the country, or that would be in
restraint of trade. However, the FRB may approve any such transaction if it
determines that the public interest in meeting the convenience and needs of the
community served clearly outweighs the anti-competitive effects of the proposed
transaction.
The FRB is also required to consider the financial and managerial resources
and future prospects of the bank holding companies and banks concerned, as well
as the convenience and needs of the community to be served. Consideration of
financial resources generally focuses on capital adequacy, which is discussed
below. The consideration of convenience and needs includes the parties'
performance under the Community Reinvestment Act of 1977 (the "CRA"). Under the
CRA, a depository institution must, consistent with its safe and sound
operation, help meet the credit needs of its entire community, including low and
moderate income neighborhoods. There are no specific lending requirements or
programs nor does the law limit the institution's discretion to develop products
and services that it believes are best suited to its particular community. The
bank regulatory agencies periodically assess each institution's record of
meeting the credit needs of its community and must take such record into account
in evaluations of certain applications made by such institutions.
The BHCA authorizes the FRB to approve an application by a bank holding
company such as Union Bankshares to acquire control of a savings association
such as Waldoboro in accordance with certain requirements contained in the BHCA.
At the same time, the BHCA prohibits a bank holding company from: (i) engaging
in activities other than banking, managing or controlling banks or other
permitted subsidiaries or providing certain permissible services; and (ii)
acquiring or retaining direct or indirect control of any company
54
<PAGE> 64
engaged in any activities other than those activities determined by the FRB to
be so closely related to banking or managing or controlling banks as to be a
proper incident thereto.
The FRB has by regulation determined that certain activities are so closely
related to banking, within the meaning of the BHCA, that such activities are
permissible by bank holding companies. These activities include owning,
controlling, or operating a savings association if the savings association
engages only in deposit-taking activities, lending and other activities that are
permissible for bank holding companies under certain provisions of the FRB's
Regulation Y issued under the BHCA.
Other closely related activities include making or servicing loans such as
would be made by a mortgage, consumer finance, credit card, or factoring
company; performing trust company functions; performing certain data processing
operations; providing limited securities brokerage services; acting as an
investment or financial advisor; acting as an insurance agent for certain types
of credit-related insurance; leasing personal property on a full-payout,
non-operating basis; providing tax planning and preparation services; operating
a collection agency; and providing certain courier services.
In addition to the restrictions imposed by the BHCA, as a financial
institution holding company for purposes of the laws of the State of Maine,
Union Bankshares must obtain the prior approval of the Bureau of Banking before
acquiring control of more than 5% of the voting shares of (i) a Maine financial
institution or any financial institution or financial institution holding
company which controls, directly or indirectly, a Maine financial institution or
financial institution holding company, or (ii) an out of state financial
institution. The term "financial institution" includes, but is not limited to,
trust companies, non-depository trust companies, savings banks, industrial banks
and savings and loan associations.
In determining whether to grant such an approval, the Bureau of Banking
must consider whether a proposed transaction will contribute to the financial
strength and success of the relevant financial institution and promote the
convenience and advantage of the public. When determining whether the standard
of public convenience and advantage has been met, the Bureau of Banking will
consider the following factors:
- character, ability and overall sufficiency of the management; the
adequacy of capital and financial resources of the relevant institutions;
- competitive effect of the proposed transaction;
- convenience and needs of the market area(s) to be served;
- effect of the proposed transaction on the price, availability and quality
of services in the market area(s) to be served;
- impact of the proposed transaction on other financial institutions in the
relevant market area(s); and
- fairness and equities involved.
The Bureau of Banking has by regulation determined that, unless otherwise
prohibited by applicable state law, Maine financial institution holding
companies and/or their subsidiaries may engage in those activities which are
authorized for bank holding companies under federal law, including the BHCA, and
the regulations promulgated pursuant thereto. Any Maine financial institution
holding company (or subsidiary thereof) proposing to engage in such an
authorized activity must first apply for and obtain the prior approval of the
Bureau of Banking.
CERTAIN TRANSACTIONS BY BANK HOLDING COMPANIES AND THEIR AFFILIATES
There are various legal restrictions on the extent to which a bank holding
company, such as Union Bankshares, and its non-bank subsidiaries may borrow,
obtain credit from or otherwise engage in "covered transactions" with its
insured depository institution subsidiaries. Such borrowings and other covered
transactions by an insured depository institution subsidiary (and its
subsidiaries) with its non-depository institution affiliates are limited to the
following amounts: (i) in the case of any affiliate, the aggregate amount of
covered transactions of the insured depository institution and its subsidiaries
cannot exceed 10% of the capital stock and surplus of the insured depository
institution; and (ii) in the case of all affiliates, the aggregate amount of
55
<PAGE> 65
covered transactions of the insured depository institution and its subsidiaries
cannot exceed 20% of the capital stock and surplus of the insured depository
institution.
"Covered transactions" are defined by statute for these purposes to include
a loan or extension of credit to an affiliate, a purchase of, or investment in,
securities issued by an affiliate, a purchase of assets from an affiliate unless
exempted by the FRB, the acceptance of securities issued by an affiliate as
collateral for a loan or extension of credit to any person or company, or the
issuance of a guarantee, acceptance, or letter of credit on behalf of an
affiliate. Covered transactions are also subject to certain collateral security
requirements. Further, certain other transactions between a bank holding company
and its non-bank subsidiaries on the one hand, and its insured depository
institution subsidiaries on the other hand, are subject to certain additional
restrictions, and a bank holding company and its non-bank subsidiaries are
prohibited from engaging in certain tying arrangements in connection with any
extension of credit, lease or sale of property of any kind, or furnishing of any
service.
PAYMENT OF DIVIDENDS
Union Bankshares is a legal entity separate and distinct from its bank and
any other subsidiaries that it may own from time to time. A principal source of
cash flow of Union Bankshares, including cash flow to pay dividends to its
stockholders, are dividends from its bank subsidiary. There are statutory and
regulatory limitations on the payment of dividends by subsidiary depository
institutions to Union Bankshares, as well as by Union Bankshares to its
stockholders.
As to the payment of dividends, each of Union Bankshares' depository
institution subsidiaries is subject to the laws and regulations of its
chartering jurisdiction and to the regulations of its primary federal regulator.
If the federal banking regulator determines that a depository institution under
its jurisdiction is engaged in or is about to engage in an unsafe or unsound
practice, the regulator may require, after notice and hearing, that the
institution cease and desist from such practice. Depending on the financial
condition of the depository institution, an unsafe or unsound practice could
include the payment of dividends. The federal banking agencies have indicated
that paying dividends that deplete a depository institution's capital base to an
inadequate level would be an unsafe and unsound banking practice.
Under the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), a depository institution may not pay any dividend if payment would
cause it to become undercapitalized or if it already is undercapitalized. The
federal agencies have also issued policy statements that provide that bank
holding companies and insured banks should generally only pay dividends out of
current operating earnings. Federal savings associations such as Waldoboro may
generally pay dividends only out of current net income and retained net income
from the preceding two years, subject to certain other requirements. The payment
of dividends by Union Bankshares and its depository institution subsidiaries may
also be affected or limited by other factors, such as the requirement to
maintain adequate capital above regulatory guidelines.
REGULATION OF WALDOBORO AND UNION TRUST
Union Trust and Waldoboro are subject to numerous state and/or federal
statutes and regulations that affect their business, activities, and operations,
and each is supervised and examined by one or more federal or state bank
regulatory agencies. Union Trust is a Maine chartered trust company subject to
regulation and supervision by the Bureau of Banking. As a member of the Federal
Reserve System, Union Trust is also subject to regulation and supervision by the
FRB. Waldoboro is a federal savings association chartered under the laws of the
United States and regulated and supervised by the OTS.
If, as is expected, Union Trust and Waldoboro merge with Union Trust as the
surviving entity, the resultant institution will continue to be subject to
regulation and supervision by the Bureau of Banking and the FRB. As FDIC-insured
institutions, each of Union Trust and Waldoboro is also subject to certain
requirements applicable to insured depository institutions. Waldoboro and Union
Trust are also required to file reports with and obtain approvals from various
regulatory agencies prior to entering into certain transactions, including
mergers with, or acquisitions of, other financial institutions.
56
<PAGE> 66
Virtually every aspect of insured depository institutions' day-to-day
operations is subject to numerous requirements and restrictions. These
requirements and restrictions apply with respect to such matters as, for example
and without limitation, the nature and amount of loans and investments that may
be made, the nature and amount of collateral for certain loans, the maximum
amount of deposits each of such institutions may hold as a percentage of the
aggregate deposits in a particular geographic area, the issuance of securities,
the taking of reserves against deposits, the establishment and closure of
branches, non-banking activities and other operations. Numerous laws and
regulations also set forth special restrictions and procedural requirements with
respect to the extension of credit, credit practices, the disclosure of credit
terms and discrimination in credit transactions. These legal requirements differ
for each of Union Trust and Waldoboro to a greater or lesser extent because
these entities are chartered under different legal authorities. Furthermore, the
laws and regulations that govern Union Trust and Waldoboro have generally been
promulgated to protect depositors and the deposit insurance funds of the FDIC
and not for the protection of Union Bankshares and its stockholders.
As a state chartered bank that is a member of the Federal Reserve System,
Union Trust must comply with Maine banking law and the Federal Reserve Act and
the regulations promulgated thereunder by the Bureau of Banking and FRB,
respectively, which limit Union Trust's activities to those that are deemed to
be part of or incidental to the "business of banking." Activities that are part
of or incidental to the business of banking include taking deposits, borrowing
and lending money, discounting or negotiating paper, acting as fiduciary, and
investing in certain bank-eligible securities. Examples of activities that are
not permissible for state chartered banks that are members of the Federal
Reserve System include, without limitation, engaging in real estate investment
and development, a general real estate brokerage business, and investing in most
types of equity securities. Subsidiaries of national banks, in general, may only
engage in activities permissible for the parent national bank.
In addition, Section 24 of the Federal Deposit Insurance Act ("FDIA"), as
added by FDICIA, provides that an insured state bank may not engage as a
principal in any activity that is not permissible for a national bank, unless
the FDIC has determined that the activity would pose no significant risk to the
appropriate deposit insurance fund and the state bank is in compliance with
applicable capital standards. Activities of subsidiaries of insured state banks
are similarly restricted to those activities permissible for subsidiaries of
national banks, unless the FDIC has determined that the activity would pose no
significant risk to the appropriate deposit insurance fund and the state bank is
in compliance with applicable capital standards. Section 24 also provides that
an insured state bank generally may not, directly or indirectly, acquire or
retain any equity investment of a type that is not permissible for a national
bank, which would include most equity security investments. In addition,
state-chartered banks are subject to numerous restrictions on their activities
and investments under the laws of their chartering jurisdiction.
Federal savings associations such as Waldoboro are subject to similar
restrictions on their business and activities. Waldoboro derives its lending and
investment powers from the Home Owners' Loan Act, as amended (the "HOLA") and
OTS regulations issued thereunder. Under these laws and regulations, federal
savings associations may invest in mortgage loans secured by residential and
commercial real estate, commercial and consumer loans, certain types of debt
securities and certain other assets. Federal savings associations may also
establish service corporations that may engage in activities not otherwise
permissible for federal savings associations directly, including certain real
estate equity investments and securities and insurance brokerage. These
investment powers are subject to various limitations.
The HOLA requires each federal savings association to meet a "qualified
thrift lender" or "QTL" test. Under the QTL test, a federal savings association
is required to maintain at least 65 percent of its "portfolio assets" in certain
"qualified thrift investments" in at least nine months of the most recent 12
month period. "Portfolio assets" means, in general, an association's total
assets less the sum of (a) specified liquid assets up to 20 percent of total
assets, (b) goodwill and other intangible assets, and (c) the value of property
used to conduct the association's business. "Qualified thrift investments"
includes various types of loans made for residential and housing purposes,
investments related to such purposes, including certain mortgage-backed and
related securities, and loans for personal, family, household, and certain other
purposes up to a limit of 20 percent of an association's portfolio assets.
Certain other assets also count as qualified thrift investments. A
57
<PAGE> 67
federal savings association that fails to meet the QTL test must either operate
under certain restrictions on its activities or convert to a bank charter. As of
March 31, 2000, Waldoboro had met the QTL test in the requisite months and
expects to continue to operate as a qualified thrift lender prior to the
Subsidiary Merger.
FDIC INSURANCE ASSESSMENTS
The deposit accounts of Union Trust are insured by the Bank Insurance Fund
(the "BIF") of the FDIC generally up to a maximum of $100,000 per separately
insured depositor, and Union Trust is subject to FDIC deposit insurance
assessments. The deposit accounts of Waldoboro are insured by the Savings
Association Insurance Fund (the "SAIF") of the FDIC, and Waldoboro is also
subject to FDIC deposit insurance assessments. Thus, if, as is expected, Union
Trust and Waldoboro merge with Union Trust as the surviving entity, certain
deposit obligations of the surviving entity will be insured by the BIF and
certain deposit obligations of the surviving entity will be insured by the SAIF.
Pursuant to FDICIA, the FDIC adopted a risk-based system for determining
deposit insurance assessments under which all insured institutions were placed
into one of nine categories and assessed insurance premiums, ranging from $2,000
to 0.27% of insured deposits, based upon their level of capital and supervisory
evaluation. Because the FDIC sets the assessment rates based upon the level of
assets in the insurance fund, premium rates rise and fall as the number and size
of bank failures increase and decrease, respectively. Under the system,
institutions are assigned to one of three capital groups based solely on the
level of an institution's capital -- "well capitalized," "adequately
capitalized" and "undercapitalized" -- that are defined in the same manner as
the regulations establishing the prompt corrective action system under Section
38 of FDIA, as discussed below. These three groups are then divided into three
subgroups that reflect varying levels of supervisory concern, from those that
are considered to be healthy to those that are considered to be of substantial
supervisory concern. BIF and SAIF deposits may be assessed at different rates.
The FDIC is authorized to raise the assessment rates as necessary to
maintain the required reserve ratio of 1.25 percent. As a result of the Deposit
Insurance Funds Act of 1996 (the "Funds Act"), both the BIF and SAIF currently
satisfy the reserve ratio requirement. If the FDIC determines that assessment
rates should be increased, institutions in all risk categories could be
affected. The FDIC has exercised this authority several times in the past and
could raise insurance assessment rates in the future. If such action is taken by
the FDIC, it could have an adverse effect on the earnings of insured depository
institutions. The Funds Act also amended the FDIA to expand the assessment base
for the payments on Financing Corporation bonds used to finance the thrift
bailout. The Funds Act requires BIF-insured banks to participate in the payment
of interest due on Financing Corporation bonds. As a BIF-insured institution,
Union Trust is subject to a special Financing Corporation assessment in addition
to assessments applicable to BIF-insured deposits.
MINIMUM CAPITAL REQUIREMENTS AND PROMPT CORRECTIVE ACTION
Each of Union Trust and Waldoboro must satisfy certain minimum capital
requirements, and Union Bankshares is expected to satisfy similar requirements
established by the FRB. Under FRB regulations applicable to Union Trust because
of its membership in the Federal Reserve System, a bank is deemed to be (i)
"well capitalized" if it has total risk-based capital of 10% or more, a Tier 1
risk-based capital ratio of 6% or more, and a Tier 1 leverage capital ratio of
5% or more and is not subject to any written agreement, order, capital
directive, or corrective action directive, (ii) "adequately capitalized" if it
has a total risk-based capital ratio of 8% or more, a Tier 1 risk-based capital
ratio of 4% or more and a Tier 1 leverage capital ratio of 4% or more (3% under
certain circumstances) and does not meet the definition of "well capitalized,"
(iii) "undercapitalized" if it has a total risk-based capital ratio that is less
than 8%, a Tier 1 risk-based capital ratio that is less than 4% or a Tier 1
leverage capital ratio that is less than 4% (3% under certain circumstances),
(iv) "significantly undercapitalized" if it has a total risk-based capital ratio
that is less than 6%, a Tier 1 risk-based capital ratio that is less than 3% or
a Tier 1 leverage capital ratio that is less than 3%, and (v) "critically
undercapitalized" if it has a ratio of tangible equity to total assets that is
equal to or less than 2%.
58
<PAGE> 68
Section 38 of the FDIA and the regulations promulgated thereunder by the
federal banking agencies also specify circumstances under which a federal bank
regulator may reclassify a well capitalized institution as adequately
capitalized and may require an adequately capitalized institution or an
undercapitalized institution to comply with supervisory actions as if it were in
the next lower category (except that the FRB may not reclassify a significantly
undercapitalized institution as critically undercapitalized).
A number of sanctions may be imposed on depository institutions that are
not in compliance with applicable capital requirements, including, without
limitation, restrictions on asset growth and imposition of a capital directive
that may require, among other things, an increase in regulatory capital,
reduction of rates paid on savings accounts, cessation of or limitations on
deposit-gathering, lending, purchasing loans, making specified investments, or
issuing new accounts, limits on operational expenditures, an increase in
liquidity, and such other restrictions or corrective actions as the appropriate
federal bank regulator may deem necessary or appropriate. Federal law also
restricts the use of brokered deposits by certain depository institutions in
certain capitalization categories.
Under the system of prompt corrective action mandated by FDICIA,
immediately upon becoming undercapitalized, an institution will become subject
to the provisions of Section 38 of the FDIA, which include (i) restricting
payment of capital distributions and management fees, (ii) requiring that the
appropriate federal banking agency monitor the condition of the institution and
its efforts to restore its capital, (iii) requiring submission of a capital
restoration plan, (iv) restricting the growth of the institution's assets, and
(v) requiring prior approval of certain expansion proposals. The appropriate
federal banking agency for an undercapitalized institution also may take any
number of discretionary supervisory actions if the agency determines that any of
these actions is necessary to resolve the problems of the institution at the
least possible long-term cost to the deposit insurance fund, subject in certain
cases to specified procedures. These discretionary supervisory actions include
the following: requiring the institution to raise additional capital;
restricting transactions with affiliates; restricting interest rates paid by the
institution on deposits; requiring replacement of senior executive officers and
directors; restricting the activities of the institution and its affiliates;
requiring divestiture of the institution or the sale of the institution to a
willing purchaser; and any other supervisory action that the agency deems
appropriate.
FDICIA provides for the appointment of a conservator or receiver for any
insured depository institution that is "critically undercapitalized," or that is
"undercapitalized" and (i) has no reasonable prospect of becoming "adequately
capitalized," (ii) fails to become "adequately capitalized" when required to do
so under the prompt corrective action provisions, (iii) fails to submit an
acceptable capital restoration plan within the prescribed time limits, or (iv)
materially fails to implement an accepted capital restoration plan. In addition,
the appropriate federal regulatory agency will be required to appoint a receiver
(or a conservator) for a "critically undercapitalized" depository institution
within 90 days after the institution becomes "critically undercapitalized" or to
take such other action that would better achieve the purpose of Section 38 of
FDIA. Such alternative action can be renewed for successive 90 day periods. With
limited exceptions, however, if the institution continues to be "critically
undercapitalized" on average during the quarter that begins 270 days after the
institution first became "critically undercapitalized," a receiver must be
appointed.
OTHER ASPECTS OF FEDERAL AND STATE LAW
Regulation D promulgated by the FRB requires all depository institutions to
maintain reserves against their transaction accounts or non-personal time
deposits, subject to certain exemptions. "Transaction accounts" include demand
deposits, NOW accounts, and certain other types of accounts that permit payments
or transfers to third parties. "Non-personal time deposits" include money market
deposit accounts or other savings deposits held by corporations or other
depositors and certain other types of time deposits. Because required reserves
must be maintained in the form of vault cash or non-interest bearing deposits
with a regional Federal Reserve Bank, the effect of this reserve requirement is
to reduce the amount of the institution's interest-bearing assets.
Depository institutions are also subject to federal and state statutory and
regulatory provisions covering security procedures, currency and foreign
transactions reporting, insider and affiliated party transactions,
59
<PAGE> 69
management interlocks, loan interest rate limitations, lending policies,
truth-in-lending, electronic funds transfers, funds availability,
truth-in-savings, home mortgage disclosure, and equal credit opportunity, in
addition to a variety of other statutes and regulations.
GOVERNMENT POLICIES AND LEGISLATIVE AND REGULATORY PROPOSALS
Depository institutions' operations are generally affected by the economic,
fiscal, and monetary policies of the United States and its agencies and
regulatory authorities, particularly the FRB (which regulates the money supply
of the United States, reserve requirements against deposits, the discount rate
on FRB borrowings and related matters, and which conducts open-market operations
in U.S. government securities). The fiscal and economic policies of various
governmental entities and the monetary policies of the FRB have a direct effect
on the availability, growth, and distribution of bank loans, investments, and
deposits.
In addition, various proposals to change the laws and regulations governing
the operations and taxation of, and deposit insurance premiums paid by,
federally and state-chartered banks and other financial institutions are from
time to time pending in Congress and in state legislatures as well as before the
FRB, the FDIC, the OTS and other federal and state bank regulatory authorities.
The likelihood of any major changes in the future, and the impact any such
changes might have on Union Trust and Waldoboro, are not possible to determine.
REGULATORY DEVELOPMENTS
On November 12, 1999, the President signed into law the Gramm-Leach-Bliley
Act. This statute contains several provisions that may affect how Union
Bankshares does business or the nature of the competition that it faces. The act
permits banks, insurance companies, and securities firms to affiliate within a
single corporate structure, known as a financial holding company. Using the
financial holding company structure, insurance companies and securities firms
may acquire bank holding companies and bank holding companies may acquire
insurance companies and securities firms. A bank holding company that wishes to
become a financial holding company must satisfy a number of conditions,
including management, capital and community reinvestment standards, to engage in
a substantially broader range of activities including insurance underwriting and
merchant banking provided that all of the insured depository institution
subsidiaries of the bank holding company have at least a "Satisfactory" CRA
rating. In addition, a financial holding company may not commence a new
financial activity or acquire control of a company engaged in such activities
without satisfying this CRA requirement. Some of these affiliations are also
permissible for bank subsidiaries. The act gives the FRB authority to regulate
financial holding companies, but provides for functional regulation of
subsidiary activities.
The act also contains several provisions respecting customer privacy. The
complete extent of Union Bankshares' obligations in this regard will not be
known until the FRB and the other federal banking agencies issue final rules
applicable to banks. Union Bankshares will be required to disclose a privacy
policy to its customers on an annual basis. In addition, if Union Bankshares
provides nonpublic personal information about customers to third parties for use
in the marketing of third party products, it must first disclose this fact to
its customers and provide them an opportunity to opt out of the arrangement. The
act does not limit the sharing of information among affiliates within the Union
Bankshares family.
OTHER MATTERS
As of the date of this joint proxy statement, neither Mid-Coast's board of
directors nor Union Bankshares' board of directors knows of any matters that
will be presented for consideration at the Mid-Coast or Union Bankshares special
meetings other than as described in this joint proxy statement. However, if any
other matters properly come before the Mid-Coast or Union Bankshares special
meetings or any adjournment or postponement of the Mid-Coast or Union Bankshares
special meetings and are voted upon, the enclosed proxy will be deemed to confer
discretionary authority to the individuals named as proxies to vote the shares
represented by such proxies as to any such matters.
60
<PAGE> 70
STOCKHOLDER PROPOSALS
MID-COAST
Mid-Coast will hold its 2000 annual meeting of stockholders only if the
Merger is not consummated. In order to be eligible for inclusion in Mid-Coast's
proxy materials for the 2000 annual meeting, if held, any Mid-Coast stockholder
proposal to take action at such meeting must have been received at Mid-Coast's
executive offices at 1768 Atlantic Highway, Waldoboro, Maine 04572, no later
than February 18, 2000. Any such proposals shall be subject to the requirements
of the proxy rules adopted under the Securities Exchange Act of 1934, as
amended, Delaware law and Mid-Coast's certificate of incorporation and bylaws.
UNION BANKSHARES
Union Bankshares expects to hold its next annual meeting of stockholders on
April 19, 2001. Under the rules of the SEC, proposals of Union Bankshares
stockholders intended to be presented at that meeting must be received by Union
Bankshares at its principal executive offices no later than January 20, 2001, to
be included in the proxy statement for the meeting. Any such proposals shall be
subject to the requirements of the proxy rules adopted under the Securities
Exchange Act of 1934, as amended, Maine law and Union Bankshares' articles of
incorporation and bylaws.
61
<PAGE> 71
WHERE YOU CAN FIND MORE INFORMATION
Union Bankshares and Mid-Coast file annual, quarterly and current reports,
proxy and information statements, and other information with the SEC under the
Securities Exchange Act of 1934, as amended. You may read and copy this
information at the Public Reference Section at the SEC at 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
SEC maintains an Internet site that contains reports, proxy and information
statements, and other information about issuers that file electronically with
the SEC. The address of that site is http://www.sec.gov. In addition, you can
read and copy this information at the regional offices of the SEC at 7 World
Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661.
This joint proxy statement incorporates important business and financial
information about Union Bankshares and Mid-Coast that is not included in or
delivered with this joint proxy statement.
The following documents filed with the SEC by Union Bankshares are
incorporated by reference in this joint proxy statement (SEC File No.
000-12958):
(1) Union Bankshares' Annual Report on Form 10-K for the fiscal year ended
December 31, 1999;
(2) Union Bankshares' Quarterly Report on Form 10-Q for the three months
ended March 31, 2000;
(3) Union Bankshares' Current Report on Form 8-K dated March 31, 2000; and
(4) The description of Union Bankshares' current management and Union
Bankshares' board of directors contained in Union Bankshares' proxy
statement filed pursuant to Section 14(a) of the Securities Exchange
Act of 1934, as amended, for Union Bankshares' Annual Meeting of
Stockholders held on June 15, 2000.
The following documents filed with the SEC by Mid-Coast are incorporated by
reference in this joint proxy statement (SEC File No. 000-18096):
(1) Mid-Coast's Annual Report on Form 10-KSB for the fiscal year ended
March 31, 2000; and
(2) Mid-Coast's Current Report on Form 8-K dated March 31, 2000.
Union Bankshares and Mid-Coast also incorporate by reference additional
documents filed by them pursuant to Sections 13(a), 13(c), 14, or 15(d) of the
Securities Exchange Act of 1934, as amended after the date of this joint proxy
statement and prior to final adjournment of the Mid-Coast special meeting. Any
statement contained in this joint proxy statement or in a document incorporated
or deemed to be incorporated by reference in this joint proxy statement shall be
deemed to be modified or superseded to the extent that a statement contained
herein or in any subsequently filed document which also is, or is deemed to be,
incorporated by reference herein modifies or supersedes such statement.
You may obtain copies of the information incorporated by reference in this
joint proxy statement upon written or oral request. The inside front cover of
this joint proxy statement contains information about how such requests should
be made.
All information contained in this joint proxy statement or incorporated
herein by reference with respect to Union Bankshares was supplied by Union
Bankshares, and all information contained in this joint proxy statement with
respect to Mid-Coast was supplied by Mid-Coast.
62
<PAGE> 72
APPENDIX A
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
BY AND AMONG
UNION BANKSHARES COMPANY,
UBC ACQUISITION COMPANY, INC.
AND
MID-COAST BANCORP, INC.
JUNE 20, 2000
A-1
<PAGE> 73
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (the "Agreement"),
dated as of the 20th day of June, 2000, is made by and among Mid-Coast Bancorp,
Inc., Waldoboro, Maine, a Delaware corporation ("Mid-Coast"), Union Bankshares
Company, Ellsworth, Maine, a Maine corporation ("Union Bankshares") and UBC
Acquisition Company, Inc., a Delaware corporation ("Acquisition Company").
PREAMBLE
The respective Boards of Directors of Union Bankshares and Mid-Coast are of
the opinion that the transactions described herein are in the best interests of
the parties to this Agreement and their respective stockholders. This Agreement
provides for the acquisition of Mid-Coast by Union Bankshares pursuant to the
merger of Mid-Coast with the Acquisition Company, and then immediately
thereafter, Mid-Coast shall be merged up and into Union Bankshares. At the
effective date of the Merger, the outstanding shares of capital stock of
Mid-Coast shall be converted into the right to receive cash. The transactions
described in this Agreement are subject to the approvals of the stockholders of
Mid-Coast and Union Bankshares, respectively, expiration of the required waiting
period under applicable federal and state regulatory laws and regulations, and
the satisfaction of certain other conditions described in this Agreement.
Simultaneously with the execution and delivery of this Agreement, and as a
condition and inducement to the willingness of Union Bankshares and Mid-Coast to
enter into this Agreement, Mid-Coast and Union Bankshares are entering into an
Option Agreement pursuant to which Mid-Coast is granting to Union Bankshares an
option to purchase shares of Mid-Coast Common Stock.
Now, therefore, in consideration of their mutual promises and obligations,
the parties agree that Mid-Coast shall be merged with Acquisition Company, and
immediately thereafter with and into Union Bankshares on the terms and subject
to the conditions set forth in this Agreement:
ARTICLE 1
DEFINITIONS
Certain Defined Terms. As used in this Agreement, the following terms
shall have the following meanings (such meaning to be equally applicable to both
the singular and plural forms of the terms defined):
1.1 "1933 Act" shall mean the Securities Act of 1933, as amended.
1.2 "1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
1.3 "Acquisition Company" shall mean UBC Acquisition Company, Inc., a
Delaware corporation, and a wholly owned subsidiary of Union Bankshares.
1.4 "Affiliate" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person; or (ii) any officer, director, partner,
employer, or direct or indirect beneficial owner of any 10% or greater equity or
voting interest of such Person.
1.5 "Agreement" shall mean this Amended and Restated Agreement and Plan of
Merger by and among Mid-Coast, Union Bankshares and Acquisition Company, and any
amendments thereto. References to Articles, Sections, Schedules and the like
refer to the Articles, Sections, Schedules and the like of this Agreement unless
otherwise indicated.
1.6 "Assets" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible, accrued or
contingent, or otherwise relating to or utilized in such Person's business,
directly or indirectly, in whole or in part, whether or not carried on the books
and records of such Person, and whether or not owned in the name of such Person
or any Affiliate of such Person and wherever located.
1.7 "BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
A-2
<PAGE> 74
1.8 "Bank Regulator" shall mean and include, any pertinent federal or state
Regulatory Authority charged with the supervision of banks, bank holding
companies, savings associations, or savings association holding companies or
engaged in the insurance of bank or savings association deposits, including
without limitation, the FRB, the FDIC, the OTS and the Bureau of Banking.
1.9 "Bureau of Banking" means the Bureau of Banking of the Department of
Professional and Financial Regulation of the State of Maine having regulatory
authority over Union Trust or any successor Maine governmental agency exercising
such regulatory authority.
1.10 "Business Day" shall mean a day on which Union Trust is open for
business and which is not a Saturday, Sunday or legal bank holiday.
1.11 "Closing" The closing of the transactions contemplated herein will
take place at a place that is mutually agreed to by the parties and on the date
that is the last Business Day of the month during which all of the following are
then complete:
(i) all applicable regulatory approvals relating to the transactions
contemplated herein have been received; and
(ii) all applicable statutory and regulatory waiting periods relative
to the Merger and the Subsidiary Merger have expired; and
(iii) the Mid-Coast stockholders have approved the Agreement; and
(iv) the Union Bankshares stockholders have approved the Agreement,
or such earlier or later date as may be agreed to by the parties. At the Closing
the parties shall each deliver to the other such evidence of the satisfaction of
the conditions to the Merger (as defined in Section 2.1 hereof and the
Subsidiary Merger) as may reasonably be required (including material required to
be delivered pursuant to this Agreement).
1.12 "Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
1.13 "Contract" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease, obligation,
plan, practice, restriction, understanding, or undertaking of any kind or
character, or other document to which any Person is a party or that is binding
on any Person or its capital stock, Assets or business.
1.14 "Default" shall mean (i) any breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit, (ii)
any occurrence of any event that with the passage of time or the giving of
notice or both would constitute a breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit, or
(iii) any occurrence of any event that with or without the passage of time or
the giving of notice would give rise to a right of any Person to exercise any
remedy or obtain any relief under, terminate or revoke, suspend, cancel, or
modify or change the current terms of, or renegotiate, or to accelerate the
maturity or performance of, or to increase or impose any Liability under, any
Contract, Law, Order, or Permit, where, in any such event, such Default is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Mid-Coast.
1.15 "Effective Date" The Merger shall become effective as of the date and
time when the Certificates of Merger filed with the Delaware Secretary of State
pursuant to Section 252 of the Delaware General Corporation Law (the "DGCL")
shall be effective.
1.16 "Exchange Agent" shall mean the Person engaged by Union Bankshares to
act as agent for the exchange of Mid-Coast Common Stock for Merger
Consideration.
1.17 "FDIA" shall mean the Federal Deposit Insurance Act, as amended.
A-3
<PAGE> 75
1.18 "FDIC" means that agency of the United States of America known as the
Federal Deposit Insurance Corporation, or any successor United States
Governmental Agency which insures deposits of commercial or savings banks.
1.19 "FRB" means that agency of the United States of America known as the
Federal Reserve Board which acts in the capacity of a governmental central bank
known as the Federal Reserve System represented by actions of its Board of
Governors, having regulatory authority over bank holding companies and certain
banks that are members of the Federal Reserve System or any successor United
States governmental agency performing the function of exercising such regulatory
authority.
1.20 "Governmental Authority" shall mean any United States federal, state
or local governmental commission, board or other regulatory authority or agency,
including courts and other judicial bodies and including without limitation, any
Regulatory Authority and any Bank Regulator.
1.21 "Hazardous Materials" shall mean (a) any hazardous or toxic wastes,
materials or substances, and other pollutants or contaminants, which are or
hereafter become regulated by or under any Environmental Laws; (b) petroleum,
petroleum products, petroleum byproducts, crude oil or any fraction thereof; (c)
asbestos; (d) polychlorinated biphenyls; (e) radioactive materials; (f) any
other substance requiring special handling under any Environmental Laws; (g) any
materials which cause a nuisance upon a waste to any Property; and (h) any other
material or substance displaying toxic, reactive, ignitable or corrosive
characteristics, as all such terms are used in their broadest sense, and are
defined or become defined by or under any Environmental Law.
1.22 "Knowledge" as used with respect to a Person (including references to
such Person being aware of a particular matter) shall mean those facts that are
known after due inquiry by the officers and directors of such Person.
1.23 "Law" shall mean any code, law (including common law), ordinance,
regulation, reporting or licensing requirement, rule, or statute applicable to a
Person or its Assets, Liabilities, or business, including those promulgated,
interpreted or enforced by any Regulatory Authority.
1.24 "Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including costs
of investigation, collection and defense), claim, deficiency, guaranty or
endorsement of or by any Person (other than endorsements of notes, bills,
checks, and drafts presented for collection or deposit in the ordinary course of
business) of any type, whether accrued, absolute or contingent, liquidated or
unliquidated, matured or unmatured, or otherwise.
1.25 "Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention
or other security arrangement, or any adverse right or interest, charge, or
claim of any nature whatsoever of, on, or with respect to any property or
property interest, other than (i) Liens for current property Taxes not yet due
any payable, and (ii) Liens which do not materially impair the use of or title
to the Assets subject to such Lien.
1.26 "Litigation" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, governmental or other examination or
investigation, hearing, administrative or other proceeding relating to or
affecting a Party, its business, its Assets (including Contracts related to it),
or the transactions contemplated by this Agreement.
1.27 "Merger Consideration" shall mean $15.875 per share of Mid-Coast
Common Stock.
1.28 "Material Adverse Effect" shall mean, with respect to any Person, a
change or effect that is or is reasonably likely to be materially adverse to the
business, results of operations or financial condition of such Person taken as a
whole; provided, however, that "Material Adverse Effect" shall not be deemed to
include the impact of (a) changes in laws and regulations or interpretations
thereof by Governmental Authorities generally applicable to depository
institutions and their holding companies (including changes in insurance deposit
assessment rates and special assessments with respect thereto), (b) changes in
GAAP or regulatory accounting principles generally applicable to financial
institutions and their holding companies, (c) actions
A-4
<PAGE> 76
and omissions of a Party taken with the prior written consent of the other
Party, and (d) the direct effects of compliance with this Agreement on the
operating performance of the Parties including expenses incurred by the Parties
hereto in consummating the transactions contemplated by this Agreement.
1.29 "Mid-Coast" means Mid-Coast Bancorp, Inc., a corporation duly
chartered, organized, and existing under and pursuant to the laws of the State
of Delaware; maintaining its principal place of business at 1768 Atlantic
Highway, Waldoboro, Maine 04572.
1.30 "Mid-Coast Common Stock" means the shares of Common Stock of
Mid-Coast, $1.00, par value per share.
1.31 "NASD" means the National Association of Securities Dealers, Inc.
1.32 "Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency, or Regulatory Authority.
1.33 "OTS" means the Office of Thrift Supervision having regulatory
authority over Mid-Coast and Waldoboro.
1.34 "Party" shall mean Union Bankshares or Mid-Coast and "Parties" shall
mean Union Bankshares and Mid-Coast.
1.35 "Permit" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing, franchise,
license, notice, permit, or right to which any Person is a party or that is or
may be binding upon or inure to the benefit of any Person or its securities,
Assets, or business.
1.36 "Person" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
1.37 "Property" shall mean any property owned, leased, or operated by the
Party in question or by any of its Subsidiaries or in which such Party or
Subsidiary holds a security interest or other interest (including an interest in
a fiduciary capacity), and, where required by the context, includes the owner or
operator of such property, but only with respect to such property.
1.38 "Public Announcement" shall mean a written press release, public
announcement or public information disclosure by Mid-Coast or Union Bankshares
or any of their Subsidiaries relating to the Merger or the other transactions
contemplated hereby.
1.39 "Regulatory Authorities" shall mean, collectively, the SEC, the NASD,
the United States Department of Justice, any Bank Regulator and all other
federal, state, county, local or other governmental or regulatory agencies,
authorities (including self-regulatory authorities), instrumentalities,
commissions, boards or bodies having jurisdiction over the Parties and their
respective Subsidiaries.
1.40 "Representative" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative engaged by a Person.
1.41 "SEC" means that agency of the United States of America known as the
Securities and Exchange Commission.
1.42 "SEC Documents" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to be
filed, by a Party or any of its Subsidiaries with any Regulatory Authority
pursuant to the Securities Laws.
1.43 "Securities Laws" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of 1940,
as amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated thereunder.
1.44 "Subsidiaries" shall mean all those corporations, associations, or
other business entities of which the entity in question either (i) owns or
controls 25% or more of the outstanding equity securities either directly or
A-5
<PAGE> 77
through an unbroken chain of entities as to each of which 25% or more of the
outstanding equity securities is owned directly or indirectly by its parent
(provided, there shall not be included any such entity the equity securities of
which are owned or controlled in a fiduciary capacity), (ii) in the case of
partnerships, serves as a general partner, (iii) in the case of limited
liability company, serves as a managing member, or (iv) otherwise has the
ability to elect a majority of the directors, trustees or managing members
thereof.
1.45 "Subsidiary Merger" shall mean the merger of Waldoboro with and into
Union Trust as contemplated in this Agreement and the Subsidiary Merger
Agreement.
1.46 "Subsidiary Merger Agreement" means the Amended and Restated Agreement
and Plan of Merger by and between Union Trust and Waldoboro in substantially the
form of Exhibit A hereto.
1.47 "Surviving Corporation" shall mean Acquisition Company as the
surviving corporation resulting from this Agreement.
1.48 "Tax" or "Taxes" shall mean any federal, state, county, local, or
foreign taxes, charges, fees, levies, imposts, duties, or other assessments,
including income, gross receipts, excise, employment, sales, use, transfer,
license, payroll, franchise, severance, stamp, occupation, windfall profits,
environmental, federal highway use, commercial rent, customs duties, capital
stock, paid-up capital, profits, withholding, Social Security, single business
and unemployment, disability, real property, personal property, registration, ad
valorem, value added, alternative or add-on minimum, estimated, or other tax or
governmental fee of any kind whatsoever, imposed or required to be withheld by
the United States or any state, county, local or foreign government or
subdivision or agency thereof, including any interest, penalties, and additions
imposed thereon or with respect thereto.
1.49 "Tax Return" shall mean any report, return, information return, or
other information required to be supplied to a taxing authority in connection
with Taxes, including any return of an affiliated or combined or unitary group
that includes a Party or its Subsidiaries.
1.50 "Transaction Documents" shall mean this Agreement, the Subsidiary
Merger Agreement and the Option Agreement.
1.51 "Union Bankshares" means Union Bankshares Company, a corporation duly
chartered, organized and existing under and pursuant to the laws of the State of
Maine; maintaining its principal place of business at 66 Main Street, Ellsworth,
Maine 04605.
1.52 "Union Trust" means Union Trust Company, a Maine banking corporation,
duly chartered, organized and existing under and pursuant to the laws of the
State of Maine and maintaining its principal place of business at 66 Main
Street, Ellsworth, Maine 04605 and a member of the Federal Reserve System.
1.53 "Waldoboro" means The Waldoboro Bank, F.S.B., a federally chartered
savings bank, organized and existing under and pursuant to the laws of the
United States of America and maintaining its principal place of business and
registered address at 1768 Atlantic Highway, Waldoboro, Maine 04572, and its
subsidiary, First Waldoboro Corporation.
Any singular term in this Agreement shall be deemed to include the plural,
and any plural term the singular. Whenever the words "include", or "includes" or
"including" are used in this Agreement, they shall be deemed followed by the
words "without limitation."
ARTICLE 2
THE MERGER
2.1 Merger. On the Effective Date, Mid-Coast shall be merged with the
Acquisition Company (the "Merger") pursuant to the provisions of this Agreement,
the provisions of and with the effect provided in Section 252 of the DGCL.
Immediately thereafter, Mid-Coast shall be merged up and into Union Bankshares
pursuant to Chapter 9 of the Maine Business Corporation Act ("MBCA") and Section
252 of the DGCL.
A-6
<PAGE> 78
2.2 The Closing.
(a) The Closing of the transactions contemplated herein will take place,
assuming satisfaction or waiver of each of the conditions set forth in Article 8
hereof, on or immediately prior to the Effective Date. The Closing shall be held
at such location as may be mutually agreed upon by Parties.
(b) At the Closing (i) Mid-Coast and Union Bankshares shall each provide to
the other such proof of satisfaction of the conditions set forth in Article 8 as
the Party whose obligations are conditioned upon such satisfaction may
reasonably request; (ii) the certificates and letters required by Article 8
shall be delivered; (iii) the appropriate officers of the Parties shall complete
the execution, acknowledgment and delivery of the Merger Agreement and the
Subsidiary Merger Agreement; and (iv) the Parties shall take such further action
as is required to consummate the transactions contemplated by this Agreement and
the Subsidiary Merger Agreement.
2.3 Effect of Merger. Upon consummation of the Merger, the separate
corporate existence of the Acquisition Company shall cease and Mid-Coast shall
become a subsidiary of Union Bankshares and shall continue as the surviving
corporation. The name of Mid-Coast, as the surviving corporation, shall by
virtue of the Merger remain unchanged. On the Effective Date, all of the Assets
then owned by Acquisition Company, or which would inure to it, shall immediately
by operation of law and without any conveyance or transfer or without any
further action or deed, be vested in and become the property of Mid-Coast, which
shall have, hold and enjoy the same in its own right as fully and to the same
extent as the same were possessed, held and enjoyed by Acquisition Company prior
to such Merger, and Mid-Coast shall be a continuation of the original entities
and all of the rights and obligations of Acquisition Company shall remain
unimpaired, and Mid-Coast, on the Effective Date of the Merger shall succeed to
all such rights, obligations, duties and liabilities connected therewith.
2.4 Subsidiary Merger. Union Bankshares and Mid-Coast shall take all
action necessary and appropriate to cause Waldoboro to merge into Union Trust
subsequent to the consummation of the Merger under the terms set forth in the
Subsidiary Merger Agreement.
2.5 Parent-Subsidiary Merger. Union Bankshares shall take all action
necessary and appropriate to cause Mid-Coast to be merged up and into Union
Bankshares immediately following the Effective Date.
2.6 Option Agreement. Simultaneously with the execution of this Agreement
and as a condition thereto, the parties shall have executed an Option Agreement
(the "Option Agreement") substantially in the form of Exhibit B hereto,
providing Union Bankshares an option to acquire up to 19.9% of the outstanding
shares of Mid-Coast Common Stock, if certain triggering events occur as
described therein.
2.7 Charter; By Laws. On the Effective Date, the Certificate of
Incorporation and ByLaws of Mid-Coast shall be amended in their entirety to
confirm to the Certificate of Incorporation any ByLaws of the Acquisition
Company as in effect immediately prior to the Effective Date.
2.8 Directors and Officers.
(a) The directors of Union Bankshares in office immediately prior to the
Effective Date, together with such additional persons as may thereafter be
elected, shall serve as the directors of Union Bankshares from and after the
Effective Date in accordance with the Bylaws of Union Bankshares. The officers
of Union Bankshares in office immediately prior to the Effective Date, together
with such additional persons as may thereafter be elected, shall serve as the
officers of Union Bankshares from and after the Effective Date in accordance
with the Bylaws of Union Bankshares.
(b) Upon the Effective Date, Union Bankshares shall take, or cause to be
taken, such action as may be required in order to appoint two new Directors to
its Board of Directors from the current Mid-Coast Board of Directors who shall
represent the mid-coast banking market. Any person who is appointed or elected
to the Board of Directors of Union Bankshares pursuant to the preceding
sentence, shall serve until the first annual meeting of stockholders of Union
Bankshares following the Effective Date and until his or her successor is
elected and qualified.
A-7
<PAGE> 79
(c) Effective upon the Effective Date, each of the Directors and Officers
of Mid-Coast immediately prior to the Effective Date shall have resigned from
the Mid-Coast Board of Directors or from their managerial positions,
respectively, and the Directors and Officers of Acquisition Company shall become
the Directors and Officers of Mid-Coast.
ARTICLE 3
CONVERSION AND CANCELLATION OF STOCK
3.1 Conversion of Mid-Coast Common Stock.
(a) Conversion. On the Effective Date, each shareholder of Mid-Coast
Common Stock issued and outstanding immediately prior to the Effective Date,
other than holders of shares of Mid-Coast Common Stock who pursuant to Section
262 of the DGCL dissent and perfect appraisal rights, shall by virtue of the
Merger become and be converted to the right to receive the Merger Consideration
in cash for each share of Mid-Coast Common Stock held by such shareholder. On
the Effective Date, all shares of Mid-Coast Common Stock held in treasury will
be canceled and terminated and Mid-Coast shall not have any rights to receive
Merger Consideration for such shares.
(b) Anti-Dilution Provisions. The Merger Consideration shall be
proportionately adjusted to reflect fully the effect of any stock split, stock
dividend (including any dividend or distribution of securities convertible into
Mid-Coast Common Stock), recapitalization, reorganization or other like change
with respect to such stock if the record date therefore (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split,
recapitalization, reorganization or similar change for which a record date is
not established) shall be prior to the Effective Date.
(c) Cancellation. As a result of the Merger and without any action on the
part of the holder thereof, on the Effective Date, all shares of Mid-Coast
Common Stock shall cease to be outstanding and shall be canceled and retired and
shall cease to exist, and each holder of a certificate (a "Certificate")
representing any shares of Mid-Coast Common Stock shall thereafter cease to have
any rights with respect to such shares of Mid-Coast Common Stock, except the
right to receive, without interest, the Merger Consideration, upon the terms set
forth in this Agreement.
(d) Acquisition Company Stock. In addition to, but without limiting the
provisions of Section 3.1(a), (b) and (c), the shares of common stock of the
Acquisition Company issued and outstanding immediately prior to the Effective
Date shall as of the Effective Date become validly issued, fully paid and
nonassessable shares of Mid-Coast Common Stock and shall thereafter constitute
all of the issued and outstanding shares of capital stock of Mid-Coast. Each
share of Acquisition Company stock shall, as of the Effective Time, evidence
ownership of such shares of Mid-Coast Common Stock.
ARTICLE 4
EXCHANGE AND PAYMENT
4.1 Exchange of Certificates Representing Mid-Coast Common Stock.
(a) As of the Effective Date, Union Bankshares shall deposit, or shall
cause to be deposited, with the Exchange Agent for the benefit of the holders of
shares of Mid-Coast Common Stock, for exchange in accordance with this Article
4, the Merger Consideration (the aggregate of such cash being hereinafter
referred to as the "Exchange Fund") to be paid pursuant to Articles 3 and 4, in
exchange for outstanding shares of Mid-Coast Common Stock.
(b) Within two (2) business days after the Effective Date Union Bankshares
shall cause the Exchange Agent to mail to each holder of record of a Certificate
or Certificates (other than those representing shares with respect to which the
holder thereof has perfected appraisal rights under the DGCL and has not
subsequently lost, withdrawn or forfeited such rights) (i) a letter of
transmittal which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
A-8
<PAGE> 80
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Union Bankshares may reasonably specify and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for the per share
Merger Consideration. Upon surrender of a Certificate for cancellation to the
Exchange Agent together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, the holder of such
Certificate shall be entitled to receive in exchange therefore a check in the
amount of Merger Consideration that such holder has the right to receive
pursuant to this Agreement after giving effect to any required withholding tax,
and the Certificate so surrendered shall forthwith be canceled. No interest will
be paid or accrued on the value of any Merger Consideration payable to holders
of Certificates. In the event of a transfer of ownership of Mid-Coast Common
Stock which is not registered in the transfer records of Mid-Coast, a check in
the amount of Merger Consideration that such holder has the right to receive
pursuant to this Agreement after giving effect to any required withholding tax,
may be issued to such a transferee if the Certificate representing such
Mid-Coast Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid.
(c) Notwithstanding any other provisions of this Agreement, except with
respect to dividends declared by the Board of Directors of Mid-Coast which are
consistent with past practice, no dividends shall be paid with respect to any
shares of Mid-Coast Common Stock represented by a Certificate until such
Certificate is surrendered for exchange as provided herein.
(d) On or after the Effective Date, there shall be no transfers on the
stock transfer books of Mid-Coast of the shares of Mid-Coast Common Stock that
were outstanding immediately prior to the Effective Date. If, after the
Effective Date, Certificates are presented to Union Bankshares, they shall be
canceled and exchanged for the amount of Merger Consideration that such holder
has the right to receive pursuant to this Agreement.
(e) Any portion of the cash (including the proceeds of any investments
thereof) that remains unclaimed by the former stockholders of Mid-Coast six
months after the Effective Date shall be delivered to Union Bankshares. Any
former stockholders of Mid-Coast who have not complied with this Article 4
before that date shall look only to Union Bankshares for payment in respect of
their shares, without any interest thereon.
(f) Any other provision of this Agreement notwithstanding, neither
Mid-Coast, Union Bankshares nor the Exchange Agent shall be liable to a holder
of Mid-Coast Common Stock for any amounts paid or properly delivered in good
faith to a public official pursuant to any applicable abandoned property,
escheat or similar Law.
(g) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed and, if required by Union
Bankshares, the posting by such Person of a bond in such reasonable amount as
Union Bankshares may 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 cash as provided in
Section 4.1(b).
(h) Adoption of this Agreement by the stockholders of Mid-Coast shall
constitute ratification of the appointment of the Exchange Agent.
4.2 Cash-Out of Stock Options. Schedule 4.2 sets forth all individuals
holding outstanding exercisable options as of the Effective Date, including the
name of each such holder, the appropriate tax identification information of each
such holder, and the number of options held. Not later then five (5) business
days subsequent to the Effective Date, Union Bankshares shall provide to each
person listed on Schedule 4.2 a cash payment equal to the excess of (i) the
Merger Consideration per share of Mid-Coast Common Stock multiplied by the
number of shares of Mid-Coast Common Stock subject to the option(s) less (ii)
the aggregate exercise price for shares of Mid-Coast Common Stock subject to the
option(s), less any applicable taxes.
4.3 Dissenters' Rights. Any dissenting stockholder who shall be entitled
to be paid the "fair value" of his or her dissenters' shares, as provided in
Section 262 et seq. of the DGCL, shall not be entitled to the Merger
Consolidation, unless and until the holder thereof shall have failed to perfect
or shall have effectively
A-9
<PAGE> 81
withdrawn or lost such holder's right to dissent from the Merger under Section
262 et seq. of the DGCL and shall be entitled to receive only the payment to the
extent provided for by Section 262 et seq. of the DGCL with respect to such
dissenters' shares. If any dissenting stockholder shall fail to perfect or shall
have efficiently withdrawn or lost the right to dissent, the dissenters' shares
held by such dissenting stockholder shall thereupon be treated as though such
dissenters' shares had been converted into the right to receive the Merger
Consolidation pursuant to Section 3.1.
ARTICLE 5
COVENANTS AND AGREEMENTS OF MID-COAST
5.1 Operation of Business. Between the date hereof and the Effective Date,
or until the termination of this Agreement, Mid-Coast covenants and agrees that
it will (i) operate its business solely in the ordinary course consistent with
past practices and in compliance with all applicable Laws; and, (ii) cause
Waldoboro to operate its business solely in the ordinary course consistent with
past practices and in compliance with all applicable Laws; (iii) use reasonable
best efforts to maintain and preserve intact its and Waldoboro's business
organization, employees and advantageous business relationships and retain the
services of its and Waldoboro's officers and key employees; (iv) take no action
which would materially adversely affect or materially delay the ability of
Mid-Coast or Waldoboro, respectively, to obtain any necessary approvals of any
Regulatory Authority required for the transactions contemplated hereby or to
perform its or Waldoboro's covenants and agreements under this Agreement, the
Subsidiary Merger Agreement or the Option Agreement, respectively; and (v)
Mid-Coast will not, and Mid-Coast will cause Waldoboro not to:
(a) Amend or otherwise change its Certificate of Incorporation,
charter or Bylaws (except to the extent required in order to effect the
Merger or Subsidiary Merger as contemplated herein), as each such document
is in effect on the date hereof;
(b) Issue or sell, or authorize for issuance or sale, any shares of
Mid-Coast Common Stock or the common stock, $1.00 par value, of Waldoboro
or any additional shares of any class of capital stock of Mid-Coast or
Waldoboro (except to satisfy the exercise of stock options or to the extent
required to effect the Merger or Subsidiary Merger as contemplated herein)
or adjust, split, combine or reclassify any shares of the capital stock of
Mid-Coast or Waldoboro or issue any other securities in respect of, in lieu
of or in substitution for such shares of capital stock;
(c) Issue, grant, or enter into any subscription, option, warrant,
right, convertible security, or other agreement or commitment of any
character obligating Mid-Coast or Waldoboro to issue securities;
(d) Declare, set aside, make, or pay any dividend or other
distribution with respect to its capital stock except (i) for each calendar
quarter in which the record date for dividends on Mid-Coast Common Stock
precedes the Effective Date, Mid-Coast may pay a regular semi-annual
dividend in the amount of $.10 per share, and (ii) dividends from Waldoboro
to Mid-Coast to the extent necessary to pay necessary and routine expenses
of Mid-Coast (including expenses relating to the transactions contemplated
by this Agreement) and to fund regular dividends by Mid-Coast to its
stockholders to the extent permitted by this paragraph;
(e) Redeem, purchase, or otherwise acquire, directly or indirectly,
any of its capital stock, respectively;
(f) Absent Union Bankshares' prior written consent, which will not be
unreasonably withheld, authorize any capital expenditure(s) which,
individually or in the aggregate, exceed $5,000.00;
(g) Except in the ordinary course of business, sell, pledge, dispose
of, or encumber, or agree to sell, pledge, dispose of, or encumber, any
assets of Mid-Coast or Waldoboro;
(h) Excluding normal and customary banking transactions, incur any
indebtedness for borrowed money, issue any debt securities, or enter into
or modify any contract, agreement, commitment, or arrangement with respect
thereto or assume, guarantee, endorse or otherwise as an accommodation
A-10
<PAGE> 82
become responsible for the obligations of any other individual, corporation
or other entity, or make any loan or advance therefore;
(i) Impose or suffer the imposition, on any share of stock held by
Mid-Coast in Waldoboro, of any material lien, charge, or encumbrance, or
permit any such lien to exist;
(j) Establish or add any automated teller machines or branch or other
banking offices or enter into any new line of business or file any
application to relocate or terminate the operations of any banking office
of Mid-Coast or Waldoboro or, materially expand the business currently
conducted by Mid-Coast or Waldoboro;
(k) Acquire (by merger, consolidation, lease or other acquisition of
stock, ownership interests or assets) any corporation, partnership, or
other business organization or division thereof, or enter into any
contract, agreement, commitment, or arrangement with respect to any of the
foregoing, except to the extent required in order to effect the Merger as
contemplated herein and except in the ordinary course of business in
connection with foreclosures or similar actions;
(l) Enter into, extend, or renew any lease for office or other space;
(m) Except as required by law or permitted by this Agreement, enter
into, adopt or amend any bonus, profit sharing, compensation, stock option,
pension, retirement, deferred compensation, employment, or other employee
benefit plan, agreement, trust, fund, or arrangement for the benefit or
welfare of any officer, employee or Representative of Mid-Coast or
Waldoboro, except that Mid-Coast and Waldoboro may (i) offer, pay or grant
any bonus or other incentive to any specific employee or groups of
employees as may be reasonably required to keep such individuals under the
employ of Mid-Coast or Waldoboro; (ii) enter into a Termination Agreement
with Wesley E. Richardson as set forth in Exhibit C (the "Termination
Agreement"); and (iii) terminate the participation of Mid-Coast and
Waldoboro in the defined benefit plan maintained by Pentegra.
(n) Grant any increase in compensation to any director, officer, or
employee or Representative of Mid-Coast or Waldoboro except in the ordinary
course of business consistent with past practice and as set forth in
Schedule 5.1;
(o) Absent Union Bankshares' prior written consent, which shall not be
unreasonably withheld, except as otherwise provided in this Agreement,
enter into, amend, or terminate any employment agreement, relationship or
responsibilities with any director, officer, or key employee or
Representative of Mid-Coast or Waldoboro, or enter into, amend, or
terminate any employment agreement with any other person otherwise than in
the ordinary course of business, or take any action with respect to the
grant or payment of any severance or termination pay;
(p) Take any action or omit to take any action which would cause any
of Mid-Coast's or Waldoboro's representations or warranties to be untrue or
misleading in any material respect or any covenant of Mid-Coast or
Waldoboro under this Agreement incapable of being performed;
(q) Take any action that would materially and adversely affect the
ability of any Party hereto to obtain the approvals necessary for
consummation of the transactions contemplated hereby or that would
materially and adversely affect Mid-Coast's or Waldoboro's ability to
perform its covenants and agreements hereunder;
(r) Take any action with respect to accounting methods, principles or
practices, other than changes required by applicable law or GAAP or
regulatory accounting as concurred in by Mid-Coast's independent
accountants; or make any Tax election or settle or compromise any federal,
state, local or foreign Tax liability;
(s) Change in any material respect its loan policies, except as
required by Regulatory Authorities; or
(t) Agree in writing or otherwise to do any of the foregoing.
A-11
<PAGE> 83
5.2 Insurance. Pending the Closing, Mid-Coast shall cause all of its
personal property and all real property owned or leased by Mid-Coast and
Waldoboro jointly or individually to be insured under policies with reasonable
deductibles and in full compliance with any coinsurance provision. Mid-Coast and
Waldoboro each shall also maintain all such insurance in place as of the date of
the signing of this Agreement with respect to its employees and with respect to
general liability. The insurance required under this Section 5.2 shall be in
addition to and not in lieu of the Environmental Insurance (as defined in
Section 8.3(g)).
5.3 Board Consent; Stockholders' Meeting.
(a) The Board of Directors of Mid-Coast shall adopt a resolution
recommending approval and adoption of this Agreement and the Subsidiary Merger
Agreement by Mid-Coast's stockholders, and, the Board of Directors of Mid-Coast
shall at all times recommend approval and adoption of this Agreement and the
Subsidiary Merger Agreement by Mid-Coast's stockholders. The Board of Directors
of Mid-Coast shall be permitted to withdraw or modify (or not to continue to
make) its recommendation to its stockholders if, but only if, (a) in the opinion
of the Mid-Coast's outside counsel, such action is required, in response to an
unsolicited bona fide written "Superior Proposal" (as defined herein), in order
for the Board of Directors of Mid-Coast not to breach its fiduciary duties under
applicable law, (b) Mid-Coast has given Union Bankshares five (5) business days'
prior notice of any meeting of the Board of Directors of Mid-Coast to consider
such Superior Proposal and the Mid-Coast Board of Directors has considered any
proposed changes to this Agreement (if any) proposed by Union Bankshares, and
(c) Mid-Coast has fully and completely complied with Section 5.6 hereof. For the
purposes of this Agreement, "Superior Proposal" shall mean any bona fide
Acquisition Proposal for at least a majority of the outstanding shares of
Mid-Coast Common Stock on terms the Board of Directors of Mid-Coast determines
in its good faith judgment (taking into account the advice of its financial
advisor, taking into account all the terms and conditions of the Acquisition
Proposal, including any break-up fees, option agreements, expense reimbursement
provisions and conditions to consummation) are in the aggregate more favorable
and provide greater value to all the Mid-Coast's stockholders than this
Agreement and the Merger taken as a whole. For purposes of this Agreement,
"Acquisition Proposal" means any offer or proposal for, or any indication of
interest in (w) a merger or consolidation, or any similar transaction, involving
Mid-Coast or Waldoboro, (x) a purchase, lease or other acquisition or assumption
of all or a substantial portion of the assets or deposits of Mid-Coast or all or
substantially all of the assets or deposits of Waldoboro, (y) a purchase or
other acquisition (including by way of merger, consolidation, share exchange or
otherwise) of beneficial ownership (the term "beneficial ownership" for purposes
of this Agreement having the meaning assigned thereto in Section 13(d) of the
1934 Act, and the rules and regulations thereunder) of securities representing
10% or more of the voting power of Mid-Coast or Waldoboro, or (z) any
substantially similar transaction.
(b) Mid-Coast will (i) take all steps necessary to call, give notice of,
convene and hold a special meeting of its stockholders no later than July 15,
2000 for the purpose of approving this Agreement and the transactions
contemplated hereby and for such other purposes as may be necessary or
desirable, and (ii) cooperate and consult with Union Bankshares with respect to
each of the foregoing matters. Said notice shall include notice of dissenter's
rights, if any, and shall solicit stockholders' proxies in favor of this
Agreement, and all notices shall be given in accordance with all applicable
Laws. Except as may be required by fiduciary obligations, Mid-Coast and its
directors will support and vote in favor of a shareholder resolution approving
this Agreement and the transaction contemplated hereby including the Merger.
5.4 Mid-Coast and Waldoboro Financial and Other Reports. Mid-Coast shall
(and shall cause Waldoboro to) make available to Union Bankshares and Union
Trust the following statements and other reports and documents:
(a) Mid-Coast's Consolidated Balance Sheets as of December 31, 1999
and 1998 (unaudited) and March 31, 1999, 1998 and 1997 (audited);
Consolidated Statements of Income and Changes in Stockholders' Equity and
Consolidated Statements of Cash Flows for the years ended March 31, 1999,
1998 and 1997 (audited) and Statements of Income for the six-month periods
ended December 31, 1999 and 1998 (unaudited) and all additional
Consolidated Balance Sheets, Consolidated Statements of Income and Changes
in Stockholders' Equity, Consolidated Statements of Cash Flows and
Statements of
A-12
<PAGE> 84
Income prepared after the date hereof but prior to the Effective Date
("Mid-Coast Financial Statements"), and any related notes and reports of
its independent public accountants with respect thereto.
(b) The thrift financial reports, consolidated reports of condition
and income, and accompanying schedules, filed by Waldoboro with the OTS for
each calendar quarter, beginning January 1, 1995, through December 31,
1999.
(c) Such additional financial or other information as may be required
for the regulatory applications in connection with the consummation of the
Merger or the Subsidiary Merger (subject to any legal limitations).
5.5 Access to Properties and Records. Mid-Coast shall (and shall cause
Waldoboro to), upon reasonable notice, afford Union Bankshares and its officers,
employees, counsel, accountants, and other authorized Representatives access,
during normal business hours throughout the period prior to the Effective Date,
to all of its and Waldoboro's properties; books, contracts, commitments, loan
files, litigation files and records (including, but not limited to, the minutes
of the Boards of Directors of Mid-Coast and Waldoboro and all committees
thereof), and it shall (and shall cause Waldoboro to), upon reasonable notice
and to the extent consistent with applicable law, furnish promptly to Union
Bankshares such information as Union Bankshares may reasonably request to
perform such review. All information obtained hereunder shall be subject to the
confidentiality agreement heretofore executed.
5.6 No Solicitation. Prior to the Effective Date, neither Mid-Coast nor
Waldoboro shall authorize or knowingly permit any of their officers, directors,
employees, Representatives, agents or other Persons controlled by Mid-Coast or
Waldoboro to directly or indirectly, encourage or solicit or, hold any
discussions or negotiations with, or provide any information to, any Persons,
entity or group concerning any merger, consolidation, sale of substantial
assets, sale of shares of capital stock or similar transactions involving,
directly or indirectly, Mid-Coast or Waldoboro, except as contemplated by this
Agreement or as required to avoid any breach of any fiduciary obligations.
5.7 Covenant Not to Compete. Except as set forth on Schedule 5.7, in
addition to any restrictions which may be contained in any employment agreement
between Mid-Coast, Waldoboro and any director (other than Wesley E. Richardson
who has entered into a separate noncompetition agreement pursuant to Section
5.10 hereof), each of the directors of Mid-Coast and Waldoboro agree that for
the period from the date hereof until two (2) years after the Effective Date,
they will not become directly, indirectly or beneficially an employee, five
percent (5%) or more shareholder, consultant to or director of any bank, savings
bank, savings association, trust company, financial institution or other similar
business enterprise which competes with Union Trust (as successor to Waldoboro)
within Waldo, Knox and Lincoln Counties, Maine. The directors of Mid-Coast and
Waldoboro further agree not to initiate any action to induce any employee of
Union Trust (as successor to Waldoboro) to leave Union Trust's employment or
directly or indirectly assist any other Person or entity in requesting or
inducing any such other employee of Union Trust to leave such employment for the
period of the date hereof until five (5) years after the Effective Date.
5.8 Termination of Employee Stock Options. Prior to the Effective Date,
Mid-Coast shall take all such action as is necessary to terminate the 1989 Stock
Option Plan (the "Stock Option Plans") as of the Effective Date, and shall
provide written notice to each holder of a then outstanding stock option to
purchase shares of Mid-Coast Common Stock pursuant to the Stock Option Plans
(whether or not such stock option is then vested or exercisable), that such
stock option shall be, as at the date of such notice, exercisable in full and
that such stock option shall terminate at the Effective Date, provided however
that each Option Holder shall be entitled to receive the cash payments described
in Section 4.2. Subject to the foregoing, the Stock Option Plan and all options
issued thereunder shall terminate not later than the Effective Date with no
Liability, monetary or otherwise, ensuing as a result thereof, other than the
obligation to provide cash payments as described in Section 4.2. Mid-Coast
hereby represents and warrants to Union Bankshares that the maximum number of
shares of Mid-Coast Common Stock subject to issuance pursuant to the exercise of
stock options issued and outstanding under the Stock Option Plan or otherwise is
not and shall not be at or prior to the Effective Date more than 5,583.
A-13
<PAGE> 85
5.9 Employee Retention Plan. Prior to the Effective Date, Mid-Coast shall
take all action as is necessary to terminate the Recognition and Retention Plan
of Mid-Coast (the "Retention Plan") and the trust related thereto on or prior to
the Effective Date and shall provide written notice to each holder of an
outstanding stock award (whether or not such stock award is then vested), that
the Retention Plan shall be terminated on or prior to the Effective Date and
that all outstanding shares awarded thereunder shall become immediately and
fully vested in accordance with the terms of the Retention Plan. Subject to the
foregoing, the Retention Plan shall terminate not later than the Effective Date,
with no Liability, monetary or otherwise, ensuing as a result thereof other than
the payment of the Merger Consideration to each holder of a stock award in
accordance with Section 4.1 hereof. Mid-Coast hereby represents and warrants to
Union Bankshares that the maximum number of shares of Mid-Coast Common Stock
subject to vesting pursuant to the Retention Plan, or subject to distribution by
the Trustee under the Retention Plan, is not and shall not be at or prior to the
Effective Date more than 11,718.
5.10 Termination of Richardson Employment Agreement. Prior to the
Effective Date, Mid-Coast shall take all such action as is necessary to
terminate the Amended and Restated Employment Agreement of Wesley E. Richardson
dated May 18, 1993 (the "Employment Agreement") as of the Effective Date, such
termination to be effective as of the Effective Date. In connection therewith,
Mid-Coast shall enter into the Termination Agreement. Union Bankshares shall,
within five days following the Effective Date, pay all amounts due under
Sections 2(a) and 2(c) of the Termination Agreement.
5.11 Environmental Reports. Prior to the Effective Date, Mid-Coast shall
take all such action as is necessary to obtain a Phase I environmental site
assessment, conducted in accordance with current ASTM standards and applicable
Maine statutes and regulations governing environmental issues, with respect to
each of its or Waldoboro's operating locations including the Waldoboro main
branch location and use its best efforts to obtain such Phase I assessments with
respect to such other locations which Mid-Coast or Waldoboro may use for
operations under lease, and shall deliver all such reports, assessments and
analyses to Union Bankshares prior to the Effective Date. Union Bankshares shall
reimburse Mid-Coast for one-half of the costs of obtaining all such
environmental reports; provided that Union Bankshares shall select the firm or
organization that will prepare the site assessment; and provided further that
nothing in this Section 5.11 shall be construed to create any liability
whatsoever on the part of Union Bankshares with respect to any environmental
liabilities discovered or caused as a result of Mid-Coast obtaining such
reports.
5.12 Quality Control Program. Prior to the Effective Date, Mid-Coast shall
continue to enforce its quality control program for Waldoboro with respect to
Waldoboro's FHLMC loans and Maine state housing loans in accordance with the
rules, policies and regulations of such agencies with respect to such loan
programs and Mid-Coast shall cooperate fully with Union Bankshares and take all
actions necessary and desirable, as reasonably requested by Union Bankshares, to
allow Union Bankshares to review and monitor the quality control program prior
to the Effective Date.
5.13 Loan Documentation. Prior to the Effective Date, Mid-Coast shall
cooperate fully with Union Bankshares and take all actions necessary and
desirable, as reasonably requested by Union Bankshares, to review and update
documentation with respect to Waldoboro's completed and pending commercial and
consumer lending transactions.
5.14 No Further Remediation Action. Neither Mid-Coast nor Waldoboro shall
have received any modification or revocation from any Governmental Authority of
that certain letter (the "DEP Letter") dated March 23, 2000 from the Maine
Department of Environmental Protection to Mid-Coast with respect to DEP Spill
#A-146-85 and matters related thereto concerning Mid-Coast's Rockland property.
5.15 Verification of Excavation and Disposal. Within thirty days of the
date hereof, Mid-Coast shall use its best efforts to deliver to Union Bankshares
documentation evidencing the lawful disposal of all of the oil-contaminated
materials excavated at Mid-Coast's Rockland property prior to and in connection
with the construction of the bank facility located thereon, provided however,
that in the event that such documentation cannot be provided for reasons beyond
the control of Mid-Coast, Mid-Coast shall deliver to Union Bankshares within
forty-five days of the date hereof documents evidencing that (i) Mid-Coast was
not the equitable or title owner of the Rockland property at the time such
excavation and disposal was undertaken and (ii) Mid-
A-14
<PAGE> 86
Coast did not participate and was not associated, in any fashion, with such
excavation and disposal activities. All such documentation shall be to the sole
satisfaction of Union Bankshares. In the event that such documentation is not
provided timely, or documentation provided is not satisfactory to Union
Bankshares in its sole discretion, then Mid-Coast shall seek to increase the
Environment Insurance to provide coverage with respect to the Liabilities
associated with any improper or unlawful excavation or disposal of the oil-
contaminated soil from the Rockland property. Any costs associated with an
increase to the Environmental Insurance shall be borne solely by Mid-Coast.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF MID-COAST
For purposes of this Agreement, except where the context requires
otherwise, any reference to Mid-Coast in this Article 6 shall be deemed to
include each of Mid-Coast and Waldoboro (including any Subsidiary of Waldoboro)
and any reference to "material," Material Adverse Effect or a similar standard
shall refer to the financial condition, operations or other aspects of Mid-Coast
and Waldoboro taken as a whole. Mid-Coast hereby represents and warrants to
Union Bankshares as follows:
6.1 Organization and Authority. Mid-Coast is a savings association holding
company registered with the OTS under the Savings and Loan Holding Company Act
and is a corporation duly organized, validly existing and in good standing under
the Laws of the State of Delaware. Waldoboro is a federally chartered savings
bank duly organized, validly existing and in good standing under the Laws of the
United States. Each of Mid-Coast and Waldoboro is duly licensed or qualified to
do business and is in corporate good standing in each jurisdiction in which the
nature of the business conducted by it or the character or location of the
properties and Assets owned, leased or operated by it makes such licensing or
qualification necessary, except where the failure to be so licensed or qualified
and in corporate good standing would not, individually or in the aggregate,
result in any Material Adverse Effect. Each of Mid-Coast and Waldoboro has the
requisite corporate power and authority to own, lease and operate its properties
and Assets and to carry on its business as it is now being conducted. The
Certificate of Incorporation, Charter and Bylaws of each of Mid-Coast and
Waldoboro, copies of which have previously been made available to Union
Bankshares, are true, correct and complete copies of such documents in effect as
of the date of this Agreement. Neither Mid-Coast nor Waldoboro is as of the date
of this Agreement or will be as of the Effective Date in violation of any
provision of its Certificate of Incorporation, Charter or its Bylaws. The minute
books of each of Mid-Coast and Waldoboro contain in all material respects true
and complete records of all meetings held and corporate actions taken since
January 1, 1997 of their respective stockholders and boards of directors
(including committees of their respective boards of directors).
6.2 Authorization.
(a) Authority of Mid-Coast. Mid-Coast has all requisite corporate power
and authority to execute and deliver this Agreement and the other Transaction
Documents and to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance of this Agreement and the Transaction
Documents by Mid-Coast and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by the Board of Directors of
Mid-Coast, subject to regulatory and stockholder approval. No other corporate
proceedings on the part of Mid-Coast are necessary to authorize consummation of
this Agreement, except for the approval of the transaction by Mid-Coast's
stockholders, and the performance by Mid-Coast of the terms hereof. This
Agreement and each of the Transaction Documents is a valid and binding
obligation of Mid-Coast enforceable against Mid-Coast in accordance with its
terms except as may be limited by applicable bankruptcy, insolvency,
reorganization or moratorium or other similar Laws affecting creditors' rights
generally and except that the availability of equitable remedies is within the
discretion of the appropriate court and except that it is subject to approval by
its stockholders and applicable Regulatory Agencies.
(b) Authority of Waldoboro. Waldoboro has full corporate power and
authority to execute and deliver the Subsidiary Merger Agreement, to perform its
obligations thereunder and to consummate the transactions contemplated thereby.
The execution and delivery of the Subsidiary Merger Agreement, the performance
of
A-15
<PAGE> 87
its obligations thereunder and the consummation of the transactions contemplated
thereby have been duly and validly approved by the unanimous action of the Board
of Directors of Waldoboro. Except for adoption of the Subsidiary Merger
Agreement by Waldoboro's stockholders, no other corporate action and no other
corporate proceedings on the part of Waldoboro are necessary to authorize the
Subsidiary Merger Agreement or the performance of Waldoboro's obligations
thereunder or to consummate the transactions contemplated thereby. The
Subsidiary Merger Agreement, upon execution and delivery by Waldoboro, will be
duly and validly executed and delivered by Waldoboro and will constitute a
legal, valid and binding obligation of Waldoboro, enforceable against Waldoboro
in accordance with its terms.
(c) No Violation. Neither the execution, delivery or performance of this
Agreement or the other Transaction Documents by Mid-Coast, nor the consummation
of the transactions contemplated hereby or thereby, nor the execution, delivery
or performance of the Subsidiary Merger Agreement by Waldoboro, nor the
consummation by Waldoboro of the transactions contemplated hereby or thereby,
nor compliance by Mid-Coast or Waldoboro with any of the provisions hereof or
thereof, will (i) in any material respect violate, conflict with, or result in a
breach of any provision of, or constitute a Default (or an event which, with
notice or lapse of time or both, would constitute a Default) under or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration, or the creation of any Lien, security
interest, charge or encumbrance upon any of the properties or Assets of
Mid-Coast or Waldoboro under any terms, conditions or provisions of (A)
Mid-Coast's or Waldoboro's Certificate of Incorporation, Charter or Bylaws, or
(B) except as set forth on Schedule 6.2, any material note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which Mid-Coast or Waldoboro is a party or by which Mid-Coast or
Waldoboro may be bound, or to which Mid-Coast or Waldoboro or the properties or
Assets of it may be subject, or (ii) violate in any material respect any Order
applicable to Mid-Coast or Waldoboro or any of its properties or Assets.
6.3 Capital Structure.
(a) Mid-Coast. As of the date hereof, the authorized capital of Mid-Coast
consists solely of 1,500,000 shares of Mid-Coast Common Stock and 500,000 shares
of preferred stock, $1.00 par value. As of the date hereof, 753,570 shares of
such authorized Common Stock were issued and outstanding and no shares of such
authorized preferred stock were issued and outstanding. The outstanding shares
of capital stock of Mid-Coast are validly issued and outstanding, fully paid and
nonassessable. Except as set forth on Schedule 6.3, there are no outstanding
options, conversion rights, warrants, calls, rights, commitments or agreements
to issue any form of stock or other security of Mid-Coast or sell any form of
common stock or other security of Mid-Coast or Waldoboro. There are no
outstanding obligations or commitments to purchase, redeem or otherwise acquire
any outstanding shares of Mid-Coast Common Stock.
(b) Waldoboro. As of the date hereof, the authorized capital of Waldoboro
consists solely of 7,500,000 shares of common stock and 2,500,000 shares of
preferred stock. As of the date hereof, 203,174 shares of such authorized common
stock were issued and outstanding and no shares of such authorized preferred
stock were issued and outstanding. The outstanding shares of capital stock of
Waldoboro are validly issued and outstanding, fully paid and nonassessable.
There are no outstanding options, conversion rights, warrants, calls, rights,
commitments or agreements to issue any form of stock or other security of
Waldoboro or sell any form of common stock or other security of Waldoboro. There
are no outstanding obligations or commitments to purchase, redeem or otherwise
acquire any outstanding shares of Waldoboro Common Stock.
6.4 Subsidiaries.
(a) Waldoboro. Except as set forth on Schedule 6.4, Mid-Coast does not
own, directly or indirectly, five percent (5%) or more of the outstanding
capital stock or other voting securities of any corporation, bank, or other
organization. Schedule 6.4 sets forth as of the date of this Agreement the
percentage and type of equity securities issued and outstanding by Waldoboro and
owned or controlled by Mid-Coast. Waldoboro's deposits are insured by the
Savings Association Insurance Fund of the FDIC in accordance with the FDIA to
the fullest extent permitted by Law, and had paid all premiums and assessments
and filed all reports required by the FDIA. As of the date hereof, no
proceedings for the revocation or termination of such deposit insurance
A-16
<PAGE> 88
are pending or to the Knowledge of Mid-Coast or Waldoboro, threatened. Waldoboro
is "adequately capitalized" as such term is defined in the rules and regulations
promulgated by the OTS and the FDIC.
(b) First Waldoboro. Waldoboro does not own, directly or indirectly, five
percent (5%) or more of the outstanding capital stock or other voting securities
of any corporation, bank, or other organization except First Waldoboro
Corporation ("First Waldoboro"). Schedule 6.4 sets forth as of the date of this
Agreement the percentage and type of equity securities of First Waldoboro issued
and outstanding and owned or controlled by Waldoboro and the jurisdiction of
First Waldoboro's incorporation. Except as set forth on Schedule 6.4, First
Waldoboro does not hold title to any Assets, is not a party to any Contracts,
and conducts no significant business activity. There are no outstanding options,
conversion rights, warrants, calls, rights, commitments or agreements to issue
any form of stock or other security of First Waldoboro. There are no outstanding
obligations or commitments to purchase, redeem or otherwise acquire any
outstanding shares of First Waldoboro's securities. The outstanding shares of
common stock of First Waldoboro are validly issued and outstanding, fully paid
and nonassessable and all of such shares are owned by Waldoboro, free and clear
of all Liens, claims and encumbrances.
6.5 Mid-Coast Financial Statements. Mid-Coast and Waldoboro have made
available to Union Bankshares true and correct copies of the Mid-Coast Financial
Statements (defined in Section 5.4). The Mid-Coast Financial Statements (i) have
been prepared in accordance with generally accepted accounting principles
("GAAP") consistently applied, and (ii) present fairly the consolidated results
of operations of Mid-Coast and Waldoboro for the periods covered thereby and the
consolidated financial condition of Mid-Coast and Waldoboro as of the dates
thereof.
6.6 No Material Adverse Change. Since March 31, 1999, there has been no
event or condition of any character (whether actual, or to the Knowledge of
Mid-Coast or Waldoboro, threatened or contemplated) that has had or can
reasonably be anticipated to have, a Material Adverse Effect on Mid-Coast or
Waldoboro.
6.7 Tax Liability. The amounts set up as Liabilities for Taxes in the
Mid-Coast Financial Statements are sufficient for the payment of all respective
Taxes accrued in accordance with GAAP and unpaid at the respective dates
thereof.
6.8 Tax Returns; Payment of Taxes. All federal, state, local, and foreign
Tax Returns (including, without limitation, estimated Tax Returns, withholding
Tax Returns with respect to employees, and FICA and FUTA returns) required to be
filed by or on behalf of Mid-Coast or Waldoboro have been timely filed or
requests for extensions have been timely filed and granted and have not expired
for periods ending on or before December 31, 1999, and all returns filed are
complete and accurate to the Knowledge of its management and all Taxes shown on
filed returns have been paid. As of the date hereof, there is no audit,
examination, deficiency or refund Litigation or matter in controversy with
respect to any Taxes that might result in a determination materially adverse to
Mid-Coast or Waldoboro, except as reserved against in the Mid-Coast Financial
Statements. All Taxes, interest, additions and penalties due with respect to
completed and settled examinations or concluded Litigation have been paid, and
Mid-Coast's and Waldoboro's reserves for bad debts at March 31, 1999, as filed
with the Internal Revenue Service were not greater than the maximum amounts
permitted under the provisions of Section 585 of the Code.
6.9 Litigation and Proceedings. Except as set forth on Schedule 6.9
hereto, no Litigation, proceeding or controversy before any court or
governmental agency is pending against Mid-Coast or Waldoboro that in the
opinion of its management is likely to have a Material Adverse Effect on
Mid-Coast or Waldoboro, and, to the Knowledge of the management of Mid-Coast or
Waldoboro, no such Litigation, proceeding or controversy has been threatened or
is contemplated.
6.10 Professional Fees. Except for Trident Securities, a division of
McDonald Investments, Inc., neither Mid-Coast or Waldoboro, nor any of their
respective officers, directors, employees, or Affiliates has employed any broker
or finder or incurred any Liability for any financial advisory fees, investment
bankers' fees, brokerage fees, commissions, or finders' fees in connection with
this Agreement or the transactions contemplated hereby.
A-17
<PAGE> 89
6.11 Contingent Liabilities. Except as disclosed on Schedule 6.11 hereto
or as reflected in the Mid-Coast Financial Statements, and except in the case of
Waldoboro for unfunded loan commitments made in the ordinary course of business
consistent with past practices, as of December 31, 1999, neither Mid-Coast nor
Waldoboro has any obligation or Liability (contingent or otherwise) that was
material, or that when combined with all similar obligations or liabilities
would have been material, to Mid-Coast and Waldoboro taken as a whole and there
does not exist a set of circumstances that, to the Knowledge of Mid-Coast, could
reasonably be expected to result in any such material obligation or Liability.
6.12 Title to Assets; Insurance. Schedule 6.12 sets forth all real
property and material properties and Assets owned or leased by Mid-Coast or
Waldoboro, including property on or at which is situated or located any
automatic teller machine (ATM) owned, leased, licensed or controlled by
Mid-Coast or Waldoboro.
Except as described on Schedule 6.12:
(a) As of December 31, 1999, each of Mid-Coast and Waldoboro had, and
except with respect to Assets disposed of for adequate consideration in the
ordinary course of business consistent with past practices since such date,
now has, good and merchantable title to all real property and good and
merchantable title to all other material properties and Assets reflected in
the Mid-Coast Financial Statements, free and clear of all mortgages, Liens,
pledges, restrictions, security interests, charges and encumbrances of any
nature except for (i) mortgages and encumbrances which secure indebtedness
which is properly reflected in the Mid-Coast Financial Statements or which
secure deposits of public funds as required by Law; (ii) Liens for Taxes
accrued but not yet payable; (iii) Liens arising as a matter of Law in the
ordinary course of business consistent with past practices with respect to
obligations incurred after December 31, 1999, provided that the obligations
secured by such Liens are not delinquent or are being contested in good
faith; (iv) such imperfections of title and encumbrances, if any, as do not
materially detract from the value or materially interfere with the present
use of any of such properties or Assets or the potential sale of any such
owned properties or Assets; and (v) capital leases and leases, if any, to
third parties for fair and adequate consideration. Each of Mid-Coast and
Waldoboro owns, or has valid leasehold interests in, all material
properties and Assets, tangible or intangible, used in the conduct of its
business. Any real property and other material Assets held under Contract
by Mid-Coast or Waldoboro are held under valid, subsisting and enforceable
Contracts with such exceptions that do not have a Material Adverse Effect
and do not interfere with the use made or proposed to be made by Union
Bankshares in such Contract of such property. Except as disclosed on
Schedule 6.12 with respect to each Contract for any real property or a
material amount of personal property to which Mid-Coast or Waldoboro is a
party and except for financing leases in which Mid-Coast is lessor, (i)
such Contract is in full force and effect in accordance with its terms;
(ii) all rents and other monetary amounts that have been due and payable
thereunder have been paid; (iii) there exists no Default or event,
occurrence, condition or act which with the giving of notice, the lapse of
time or the happening of any further event, occurrence, condition or act
would become a Default under such Contract; (iv) the Merger will not
constitute a Default or a cause for termination or modification of such
Contract; and (v) no Consent must be obtained from any third party,
including any party to such Contract, for the valid transfer of such
Contract to Union Bankshares pursuant to the Merger.
(b) Neither Mid-Coast nor Waldoboro has any legal obligation, absolute
or contingent, to any other Person to sell or otherwise dispose of any
substantial part of its Assets or to sell or dispose of any of its Assets
except in the ordinary course of business consistent with past practices.
(c) To the Knowledge and belief of Mid-Coast, the policies of fire,
theft, liability and other insurance maintained with respect to the Assets
or business of Mid-Coast and Waldoboro provide adequate coverage against
such risks as companies engaged in a similar business would in accordance
with good business practice insure against and are insured in such amounts
with such deductibles and against such risks and losses as are in the
opinion of management adequate for the business engaged in by each of
Mid-Coast and Waldoboro. Schedule 6.12 sets forth a summary of all material
policies of insurance of Mid-Coast and Waldoboro currently in effect, which
summary is accurate and complete in all material respects. All of the
policies relating to insurance maintained by Mid-Coast and Waldoboro
A-18
<PAGE> 90
with respect to its material properties and the conduct of its business in
any material respect (or any comparable policies entered into as a
replacement therefore) are in full force and effect and neither Mid-Coast
nor Waldoboro has received any notice of cancellation with respect thereto.
6.13 Liabilities. To the Knowledge of Mid-Coast, all Liabilities of
Mid-Coast and Waldoboro were, and will be created, for good, valuable and
adequate consideration in accordance with prudent business standards and in
compliance with all Laws and the accounts or evidence of ownership of accounts
are and will be genuine, true, valid and enforceable in accordance with their
written terms. Neither Mid-Coast nor Waldoboro has agreed to any modification or
extension of accounts or account terms or otherwise made any agreements
regarding such accounts except as disclosed in writing on the books and records
of Mid-Coast and Waldoboro; neither Mid-Coast nor Waldoboro has Knowledge of any
claim of ownership to any account other than as shown on the written ownership
records of Mid-Coast and Waldoboro for each account; and neither Mid-Coast nor
Waldoboro has Knowledge of any alleged improper or wrongful withdrawal or
payment of any such account.
6.14 Loans. To the Knowledge of Mid-Coast each loan reflected as an asset
of Mid-Coast or Waldoboro in the Mid-Coast Financial Statements, as of December
31, 1999, or acquired since that date, was issued or originated and is in
compliance with all applicable loan policies of Mid-Coast and Waldoboro (except
where such non-compliance would not have a Material Adverse Effect), and is the
legal, valid, and binding obligation of the obligor named therein, enforceable
in accordance with its terms, and no loan is subject to any asserted defense,
offset or counterclaim known to Mid-Coast or Waldoboro, except as disclosed in
writing to Union Bankshares on or prior to the date hereof. The information
(including electronic information and information contained on tapes and
computer disks) with respect to all loans held by Mid-Coast and Waldoboro
furnished to Union Bankshares is true and complete in all material respects.
6.15 Allowance for Loan Losses. To the knowledge of Mid-Coast, and except
as set forth on Schedule 6.15 hereto, the allowance for loan losses shown on the
consolidated balance sheet of Mid-Coast as of December 31, 1999 is adequate in
all material respects under the requirements of GAAP to provide for reasonably
anticipated losses on outstanding loans, net of recoveries.
6.16 Investment Securities. Except as disclosed on Schedule 6.16 and
except for pledges to secure public and trust deposits, FHLB borrowings,
repurchase agreements and reverse repurchase agreements entered into in arms'
length transactions pursuant to normal commercial terms and conditions and other
pledges required by Law, none of the investments reflected in the Mid-Coast
Financial Statements for the period ended March 31, 1999, and none of the
material investments made by Mid-Coast or Waldoboro since March 31, 1999, is
subject to any restriction (contractual, statutory or otherwise) that would
materially impair Mid-Coast's or Waldoboro's ability freely to dispose of such
investment at any time.
6.17 Information for Proxy Statement; Regulatory Filings. None of the
information supplied or to be supplied by Mid-Coast or Waldoboro with respect to
each of Mid-Coast and Waldoboro for inclusion in (a) the Notice of Meeting and
Joint Proxy Statement to be mailed by Mid-Coast to its stockholders in
connection with the meeting referred to in Section 5.3 hereof (the "Joint Proxy
Statement") and (b) any other documents to be filed with any Regulatory
Authority in connection with the transactions contemplated hereby will at the
time the Proxy Statement is mailed to holders of Mid-Coast's Common Stock, as
may be amended at the time of Mid-Coast Stockholders' Meeting, and at the time
of filing of such other documents, respectively, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. All documents, financial statements, or
other information or materials which Mid-Coast or Waldoboro shall provide for
filing with any Regulatory Authority in connection with the Merger and the
Subsidiary Merger will, to the extent applicable, comply with GAAP.
6.18 Commitments and Contracts. Neither Mid-Coast nor Waldoboro is a party
or subject to any of the following (whether written or oral, express or
implied):
(a) Except as listed on Schedule 6.18(a) attached hereto and with a
complete copy provided to Union Bankshares, any Contract (including any
obligations with respect to severance or termination pay
A-19
<PAGE> 91
liabilities or fringe benefits) with any present or former officer,
director, employee or consultant (other than those which are terminable at
will by Mid-Coast or Waldoboro) or any agreement with any labor union;
(b) Except as listed on Schedule 6.18(b) attached hereto, with a
complete copy provided to Union Bankshares, any Contract providing for any
bonus, pension, option, deferred compensation, retirement payment, profit
sharing or similar arrangement with respect to any present or former
officer, director, employee or consultant; or
(c) Except as listed on Schedule 6.18(c) attached hereto, any Contract
containing covenants which limit the ability of Mid-Coast or Waldoboro to
compete in any line of business or with any Person or which involves any
restriction of the geographical area in which, or method by which,
Mid-Coast or Waldoboro may carry on its business (other than as may be
required by Law or applicable Regulatory Authority).
(d) Except as listed on Schedule 6.18(d) attached hereto, any
Contract, or any other commitment, understanding, term, obligation or
arrangement, whether absolute or contingent, with respect to any sale,
tender, merger, consolidation, reorganization or similar arrangement
between Mid-Coast or Waldoboro and any third party other than Union
Bankshares or Union Trust, with respect to the Assets or capital stock of
either Waldoboro or Mid-Coast.
6.19 Employees.
(a) Schedule 6.19(a) sets forth a true and complete list of each
material employee benefit or compensation plan, arrangement or agreement
and any material bonus, incentive, deferred compensation, vacation, stock
purchase, stock option, severance, employment, change of control or fringe
benefit plan, program or agreement that is maintained, or contributed to,
as of the date of this Agreement (the "Benefit Plans") by each of Mid-Coast
and Waldoboro.
(b) Mid-Coast and Waldoboro have heretofore made available to Union
Bankshares true and complete copies of each of the Benefit Plans and
certain related documents, including, but not limited to (i) the actuarial
report for such Benefit Plan (if applicable) for 1999; and (ii) the most
recent determination letter from the IRS (if applicable) for such Benefit
Plan.
(c) (i) Each of the Benefit Plans has been operated and administered
in all material respects in compliance with applicable Laws, including, but
not limited to, ERISA and the Internal Revenue Code of 1986, as amended
(the "Code"); (ii) to the knowledge of Mid-Coast each of the Benefit Plans
intended to be "qualified" within the meaning of Section 401 (a) of the
Code has been operated in all material respects within the requirements of
Section 401(a) of the Code, and there are no existing circumstances or any
events that have occurred that will adversely affect the qualified status
of any such Benefit Plan; (iii) with respect to each Benefit Plan which is
subject to Title IV of ERISA, the present value of accrued benefits under
such Benefit Plan, based upon the actuarial assumptions used for funding
purposes in the most recent actuarial report prepared by such Benefit
Plan's actuary with respect to such Benefit Plan, did not, as of its latest
valuation date, exceed the then current value of the Assets of such Benefit
Plan allocable to such accrued benefits; (iv) no Benefit Plan provides
benefits, including, without limitation, death or medical benefits (whether
or not insured), with respect to current or former employees or directors
of Mid-Coast or Waldoboro beyond their retirement or other termination of
service, other than (A) coverage mandated by applicable Law; (B) death
benefits or retirement benefits under any "employee pension plan" (as such
term is defined in Section 3(2) of ERISA); (C) deferred compensation
benefits accrued as liabilities on the consolidated books of Mid-Coast; or
(D) benefits the full cost of which is borne by the current or former
employee or director (or his or her beneficiary); (v) no Liability under
Title IV of ERISA has been incurred by Mid-Coast or Waldoboro that has not
been satisfied in full, and no condition exists that presents a risk to
Mid-Coast or Waldoboro, of incurring a material Liability thereunder; (vi)
no Benefit Plan is a "multiemployer pension plan" (as such term is defined
in Section 3(37) of ERISA); (vii) all contributions or other amounts
payable by Mid-Coast or Waldoboro as of the Effective Date with respect to
each Benefit Plan in respect of current or prior plan
A-20
<PAGE> 92
years have been paid or accrued in accordance with GAAP and Section 412 of
the Code; (viii) to the Knowledge of Mid-Coast, neither Mid-Coast,
Waldoboro nor any other Person, including any fiduciary, has engaged in a
transaction in connection with which Mid-Coast, Waldoboro or any Benefit
Plan will be subject to either a material civil penalty assessed pursuant
to Section 409 or 502(i) of ERISA or a material Tax imposed pursuant to
Section 4975 or 4976 of the Code; and (ix) to the Knowledge of the
management of each of Mid-Coast and Waldoboro there are no pending,
threatened or anticipated claims (other than routine claims for benefits)
by, on behalf of or against any of the Benefit Plans or any trusts related
thereto which will have, either individually or in the aggregate, a
Material Adverse Effect on Mid-Coast or Waldoboro.
(d) Except with respect to the Termination Agreement, the Stock Option
Plan and the Retention Plan, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
(either alone or in conjunction with any other event) (i) result in any
payment (including, without limitation, severance, unemployment
compensation, "excess parachute payment" (within the meaning of Section
280G of the Code), forgiveness of indebtedness or otherwise) becoming due
to any director or any employee of Mid-Coast or Waldoboro under any Benefit
Plan or otherwise; (ii) increase any benefits otherwise payable under any
Benefit Plan; or (iii) result in any acceleration of the time of payment or
vesting of any such benefits.
(e) Neither Mid-Coast nor Waldoboro maintain or have taken any action
to obtain life insurance policies on the lives of any of the current and
former officers and directors of Mid-Coast or Waldoboro.
(f) Each Welfare Plan (as defined in Section 3(1) of ERISA) has been
operated in all material respects in accordance with its terms and in
compliance in all material respects with the applicable provisions of
ERISA, the Code and all other applicable laws, including, without
limitation, the Health Insurance Portability and Accountability Act of 1996
("HIPAA") and the Consolidated Omnibus Budget Reconciliation Act of 1984
("COBRA"). No insurance contract or policy requires or permits any
retroactive increase in premiums or payments due thereunder. Neither
Mid-Coast nor Waldoboro has established or contributed to, is required to
contribute to or has or could have any liability of any nature, whether
known or unknown, direct or indirect, fixed or contingent, with respect to
any "voluntary employees' beneficiary association" within the meaning of
Section 501(c)(9) of the Code, "welfare benefit fund" within the meaning of
Section 419 of the Code, "qualified asset account" within the meaning of
Section 419A of the Code or "multiple employer welfare arrangement" within
the meaning of Section 3(40) or ERISA.
(g) There are no facts or circumstances which could, directly or
indirectly, subject Mid-Coast or Waldoboro or to any (1) excise tax or
other liability under Chapters 43, 46 or 47 of Subtitle D of the Code, (2)
penalty tax or other liability under Chapter 68 of Subtitle F of the Code
or (3) civil penalty, damages or other liability arising under Section 502
of ERISA.
(h) Full payment has been made of all amounts which Mid-Coast or
Waldoboro is required, under applicable law, the terms of any pension plan,
welfare plan or other compensation plan, or any agreement relating to any
pension plan, welfare plan or other compensation plan, to have paid as a
contribution, premium or other remittance thereto or benefit thereunder.
There will be no change on or before the Effective Date in the operation of
any pension plan, welfare plan, or other compensation plan or any documents
with respect thereto which will result in an increase in the benefit
liabilities under such plans, except as may be required by law.
(i) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will constitute (i) a
termination of employment or other event entitling any person to any
additional or other benefits, or that would otherwise modify any benefits
or the vesting, funding or payment of any benefits, under any such plan
other than the Stock Option Plan and the Retention Plan or (ii) a violation
of Section 406 of ERISA or a prohibited transaction for which there exists
neither a statutory nor regulatory exemption or for which an exemption has
not been obtained.
A-21
<PAGE> 93
(j) No action or omission of Mid-Coast or Waldoboro or any
shareholder, director, employee, or agent thereof in any way restricts,
impairs or prohibits Union Bankshares or any successor from amending,
merging, or terminating any pension plan, welfare plan or other
compensation plan in accordance with the express terms of any such plan and
applicable law.
(k) Except as provided in Section 5.1(m) neither Mid-Coast nor
Waldoboro shall adopt or amend in any material respect any employee
pension, profit-sharing, retirement, bonus, deferred compensation,
insurance, incentive compensation, severance, thrift, vacation or other
plan, agreement, trust fund or arrangement for the benefit of its employees
(whether or not legally binding) other than amendments to existing benefit
plans necessary to conform to legal requirements (after providing copies
thereof to the Union Bankshares).
(l) No "reportable event", within the meaning of section 4043 of
ERISA, has occurred with respect to any pension plan subject to Title IV of
ERISA.
6.20 Vote Required. The affirmative vote of the holders of at least a
majority of the outstanding shares of Mid-Coast Common Stock is the only vote of
the stockholders of Mid-Coast necessary to approve the Merger (with respect to
Mid-Coast) and related transactions contemplated hereby. The affirmative vote of
at least a majority of the outstanding shares of capital stock of Waldoboro is
the only vote of the stockholders of Waldoboro necessary to approve the
Subsidiary Merger and related transactions contemplated thereby.
6.21 Environmental Matters. Except as set forth on Schedule 6.21, neither
Mid-Coast nor Waldoboro, nor to the Knowledge of the management of each of
Mid-Coast and Waldoboro, any previous or current owner or operator of any
properties at any time owned (including any properties owned or subsequently
resold), leased, or occupied by Mid-Coast or Waldoboro or used by Mid-Coast or
Waldoboro in its respective business ("Mid-Coast Properties") used, generated,
treated, stored, or disposed of any Hazardous Materials on, under, or about
Mid-Coast Properties except in compliance with all applicable federal, state,
and local Laws pertaining to air and water quality, environmental contamination
Hazardous Materials, waste disposal, air emissions, health and safety and other
environmental matters including but not limited to Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. sec.sec.9601-9675
and the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C.
sec.sec.6901-6992k, each as amended, ("Environmental Laws"). Mid-Coast has not
received any notice of noncompliance with Environmental Laws, applicable Laws,
Orders, or regulations of any governmental authorities relating to any
environmental condition generated by any such party or otherwise or notice that
any such party is liable or responsible for the remediation, removal, or cleanup
of any of the Mid-Coast Properties. Except as set forth on Schedule 6.21,
neither Mid-Coast nor Waldoboro has Knowledge of any contamination by Hazardous
Materials on any Mid-Coast Properties. There are no legal, administrative,
arbitral or other proceedings, claims, actions, causes of action, private
environmental investigations or remediation activities or governmental
investigations of any nature seeking to impose, or that could reasonably result
in the imposition, on Mid-Coast or Waldoboro of any Liability or obligation
arising under any Environmental Laws, pending or threatened to the Knowledge of
Mid-Coast or Waldoboro against Mid-Coast or Waldoboro, which Liability or
obligation would, either individually or in the aggregate, have a Material
Adverse Effect on either Mid-Coast or Waldoboro. Neither Mid-Coast nor Waldoboro
is subject to any agreement, order, judgment, decree, letter or memorandum by or
with any court, Governmental Authority, regulatory agency or third party
imposing any Liability or obligation with respect to the foregoing that will
have, either individually or in the aggregate, a Material Adverse Effect on
either Mid-Coast or Waldoboro.
6.22 Labor. No work stoppage involving Mid-Coast or Waldoboro employees is
pending or, to the Knowledge Mid-Coast's or Waldoboro's management, threatened.
Neither Mid-Coast nor Waldoboro is involved in, or, to the Knowledge of
Mid-Coast's or Waldoboro's management, threatened with or affected by, any
dispute, arbitration, lawsuit or administrative proceeding relating to labor or
employment matters which might reasonably be expected to interfere in any
material respect with the business activities of Mid-Coast or Waldoboro. No
employees of Mid-Coast or Waldoboro are represented by any labor union, and, to
the Knowledge of each of Mid-Coast's and Waldoboro's management, no labor union
is attempting to organize employees of Mid-Coast.
A-22
<PAGE> 94
6.23 Accuracy of Information. To the Knowledge of each of Mid-Coast's and
Waldoboro's officers and directors, none of the information supplied or to be
supplied by each of Mid-Coast and Waldoboro to Union Bankshares and Union Trust
with respect to the Assets and Liabilities of Mid-Coast and Waldoboro, and this
Agreement, contains any untrue statement of a material fact or omit to state a
material fact required to be stated therein in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Neither Mid-Coast nor Waldoboro has failed to disclose or will fail
to disclose to Union Bankshares any information which is material to this
Agreement or the transactions contemplated herein or in the Transaction
Documents.
6.24 Agreements with Banking Authorities. Neither Mid-Coast nor Waldoboro
(i) is a party to any commitment, letter (other than letters addressed to
regulated depository institutions or their holding companies generally), written
agreement, or memorandum of understanding with, or Order to cease and desist, or
subject to any Order or directive specifically naming or referring to Mid-Coast
or Waldoboro, (ii) has been required to adopt any board resolution by, any
federal or state governmental entity charged with the supervision or regulation
of depository institutions or depository institution holding companies or
engaged in the insurance of bank deposits which is currently in effect and
restricts materially the conduct of its business, or in any manner relates to
its capital adequacy, loan loss allowances or reserves, credit policies,
management or overall safety and soundness or such entity's ability to perform
its obligations hereunder, (iii) has received written notification from any such
federal or state governmental entity that any such Person may be requested to
enter into, or otherwise be subject to, any such commitment, letter, written
agreement, memorandum of understanding or cease and desist Order. Neither
Mid-Coast nor Waldoboro has been informed by any Bank Regulator that it is
contemplating issuing or requesting any such Order, directive, agreement,
memorandum of understanding, commitment letter or similar submission. Neither
Mid-Coast nor Waldoboro is a party to any agreement or arrangement entered into
in connection with the consummation of a federally assisted acquisition of a
depository institution pursuant to which Mid-Coast or Waldoboro is entitled to
receive financial assistance or indemnification from any governmental agency.
6.25 Compliance with Applicable Law. Each of Mid-Coast and Waldoboro
holds, and has at all times held, all Permits necessary for the lawful conduct
of its business under and pursuant to all, and has complied with and is not in
Default in any respect under any, applicable Law or Order, rule, of any
Governmental Authority relating to Mid-Coast or Waldoboro, respectively, and
neither Mid-Coast nor Waldoboro has any Knowledge of nor has received notice of
any violations of any of the above. Since January 1, 1996, each of Mid-Coast and
Waldoboro has timely filed, and subsequent to the date hereof will timely file,
all reports, registrations and statements, together with any amendments required
to be made with respect thereto, that were and are required to be filed with any
Regulatory Authorities and has paid all fees and assessments due and payable in
connection with any of the foregoing.
6.26 Year 2000. To the Knowledge each of Mid-Coast's and Waldoboro's
management, neither Mid-Coast's nor Waldoboro's computer systems contain any
material deficiencies relating generally to formatting for entering dates
(commonly referred to and referred to herein as the Year 2000 problem) and all
of such computer systems comply in all material respects with all regulations,
including FFIEC statements and guidance and OTS requirements and trade
organization guidelines concerning the Year 2000 problem.
6.27 State Takeover Laws. Mid-Coast and Waldoboro have taken all necessary
action to exempt the transactions contemplated by this Agreement from, or if
necessary to challenge the validity or applicability of, any applicable
"moratorium," "fair price," "business combination," "control share," or other
anti-takeover Laws (collectively, "Takeover Laws") under the MBCA and DGCL.
6.28 Opinion of Financial Advisor. Mid-Coast has received the opinion of
its financial advisor dated the date of this Agreement, to the effect that, as
of the date thereof, the Merger Consideration is fair, from a financial point of
view, to the holders of Mid-Coast Common Stock, a signed copy of which will be
delivered to Union Bankshares promptly after receipt thereof.
6.29 Board Recommendation. The Board of Directors of Mid-Coast, at a
meeting duly called and held, has by unanimous vote of those directors present
(who constituted all of the directors then in office) (i) determined that this
Agreement and the transactions contemplated hereby, including the Merger, the
A-23
<PAGE> 95
Subsidiary Merger, and the Option Agreement and the transactions contemplated
thereby, taken together, are fair to and in the best interests of the
stockholders; and (ii) resolved to recommend that the holders of the shares of
Mid-Coast Common Stock approve this Agreement.
ARTICLE 7
REPRESENTATIONS, WARRANTIES AND COVENANTS OF UNION BANKSHARES
For purposes of this Article 7, except where the context requires
otherwise, any reference to Union Bankshares in this Article 7 shall be deemed
to include Union Bankshares and Union Trust and any reference to "material,"
Material Adverse Effect or a similar standard shall refer to the financial
condition, operations or other aspects of Union Bankshares and its Subsidiaries
including Union Trust taken as a whole. Union Bankshares represents and warrants
to Mid-Coast as follows:
7.1 Organization and Authority. Union Bankshares is a business corporation
and Union Trust is a trust company duly incorporated, validly existing and in
good standing under the laws of the State of Maine and each has the corporate
power and authority to own, lease and operate its properties and assets and to
carry on its business as now being conducted.
7.2 Authorization. The execution, delivery and performance of this
Agreement by Union Bankshares and Union Trust and the consummation of the
transactions contemplated hereby have been duly authorized by the Boards of
Directors of Union Bankshares, Acquisition Company and Union Trust respectively,
subject to receipt of all required regulatory approvals. No other corporate
proceedings on the part of Union Bankshares are necessary to authorize the
execution and delivery of this Agreement and the performance by Union Bankshares
of the terms hereof. This Agreement is a valid and binding obligation of Union
Bankshares enforceable against Union Bankshares in accordance with its terms
except as may be limited by applicable bankruptcy, insolvency, reorganization or
moratorium or other similar laws affecting creditors' rights generally and
except that the availability of equitable remedies is within the discretion of
the appropriate court and except that it is subject to approval of applicable
Regulatory Authorities.
Neither the execution, delivery or performance of this Agreement by Union
Bankshares, nor the consummation of the transactions contemplated hereby, nor
compliance by Union Bankshares with any of the provisions hereof, will (a) in
any material respect violate, conflict with, or result in a breach of any
provision of, or constitute a Default (or an event which, with notice or lapse
of time or both, would constitute a Default) under or result in the termination
of, or accelerate the performance required by, or result in a right of
termination or acceleration, or the creation of any Lien, security interest,
charge or encumbrance upon any of the properties or Assets of Union Bankshares
or Union Trust under any terms, conditions or provisions of (i) Union
Bankshares' or Union Trust's Charter or Bylaws or (ii) except as set forth on
Schedule 7.2, any material note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which Union
Bankshares or Union Trust is a party or by which Union Bankshares or Union Trust
may be bound, or to which Union Bankshares or Union Trust or the properties or
assets of it may be subject, or (b) violate in any material respect any Law or
Order applicable to Union Bankshares or Union Trust or any of its properties or
Assets.
7.3 Information for Regulatory Filings. None of the information supplied
or to be supplied by Union Bankshares with respect to Union Bankshares for
inclusion in any documents to be filed with the SEC or any other Regulatory
Authority in connection with the transactions contemplated hereby will at the
time of filing of such documents contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. All documents, financial statements, or other information
or materials which Union Bankshares shall provide for filing with the SEC and
any other Regulatory Authority in connection with the Merger will, to the extent
applicable, comply with GAAP.
7.4 Accuracy of Information. To the Knowledge of Union Bankshares and its
officers and directors, none of the information supplied or to be supplied by
Union Bankshares or Union Trust to Mid-Coast and Waldoboro relating to its
Assets and Liabilities, this Agreement and the Joint Proxy Statement, contains
any
A-24
<PAGE> 96
untrue statement of a material fact or omits to state a material fact required
to be stated therein in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Union Bankshares has
not failed to disclose any information which is material to this Agreement, the
transactions contemplated herein, the Joint Proxy Statement or the requisite
applications and filings with appropriate Banking Regulations.
7.5 Operation of Business. Between the date hereof and the Effective Date,
or until the termination of this Agreement, Union Bankshares covenants and
agrees that it will take no action which would materially adversely affect or
materially delay the ability of Union Bankshares or Union Trust, respectively,
to obtain any necessary approvals of any Regulatory Authority required for the
transactions contemplated hereby or to perform its or Union Trust's covenants
and agreements under this Agreement, the Subsidiary Merger Agreement or the
Option Agreement, respectively.
7.6 Board Consent; Stockholders' Meeting.
(a) The Board of Directors of Union Bankshares shall adopt a resolution
recommending approval and adoption of this Agreement and the Subsidiary Merger
Agreement by Union Bankshares' stockholders, and, the Board of Directors of
Union Bankshares shall recommend approval and adoption of this Agreement and the
Subsidiary Merger Agreement by Union Bankshares' stockholders.
(b) Union Bankshares will (i) take all steps necessary to call, give notice
of, convene and hold a special meeting of its stockholders no later than July
15, 2000 for the purpose of approving this Agreement and the transactions
contemplated hereby and for such other purposes as may be necessary or
desirable, and (ii) cooperate and consult with Mid-Coast with respect to each of
the foregoing matters. Said notice shall include notice of dissenter's rights,
if any, and shall solicit stockholders' proxies in favor of this Agreement, and
all notice shall be given in accordance with applicable Laws. Except as may be
required by fiduciary obligations, Union Bankshares and its directors will
support and vote in favor of a shareholder resolution approving this Agreement
and the transaction contemplated hereby including the Merger.
7.7 Information for Proxy Statement. None of the information supplied or
to be supplied by Union Bankshares or Union Trust with respect to each of Union
Bankshares and Union Trust for inclusion in (a) the Notice of Meeting and Joint
Proxy Statement to be mailed by Union Bankshares to its stockholders in
connection with the meeting referred to in Section 7.6 hereof (the "Joint Proxy
Statement") and (b) any other documents to be filed with any Regulatory
Authority in connection with the transactions contemplated hereby will at the
time the Proxy Statement is mailed to holders of Union Bankshares' Common Stock,
as may be amended at the time of Union Bankshares Stockholders' Meeting, and at
the time of filing of such other documents, respectively, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. All documents,
financial statements, or other information or materials which Union Bankshares
or Union Trust shall provide for filing with any Regulatory Authority in
connection with the Merger and the Subsidiary Merger will, to the extent
applicable, comply with GAAP.
7.8 Vote Required. The affirmative vote of the holders of at least
sixty-seven percent (67%) of the outstanding shares of Union Bankshares' Common
Stock is the only vote of the stockholders of Union Bankshares necessary to
approve the Merger and the subsequent merger of Union Bankshares with Mid-Coast
(with respect to Union Bankshares) and related transactions contemplated hereby.
The affirmative vote of at least a majority of the outstanding shares of capital
stock of Union Trust is the only vote of the stockholders of Union Trust
necessary to approve the Subsidiary Merger and related transactions contemplated
thereby.
7.9 Agreements with Banking Authorities. Neither Union Bankshares nor
Union Trust (i) is a party to any commitment, letter (other than letters
addressed to regulated depository institutions or their holding companies
generally), written agreement, or memorandum of understanding with, or Order to
cease and desist, or subject to any Order or directive specifically naming or
referring to Union Bankshares or Union Trust, (ii) has been required to adopt
any board resolution by, any federal or state governmental entity charged with
the supervision or regulation of depository institutions or depository
institution holding companies or engaged in the insurance of bank deposits which
is currently in effect and restricts materially the
A-25
<PAGE> 97
conduct of its business, or in any manner relates to its capital adequacy, loan
loss allowances or reserves, credit policies, management or overall safety and
soundness or such entity's ability to perform its obligations hereunder, (iii)
has received written notification from any such federal or state governmental
entity that any such Person may be requested to enter into, or otherwise be
subject to, any such commitment, letter, written agreement, memorandum of
understanding or cease and desist Order. Neither Union Bankshares nor Union
Trust has been informed by any Bank Regulator that it is contemplating issuing
or requesting any such Order, directive, agreement, memorandum of understanding,
commitment letter or similar submission. Neither Union Bankshares nor Union
Trust is a party to any agreement or arrangement entered into in connection with
the consummation of a federally assisted acquisition of a depository institution
pursuant to which Union Bankshares or Union Trust is entitled to receive
financial assistance or indemnification from any governmental agency.
7.10 Opinion of Financial Advisor. Union Trust has received the opinion of
its financial advisor dated the date of this Agreement, to the effect that, as
of the date thereof, the Merger Consideration is fair, from a financial point of
view, to the holders of Union Bankshares' Common Stock, a signed copy of which
will be delivered to Mid-Coast promptly after receipt thereof.
7.11 Board Recommendation. The Board of Directors of Union Bankshares, has
by unanimous vote of all of the directors then in office (i) determined that
this Agreement and the transactions contemplated hereby, including the Merger,
the Subsidiary Merger, and the Option Agreement and the transactions
contemplated thereby, taken together, are fair to and in the best interests of
the stockholders; and (ii) resolved to recommend that the holders of the shares
of Union Bankshares' Common Stock approve this Agreement.
7.12 Purchaser Investigation. Union Bankshares acknowledges that: (i) it
has had the opportunity to visit with Mid-Coast and meet with its representative
officers and other representatives to discuss the business, assets, liabilities,
reserves, financial condition, cash flow and operations of Mid-Coast, and (ii)
substantially all materials and information requested by Union Bankshares have
been provided to Union Bankshares to the reasonable satisfaction of such party.
Union Bankshares acknowledges that it has made its own independent examination,
investigation, analysis and evaluation of Mid-Coast, including its own estimate
of the value of Mid-Coast business. Union Bankshares acknowledges that it has
undertaken such investigation (including a review of the assets, liabilities,
books, records and contracts of Mid-Coast) as Union Bankshares deems adequate,
including that described above. Notwithstanding such investigation, Union
Bankshares shall be entitled to rely upon the representation, warranties and
covenants of Mid-Coast and Waldoboro set forth in this Agreement and the related
Transaction Documents, including but not limited to Section 6.17, Section 6.23
and the certificate to be delivered to Union Bankshares pursuant to Section
8.3(a).
7.13 Financing. Union Bankshares shall not require any financing from any
third-party source as a condition or contingency to the payment in full of the
Merger Consideration as contemplated under this Agreement and shall deposit the
Merger Consideration with the Exchange Agent from its available working capital
and cash flow.
7.14 Minimum Capital. Union Bankshares satisfies, and subsequent to the
payment in full of the Merger Consideration will satisfy, the minimum capital
requirements imposed by the FRB. Union Trust satisfies the minimum capital
requirements imposed by the Bureau of Banking and the FRB.
7.15 Professional Fees. Except for New England Business Advisors, Inc.,
neither Union Bankshares or Union Trust, nor any of their respective officers,
directors, employees, or Affiliates has employed any broker or finder or
incurred any Liability for any financial advisory fees, investment bankers'
fees, brokerage fees, commissions, or finders' fees in connection with this
Agreement or the transactions contemplated hereby.
7.16 Acquisition Company. Union Bankshares shall take all action necessary
or desirable to duly incorporate Acquisition Company under the laws of the State
of Delaware for the sole purpose of merging Acquisition Company with and into
Mid-Coast on the terms set forth in this Agreement. As of the Closing,
Acquisition Company shall be duly formed, validly existing and in good standing
under the laws of the State of Delaware; it shall have all requisite corporate
power and authority to enter into the Merger with Mid-Coast and Union Bankshares
shall have taken, or caused to be taken, all corporate actions on the part of
Acquisition
A-26
<PAGE> 98
Company necessary or desirable for Acquisition Company to perform its
obligations with respect to the Merger. Union Bankshares will take all steps
necessary to cause the Board of Directors of Acquisition Company to adopt a
resolution authorizing Acquisition Company to enter into the Merger and shall
vote all of its shares of capital stock in Acquisition Company in favor of the
Merger. Union Bankshares shall also take all steps necessary or desirable to
cause the Articles of Merger with respect to the Acquisition Company to be duly
filed with the Office of the Secretary of the State of Delaware.
ARTICLE 8
CONDITIONS TO CLOSING
The obligations of the Parties under this Agreement, except as otherwise
provided herein, shall be subject to the satisfaction or waiver of the following
conditions on or prior to the Closing:
8.1 Conditions to Each Party's Obligations to Effect the Merger. The
respective obligation of each Party to effect the Merger shall be subject to the
following conditions:
(a) Stockholder Approval. The stockholders of Union Bankshares shall
have approved this Agreement, and the consummation of the transactions
contemplated hereby, including the Merger, as and to the extent required by
Law, the provisions of any governing instruments, or the rules of the NASD.
(b) Stockholder Approval. The stockholders of Mid-Coast shall have
approved this Agreement, and the consummation of the transactions
contemplated hereby, including the Merger, as and to the extent required by
Law, the provisions of any governing instruments, or the rules of the NASD.
(c) Regulatory Approvals. All Consents of, filings and registrations
with, and notifications to, all Regulatory Authorities required for
consummation of the Merger and the Subsidiary Merger shall have been
obtained or made and shall be in full force and effect and all waiting
periods required by Law shall have expired. No Consent obtained from any
Regulatory Authority which is necessary to consummate the transactions
contemplated hereby or in the Subsidiary Merger Agreement shall be
conditioned or restricted in a manner (including requirements relating to
the raising of additional capital or the disposition of Assets) which in
the judgment of the Board of Directors of Union Bankshares or Mid-Coast
would so materially and adversely impact the conduct of the combined
businesses of Union Bankshares and Mid-Coast that, had such condition or
requirement been known, such Party would not, in its reasonable judgment,
have entered into this Agreement.
(d) No Restraining Action. No court or governmental or Regulatory
Authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any Law or Order (whether temporary,
preliminary or permanent) or taken any other action which prohibits,
restricts in any manner or makes illegal the consummation of the
transactions contemplated by this Agreement or the Subsidiary Merger
Agreement.
(e) Consents and Approvals. Each Party shall have obtained any and
all Consents required for consummation of the Merger (other than those
referred to in Section 8.1(c)) and the Subsidiary Merger or for the
preventing of any Default under any Contract or Permit of such Party which,
if not obtained or made, would have, individually or in aggregate, a
Material Adverse Effect on either Party.
(f) Formation of Acquisition Company. Union Bankshares shall have
duly incorporated Acquisition Company under the laws of the State of
Delaware for the sole purpose of merging Acquisition Company with and into
Mid-Coast on the terms set forth in this Agreement. At the time of the
Closing, Acquisition Company shall be duly formed, validly existing and in
good standing under the laws of the State of Delaware; it shall have all
requisite corporate power and authority to enter into the Merger and it
shall have taken, or caused to be taken, all corporate actions necessary or
desirable to perform its obligations with respect to the Merger.
A-27
<PAGE> 99
8.2 Conditions to Obligations of Mid-Coast to Effect the Merger. The
obligations of Mid-Coast to effect the Merger shall be subject to the following
additional conditions:
(a) Representations and Warranties. The representations and
warranties of Union Bankshares set forth in this Agreement shall be true
and correct in all material respects (except to the extent such
representation or warranty is qualified by materiality in which case such
representation or warranty shall be true and correct) as of the date of
this Agreement and as of the Closing as though made at and as of the
Closing, except as otherwise contemplated by this Agreement or consented to
in writing by Mid-Coast, and Union Bankshares shall deliver at Closing an
appropriate certificate to that effect.
(b) Performance of Obligations. Union Bankshares shall have performed
in all material respects all obligations and complied with all covenants
required by it under this Agreement prior to the Closing and Union
Bankshares shall deliver at Closing an appropriate certificate to that
effect.
(c) Opinion of Counsel. Mid-Coast shall have received an opinion of
Peabody & Arnold LLP, counsel to Union Bankshares and Union Trust, dated as
of the Closing, in form reasonably acceptable to Mid-Coast and
substantially covering such matters set forth in Exhibit D.
(d) Certificates. Union Bankshares shall have delivered to Mid-Coast
(i) a certificate, dated as of the Closing and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that
the conditions set forth in Section 8.2, as they apply to Union Bankshares,
and Section 8.3 have been satisfied, and (ii) certified copies of
resolutions duly adopted by Union Bankshares' Board of Directors and
stockholders evidencing the taking of all corporate action necessary to
authorize the execution, delivery and performance of the Transaction
Documents, and the consummation of the transactions contemplated hereby and
thereby, all in such reasonable detail as Mid-Coast and its counsel shall
request.
8.3 Conditions to Obligations of Union Bankshares to Effect the
Merger. The obligations of Union Bankshares to effect the Merger shall be
subject to the following additional conditions:
(a) Representations and Warranties. The representations and
warranties of Mid-Coast and Waldoboro set forth in this Agreement shall be
true and correct in all material respects (except to the extent such
representation or warranty is qualified by materiality in which case such
representation or warranty shall be true and correct) as of the date of
this Agreement and as of the Closing as though made at and as of the
Closing, except as otherwise expressly contemplated by this Agreement or
consented to in writing by Union Bankshares, and Mid-Coast shall deliver at
Closing an appropriate certificate to that effect.
(b) Performance of Obligations. Mid-Coast and Waldoboro shall have
performed in all material respects all obligations and complied with all
covenants required by it under the Transaction Agreements including, but
not limited to, those set forth under Article 8 herein, prior to the
Closing and Mid-Coast shall deliver at Closing an appropriate certificate
to that effect.
(c) Option Agreement. An Option Agreement substantially in the form
set forth on Exhibit B hereto shall have been executed by Mid-Coast; and
Mid-Coast shall have taken all steps necessary and desirable to perform the
Option Agreement.
(d) Certificates. Mid-Coast shall have delivered to Union Bankshares
(i) a certificate, dated as of the Closing and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that
the conditions set forth in Section 8.1, as they apply to Mid-Coast, and
Section 8.3 have been satisfied, and (ii) certified copies of resolutions
duly adopted by Mid-Coast's Board of Directors and stockholders evidencing
the taking of all corporate action necessary to authorize the execution,
delivery and performance of the Transaction Documents, and the consummation
of the transactions contemplated hereby and thereby, all in such reasonable
detail as Union Bankshares and its counsel shall request.
(e) Subsidiary Merger Agreement. Each of Union Trust and Waldoboro
shall have executed and delivered the Subsidiary Merger Agreement,
substantially in the form of Exhibit A hereto; and each shall have taken
all steps necessary or desirable to perform the Subsidiary Merger
Agreement.
A-28
<PAGE> 100
(f) Opinion of Counsel. Union Bankshares shall have received an
opinion of Thacher Proffitt & Wood, counsel to Mid-Coast, dated as of the
Closing, in form reasonably acceptable to Union Bankshares, and
substantially covering such matters set forth in Exhibit E.
(g) Environmental Insurance. Mid-Coast shall have purchased, at its
sole expense, as evidenced by a binder, an environmental insurance policy
(the "Environmental Insurance") from an underwriter authorized to conduct
business in the state of Maine which shall, at a minimum, and to the sole
satisfaction of Union Bankshares, provide coverage for Union Bankshares
(with Waldoboro and Mid-Coast as additional named insureds) for a period of
no less than ten years from the Effective Date for the following
liabilities relating to the Rockland branch location (i) on-site
remediation; (ii) off-site remediation; (iii) off-site personal injury and
property loss; (iv) legal liability; and (v) business interruption. The
Environmental Insurance shall in all respects be subject to the
satisfaction of Union Bankshares in its sole discretion.
(h) Mid-Coast Board of Directors. Each of the Directors serving on
the Mid-Coast Board of Directors and the Waldoboro Board of Directors
immediately prior to the Effective Date shall have tendered a letter of
resignation to Mid-Coast or Waldoboro, as appropriate, resigning their
directorship effective as of the Effective Date.
ARTICLE 9
ADDITIONAL AGREEMENTS OF THE PARTIES
9.1 Proxy Statement; Stockholder Approval. As soon as reasonably
practicable after execution of this Agreement, each of Union Bankshares and
Mid-Coast shall call a Stockholders' Meeting, to be held as soon as reasonably
practicable for the purpose of voting upon approval of this Agreement and the
Merger and such other related matters as each may deem appropriate. In
connection with the Stockholders' Meetings, (i) Union Bankshares and Mid-Coast
shall prepare and file with the SEC a Joint Proxy Statement and mail such Joint
Proxy Statement to their respective stockholders, (ii) the Parties shall furnish
to each other all information concerning them that they may reasonably request
in connection with such Joint Proxy Statement, (iii) the Board of Directors of
Union Bankshares and Mid-Coast shall recommend to their respective stockholders
the approval of the matters submitted for approval (unless the Board of
Directors of either Union Bankshares or Mid-Coast, after having consulted with
and considered the advice of outside legal counsel, determines in good faith
that the making of such recommendation, or the failure to withdraw or modify its
recommendation, would constitute a breach of fiduciary duties of the members of
such Board of Directors to its stockholders under applicable law), and (iv) the
Boards of Directors and officers of Union Bankshares and Mid-Coast shall use
their reasonable best efforts to obtain such stockholders' approval (unless the
Board of Directors of Union Bankshares or Mid-Coast, after having consulted with
and considered the advice of outside counsel, determines in good faith that the
taking of such actions would constitute a breach of fiduciary duties of the
members of such Board of Directors to Union Bankshares' and Mid-Coast's
stockholders under applicable law). Union Bankshares and Mid-Coast shall make
all necessary filings with respect to the Merger under the Securities Laws.
9.2 Applications; Regulatory Approvals. As soon as practicable after the
date hereof, each of Union Bankshares, Union Trust, Mid-Coast and Waldoboro
shall take all reasonable efforts to prepare all necessary documentation to
effect all necessary filing and to obtain all necessary permits, consents,
approvals and authorizations of all third parties and Regulatory Authorities
necessary to consummate the transaction contemplated by this Agreement. Union
Bankshares, Union Trust, Mid-Coast and Waldoboro will each cooperate with the
other and will each furnish the other and the 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 Union Bankshares, Union Trust, Mid-Coast and Waldoboro
to any Regulatory Authority in connection with the transaction contemplated by
this Agreement. Union Bankshares, Union Trust, Mid-Coast and Waldoboro shall
have the right to view in advance all filings and approve in advance all
characterizations of the information relating to them and any of their
respective subsidiaries which appear in
A-29
<PAGE> 101
any filing made in connection with the transactions contemplated by this
Agreement with any Regulatory Authority. In addition, Union Bankshares, Union
Trust, Mid-Coast and Waldoboro shall each furnish to the other a final copy of
each such filing made in connection with the transactions contemplated by this
Agreement with any Regulatory Authority.
9.3 Merger Filings with State Offices. Upon the terms and subject to the
conditions of this Agreement, Mid-Coast shall execute and file the Certificate
of Merger with the Secretary of State of Delaware in connection with the Closing
and Union Bankshares shall execute and file the Articles of Merger, on behalf of
Acquisition Company, with the Secretary of State of the State of Delaware in
connection with the Closing.
9.4 Agreement as to Efforts to Consummate. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its commercially reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary,
proper, or advisable under applicable Laws to consummate and make effective, as
soon as reasonably practicable after the date of this Agreement, the
transactions contemplated by this Agreement, including using its commercially
reasonable efforts to lift or rescind any Order adversely affecting its ability
to consummate the transactions contemplated herein and to cause to be satisfied
the conditions referred to in Article 8 provided, that nothing herein shall
preclude either Party from exercising its rights under this Agreement or the
Option Agreement, as applicable. Each Party shall use, and shall cause each of
its Subsidiaries to use, its commercially reasonable efforts to obtain all
material Consents necessary or desirable (in the good faith judgment of the
Board of Directors of such Party) for the consummation of the transactions
contemplated by this Agreement.
9.5 Investigation and Disclosure.
(a) Prior to the Effective Date, Mid-Coast shall keep Union Bankshares
advised of all material developments relevant to its business and to
consummation of the Merger and the Subsidiary Merger and shall permit Union
Bankshares to make or cause to be made such investigation of the business
and properties of it and its Subsidiaries and of their respective financial
and legal conditions as Union Bankshares reasonably requests, provided that
such investigation shall be reasonably related to the transactions
contemplated hereby and shall not interfere unnecessarily with normal
operations. No investigation by Union Bankshares shall affect the
representations and warranties of Mid-Coast.
(b) Each Party agrees to give the other Party notice as soon as
practicable after any determination by it of any fact or occurrence
relating to such Party which represents, or is reasonably likely to
represent, a material breach of any representation, warranty, covenant or
agreement of such Party or which has had or is reasonably likely to have a
Material Adverse Effect on its business or operations.
9.6 Press Releases. Prior to the Closing, each Party shall consult with
the other as to the form and substance of any press release or other public
disclosure materially related to this Agreement or any other transaction
contemplated hereby; provided, that nothing in this Section 9.6 shall be deemed
to prohibit any Party from making any disclosure which its counsel deems
necessary or advisable in order to satisfy such Party's disclosure obligations
imposed by Law.
9.7 State Anti-Takeover Law. Mid-Coast shall take all necessary steps to
exempt the transactions contemplated by this Agreement from, or if necessary to
challenge the validity or applicability of, any applicable anti-takeover law
under the DGCL.
9.8 Employee Benefits and Contracts. Following the Effective Date, Union
Bankshares shall provide generally to former officers and employees of Mid-Coast
and Waldoboro employee benefits under employee benefit plans (other than stock
option or other plans involving the potential issuance of Union Bankshares
Common Stock), on terms and conditions which when taken as a whole are
substantially similar to those currently provided by Mid-Coast and Waldoboro to
their similarly situated officers and employees, except that there is no
matching contribution under the Union Bankshares' Section 401(k) plan; provided
however, this Section 9.8 shall not be deemed or construed to be an undertaking
or obligation on the part of Union Bankshares or Union Trust to provide the same
benefits which Mid-Coast or Waldoboro presently provide to their employees and
officers; and provided further that Union Bankshares and Union Trust shall have
no obligation to continue to provide after the Effective Date any benefits
currently provided to their employees or
A-30
<PAGE> 102
officers as of the date hereof, or provided to their employees or officers at
any time subsequent to the Effective Date. For purposes of participation,
vesting and (except in the case of Union Bankshares' defined benefit plans)
benefit accrual under Union Bankshares' employee benefit plans, the service of
the employees of Mid-Coast or Waldoboro prior to the Closing shall be treated as
service with Union Bankshares or Union Trust for participation in such employee
benefit plans. Following the Effective Date, former employees of Mid-Coast or
Waldoboro shall receive credit under Union Bankshares' group health plans for
all deductibles and co-payments made by such former employees under the health
plans maintained by Mid-Coast or Waldoboro prior to the Effective Date, and
health care coverage under Union Bankshares group health plans shall be extended
to former employees of Mid-Coast and Waldoboro with no waiting period, and Union
Bankshares will, use its best efforts to provide that such coverage shall be
without any exclusions for pre-existing conditions and shall inform Mid-Coast in
writing, within thirty days of the date hereof, as to the efforts undertaken to
secure a waiver of such exclusions and whether such exclusions have been
eliminated.
9.9 Data Processing. Mid-Coast and Union Bankshares agree to use their
best efforts to take all steps necessary, including Mid-Coast's notification to
its outside data processing service provider of its intent to terminate its data
processing contract, to coordinate and effect the transition of the data
processing systems of Mid-Coast and Waldoboro to those of Union Bankshares. The
termination of Mid-Coast of its data processing contract as provided in this
paragraph shall not constitute a breach of any warranty, representation or
covenant contained in this Agreement. Union Bankshares shall pay $24,500 to
Mid-Coast, upon receipt of evidence that Mid-Coast has provided notification to
its outside data processing service provider of its intent to terminate the
contract to cover the cost of the standard deconversion package of the data
processing service provider. Union Bankshares shall also bear and pay all
additional costs and expenses incurred by Mid-Coast and/or Waldoboro in
connection with the data processing conversation.
9.10 Deliveries at Closing. At the Closing, all documents and instruments
shall have been duly and validly executed and delivered by all the Parties
hereto.
ARTICLE 10
EMPLOYMENT AND MANAGEMENT MATTERS
10.1 Employees.
(a) Upon the Effective Date, Union Bankshares and/or Union Trust, as
appropriate, shall retain and employ each officer and employee other than Wesley
E. Richardson employed by Mid-Coast or Waldoboro as of the Effective Date (the
"Retained Employees") for a period of one year from the Effective Date, shall
not reduce the base salary or base wages of Retained Employees during such
one-year period, including Retained Employees who are reassigned to jobs other
than Comparable Jobs. The term "Comparable Job" as used herein shall mean, with
respect to any Retained Employee, a position that (i) is to be performed within
twenty-five (25) miles of such Retained Employee's current office, and (ii) is
associated with a salary grade or range that is substantially the same grade or
salary range associated with the Retained Employee's position immediately prior
to the Effective Date, it being understood that in no event will a Comparable
Job mean a position in which the Retained Employee's actual base salary or base
pay is less than his base pay or base salary in effect immediately prior to the
Effective Date.
(b) Retained Employees terminated for "cause" as defined herein or who
voluntarily resign (except Retained Employees who resign following reassignment
to a job other than a Comparable Job) shall not be entitled to any rights under
Section 10.1(a). The term "cause" for purposes of this Section 10.1(b) shall
mean personal dishonesty, incompetence, intentional failure to perform stated
duties, willful misconduct, breach of fiduciary duty involving personal profit,
conviction of a felony, or willful violation of any law, rule or regulation
(other than traffic violations or similar offenses).
(c) Except as described in Section 10.1(a) and Section 10.1(b), Retained
Employees will be subject to (i) the employment terms, conditions, policies and
rules applicable to other employees of Union Bankshares and/or Union Trust
including those set forth in Union Trust's Personnel Manual as the same may be
amended from time to time (the "Personnel Manual") and (ii) the terms,
conditions, policies and rules relating to
A-31
<PAGE> 103
vacation benefits, sick leave, and other plans and benefits available to other
Union Bankshares and Union Trust employees, except as any such terms,
conditions, policies and rules may be modified by Section 9.8.
(d) Except as described in Sections 9.8 or 10.1(a), nothing in this
Agreement shall be construed to constitute a contract of employment with any
Retained Employee or to create any term or condition of employment of Retained
Employees not enjoyed as of the Effective Date by other employees of Union
Bankshares and/or Union Trust.
10.2 Notices. Mid-Coast and Waldoboro shall be responsible for notifying
their employees of the terms of this Agreement as it affects them and for
complying with any applicable laws regarding such notices.
10.3 Directors' and Officers' Liability Insurance Coverage. Union
Bankshares shall maintain a "tail" directors' and officers' liability insurance
policy covering persons who are currently covered by such insurance policies of
Mid-Coast and Waldoboro for a period of four (4) years after the Effective Date
on terms generally no less favorable than those in effect on the date of this
Agreement; provided, however, that Union Bankshares may substitute therefore
policies providing at least comparable coverage containing terms and conditions
no less favorable than those in effect on the date of this Agreement; and
provided further that the annual cost of such insurance shall not be greater
than 125% the cost of such "tail" insurance to Mid-Coast and Waldoboro as of the
Effective Date. In addition to and without limiting the foregoing, if the
Effective Date shall be prior to May 11, 2000, Mid-Coast shall prepay the cost
of such "tail" insurance for a one year period commencing on May 11, 2000.
10.4 Indemnification. From and after the Effective Date through the sixth
anniversary of the Effective Date, Union Bankshares shall indemnify and hold
harmless each present and former director, officer and employee of Mid-Coast and
Waldoboro determined as of the Effective Date (the "Indemnified Parties")
against any costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities (collectively, "Costs") incurred
in connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of matters
existing or occurring at or prior to the Effective Date, whether asserted or
claimed prior to, at or after the Effective Date, to the fullest extent to which
such Indemnified Parties were entitled under Delaware law and Mid-Coast's
Certificate of Incorporation and Bylaws as in effect on the date hereof.
Any Indemnified Party wishing to claim indemnification under this Section
10.4, upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify Union Bankshares, but the failure to so
notify shall not relieve Union Bankshares of any liability it may have to such
Indemnified Party if such failure does not materially prejudice Union
Bankshares. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Date), (i) Union
Bankshares shall have the right to assume the defense thereof and Union
Bankshares shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if Union
Bankshares elects not to assume such defense or counsel for the Indemnified
Parties advises that there are issues which raise conflicts of interest between
Union Bankshares and the Indemnified Parties, the Indemnified Parties may retain
counsel which is reasonably satisfactory to Union Bankshares, and Union
Bankshares shall pay, promptly as statements therefore are received, the
reasonable fees and expenses of such counsel for the Indemnified Parties (which
may not exceed one firm in any jurisdiction unless the use of one counsel for
such Indemnified Parties would present such counsel with a conflict of
interest), (ii) the Indemnified Parties will cooperate in the defense of any
such matter, and (iii) Union Bankshares shall not be liable for any settlement
effected without its prior written consent.
In the event that Union Bankshares or any of its respective successors or
assigns (i) consolidates with or merges into any other Person and shall not be
the continuing or surviving corporation 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, the successors and assigns of such
entity shall assume the obligations set forth in this Section 10.4, which
obligations are expressly intended to be for the irrevocable benefit of, and
shall be enforceable by, each of the Indemnified Parties and his or her heirs or
Representatives subject to the limitations set forth in this Article 10.
A-32
<PAGE> 104
ARTICLE 11
TERMINATION AND REMEDIES
For purposes of this Agreement, any reference to Union Bankshares in this
Article 11 shall be deemed to include Union Bankshares and Union Trust and any
reference to Mid-Coast in this Article 11 shall be deemed to include Mid-Coast
and Waldoboro.
11.1 Parties' Joint Remedies. In the event any Regulatory Authority
imposes requirements that do not meet the standards for termination as set forth
in Section 11.2, then the Parties agree to amend this Agreement to conform to
such regulatory requirements; provided however, that no Party shall be obligated
to agree to such amendment, if in its sole discretion such amendment would
require a new vote of its stockholders to approve the Agreement, as amended, or
if it otherwise causes a material change in the terms of the Agreement or the
Merger such that either Party's Board of Directors no longer deems the Merger to
be in the best interest of such Party's stockholders; and provided further that
such amendment shall only be made in accordance with Section 12.6.
11.2 Termination. This Agreement may be terminated and the Merger
abandoned, either before or after approval by the stockholders of Mid-Coast and
Union Bankshares any time prior to the Effective Date as follows:
(a) At any time on or prior to the Effective Date, by the mutual
consent of the Parties hereto;
(b) By either Party hereto, at any time after any Regulatory Authority
or Bank Regulator has denied any application for any approval or clearance
required to be obtained as a condition to the consummation of the Merger or
the Subsidiary Merger and the time period for all appeals or requests for
reconsideration thereof has expired;
(c) By Union Bankshares, if holders of twenty percent (20%) or more of
the outstanding Mid-Coast Common Stock exercise statutory appraisal rights
pursuant to Section 262 of the DGCL;
(d) By either Party (provided that the terminating Party is not then
in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event of a material breach by
the other Party of any representation or warranty contained in this
Agreement which cannot be or has not been cured within 30 days after the
giving of written notice to the breaching Party of such breach, such that
the conditions set forth in Sections 8.2(a) and 8.3(a), as applicable,
would not then be satisfied by the breaching Party; or
(e) By either Party (provided that the terminating Party is not then
in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event of a material breach of
the other Party of any covenant or agreement contained in this Agreement
which cannot be or has not been cured within 30 days after the giving of
written notice to the breaching Party of such breach, such that the
conditions set forth in Sections 8.2(a) and 8.3(a), as applicable, would
not then be satisfied by the breaching Party; or
(f) By either Party (provided that the terminating Party is not then
in material breach of any representation, warranty, covenant or other
agreement contained in this Agreement) in the event (i) any Consent of any
Regulatory Authority (other than as set forth under Section 11.2(b)
required for consummation of the Merger and the Subsidiary Merger and the
other transactions contemplated hereby and thereby shall have been denied
by final non-appealable action of such authority or if any action taken by
such authority is not appealed within the time limit for appeal such that
the conditions set forth in Section 11.2(b) would not be satisfied, or (ii)
the stockholders of Union Bankshares or Mid-Coast fail to vote their
approval of the matters relating to this Agreement and the transactions
contemplated hereby at the special meeting of stockholders where such
matters were presented to such stockholders for approval and voted upon; or
(g) By either Party in the event that the Merger shall not have been
consummated by December 31, 2000, if the failure to consummate the
transactions contemplated hereby on or before such date is
A-33
<PAGE> 105
not caused by any breach of this Agreement by the Party electing to
terminate pursuant to this Section 11.2(g); or
(h) By either Party (provided that the terminating Party is not then
in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event that any of the
conditions precedent to the obligations of such Party to consummate the
Merger or the Subsidiary Merger cannot be satisfied or fulfilled by the
date specified in Section 11.2(g); or
(i) By either Party, if: (i) the Board of Directors of Mid-Coast shall
have authorized, recommended, publicly proposed or publicly announced an
intention to authorize, recommend or propose to the stockholders of
Mid-Coast, or has entered into an agreement with any Person (other than
Union Bankshares) to effect an alternative Acquisition Proposal or (ii) a
tender offer or exchange offer for 25% or more of the outstanding shares of
Mid-Coast Common Stock is commenced and the Board of Directors of Mid-Coast
recommends that the stockholders of the company tender their shares in such
tender or exchange offer; provided that Mid-Coast shall not be entitled to
exercise any termination rights under clause (i) or (ii) of this Section
11.2(i) unless (x) any action of the Board of Directors of Mid-Coast is
taken in good faith by the Board of Directors of Mid-Coast after
consultation with and consideration of the advice of its outside counsel
and financial advisors, in order to discharge properly its fiduciary duties
to its stockholders and (y) Mid-Coast has complied with its obligations in
Article 8;
(j) By Union Bankshares, if the Board of Directors of Mid-Coast shall
withdraw, modify or change its approval or recommendation of this
Agreement, the Option Agreement, the Subsidiary Merger or the Merger in a
manner adverse to Union Bankshares, provided that Union Bankshares is not
then in material breach of any representation, warranty, covenant or
agreement contained in this Agreement;
(k) By Mid-Coast, if the Board of Directors of Union Bankshares shall
withdraw, modify or change its approval or recommendation of this Agreement
or the Merger in any manner adverse to Mid-Coast, provided that Mid-Coast
is not then in material breach of any representation, warranty, covenant or
agreement contained in this Agreement.
(l) By Union Bankshares if, in the opinion of its environmental
consultant, Woodard & Curran, Inc. (a) any of the Phase I site assessments
conducted pursuant to Section 5.11 reveals the presence of any condition at
any Mid-Coast Property which creates or has the potential to create a
Liability on the part of any of Mid-Coast, Waldoboro, Union Bankshares or
Union Trust (an "Environmental Condition") and (b) where such Liability
would be in excess of $25,000.00 as a result of any one or a combination of
the following (i) further investigation of the Environmental Condition,
necessary or desirable in the reasonable opinion of Union Bankshares, its
environmental consultant or its counsel, including but not limited to a
Phase II site assessment; (ii) obtaining environmental insurance for
coverage of all Liabilities related to the Environmental Condition
including but not limited to, remediation, personal and property damage,
legal liability and business interruption, all on terms and conditions
satisfactory to Union Bankshares in its reasonable discretion; (iii) any
remediation activities, necessary or desirable in the reasonable opinion of
Union Bankshares, its environmental consultant or its counsel, with respect
to the Environmental Condition, whether or not such activities are
compulsory or voluntary under any applicable Law or Governmental Authority;
and (iv) the diminution in value of the effected Mid-Coast Property as a
result of the presence of the Environmental Condition, as compared to the
fair market value of such property in the absence of such Environmental
Condition, where such diminution is determined by a licensed appraisal
firm, mutually acceptable to Mid-Coast and Waldoboro, and in each case
(clauses (i) through (iv) inclusive) including but not limited to, the
reasonable fees and expenses of consultants, engineers, contractors,
appraisal firms and attorneys.
11.3 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 11.2, this Agreement shall
become void and have no effect, except that (i) the provisions of Article 12
shall survive any such termination and abandonment, and (ii) a termination
pursuant to Sections 11.1(d), 11.1(e) or 11.1(h) shall not relieve the breaching
Party from Liability for an uncured willful breach of a representation,
warranty, covenant, or agreement giving rise to such termination.
A-34
<PAGE> 106
11.4 Non-Survival of Representations and Covenants. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Date except this Section 11.4 and
Articles 1, 2, 3, 4 and 12 and Section 10.3 and 10.4.
ARTICLE 12
MISCELLANEOUS
12.1 Entire Agreement. This Agreement (and the documents, instruments and
certificates contemplated hereby) embodies the entire understanding of the
Parties in relation to the subject matter herein and supersedes all prior
understandings or agreements, oral or written, between the Parties hereto.
12.2 Headings. The headings and subheadings in this Agreement, except the
terms identified for definition in Article 1 and elsewhere in this Agreement,
are inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement or any provision hereof.
12.3 Duplicate Originals. This Agreement may be executed in any number of
duplicate originals, any one of which when fully executed by all Parties shall
be deemed to be an original without having to account for the other originals.
12.4 Governing Law. This Agreement and the rights and obligations
hereunder shall be governed and construed by the laws of the State of Maine.
12.5 Successors; No Third Party Beneficiaries. All terms and conditions of
this Agreement shall be binding on the successors and assigns of Mid-Coast,
Acquisition Company and Union Bankshares. Except as otherwise specifically
provided in this Agreement including but not limited to Section 10.1, nothing
expressed or referred to in this Agreement is intended or shall be construed to
give any Person other than Mid-Coast, Acquisition Company and Union Bankshares
any legal or equitable right, remedy or claim under or in respect of this
Agreement or any provisions contained herein, it being the intention of the
Parties hereto that this Agreement, the obligations and statements of
responsibilities hereunder, and all other conditions and provisions hereof are
for the sole and exclusive benefit of Mid-Coast, Acquisition Company and Union
Bankshares and for the benefit of no other Person.
12.6 Modification; Assignment. To the extent permitted by Law, this
Agreement may be amended by a subsequent writing signed by each of the Parties
upon the approval of each of the Parties, whether before or after stockholder
approval of this Agreement has been obtained; provided, that after any such
approval by the holders of Mid-Coast Common Stock, there shall be made no
amendment that requires further approval by such stockholders without the
further approval of such stockholders; and further provided, that after any such
approval by the holders of Union Bankshares Common Stock, the provisions of this
Agreement shall not be amended after the special meeting of the stockholders of
Union Bankshares in a manner adverse to the holders of Union Bankshares Common
Stock without any requisite approval of the holders of the issued and
outstanding shares of Union Bankshares Common Stock entitled to vote thereon.
12.7 Notice. Any notice, request, demand, consent, approval or other
communication to any Party hereof shall be effective when received and shall be
given in writing, and delivered in person against receipt thereof, or sent by
certified mail, postage prepaid or courier service at its address set forth
below or at such other address as it shall hereafter furnish in writing to the
others. All such notices and other communications shall be deemed given on the
date received by the addressee or its agent.
To: Mid-Coast
Mid-Coast Bancorp, Inc.
1768 Atlantic Highway
Waldoboro, Maine 04572
Attn: Wesley E. Richardson
Fax Number: (207) 832-7516
A-35
<PAGE> 107
Copy to: Richard Schaberg, Esq.
Thacher Proffitt & Wood
1700 Pennsylvania Avenue, N.W.
Washington, DC 20006
Fax Number: (202) 626-1930
To: Union Bankshares or the Acquisition Company
Union Bankshares Co.
66 Main Street
P. O. Box 479
Ellsworth, Maine 04605
Attn: Peter A. Blyberg
Fax Number: (207) 667-2865
Copy to: Kenneth F. Ehrlich, Esq.
Peabody and Arnold LLP
50 Rowes Wharf
Boston, Massachusetts 02110
Fax Number: (617) 951-2125
12.8 Waiver. Mid-Coast and Union Bankshares may waive their respective
rights, powers or privileges under this Agreement; provided that such waiver
shall be in writing; and further provided that no failure or delay on the part
of Mid-Coast or Union Bankshares to exercise any right, power or privilege under
this Agreement will operate as a waiver thereof, nor will any single or partial
exercise of any right, power or privilege under this Agreement preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege by Mid-Coast or Union Bankshares under the terms of this Agreement,
nor will any such waiver operate or be construed as a future waiver of such
right, power or privilege under this Agreement.
12.9 Fees and Expenses.
(a) Except as otherwise provided in this Section 12.9, each of the Parties
shall bear and pay all direct costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including filing,
registration and application fees, printing fees, and fees and expenses of its
own financial or other consultants, investment bankers, accountants, and
counsel, except that each of the Parties shall bear and pay one-half of the
filing fees payable in connection with the Joint Proxy Statement and printing
costs incurred in connection with the printing of the Joint Proxy Statement.
(b) Notwithstanding Section 12.9(a) above, if this Agreement is terminated
by Union Bankshares in accordance with Sections 11.2(d), (e) (i) or (j),
Mid-Coast shall be liable to Union Bankshares for all out-of-pocket costs and
expenses, including, without limitation, the reasonable fees and expenses of
lawyers, accountants and investment bankers, incurred by Union Bankshares in
connection with the entering into of this Agreement and the carrying out of any
and all acts contemplated hereunder ("Expenses").
(c) Notwithstanding Section 12.9(a) above, if this Agreement is terminated
by Mid-Coast in accordance with Sections 11.2(d), (e) (i) or (k), Union
Bankshares shall be liable to Mid-Coast for all of its Expenses.
(d) The Payment of Expenses is not an exclusive remedy, but is in addition
to any other rights or remedies available to either Party hereto at law or in
equity.
12.10 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provisions of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
A-36
<PAGE> 108
12.11 Enforcement of Agreement. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
12.12 Brokers and Finders. In the event of a claim by any broker or finder
based upon his or its representing or being retained by or allegedly
representing or being retained by Union Bankshares or by Mid-Coast, each of
Mid-Coast and Union Bankshares, as the case may be, agrees to indemnify and hold
the other Party harmless of and from any Liability in respect of any such claim.
12.13 Mutual Covenant of Best Efforts and Good Faith. The Parties mutually
covenant and agree with each other that they will use their best efforts to
consummate the transactions herein contemplated and that they will act and deal
with each other in good faith as to this Agreement and all matters arising from
or related to it.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
A-37
<PAGE> 109
IN WITNESS WHEREOF, the Parties hereto have caused this Amended and
Restated Agreement and Plan of Merger to be executed by their duly authorized
representatives as of the date first above written.
<TABLE>
<S> <C>
Attest: MID-COAST BANCORP, INC.
/s/ WAITE WESTON By: /s/ WESLEY E. RICHARDSON
--------------------------------------------------- ---------------------------------------------------
Name: Wesley E. Richardson
Title: President
Attest: UNION BANKSHARES COMPANY
/s/ SALLY J. HUTCHINS By: /s/ PETER A. BLYBERG
---------------------------------------------------
---------------------------------------------------
Name: Peter A. Blyberg
Title: President
Attest:
UBC ACQUISITION COMPANY, INC.
/s/ SALLY J. HUTCHINS
By: /s/ PETER A. BLYBERG
--------------------------------------------------- ---------------------------------------------------
Name: Peter A. Byberg
Title: President
</TABLE>
A-38
<PAGE> 110
APPENDIX B
EXHIBIT A
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER BY AND BETWEEN THE WALDOBORO
BANK, F.S.B. AND UNION TRUST COMPANY
This Amended and Restated Agreement and Plan of Merger (the "Subsidiary
Merger Agreement") is made and entered into as of the date set forth below by
and between Union Trust Company, a Maine trust company ("Union Trust") with its
principal place of business located at 66 Main Street, Ellsworth, Maine 04605,
and The Waldoboro Bank, F.S.B., a federally chartered savings association
("Waldoboro") with its principal place of business located at 1768 Atlantic
Highway, P.O. Box 589, Waldoboro, Maine 04572.
RECITALS
WHEREAS, Union Trust is a wholly-owned subsidiary of Union Bankshares
Company, a Maine corporation ("Union Bankshares"), and Waldoboro is a
wholly-owned subsidiary of Mid-Coast Bancorp, Inc., a Delaware corporation
("Mid-Coast"); and
WHEREAS, Union Bankshares and Mid-Coast have entered into an Amended and
Restated Agreement and Plan of Merger dated as of June 20, 2000 (the "Plan")
(the defined terms in which are used herein as defined therein) providing for
the merger of Mid-Coast with a wholly-owned subsidiary of Union Bankshares;
subsequently Mid-Coast will be merged up and into Union Bankshares;
WHEREAS, Mid-Coast and Union Bankshares are required to take all action
necessary and appropriate to cause Waldoboro to merge with and into Union Trust
under the terms set forth herein and in the Plan; and
WHEREAS, Union Trust and Waldoboro (collectively, the "Constituent
Corporations") and their respective Boards of Directors deem it advisable that
Waldoboro be merged with and into Union Trust (the "Subsidiary Merger") pursuant
to the provisions of Title 12 of the Code of Federal Regulations ("CFR")
sec.sec.552.13 and 563.22, and Title 9-B of the Maine Revised Statutes Annotated
sec.sec.351 and 352, respectively, and upon the terms and conditions hereinafter
set forth and in the Plan;
NOW THEREFORE, the Constituent Corporations hereby make, adopt, and approve
this Subsidiary Merger Agreement and prescribe the terms and conditions of the
Subsidiary Merger and the mode of carrying out the Subsidiary Merger as follows:
ARTICLE 1
THE SUBSIDIARY MERGER
Upon the terms and subject to the conditions hereinafter set forth,
Waldoboro shall be merged with and into Union Trust and the separate existence
of Waldoboro shall cease. Upon consummation of the Subsidiary Merger, Union
Trust shall continue as the surviving corporation.
ARTICLE 2
EFFECTIVE DATE AND TIME
The Subsidiary Merger shall be effective subsequent to the Effective Date
at noon time as the parties shall determine (the "Subsidiary Effective Date").
ARTICLE 3
ARTICLES OF INCORPORATION AND BYLAWS
The Articles of Incorporation, as amended (the "Articles of Incorporation")
and By-Laws of Union Trust shall not be amended as a result of the Subsidiary
Merger. The Articles of Incorporation of Union Trust
B-1
<PAGE> 111
in effect immediately prior to the Subsidiary Effective Date shall be the
Articles of Incorporation of the surviving corporation until duly amended or
repealed. The Bylaws of Union Trust in effect immediately prior to the
Subsidiary Effective Date shall be the Bylaws of the surviving corporation until
duly amended or repealed.
ARTICLE 4
NAME OF SURVIVING ENTITY
The name of the surviving corporation shall be "Union Trust Company."
ARTICLE 5
CANCELLATION OF SHARES
On the Subsidiary Effective Date, each authorized share of common stock,
$1.00 par value, of Waldoboro ("Waldoboro Common Stock"), whether issued and
outstanding immediately prior to the Subsidiary Effective Date or held in
treasury, shall by virtue of the Subsidiary Merger be cancelled and terminated.
Shareholders of Mid-Coast, the owner of the Waldoboro Common Stock, will be paid
cash consideration for their shares in accordance with the Plan.
ARTICLE 6
CERTAIN EFFECTS OF MERGER
On the Subsidiary Effective Date, all of the Assets then owned by
Waldoboro, or which would inure to it, shall immediately by operation of law and
without any conveyance or transfer or without any further action or deed, be
vested in and become the property of Union Trust, which shall have, hold and
enjoy the same in its own right as fully and to the same extent as the same were
possessed, held and enjoyed by Waldoboro prior to such Merger, and all of the
rights and obligations of Waldoboro shall remain unimpaired, and Union Trust, on
the Subsidiary Effective Date, shall succeed to all such rights, obligations,
duties and liabilities connected therewith.
ARTICLE 7
DIRECTORS AND OFFICERS
The directors of Union Trust in office immediately prior to the Subsidiary
Effective Date, together with such additional persons as may thereafter be
elected, shall serve as the directors of the surviving corporation from and
after the Subsidiary Effective Date in accordance with the Bylaws of the
surviving corporation. The names, addresses and occupations of the directors of
the surviving corporation are set forth on Appendix A hereto, which is hereby
incorporated herein. The officers of Union Trust in office immediately prior to
the Subsidiary Effective Date, together with such additional persons as may
thereafter be elected, shall serve as the officers of the surviving corporation
from and after the Subsidiary Effective Date in accordance with the Bylaws of
the surviving corporation. The names and addresses of the officers of the
surviving corporation are set forth on Appendix B hereto, which is hereby
incorporated herein.
ARTICLE 8
CERTAIN NOTIFICATIONS AND APPROVALS
The Subsidiary Merger shall not be effective unless and until a
notification pursuant to 12 CFR sec.563.22(b) has been filed with the Office of
Thrift Supervision (the "OTS"). This Subsidiary Merger Agreement is subject to
the approval of the Superintendent of the Bureau of Banking and Mid-Coast and
Union Bankshares, as the stockholders, respectively, of the Constituent
Corporations.
B-2
<PAGE> 112
ARTICLE 9
SAVINGS ACCOUNTS
The savings accounts of the surviving corporation shall be issued in the
same manner in which they were issued by Union Trust prior to the Subsidiary
Merger.
ARTICLE 10
LIQUIDATION ACCOUNT
Union Trust shall assume on the Subsidiary Effective Date any liquidation
account maintained on the books and records of Waldoboro prior to the Subsidiary
Merger.
ARTICLE 11
PRINCIPAL AND BRANCH OFFICES OF UNION TRUST
Upon completion of the Subsidiary Merger, the principal office of Union
Trust, the resulting institution, shall be located at 66 Main Street, Ellsworth,
Maine 04605, which was Union Trust's principal office prior to the Subsidiary
Merger. Branch offices of the resulting institution shall be located at:
43 Cottage Street, Bar Harbor, Maine 04609
Main Street, Blue Hill, Maine 04614
Main Street, Castine, Maine 04421
Main Street, Cherryfield, Maine 04622
Ellsworth Shopping Center, Ellsworth, Maine 04605
Main Street, Jonesport, Maine 04649
U.S. Route 1, Machias, Maine 04654
Main Street, Milbridge, Maine 04658
Routes 102 and 198, Somesville, Maine 04660
Atlantic Avenue, Stonington, Maine 04681
1768 Atlantic Highway, Waldoboro, Maine 04572
3 Starrett Drive, Belfast, Maine 04915
73 Camden Street, Rockland, Maine 04841
Route 32, Jefferson, Maine 04348
ARTICLE 12
CAPITAL, NUMBER OF SHARES, PAR VALUE
The total capital of Union Trust as of December 31, 1999 was $27,642,991.
The total capital of Union Trust on a pro forma basis upon consummation of the
Subsidiary Merger shall be $36,645,000. The number of authorized and issued and
outstanding shares of each class of equity security of Union Trust and the par
value of each of those classes as of December 31, 1999, which shall be the same
upon consummation of the Subsidiary Merger, are as follows:
<TABLE>
<CAPTION>
CLASS PAR VALUE NUMBER OF SHARES
<S> <C> <C> <C>
Common $12.50 Authorized: 1,200,000
Issued: 582,394
Outstanding: 582,394
</TABLE>
B-3
<PAGE> 113
ARTICLE 13
RIGHT TO ABANDON MERGER PLAN
The foregoing provisions notwithstanding, this Subsidiary Merger Agreement
may be abandoned at any time prior to the Subsidiary Effective Date by the votes
of the Boards of Directors of the Constituent Corporations, respectively.
ARTICLE 14
OBLIGATIONS SUBJECT TO PLAN; COOPERATION
The obligations of the Constituent Corporations to effect the Subsidiary
Merger shall be subject to the satisfaction in full of all the terms and
conditions of the Plan by Union Bankshares and Mid-Coast. The Constituent
Corporations each hereby undertake to do all such things which may be desirable
or necessary in order to effectuate the Subsidiary Merger including, without
limitation, obtaining approval or consent of the appropriate Bank Regulators and
taking all steps as may be necessary under Law to effect the Subsidiary Merger.
ARTICLE 15
GOVERNING LAW
This Subsidiary Merger Agreement shall be governed by and interpreted under
the laws of the State of Maine.
ARTICLE 16
INTEGRATION
This Subsidiary Merger Agreement completely expresses the obligations of
the Constituent Corporations and supersedes all other agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof; provided however, that notwithstanding the foregoing, in
the event of a conflict between any provision of this Subsidiary Merger
Agreement, and the Plan, the provisions of the Plan shall govern.
ARTICLE 17
NOTICE PROVISIONS
All notices required or permitted hereunder shall be in writing and shall
be addressed to the receiving party at its Notice Address set forth in this
Subsidiary Merger Agreement and shall be given in conformity with the Notice
Provisions set forth in the Plan.
ARTICLE 18
NOTICE ADDRESSES
If to Union Trust:
Union Bankshares Company
66 Main Street
P.O. Box 479
Ellsworth, Maine 04605
Attn: Peter A. Blyberg
Fax Number: (207) 667-2865
B-4
<PAGE> 114
With a copy to:
Kenneth F. Ehrlich, Esquire
Peabody & Arnold LLP
50 Rowes Wharf
Boston, MA 02110
Telecopier: (617) 951-2125
If to Waldoboro:
Mid-Coast Bancorp, Inc.
1768 Atlantic Highway
Waldoboro, Maine 04572
Attn: Wesley E. Richardson
Fax Number: (207) 832-7516
With a copy to:
Richard Schaberg, Esquire
Thacher Proffitt & Wood
1700 Pennsylvania Avenue, N.W.
Washington, DC 20006
Fax Number: (202) 347-6238
ARTICLE 19
BINDING EFFECT
This Subsidiary Merger Agreement shall extend to and be obligatory upon the
successors and assigns of the respective Constituent Corporations.
[Remainder of This Page Intentionally Left Blank.]
B-5
<PAGE> 115
IN WITNESS WHEREOF, the Constituent Corporations have caused this Amended
and Restated Agreement and Plan of Merger to be executed by their duly
authorized representatives as of the date set forth below.
<TABLE>
<S> <C>
Attest: THE WALDOBORO BANK, F.S.B.
/s/ WAITE WESTON By: /s/ WESLEY E. RICHARDSON
----------------------------------------- ------------------------------------------------------
Name: Wesley E. Richardson
Title: President
Attest: UNION TRUST COMPANY
/s/ SALLY J. HUTCHINS By: /s/ PETER A. BLYBERG
----------------------------------------- ------------------------------------------------------
Name: Peter A. Blyberg
Title: President
</TABLE>
DATE: June 20, 2000
B-6
<PAGE> 116
APPENDIX A
The names, addresses and occupations of the surviving corporation's
directors are as follows.
<TABLE>
<CAPTION>
NAME ADDRESS OCCUPATION
---- ------- ----------
<S> <C> <C>
Arthur J. Billings........ Post Office Box 194 President, Barter Lumber Company
Deer Isle, Maine 04627
Peter A. Blyberg.......... Pleasant Street President and CEO of Union
Post Office Box 496 Bankshares Company and Union Trust
Blue Hill, Maine 04614 Company
Robert S. Boit............ RR1-Box 29 Retired; former President and CEO
Penobscot, Maine 04476 of Union Bankshares Company and
Union Trust Company
Blake B. Brown............ 13 Westwood Drive President and owner, Brown's
Post Office Box 669 Appliance and TV
Ellsworth, Maine 04605
Richard C. Carver......... Post Office Box 187 Owner and manager, Carver Oil
Beals, Maine 04611 Company and Carver Shellfish, Inc.
Peter A. Clapp............ Post Office Box 600 President, Blue Hill Garage
Blue Hill, Maine
Sandra H. Collier......... RR1-Box 1795 Attorney at Law, Sandra Hyland
Surry, Maine 04684 Collier Law Offices
Robert B. Fernald......... Post Office Box 99 Treasurer, A.C. Fernald Sons, Inc.
Mount Desert, Maine 04660 and Jordan-Fernald
Douglas A. Gott........... 110 Bass Harbor Road Owner, Douglas A. Bott & Sons
Southwest Harbor, Maine 04679 General Contractors
David B. Honey............ HC 31-Box 440 Retired; former Manager, Swans
Great Pond Road Island Electric Cooperative
Aurora, Maine 04408
James L. Markos, Jr. ..... Post Office Box 965 General Manager, Maine Shellfish
Blue Hill, Maine 04614 Company, Inc.
Casper G. Sargent, Jr. ... Post Office Box 368 Owner, Sargent's Real Estate
Ellsworth, Maine 04605 Corporation
John V. Sawyer II......... Post Office Box 501 Chairman of the Board of Union
Jonesport, Maine 04649 Bankshares Company and Union Trust
Company; Retired; former
President, Worcester-Sawyer
Insurance Agency and Real Estate
Stephen C. Shea........... 20 Park Street Treasurer, E.L. Shea, Inc.;
Ellsworth, Maine 04605 President, Shea Leasing
Richard W. Teele.......... 18 Elm Street Secretary of Union Bankshares
Ellsworth, Maine 04605 Company and Union Trust Company
Retired; former Executive Vice
President and Treasurer of Union
Bankshares Company and Union Trust
Company
</TABLE>
B-7
<PAGE> 117
<TABLE>
<CAPTION>
NAME ADDRESS OCCUPATION
---- ------- ----------
<S> <C> <C>
Paul L. Tracy............. Post Office Box 100 President and owner, Winter Harbor
Gouldsboro, Maine 04607 Insurance Agency; Vice President
and co-owner, Schoodic Insurance
Services; Vice President and
co-owner, MDI Insurance Agency;
Co-owner, Grindstone Financial
Group LLC
Richard W. Whitney........ Post Office Box 593 Dentist
Ellsworth, Maine 04605
</TABLE>
B-8
<PAGE> 118
APPENDIX B
The names and addresses of the officers, as that term is defined in Maine
Revised Statutes Annotated Title 9-B, sec.131 (26-C), of the surviving
corporation are as follows.
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
John V. Sawyer II.................................... Post Office Box 501
Jonesport, Maine 04649
Peter A. Blyberg..................................... Pleasant Street
Post Office Box 496
Blue Hill, Maine 04614
John P. Lynch........................................ 62 Beals Avenue
Ellsworth, Maine 04605
Sally J. Hutchins.................................... Box 23
Penobscot, Maine 04476
Peter F. Greene...................................... Ridge Road-Addison
RR1-Box 2191A
Addison, Maine 04606
Rebecca J. Sargent................................... 13 Barrett Way
Ellsworth, Maine 04605
Richard W. Teele..................................... 18 Elm Street
Ellsworth, Maine 04605
Robert E. Carter, Jr. ............................... Post Office Box 254
17 White Street
Warren, Maine 04864
</TABLE>
B-9
<PAGE> 119
APPENDIX C
TRIDENT SECURITIES LETTERHEAD
June 27, 2000
Board of Directors
Mid-Coast Bancorp, Inc.
1768 Atlantic Highway
Waldoboro, Maine 04572
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, to the stockholders of common stock (the "Mid-Coast Common Stock") of
Mid-Coast Bancorp, Inc., Waldoboro, Maine ("Mid-Coast"), of the consideration
(as defined below) to be received by such shareholders in a merger (the
"Merger") of Mid-Coast with and into Union Bankshares Company, Ellsworth, Maine
("Union"), pursuant to the Amended and Restated Agreement and Plan of Merger
dated June 20, 2000 (the "Agreement"). Unless otherwise noted, all terms used
herein will have the same meaning as defined in the Agreement.
As more specifically set forth in the Agreement, and subject to a number of
conditions and procedures described in the Agreement, in the Merger each of the
issued and outstanding shares of Mid-Coast Common Stock (other than shares held
in treasury and shares as to which dissenters' rights of appraisal have been
effected in accordance with applicable provisions of Delaware law) shall be
exchanged for $15.875 of cash and each vested option to purchase Mid-Coast
Common Stock will be exchanged for an amount of cash equal to $15.875 less the
exercise price for such option (collectively referred to as the "Merger
Consideration").
Trident Securities ("Trident"), a division of McDonald Investments, Inc.,
is a financial consulting and investment banking firm experienced in the
valuation of business enterprises with considerable experience in the valuation
of thrift institutions. In the past, Trident has provided financial advisory
services for Mid-Coast and has received fees for the rendering of these
services. In addition, in the ordinary course of our business we may trade the
securities of Union or Mid-Coast for our own account and for the accounts of our
customers and, accordingly, may at any one time hold a long or short position in
such securities. Trident is not affiliated with Union or Mid-Coast.
In connection with rendering our opinion, we have reviewed and analyzed,
among other things, the following: (i) the Agreement, including the exhibits and
schedules thereto; (ii) certain publicly available information concerning
Mid-Coast, including Mid-Coast's Annual Reports on Form 10-KSB for each of the
years in the three year period ended March 31, 2000 and its Quarterly Reports on
Forms 10-QSB for the quarters ended June 30, 1999, September 30, 1999, and
December 31, 1999; (iii) certain publicly available information concerning
Union, including Union's Annual Reports on Forms 10-K for the years ended
December 31, 1999 and December 31, 1998 and Form 10-Q for the quarter ended
March 31, 2000; (iv) certain other internal information, primarily financial in
nature, concerning the business and operations of Mid-Coast furnished to us by
Mid-Coast for purposes of our analysis; (v) information with respect to the
trading market for Mid-Coast Common Stock; (vi) certain publicly available
information with respect to other companies that we believe to be comparable to
Mid-Coast and the trading markets for such other companies' securities; and
(vii) certain publicly available information concerning the nature and terms of
certain other transactions that we consider relevant to our inquiry. We have
also met with certain officers and employees of Mid-Coast to discuss the
business and prospects of Mid-Coast, as well as other matters we believe
relevant to our inquiry.
C-1
<PAGE> 120
TRIDENT SECURITIES LETTERHEAD
JUNE 27, 2000
BOARD OF DIRECTORS
PAGE 2
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided to us or publicly available, and we have assumed and relied
upon the representations and warranties of Mid-Coast and Union contained in the
Agreement. We have not been engaged to, and have not independently attempted to,
verify any of such information. We have not conducted a physical inspection or
appraisal of any of the assets, properties or facilities of Mid-Coast nor have
we been furnished with any such evaluation or appraisal. We have also assumed
that the conditions to the Merger as set forth in the Agreement would be
satisfied and that the Merger would be consummated on a timely basis in the
manner contemplated by the Agreement.
It should be noted that this opinion is based on economic and market
conditions and other circumstances existing on, and information made available
as of, the date hereof and does not address any matters subsequent to such date.
In addition, our opinion is, in any event, limited to the fairness, as of the
date hereof, from a financial point of view, of the consideration to be received
and does not address Mid-Coast's underlying business decision to effect the
Merger or any other terms of the Merger.
We have acted as financial advisor to Mid-Coast in connection with the
Merger and will receive from Mid-Coast a fee for our services, a significant
portion of which is contingent upon the consummation of the Merger, as well as
Mid-Coast's agreement to indemnify us under certain circumstances.
It is understood that this opinion was prepared solely for the confidential
use of the Board of Directors and senior management of Mid-Coast and may not be
disclosed, summarized, excerpted from or otherwise publicly referred to without
our prior written consent. We are permitted to include this opinion as an
amendment to the proxy statement to stockholders. Our opinion does not
constitute a recommendation to any stockholder of Mid-Coast as to how such
stockholder should vote at the stockholders' meeting held in connection with the
Merger.
Based upon and subject to the foregoing and such other matters as we
consider relevant, it is our opinion that as of the date hereof, the Merger
Consideration is fair, from a financial point of view, to the stockholders of
Mid-Coast.
Very truly yours,
/s/ TRIDENT SECURITIES
TRIDENT SECURITIES,
A Division of McDonald Investments,
Inc.
C-2
<PAGE> 121
APPENDIX D
--------------------------------------------------------------------------------
NEW ENGLAND BUSINESS ADVISORS, INC.
40 SALEM STREET
LYNNFIELD, MASSACHUSETTS 01940
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
(781) 246-6272 PRINCIPALS
FAX (781) 246-5848 STEPHEN F. O'SULLIVAN
E-MAIL [email protected] KAREN A. KEZERIAN
</TABLE>
June 27, 2000
Board of Directors
Union Bankshares Company
66 Main Street
Post Office Box 479
Ellsworth, Maine 04605
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the shareholders of Union Bankshares Company ("Union") of the
consideration paid in connection with its proposed merger with Mid-Coast
Bancorp, Inc. ("Mid-Coast") (the "Transaction") pursuant to and in accordance
with the terms of the Amended and Restated Agreement and Plan of Merger (the
"Agreement") entered into by and between Mid-Coast, Union and UBC Acquisition
Company, Inc. ("Acquisition Company"). Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to them in the Agreement.
Pursuant to the Agreement, Mid-Coast will merge with and into Acquisition
Company (the "Merger") and Mid-Coast's banking subsidiary, The Waldoboro Bank,
F.S.B., will merge with and into Union's subsidiary bank, Union Trust Company
("Union Trust"). The consideration paid to Mid-Coast shareholders for shares of
Mid-Coast common stock (excluding shares held by Mid-Coast shareholders who have
perfected their dissenters' rights of appraisal) will consist of approximately
$11,874,420 in cash.
New England Business Advisors, Inc. ("NEBA"), as part of its bank advisory
business, provides investment banking services to its client banks in connection
with mergers and acquisitions. We are familiar with Union Trust, having
performed other services for it, including Asset/Liability Management, since
1994. We have been retained by the Board of Directors of Union to serve as its
financial advisor in connection with this Transaction. NEBA will receive a fee
for providing investment banking services for the Transaction, which includes
rendering this opinion. We have not advised any party in connection with the
Transaction other than Union and we make no recommendation to the shareholders
of Union.
In connection with our opinion, we have (1) reviewed the Agreement; (2) held
discussions with various members of management of Union and Mid-Coast concerning
each company's historical and current operations, financial condition and
prospects; (3) reviewed historical consolidated financial and operating data
that was publicly available or furnished to us by Union and Mid-Coast; (4)
reviewed internal financial analyses, financial and operating forecasts, to the
extent publicly available, reports and other information prepared by officers
and representatives of Union and Mid-Coast; (5) reviewed certain publicly
available information with respect to certain other companies that we believe to
be comparable to Mid-Coast; (6) reviewed certain publicly available information
concerning the terms of certain other transactions that we deemed relevant to
our inquiry; (7) assessed the accretion/dilution to Union's shareholders; and
(8) conducted such other financial studies, analyses and investigations as we
deemed appropriate for the purpose of this opinion.
In our review and analysis and in arriving at our opinion, we have assumed and
relied upon the accuracy and completeness of all of the financial and other
information provided us or publicly available and have assumed and relied upon
the representations and warranties of Union and Mid-Coast contained in the
Agreement. We have also relied upon the management of Mid-Coast as to the
reasonableness and achievability of the financial
D-1
<PAGE> 122
and operating projections and the assumptions and bases provided to us and we
have assumed that such projections reflect the best currently available
estimates and judgments of the management of Mid-Coast and that such projections
and forecasts will be realized in the amounts and time periods currently
estimated by the management. We have not been engaged to assess the
achievability of such projections or the assumptions on which they were based
and express no view as to such projections or assumptions. In addition, we have
not conducted a physical inspection or appraisal of any of the assets,
properties or facilities of either Union or Mid-Coast nor have we been furnished
with any such evaluation or appraisal. We have also assumed that the conditions
to the Transaction would be consummated on a timely basis in the manner
contemplated in the Agreement. Our opinion is based upon analyses of the
foregoing factors in light of our assessment of general economic, financial and
market conditions as they exist and can be evaluated by us as of the date
hereof. We express no opinion as to the price or trading range at which shares
of Union's Common Stock will trade following the date hereof, or the price or
trading range at which the Union's Common Stock will trade upon completion of
the Transaction.
It is understood that this opinion is not to be quoted or referred to, in whole
or in part (including excerpts or summaries), in any filing, report, document,
release or other communication used in connection with the Transaction (unless
required to be quoted or referred to by applicable regulatory requirements), nor
shall this opinion be used for any other purposes, without our prior written
consent, which consent shall not be unreasonably withheld. Furthermore, our
opinion is directed to the Board of Directors of Union and does not constitute a
recommendation to any shareholder of Union as to how such shareholder should
vote at the shareholders' meeting to be held in connection with the Transaction.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that, as of the date hereof, the
consideration proposed to be paid in the Transaction is fair, from a financial
point of view, to Union's shareholders.
Cordially,
/s/ New England Business Advisors, Inc.
New England Business Advisors, Inc.
D-2
<PAGE> 123
APPENDIX E
EXHIBIT B
OPTION AGREEMENT
This Option Agreement ("Option Agreement") is dated as of March 27, 2000,
between Mid-Coast Bancorp, Inc., a Delaware corporation ("Mid-Coast") and Union
Bankshares Company ("Union Bankshares"), a Maine corporation.
RECITALS
WHEREAS, the Boards of Directors of Mid-Coast and Union Bankshares have
approved an Agreement and Plan of Merger by and between Union Bankshares and
Mid-Coast ("Merger Agreement") dated as of the date hereof providing for the
merger of Mid-Coast into Union Bankshares;
WHEREAS, as a condition to Union Bankshares' entry into the Merger
Agreement and to induce such entry, Mid-Coast has agreed to grant to Union
Bankshares the option set forth herein to purchase authorized but unissued
shares of Mid-Coast Common Stock;
NOW, THEREFORE, in consideration of the premises herein contained, the
parties agree as follows:
1. Definitions.
Capitalized terms defined in the Merger Agreement and used herein shall
have the same meanings as in the Merger Agreement.
2. Grant of Option.
Subject to the terms and conditions set forth herein, Mid-Coast hereby
grants to Union Bankshares an option ("Option") to purchase up to 149,960 shares
of Mid-Coast Common Stock, at a price of $6.00 per share payable in cash as
provided in Section 4 hereof; provided, however, that in the event Mid-Coast
issues or agrees to issue any shares of Mid-Coast Common Stock (other than as
permitted under the Merger Agreement) at a price less than $6.00 per share (as
adjusted pursuant to Section 6 hereof), the exercise price shall be equal to
such lesser price; in no event, however, shall the number of shares for which
the Option is exercisable exceed 19.9% of Mid-Coast's issued and outstanding
Common Stock without giving effect to any shares subject to or issued pursuant
to the Option.
3. Exercise of Option.
(a) Subject to compliance with applicable laws and regulations and unless
Union Bankshares shall have breached in any material respect and failed to cure
any material covenant or representation contained in the Merger Agreement, Union
Bankshares may exercise the Option, in whole or part, at any time following the
occurrence of a Purchase Event (as defined below).
(b) As used herein, a "Purchase Event" shall mean any of the following
events or transactions occurring after the date hereof:
i. Mid-Coast or any of its Subsidiaries (each an "Mid-Coast
Subsidiary"), without having received Union Bankshares' 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
Union Bankshares or any of its Subsidiaries (each a "Union Bankshares
Subsidiary") or the Board of Directors of Mid-Coast shall have recommended
that the stockholders of Mid-Coast approve or accept any Acquisition
Transaction or shall have failed to publicly oppose an Acquisition
Transaction, in each case with any person other than Union Bankshares or a
Union Bankshares Subsidiary. For purposes of this Agreement, "Acquisition
Transaction" shall mean (w) a merger or consolidation, or any similar
E-1
<PAGE> 124
transaction, involving Mid-Coast or any Significant Subsidiary (as defined
in Rule 1-02(w) of Regulation S-X promulgated by the Securities and
Exchange Commission (the "SEC") of Mid-Coast, (x) a purchase, lease or
other acquisition of all or a substantial portion of the assets of
Mid-Coast or any Significant Subsidiary of Mid-Coast, (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 Mid-Coast or any Significant Subsidiary of Mid-Coast, or (z) any
substantially similar transaction; provided, however, that in no event
shall any merger, consolidation, purchase, liquidation, dividend in kind,
reorganization or similar transaction involving only Mid-Coast 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. Mid-Coast or any Mid-Coast Subsidiary, without having received
Union Bankshares' 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 Union Bankshares or a Union Bankshares Subsidiary, or the
Board of Directors of Mid-Coast shall have publicly withdrawn or modified,
or publicly announced its intention to withdraw or modify, in any manner
adverse to Union Bankshares, its recommendation that the stockholders of
Mid-Coast approve the transactions contemplated by the Merger Agreement;
iii. The shareholders of Mid-Coast shall have voted and failed to
approve and adopt the Merger Agreement and the Merger at a meeting which
has been held for that purpose or any adjournment or postponement thereof,
or such meeting shall not have been held in violation of the Merger
Agreement or shall have been canceled prior to termination of the Merger
Agreement if, prior to such meeting (or if such meeting shall not have been
held or shall have been canceled, prior to such termination), any person
(other than the Union Bankshares or a Union Bankshares Subsidiary) shall
have made a proposal to Mid-Coast or its stockholders by public
announcement or written communication that is or becomes the subject of
public disclosure to engage in an Acquisition Transaction;
iv. Any person other than Union Bankshares, any Union Bankshares
Subsidiary or any Mid-Coast Subsidiary shall have acquired beneficial
ownership or the right to acquire beneficial ownership of 10% or more of
the outstanding shares of Common Stock (the term "beneficial ownership" for
purposes of this Option Agreement having the meaning assigned thereto in
Section 13(d) of the 1934 Act, and the rules and regulations thereunder);
v. Any person other than Union Bankshares or any Union Bankshares
Subsidiary shall have made a bona fide proposal to Mid-Coast or its
stockholders by public announcement or written communication that is or
becomes the subject of public disclosure to engage in an Acquisition
Transaction;
vi. After an overture is made by a third party to Mid-Coast or its
stockholders to engage in an Acquisition Transaction, Mid-Coast shall have
breached any covenant or obligation contained in the Merger Agreement and
such breach (x) would entitle Union Bankshares to terminate the Merger
Agreement and (y) shall not have been cured to the satisfaction of Union
Bankshares; or
vii. Any person other than Union Bankshares or any Union Bankshares
Subsidiary, other than in connection with a transaction to which Union
Bankshares has given its prior written consent, shall have filed an
application or notice with any Regulatory Authority, whether in draft or
final form, for approval to engage in an Acquisition Transaction.
(c) In the event Union Bankshares determines to exercise the Option, it
shall send to Mid-Coast a written notice (the date of which being herein
referred to as "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 (3) business days nor later than twenty (20) business days from the Notice
Date for the closing of such purchase ("Closing Date"); provided that if prior
notification to or approval of any Regulatory Authority is required in
connection with such purchase, Union Bankshares 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
E-2
<PAGE> 125
shall run instead from the date on which any required notification period has
expired or been terminated or such approval has been obtained and any requisite
waiting period shall have passed.
(d) The Option shall expire and terminate to the extent not previously
exercised, upon the earliest to occur of the following (each a "Termination
Event"):
i. the Effective Date of the Merger; or
ii. eight (8) months after the occurrence of a Purchase Event; or
iii. the Merger Agreement is terminated in accordance with its terms
except for any termination resulting from a material breach by Mid-Coast of
any of its representations, warranties or covenants, or the failure of the
stockholders of Mid-Coast to approve the Merger Agreement; or
iv. (iv) December 31, 2000.
(e) Notwithstanding the termination of the Option, Union Bankshares shall
be entitled to purchase any shares with respect to which it has exercised the
Option in accordance with the terms hereof prior to the termination of the
Option. The termination of the Option shall not affect any rights hereunder
which by their terms extend beyond the date of such termination.
(f) Mid-Coast shall notify Union Bankshares promptly in writing of the
occurrence of any Purchase Event, it being understood that the giving of such
notice by Mid-Coast shall not be a condition to the right of Union Bankshares to
exercise the Option.
4. Payment and Delivery of Certificates.
(a) At the closing referred to in Section 3 hereof, Union Bankshares shall
pay to Mid-Coast the aggregate purchase price for the shares of Mid-Coast Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by a wire transfer to a bank account designated by Mid-Coast or if no
account has been designated in a manner determined to be reasonable by Union
Bankshares.
(b) At such closing, simultaneously with the delivery of cash as provided
in subsection (a), Mid-Coast shall deliver to Union Bankshares a certificate or
certificates representing the number of shares of Mid-Coast Common Stock
purchased by Union Bankshares and Union Bankshares shall deliver to Mid-Coast a
letter agreeing that Union Bankshares will not offer to sell or otherwise
dispose of such shares in violation of applicable law or the provisions of this
Option Agreement.
5. Representations.
Mid-Coast hereby represents, warrants and covenants to Union Bankshares as
follows:
(a) Mid-Coast shall at all times maintain sufficient authorized but
unissued shares of Mid-Coast Common Stock so that the Option may be
exercised without authorization of additional shares of Mid-Coast Common
Stock.
(b) The shares to be issued upon due exercise, in whole or in part, of
the Option, when paid for as provided herein, will be duly authorized,
validly issued, fully paid and nonassessable and will be delivered free and
clear of all claims, liens, encumbrances and security interests and not
subject to any preemptive rights.
(c) Mid-Coast will not, by amendment of its certificate of
incorporation 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 it; and will promptly
take all action as may from time to time be required (including cooperating
fully with Union Bankshares in preparing applications or notices and
providing information with respect to regulatory approval) in order to
permit Union Bankshares to exercise the Option and Mid-Coast duly and
effectively to issue shares of Mid-Coast Common Stock pursuant hereto.
E-3
<PAGE> 126
6. Adjustment Upon Changes in Capitalization.
If Mid-Coast should split or combine the Mid-Coast Common Stock, or pay a
stock dividend or other stock distribution in Mid-Coast Common Stock, or
otherwise change the Mid-Coast Common Stock into any other securities, or make
any other dividend or distribution in respect of the Mid-Coast Common Stock
(other than normal cash dividends), then the number of shares of Mid-Coast
Common Stock subject to the Option shall be adjusted so that, after such
issuance, it equals 19.9% of the number of shares of Mid-Coast Common Stock then
issued and outstanding without giving effect to any shares subject or issued
pursuant to the Option. Nothing contained in this Section 6 shall be deemed to
authorize Mid-Coast to breach any provisions of the Merger Agreement. Whenever
the number of shares of Mid-Coast Common Stock purchasable upon exercise hereof
is adjusted as provided in this Section 6, the Option exercise price shall be
adjusted by multiplying the Option exercise price by a fraction, the numerator
of which shall be equal to the number of shares of Mid-Coast Common Stock
purchasable prior to the adjustment and the denominator of which shall be equal
to the number of shares of Mid-Coast Common Stock purchasable after the
adjustment.
7. Registration Rights.
Mid-Coast shall, if requested by Union Bankshares, as expeditiously as
possible file a registration statement in order to permit the sale or other
disposition of this Option and/or the shares of Mid-Coast Common Stock acquired
upon exercise of the Option in accordance with the intended method of sale or
other disposition requested by Union Bankshares. Union Bankshares shall provide
all information reasonably requested by Mid-Coast for inclusion in any
registration statement to be filed hereunder. Mid-Coast 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 one year from the day
such registration statement first becomes effective as may be reasonably
necessary to effect such sales or other dispositions. The first registration
effected under this Section 7 shall be at Mid-Coast's expense except for
underwriting commissions and the fees and disbursements of Union Bankshares'
counsel attributable to the registration. A second registration may be requested
hereunder at Union Bankshares' expense. In no event shall Mid-Coast be required
to effect more than two registrations hereunder. If requested by Mid-Coast, in
connection with any such registration, Union Bankshares will become a party to
any underwriting agreement relating to the sale of such shares, but only to the
extent of obligating itself in respect of representations, warranties,
indemnities and other agreements customarily included by a selling shareholder
in such underwriting agreements.
8. Certain Puts.
(a) Upon the occurrence of a Purchase Event that occurs prior to
termination of the Option, (i) at the request of Union Bankshares, delivered
while the Option (in whole or part) is exercisable, Mid-Coast shall repurchase
the Option from Union Bankshares at a price equal to (x) the amount by which (a)
the market/offer price (as defined below) exceeds (b) the Option exercise price,
multiplied by (y) the number of shares for which the Option may then be
exercised; and (ii) at the request from time to time of the owner of shares
purchased pursuant to the Option, delivered while the Option (in whole or part)
is exercisable (or, if it has been fully exercised, would have been exercisable
had such exercise not been made), Mid-Coast shall repurchase such number of the
shares issued pursuant to the Option from the owner as the owner shall designate
at a price equal to the market/offer price multiplied by the number of such
shares so designated. The term "market/offer price" shall mean the highest of
(i) the price per share of Mid-Coast Common Stock at which a tender offer or
exchange offer therefor has been made after the date hereof, (ii) the price per
share of Mid-Coast Common Stock to be paid by any third party pursuant to any
merger, consolidation, share exchange or other agreement with Mid-Coast entered
into after the date hereof, (iii) the average closing price for shares of
Mid-Coast Common Stock within the 30-day period immediately preceding the date
Union Bankshares gives notice of the required repurchase of this Option or the
owner gives notice of the required repurchase of shares, as the case may be, or
(iv) in the event of a sale of all or substantially all of Mid-Coast's assets,
the sum of the price paid in such sale for such assets and the current market
value of the remaining assets of Mid-Coast as determined by a nationally
recognized investment banking firm selected by the parties (or by an arbitrator
if they cannot agree) divided by the number of shares of Mid-Coast Common Stock
outstanding at the time of such sale. In determining the market/offer price, the
value of consideration other
E-4
<PAGE> 127
than cash shall be determined by a nationally recognized investment banking firm
selected by the parties (or by an arbitrator if they cannot agree), and such
determination shall be conclusive and binding on all parties.
(b) Union Bankshares or the owner, as the case may be, may exercise its
right to require Mid-Coast to repurchase the Option and any shares pursuant to
this Section 8 by surrendering for such purpose to Mid-Coast, at its principal
office, this Option Agreement or certificates for the shares, as applicable,
accompanied by a written notice or notices stating that Union Bankshares or the
owner, as the case may be, elects to require Mid-Coast to repurchase the Option
and/or the shares in accordance with the provisions of this Section 8. As
promptly as practicable, and in any event within five (5) business days after
the surrender of the Option and/or certificates representing shares and the
receipt of such notice or notices relating thereto, Mid-Coast shall deliver or
cause to be delivered to Union Bankshares or the owner of the shares, the
applicable repurchase price therefor or the portion thereof that Mid-Coast is
not then prohibited from so delivering under applicable law and regulation.
(c) Mid-Coast hereby undertakes to use its best efforts to obtain all
required regulatory and legal consents and to file any required notices in order
to accomplish any repurchase contemplated by this Section 8. To the extent that
Mid-Coast is prohibited under applicable law or regulation from repurchasing the
Option and/or the shares in full, Mid-Coast shall immediately so notify Union
Bankshares and the owner, if applicable, and thereafter deliver or cause to be
delivered, from time to time, the portion of the repurchase price that it is no
longer prohibited from delivering. If Mid-Coast at any time after delivery of a
notice of repurchase pursuant to Section 8 is prohibited under applicable law or
regulation from delivering the repurchase price in full (and Mid-Coast hereby
undertakes to use its best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to accomplish such repurchase), Union Bankshares and/or the owner may revoke its
notice of repurchase either in whole or to the extent of the prohibition.
9. Total Profit. Notwithstanding any other provision of this Option
Agreement to the contrary, in no event shall Union Bankshares' Total Profit (as
defined below) exceed $800,000 and, if it otherwise would exceed such amount,
Union Bankshares, at its sole election, shall either (A) reduce any remaining
shares of Mid-Coast Common Stock subject to the Option, (B) deliver to Mid-Coast
for cancellation without consideration shares of Mid-Coast Common Stock
previously purchased by Union Bankshares pursuant to the exercise of the Option,
(C) pay cash to Mid-Coast, (D) increase the per share exercise price, or (E) any
combination of the foregoing, so that Union Bankshares' actually realized Total
Profit shall not exceed $800,000 after taking into account the foregoing
actions.
As used in this Option Agreement, the term "Total Profit" shall mean the
aggregate sum (prior to the payment of taxes) of the following: (i) any net cash
amounts received by Union Bankshares pursuant to the sale of shares of Mid-Coast
Common Stock received pursuant to the exercise of the Option (or any other
securities into which such shares shall be converted or exchanged) to any
unaffiliated person less Union Bankshares' purchase price of such shares, (ii)
any amount received by Union Bankshares pursuant to Mid-Coast's repurchase of
shares of Mid-Coast Common Stock received pursuant to the exercise of the Option
less Union Bankshares' purchase price of such shares, and (iii) any amount
received by Union Bankshares' pursuant to Mid-Coast's repurchase of the Option
(or any portion thereof).
10. Severability.
If any term, provision, covenant or restriction contained in this Option
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 Option
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 Option will not permit the holder to acquire the full
number of shares of Mid-Coast Common Stock provided in Section 2 hereof (as
adjusted pursuant to Section 6 hereof), it is the express intention of Mid-Coast
to allow the holder to acquire or to require Mid-Coast to repurchase such lesser
number of shares as may be permissible, without any amendment or modification
hereof.
E-5
<PAGE> 128
11. Miscellaneous.
(a) Extension. The period for exercise by Union Bankshares and its
assignees of any rights under this Option Agreement 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.
(b) Consents. Each of Union Bankshares and Mid-Coast will use its best
efforts to make all filings with, and to obtain consents of, all third parties
and regulatory authorities necessary to the consummation of the transactions
contemplated by this Option Agreement, including without limitation applying to
the FRB and the Maine Bureau of Banking for approval to acquire the shares
issuable hereunder.
(c) Expenses. Except as otherwise expressly provided herein or in the
Merger Agreement 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.
(d) Entire Agreement. Except as otherwise expressly provided herein or in
the Merger Agreement, this Option Agreement contains the entire agreement
between the parties with respect to the transactions contemplated hereunder and
supersedes all prior agreements or understandings with respect thereto, written
or oral. The terms and conditions of this Option Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. Nothing in this Option Agreement, expressed or implied,
is intended to confer upon any party, other than the parties hereof, and their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Option Agreement, except as expressly
provided herein.
(e) Assignment. 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.
(f) Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by overnight express or by registered or certified mail, postage
prepaid, addressed as follows:
Mid-Coast
Mid-Coast Bancorp, Inc.
1768 Atlantic Highway
Waldoboro, Maine 04572
Attn: Wesley E. Richardson
Fax Number: (207) 832-7516
Copy to: Richard Schaberg, Esq.
Thacher Proffitt & Wood
1700 Pennsylvania Avenue, N.W.
Washington, DC 20006
Fax Number: (202) 347-6238
Union Bankshares
Union Bankshares Co.
66 Main Street
P. O. Box 479
Ellsworth, Maine 04605
Attn: Peter A. Blyberg
Fax Number: (207) 667-2865
E-6
<PAGE> 129
Copy to: Kenneth F. Ehrlich, Esq.
Peabody & Arnold, LLP
50 Rowes Wharf
Boston, Massachusetts 02110
Fax Number: (617) 951-2125
A party may change its address for notice purposes by written notice to the
other party hereto.
(g) Counterparts. This Option Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
(h) Specific Performance. The parties agree that damages would be an
inadequate remedy for a breach of the provisions of this Option Agreement by
either party hereto and that this Option Agreement may be enforced by either
party hereto through injunctive or other equitable relief.
(i) Governing Law. This Option Agreement shall be governed by and
construed in accordance with the laws of the State of Maine applicable to
agreements made and entirely to be performed within such state, and such federal
laws as may be applicable.
[Remainder of Page Intentionally Left Blank.]
E-7
<PAGE> 130
IN WITNESS WHEREOF, each of the parties hereto has executed this Option
Agreement as of the day and year first written above.
MID-COAST BANCORP, INC.
By: /s/ WESLEY E. RICHARDSON
------------------------------------
Name: Wesley E. Richardson
Title: President
Attest:
/s/ SAMUEL COHEN
---------------------------------------------------
UNION BANKSHARES COMPANY
By: /s/ PETER A. BLYBERG
------------------------------------
Name: Peter A. Blyberg
Title: President
Attest:
/s/ SALLY J. HUTCHINS
---------------------------------------------------
E-8
<PAGE> 131
APPENDIX F
TITLE 8. CORPORATIONS
CHAPTER 1. GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER, CONSOLIDATION OR CONVERSION
8 DEL. C. SEC. 262 (1999)
SEC. 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 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 subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's 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 nonstock 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 nonstock 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 sec. 251 (other than a merger effected pursuant to sec.
251(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or sec.
264 of this title:
(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
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. 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 stockholders of the surviving corporation
as provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, 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 sec.
sec. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for such
stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
F-1
<PAGE> 132
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title 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 subsections (d) and
(e) of this section, 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 subsection (b) or (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 such
stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of
such stockholder's 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 such stockholder's
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 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 sec. 228
or sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's 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 such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constitutent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary
F-2
<PAGE> 133
or of the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constitutent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(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 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 such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
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 such stockholder's 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 1 or more publications at
least 1 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 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.
(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 determining 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
such stockholder's
F-3
<PAGE> 134
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that such
stockholder 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 so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and 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 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 attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded 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 such stockholder's
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.
(l) The shares of the surviving or resulting corporation to 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.
F-4
<PAGE> 135
UNION BANKSHARES COMPANY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Sally J. Hutchins and Peter J. Blyberg,
jointly and severally, proxies, with full power to act alone, and with full
power of substitution, to represent the undersigned and to vote, as designated
below and upon any and all other matters that may properly be brought before
such meeting, all shares of common stock that the undersigned would be entitled
to vote at a Special Meeting of Shareholders of Union Bankshares Company
("Union"), a Maine corporation, to be held at White Birches Restaurant, Route 1,
Hancock, Maine, on August 3, 2000 at 11:00 a.m., local time, or any adjournments
or postponements thereof, for the following purposes:
1. To approve the Amended and Restated Agreement and Plan of Merger dated
June 20, 2000 (the "Merger Agreement") by and among Mid-Coast Bancorp,
Inc., Union and UBC Acquisition Company, Inc., a wholly-owned subsidiary
of Union, and the transactions contemplated by the Merger Agreement. The
Merger Agreement is enclosed with the accompanying joint proxy statement
as Appendix A.
[ ] For [ ] Against [ ] Abstain
2. In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting, or any adjournments
or postponements thereof.
[ ] For [ ] Against [ ] Abstain
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR"
APPROVAL OF THE MERGER AGREEMENT, AND IN THE DISCRETION OF MANAGEMENT WITH
RESPECT TO ANY OTHER MATTERS WHICH MAY COME BEFORE THE MEETING. Only one joint
tenant need sign.
--------------------------------------
------------------------------
Print Name Signature
------------------------------
Signature
------------------------------
Dated:
------------------------------
(If signing as Attorney,
Administrator, Executor,
Guardian or Trustee, please
add your full title as such).
PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY
<PAGE> 136
MID-COAST BANCORP, INC.
Proxy Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Samuel Cohen and Wesley E. Richardson,
jointly and severally, proxies, with full power to act alone, and with full
power of substitution, to represent the undersigned and to vote, as designated
below and upon any and all other matters that may properly be brought before
such meeting, all shares of common stock that the undersigned would be entitled
to vote at a Special Meeting of Shareholders of Mid-Coast Bancorp, Inc.
("Mid-Coast"), a Delaware corporation, to be held at the Samoset Resort,
Rockport, Maine, on August 3, 2000 at 3:00 p.m., local time, or any adjournments
thereof, for the following purposes:
1. To approve the Amended and Restated Agreement and Plan of
Merger dated June 20, 2000 (the "Merger Agreement") by Union
Bankshares Company, UBC Acquisition Company, Inc., a
wholly-owned subsidiary of Union Bankshares Company, and
Mid-Coast, and the transactions contemplated by the Merger
Agreement. The Merger Agreement is enclosed with the
accompanying joint proxy statement as Appendix A.
[ ] For [ ] Against [ ] Abstain
2. In their discretion, the proxies are authorized to vote upon
any other business that may properly come before the meeting,
or any adjournment thereof.
[ ] For [ ] Against [ ] Abstain
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED BY THE SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
"FOR" APPROVAL OF THE MERGER AGREEMENT. Please sign, date and return today in
the envelope provided. Only one signature is needed for joint ownership.
---------------------------- ----------------------------
Print Name Signature
[ ] I (We) plan to attend ----------------------------
the special meeting. Signature
Dated:
----------------------
(If signing as Attorney,
Administrator, Executor, Guardian
or Trustee, please add your title
as such).
PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY
