SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
BNH BANCSHARES, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
Common Stock
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2) Aggregate number of securities to which transaction applies:
3,840,718
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
$15.50 cash consideration for each share. Filing fee calculated on
basis of maximum aggregate value of transaction.
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4) Proposed maximum aggregate value of transaction:
$59,531,129
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5) Total fee paid:
$11,907.00
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(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
[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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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PRELIMINARY COPIES
BNH BANCSHARES, INC.
209 CHURCH STREET
NEW HAVEN, CONNECTICUT 06510
(203)498-3500
July 14, 1997
TO OUR SHAREHOLDERS:
You are cordially invited to attend the Special Meeting of Shareholders
(the "Special Meeting") of BNH BANCSHARES, INC. (the "Company") to be held at
The New Haven Lawn Club, 193 Whitney Avenue, New Haven, Connecticut 06511 on
Thursday, August 14, 1997 at 10:00 a.m.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve and adopt an Agreement and Plan of Merger dated as of April
8, 1997 (the "Merger Agreement"), which provides for the merger (the "Holding
Company Merger") of a subsidiary of Citizens Bank of Connecticut ("Citizens")
into the Company. Immediately following the Holding Company Merger, the
Company's wholly owned subsidiary, The Bank of New Haven, will be merged into
Citizens, with Citizens as the surviving bank.
Under the terms of the Merger Agreement, the holders of the outstanding
shares of the Company's common stock will be entitled to receive, at the
effective time of the Holding Company Merger, cash in the amount of $15.50 for
each share that they hold, subject to possible upward adjustment as described in
the enclosed Proxy Statement.
The accompanying Proxy Statement provides important information concerning
the proposed Holding Company Merger. Please review it carefully.
Approval of the Holding Company Merger requires the affirmative vote of the
holders of at least two-thirds of the shares of the Company's common stock
outstanding and entitled to vote thereon. THEREFORE, FAILURE TO RETURN A
PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE SPECIAL MEETING WILL HAVE THE
SAME EFFECT AS A VOTE AGAINST THE MERGER AGREEMENT.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE "FOR"
APPROVAL OF THE MERGER AGREEMENT. YOU ARE URGED TO SIGN AND RETURN THE ENCLOSED
PROXY CARD PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED FOR YOUR CONVENIENCE.
Promptly after the Holding Company Merger, a letter of transmittal will be
mailed to all holders of record of shares of the Company's common stock to use
in connection with surrendering their stock certificates. Please do not send
your stock certificates until you receive a letter of transmittal, which will
include instructions as to the procedure to be used in sending your stock
certificates.
Sincerely,
George M. Dermer
Chairman of the Board of Directors
F. Patrick McFadden, Jr.
President and Chief Executive Officer
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PRELIMINARY COPIES
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BNH BANCSHARES, INC.
209 CHURCH STREET
NEW HAVEN, CONNECTICUT 06510
(203)498-3500
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 14, 1997
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Special
Meeting") of BNH Bancshares, Inc. (the "Company") will be held at The New Haven
Lawn Club, 193 Whitney Avenue, New Haven, Connecticut 06511, on Thursday,
August 14, 1997 at 10:00 a.m., local time, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger dated as of April 8, 1997 (the "Merger
Agreement") by and among Citizens Bank of Connecticut ("Citizens"),
the Company and The Bank of New Haven (the "Bank") pursuant to which
(i) a subsidiary of Citizens will be merged with and into the Company
(the "Holding Company Merger"), and (ii) the holders of outstanding
shares of Company common stock will be entitled to receive $15.50 in
cash for each share that they hold, subject to upward adjustment in
certain circumstances described in the Proxy Statement. Immediately
following the Holding Company Merger, the Bank will be merged with and
into Citizens, with Citizens as the surviving bank.
2. To transact such other business as may properly be brought before the
Special Meeting, or any adjournments or postponements thereof.
Any action may be taken on the foregoing proposals at the Special Meeting
on the date specified above, or on any date or dates to which, by original or
later adjournment, the Special Meeting may be adjourned or to which the Special
Meeting may be postponed.
The Board of Directors has fixed the close of business on June 20, 1997 as
the record date (the "Record Date") for the determination of the shareholders
entitled to vote at the Special Meeting and any adjournments or postponements
thereof. Only holders of shares of Company common stock, without par value
("Shares"), of record at the close of business on the Record Date will be
entitled to notice of and to vote at the Special Meeting and any adjournments or
postponements thereof.
A majority in interest of the outstanding Shares must be represented at the
Special Meeting, in person or by proxy, to constitute a quorum for the
transaction of business. The affirmative vote of the holders of two-thirds of
the Shares issued, outstanding and entitled to vote at the Special Meeting will
be required to approve the Merger Agreement and the transactions contemplated
thereby.
If the Merger is approved by shareholders at the Special Meeting and the
transactions contemplated thereby are effected by the Company, any Shareholder
who: (1) files with the Company, before the taking of the vote on the approval
of the Merger, written objection to the Merger stating that he or she intends to
demand payment for his or her shares if the action is taken and (2) whose shares
are not voted in favor of the Merger, has or may have the right to demand in
writing from Citizens payment for his or her shares and an appraisal of the
value thereof. Any such shareholder is hereinafter referred to as a "Dissenting
Shareholder." Any Dissenting Shareholder shall in such cases have the rights and
duties and shall follow the procedure set forth in Sections 33-855
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through 33-872 of the Connecticut General Statutes, the text of which has been
reproduced and is attached to this Proxy Statement as Appendix C. See "Proposal
I -- Proposed Merger -- Rights of Dissenting Shareholders."
Your proxy is being solicited by the Board of Directors of the Company. A
proxy card and proxy statement for the Special Meeting are enclosed. You are
requested to fill in and sign the enclosed proxy card and to mail it promptly in
the enclosed envelope. The proxy will not be used if you are a shareholder of
record and you choose to revoke the proxy and vote in person at the Special
Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ EVELYN R. MILLER
-----------------------------------
Evelyn R. Miller
Secretary
New Haven, Connecticut
July 14, 1997
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE
OF FURTHER REQUESTS FOR PROXIES. WE URGE YOU TO SIGN AND RETURN THE
ENCLOSED PROXY AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING IN PERSON. AN ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
INTRODUCTION.............................................................................1
MEETING INFORMATION......................................................................2
Date, Place and Time...............................................................2
Record Date; Voting Rights.........................................................2
Quorum.............................................................................2
Vote Required......................................................................2
Proxies............................................................................2
Solicitation of Proxies............................................................3
Rights of Dissenting Shareholders..................................................3
PROPOSAL I -- PROPOSED MERGER............................................................3
The Parties........................................................................4
Background of the Merger...........................................................5
Reasons for the Merger; Recommendation of the Board of Directors...................5
Opinion of Financial Advisor.......................................................8
Effective Time.....................................................................8
Structure of the Merger............................................................8
Merger Consideration...............................................................9
Treatment of Stock Options.........................................................9
Financing the Merger..............................................................10
No Solicitation...................................................................10
Surrender of Stock Certificates; Payment for Shares...............................10
Conditions to the Merger..........................................................11
Representations, Warranties and Covenants of the Company, the Bank and Citizens...12
Conduct Pending the Merger........................................................13
Expenses..........................................................................16
Termination.......................................................................16
Termination Fee...................................................................17
Interests of Certain Persons in the Merger........................................18
Employee Benefits Matters.........................................................18
Rights of Dissenting Shareholders.................................................19
Certain Federal Income Tax Consequences...........................................21
Accounting Treatment..............................................................22
Regulatory Approvals..............................................................23
Waiver and Amendment..............................................................23
SECURITY OWNERSHIP......................................................................24
INDEPENDENT AUDITORS....................................................................26
SHAREHOLDER PROPOSALS...................................................................27
STOCK PRICE AND DIVIDEND INFORMATION....................................................27
INCORPORATION BY REFERENCE..............................................................27
AVAILABLE INFORMATION...................................................................28
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
MISCELLANEOUS...............................................................................
COMPANY SELECTED CONSOLIDATED FINANCIAL DATA................................................
CITIZENS FINANCIAL GROUP, INC. SELECTED CONSOLIDATED FINANCIAL DATA.........................
Appendix A -- Agreement and Plan of Merger..................................................
Appendix B -- Opinion of Financial Advisor..................................................
Appendix C -- Connecticut statutes relating to Appraisal Rights of Dissenting Shareholders..
Appendix D -- Quarterly Report on Form 10-Q for quarter ended March 31, 1997................
Appendix E -- Annual Report on Form 10-K for year ended December 31, 1996...................
</TABLE>
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<PAGE>
PRELIMINARY COPIES
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BNH BANCSHARES, INC.
209 CHURCH STREET
NEW HAVEN, CONNECTICUT 06510
(203)498-3500
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PROXY STATEMENT
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SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 14, 1997
INTRODUCTION
This Proxy Statement (the "Proxy Statement") is furnished to the
shareholders of BNH Bancshares, Inc. (the "Company") in connection with the
solicitation of proxies by the Board of Directors of the Company (the "Board of
Directors") for use at the Special Meeting of Shareholders (the "Special
Meeting") of the Company to be held at The New Haven Lawn Club, 193 Whitney
Avenue, New Haven, Connecticut 06511, on Thursday, August 14, 1997 at 10:00
a.m., local time, and at any adjournments or postponements thereof. This Proxy
Statement is first being mailed to shareholders of the Company on or about July
14, 1997.
At the Special Meeting, shareholders of the Company will be asked to
consider and vote upon a proposal to approve and adopt the Agreement and Plan of
Merger dated as of April 8, 1997 (the "Merger Agreement") by and among Citizens
Bank of Connecticut ("Citizens"), The Bank of New Haven (the "Bank") and the
Company pursuant to which Citizens will acquire the Company through a merger of
a subsidiary of Citizens and the Company (the "Holding Company Merger" or
"Merger"), with the Company as the surviving entity. Immediately following the
Merger, the Bank will be merged with and into Citizens, with Citizens as the
surviving bank (the "Bank Merger"). A copy of the Merger Agreement is attached
to this Proxy Statement as Appendix A.
At the effective time of the Merger, each outstanding share of Company
common stock, no par value ("Shares" or "Common Stock") (except for any
dissenting shares, shares held in the Company's treasury and shares held by the
Company or by Citizens or any of their respective direct or indirect
subsidiaries), will be converted into the right to receive an amount equal to
$15.50 in cash, subject to upward adjustment if the Holding Company Merger is
not consummated on or prior to August 31, 1997 and certain other conditions are
satisfied (the "Merger Consideration"), as described more fully in "PROPOSAL I
- -- PROPOSED MERGER -- Merger Consideration."
<PAGE>
MEETING INFORMATION
DATE, PLACE AND TIME
The Special Meeting will be held at The New Haven Lawn Club, 193 Whitney
Avenue, New Haven, Connecticut, on Thursday, August 14, 1997 at 10:00 a.m.,
local time.
RECORD DATE; VOTING RIGHTS
The close of business on June 20, 1997 has been fixed as the record date
(the "Record Date") for the determination of shareholders of the Company
entitled to receive notice of and to vote at the Special Meeting. There were
3,690,576 Shares outstanding as of the Record Date. The holders of each of the
Shares outstanding on the Record Date will be entitled to one vote for each
Share held of record upon each matter properly submitted at the Special Meeting.
At the Record Date, there were approximately 695 shareholders of record.
QUORUM
The presence, in person or by proxy, of at least a majority in interest of
all the Shares issued, outstanding, and entitled to vote at the Special Meeting
is necessary to constitute a quorum for the transaction of business at the
Special Meeting.
VOTE REQUIRED
Pursuant to Connecticut law, the Merger must be approved by the affirmative
vote of the holders of at least two-thirds of the Shares issued, outstanding and
entitled to vote thereon.
PROXIES
Common Stock represented by properly executed proxies received by the
Company and not revoked will be voted at the Special Meeting in accordance with
the instructions contained therein. If instructions are not given therein,
properly executed proxies will be voted FOR the proposal to approve the Merger
Agreement.
The Company intends to count the Shares present in person at the Special
Meeting but not voting and Shares for which it has received proxies, but with
respect to which holders of Shares have abstained on any matter, as present at
the Special Meeting for purposes of determining the presence or absence of a
quorum for the transaction of business. However, such non-voting Shares and
abstentions will not be counted as votes cast for purposes of determining
whether the Merger Agreement has been approved. Since the Merger requires the
affirmative vote of two-thirds of the Shares issued and outstanding, such
non-voting Shares and abstentions will have the same effect as votes against the
Merger Agreement.
In addition, brokers who hold Shares in street name for customers who are
the beneficial owners of such Shares are prohibited from giving a proxy to vote
Shares in favor of the approval of the Merger Agreement without specific
instructions from the customers who beneficially own the Shares. Accordingly,
the failure of such customers to provide instructions to their broker with
respect to their Shares will result in those Shares not being voted, which will
have the same effect as votes against the Merger Agreement.
A shareholder of record may revoke a proxy (i) by filing a written notice
of revocation with the Company or (ii) by filing a duly executed proxy bearing a
later date or (iii) by appearing at the Special Meeting in person, notifying the
Inspectors of Election, and voting by ballot at the Special Meeting. The mere
presence of a shareholder at the Special Meeting (without notification of
revocation to the Inspectors of Election) will not, by itself, automatically
revoke the shareholder's proxy.
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SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of the Company for use at the Special Meeting.
The cost of solicitation of proxies by the Company will be borne by the Company.
In addition to the solicitation of proxies by mail, the directors, officers and
employees of the Company may also solicit proxies personally or by telephone,
telecopier, or similar means. The Company also will request persons, firms and
corporations holding Shares which are beneficially owned by others to send proxy
materials to and obtain proxy instructions from those beneficial owners. The
Company will reimburse those holders for their reasonable out-of-pocket
expenses. The Company also has retained ChaseMellon Shareholder Services, L.L.C.
to assist in the distribution of proxies at a fee of $500.00 plus reimbursement
of certain out-of-pocket expenses.
RIGHTS OF DISSENTING SHAREHOLDERS
Any shareholder entitled to vote on the Holding Company Merger at the
Special Meeting shall have the right to object to the Merger and to receive
payment equal to the "fair value" of the Shares held of record by such
shareholder upon compliance with Sections 33-855 through 33-872 of the
Connecticut General Statutes, the full text of which is included as Appendix C
to the Proxy Statement. See "PROPOSAL I -- PROPOSED MERGER -- Rights of
Dissenting Shareholders."
PROPOSAL I -- PROPOSED MERGER
The following description of the Merger does not purport to be complete and
is qualified in its entirety by reference to the Merger Agreement attached
hereto as Appendix A. Shareholders are urged to read the Merger Agreement
carefully and in its entirety. Capitalized terms not defined herein shall have
the meanings assigned to them in the Merger Agreement.
THE PARTIES
BNH Bancshares, Inc. The Company is a bank holding company incorporated in
Connecticut in February 1985, the principal assets of which are the common stock
of its wholly-owned subsidiaries, the Bank and Northeastern Capital Corporation
(presently inactive). The principal business of the Bank is to provide a full
range of banking services, including checking and savings accounts and loans
primarily to small and medium-sized businesses, professional organizations and
individuals in the New Haven metropolitan area. As of March 31, 1997, the
Company had total assets of $334 million, total deposits of $289 million, total
loans, net of the allowance for loan losses, of $234 million, and shareholders'
equity of $26 million.
The Bank, a state-chartered bank and trust company, was organized under the
Connecticut banking laws on May 24, 1978 and began commercial banking operations
in New Haven, Connecticut on April 16, 1979. The Bank has concentrated its
marketing efforts in the greater New Haven area. The main office of the Bank and
its executive offices are located at 209 Church Street, New Haven, Connecticut
06510. As of March 31, 1997, the Bank operated ten additional branch offices,
two each in New Haven and Milford, and one each in Branford, Orange, Woodbridge,
North Haven, Guilford and Hamden, Connecticut. The Bank also maintains an
Operations Center in Orange, Connecticut. The Bank employed 154 full-time
equivalent employees at March 31, 1997.
Citizens Financial Group, Inc. Citizens Financial Group, Inc. ("CFG") is a
Delaware corporation and the holding company for Citizens Bank of Connecticut,
Citizens Bank of Massachusetts, Citizens Bank New Hampshire and Citizens Bank of
Rhode Island. The outstanding common stock of CFG is owned as follows: 76.5% by
The Royal Bank of Scotland plc, a company organized under the laws of Great
Britain and registered in Scotland ("Royal Bank"); and 23.5% by The Governor and
Company of the Bank of Ireland, a chartered corporation organized and existing
in Ireland. Royal Bank is a wholly owned subsidiary of The Royal Bank of
Scotland Group plc, a publicly owned financial services holding company
incorporated under the laws of Great Britain and registered in Scotland. At
March 31, 1997, CFG had total assets of approximately $15.6 billion. Citizens'
principal executive offices are located at One Citizens Plaza, Providence, Rhode
Island 02903. Citizens' telephone number at that location is (401) 456-7000.
Citizens Bank of Connecticut. Citizens is a Connecticut chartered stock
savings bank headquartered in New London, Connecticut. At March 31, 1997,
Citizens had total assets of approximately $1.4 billion. Citizens operates a
network of 31 offices in central and southwestern Connecticut, including its
principal executive offices located at 63 Eugene O'Neill Drive, New London,
Connecticut 06320.
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BACKGROUND OF THE MERGER
Over the past several years, the Company Board and its senior management
have periodically reviewed the Company's strategic alternatives and assessed
various opportunities for increasing long-term shareholder value, including
opportunities for enhancing earnings internally, for growing through
acquisitions and for affiliating with other financial institutions.
Starting in the fall of 1996 and continuing into 1997, acquisition activity
in the New England banking industry began to increase significantly. During this
period, the Company was approached on an informal basis by certain financial
institutions, including Citizens. Those meetings consisted of general
discussions regarding trends in the financial services industry and, in general
terms, the potential benefits of a combination of the Company with these other
companies. At that time, however, it was believed that long-term shareholder
value could best be enhanced by remaining independent and continuing to grow, by
acquisition or otherwise.
In the summer of 1996, Lawrence K. Fish, Chairman of CFG, contacted the
Company's President and Chief Executive Officer, F. Patrick McFadden, Jr. They
arranged to meet on July 24, 1996. At that meeting, Mr. Fish expressed his
interest in the Company and explained to Mr. McFadden that Citizens was prepared
to pay a significant but undisclosed premium for the Company and that he
believed the resulting transaction would be of great benefit to the Company's
shareholders and customers.
After consulting with members of the Company's Executive Committee and
management, Mr. McFadden informed Mr. Fish that the Board of Directors was
beginning to undertake certain reviews, including a review of technology
upgrading costs, and that the conclusions of McGladrey & Pullen's ("McGladrey")
technology experts in Minneapolis, Minnesota were going to be an important part
in determining the Company's strategic direction. McGladrey had been retained by
the Company on February 5, 1996 to assist the Bank with the development of a
Strategic Information Technology Plan. McGladrey is a public accounting firm
well known in the banking industry, especially with regard to the consulting
services it renders to community banks. Upon conclusion of a bidding process,
McGladrey was selected over other firms bidding on the project due to the
quality and cost of its services. For its services to the Bank, McGladrey
received a fee of $50,000.00. Prior to this engagement, there was no material
relationship between McGladrey (including its affiliates and representatives)
and the Company, the Bank, and any of their affiliates.
The major objectives of McGladrey's engagement were to analyze the
information systems and technology currently implemented within the Bank,
identify opportunities for improvement, recommend the best strategies to meet
the short-term and long-range requirements of the Bank, and develop a plan for
achieving the optimal usage of information systems and technology.
During the course of McGladrey's analysis, representatives of McGladrey met
with and interviewed (in person and through the use of questionnaires) employees
and the management of the Bank on various topics related to the project,
reviewed the Bank's overall strategic plan, analyzed organization charts, MIS
organization structure and responsibilities, computer facilities, software,
existing hardware and software contracts, and costs related to the existing
system, and analyzed the need for and the feasibility of achieving automation of
processes currently performed manually. In conducting its analysis, McGladrey
compared the state of the Bank's information systems and technology with that of
other banks in the Bank's market area and similaryly sized banks in other
locations. This work culminated in the development by McGladrey of a Strategic
Information Technology Plan containing a needs analysis, an estimate of the
costs of implementing the plan, and recommendations regarding the core system,
item processing, networking, automation of certain functions, imaging, alternate
delivery systems, and staffing and training.
Specifically, the plan recommended that the Bank implement a new core
banking system to replace the existing system, either replace the existing item
processing system with a new one or contract for the needed item processing work
with an outside firm, establish hardware and software standards to promote ease
of support, uniformity, and sharing of information, automate new account and
teller platform functions, implement telephone and debit card banking, and hire
new personnel on a temporary basis to implement these recommendations. McGladrey
estimated that the cost to the Bank of implementing the recommendations
contained in the strategic plan would be up to $3 million.
McGladrey's final report was issued in August, 1996, and received a full
review at the Board level on September 5, 1996. The Board examined the costs of
technology set forth in the report and considered the facts that the Company was
now the largest independent commercial bank in the State of Connecticut, that it
had essentially completed the recovery and repair of its commercial loan
portfolio and that it recognized substantially all of its deferred tax asset
during fiscal 1996. The Board decided it would be an appropriate time to engage
Friedman, Billings, Ramsey & Co., Inc. ("FBR") to explore, on the Company's
behalf, ways to maximize shareholder value.
On October 15, 1996, at a meeting at which the entire Board of Directors
was present, Ms. Karen K. Edwards and Mr. Paul Click, of FBR, made a
presentation concerning their beliefs with respect to maximizing shareholder
value, and FBR was subsequently retained by the Company for this purpose.
As the result of interviews with various members of senior management of
the Company as well as an on-premise review of certain Bank information by
individuals from FBR in February, 1997, FBR prepared an information document.
The completed document was delivered to Mr. Fish and his associates on March 3,
1997 by representatives of FBR, at which time FBR discussed the strategic
implications and imperatives of a transaction between Citizens and the Company.
A Negotiating Committee, consisting of the Company Board members Dermer, Porto
and Romei (the "Committee"), Mr. McFadden and Ms. Karen K. Edwards and Mr.
William L. Boyan III, the representatives of FBR, met with Mr. Bradford B. Kopp,
Executive Vice President and Chief Financial Officer of CFG on March 21, 1997.
At this meeting, Mr. Kopp presented a proposal to acquire the Company. Following
the meeting, the Negotiating Committee advised Citizens that further discussion
would not be productive unless Citizens would be prepared to offer a higher
price than previously indicated.
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On April 4th, the Committee and Messrs. McFadden and Trentacosta met with
Mr. Kopp. After lengthy discussion and telephone conversations with
representatives of FBR, an offer of $15.50 a share, subject to various
conditions, including due diligence and the satisfactory negotiation of an
agreement, was made, and the Committee indicated that it would recommend, from a
financial perspective, that the Company's Board accept the offer. The Company's
Board met later that day to consider the Committee's recommendation, discuss
open issues regarding the definitive agreement being negotiated, and to
authorize Citizens to proceed with off-site due diligence.
Due diligence was conducted on April 4th and 5th and, on April 7th, in a
conversation between management of the Company and Mr. Kopp, Mr. Kopp indicated
that CFG was prepared to proceed. At a Special Meeting of the Company's Board of
Directors held on the afternoon of April 7th, the Board agreed to accept the
offer from Citizens. All Directors present, with the exception of Martin R.
Anastasio, voted in favor of acceptance of the offer. Mr. Anastasio's reason
for voting against the Merger was that he believed that maximum value for the
Shares could best be obtained by giving other institutions which had recently
made bank acquisitions in Connecticut an opportunity to make a proposal to
acquire the Company.
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS
In reaching its determination to approve and adopt the Merger Agreement and
the transactions contemplated thereby, the Company's Board of Directors
considered a number of factors, including, without limitation, the following:
(i) the value being offered the Company's shareholders in relation to the book
value and earnings per share of the Company's Common Stock; (ii) the financial
terms of other recent business combinations in the local financial services
industry; (iii) the fact that the Merger Consideration reflects a significant
premium for the Company's Common Stock; (iv) the compatibility of the respective
business management philosophies of the Company and Citizens; (v) the ability of
Citizens to provide comprehensive financial services to the local communities
served by the Company; (vi) the opportunities for career advancement available
to Bank employees who continue as employees of Citizens; (vii) the opinion of
FBR that the terms of the Merger are fair from a financial point of view to the
Company's shareholders, subject to terms set forth in its opinion; and (viii)
the long-term interests of the Company and its shareholders. The Board also was
concerned about and considered the fact that if the merger were consummated the
New Haven community would lose its last locally based commercial bank, and the
possibility that the merger would have an adverse impact on the Bank's
employees.
In the event the merger is not approved by the shareholders, the Company
will continue its efforts to enhance shareholder value through internal growth
and development. Management believes that to remain competitive in the New Haven
banking market the Company would be required to improve the information systems
and other technology currently in use by the Bank. The Board believes that
though this process might enable the Bank to reduce its workforce, the expense
involved and could result in reduced earnings over a number of years and would
make it more difficult for the Company to achieve its long-term objectives.
Based on the factors described above, the Company's Board of Directors
determined that the Merger was desirable and in the best interests of the
Company's shareholders and approved the Merger Agreement. THE BOARD OF DIRECTORS
OF THE COMPANY RECOMMENDS A VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY.
OPINION OF FINANCIAL ADVISOR
FBR was retained by the Company in 1996 to act as its financial advisor in
connection with a review of the Company's strategic alternatives. At the meeting
of the Company's Board held on April 7, 1997, FBR delivered its opinion to the
effect that as of the date of such opinion, the proposed consideration to be
received by the holders of Shares pursuant to the Merger Agreement was fair from
a financial point of view to such holders. FBR has reconfirmed its April 7, 1997
opinion by delivery of its written opinion to the Company Board, dated the date
of this Proxy Statement (the "FBR Opinion"), stating that, as of the date hereof
and based on the matters set forth in such opinion, the proposed consideration
to be received by the holders of Shares pursuant to the Merger Agreement is fair
to such holders from a financial point of view.
THE FULL TEXT OF THE FBR OPINION, WHICH SETS FORTH THE ASSUMPTIONS MADE,
PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN, IS
ATTACHED AS APPENDIX B TO THIS PROXY STATEMENT AND IS INCORPORATED HEREIN BY
REFERENCE. THE DESCRIPTION OF THE FBR OPINION SET FORTH HEREIN IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO APPENDIX B. THE COMPANY'S SHAREHOLDERS ARE URGED TO
READ THE FBR OPINION IN ITS ENTIRETY. FBR'S OPINION IS ADDRESSED ONLY TO THE
COMPANY'S BOARD OF DIRECTORS AND DIRECTED ONLY TO THE CONSIDERATION TO BE
RECEIVED IN THE MERGER BY THE HOLDERS OF THE COMPANY SHARES AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD
VOTE AT THE SPECIAL MEETING.
FBR is a nationally recognized investment banking firm and was selected by
the Company based on the firm's reputation and experience in investment banking
in general, its recognized expertise in the valuation of banking businesses and
because of its familiarity with, and prior work for, the Company. FBR, as part
of its investment banking business, is frequently engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes.
In connection with rendering the opinions dated April 7, 1997 and the date
hereof, FBR, among other things: (i) reviewed the Merger Agreement; (ii)
reviewed the Annual Reports to Shareholders of the Company for the fiscal years
ended December 31, 1993 through 1995 and Annual Reports on Form 10-K of the
Company for the fiscal years ended December 31, 1993 through 1996, as well as
Quarterly Reports of the Company on Form 10-Q for the three-month periods ended
March 31, 1996, June 30, 1996 and September 30, 1996, and certain other
communications from the Company to its Shareholders; (iii) reviewed certain
financial analyses and forecasts prepared by the Company's management; (iv)
discussed with members of senior management of the Company the past and current
business
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operations, regulatory relationships, financial condition and future prospects
of the Company; (v) reviewed the reported price and trading activity for the
Shares; (vi) compared certain financial and stock market information for the
Company with similar information for certain other companies, the securities of
which are publicly traded; (vii) reviewed the financial terms of certain recent
business combinations in the banking industry; and (viii) performed such other
studies and analyses as it considered appropriate.
In connection with rendering the FBR Opinion, as set forth therein, FBR
relied without independent verification upon the accuracy and completeness of
all the financial and other information reviewed by it for purposes of rendering
its opinion. FBR has further relied on the assurances of management of the
Company and CFG that they are not aware of any facts that would make such
financial or other information relating to such entities inaccurate or
misleading. FBR also has assumed that there has been no material change in the
Company's or Citizens' assets, financial condition, results of operations,
business or prospects since December 31, 1996. FBR did not review individual
credit files nor did it make an independent evaluation or appraisal of any
assets or liabilities of the Company or any of its subsidiaries and was not
furnished with any such evaluation or appraisal.
The following is a summary of the material analyses presented by FBR to the
Company's Board of Directors in connection with providing its opinion dated
April 7, 1997 and the date of this Proxy Statement to the Company's Board, and
does not purport to be a complete description of the analyses by FBR. FBR
believes that its analyses must be considered as a whole and that selecting
portions of its analyses without considering all factors and analyses would
create an incomplete view of the analyses and processes underlying its opinion.
In its analyses, FBR relied upon numerous assumptions made by the Company with
respect to industry performance, general business and economic conditions, and
other matters, many of which are beyond the control of the Company. Analyses
based upon forecasts of future results are not necessarily indicative of actual
values, which may be significantly more or less favorable than suggested by such
analyses. No company or transaction used as a comparison in the analyses is
identical to the Company or to the Merger. Additionally, estimates of the value
of businesses do not purport to be appraisals or necessarily reflective of the
prices at which businesses actually may be sold. Because such estimates are
inherently subject to uncertainty, neither the Company's Board, nor FBR, nor any
other person assumes responsibility for the accuracy of such estimates. FBR's
analyses were prepared solely for purposes of its opinions rendered April 7,
1997 and the date of this Proxy Statement, were provided to the Company's Board
regarding the fairness from a financial point of view of the proposed cash
consideration to be received for Shares pursuant to the Merger by holders of
such Shares, and do not purport to be appraisals or necessarily reflect the
prices at which the Company or its securities actually may be sold. The
preparation of a fairness opinion is a complex process and is not necessarily
susceptible to partial analysis or a summary description.
Summary of Terms of Merger. FBR reviewed the terms of the proposed Merger,
including the aggregate amount of consideration, the form of consideration, and
the percentage of premium to the current market price for the Common Stock. The
amount of consideration is $15.50 per Share, subject to upward adjustment under
certain circumstances, all of which is to be paid in cash (the "Cash
Consideration"). The Cash Consideration represented a premium over the closing
price of the Shares on April 7, 1997, April 4, 1997 and March 4, 1997 of 14.8%,
26.5% and 29.2%, respectively.
FBR stated that the Cash Consideration represented a multiple of (i) 41.9
times the Company's earnings per Share for the three months ended December 31,
1996 on an annualized basis; (ii) 43.1 times the Company's earnings per Share
for the twelve months ended December 31, 1996 assuming taxes of 40%; (iii) 22.5
times the analysts' estimate of the Company's 1997 earnings per Share; and (iv)
2.2 times the Company's book value per Share as of December 31, 1996. The Cash
Consideration also represented a deposit premium of 10.54 percent based on
tangible book value per Sha`re as of December 31, 1996.
The actual earnings results for the Company for the twelve months ended
December 31, 1996 included a tax benefit of $7.5 million taken in the third
quarter of 1996. The forecasts and projections furnished to FBR for the Company
were prepared by the management of the Company. As a matter of policy, the
Company does not publicly disclose internal management forecasts, projections or
estimates of the type furnished to FBR in connection with its analysis of the
Merger, and such forecasts, projections and estimates were not prepared with a
view towards public disclosure. These forecasts, projections and estimates were
based on numerous variables and assumptions which are inherently uncertain and
which may not be within the control of management, including, without
limitation, general economic, regulatory and competitive conditions.
Accordingly, actual results could vary materially from those set forth in such
forecasts, projections and estimates.
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Comparable Transaction Analysis. FBR reviewed certain information relating
to transactions involving acquisitions of banks that were announced between
January 1, 1996 and April 5, 1997. In conjunction with its analysis, FBR
reviewed valuation multiples based on price to book value, price to tangible
book value, price to latest twelve months earnings per share and the premium
over tangible book value as a percentage of deposits. FBR compared Citizens'
pending acquisition of the Company to transactions involving banks nationwide,
banks in New England, banks in Connecticut, banks with assets between $300 and
$400 million, banks with a ratio of nonperforming assets to total assets between
1% and 2%, and bank transactions where the consideration was paid in cash (the
"Comparable Groups"). The following table presents the average and median
multiples and ratios for the Comparable Groups.
<TABLE>
SUMMARY OF BANK MERGER & ACQUISITION TRANSACTIONS
JANUARY 1, 1996 - APRIL 4, 1997
<CAPTION>
Announced
----------------------------------------------------------
Deal Price/ Deal Price/ Deal Price/ Tangible Book
Deal Book Tangible Book 4-Qtr Prem/CoreDeps
Value (%) (%) EPS (x) (%)
----- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Nationwide 362 Transactions
Average 154.0 194.31 199.60 18.03 11.73
Median 16.7 190.00 192.39 16.57 10.80
New England 13 Transactions
Average 104.5 188.08 188.57 17.12 9.74
Median 22.0 175.35 176.74 15.13 9.24
Connecticut 5 Transactions
Average 53.8 204.66 205.22 16.70 12.61
Median 31.9 214.46 214.46 12.36 13.01
Assets $300m-$400m 15 Transactions
Average 63.1 204.60 209.91 21.47 13.09
Median 65.0 195.33 210.64 16.92 12.63
NPAs/Assets(1%-2%) 58 Transactions
Average 61.1 196.04 198.83 17.74 11.56
Median 22.0 191.17 196.65 17.28 11.06
Cash Deals 122 Transactions
Average 22.1 168.29 171.04 17.15 8.39
Median 9.9 172.03 173.37 14.96 8.15
BNH Bancshares, Inc. 57.1 222.83 222.83 10.54
- --------------------
Earnings Multiples: 3 Months Ended December 31, 1996 Annualized 41.87
12 Months Ended December 31, 1996 Assuming 40% Taxes 43.06
Analysts' 1997 Earnings Estimate 22.46
</TABLE>
The price to book value multiple and price to tangible book value multiple
for the Merger at announcement was greater than the average and median for all
of the Comparable Groups. On a multiple of earnings basis utilizing the three
methodologies shown in the table above, the Consideration reflects an earnings
multiple that is greater than the average and median for all the Comparable
Groups.
Present Value Analysis. Using a present value analysis, FBR estimated the
present value of the future earnings streams and terminal values of the Company
through the year 2000 based on the Company management's estimates of the
Company's earnings per Share and analysts' estimates of the Company's earnings
per Share for 1997 and 1998 and assuming long-term earnings growth rates of 15
percent thereafter. FBR used discount rates of 10 percent and 15 percent and
terminal multiples of 15 times, 15.5 times, 16 times, 16.5 times, 17 times and
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17.5 times projected earnings in the year 2000. The present value of estimated
earnings per Share of the Company using the analysts' assumptions ranged from a
low of $9.67 per Share (based on a multiple of 15 times, a discount rate of 15
percent and a long-term earnings growth rate of 15 percent) to a high of $14.08
per share (based on a multiple of 17.5 times, a discount rate of 10 percent, and
a long-term earnings growth rate of 15 percent).
FBR has provided certain investment banking advisory services to the
Company from time to time, for which it has received, and will receive,
customary compensation, including acting as financial advisor for the Company in
connection with the Merger Agreement. Other investment banking services provided
by FBR to the Company include services provided to the Company in connection
with a Common Stock Rights Offering in July 1993. The Company's agreement with
FBR provides for an incentive-based fee based on an escalating percentage of the
aggregate consideration to be paid to the Company's Shareholders. For its
services as financial advisor to the Company in connection with the Merger, FBR
will receive a transaction fee equal to 1.72% of the aggregate consideration
paid to the Company's Shareholders and option holders, or approximately $984,000
(the "Transaction Fee"). The Transaction Fee is payable upon consummation of the
Merger. The Company has also agreed to pay FBR its reasonable out-of-pocket
expenses, including the reasonable fees and disbursements of its counsel, and to
indemnify FBR against certain liabilities, including certain liabilities arising
under the federal securities laws.
FBR has advised the Company that, in the ordinary course of its business as
a full-service securities firm, FBR may, subject to certain restrictions,
actively trade the equity and/or debt securities of the Company, The Royal Bank
of Scotland plc and The Governor and Company of the Bank of Ireland for its own
account or for the accounts of its customers, and, accordingly, may at any time
hold a long or short position in such securities.
EFFECTIVE TIME
The closing of the transactions contemplated by the Merger Agreement will
take place on a date (the "Closing Date") that is within ten business days after
the satisfaction or waiver of all of the conditions to the Merger, as set forth
in the Merger Agreement. See "Conditions to the Merger." On the Closing Date, a
duly executed Certificate of Merger will be filed with the Secretary of State of
the State of Connecticut in accordance with the General Statutes of Connecticut
("Connecticut Law"). The Effective Time of the Holding Company Merger shall be
at such time as the Certificate of Merger is filed with the Secretary of State,
or at such later time as is specified in the Certificate of Merger. There can be
no assurance given that any or all of the approvals required to consummate the
Merger will be obtained or that the Merger will be completed at any time.
STRUCTURE OF THE MERGER
The Merger Agreement contemplates that Citizens will form a corporation
under Connecticut Law as a subsidiary ("Merger Sub") for the purpose of
facilitating the Holding Company Merger. At the Effective Time, Merger Sub will
be merged with the Company, such that the Company will be the surviving entity
(the "Surviving Corporation"), and the separate corporate existence of Merger
Sub will cease. The directors and officers of Merger Sub immediately prior to
the Effective Time will be the initial directors and officers of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation. Unless otherwise
determined by Citizens prior to the Effective Time, as of the Effective Time the
Certificate of Incorporation of the Surviving Corporation will be the
Certificate of Incorporation of the Company immediately prior to the Effective
Time, and the By-Laws of the Surviving Corporation will be the By-Laws of Merger
Sub immediately prior to the Effective Time.
The Merger Agreement further provides that following the execution and
delivery of the Merger Agreement, Citizens and the Bank will enter into an
Agreement (the "Bank Merger Agreement") pursuant to which on the date the Bank
Merger Agreement and the approval of the Banking Commissioner of the State of
Connecticut are filed with the Secretary of State of the State of Connecticut
(the "Bank Merger Effective Time"), the Bank Merger will occur, the separate
corporate existence of the Bank will cease, and Citizens will be the
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surviving bank (the "Surviving Bank"). The initial directors and officers of the
Surviving Bank will be the directors and officers of Citizens immediately prior
to the Bank Merger Effective Time, plus those two individuals to be named on
Annex A to the Bank Merger Agreement who were directors of the Bank prior to the
consummation of the Bank Merger.
MERGER CONSIDERATION
At the Effective Time, by virtue of the Holding Company Merger and without
any action on the part of Merger Sub, the Company, or the holders of any of the
Shares, each Share issued and outstanding immediately prior to the Effective
Time (other than any Shares held in the Company's treasury, or by Merger Sub,
Citizens or any direct or indirect wholly owned subsidiary of Citizens or the
Company and Shares held by dissenting shareholders) will be cancelled and
converted automatically into the right to receive an amount equal to $15.50 in
cash (the "Fixed Consideration"), subject to possible upward adjustment as
described below. Citizens, which is expecting a $65 million capital
contribution from CFG, will be the source of all funds necessary to pay the
Merger Consideration.
If the Effective Time has not occurred on or prior to October 15, 1997 and
(i) the Merger has been approved by the Company's shareholders (ii) the failure
of the Effective Time to have occurred on or prior to October 15, 1997 is not
attributable to acts or omissions by or circumstances related to the Company or
the Bank, then interest at the rate of 6% per year will be paid on the cash
consideration from October 15 through the Effective Time.
After the consummation of the Holding Company Merger, holders of
certificates that prior to the Holding Company Merger represented the Shares
will have no rights with respect to those Shares except that holders other than
Citizens, the Bank, or any of their subsidiaries will have the right to
surrender the certificates for the Merger Consideration or to perfect their
rights of appraisal pursuant to Sections 33-855 through 33-872 of the
Connecticut General Statutes, the text of which is attached to this Proxy
Statement as Appendix C. After the consummation of the Holding Company Merger,
holders of the Shares will have no continuing equity interest in the Company or
Citizens and, therefore, will not share in future earnings, dividends or growth
of the Surviving Bank.
Each share of the common stock of Merger Sub issued and outstanding
immediately prior to the Effective Time will be converted into and exchanged for
one validly issued, fully paid and nonassessable share of the common stock of
the Surviving Corporation.
TREATMENT OF STOCK OPTIONS
Prior to the Effective Time, the Company will take all such action as is
necessary to terminate the 1986 BNH Bancshares, Inc. Stock Option Plan, the BNH
Bancshares, Inc. 1992 Stock Incentive Plan, and the BNH Bancshares, Inc. Stock
Option Plan for Non-Employee Directors, each as amended to date (collectively,
the "Company Option Plans"), and will provide written notice to each holder of a
then-outstanding stock option to purchase Shares pursuant to the Company Option
Plans (whether or not such stock option is then vested or exercisable), that
such stock option will be, as of the date of such notice, exercisable in full
and that such stock option will terminate at the Effective Time and that, if
such stock option is not exercised or otherwise terminated before the Effective
Time, such holder will be entitled to receive in cancellation of such option a
cash payment from the Company at the Closing in an amount equal to the excess of
the Merger Consideration over the per share
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exercise price of such stock option, multiplied by the number of Shares covered
by such stock option, subject to any required withholding of taxes. Such cash
payments will amount to approximately $1,050,000.
Subject to the foregoing, the Company Option Plans and all options issued
thereunder will terminate at the Effective Time. Pursuant to the Merger
Agreement, directors and officers holding substantially all of the options have
entered into agreements with Citizens that such directors and officers will not
exercise any options prior to the Effective Time. See "--Interests of Certain
Persons in the Merger."
FINANCING THE MERGER
Assuming that no Company shareholder exercises appraisal rights in
connection with the Holding Company Merger, that the Holding Company Merger
occurs on or before August 31, 1997, and based upon a total of 3,690,576 shares
of the Company Common Stock, the aggregate amount of consideration to be paid to
the Company's shareholders will be approximately $57.2 million. Citizens has
represented and warranted in the Merger Agreement that it and Merger Sub will
have available to them sources of capital and financing sufficient to fulfill
their obligations under the Merger Agreement.
NO SOLICITATION
The Company and the Bank have agreed that, unless and until the Merger
Agreement is terminated, none of the Company, the Bank, or any of their
subsidiaries will, directly or indirectly, through any officer, director, agent
or otherwise, solicit or initiate the submission of any proposal or offer
concerning any acquisition or purchase of all or (other than in the ordinary
course of business) any material portion of the assets of, or any equity
interest in, the Company, the Bank, or any of their subsidiaries or any business
combination with the Company, the Bank or any of their subsidiaries or (except
to the extent determined by the Company Board, upon the opinion of its
independent counsel, to be required by fiduciary obligations under applicable
law), to participate in any negotiations regarding, or furnish to any other
person any information with respect to, or otherwise cooperate in any way with
any effort or attempt by any other person to do or seek any of the foregoing.
Pursuant to the Merger Agreement, the Company and the Bank have also agreed
to cease and cause to be terminated all discussions and negotiations with any
parties existing prior to the execution of the Merger Agreement with respect to
any of the foregoing, to communicate promptly to Citizens the terms of any
proposal or offer or any inquiry or contact with any person with respect to any
of the foregoing, to identify any party making such proposal or inquiry, and not
to release any third party from or waive any provision of any confidentiality or
standstill agreement to which either the Company or the Bank is a party.
SURRENDER OF STOCK CERTIFICATES; PAYMENT FOR SHARES
The cancellation of Shares held by shareholders prior to the Merger and the
conversion of such Shares into the right to receive the Merger Consideration
will occur automatically at the Effective Time. Immediately prior to the
Effective Time, Citizens will cause to be deposited with a bank or trust company
designated by it to act as agent (the "Paying Agent") such amount of cash as is
sufficient to pay the aggregate Merger Consideration.
At the Effective Time, all Shares owned directly or indirectly by Citizens,
Merger Sub, or by any direct or indirect wholly owned subsidiary of Citizens or
the Company immediately prior to the Effective Time will be cancelled without
any conversion thereof, and no payment or distribution will be made with respect
thereto. All Shares held by the Company as treasury stock will be cancelled and
will cease to exist and no Merger Consideration will be paid in exchange
therefor.
Promptly after the Effective Time (but in no event more than three business
days thereafter), Citizens and the Surviving Corporation will cause to be mailed
to each holder of record of the Shares as of the Effective
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Time a letter of transmittal and instructions for use in effecting the surrender
of certificates representing the Shares. After the Effective Time, each holder
of a certificate representing the Shares will, upon surrender to the Paying
Agent of the certificate for exchange and cancellation, together with a duly
executed letter of transmittal and such other documentation as may be required
pursuant to the instructions contained in the letter of transmittal, be entitled
to receive an amount of cash equal to the Merger Consideration multiplied by the
number of Shares evidenced by the certificate.
No interest will be paid or accrued on the Merger Consideration upon the
surrender of any certificate for the benefit of the holder of such certificate.
If payment of the Merger Consideration is to be paid to a person other than the
person in whose name the surrendered certificate is registered on the stock
transfer books of the Company, payment will be conditioned on proper endorsement
of the certificate and the payment (or proof of payment or proof that such
payment is not required) by the person requesting payment of all transfer and
other taxes required by reason of the payment of the Merger Consideration to a
person other than the registered holder. In the event a certificate evidencing
ownership of the Shares has been lost, stolen or destroyed, the paying agent
will issue the Merger Consideration to the person claiming such certificate has
been lost, stolen or destroyed in exchange for an affidavit of the fact of loss,
theft, or destruction and, if reasonably directed by Citizens or the Surviving
Corporation, the posting of a bond to indemnify Citizens and the Surviving
Corporation against any claim arising in connection with the lost, stolen or
destroyed certificate.
Any Shares as to which the holder has duly demanded payment of the fair
value pursuant to Sections 33-855 through 33-872 of the Connecticut General
Statutes will not be converted into the right to receive the Merger
Consideration, unless and until such shareholders shall have failed to perfect
or shall have effectively withdrawn or lost their right of appraisal. See
"--Rights of Dissenting Shareholders." Any Shares of Common Stock held by a
shareholder who fails to perfect or withdraws or otherwise loses such right of
appraisal will thereupon be deemed to have been converted into the right to
receive and become exchangeable for, at the Effective Time, the Merger
Consideration.
At the close of business on the Effective Date, the stock transfer books of
the Company will be closed and thereafter there will be no further registration
of transfers of the Shares.
At any time following the sixth month after the Effective Time, Citizens
and the Surviving Corporation will be entitled to require the Paying Agent to
deliver to them any funds which had been made available to the Paying Agent and
not disbursed to holders of Shares. Any holders of Shares who have not exchanged
their certificates as of that date may look only to Citizens and the Surviving
Corporation for payment of the Merger Consideration, subject to abandoned
property, escheat and other similar laws, and only as general creditors thereof
with respect to any Merger Consideration that may be payable upon due surrender
of the certificates held by them. None of Citizens, the Surviving Corporation,
or the Paying Agent will be liable to any holder of Shares for any amount
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
CONDITIONS TO THE MERGER
The obligations of the Company, the Bank and Citizens to effect the Holding
Company Merger are subject to the satisfaction or waiver of a number of
conditions at or prior to the Effective Time, including the following: (i) the
Merger Agreement shall have been approved and adopted by the requisite vote of
the shareholders of the Company; (ii) all requisite regulatory approvals,
authorizations and consents required to consummate the Merger shall have been
received and remain in full force and effect, and all associated waiting periods
shall have expired or terminated; (iii) no order, injunction or decree issued by
federal or state governmental authority or other agency or commission or federal
or state court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger or any of the other transactions
contemplated by the Merger Agreement or the Bank Merger Agreement shall be in
effect and no proceeding initiated by any governmental entity seeking any of the
foregoing shall be pending; and (iv) no statute, rule,
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regulation, order, injunction or decree shall have been enacted, entered,
promulgated or enforced by any governmental entity which prohibits, restricts or
makes illegal the consummation of the Merger or any of the other transactions
contemplated by the Merger Agreement or the Bank Merger Agreement.
The obligations of Citizens and Merger Sub to effect the Holding Company
Merger also are subject to the satisfaction of the following additional
conditions: (i) the representations and warranties made by the Company and the
Bank shall be true in all material respects as of the date of the Merger
Agreement and (to the extent they do not speak as of an earlier date) as of the
Effective Date, and the Chief Executive Officer and the Chief Financial Officer
of the Company and the Bank shall have signed and Citizens shall have received a
certificate to that effect dated as of the Effective Date; (ii) the Company and
the Bank shall have performed in all material respects all obligations and
complied in all material respects with all agreements or covenants of the
Company and the Bank to be performed or complied with by them at or prior to the
Effective Date under the Merger Agreement and the Bank Merger Agreement, and the
Chief Executive Officer and the Chief Financial Officer of the Company and the
Bank shall have signed and Citizens shall have received a certificate to that
effect dated as of the Effective Date; (iii) the consent, approval, or waiver of
each person whose consent or approval shall be required in order to permit the
lawful succession by the Surviving Corporation pursuant to the Holding Company
Merger or the Surviving Bank as survivor to the Bank Merger, as the case may be,
to any material obligation, right or interest of the Company, the Bank or any of
their subsidiaries under any agreement or instrument shall have been obtained,
and none of such permits, consents, waivers, clearances, approvals and
authorizations shall contain any term or condition which would materially impair
the value of the Company and the Bank to Citizens; (iv) none of the requisite
regulatory approvals shall impose any material term, condition or restriction
upon any of the parties that Citizens reasonably determines would materially and
adversely affect the business, operations, financial condition, property or
assets of the Surviving Bank or otherwise materially impair the value of the
Bank to Citizens in a manner which is material and adverse to Citizens and its
subsidiaries taken as a whole; (v) agreements regarding the exercise of stock
options granted pursuant to the Company Option Plans shall have been executed
and delivered by directors and officers of the Company and the Bank who held, as
of the date of the Merger Agreement, 90% of the outstanding stock options under
the Company Option Plans; (vi) the employment agreement dated as of May 1, 1993
by and between the Bank and F. Patrick McFadden, Jr., shall have been terminated
and shall be completely without effect; and (vii) Citizens shall have received a
legal opinion from counsel to the Company and the Bank, dated as of the Closing
Date, opining as to the legal existence of the Bank and the Company, the
authority of each to carry on its business, to enter into and be bound by the
Agreement, and to perform its obligations thereunder, the due authorization and
issuance of the Company's Common Stock and the nature of the capital structure
of the Company, the absence of litigation, that consummation of the Merger and
the transactions contemplated thereby will not cause either the Company or the
Bank to violate or otherwise breach any provision in a certificate of
incorporation or by-laws, or any other agreement or arrangement with third
parties, and that all necessary regulatory approvals have been obtained.
The obligations of the Company and the Bank to effect the Holding Company
Merger are also subject to the satisfaction of the following additional
conditions: (i) the representations and warranties made by Citizens and Merger
Sub shall be true in all material respects as of the date of the Merger
Agreement and (to the extent they do not speak as of an earlier date) as of the
Effective Date, and the Chief Executive Officer and the Chief Financial Officer
of Citizens shall have signed and the Company shall have received a certificate
to that effect dated as of the Effective Date; and (ii) Citizens and Merger Sub
shall have performed in all material respects all obligations and complied in
all material respects with all agreements or covenants to be performed or
complied with by such parties under Merger Agreement, and the Chief Executive
Officer and the Chief Financial Officer of Citizens shall have signed and the
Company shall have received a certificate to that effect dated as of the
Effective Date.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY, THE BANK AND CITIZENS
The Company, the Bank, and Citizens have made certain representations and
warranties to one another with respect to: (i) corporate organization and
existence; (ii) authority and power to execute the Merger Agreement, the Bank
Merger Agreement and the consummation of the transactions contemplated thereby
and the absence of any conflicting obligations in this regard; (iii) required
consents and approvals; (iv) the accuracy of their respective financial
statements; (v) the broker's fees incurred in connection with any of the
transactions contemplated by the Merger Agreement or the Bank Merger Agreement;
and (vi) the truth and accuracy of
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information contained in and supplied for inclusion in the Proxy Statement to be
prepared in connection with the transactions.
The Company and the Bank have made certain additional representations and
warranties to Citizens with respect to: (i) subsidiaries; (ii) Certificates of
Incorporation, By-Laws, corporate records; (iii) capitalization; (iv) compliance
with general laws; (v) the timeliness of the filing of certain required
regulatory reports; (vi) the absence of certain changes or events; (vii) the
absence of litigation; (viii) employee benefits plans and the administration
thereof; (ix) labor matters; (x) property and leases; (xi) the filing of tax
returns and payment of taxes; (xii) material contracts; (xiii) loan portfolios;
(xiv) investment securities; (xv) derivative transactions; (xvi) insurance;
(xvii) environmental matters; (xviii) intellectual property; (xix) the
administration of fiduciary accounts; (xx) agreements with bank regulators;
(xxi) material interests of certain persons; (xxii) the inapplicability of
certain state antitakeover laws; (xxiii) the status of certain legal opinions;
and (xxiv) the truth and accuracy of the information provided to Citizens.
Citizens also has made certain additional representations to the Company
with respect to (i) the adequacy of the capitalization of Citizens; and (ii) the
availability of capital and financing sufficient to fulfill its obligations
under the Merger Agreement.
CONDUCT PENDING THE MERGER
The Company and the Bank have agreed that, prior to the Effective Time, the
business of the Company, the Bank and their subsidiaries will be conducted only
in the usual, regular and ordinary course of business, in a manner consistent
with prudent banking practice, and in substantially the same manner as prior to
the execution of the Merger Agreement, and have further agreed to continue to
operate in the same geographic markets serving the same market segments and
without significant increase in the rate of growth of the Bank's loan portfolio,
and to use their reasonable best efforts to preserve substantially intact the
business organization of the Company, the Bank and their subsidiaries, to keep
available the present services of officers, employees and consultants, to
preserve current relationships and goodwill and to implement a branch employee
incentive program.
The Company and the Bank have further agreed that, except as expressly
contemplated or permitted by the Merger Agreement or the Bank Merger Agreement,
or with the prior written consent of Citizens (which consent will not be
unreasonably withheld), none of the Company, the Bank, or any of their
subsidiaries will do (or publicly announce an intention to do) any of the
following:
(i) amend or otherwise change its Certificate of Incorporation or
By-Laws or equivalent organizational documents;
(ii) issue, deliver, sell, pledge, dispose of, grant, encumber, or
authorize the issuance, delivery, sale, pledge, disposition, grant or
encumbrance of, any shares of capital stock of any class of the Company,
the Bank or any of their subsidiaries, or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of
such capital stock, or any other ownership interest, of the Company, the
Bank or any of their subsidiaries, or enter into any agreement with respect
to any of the foregoing (except for the issuance of a maximum of 150,954
shares issuable pursuant to officer and director stock options outstanding
under the Company Option Plans);
(iii) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock;
(iv) split, combine or reclassify any shares of its capital stock or
issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock,
except
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upon the exercise or fulfillment of rights or options issued or existing
pursuant to employee benefit plans, programs or arrangements, all to the
extent outstanding and in existence on the date of the Merger Agreement;
(v) repurchase, redeem or otherwise acquire any shares of the capital
stock of the Company, the Bank or any of their subsidiaries, or any
securities convertible into or exercisable for any shares of the capital
stock of the Company, the Bank or any of their subsidiaries;
(vi) enter into any new line of business or materially expand the
business currently conducted by the Company, the Bank and their
subsidiaries or file any application to relocate or terminate the
operations of any banking office of the Company, the Bank or any of their
subsidiaries;
(vii) acquire or agree to acquire, by merging or consolidating with,
or by purchasing an equity interest in or a portion of the assets of, or by
any other manner, any business or any corporation, partnership, other
business organization or any division thereof or any material amount of
assets, other than subject to Section 5.05 of the Merger Agreement;
(viii) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any individual,
corporation or other entity, or make any loan or advance, other than in the
ordinary course of business consistent with past practice;
(ix) enter into any contract or agreement other than in the ordinary
course of business consistent with past practice and, in any event,
regardless of whether consistent with past practice, undertake or enter
into (i) any contract or other commitment (other than contracts or
commitments related to Loans) involving an aggregate payment by or to the
Company, the Bank or any of their subsidiaries under any such contract or
commitment of more than $100,000 or having a term of one year or more from
the time of execution, or (ii) any contract or commitment, or related
contracts or commitments, for Loans having an original principal amount in
excess of $250,000;
(x) authorize any single capital expenditure which is in excess of
$50,000 or capital expenditures which are, in the aggregate, in excess of
$100,000 for the Company, the Bank and their subsidiaries taken as a whole,
except for written contractual commitments entered into prior to the date
of the Merger Agreement as disclosed in the Disclosure Schedule and for
capital expenditures (A) not to exceed $150,000 related to the Bank's
acquisition of its Whalley Norton branch site and (B) not to exceed
$450,000 relating to its wide area network service;
(xi) (i) except as required by applicable law, (A) adopt, amend, renew
or terminate any Plan or any agreement, arrangement, plan or policy between
the Company, the Bank or any of their subsidiaries and one or more of its
current or former directors, officers or employees, or (B) increase in any
manner the compensation or fringe benefits of any director, officer or
employee or pay any benefit not required by any plan or agreement as in
effect as of the date hereof (including, without limitation, the granting
of stock options, stock appreciation rights, restricted stock, restricted
stock units or performance units or shares); provided, however, that the
Company and the Bank may, in consultation with Purchaser, increase the
directors' fees payable to the directors of the Company or the Bank in the
ordinary course of business consistent with past practice and grant salary
increases to its employees (other than those employees who are officers) at
the regular review date of such employees in an aggregate amount for all
employees not to exceed four percent (4%) of the aggregate current
annualized base salaries of such employees or constitute more than a ten
percent (10%) increase with respect to any one employee; or (ii) enter
into, modify or renew any employment, severance or other agreement with any
director, officer or employee of the Company, the Bank or any of their
subsidiaries, or establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement,
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deferred compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement providing for any benefit to
any director, officer or employee;
(xii) 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 with by the Company's independent
accountants;
(xiii) make any tax election or settle or compromise any Federal,
state, local or foreign tax liability;
(xiv) pay, discharge or satisfy any claim, liability or obligation,
other than the payment, discharge or satisfaction, in the ordinary course
of business and consistent with past practice, of liabilities reflected or
reserved against in the consolidated balance sheet of the Company and its
subsidiaries included in the Annual Report on Form 10-K for the period
ended December 31, 1996, or subsequently incurred in the ordinary course of
business and consistent with past practice or in connection with the Merger
Agreement;
(xv) make any new or additional equity investment or commitment to
make such an investment in real estate or in any real estate development
project, other than in connection with foreclosures, settlements in lieu of
foreclosure or troubled loan or debt restructuring in the ordinary course
of business consistent with past practice;
(xvi) sell any securities in its investment portfolio, except in the
ordinary course of business, or engage in transactions in or involving
forwards, futures, options on futures, swaps or similar derivative
instruments;
(xvii) sell, lease, encumber, assign or otherwise dispose of, or agree
to sell, lease, encumber, assign or otherwise dispose of, any of its
material assets, properties or other rights or agreements or purchase or
sell any loans in bulk;
(xviii) take any action that is intended or reasonably can be expected
to result in any of its representations and warranties set forth in the
Merger Agreement being or becoming untrue in any material respect, or any
of the conditions to the consummation of the Holding Company Merger, the
Bank Merger and the other transactions contemplated by the Merger Agreement
not being satisfied in any material respect, or in any material violation
of any provision of the Merger Agreement or the Bank Merger Agreement,
except, in every case, as may be required by applicable law;
(xix) commit any act or omission which constitutes a material breach
or default by the Company, the Bank or any of their subsidiaries under any
Regulatory Agreement or under any material contract or material license to
which any of them is a party or by which any of them or their respective
properties is bound;
(xx) foreclose upon or take a deed or title to any commercial real
estate without first conducting a Phase I environmental assessment of the
property or foreclose upon any commercial real estate if such environmental
assessment indicates the presence of Hazardous Material in amounts which,
if such foreclosure were to occur, would be material;
(xxi) enter into or renew, amend or terminate, or give notice of a
proposed renewal, amendment or termination of or make any commitment with
respect to, (i) any contract, agreement or lease for office space,
operations space or branch space to which the Company, the Bank or any of
their subsidiaries is a party or by which the Company, the Bank or any of
their subsidiaries or their respective properties is bound; (ii) any lease,
contract or agreement other than in the ordinary course of business
consistent with past practice including renewals of leases to existing
tenants of the Company or the Bank; (iii) regardless of whether consistent
with past practices, any lease, contract, agreement or commitment involving
an aggregate payment by or to the Company, the Bank
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or any of their subsidiaries of more than $100,000 or having a term of one
year or more from the time of execution except with respect to the
acquisition of its Whalley Norton branch site;
(xxii) change in any material respect its loan policies or procedures,
except as required by regulatory authorities; or
(xxiii) agree to do any of the foregoing.
EXPENSES
The Merger Agreement provides that each party shall bear its own costs and
expenses incurred in connection with the Merger Agreement and the transactions
contemplated thereby unless the Merger Agreement is terminated as a result of
any breach of a representation, warranty, covenant or other agreement which is
caused by the gross negligence or willful breach of a party to the Merger
Agreement, in which case the breaching party will be liable to the non-breaching
party for all out-of-pocket expenses incurred by the non-breaching party in
connection with entering into the Merger Agreement. The payment of the foregoing
expenses is not an exclusive remedy, but is in addition to any other rights or
remedies available to the parties at law or in equity.
TERMINATION
The Merger Agreement may be terminated and the Holding Company Merger and
Bank Merger and the other transactions contemplated by the Merger Agreement or
the Bank Merger Agreement abandoned at any time prior to the Effective Time (a)
by mutual written consent of Citizens, Merger Sub, the Company, and the Bank;
(b) by either Citizens and Merger Sub or the Company and the Bank if the
Effective Time shall not have occurred on or before December 31, 1997 and the
failure of the timely occurrence of the Effective Time is not the cause of the
party seeking termination; (c) by either Citizens and Merger Sub or the Company
and the Bank (i) ninety days after the date on which any request or application
for a regulatory approval required to consummate the Holding Company Merger or
the Bank Merger shall have been denied or withdrawn at the request or
recommendation of the governmental entity which must grant such requisite
regulatory approval unless within such ninety-day period a petition for
rehearing or an amended application has been filed with such governmental
entity, provided that no party shall have the right to so terminate the Merger
Agreement if such denial or request or recommendation for withdrawal is due to
the failure of the party seeking termination to perform or observe the covenants
and agreements of such party under the Merger Agreement, or (ii) if any court of
competent jurisdiction or other governmental authority shall have issued an
order, decree, ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Holding Company Merger or the Bank Merger and such
order, decree, ruling or other action shall have become final and nonappealable;
(d) by either Citizens and Merger Sub or the Company and the Bank (provided that
the terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained in the Merger Agreement) if
there shall have been a material breach of any of the representations and
warranties, covenants, and agreements set forth in the Merger Agreement on the
part of the other party which cannot be timely cured; (e) by either Citizens and
Merger Sub or (if the Company and the Bank are not in material breach of their
obligation to hold the Special Meeting) the Company and the Bank if the Merger
has not been approved by the shareholders of the Company; or (f) by Citizens if
the Board of Directors of the Company shall not have publicly recommended to the
shareholders of the Company that the shareholders vote in favor of the approval
of the Merger Agreement, the Holding Company Merger, and the other transactions
contemplated by the Merger Agreement, or shall have withdrawn or modified such
recommendation in a manner adverse to Citizens.
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TERMINATION FEE
The Merger Agreement provides that Citizens may elect to receive as
liquidated damages, in lieu of exercising any other rights or remedies under the
Merger Agreement, a payment from the Bank of $500,000 in the event that:
(a) either the Company and the Bank or Citizens has terminated the Merger
Agreement due to the failure of the Company's shareholders to approve the Merger
Agreement; (b) Citizens has terminated the Merger Agreement due to the Company's
Board of Directors' failure to publicly recommend the approval of the Merger
Agreement or the Company Board's modification or withdrawal of such
recommendation in a manner adverse to Citizens; or (c) Citizens has terminated
the Merger Agreement due to a material breach of any representation, warranty,
covenant or agreement caused by the willful misconduct or gross negligence of
the Company and the Bank; and (i) within 12 months of any such termination the
Company enters into an agreement to engage in an Acquisition Transaction (as
defined in the Merger Agreement) or the Board of Directors or a committee
thereof shall have authorized, approved, recommended, publicly proposed or
failed to publicly oppose an Acquisition Transaction, or recommended that
shareholders of the Company authorize, approve or accept an Acquisition
Transaction with any person other than Citizens or an affiliate of Citizens; or
(ii) at the time of any termination or event giving rise to a termination
pursuant to (a) or (b) above, it shall have been publicly announced that any
party other than Citizens or an affiliate of Citizens shall have made, or
disclosed an intention to make, a bona fide offer to engage in an Acquisition
Transaction or filed an application under the Bank Holding Company Act or the
Change in Bank Control Act of 1978, for approval to engage in an Acquisition
Transaction.
In the event that the Company is required to make a payment under
circumstances described in subsection (i) of the previous paragraph, and the
Acquisition Transaction giving rise to such payment provides a per share
consideration (the "Acquisition Consideration") to the Company's shareholders
exceeding the Fixed Consideration, then the $500,000 cash payment will be
increased by an amount equal to the product of 738,528 multiplied by the excess
of the per share Acquisition Consideration over the Fixed Consideration.
The term "Acquisition Transaction" generally means the sale of more than
14.9% of the Company, whether by merger, disposition of assets or acquisition or
sale of securities, and also includes the commencement of a tender offer or
exchange offer to purchase 14.9% or more of the outstanding Shares.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of the Company's and the Bank's management and Boards of
Directors may be deemed to have certain interests in the Merger that are in
addition to their interests as shareholders of the Company generally. The Board
of Directors of the Company was aware of these interests and considered them,
among other matters, in approving the Merger Agreement and the transactions
contemplated thereby.
As of May 1, 1993, the Bank entered into an employment agreement with F.
Patrick McFadden, Jr. which provides that he will serve as President and Chief
Executive Officer of the Company and the Bank. If the Bank terminates the
agreement for any reason other than for cause, Mr. McFadden will be entitled to
all unpaid base salary through the remaining term of the agreement and any
unpaid bonuses. This agreement will be terminated prior to the closing.
F. Patrick McFadden, Jr., John F. Trentacosta, Lorraine K. Young and three
other executive officers of the Bank have entered into severance agreements with
the Bank which provide for the payment of termination benefits in the event of a
change in control. In the event there is an involuntary termination of Mr.
McFadden's, Mr. Trentacosta's or Ms. Young's employment within one year prior to
the change in control or within the two year period following a change in
control, such officer will receive a lump sum payment equal to three times his
or her annual salary during the 12 months preceding the date of termination or
the 12 months preceding the date of the change in control, whichever is greater,
in addition to a continuation of certain employee benefits for a period of one
year following termination of employment, subject to the limitations set forth
in Section 280G of the Internal Revenue Code of 1986, as amended. The proposed
Merger will constitute a change in control as defined in such agreements.
Under the Merger Agreement, all of the outstanding options granted under
the Company Option Plans, including those for non-employee directors, will
become exercisable in full, whether or not then vested or exercisable, upon
written notice to the option holders by the Company prior to the Effective Time.
As a result of this acceleration in vesting, 136,892 options granted to officers
and 13,250 options granted to non-employee directors of the Company will become
vested as a result of the Merger.
Citizens has agreed to maintain in effect for a period of three years from
the Effective Time the current directors' and officers' liability insurance
policies maintained by the Company and the Bank if available (or a substitute
policy of at least the same coverage containing terms and conditions which are
not materially less favorable) with respect to matters occurring prior to the
Effective Time.
EMPLOYEE BENEFITS MATTERS
Citizens has agreed to provide the employees of the Company and the Bank
with the same health, dental, pension, life insurance, disability, 401(k) plan
and other benefits, if any, which Citizens provides generally to its employees.
To the extent the Company or Bank Employees participate after the Effective Time
in employee benefit plans of Citizens, all prior service of such employees with
the Bank will be credited under such plans for purposes of eligibility and
vesting, but excluding benefit accrual under any qualified defined benefit
pension plan.
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RIGHTS OF DISSENTING SHAREHOLDERS
In accordance with Sections 33-855 through 33-872 of the Connecticut
General Statutes, if the proposed Merger is approved and consummated, holders of
Shares who neither vote for nor consent in writing to the Merger and who provide
the notice prescribed by law prior to the Special Meeting ("Dissenting
Shareholders") will have the right to demand the purchase of their Shares at
their "fair value" (exclusive of any element of value arising from the
accomplishment or expectation of the Merger) if they fully comply with the
provisions of Sections 33-855 through 33-872. Appraisal rights under Sections
33-855 through 33-872 constitute the exclusive remedy available to shareholders
objecting to the Merger.
The following is a brief summary of the procedures set forth in Sections
33-855 through 33-872 that must be followed by shareholders who wish to dissent
from the Merger and demand the purchase of their Shares at their fair value.
This summary is qualified in its entirety by reference to Sections 33-855
through 33-872, the complete text of which has been reproduced and is attached
to this Proxy Statement as Appendix C. Dissenting Shareholders are advised to
seek independent counsel. This Proxy Statement constitutes notice to
shareholders concerning the availability of appraisal rights under Sections
33-855 through 33-872.
DISSENTING SHAREHOLDERS MUST SATISFY ALL THE CONDITIONS OF SECTIONS 33-855
THROUGH 33-872.
Under Sections 33-855 through 33-872, each Dissenting Shareholder must,
before the taking of the vote on the Merger, give written notice to the
Secretary of the Company of such shareholder's intent to demand payment for his
or her Shares. If the Merger Agreement is approved by the shareholders at the
Special Meeting, within 10 days of the Special Meeting the Company will send a
written dissenters' notice (the "Dissenters' Notice") to all shareholders who
timely delivered to the Company a notice of intent to demand payment. The
Dissenters' Notice (i) will state where the Payment Demand (defined below) must
be sent and where and when certificates evidencing ownership of the Shares must
be deposited, (ii) will inform holders of uncertificated Shares to what extent
transfer of the Shares will be restricted after the Payment Demand is received,
(iii) will supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the Merger
and requires that the person asserting dissenters' rights certify whether or not
he or she acquired beneficial ownership of the Shares before that date (the
"Payment Demand"), (iv) will set a date by which the Company must receive the
Payment Demand, which date will not be fewer than thirty nor more than sixty
days after the date the Dissenters' Notice is delivered, and (v) will include a
copy of Connecticut General Statutes sections 33-855 through 33-872, inclusive.
A shareholder sent a Dissenters' Notice must demand payment, certifying
whether he or she acquired beneficial ownership of the Shares before the date
set forth in the Dissenters' Notice, and deposit his or her certificates in
accordance with the terms of the Dissenters' Notice. A SHAREHOLDER WHO DOES NOT
DEMAND PAYMENT OR DEPOSIT HIS OR HER SHARE CERTIFICATES WHERE REQUIRED BY THE
DATE SET FORTH IN THE DISSENTERS' NOTICE WILL NOT BE ENTITLED TO PAYMENT OF THE
FAIR VALUE OF HIS OR HER SHARES. MERELY VOTING "AGAINST," ABSTAINING FROM
VOTING, OR FAILING TO VOTE ON THE ADOPTION OF THE MERGER WILL NOT CONSTITUTE AN
OBJECTION TO THE MERGER OR A DEMAND FOR THE PURCHASE OF SHARES AT THEIR FAIR
VALUE WITHIN THE MEANING OF SECTIONS 33-855 THROUGH 33-872.
A Dissenting Shareholder must NOT vote for adoption of the Merger. If a
shareholder returns a signed proxy but does not specify therein a vote "AGAINST"
adoption of the Merger or an instruction to abstain, the proxy will be voted
"FOR" adoption of the Merger, which will have the effect of waiving the right of
that shareholder to receive the "fair value" therefor. Abstaining from voting or
voting against the adoption of the Merger will NOT constitute a waiver of such
shareholder's rights.
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A demand to have Shares purchased at fair value must be executed by or for
the holder of record of Shares to which such demand is made as such
shareholder's name appears on the certificate representing such Shares. If
Shares are owned of record in a fiduciary capacity, such as by a trustee,
guardian or custodian, such demand must be executed by or for the appropriate
fiduciary. If Shares are owned of record by or for more than one person, as in a
joint tenancy or tenancy in common, such demand must be executed by all joint
owners of such Shares. An authorized agent, including an agent for two or more
joint owners, may execute the demand for a shareholder of record; however, the
agent must identify the record owner and expressly disclose the fact that, in
making the objection and the demand, he or she is acting as agent for the
identified record owner.
A record owner, such as a broker, who holds Shares as a nominee for others,
may object to the Merger and demand purchase of Shares at fair value with
respect to the Shares held for all or less than all beneficial owners of Shares
as to which he or she is the record owner. In such case, the written demand
submitted by such broker as a record owner must set forth the number of Shares
covered by such demand and the identity and street address of each beneficial
owner demanding payment. A beneficial owner may assert dissenting rights only if
he or she submits to the Company the record shareholder's written consent prior
to or at the time the beneficial owner asserts dissenters' rights.
Upon receipt of a valid, timely and complete Payment Demand, or upon
consummation of the Merger, the Company will pay to each Dissenting Shareholder
the amount the Company estimates to be the fair value of his or her Shares, plus
accrued interest. The payment will be accompanied by (i) the Company's balance
sheet as of the end of a fiscal year ending within 16 months of the date of
payment, an income statement for that year, a statement of changes in
shareholders' equity for that year and the latest available interim financial
statements, if any, (ii) a statement of the Company's estimate of the fair value
of the shares, (iii) an explanation of how the interest was calculated, (iv) a
statement of the Dissenting Shareholder's right to demand payment under section
33-860 of the Connecticut General Statutes, and (v) a copy of Connecticut
General Statutes sections 33-855 through 33-872, inclusive.
If the Merger does not take place within sixty days after the date set for
demanding payment and depositing Share certificates, the Company will return the
deposited certificates and release any transfer restrictions imposed on
uncertificated Shares. If the Merger is consummated after returning deposited
certificates and releasing transfer restrictions, the Company will send a new
Dissenters' Notice and repeat the payment demand procedure.
The Company may elect to withhold payment from a Dissenting Shareholder who
was not the beneficial owner of the Shares before the date set forth in the
Dissenters' Notice as the date of the first announcement of the Merger. To the
extent the Company so withholds payment, after completion of the Merger it will
estimate the fair value of the Shares, plus accrued interest, and offer this
amount to each Dissenting Shareholder, and actually pay this amount to each
Dissenting Shareholder who agrees to accept it in full satisfaction of his or
her demand.
If a Dissenting Shareholder is dissatisfied with the payment (or offer of
payment) made by the Company, he or she may notify the Company in writing of his
or her own estimate of the fair value of his or her Shares and the amount of
interest due, and demand payment of his or her estimate, plus interest, less any
payment already made if (i) the Dissenting Shareholder believes that the amount
paid or offered by the Company is less than the fair value or that the interest
due is incorrectly calculated, (ii) the Company fails to make payment (except as
payment may be withheld to holders who acquired the Shares after the
announcement of the Merger) within sixty days after the date set for demanding
payment, or (iii) the Company, having failed to complete the Merger, does not
return the deposited certificates or release any transfer restrictions imposed
on uncertificated Shares within sixty days after the date set for demanding
payment.
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A DISSENTING SHAREHOLDER WHO FAILS TO DEMAND IN WRITING PAYMENT OF HIS OR
HER OWN ESTIMATE WITHIN THIRTY DAYS AFTER THE COMPANY MAKES OR OFFERS PAYMENT
FOR HIS OR HER SHARES WAIVES HIS OR HER RIGHT TO DEMAND PAYMENT OF HIS OR HER
OWN ESTIMATE.
If a shareholder's demand for payment of his or her own estimate remains
unsettled, the Company will commence a proceeding in the superior court for the
judicial district containing its principal office within sixty days after
receiving the Payment Demand and petition the court to determine the fair value
of the Shares and accrued interest. If the Company fails to do so, it will pay
each Dissenting Shareholder whose demand remains unsettled the amount demanded.
The Company will make all Dissenting Shareholders, whether or not residents
of Connecticut, whose demands remain unsettled parties to the proceeding, and
all parties will be served with a copy of the petition. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. Each Dissenting Shareholder made a party to the
proceeding will be entitled to a judgment for the amount, if any, by which the
court finds the fair value of his or her Shares, plus interest, exceeds the
amount paid by the Company, or for the fair value, plus accrued interest, of his
or her after-acquired Shares for which the Company elected to withhold payment.
The court will determine all costs of the proceeding, including expenses
relating to the appraisal of the Shares, and shall assess these costs against
the Company, except that the court may assess costs against all or some of the
Dissenting Shareholders, in amounts it finds equitable, to the extent the court
finds the Dissenting Shareholders acted arbitrarily, vexatiously or not in good
faith in demanding payment. Other expenses, including counsel fees and the fees
of experts, may be assessed among the parties based on the circumstances.
If a demand to purchase the Shares of a Dissenting Shareholder is withdrawn
upon consent, or if the Merger is abandoned or rescinded or the shareholders
revoke the authority to effect such action, or if no demand or petition for the
determination of fair value by a court has been made or if a court determines
the Dissenting Shareholder is not entitled to relief under Sections 33-855
through 33-872, then the right of the Dissenting Shareholder to be paid fair
value shall cease and his or her status as a Shareholder entitled to receive the
Merger Consideration shall be restored.
All written demands for the purchase of Shares at fair value should be sent
or delivered to the Company at 209 Church Street, New Haven, Connecticut 06510,
ATTN: Evelyn R. Miller, Secretary. The Company suggests that Shareholders use
registered or certified mail, return receipt requested, for this purpose.
THE SUMMARY SET FORTH ABOVE DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF
THE RIGHTS OF DISSENTING SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SECTIONS 33-855 THROUGH 33-872 OF THE CONNECTICUT GENERAL STATUTES,
THE TEXT OF WHICH HAS BEEN REPRODUCED AND IS ATTACHED TO THIS PROXY STATEMENT AS
APPENDIX C. SHAREHOLDERS INTENDING TO DEMAND THE PURCHASE OF THEIR SHARES AT
FAIR VALUE ARE URGED TO REVIEW CAREFULLY APPENDIX C HERETO AND TO CONSULT WITH
LEGAL COUNSEL SO AS TO BE IN STRICT COMPLIANCE THEREWITH.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following paragraphs describe very generally the United States federal
income taxation of holders of the Shares, and options for the purchase of the
Shares, as a result of the Merger. The following is intended merely as a general
summary of the principal U.S. federal income tax consequences of the Merger to
such holders and is not intended as a substitute for professional tax advice
that takes into account the particular circumstances relevant to a specific
holder. Accordingly, all holders should consult their own professional advisors
on the
21
<PAGE>
possible tax consequences of the Merger to them. In addition, holders should
note that the following discussion does not address even generally state or
local tax considerations, or taxation under the laws of jurisdictions other than
the United States.
This summary is based on the Internal Revenue Code of 1986, as amended to
the date hereof (the "Code"), administrative pronouncements, judicial decisions
and existing and proposed Treasury regulations, changes to any of which
subsequent to the date hereof may affect the tax consequences described herein.
Except as discussed below under "Stock Options," this summary discusses only
Shares that are held as capital assets within the meaning of Section 1221 of the
Code. It does not discuss all of the tax consequences that may be relevant to a
holder of stock, stock options or warrants in light of such holder's particular
circumstances, or to holders subject to special rules, such as certain financial
institutions, insurance companies, tax-exempt investors and dealers in
securities; nor does it discuss the tax consequences to a holder that, for
United States federal income tax purposes, is a non-resident alien individual, a
foreign corporation, a foreign partnership, or a foreign estate or trust.
Holders should consult their own professional tax advisors with regard to the
application of the United States federal income tax laws to their particular
situations.
Treatment of Merger Generally; Sale of Shares. For federal income tax
purposes, Merger Sub will be disregarded and the Merger will be treated as the
purchase by Citizens, and the sale by each holder, of the Shares issued and
outstanding immediately prior to the Effective Time. Upon such sale, each holder
of such Shares will recognize taxable gain or loss equal to the difference
between (i) the aggregate Merger Consideration payable to such holder in
connection with the Merger and (ii) such holder's aggregate adjusted tax basis
in such Shares.
Capital Gain or Loss. Except as discussed below under "Stock Options," gain
or loss recognized on the sale of Shares will be capital gain or loss, and will
be long-term capital gain or loss if at the Effective Time the holder has held
such Shares for more than one year. Under current law, the excess of net
long-term capital gains over net short-term capital losses is taxed at a lower
rate than ordinary income for certain non-corporate taxpayers. The distinction
between capital gain or loss and ordinary income or loss also is relevant for
purposes of, among other things, limitations on the deductibility of capital
losses.
Stock Options. For a holder of Shares acquired pursuant to the exercise of
an incentive stock option that was granted less than two years prior to the
Effective Time or exercised less than one year prior to the Effective Time, the
portion of gain recognized on the sale of such Shares that is equal to the
lesser of (i) the fair market value of such Shares on the date of exercise, or
(ii) the fair market value of such Shares at the Effective Time, over the
exercise price for such Shares, will be treated as ordinary income.
A holder of incentive or nonqualified stock options who does not exercise
such options but who receives the Merger Consideration in exchange for such
options pursuant to Section 2.02 of the Merger Agreement will be treated for
federal income tax purposes as having exercised such options immediately prior
to the Effective Time in exchange for Shares, and then immediately having sold
such Shares for the Merger Consideration. For a holder of incentive stock
options, such treatment will have the result described in the preceding
paragraph. For a holder of nonqualified stock options, the deemed exercise of
such option will result in ordinary income equal to the difference between the
fair market value (which should be the same as the Merger Consideration) of the
Shares deemed received upon such exercise, and the exercise price thereof; the
deemed sale of such Shares for the Merger Consideration should result in no
further taxable income or gain.
ACCOUNTING TREATMENT
The Company and the Bank have been advised that Citizens will use the
purchase method of accounting in connection with the Holding Company Merger and
related transactions.
22
<PAGE>
REGULATORY APPROVALS
The consummation of the Holding Company Merger and the Bank Merger is
subject to the prior receipt of consents, approvals or waivers from various
regulatory agencies, including the Federal Deposit Insurance Corporation (the
"FDIC"), the Board of Governors of the Federal Reserve System, the Massachusetts
Board of Bank Incorporation, the Commissioner of Banking of the State of
Connecticut, and the United States Department of Justice. The Merger may not be
consummated until 30 days after approval by the FDIC (or such shorter period as
the FDIC may prescribe with the concurrence of the Attorney General, but not
less than 15 days), during which time the Department of Justice may challenge
the Merger on antitrust grounds. The commencement of an antitrust action by the
Department of Justice would stay the effectiveness of FDIC approval unless a
court specifically orders otherwise.
The parties have filed all applications and applied for all waivers
necessary for consummation of the Merger. The Merger will not proceed until all
regulatory approvals required to consummate the Merger have been obtained, such
approvals are in full force and effect and all statutory waiting periods in
respect thereof have expired. There can be no assurance that the Merger will be
approved by any of the foregoing regulatory authorities. If such approvals are
received, there can be no assurance as to the date of such approvals or the
absence of any litigation challenging such approvals. Citizens and the Company
are not aware of any other governmental approvals or actions that are required
prior to the parties' consummation of the Merger. It is currently contemplated
that if any such additional governmental approvals or actions are required, such
approvals or actions will be sought. There can be no assurance, however, that
any such additional approvals or actions will be obtained.
WAIVER AND AMENDMENT
The Merger Agreement provides that any party to the Merger Agreement, by
action authorized by its Board of Directors and applicable law, may extend the
time for performance of any of the obligations or acts of the other parties,
waive any inaccuracies in the representations and warranties contained in the
Agreement and waive compliance with any of the agreements and conditions
contained therein. Any such extension or waiver must be in writing.
The Merger Agreement may be amended, in writing, by the parties to the
Merger Agreement at any time prior to the Effective Time, provided that after
the Merger Agreement has been approved by the shareholders, no amendment may be
made which would reduce the amount or change the type of consideration into
which each Share shall be converted upon consummation of the Merger.
23
<PAGE>
SECURITY OWNERSHIP
The following table sets forth information as of June 20, 1997 with respect
to those persons known to the Company to be the beneficial owners of more than
5% of the Company's Common Stock:
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS (a)
------------------- ---------------------- ----------
Franklin Mutual Advisers, Inc. 319,750 (b) 8.66%
51 John F. Kennedy Parkway
Short Hills, NJ 07078
- ------------
(a) The percentages shown are calculated on the basis of the number of
outstanding Shares of the Company's Common Stock on June 20, 1997.
(b) FMA is an investment advisor registered under the Investment Advisors Act
of 1940. One or more of FMA's advisory clients is the legal owner of the
Shares shown. FMA has sole dispositive and voting power with respect to
Shares pursuant to investment advisory agreements with its clients.
24
<PAGE>
The following table sets forth for each director and principal executive
officer of the Company or the Bank information pertaining to his or her
beneficial ownership of the Shares as of June 20, 1997. Each such person has
sole investment power and voting power over Shares beneficially owned except
where shared ownership is indicated below.
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP PERCENT OF
NAME OF COMMON STOCK COMMON STOCK
- ---- ----------------------- ------------
Stephen P. Ahern................... 7,781(a)* **
Martin R. Anastasio................ 20,610(b)* **
Edward M. Crowley.................. 500(c) **
James J. Cullen.................... 725(d) **
George M. Dermer................... 16,284(e)* **
Thomas M. Donegan, P.E............. 2,460(f)* **
Theodore F. Hogan, Jr.............. 7,273(g)* **
Jean G. Lamont..................... 250(h) **
Lawrence M. Liebman................ 16,872(i)* **
F. Patrick McFadden, Jr............ 60,444(j) 1.56%
Carl M. Porto...................... 19,953(k)* **
Vincent A. Romei................... 41,949(l)* 1.10%
Stanley Scholsohn.................. 22,960(m)* **
Cheever Tyler...................... 2,950* **
John F. Trentacosta................ 23,902(n) **
Lorraine K. Young.................. 15,765(o) **
- ----------------
* Includes 1,250 Shares which are subject to stock options.
** Beneficially owns less than one percent (1%) of the Shares then
outstanding.
(a) Includes 281 Shares owned by Ahern Family Limited Partnership, of which Mr.
Ahern is a general partner.
(b) Includes 3,819 Shares owned by Weinstein & Anastasio, P.C. Pension Plan and
6,375 Shares owned by Weinstein & Anastasio, P.C. Profit Sharing Plan, for
both of which Mr. Anastasio is a Trustee for which he shares voting and
investment power, 920 Shares owned in the aggregate by members of Mr.
Anastasio's family and 8,246 Shares owned by Mr. Anastasio's wife in which
Mr. Anastasio does not have voting and investment power.
(c) Includes 250 Shares which are subject to stock options.
25
<PAGE>
(d) Includes 475 Shares in an individual retirement account ("IRA") for the
benefit of Mr. Cullen and 250 Shares which are subject to stock options.
(e) Includes 8,328 Shares owned by Mr. Dermer's wife in which Mr. Dermer shares
voting and investment power.
(f) Includes 84 Shares owned jointly by Mr. Donegan with his wife, 1,042 Shares
held in a retirement fund, 42 Shares in an IRA for Mr. Donegan's benefit
and 42 Shares in an IRA for Mrs. Donegan's benefit.
(g) Includes 4,368 Shares owned jointly by Mr. Hogan and his wife and 783
Shares owned by his wife in which Mr. Hogan shares voting and investment
power.
(h) Represents 250 Shares which are subject to stock options.
(i) Includes an aggregate of 8 Shares owned by Mr. Liebman as custodian for his
son and 352 Shares in an IRA for Mr. Liebman's benefit.
(j) Includes 59,413 Shares which are subject to stock options, 887 Shares held
in various retirement funds for Mr. McFadden's benefit and 144 Shares
allocated to Mr. McFadden through his contributions and the Company's
matching contributions to the Company's 401(k) Profit Sharing Plan.
(k) Includes 1,643 Shares owned by the Porto Tire and Auto Pension Plan of
which Mr. Porto is Trustee and 6,410 Shares owned by the Parrett, Porto,
Parese & Colwell Pension Profit Sharing Plan, over which Shares Mr. Porto
exercises no voting power, 8,317 Shares owned by the Carl Porto, Grantor,
Retained Income Trust, of which Mr. Porto is Trustee, and 65 Shares in an
IRA for the benefit of Mr. Porto and his wife.
(l) Includes 14,250 Shares owned jointly by Mr. Romei and his wife and 21,106
Shares in an IRA for the benefit of Mr. Romei.
(m) Includes 21,710 Shares in the aggregate owned by Mr. Scholsohn's family.
(n) Includes 19,104 Shares which are subject to stock options and 1,098 Shares
allocated to Mr. Trentacosta through his contributions and the Company's
matching contributions to the Company's 401(k) Profit Sharing Plan.
(o) Includes 10,032 Shares under stock options, 715 Shares in an IRA for the
benefit of Ms. Young, 243 Shares allocated to Ms. Young through her
contributions to the Company's 401(k) Profit Sharing Plan, and 28 Shares
owned by Ms. Young's son, over which she has no voting or investment power.
All of the executive officers and directors of the Company or the Bank as a
group (19 persons) owned beneficially as of June 20, 1997, 298,543 Shares,
including 136,614 Shares which are subject to options, representing 7.8% of the
Shares then outstanding.
INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P. serves as independent auditor for the Company and
the Bank. A representative of Coopers & Lybrand L.L.P. will be present at the
Special Meeting, will be given an opportunity to make a statement if he or she
so desires and will be available to respond to appropriate questions.
26
<PAGE>
SHAREHOLDER PROPOSALS
It is not anticipated that the Company will hold a 1998 Annual Meeting of
Shareholders unless the Merger is not consummated. In the event the Merger is
not consummated, any shareholder proposal intended for inclusion in the
Company's Proxy Statement for the 1998 Annual Meeting of Shareholders must be
received by the Company at its principal executive office before November 26,
1997. Any such proposals shall be subject to the requirements of the proxy rules
adopted under the Securities Exchange Act of 1934.
STOCK PRICE AND DIVIDEND INFORMATION
The Company's Common Stock is listed and traded on the Nasdaq National
Market System under the symbol "BNHB." The following table sets forth the high
and low sales prices during the periods reported, adjusted to reflect a
one-for-four reverse stock split consummated in May of 1996. No dividends were
paid on the Company's Common Stock during these periods.
Price
--------------------------
High Low
------- -------
1997
----
First Quarter $13.00 $10.75
1996
----
First Quarter 9.00 7.50
Second Quarter 8.25 7.00
Third Quarter 7.88 6.75
Fourth Quarter 13.00 7.75
1995
----
First Quarter 6.00 3.52
Second Quarter 6.52 5.00
Third Quarter 8.00 5.00
Fourth Quarter 8.00 7.00
1994
----
First Quarter 8.52 5.52
Second Quarter 7.00 5.00
Third Quarter 6.00 4.00
Fourth Quarter 6.00 3.24
On April 7, 1997, the last trading day preceding the public announcement of
the proposed Merger, the high and low per share sales prices for the Common
Stock were $13.75 and $12.125, respectively.
INCORPORATION BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1996, its Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 and
its Current Report on Form 8-K dated April 8, 1997, as filed with the Securities
and Exchange Commission, are incorporated herein by reference and made a part of
this Proxy Statement as of the date hereof. The Form 10-K and Form 10-Q are
enclosed herewith. In addition, all documents filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") subsequent to the date of this proxy statement and
prior to the date of the Special Meeting shall be deemed to be incorporated by
reference into this Proxy Statement. Any statement contained in a
27
<PAGE>
document incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy Statement to the extent that a statement
contained herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified and
superseded, to constitute a part of this Proxy Statement.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's New York Regional Office, 7 World Trade Center, Suite
1300, New York, New York 10048 and Chicago Regional Office, Northwestern Atrium
Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains an Internet Web site that contains reports,
proxy and information statements and other information regarding reporting
companies under the Exchange Act. The address of such Internet Web site is
http://www.sec.gov.
MISCELLANEOUS
The Board was not aware, a reasonable time before mailing this Proxy
Statement to shareholders, of any business that may properly be presented at the
Special Meeting other than the matters specifically listed in the Notice of
Special Meeting of Shareholders. However, if further business is properly
presented, the persons present will have discretionary authority to vote the
Shares they own or represent by proxy in accordance with their judgment.
The Board of Directors would like you to attend the meeting in person.
However, whether or not you plan to attend the meeting, please complete, date
and sign the enclosed proxy card and return it in the enclosed postage prepaid
envelope as soon as possible. If you attend the meeting, you may vote in person
if you desire.
By Order of the Board of Directors
/s/ EVELYN R. MILLER
-----------------------------------
EVELYN R. MILLER, Secretary
New Haven, Connecticut
July 14, 1997
28
<PAGE>
BNH BANCSHARES, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents selected consolidated financial information for the
Company for the periods indicated. This information is derived from and should
be read in conjunction with the Company's consolidated financial statements and
the notes thereto contained in the Company's 1996 Annual Report on Form 10-K
(the "Form 10-K") and the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997 (the "Form 10-Q"), which are incorporated herein by
reference and copies of which accompany this Proxy Statement.
<TABLE>
<CAPTION>
March 31, December 31,
BALANCE SHEET DATA (000'S): -------------------- --------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Assets................ $334,035 $297,465 $342,229 $298,911 $299,175 $287,616 $290,622
Loans and Leases:
Mortgages
Residential............. 54,591 47,720 54,651 45,399 36,605 26,625 17,418
Commercial.............. 59,983 54,373 59,283 54,518 57,097 70,212 78,381
Commercial................ 54,810 54,774 54,240 58,746 67,418 75,230 89,024
Consumer.................. 68,732 45,935 65,686 45,433 45,866 26,883 20,281
Other loans............... 1,009 750 820 400 -- -- 1,145
Allowance for loan losses... 4,698 5,164 4,696 5,893 6,827 9,497 10,574
Securities and short-term
holdings ................. 64,111 72,496 74,686 72,398 67,955 72,836 55,094
Deposits.................... 289,498 272,697 298,924 276,764 277,716 264,606 273,119
Borrowed funds.............. 17,469 7,847 16,663 5,547 8,253 2,089 5,689
Shareholders' equity........ 25,764 15,971 25,611 15,593 12,356 20,206 10,739
</TABLE>
<TABLE>
<CAPTION>
Three month period
ended March 31 For the years ended December 31,
------------------ ------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net interest income............. $3,373 $3,027 $12,769 $12,864 $13,098 $11,619 $11,681
Provision for loan losses....... 326 576 1,964 3,663 9,199 4,890 10,601
Noninterest income.............. 799 788 3,349 3,063 2,604 2,630 2,600
Noninterest expense............. 3,038 2,730 11,970 11,487 12,669 12,029 14,039
Net Income (loss)............... 484 734 9,984 1,811 (6,188) (2,512) (9,088)
SELECTED RATIOS:
Return on average assets........ 0.58% 0.99% 3.27% 0.61% (2.13)% (0.88)% (3.04)%
Return on average common equity. 7.57% 18.38% 54.21% 13.02% (37.78)% (17.66)% (59.02)%
Allowance for loan
losses as a % of
nonperforming loans........... 153.43% 97.93% 129.65% 98.81% 96.93% 107.87% 113.75%
Nonperforming assets as a % of
total assets.................. 1.09% 2.32% 1.20% 2.20% 2.97% 5.14% 6.19%
Capital ratios
Equity to assets.............. 7.71% 5.37% 7.48% 5.22% 4.13% 7.03% 3.70%
Tier 1 leverage............... 5.94% 5.68% 5.75% 5.29% 4.68% 7.01% 3.74%
Total risk based.............. 9.78% 9.76% 9.56% 9.37% 8.09% 11.04% 6.34%
Net Income (loss) per share..... $ .13 (1) $ .20 $ 2.71 $ .49 $ (1.68) $(1.16) $(8.40)
Book value per share(1)......... $ 6.98 $ 4.34 $ 6.96 $ 4.24 $ 3.36 $ 5.48 $ 9.96
</TABLE>
(1) Adjusted to reflect a 1 for 4 reverse stock split which occurred during
1996.
29
<PAGE>
CITIZENS FINANCIAL GROUP, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables set forth in summary form certain consolidated financial
data of CFG for the periods indicated. This information has been extracted from
the Consolidated Financial Statements of CFG and its subsidiaries and is not
complete. Operating results for any prior period are not necessarily indicative
of the results which might be expected in future periods.
<TABLE>
<CAPTION>
March 31, At September 30,
----------- ----------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
----------- ----------- ----------- ---------- ---------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total Assets................... $15,528,927 $14,450,022 $10,174,667 $9,449,220 $5,243,706 $4,440,515
Loans and Leases:
Mortgage:
Consumer................... 3,540,028 3,200,204 2,805,418 2,652,122 1,446,826 1,218,802
Commercial................. 1,613,262 1,503,207 1,222,318 1,182,783 458,785 399,507
Commercial..................... 1,658,341 1,239,129 623,085 514,007 396,803 407,461
Consumer....................... 2,291,484 2,197,757 1,298,398 1,294,456 907,229 640,370
Other loans and leases......... 2,103 146,243 114,456 85,120 74,414 58,370
Allowance for possible credit loss 186,008 163,891 158,324 145,927 64,785 46,761
Securities and short-term holdings 4,880,189 4,545,245 2,993,508 2,789,501 1,408,843 1,212,531
Deposits....................... 12,804,493 11,563,446 8,664,693 8,119,589 4,447,065 3,679,211
Securities sold under agreements
to repurchase and
borrowed funds............... 960,032 1,288,643 354,234 366,431 183,034 247,521
Trust Preferred Securities .... 150,000 --- --- --- --- ---
Subordinated debt.............. --- 40,000 40,000 --- ---
Stockholders' equity........... 1,412,695 1,335,188 882,473 751,955 357,917 329,262
</TABLE>
<TABLE>
<CAPTION>
6 months
ended Years Ended September 30,
March 31, -------------------------------------------------------------
1997 1996 1995 1994 1993 1992
--------- --------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net interest income............ $275,633 $432,247 $367,658 $280,013 $172,437 $139,729
Provision for credit losses.... 14,350 (4,847) 21,601 21,094 21,057 28,714
Noninterest income............. 126,242 140,507 92,570 95,106 72,403 59,704
Noninterest expense............ 226,700 363,905 299,370 273,977 176,398 141,641
Net income..................... 97,116 128,168 79,816 52,730 28,655 17,543
OTHER DATA:
Return on average assets....... 1.31% 1.07% 0.81% 0.61% 0.60% 0.43%
Return on average common equity 13.89% 12.25% 10.11% 8.36% 8.28% 5.43%
Allowance for possible credit
losses as a % of
nonperforming loans
and leases 193.36% 206.80% 180.80% 136.20% 114.90% 69.90%
Nonperforming loans and leases
as a % of total loans and
leases....................... 1.1% 0.96% 1.44% 1.87% 1.72% 2.46%
Nonperforming assets as a %
of total assets .70% 0.62% 1.00% 1.28% 1.42% 2.10%
CAPITAL RATIOS (PERIOD END):
Equity to assets............... 9.1% 9.24% 8.61% 7.96% 6.83% 7.41%
Risk-based capital ratios:
Tier 1....................... 10.74% 9.60% 9.20% 9.59% 9.96% 11.17%
Total........................ 12.00% 10.86% 11.14% 11.60% 11.22% 12.43%
Leverage ratio................. 6.63% 5.95% 5.58% 5.60% 6.11% 7.18%
</TABLE>
30
<PAGE>
APPENDIX A
================================================================================
AGREEMENT AND PLAN OF MERGER
By and Among
CITIZENS BANK OF CONNECTICUT
and
BNH BANCSHARES, INC.
and
BANK OF NEW HAVEN
----------
Dated as of April 8, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
THE MERGER
SECTION 1.01. The Merger ................................................. 1
SECTION 1.02. Effective Time ............................................. 1
SECTION 1.03. Effect of the Holding Company Merger ....................... 2
SECTION 1.04. Certificate Incorporation .................................. 2
SECTION 1.05. By-Laws .................................................... 2
SECTION 1.06. Directors and Officers ..................................... 2
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.01. Conversion of Securities ................................... 2
SECTION 2.02. Employee Stock Options ..................................... 3
SECTION 2.03. Objecting Shares ........................................... 4
SECTION 2.04. Surrender of Shares; Stock Transfer Books .................. 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE BANK
SECTION 3.01. Organization and Qualification; Subsidiaries ............... 6
SECTION 3.02. Certificate of Incorporation; By-Laws; Corporate Records ... 7
SECTION 3.03. Capitalization ............................................. 7
SECTION 3.04. Authority .................................................. 8
SECTION 3.05. No Conflict ................................................ 9
SECTION 3 06. Consents and Approvals ..................................... 10
SECTION 3.07. Compliance ................................................. 10
SECTION 3.08. SEC Report and Bank Reports ................................ 11
SECTION 3.09. Financial Statements ....................................... 12
SECTION 3.10. Absence of Certain Changes or Events ....................... 13
SECTION 3.11. Absence of Litigation ...................................... 14
SECTION 3.12. Employee Benefit Plans ..................................... 14
SECTION 3.13. Labor Matters .............................................. 15
SECTION 3.14. Property and Leases ........................................ 16
SECTION 3.15. Taxes ...................................................... 17
SECTION 3.16. Certain Contracts .......................................... 18
A-(i)
<PAGE>
Page
----
SECTION 3.17. Loan Portfolio ............................................. 19
SECTION 3.18. Investment Securities ...................................... 20
SECTION 3.19. Derivative Transactions .................................... 20
SECTION 3.20. Insurance .................................................. 20
SECTION 3.21. Environmental Matters ...................................... 21
SECTION 3.22. Intellectual Property ...................................... 23
SECTION 3.23. Administration of Fiduciary Accounts ....................... 23
SECTION 3.24. Agreements with Bank Regulators ............................ 23
SECTION 3.25. Material Interests of Certain Persons ...................... 23
SECTION 3.26. Brokers' Fees; Opinions .................................... 24
SECTION 3.27. Proxy Statement ............................................ 24
SECTION 3.28. State Takeover Laws ........................................ 24
SECTION 3.29. Disclosure ................................................. 25
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
SECTION 4.01. Corporate Organization ..................................... 25
SECTION 4.02. Authority .................................................. 25
SECTION 4.03. No Conflict ................................................ 26
SECTION 4.04. Consents and Approvals ..................................... 26
SECTION 4.05. Proxy Statement ............................................ 27
SECTION 4.06. Financial Statements ....................................... 27
SECTION 4.07. Brokers' Fees .............................................. 27
SECTION 4.08. Capital; Financing ......................................... 27
ARTICLE V
CONDUCT OF BUSINESS PENDING
THE HOLDING COMPANY MERGER
SECTION 5.01. Covenants of the Company and the Bank ...................... 28
SECTION 5.02. Purchaser Products and Services ............................ 32
SECTION 5.03. System Conversions ......................................... 32
SECTION 5.04. Certain Changes and Adjustments ............................ 32
SECTION 5.05. ALCO Management ............................................ 33
SECTION 5.06. Covenants of Purchaser ..................................... 33
A-(ii)
<PAGE>
Page
----
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Stockholders' Meeting ...................................... 33
SECTION 6.02. Proxy Statement ............................................ 33
SECTION 6.03. Regulatory Matters ......................................... 34
SECTION 6.04. Access to Information ...................................... 35
SECTION 6.05. No Solicitation ............................................ 36
SECTION 6.06. Employee Benefits Matters .................................. 36
SECTION 6.07. Directors' and Officers' Insurance and Indemnification ..... 37
SECTION 6.08. Financial and Other Statements ............................. 38
SECTION 6.09. Further Action ............................................. 39
SECTION 6.10. Public Announcements ....................................... 39
SECTION 6.11. Additional Agreements ...................................... 39
SECTION 6.12. Update of Disclosure Schedules ............................. 39
SECTION 6.13. Current Information ........................................ 40
SECTION 6.14. Bank Merger ................................................ 41
SECTION 6.15. Organization of Merger Sub ................................. 41
ARTICLE VII
CONDITIONS TO THE HOLDING COMPANY MERGER
SECTION 7.01. Conditions to Each Party's Obligations to Effect the
Holding Company Merger ................................... 42
SECTION 7.02. Conditions to Obligations of Purchaser and Merger Sub. ..... 43
SECTION 7.03. Conditions to Obligations of the Company and the Bank ...... 44
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination ................................................ 45
SECTION 8.02. Effect of Termination ...................................... 46
SECTION 8.03. Amendment .................................................. 48
SECTION 8.04. Waiver ..................................................... 49
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ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Closing .................................................... 49
SECTION 9.02. Alternative Structure ...................................... 49
SECTION 9.03. Non-Survival of Representations Warranties and Agreements .. 50
SECTION 9.04. Notices .................................................... 50
SECTION 9.05. Certain Definitions ........................................ 51
SECTION 9.06. Severability ............................................... 52
SECTION 9.07. Entire Agreement ........................................... 52
SECTION 9.08. Assignment ................................................. 52
SECTION 9.09. Parties in Interest ........................................ 52
SECTION 9.10. Specific Performance ....................................... 53
SECTION 9.11. Governing Law .............................................. 53
SECTION 9.12. Headings ................................................... 53
SECTION 9.13. Interpretation ............................................. 53
SECTION 9.14. Counterparts ............................................... 53
EXHIBITS
Exhibit I Bank Merger Agreement
Exhibit II Agreement Regarding Company Option Plans
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 8, 1997 (this "Agreement"),
by and among CITIZENS BANK OF CONNECTICUT, a Connecticut chartered savings bank
("Purchaser"), BNH BANCSHARES, INC., a Connecticut corporation (the "Company"),
and BANK OF NEW HAVEN, a Connecticut chartered bank and trust company and wholly
owned subsidiary of the Company (the "Bank").
WHEREAS, the Boards of Directors of Purchaser, the Company and the Bank
have each determined that it is in the best interests of their respective
stockholders for Purchaser to acquire the Company and the Bank upon the terms
and subject to the conditions set forth herein and have each approved the
transactions contemplated by this Agreement;
WHEREAS, following the execution and delivery of this Agreement, Purchaser
shall take such action as is appropriate to form a subsidiary to be organized as
a corporation ("Merger Sub") under the General Statutes of Connecticut
("Connecticut Law"), and to cause Merger Sub to become a party to this
Agreement, pursuant to which Merger Sub shall merge with and into the Company
(the "Holding Company Merger") upon the terms and subject to the conditions set
forth herein (the Company and Merger Sub being the constituent corporations of
the Holding Company Merger);
WHEREAS, following the execution and delivery of this Agreement, Purchaser
(also sometimes referred to herein as the "Surviving Bank"), shall enter into a
Bank Merger Agreement (the "Bank Merger Agreement") with the Bank, substantially
in the form of Exhibit I hereto, providing for the merger of the Bank with and
into Purchaser (the "Bank Merger") under Connecticut Law, promptly following the
consummation of the Holding Company Merger; and
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Purchaser, the Company and the Bank hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. Upon the terms and subject to the conditions set
forth in Article VII, and in accordance with Connecticut Law, at the Effective
Time (as hereinafter defined), Merger Sub shall be merged with and into the
Company. As a result of the Holding Company Merger, the separate corporate
existence of Merger Sub shall cease and the Company shall continue as the
surviving corporation of the Holding Company Merger (the "Surviving
Corporation").
SECTION 1.02. Effective Time. As promptly as practicable after all of the
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conditions set forth in Article VII shall have been satisfied or, if
permissible, waived by the party entitled to the benefit of the same, Merger Sub
and the Company shall duly execute and file a certificate of merger (the
"Certificate of Merger") with the Secretary of State of the State of Connecticut
(the "Connecticut Secretary") in accordance with Section 33-819 of Connecticut
Law. The Holding Company Merger shall become effective on the date (the
"Effective Date") and at such time (the "Effective Time") as the Certificate of
Merger is filed with the Connecticut Secretary or at such later time as is
specified in the Certificate of Merger.
SECTION 1.03. Effect of the Holding Company Merger. At the Effective Time,
the effect of the Holding Company Merger shall be as provided herein and in the
applicable provisions of Connecticut Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities, obligations,
restrictions, disabilities and duties of the Company and Merger Sub shall become
the debts, liabilities, obligations, restrictions, disabilities and duties of
the Surviving Corporation.
SECTION 1.04. Certificate of Incorporation. Unless otherwise determined by
Purchaser prior to the Effective Time, at the Effective Time, the Certificate of
Incorporation of the Company shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter further amended as provided by law and
such Certificate of Incorporation.
SECTION 1.05. By-Laws. Unless otherwise determined by Purchaser prior to
the Effective Time, the By-Laws of Merger Sub, as in effect immediately prior to
the Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter amended as provided by law, the Certificate of Incorporation of the
Surviving Corporation and such By-Laws.
SECTION 1.06. Directors and Officers. The directors and officers of Merger
Sub immediately prior to the Effective Time shall be the initial directors and
officers of the Surviving Corporation, each to hold office in accordance with
the Certificate of Incorporation and By-Laws of the Surviving Corporation, in
each case until their respective successors are duly elected or appointed and
qualified.
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.01. Conversion of Securities. At the Effective Time, by virtue of
the Holding Company Merger and without any action on the part of Merger Sub, the
Company or the holders of any of the common stock, without par value per share,
of the Company (the "Shares" or the "Company Common Stock"):
(a) Each Share issued and outstanding immediately prior to the
Effective Time
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(other than any Shares to be canceled pursuant to Section 2.01(b) and any
Objecting Shares (as hereinafter defined)) shall be canceled and shall be
converted automatically into the right to receive an amount equal to $15.50
in cash (the "Fixed Consideration") payable, without interest, to the
holder of such Share, upon surrender, in the manner provided in Section
2.04, of the certificate that formerly evidenced such Share. In the event
that the Effective Time has not occurred on or prior to August 31, 1997 and
(i) the condition contained in Section 7.01(a) has been satisfied, and (ii)
the failure of the Effective Time to have occurred on or prior to August
31, 1997 is not attributable to acts or omissions by or circumstances
related to the Company or the Bank, then the Fixed Consideration shall be
adjusted upwards by an amount determined by (A) multiplying (1) the Fixed
Consideration by (2) 6%, rounded at the date the foregoing calculation is
made at the Effective Time to the nearest $.01, then (B) dividing the
product determined pursuant to clause (A) by 365, and then (C) multiplying
the amount obtained after the application of clauses (A) and (B) by the
number of calendar days in the period commencing on September 1, 1997
through and including the Effective Date; provided, however, that in the
event that the Stockholders Meeting (as deemed below) is not held on or
before June 30, 1997 each of the preceding references to August 31, 1997
and to September 1, 1997 shall automatically and without any action by the
parties each be extended by the number of days the Stockholder meeting is
delayed beyond June 30, 1997. The Fixed Consideration, to the extent
adjusted as provided above, is referred to herein as the "Merger
Consideration."
(b) Each Share held in the treasury of the Company and each Share
owned by Merger Sub, Purchaser or any direct or indirect wholly owned
subsidiary of Purchaser or of the Company immediately prior to the
Effective Time shall be canceled without any conversion thereof and no
payment or distribution shall be made with respect thereto.
(c) Each share of the common stock of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into
and exchanged for one validly issued, fully paid and nonassessable share of
the common stock of the Surviving Corporation.
SECTION 2.02. Employee Stock Options. Prior to the Effective Time, the
Company shall take all such action as is necessary to terminate The 1986 BNH
Bancshares, Inc. Stock Option Plan, The BNH Bancshares, Inc. 1992 Stock
Incentive Plan, and The BNH Bancshares, Inc. Stock Option Plan for Non-Employee
Directors, each as amended to date (collectively, the "Company Option Plans"),
and shall provide written notice to each holder of a then outstanding stock
option to purchase Shares pursuant to the Company 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 Time and that, if such stock option is
not exercised or otherwise terminated before the Effective Time, such holder
shall be entitled to receive in cancellation of such option a cash payment from
the Company at the Closing in an amount equal to the excess of the Merger
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Consideration over the per share exercise price of such stock option, multiplied
by the number of Shares covered by such stock option, subject to any required
withholding of taxes. Subject to the foregoing, the Company Option Plans and all
options issued thereunder shall terminate at the Effective Time. The Company
hereby represents and warrants to Purchaser that the maximum number of Shares
subject to issuance pursuant to the exercise of stock options issued and
outstanding under the Company Option Plans is not and shall not be at or prior
to the Effective Time more than 150,954. On or prior to the date of this
Agreement, the Company shall, to the extent practicable, cause each director and
executive officer of the Company or the Bank who holds, as of the date of this
Agreement, an outstanding stock option under the Company Option Plans to execute
and deliver an Agreement, in the form appended hereto as Exhibit II. After the
date of this Agreement, the Company shall cause each other director, officer or
employee of the Company or the Bank who holds, as of the date of this Agreement,
an outstanding stock option under the Company Option Plans to execute and
deliver, as soon as practicable, an Agreement in the form appended hereto as
Exhibit II.
SECTION 2.03. Objecting Shares.
(a) Notwithstanding anything in this Agreement to the contrary and unless
otherwise provided by applicable law, Shares that are issued and outstanding
immediately prior to the Effective Time and that are owned by stockholders who
have properly objected within the meaning of Section 33-855 et. seq. of
Connecticut Law (the "Objecting Shares"), shall not be converted into the right
to receive the Merger Consideration, unless and until such stockholders shall
have failed to perfect or shall have effectively withdrawn or lost their right
of payment under applicable law. If any such stockholder shall have failed to
perfect or shall have effectively withdrawn or lost such right of payment, each
Share held by such stockholder shall thereupon be deemed to have been converted
into the right to receive and become exchangeable for, at the Effective Time,
the Merger Consideration in the manner provided in Section 2.04 hereof.
(b) The Company shall give Purchaser (i) prompt notice of any objections
filed pursuant to Section 33-855 et. seq. of Connecticut Law received by the
Company, withdrawals of such objections, and any other instruments served in
connection with such objections pursuant to Connecticut Law and received by the
Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to objections under Connecticut Law consistent with the obligations of
the Company thereunder. The Company shall not, except with the prior written
consent of Purchaser, (x) make any payment with respect to any such objection,
(y) offer to settle or settle any such objections or (z) waive any failure to
timely deliver a written objection in accordance with Connecticut Law.
SECTION 2.04. Surrender of Shares; Stock Transfer Books.
(a) Prior to the Effective Time, Purchaser shall designate a bank or trust
company to act as agent (the "Paying Agent") for the holders of Shares in
connection with the Holding Company Merger to receive the funds to which holders
of Shares shall become entitled
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pursuant to Section 2.01(a). Immediately prior to the Effective Time, Purchaser
shall deposit, or cause to be deposited, with the Paying Agent, for the benefit
of the holders of Certificates, for exchange in accordance with this Article II,
such amount of cash as is sufficient to pay the aggregate Merger Consideration
which holders of Shares are entitled to receive pursuant to Section 2.01 and
paid pursuant to this Section 2.04 in exchange for outstanding Shares.
(b) Promptly after the Effective Time (but in no event more than three
business days thereafter), Purchaser and the Surviving Corporation shall cause
to be mailed to each person who was, at the Effective Time, a holder of record
of Shares entitled to receive the Merger Consideration pursuant to Section
2.01(a) a form of letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the certificates evidencing such
Shares (the "Certificates") shall pass, only upon proper delivery of the
Certificates to the Paying Agent) and instructions for use in effecting the
surrender of the Certificates pursuant to such letter of transmittal. The
Company shall have the right to review the letter of transmittal, the
instructions and any accompanying letter. Upon surrender to the Paying Agent of
a Certificate, together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto, and such other
documents as may be required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange therefor the Merger
Consideration for each Share formerly evidenced by such Certificate, and such
Certificate shall then be canceled. No interest shall accrue or be paid on the
Merger Consideration payable upon the surrender of any Certificate for the
benefit of the holder of such Certificate. If payment of the Merger
Consideration is to be made to a person other than the person in whose name the
surrendered Certificate is registered on the stock transfer books of the
Company, it shall be a condition of payment that the Certificate so surrendered
shall be endorsed properly or otherwise be in proper form for transfer and that
the person requesting such payment shall have paid all transfer and other taxes
required by reason of the payment of the Merger Consideration to a person other
than the registered holder of the Certificate surrendered or shall have
established to the satisfaction of the Surviving Corporation that such taxes
either have been paid or are not applicable.
(c) At any time following the sixth month after the Effective Time,
Purchaser and the Surviving Corporation shall be entitled to require the Paying
Agent to deliver to it any funds which had been made available to the Paying
Agent and not disbursed to holders of Shares (including, without limitation, all
interest and other income received by the Paying Agent in respect of all funds
made available to it), and thereafter such holders shall be entitled to look to
Purchaser and the Surviving Corporation (subject to abandoned property, escheat
and other similar laws) only as general creditors thereof with respect to any
Merger Consideration that may be payable upon due surrender of the Certificates
held by them. Notwithstanding the foregoing, neither Purchaser nor the Surviving
Corporation nor the Paying Agent shall be liable to any holder of a Share for
any Merger Consideration delivered in respect of such Share to a public official
pursuant to any abandoned property, escheat or other similar law.
(d) At the close of business on the Effective Date, the stock transfer
books of the Company shall be closed and thereafter there shall be no further
registration of transfers of
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Shares on the records of the Company. From and after the Effective Time, the
holders of Shares outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such Shares except as otherwise
provided herein or by applicable law.
(e) 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 Purchaser or the
Surviving Corporation, upon the posting by such person of a bond in such amount
as Purchaser or the Surviving Corporation may reasonably direct as indemnity
against any claim that may be made against it with respect to such Certificate,
the Paying Agent will issue in exchange for such lost, stolen or destroyed
Certificate, the cash representing the Merger Consideration deliverable in
respect thereof pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE BANK
The Company and the Bank hereby jointly and severally represent and warrant
to Purchaser and Merger Sub that:
SECTION 3.01. Organization and Qualification; Subsidiaries.
(a) The Company is a corporation duly organized, validly existing and in
good standing under Connecticut Law and a bank holding company registered with
the Board of Governors of the Federal Reserve System (the "FRB") under the Bank
Holding Company Act of 1956, as amended (the "BHCA"). The Bank is a state
chartered bank and trust company duly organized, validly existing and in good
standing under Connecticut Law. The deposit accounts of the Bank are insured by
the Federal Deposit Insurance Corporation (the "FDIC") to the fullest extent
permitted by law and all premiums and assessments required in connection
therewith have been paid by the Bank. Each other subsidiary (as defined in
Section 9.05(h) below) five percent or more of the capital stock (or other
voting or equity interest) of which is beneficially owned by the Company, is a
corporation or other entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization. The Company, the Bank and their subsidiaries each has the
requisite power and authority and all necessary governmental approvals to own,
lease and operate all of its properties and assets and to carry on its business
as it is now being conducted, and is duly licensed or qualified to do business
and is in good standing in each jurisdiction where 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 be in good standing would
not, either individually or in the aggregate, have a Material Adverse Effect (as
defined in Section 9.05(f) below).
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(b) A true and complete list of all the subsidiaries of the Company,
together with the jurisdiction of incorporation or organization of each
subsidiary and the percentage of the outstanding capital stock or other
ownership interest of each subsidiary, is set form in Section 3.01 of the
Disclosure Schedule previously delivered by the Company to Purchaser (the
"Disclosure Schedule"). Except for the Bank and its subsidiaries, the Company
does not directly or indirectly own five percent or more of the capital stock or
other equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity.
SECTION 3.02. Certificate of Incorporation; By-Laws; Corporate Records. The
Company and the Bank each has heretofore made available to Purchaser a complete
and correct copy of the Certificate of Incorporation and the By-Laws or
equivalent organizational documents, each as amended to date, of the Company,
the Bank and each of their subsidiaries. Such Certificate of Incorporation,
By-Laws and equivalent organizational documents are in full force and effect.
Neither the Company, the Bank nor any of their subsidiaries is in violation of
any provision of its Certificate of Incorporation or equivalent organizational
documents or of its By-Laws. The minute books of the Company, the Bank and each
of their subsidiaries contain in all material respects true and complete records
of all meetings held and true and complete records of all corporate actions
taken since January 1, 1994 of their respective stockholders and boards of
directors (including committees of their respective boards of directors).
SECTION 3.03. Capitalization.
(a) The authorized capital stock of the Company consists of 30,000,000
Shares. As of the date hereof, (a) 3,694,492 Shares are issued and outstanding,
all of which are duly authorized, validly issued, fully paid, non-assessable and
free of preemptive rights, with no personal liability attaching to the ownership
thereof, (b) 4,776 Shares are held in the treasury of the Company, (c) no Shares
are held by any of its subsidiaries, and (d) 226,716 Shares are reserved for
future issuance pursuant to the Company Option Plans. All Shares subject to
issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid, non-assessable and free of preemptive rights, with
no personal liability attaching to the ownership thereof.
(b) The authorized capital stock of the Bank consists of 1,250,000 shares
of Common Stock, par value $1.00 per share ("Bank Common Stock") (shares of Bank
Common Stock being hereinafter collectively referred to as "Bank Shares"). As of
the date hereof, (a) 1,002,735 Bank Shares are issued and outstanding and owned
by the Company, all of which are duly authorized, validly issued, fully paid,
non-assessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. (b) no Bank Shares are held in the treasury
of the Bank, and (c) no Bank Shares are held by any of its subsidiaries. Each
issued and outstanding share of capital stock of each other subsidiary of the
Company is duly authorized, validly issued, fully paid, non-assessable and free
of preemptive rights, with no personal liability
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attaching to the ownership thereof. Each share of capital stock of each
subsidiary of the Company owned by the Company, the Bank or any of their other
subsidiaries is free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements, limitations on the
Company's, the Bank's or such other subsidiary's voting rights, charges and
other encumbrances of any nature whatsoever.
(c) Neither the Company nor the Bank has any stock option or equity-based
compensation plans, agreements or arrangements other than the Company Option
Plans. Except for stock options issued pursuant to the Company Option Plans,
there are no outstanding subscriptions, options, warrants, calls or other
rights, agreements, arrangements or commitments of any character relating to the
issued or unissued capital stock of the Company, the Bank or any of their
subsidiaries or obligating the Company, the Bank or any of their subsidiaries to
issue or sell any shares of capital stock of, or other equity interests in, the
Company, the Bank or any of their subsidiaries. There are no outstanding
contractual obligations of the Company, the Bank or any of their subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of, or other
equity interests in, the Company, the Bank or any of their subsidiaries or to
provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in, any subsidiary. The names of the optionees, the
date of each option to purchase Shares granted, the number of Shares subject to
each such option, the expiration date of each such option, and the price at
which each such option may be exercised under the Company Option Plans are set
forth in Section 3.03 of the Disclosure Schedule.
(d) The BNH Bancshares, Inc. 1985 Warrant Plan for Directors has terminated
by its terms and all rights to acquire securities of the Company thereunder are
extinguished. All warrants or other rights, agreements, arrangements or
commitments of any character thereunder have terminated by their terms and none
of the foregoing is of any force or effect.
SECTION 3.04. Authority.
(a) The Company has full corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement, the performance of its obligations hereunder and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or the performance of its
obligations hereunder or to consummate the transactions contemplated hereby
(other than, with respect to the Holding Company Merger, the approval and
adoption of this Agreement by the holders of the then outstanding Shares). The
Board of Directors of the Company (the "Company Board") has approved this
Agreement and has directed that this Agreement and the transactions contemplated
hereby, including the Holding Company Merger, be submitted to the Company's
stockholders for approval at a meeting of such stockholders. This Agreement has
been duly and validly executed and delivered by the Company and constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.
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(b) The Bank has full corporate power and authority to execute and deliver
this Agreement and the Bank Merger Agreement, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Bank Merger
Agreement, the performance of its obligations hereunder and thereunder and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action and no other corporate
proceedings on the part of the Bank are necessary to authorize this Agreement or
the Bank Merger Agreement or the performance of its obligations hereunder or
thereunder or to consummate the transactions contemplated hereby or thereby
(other than, with respect to the Bank Merger, the approval and adoption of the
Bank Merger Agreement by the Surviving Corporation as the sole stockholder of
the Bank). The Board of Directors of the Bank (the "Bank Board") has approved
this Agreement and has directed that the Bank Merger Agreement and the
transactions contemplated thereby, including the Bank Merger, be submitted to
the Company as the sole stockholder of the Bank for its approval. This Agreement
has been duly and validly executed and delivered by the Bank and constitutes a
legal, valid and binding obligation of the Bank, enforceable against the Bank in
accordance with its terms. The Bank Merger Agreement, upon execution and
delivery by the Bank, will be duly and validly executed and delivered by the
Bank and will constitute a legal, valid and binding obligation of the Bank
enforceable against the Bank in accordance with its terms.
SECTION 3.05. No Conflict. Neither the execution, delivery and performance
of this Agreement by the Company, nor the consummation by the Company of the
transactions contemplated hereby, nor the execution, delivery and performance of
this Agreement or the Bank Merger Agreement by the Bank, nor the consummation by
the Bank of the transactions contemplated hereby or thereby, nor compliance by
the Company or the Bank with any of the terms or provisions hereof or thereof,
will, (i) conflict with, violate or result in a breach of the Certificate of
Incorporation or By-Laws or equivalent organizational documents of the Company,
the Bank or any of their subsidiaries, (ii) conflict with, violate or result in
a breach of any statute, code, ordinance, law, rule, regulation, order, writ,
judgment, injunction or decree applicable to the Company, the Bank or any of
their subsidiaries or by which any property or asset of the Company, the Bank or
any of their subsidiaries is bound or affected, or (iii) conflict with, violate
or result in a breach of any provisions of or the loss of any benefit under,
constitute a default (or an event which with notice or lapse of time or both
would constitute a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien,
pledge, security interest, charge or other encumbrance on any property or asset
of the Company, the Bank or any of their subsidiaries pursuant to, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company, the Bank or any of their
subsidiaries is a party or by which the Company, the Bank or any of their
subsidiaries or any property or asset of the Company, the Bank or any of their
subsidiaries is bound or affected, except, in the case of clause (iii) above,
for any such conflicts, violations, breaches, defaults or other occurrences
which would not be deemed material.
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SECTION 3.06. Consents and Approvals.
(a) The execution, delivery and performance of this Agreement by the
Company, and the execution, delivery and performance of this Agreement and the
Bank Merger Agreement by the Bank, does not require any consent, approval,
authorization or permit of, or filing with or notification to, any court,
administrative agency or commission or other governmental or regulatory
authority or instrumentally, domestic or foreign, including, without limitation,
any Bank Regulator (as hereinafter defined) (each a "Governmental Entity"),
except (i) for applicable requirements, if any, of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), state takeover laws, the pre-merger
notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder (the "HSR Act"), and
filing and recordation of appropriate merger documents as required by
Connecticut Law, (ii) for consents and approvals of or filings, registrations or
negotiations with the FRB, the FDIC and the Banking Commissioner of the State of
Connecticut (the "Connecticut Commissioner"), and (iii) the filings required by
the Bank Merger Agreement. The Company and the Bank are not aware of any reason
why the approvals, consents and waivers of Governmental Entities referred to
herein and in Section 7.01(b) should not be obtained.
(b) The execution, delivery and performance of this Agreement by the
Company, and the execution, delivery and performance of this Agreement and the
Bank Merger Agreement by the Bank, does not require any consent, approval,
authorization or permit of, or filing with or notification to, any third party,
except where failure to obtain any such consent, approval, authorization or
permit, or to make any such filing or notification, would not prevent or
significantly delay consummation of the Holding Company Merger or the Bank
Merger, or otherwise prevent the Company or the Bank from performing its
obligations under this Agreement or the Bank from performing its obligations
under the Bank Merger Agreement, or would not, either individually or in the
aggregate, be material.
SECTION 3.07. Compliance. The Company, the Bank and each of their
subsidiaries hold, and have at all times within the last six years held, all
material licenses, franchises, permits and authorizations necessary for the
lawful conduct of their respective businesses under and pursuant to all, and
have complied with and are not in conflict with, or in default or violation of,
(a) any statute, code, ordinance, law, rule, regulation, order, writ, judgment,
injunction, decree or board resolution, published policies and guidelines of any
Governmental Entity, applicable to the Company, the Bank or any of their
subsidiaries or by which any property or asset of the Company, the Bank or any
of their subsidiaries is bound or affected or (b) any note, bond, mortgage,
indenture, deed of trust, contract, agreement, lease, license, permit, franchise
or other instrument or obligation to which the Company, the Bank or any of their
subsidiaries is a party or by which the Company, the Bank or any of their
subsidiaries or any property or asset of the Company, the Bank or any of their
subsidiaries is bound or affected, except for any such noncompliance, conflicts,
defaults or violations that would not, individually or in the aggregate, be
material or, with respect to any matters described in clause (a) above, that
were resolved to the satisfaction of the appropriate Governmental Entity; and
neither the Company, the Bank or any
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of their subsidiaries knows of, or has received notice of, any material
violation of any of the above. Without limiting the generality of the foregoing,
neither the Company, the Bank nor any of their subsidiaries has been advised of
the existence of any facts or circumstances which would cause the Bank to be
deemed not to be in satisfactory compliance with the applicable provisions of
Part II of Chapter 664a of Connecticut Law (Section 36a-30 et seq.) and, as
applicable to the Bank, the Community Reinvestment Act of 1977, as amended (the
"CRA"), and the regulations promulgated thereunder.
SECTION 3.08. SEC Reports and Bank Reports.
(a) The Company has filed, and made available to Purchaser, true and
complete copies of all forms, reports and documents required to be filed by it
with the Securities and Exchange Commission (the "SEC") since January 1, 1994,
and has heretofore delivered to Purchaser, in the form filed with the SEC, true
and complete copies of (i) its Annual Reports on Form 10-K for the fiscal years
ended December 31, 1994, December 31, 1995 and December 31, 1996, respectively,
(ii) its Quarterly Report on Form 10-Q since January 1, 1994, (iii) all proxy
statements relating to the Company's meetings of stockholders (whether annual or
special) held since January 1, 1994, (iv) all other forms, reports and other
registration statements (other than Quarterly Reports on Form 10-Q not referred
to in clause (ii) above) filed by the Company with the SEC since January 1,
1994, and (v) all communications mailed by the Company to its stockholders since
January 1, 1994 (the forms, reports and other documents referred to in clauses
(i), (ii), (iii), (iv) and (v) above being referred to herein, collectively, as
the "SEC Reports"). As of their respective dates, the SEC Reports (A) complied
in all material respects as to form with the requirements of the Securities Act
of 1933, as amended (the "Securities Act") and the Exchange Act, as the case may
be, and the rules and regulations thereunder and (B) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. The
Company has timely filed all SEC Reports and other documents required to be
filed by it under the Securities Act and the Exchange Act. Neither the Bank nor
any of their other subsidiaries is required to file any form, report or other
document with the SEC. The Company has made available to Purchaser true and
complete copies of all amendments and modifications that have not been filed by
the Company with the SEC to all agreements, documents and other instruments that
previously had been filed by the Company with the SEC and are currently in
effect.
(b) The Company, the Bank and their subsidiaries each has timely filed and
made available to Purchaser true and complete copies of all forms, reports and
documents required to be filed by each of them with all appropriate federal or
state governmental or regulatory authorities charged with the supervision of
banks or bank holding companies or engaged in the insurance of bank deposits,
including without limitation, the FRB, the FDIC and the Connecticut Commissioner
("Bank Regulators") since January 1, 1994, and has paid all fees and assessments
due and payable in connection therewith. Such reports as of their respective
date of filing complied in all material respects with the requirements of all
laws, rules and regulations enforced
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or promulgated by such Bank Regulators. Except for normal periodic examinations
conducted by the FRB, the FDIC, the Connecticut Commissioner or any other Bank
Regulator in the regular course of the business of the Company, the Bank and
their subsidiaries (the "Bank Examinations"), no Bank Regulator has initiated
any proceeding or, to the best knowledge of the Company and the Bank,
investigation into the business or operations of the Company, the Bank or any of
their subsidiaries since January 1, 1994. The Company, the Bank and their
subsidiaries have resolved all violations, criticisms or exceptions by any Bank
Regulator with respect to any Bank Examination.
SECTION 3.09. Financial Statements.
(a) Each of the consolidated financial statements of the Company and its
subsidiaries, including, in each case, the notes thereto, contained in the SEC
Reports was prepared, and the financial statements referred to in Section 6.08
hereof will be prepared, in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated
("GAAP") (except as may be indicated in the notes thereto) and each fairly
presents, and the financial statements referred to in Section 6.08 hereof each
will fairly present, the consolidated financial position, results of operations
and changes in financial position of the Company and its subsidiaries as at the
respective dates thereof and for the respective periods indicated therein,
subject, in the case of unaudited statements, to normal and recurring year-end
adjustments normal in nature and not material in amount. Each of the
consolidated financial statements of the Company and its subsidiaries,
including, in each case, the notes thereto, contained in the SEC Reports comply,
and the financial statements referred to in Section 6.08 hereof will comply, in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto. Without
limiting the generality of the foregoing, (x) the allowance for possible loan
losses included in the consolidated financial statements of the Company and its
subsidiaries contained in the SEC Reports was, and the allowance for possible
loan losses to be included in the financial statements referred to in Section
6.08 hereof will be, determined in accordance with GAAP and is, and will be, in
the judgment of the Company adequate to provide for losses relating to or
inherent in the loan and lease portfolios of the Company and their subsidiaries
(including without limitation commitments to extend credit), and (y) the Other
Real Estate Owned ("OREO") included in the consolidated financial statements of
the Company and its subsidiaries contained in the SEC Reports was, and the OREO
included in the financial statements referred to in Section 6.08 hereof will be,
carried net of reserves at the lower of cost or market value in accordance with
GAAP or the regulations or other requirements of the SEC, the FDIC and the
Connecticut Commissioner. The books and records of the Company, the Bank and
their subsidiaries are true and complete in all material respects and have been,
and are being, maintained in all material respects in accordance with applicable
legal and accounting requirements.
(b) The consolidated balance sheets of the Company and its subsidiaries as
at December 31, 1996, contained in the SEC Reports, including the notes thereto,
each makes, and the consolidated balance sheets contained in the financial
statements referred to in Section 6.08
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will make, adequate provision for, reflect or disclose all material liabilities
and obligations of every nature (whether accrued, absolute, contingent or
otherwise and whether due or to become due) of the Company and its subsidiaries
as of December 31, 1996, and except as and to the extent set forth on such
balance sheets, neither the Company, the Bank nor any of their subsidiaries has
any material liability or obligation of any nature (whether accrued, absolute,
contingent or otherwise and whether due or to become due) which would be
required to be provided for, reflected or disclosed on a balance sheet, or in
the notes thereto, prepared in accordance with GAAP. To the best knowledge of
the Company and the Bank, no facts or circumstances exist which would give
either the Company or the Bank reason to believe that a material liability or
obligation that, in accordance with GAAP applied on a consistent basis, should
have been reflected or disclosed on such balance sheet, was not so reflected or
disclosed.
SECTION 3.10. Absence of Certain Changes or Events. Since December 31,
1996, except as contemplated by this Agreement or as disclosed (i) in Section
3.10 of the Disclosure Schedule or (ii) any SEC Report filed prior to the date
of this Agreement, the Company and the Bank have conducted their businesses only
in the ordinary course and in a manner consistent with past practice and, since
December 31, 1996, there has not been (a) either individually or in the
aggregate, any Material Adverse Effect, and to the best knowledge of the Company
and the Bank, no fact or condition exists which is reasonably likely to cause
such a Material Adverse Effect in the future, (b) any material damage,
destruction or loss with respect to any property or asset of the Company, the
Bank or any of their subsidiaries, (c) any change by the Company, the Bank or
any of their subsidiaries in its accounting methods, principles or practices,
other than changes required by applicable law or GAAP or regulatory accounting
as concurred in by the Company's independent accountants, (d) any revaluation by
the Company, the Bank or any of their subsidiaries of any asset, including,
without limitation, any writing down of the value of inventory or writing off of
notes or accounts receivable, other than in the ordinary course of business
consistent with past practice, (e) any entry by the Company, the Bank or any of
their subsidiaries into any contract or commitment of more than $100,000 or with
a term of more than one year, (f) any declaration, setting aside or payment of
any dividend or distribution in respect of any capital stock of the Company, the
Bank or any of their subsidiaries or any redemption, purchase or other
acquisition of any of its securities, (g) any increase in or establishment of
any bonus, insurance, severance, deferred compensation, pension, retirement,
profit sharing, stock option (including, without limitation, the granting of
stock options, stock appreciation rights, performance awards, or restricted
stock awards), stock purchase or other employee benefit plan, or any other
increase in the compensation payable or to become payable to any directors,
officers or employees of the Company, the Bank or any of their subsidiaries, or
any grant of severance or termination pay, or any contract or arrangement
entered into to make or grant any severance or termination pay, any payment of
any bonus, or the taking of any action not in the ordinary course of business
with respect to the compensation or employment of directors, officers or
employees of the Company, the Bank or any of their subsidiaries, (h) any strike,
work stoppage, slowdown or other labor disturbance, (i) any material election
made by the Company, the Bank or any of their subsidiaries for federal or state
income tax purposes, (j) any change in the credit policies or procedures of the
Company, the Bank or any of their subsidiaries, the effect of which
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was or is to make any such policy or procedure less restrictive in any material
respect, (k) any material liability or obligation of any nature (whether
accrued, absolute, contingent or otherwise and whether due or to become due),
including without limiting the generality of the foregoing, liabilities as
guarantor under any guarantees or liabilities for taxes, (l) any forgiveness or
cancellation of any indebtedness or contractual obligation other than in the
ordinary course of business consistent with past practice, (m) any mortgage,
pledge, lien or lease of any assets, tangible or intangible, of the Company, the
Bank or any of their subsidiaries, (n) any acquisition or disposition of any
assets or properties, or any contract for any such acquisition or disposition
entered into, or (o) any lease of real or personal property entered into, other
than in connection with foreclosed property or in the ordinary course of
business consistent with past practice.
SECTION 3.11. Absence of Litigation. Except as set forth in Section 3.11 of
the Disclosure Schedule, neither the Company, the Bank nor any of their
subsidiaries is a party to any, and there are no pending, or to the best
knowledge of the Company and the Bank, threatened legal, administrative,
arbitral or other claims, actions, proceedings or investigations of any nature,
against the Company, the Bank or any of their subsidiaries or any property or
asset of the Company, the Bank or any of their subsidiaries, before any court,
arbitrator or administrative, governmental or regulatory authority or body,
domestic or foreign, and no facts or circumstances have come to the Company's or
the Bank's attention which have caused either of them to believe that a material
claim, action, proceeding or investigation against or affecting the Company, the
Bank or any of their subsidiaries could reasonably be expected to occur. Neither
the Company, the Bank nor any of their subsidiaries, nor any property or asset
of the Company, the Bank or any of their subsidiaries, is subject to any order,
writ, judgment, injunction, decree, determination or award which restricts its
ability to conduct business in any area.
SECTION 3.12. Employee Benefit Plans.
(a) Section 3.12 of the Disclosure Schedule sets forth a true and complete
list of all Plans maintained or contributed to by the Bank during the six years
preceding this Agreement. The term "Plans" means all employee benefit plans,
arrangements or agreements that are maintained or contributed to, or that were
maintained or contributed to at any time during the six years preceding the date
of this Agreement, by the Company, the Bank, any of their subsidiaries or by any
trade or business, whether or not incorporated (an "ERISA Affiliate"), all of
which together with the Company or the Bank would be deemed a "single employer"
within the meaning of Section 4001 of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA").
(b) The Company and the Bank have heretofore delivered to Purchaser true
and complete copies of each of the Plans and all related documents, including
but not limited to (i) all required Forms 5500 and all related schedules for
such Plans (if applicable) for each of the last two years, (ii) the actuarial
report for such Plan (if applicable) for each of the last two years, and (iii)
the most recent determination letter from the IRS (if applicable) for such Plan.
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(c) (i) Each of the Plans has been operated and administered in all
material respects in accordance with applicable laws, including but not limited
to ERISA and the Code, (ii) each of the Plans intended be "qualified" within the
meaning of Section 401(a) of the Code has been maintained so as to qualify from
the effective date of such Plan to the Effective Time, (iii) no Plan provides
benefits, including without limitation death, medical or other benefits (whether
or not insured), with respect to current or former employees of the Company, the
Bank, their subsidiaries or any ERISA Affiliate beyond their retirement or other
termination of service, other than (u) coverage mandated by applicable law, (v)
life insurance death benefits payable in the event of the death of a covered
employee, (w) disability benefits payable to disabled former employees, (x)
death benefits or retirement benefits under any "employee pension plan," as that
term is defined in Section 3(2) of ERISA, (y) deferred compensation benefits
accrued as liabilities on the books of the Company, the Bank, their subsidiaries
or any ERISA Affiliate or (z) benefits the full cost of which is borne by the
current or former employee (or his beneficiary), (iv) neither the Company, the
Bank, nor any of their subsidiaries nor any ERISA Affiliate has ever maintained
or contributed to Plan subject to Title IV of ERISA or a "multiemployer pension
plan," as such term is defined in Section 3(37) of ERISA, (v) all contributions
or other amounts payable by the Company, the Bank or their subsidiaries as of
the Effective Time with respect to each Plan in respect of current or prior plan
years have been paid or accrued in accordance with GAAP and Section 412 of the
Code, (vi) neither the Company, the Bank, any of their subsidiaries nor any
ERISA Affiliate has engaged in a transaction in connection with which the
Company, the Bank, any of their subsidiaries or any ERISA Affiliate has any
material liability for either a civil penalty assessed pursuant to Section 409
or 502(i) of ERISA or a tax imposed pursuant to Section 4975 or 4976 of the
Code, (vii) consummation of the transactions contemplated hereby will not cause
any amounts payable under any of the Plans to fail to be deductible for federal
income tax purposes under Section 280G of the Code, (viii) there are no pending
or, to the best knowledge of the Company and the Bank, threatened or anticipated
claims (other than routine claims for benefits) by, on behalf of or against any
of the Plans or any trusts related thereto.
(d) With respect to any Plan that is a welfare plan (within the meaning of
Section 3(1) of ERISA) (i) no such Plan is funded through a "welfare benefit
fund," as such term is defined in Section 419(e) of the Code, and (ii) each such
Plan complies in all material respects with the applicable requirements of
Section 4980B(f) of the Code, Part 6 of Subtitle B of Title I of ERISA and any
applicable state continuation coverage requirements ("COBRA").
(e) Except as prohibited by law (including Section 411(d)(6) of the Code),
each Plan may be amended, terminated, modified or otherwise revised by the
Company, the Bank, their subsidiaries or any ERISA Affiliate as of the Effective
Time to eliminate without material effect, any and all future benefit accruals
under any Plan (except claims incurred under any welfare plan).
SECTION 3.13. Labor Matters. Neither the Company, the Bank nor any of their
subsidiaries is a party to any collective bargaining or other labor union or
guild contract. There is no pending or, to the best knowledge of the Company and
the Bank, threatened, labor dispute, strike or work stoppage against the
Company, the Bank or any of their subsidiaries which may
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interfere with the respective business activities of the Company, the Bank or
their subsidiaries. Neither the Company, the Bank nor any of their subsidiaries,
nor, to the best knowledge of the Company and the Bank, their respective
representatives or employees, has committed any unfair labor practices in
connection with the operation of the respective businesses of the Company, the
Bank or any of their subsidiaries, and there is no pending or, to the best
knowledge of the Company and the Bank, threatened, charge or complaint against
the Company, the Bank or any of their subsidiaries by the National Labor
Relations Board or any comparable state agency.
SECTION 3.14. Property and Leases.
(a) The Company, the Bank and each of their subsidiaries each has good and
marketable title to all the real property and all other property owned by it and
included in the consolidated balance sheet of the Company and its subsidiaries
included in its Annual Report on Form 10-K for the period ended December 31,
1996. Each parcel of real property, and each item of personal property, owned or
leased by the Company, the Bank or any of their subsidiaries (i) is owned or
leased free and clear of all mortgages, pledges, liens, security interests,
conditional and installment sale agreements, encumbrances, charges or other
claims of third parties of any kind (collectively, "Liens"), other than (A)
Liens for current taxes and assessments not yet past due or which are being
contested in good faith, (B) inchoate mechanics' and materialmen's Liens for
construction in progress, (C) workmen's, repairmen's, warehousemen's and
carriers' Liens arising in the ordinary course of business of the Company, the
Bank or such subsidiary consistent with past practice, (D) all matters of
record, Liens and other imperfections of title and encumbrances which, either
individually or in the aggregate, would not be material, and (E) those items
that secure public or statutory obligations or any discount with, borrowing
from, or obligations to any Federal Reserve Bank or Federal Home Loan Bank,
interbank credit facilities, or any transaction by a Subsidiary acting in a
fiduciary capacity (collectively, "Permitted Liens"), and (ii) is neither
subject to any governmental decree or order to be sold nor is being condemned,
expropriated or otherwise taken by any public authority with or without payment
of compensation therefor, nor, to the best knowledge of the Company or the Bank,
has any such condemnation, expropriation or taking been proposed. Neither the
Company, the Bank nor any of their subsidiaries has received any notice of
violation of any applicable zoning regulation, ordinance or other law, order,
regulation or requirement relating to its properties.
(b) All leases of real property leased for the use or benefit of the
Company, the Bank or any of their subsidiaries to which the Company, the Bank or
any of their subsidiaries is a party requiring rental payments in excess of
$100,000 during the period of the lease, and all amendments and modifications
thereto, are in full force and effect, and there exists no default under any
such lease by the Company, the Bank or any of their subsidiaries, nor, to the
best knowledge of the Company and the Bank, any event which with notice or lapse
of time or both would constitute a material default thereunder by the Company,
the Bank or any of their subsidiaries.
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SECTION 3.15. Taxes.
(a) The Company, the Bank and their subsidiaries each has duly filed in
correct form all Federal, state, county and local information returns and tax
returns required to be filed by it on or prior to the date hereof (all such
returns being true and complete in all material respects) and has duly paid,
discharged or made provisions for the payment of all material Taxes (as
hereinafter defined) and other governmental charges which have been incurred or
are due or claimed to be due from it by Federal, state, county or local taxing
authorities on or prior to the date hereof (including without limitation, if and
to the extent applicable, those due in respect of its properties, income,
business, capital stock, deposits, franchises, licenses, sales and payrolls, and
any net worth tax), other than Taxes or other charges that are not yet
delinquent or are being contested in good faith and have not been finally
determined. The amounts set up as reserves for Taxes on the consolidated balance
sheet of the Company and its subsidiaries included in its Annual Report on Form
10-K for the period ended December 31, 1996 are sufficient in the aggregate for
the payment of all material unpaid Federal, state, county and local Taxes
(including any interest or penalties thereon), whether or not disputed, accrued
or applicable, for the period ended December 31, 1996 and all prior periods
covered by such returns, and for which the Company, the Bank or any of their
subsidiaries is liable in its own right or as transferee of the assets of, or
successor to, any corporation, person, association, partnership, joint venture
or other entity. The federal income tax returns of the Company, the Bank and
their subsidiaries have been examined by the Internal Revenue Service ("IRS")
for all years through 1992 and any liability with respect thereto has been
satisfied, and no deficiencies were asserted as a result of such examination or
all such deficiencies were satisfied. The State of Connecticut tax returns of
the Company, the Bank and their subsidiaries have not, in the ten years prior to
the date of this Agreement, been examined by the State of Connecticut. There are
no material disputes pending or claims asserted for Taxes or assessments upon
the Company, the Bank or any of their subsidiaries, nor has the Company, the
Bank or any of their subsidiaries been requested to give any currently effective
waivers extending the statutory period of limitation applicable to any Federal,
state, county or local income tax return for any period. In addition, (a) proper
and accurate amounts have been withheld by the Company, the Bank and their
subsidiaries from their employees for all prior periods in compliance in all
material respects with the tax withholding provisions of applicable Federal,
state, county and local laws; (b) Federal, state, county and local returns which
are accurate and complete in all material respects have been filed by the
Company, the Bank and their subsidiaries for all periods for which returns were
due with respect to income tax withholding, Social Security and unemployment
taxes; and (c) the amounts shown on such returns to be due and payable have been
paid in full or adequate provision therefor has been included by the Company in
its consolidated financial statements included in its Annual Report on Form 10-K
for the period ended December 31, 1996.
(b) No property of the Company, the Bank or any of their subsidiaries is
property that is or will be required to be treated as being owned by another
person pursuant to the provisions of Section 168(f)(8) of the Internal Revenue
Code (as in effect prior to its amendment
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by the Tax Reform Act of 1986) or is "tax-exempt use property" within the
meaning of Section 168(h) of the Internal Revenue Code of 1986, as amended (the
"Code"). Neither the Company, the Bank nor any of their subsidiaries has been
required to include in income any adjustment pursuant to Section 481 of the Code
by reason of a voluntary change in accounting method initiated by the Company,
the Bank or any of their subsidiaries, and the IRS has not initiated or proposed
any such adjustment or change in accounting method. Neither the Company, the
Bank nor any of their subsidiaries is a party to any agreement, contract or
arrangement that would, individually or in the aggregate, result in the payment
of an "excess parachute payment" within the meaning of Section 280C; of the Code
or that would result in payments that would be nondeductible pursuant to Section
162(m) of the Code.
(c) As used in this Agreement, the term "Taxes" means all Federal, state,
county, local and foreign income, excise, gross receipts, ad valorem, profits,
gains, property, sales, transfer, use, payroll, employment, severance,
withholding, duties, intangibles, franchise and other taxes, charges, levies or
like assessments, including any net worth tax, together with all penalties and
additions to tax and interest thereon.
SECTION 3.16. Certain Contracts.
(a) Except as set forth in the SEC Reports filed prior to the date of this
Agreement or as disclosed in Section 3.16 of the Disclosure Schedule, neither
the Company, the Bank nor any of their subsidiaries is a party to or bound by
any contract, arrangement, commitment or understanding (whether written or
oral): (i) with respect to the employment of any director, officer, employee or
consultant, (ii) which, upon the consummation of the transactions contemplated
by this Agreement or the Bank Merger Agreement, will result in any payment
(whether of severance pay or otherwise) becoming due from the Company, the Bank,
or any of their subsidiaries to any officer or employee thereof, (iii) which is
a material contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC)
to be performed after the date of this Agreement that has not been filed or
incorporated by reference in the SEC Reports, (iv) which is a consulting or
other agreement (including agreements entered into in the ordinary course and
data processing, software programming and licensing contracts) not terminable on
60 days or less notice involving the payment of more than $100,000 per annum,
(v) which materially restricts the conduct of any line of business by the
Company, the Bank or any of their subsidiaries, (vi) with or to a labor union or
guild (including any collective bargaining agreement), or (vii) (including any
stock option plan, stock appreciation rights plan, restricted stock plan or
stock purchase plan) any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement, or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. The Company has previously delivered to
Purchaser true and complete copies of all employment, consulting and deferred
compensation agreements which are in writing and to which the Company, the Bank
or any of their subsidiaries is a party. Each contract, arrangement, commitment
or understanding of the type described in this Section, whether or not set forth
in Section 3.16 of the Disclosure Schedule, is referred to herein as a
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"Company Contract".
(b) (i) To the best knowledge of the Company and the Bank, each Company
Contract listed on such Disclosure Schedule is legal, valid and binding upon the
Company, the Bank or such subsidiary, as the case may be, and in full force and
effect, (ii) the Company, the Bank and each of their subsidiaries has in all
material respects performed all obligations required to be performed by it to
date under each such Company Contract, and (iii) no event or condition exists
which constitutes or, after notice or lapse of time or both, would constitute, a
material default on the part of the Company, the Bank or any of their
subsidiaries under any such Company Contract.
SECTION 3.17. Loan Portfolio. Except as set forth in Section 3.17 of the
Disclosure Schedule, neither the Company, the Bank nor any of their subsidiaries
is a party to any written or oral (a) loan agreement, note or borrowing
arrangement (including, without limitation, leases and credit enhancements)
(collectively, "Loans") the current principal balance of which exceeds $150,000
and as to which the obliger is, as of the date of this Agreement, over 90 days
delinquent in payment of principal or interest, or (b) Loan with any director,
executive officer or, to the best knowledge of the Company and the Bank, five
percent stockholder of the Company, the Bank or any of their subsidiaries, or to
the best knowledge of the Company and the Bank, any person, corporation or
enterprise controlling, controlled by or under common control with any of the
foregoing. To the best knowledge of the Company and the Bank, all of the Loans
originated and held currently and at the Effective Time by the Company, the Bank
and their subsidiaries, and any other Loans purchased and held currently and at
the Effective Time by the Company, the Bank and their subsidiaries, were
solicited, originated and exist, and will exist at the Effective Time, in
material compliance with all applicable loan policies and procedures of the
Company, the Bank and their subsidiaries. Section 3.17 of the Disclosure
Schedule sets forth as of February 28, 1997, (i) all of the Loans the current
principal balance of which exceeds $150,000 of the Company, the Bank or any of
their subsidiaries that as of the date of this Agreement are classified by the
Bank as "Other Loans Specially Mentioned", "Special Mention", "Substandard",
"Doubtful", "Loss", "Classified", "Criticized", "Watch list" or words of similar
import, together with the principal amount of and accrued and unpaid interest on
each such Loan and the identity of the obligor thereunder, and (ii) by category
of Loan (i.e., commercial, consumer, etc.), all of the other Loans of the
Company, the Bank and their subsidiaries that as of the date of this Agreement
are classified as such, together with the aggregate principal amount of such
Loans by category, it being understood that no representation is being made that
the FDIC or the Connecticut Commissioner would agree with the loan
classifications contained in Section 3.17 of the Disclosure Schedule. The
Company shall promptly inform Purchaser in writing of any Loan the current
principal balance of which exceeds $150,000 that becomes classified in the
manner described in this Section 3.17, or any Loan the classification of which
is materially and adversely changed at any time after the date of this
Agreement. The information (including electronic information and information
contained on tapes and computer disks) with respect to the Loans furnished to
Purchaser by the Company and the Bank is true and complete in all material
respects.
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SECTION 3.18. Investment Securities. Section 3.18(a) of the Disclosure
Schedule sets forth the book and market value as of February 28, 1997 of the
investment securities, mortgage backed securities and securities held for sale
by the Company, the Bank and their subsidiaries. Section 3.18(b) of the
Disclosure Schedule sets forth the names of all the joint ventures in which the
Company, the Bank or any of their subsidiaries has an investment (whether or not
such joint ventures remain active). Except for pledges to secure public and
trust deposits, Federal Reserve borrowings, repurchase agreements and reverse
repurchase agreements entered into in arms'-length transactions pursuant to
normal commercial terms and conditions and other pledges required by law, none
of the investments reflected in the consolidated balance sheet of the Company
and its subsidiaries included in its Annual Report on Form 10-K for the period
ended December 31, 1996, and none of the material investments made by the
Company, the Bank or any of their subsidiaries since December 31, 1996, is
subject to any restriction (contractual, statutory or otherwise) that would
materially impair the ability of the entity holding such investment freely to
dispose of such investment at any time. The Company has (i) properly reported as
such any investment securities which are required under GAAP to be classified as
"available for sale" at the lower of cost or market, and (ii) accounted for any
decline in the market value of its marketable equity securities portfolio in
accordance with Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 12 and Staff Accounting Bulletin No. 59, including
without limitation the recognition through the Company's consolidated statement
of operations of any unrealized loss with respect to any individual marketable
equity security as a realized loss in the accounting period in which a decline
in the market value of such security is determined to be "other than temporary."
SECTION 3.19. Derivative Transactions. Except as described in Section 3.19
of the Disclosure Schedule, neither the Company, the Bank nor any of their
subsidiaries is engaged in transactions in or involving forwards, futures,
options on futures, swaps or similar derivative instruments except as agent on
the order and for the account of others other than Federal Home Loan Bank
advances or in connection with mortgage loan secondary market activities in the
ordinary course of business consistent with the Bank's past practices. To the
extent that the Company or the Bank is engaged in such transactions, to the best
knowledge of the Company and the Bank, none of the counterparties to any
contract or agreement with respect to any such instrument is in default with
respect to such contract or agreement and no such contract or agreement, were it
to be a Loan held by the Company, the Bank or any of their subsidiaries, would
be classified as "Other Loans Specially Mentioned," "Special Mention,"
"Substandard," "Doubtful," "Loss," "Classified," "Criticized," "Credit Risk
Assets," "Concerned Loans," "Watch List" or words of similar import. The
financial position of the Company, the Bank and their subsidiaries on a
consolidated basis under or with respect to each such instrument has been
reflected in the books and records of the Company, the Bank and such
subsidiaries in accordance with GAAP consistently applied, and no open exposure
of the Company, the Bank or any of their subsidiaries with respect to any such
instrument (or with respect to multiple instruments with any single
counterparts) exceeds $100,000.
SECTION 3.20. Insurance. The Company and the Bank each has made available
to
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Purchaser true and complete copies of all material policies of insurance of the
Company, the Bank and their subsidiaries currently in effect. All of the
policies relating to insurance maintained by the Company, the Bank or any of
their subsidiaries with respect to its material properties and the conduct of
its business in any material respect (or any comparable policies entered into as
a replacement therefor)are in full force and effect and neither the Company, the
Bank nor any of their subsidiaries has received any notice of cancellation with
respect thereto. All life insurance policies on the lives of any of the current
and former officers and directors of the Company and the Bank which are
maintained by the Company and the Bank or which are otherwise included as assets
on the books of the Company or the Bank (i) are, or will at the Effective Time
be, owned by the Company or the Bank, as the case may be, free and clear of any
claims thereon by the officers or members of their families, except with respect
to the death benefits thereunder, as to which the Company and the Bank agree
that there will not be an amendment prior to the Effective Time without the
consent of Purchaser, and (ii) are accounted for properly as assets on the books
of the Bank in accordance with GAAP in all material respects. Neither the
Company, the Bank nor any of their subsidiaries has any material liability for
unpaid premiums or premium adjustments not properly reflected on the Company's
consolidated financial statements contained in the SEC Reports.
SECTION 3.21. Environmental Matters.
(a) Each of the Company, the Bank and their subsidiaries and, to the best
knowledge of the Company and the Bank, the Participation Facilities and the Loan
Properties (each as hereinafter defined), are, and have been, in material
compliance with all applicable environmental laws and with all rules,
regulations, standards and requirements of the United States Environmental
Protection Agency (the "EPA") and of state and local agencies with jurisdiction
over pollution or protection of the environment.
(b) There is no suit, claim, action or proceeding pending or, to the best
knowledge of the Company or the Bank, threatened, before any Governmental Entity
or other forum in which the Company, the Bank or any of their subsidiaries or
any Participation Facility has been or, with respect to threatened proceedings,
may be, named as a defendant, responsible party or potentially responsible party
(i) for alleged noncompliance (including by any predecessor), with any
environmental law, rule, regulation, standard or requirement or (ii) relating to
the release into or presence in the Environment (as hereinafter deemed) of any
Hazardous Materials (as hereinafter defined) or Oil (as hereinafter defined)
whether or not occurring at or on a site owned, leased or operated by the
Company, the Bank or any of their subsidiaries or any Participation Facility,
except as have not been or would not be material.
(c) To the best knowledge of the Company or the Bank, there is no suit,
claim, action or proceeding pending, or threatened, before any Governmental
Entity or other forum in which any Loan Property has been or, with respect to
threatened proceedings, may be, named as a defendant, responsible party or
potentially responsible party (i) for alleged noncompliance (including by any
predecessor) with any environmental law, rule, regulation, standard or
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requirement or (ii) relating to the release into or presence in the Environment
of any Hazardous Material or Oil whether or not occurring at or on a site owned,
leased or operated by a Loan Property, except as have not been or would not be
material.
(d) Neither the Company, nor the Bank, nor any of their subsidiaries, nor
to their best knowledge any Participation Facility or any Loan Property, has
received any notice regarding a matter on which a suit, claim, action or
proceeding as described in subsection (b) or (c) of this Section 3.21 could
reasonably be based. No facts or circumstances have come to the Company's or the
Bank's attention which have caused it to believe that a material suit, claim,
action or proceeding as described in subsection (b) or (c) of this Section 3.21
could reasonably be expected to occur.
(e) During the period of (i) the Company's, the Bank's or any of their
subsidiaries' ownership or operation of any of their respective current
properties, (ii) the Company's, the Bank's or any of their subsidiaries'
participation in the management of any Participation Facility, or (iii) the
Company's, the Bank's or any of their subsidiaries' holding of a security
interest in a Loan Property, there has been no release or presence of Hazardous
Material or Oil in the Environment in, on, under or affecting such property or,
to the best knowledge of the Company or the Bank, such Participation Facility or
Loan Property, except where such release or presence is not or would not, either
individually or in the aggregate, be material. To the best knowledge of the
Company and the Bank, prior to the period of (x) the Company's, the Bank's or
any of their subsidiaries' ownership or operation of any of their respective
current properties or any previously owned or operated properties, (y) the
Company's, the Bank's or any of their subsidiaries' participation in the
management of any Participation Facility, or (z) the Company's, the Bank's or
any of their subsidiaries' holding of a security interest in a Loan Property,
there was no release or presence of Hazardous Material or Oil in the Environment
in, on, under or affecting any such property, Participation Facility or Loan
Property, except where such release or presence is not or would not, either
individually or in the aggregate, be material.
(f) The following definitions apply for purposes of this Section 3.21: (i)
"Loan Property" means any property in which the Company, the Bank or any of
their subsidiaries holds a security interest, and, where required by the
context, said term means the owner or operator of such property; (ii)
"Participation Facility" means any facility in which the Company, the Bank or
any of their subsidiaries participates or has participated in the management
and, where required by the context, said term means the owner or operator of
such property; (iii) "Hazardous Material" means any pollutant, contaminant, or
hazardous substance or hazardous material as defined in or pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
s9601 et seq., or any other federal, state, or local environmental law,
regulation, or requirement; (iv) "Oil" means oil or petroleum of any kind or
origin or in any form, as defined in or pursuant to the Federal Clean Water Act,
33 U.S.C. s 1251 et seq., or any other federal, state, or local environmental
law, regulation, or requirement; (v) "Environment" means any soil, surface
waters, groundwaters, stream sediments, surface or subsurface strata, and
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ambient air, and any other environmental medium; and (vi) "to the best
knowledge" or "have come to the Company's or the Bank's attention" means, with
respect to the Company, the Bank or any of their respective subsidiaries, facts
or circumstances known to any officer or member of the lending or work-out staff
of any such entity or facts or circumstances reflected in the files of any such
entity.
(g) Except as set forth in Section 3.21 of the Disclosure Schedule, neither
the Company nor the Bank nor any of their respective subsidiaries currently has
or in the past has ever had any Participation Facility.
SECTION 3.22. Intellectual Property. The Company, the Bank and each of
their subsidiaries owns or possesses valid and binding licenses and other rights
to use without payment of any material amount all material patents, copyrights,
trade secrets, trade names, service marks and trademarks used in its businesses,
and neither the Company, the Bank nor any of their subsidiaries has received any
notice of conflict with respect thereto that asserts the right of others. The
Company, the Bank and each of their subsidiaries have performed in all material
respects all the obligations required to be performed by them and are not in
material default under any contract, agreement, arrangement or commitment
relating to any of the foregoing.
SECTION 3.23. Administration of Fiduciary Accounts. The Company, the Bank
and their subsidiaries each has properly administered in all material respects
all accounts for which it acts as a fiduciary, including, but not limited to,
accounts for which it serves as a trustee, agent, custodian, personal
representative, guardian, conservator or investment advisor, in accordance with
the terms of the governing documents and applicable law. Neither the Company,
the Bank nor their respective officers, directors or employees has committed any
breach of trust with respect to any fiduciary account. The accountings for each
such fiduciary account are true and correct in all material respects and
accurately reflects the assets of such fiduciary account.
SECTION 3.24. Agreements with Bank Regulators. Except for the corporate
resolution entered into at the request of the FDIC, a copy of which has
previously been delivered to Purchaser, neither the Company, the Bank nor any of
their subsidiaries is a party to any written agreement or memorandum of
understanding with, or a party to any commitment letter or similar undertaking
to, or is subject to any order, directive or board resolution by, or is a
recipient of any extraordinary supervisory letter from, any Bank Regulator which
restricts materially the conduct of its business, or in any manner relates to
its capital adequacy, its loan loss allowances or reserves, its credit policies
or its management, nor has the Company or the Bank been informed by any Bank
Regulator that it is contemplating issuing or requesting any such order,
directive, agreement, memorandum of understanding, extraordinary supervisory
letter, commitment letter or similar submission. Neither the Company, nor the
Bank or nor any of their subsidiaries is a party to any agreement or arrangement
entered into in connection with the consummation of a federally assisted
acquisition of a depository institution pursuant to which the Company, the Bank
or any of their subsidiaries is entitled to receive financial assistance or
indemnification from any governmental agency.
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SECTION 3.25. Material Interests of Certain Persons. No officer or director
of the Company, the Bank or any of their subsidiaries, or any "associate" (as
such term is defined in Rule 14a-1 under the Exchange Act) of any such officer
or director, has any material interest in any material contract or property
(real or personal), tangible or intangible, used in or pertaining to the
business of the Company, the Bank or any of their subsidiaries that would be
required to be disclosed in a proxy statement to stockholders under Regulation
14A of the Exchange Act.
SECTION 3.26. Brokers' Fees; Opinions. broker, finder or investment banker,
other than Friedman, Billings, Ramsey & Co., Inc. ("Friedman"), is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement or the Bank Merger Agreement based
upon arrangements made by or on behalf of the Company or the Bank. The fee
payable to Friedman in connection with the transactions contemplated by this
Agreement is as described in an engagement letter between the Company and
Friedman, a true and complete copy of which has heretofore been furnished to
Purchaser. The Company has previously received the opinion of Friedman to the
effect that, as of the date of such opinion, the Merger Consideration to be
received by the stockholders of the Company pursuant to the Holding Company
Merger is fair to such stockholders, and such opinion has not been amended or
rescinded as of the date of this Agreement.
SECTION 3.27. Proxy Statement. The information contained in the proxy
statement to be sent to the stockholders of the Company in connection with the
Stockholders' Meeting (the "Proxy Statement") will not, on the date the Proxy
Statement (or any amendment or supplement thereto) is first mailed to
stockholders of the Company or at the time of the Stockholders' Meeting, contain
any statement which, at such time and in light of the circumstances under which
it is made, is false or misleading with respect to any material fact, or omits
to state any material fact required to be stated therein or necessary in order
to make the statements therein not false or misleading or necessary to correct
any statement in any earlier communication with respect to the solicitation of
proxies for the Stockholders' Meeting which shall have become false or
misleading. Notwithstanding the foregoing, the Company makes no representation
or warranty with respect to any information to be supplied by Purchaser or
Merger Sub which is contained in any of the foregoing documents. The Proxy
Statement will comply in all material respects as to form with the requirements
of the Exchange Act and the rules and regulations thereunder.
SECTION 3.28. State Takeover Laws. The Board of Directors of the Company
has taken all necessary action prior to the date of this Agreement in connection
with the approval of the execution, delivery and performance of this Agreement
and the Bank Merger Agreement, any purchase or other transaction respecting the
Company Common Stock provided for herein or therein, and the other transactions
contemplated hereby and thereby, including without limitation approval by the
affirmative vote of at least a majority of the members of the Company Board and
a majority of the non-employee directors of the Company Board, such that
assuming that immediately prior to the execution of this Agreement, neither
Purchaser, Merger Sub nor any of their Affiliates or Associates (as such terms
are defined in either Section 33-840 or Section 33-843 of Connecticut Law),
either individually or in the aggregate, was an Interested Shareholder (as
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such term is defined in either Section 33-840 or Section 33-843 of Connecticut
Law), the provisions of Section 33-841 and 33-844(a) of Connecticut Law as they
relate to the Company and the provisions of Article SEVENTH of the Company's
Certificate of Incorporation do not and will not apply to this Agreement, the
Bank Merger Agreement, the Holding Company Merger, the Bank Merger or any of the
other transactions contemplated hereby or thereby. In taking the action referred
to in this Section 3.28, the Company Board has complied with the requirements of
Section 33-756(e) of Connecticut Law.
SECTION 3.29. Disclosure. No representation or warranty contained in this
Agreement, and no statement contained in any Schedule, certificate, list or
other writing furnished to Purchaser pursuant to the provisions hereof, contains
or will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements herein or
therein, in light of the circumstances in which they are made, not misleading.
No information believed by the Company or the Bank to be material to the Holding
Company Merger or the Bank Merger and which is necessary to make the
representations and warranties herein contained, taken as a whole, not
misleading, to the best knowledge of the Company and the Bank, has been withheld
from, or has not been delivered in writing to, Purchaser.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Company that:
SECTION 4.01. Corporate Organization. Purchaser is a state chartered
savings bank duly organized, validly existing and in good standing under
Connecticut Law. The deposit accounts of Purchaser are insured by the FDIC to
the fullest extent permitted by law, and all premiums and assessments required
in connection therewith have been paid by Purchaser. Purchaser has the requisite
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing or in good
standing or to have such power, authority and governmental approvals would not,
either individually or in the aggregate, have a material adverse effect on the
business, assets, liabilities, financial condition or results of operations of
Purchaser and its subsidiaries taken as a whole.
SECTION 4.02. Authority. Purchaser has full corporate power and authority
to execute and deliver this Agreement and the Bank Merger Agreement, to perform
its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Bank Merger Agreement and the performance by Purchaser of its
obligations hereunder and thereunder and the consummation by Purchaser of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of
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Purchaser are necessary to authorize this Agreement or the Bank Merger Agreement
or the performance of its obligations hereunder or thereunder or to consummate
the transactions contemplated hereby or thereby, other than the approval of its
stockholders. This Agreement has been duly and validly executed and delivered by
Purchaser and constitutes a legal, valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms. On the date executed
and delivered by Purchaser, the Bank Merger Agreement will be duly and validly
executed and delivered by Purchaser and will constitute a legal, valid and
binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms.
SECTION 4.03. No Conflict. Neither the execution, delivery and performance
of this Agreement or the Bank Merger Agreement by Purchaser, nor the
consummation by Purchaser of the transactions contemplated hereby or thereby,
will (i) conflict with, violate or result in a breach of the Certificate of
Incorporation or By-Laws or equivalent organizational documents of Purchaser,
(ii) conflict with, violate or result in a breach of any statute, code,
ordinance, law, rule, regulation, order, writ, judgment, injunction or decree
applicable to Purchaser or by which any property or asset of Purchaser is bound
or affected, or (iii) conflict with, violate or result in a breach of any
provisions of or the loss of any benefit under, constitute a default (or an
event which with notice or lapse of time or both would constitute a default)
under, or give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien, pledge, security interest,
charge or other encumbrance on any property or asset of Purchaser pursuant to,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, contract, agreement, lease, license, permit, franchise
or other instrument or obligation to which Purchaser is a party or by which
Purchaser or any property or asset of Purchaser is bound or affected, except, in
the case of clause (iii) above, for any such conflicts, violations, breaches,
defaults or other occurrences which would not, individually or in the aggregate,
have a material adverse effect on the business, assets, liabilities, financial
condition or results of operations of Purchaser and its subsidiaries taken as a
whole.
SECTION 4.04. Consents and Approvals. The execution, delivery and
performance of this Agreement and the Bank Merger Agreement by Purchaser does
not require any consent, approval, authorization or permit of, or filing with or
notification to any Governmental Entity, (i) except for (A) those referred to in
Section 3.06 hereof, (B) confirmation or approval from the Office of Fair
Trading that it is not the intention of the Secretary of State for Trade and
Industry to refer the transactions contemplated by this Agreement to the
Monopolies and Mergers Commission, (C) consent from the Treasury under Section
765 of the Income and Corporation Taxes Act 1988, (D) notification to the
International Stock Exchange of the United Kingdom and the Republic of Ireland
Limited (the "International Stock Exchange") by announcement on the Company News
Service of the International Stock Exchange of particulars of the transactions
contemplated by this Agreement, and (E) consent or approval of the Bank of
England and the Central Bank of Ireland, and (ii) except for any consent,
approval, authorization, permit of, or filing with, or notification to, any
Governmental Entity where failure to obtain any such consent, approval,
authorization or permit, or to make any such filing or notification, would not
prevent or significantly delay consummation of the Holding Company Merger, or
otherwise prevent
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Purchaser or Merger Sub from performing the obligations contemplated under this
Agreement to be performed by them or Merger Sub from performing its obligations
under the Bank Merger Agreement, or which, either individually or in the
aggregate, would not, in the reasonable judgment of the parties hereto, have a
material adverse effect on the business, liabilities, financial condition or
results of operation of Purchaser and its subsidiaries taken as a whole.
SECTION 4.05. Proxy Statement. The information supplied by Purchaser and
Merger Sub for inclusion in the Proxy Statement will not, on the date the Proxy
Statement (or any amendment or supplement thereto) is first mailed to
stockholders of the Company or at the time of the Stockholders' Meeting, contain
any statement which, at such time and in light of the circumstances under which
it is made, is false or misleading with respect to any material fact, or omits
to state any material fact required to be stated therein or necessary in order
to make the statements therein not false or misleading or necessary to correct
any statement in any earlier communication with respect to the solicitation of
proxies for the Stockholders' Meeting which shall have become false or
misleading.
SECTION 4.06. Financial Statements. Purchaser has previously made available
to the Company copies of (a) the consolidated balance sheets of Purchaser and
its subsidiaries as of the fiscal years of Purchaser ending September 30, 1994,
September 30, 1995 and September 30, 1996, and the related consolidated
statements of income, changes in shareholders' equity and cash flows for the
fiscal years ending on September 30 of each of 1993 through 1996, inclusive, and
(b) the unaudited consolidated balance sheets of Citizens Financial Group, Inc.
and its subsidiaries as of December 31, 1996, and the related unaudited
consolidated statements of income, changes in shareholder's equity and cash
flows for the three-month period then ended. Such financial statements were
prepared in accordance with GAAP (except as may be indicated in the notes
thereto) and each fairly presented the consolidated financial position, results
of operations and changes in financial position of Citizens Financial Group,
Inc. and its consolidated subsidiaries as at the respective dates thereof and
for the respective periods indicated therein subject, in the case of unaudited
statements, to normal and recurring year-end adjustments normal in nature and
not material in amount.
SECTION 4.07. Brokers' Fees. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Purchaser or Merger Sub.
SECTION 4.08. Capital; Financing. On the date hereof, Purchaser is, at a
minimum, "adequately capitalized" as such term is defined in the rules and
regulations promulgated by the FRB and the FDIC, as the case may be. Purchaser
and Merger Sub will have available to them sources of capital and financing
sufficient to fulfill their obligations hereunder.
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ARTICLE V
CONDUCT OF BUSINESS PENDING
THE HOLDING COMPANY MERGER
SECTION 5.01. Covenants of the Company and the Bank.
(a) The Company and the Bank each covenants and agrees that, between the
date of this Agreement and the Effective Time, unless Purchaser shall otherwise
agree in writing, the business of the Company, the Bank and their subsidiaries
shall be conducted only in, and the Company, the Bank and their subsidiaries
shall not take any action except in, the usual, regular and ordinary course of
business and in a manner consistent with prudent banking practice and generally
to conduct their business in substantially the same way as heretofore conducted,
and without limiting the foregoing, to continue to operate in the same
geographic markets serving the same market segments and without significant
increase in the rate of growth of the Bank's loan portfolio. The Company and the
Bank shall use their reasonable best efforts to preserve substantially intact
the business organization of the Company, the Bank and their subsidiaries, to
keep available the present services of the officers, employees and consultants
of the Company, the Bank and their subsidiaries and to preserve the current
relationships and goodwill of the Company, the Bank and their subsidiaries with
customers, suppliers and other persons with which the Company, the Bank or any
of their subsidiaries have business relationships, including without limitation,
upon the concurrence of Purchaser implementing a branch employee incentive
program in furtherance thereof.
(b) By way of amplification and not limitation of clause (a) above, except
as contemplated by this Agreement and the Bank Merger Agreement, the Company and
the Bank shall not, nor shall they permit any of their subsidiaries, between the
date of this Agreement and the Effective Time, directly or indirectly to do, or
publicly announce an intention to do, any of the following without the prior
written consent of Purchaser, which consent shall not be unreasonably withheld:
(i) amend or otherwise change its Certificate of Incorporation or
Bylaws or equivalent organizational documents;
(ii) issue, deliver, sell, pledge, dispose of, grant, encumber, or
authorize the issuance, delivery, sale, pledge, disposition, grant or
encumbrance of, any shares of capital stock of any class of the Company,
the Bank or any of their subsidiaries, or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of
such capital stock, or any other ownership interest, of the Company, the
Bank or any of their subsidiaries, or enter into any agreement with respect
to any of the foregoing (except for the issuance of a maximum of 150,954
shares issuable pursuant to employee stock options outstanding under the
Company Option Plans on the date hereof);
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(iii) declare, set aside, make or pay any dividend or other
distribution, payable cash, stock, property or otherwise, with respect to
any of its capital stock;
(iv) split, combine or reclassify any shares of its capital stock or
issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock,
except upon the exercise or fulfillment of rights or options issued or
existing pursuant to employee benefit plans, programs or arrangements, all
to the extent outstanding and in existence on the date of this Agreement;
(v) repurchase, redeem or otherwise acquire any shares of the capital
stock of the Company, the Bank or any of their subsidiaries, or any
securities convertible into or exercisable for any shares of the capital
stock of the Company, the Bank or any of their subsidiaries;
(vi) enter into any new line of business or materially expand the
business currently conducted by the Company, the Bank and their
subsidiaries or file any application to relocate or terminate the
operations of any banking office of the Company, the Bank or any of their
subsidiaries;
(vii) acquire or agree to acquire, by merging or consolidating with,
or by purchasing an equity interest in or a portion of the assets of, or by
any other manner, any business or any corporation, partnership, other
business organization or any division thereof or any material amount of
assets, other than subject to Section 5.05 hereof;
(viii) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any individual,
corporation or other entity, or make any loan or advance, other than in the
ordinary course of business consistent with past practice;
(ix) enter into any contract or agreement other than in the ordinary
course of business consistent with past practice and, in any event,
regardless of whether consistent with past practice, undertake or enter
into (i) any contract or other commitment (other than contracts or
commitments related to Loans) involving an aggregate payment by or to the
Company, the Bank or any of their subsidiaries under any such contract or
commitment of more than $100,000 or having a term of one year or more from
the time of execution, (ii) any contract or commitment, or related
contracts or commitments, for Loans having an original principal amount in
excess of $250,000;
(x) authorize any single capital expenditure which is in excess of
$50,000 or capital expenditures which are, in the aggregate, in excess of
$100,000 for the Company, the Bank and their subsidiaries taken as a whole,
except for written contractual commitments entered into prior to the date
of this Agreement as disclosed in the
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Disclosure Schedule and for capital expenditures (A) not to exceed $150,000
related to the Bank's acquisition of its Whalley Norton branch site and (B)
not to exceed $450,000 relating to its wide area network service;
(xi) (i) except as required by applicable law, (x) adopt, amend, renew
or terminate any Plan or any agreement, arrangement, plan or policy between
the Company, the Bank or any of their subsidiaries and one or more of its
current or former directors, officers or employees, or (y) increase in any
manner the compensation or fringe benefits of any director, officer or
employee or pay any benefit not required by any plan or agreement as in
effect as of the date hereof (including, without limitation, the granting
of stock options, stock appreciation rights, restricted stock, restricted
stock units or performance units or shares); provided, however, that the
Company and the Bank may, in consultation with Purchaser, increase the
directors fees payable to the directors of the Company or the Bank in the
ordinary course of business consistent with past practice and grant salary
increases to its employees (other than those employees who are officers) at
the regular review date of such employees in an aggregate amount for all
employees not to exceed four percent (4%) of the aggregate current
annualized base salaries of such employees or constitute more than a ten
percent (10%) increase with respect to any one employee; or (ii) enter
into, modify or renew any employment, severance or other agreement with any
director, officer or employee of the Company, the Bank or any of their
subsidiaries, or establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement providing for any benefit to any director, officer or employee;
(xii) take any action with respect to accounting methods, principles
or practices, other than changes required by applicable law or GAAP or
regulatory accounting as concurred in by the Company's independent
accountants;
(xiii) make any tax election or settle or compromise any Federal,
state, local or foreign tax liability;
(xiv) pay, discharge or satisfy any claim, liability or obligation,
other than the payment, discharge or satisfaction, in the ordinary course
of business and consistent with past practice, of liabilities reflected or
reserved against in the consolidated balance sheet of the Company and its
subsidiaries included in the Annual Report on Form 10-K for the period
ended December 31, 1996, or subsequently incurred in the ordinary course of
business and consistent with past practice or in connection with this
Agreement;
(xv) make any new or additional equity investment or commitment to
make such an investment in real estate or in any real estate development
project, other than in connection with foreclosures, settlements in lieu of
foreclosure or troubled loan or debt
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restructurings in the ordinary course of business consistent with past
practice;
(xvi) sell any securities in its investment portfolio, except in the
ordinary course of business, or engage in transactions in or involving
forwards, futures, options on futures, swaps or similar derivative
instruments;
(xvii) sell, lease, encumber, assign or otherwise dispose of, or agree
to sell, lease, encumber, assign or otherwise dispose of, any of its
material assets, properties or other rights or agreements or purchase or
sell any loans in bulk;
(xviii) take any action that is intended or reasonably can be expected
to result in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect, or any of the
conditions to the consummation of the Holding Company Merger, the Bank
Merger and the other transactions contemplated by this Agreement set forth
in Article VII not being satisfied in any material respect, or in any
material violation of any provision of this Agreement or the Bank Merger
Agreement, except, in every case, as may be required by applicable law;
(xix) commit any act or omission which constitutes a material breach
or default by the Company, the Bank or any of their subsidiaries under any
Regulatory Agreement or under any material contract or material license to
which any of them is a party or by which any of them or their respective
properties is bound;
(xx) foreclose upon or take a deed or title to any commercial real
estate without first conducting a Phase I environmental assessment of the
property or foreclose upon any commercial real estate if such environmental
assessment indicates the presence of Hazardous Material in amounts which,
if such foreclosure were to occur, would be material:
(xxi) enter into or renew, amend or terminate, or give notice of a
proposed renewal, amendment or termination of or make any commitment with
respect to, (i) any contract, agreement or lease for office space,
operations space or branch space to which the Company, the Bank or any of
their subsidiaries is a party or by which the Company, the Bank or any of
their subsidiaries or their respective properties is bound; (ii) any lease,
contract or agreement other than in the ordinary course of business
consistent with past practice including renewals of leases to existing
tenants of the Company or the Bank; (iii) regardless of whether consistent
with past practices, any lease, contract, agreement or commitment involving
an aggregate payment by or to the Company, the Bank or any of their
subsidiaries of more than $100,000 or having a term of one year or more
from the time of execution except with respect to the acquisition of its
Whalley Norton branch site;
(xxii) change in any material respect its loan policies or procedures,
except
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as required by regulatory authorities; or
(xxiii) agree to do any of the foregoing.
SECTION 5.02. Purchaser Products and Services. From and after the date
hereof, Purchaser, the Company and the Bank shall consult with each other on the
introduction of products and services not currently offered by the Company or
the Bank which Purchaser would expect to make available to customers following
the Holding Company Merger and the Bank Merger, and the Company and the Bank
shall consider offering such products and services to its customers prior to the
Effective Date, on terms and conditions mutually acceptable to Purchaser, the
Company and the Bank; provided, however, that nothing herein shall obligate the
Company or the Bank to offer any such products or services prior to the
Effective Time.
SECTION 5.03. System Conversions. From and after the date hereof, Purchaser
and the Bank shall meet on a regular basis to discuss and plan for the
conversion of the Bank's data processing and related electronic informational
systems to those used by Purchaser and its subsidiaries, which planning shall
include, but not be limited to, discussion of the possible termination by the
Bank of third-party service provider arrangements effective at the Effective
Time or at a date thereafter, non-renewal of personal property leases and
software licenses used by the Bank in connection with its systems operations and
outsourcing, as appropriate, of proprietary or self-provided system services, it
being understood that the Bank shall not be obligated to take any such action
prior to the Effective Time and, unless the Bank otherwise agrees, no conversion
shall take place prior to the Effective Time. In the event that the Bank takes,
at the request of Purchaser, any action relative to third parties to facilitate
the conversion that results in the imposition of any termination fees or
charges, Purchaser shall indemnify the Bank on terms reasonably satisfactory to
the Bank for any such fees and expenses, and the costs of reversing the
conversion process, if for any reason the Holding Company Merger is not
consummated in accordance with the terms of this Agreement.
SECTION 5.04. Certain Changes and Adjustments. Prior to the Closing (as
defined in Section 9.01 hereof), Purchaser, the Company and the Bank shall
consult and cooperate with each other concerning the Bank's loan, litigation and
real estate valuation policies and practices (including loan classifications and
levels of reserves) to reflect Purchaser's plans with respect to the conduct of
the Surviving Bank's business and the then anticipated post-closing disposition
of certain assets of the Surviving Bank following the Bank Merger; provided,
however, that neither the Company nor the Bank shall be obligated to take any
action pursuant to this Section which is inconsistent with GAAP and unless and
until Purchaser acknowledges, and the Company and the Bank are satisfied, that
all conditions to its obligation to consummate the Holding Company Merger have
been satisfied. No action taken by the Company or the Bank pursuant to this
Section or the consequences resulting therefrom shall be deemed to be a breach
of any representation, warranty, agreement or covenant herein or constitute a
Material Adverse Effect.
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SECTION 5.05. ALCO Management. The Company and the Bank agree that during
the period from the date of this Agreement through the Effective Time, they will
consult with Purchaser in the development of a reasonable program to manage the
Bank's interest sensitive assets and liabilities (including its fixed-rate
mortgage portfolio and its investment portfolio), which program will include a
policy not to acquire securities for the investment portfolio of the Bank other
than securities which were issued by the United States of America and have a
maturity date that is not more than two years after the date of acquisition
thereof, unless otherwise agreed by the parties. The Company, the Bank and
Purchaser agree to consult on investment programs to be administered by the
Bank.
SECTION 5.06. Covenants of Purchaser. During the period from the date of
this Agreement and continuing until the Effective Time, the Purchaser shall not,
and shall not permit any of its subsidiaries to, take any action that is
intended or which reasonably can be expected to result in any of its
representations and warranties set forth in this Agreement being untrue in any
material respect, or in any of the conditions to the Holding Company Merger, the
Bank Merger or other transactions contemplated in this Agreement as set forth in
Article VII not being satisfied in any material respect, or in a material
violation of any provision of this Agreement or the Bank Merger Agreement,
except, in every case, as may be required by applicable law.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Stockholders' Meeting. In order to consummate the Holding
Company Merger, the Company, acting through the Company Board, shall, in
accordance with applicable law and the Company's Certificate of Incorporation
and By-laws, (a) duly call, give notice of, convene and hold an annual or
special meeting of its stockholders as soon as practicable, but in no event
later than July 31, 1997, for the purpose of considering and taking action on
this Agreement and the transactions contemplated hereby (the "Stockholders'
Meeting") and (b) subject to the fiduciary duties of the Company Board under
applicable law as determined by such Board with the advice of the Company's
independent counsel, (i) include in the Proxy Statement the recommendation of
the Board that the stockholders of the Company approve and adopt this Agreement,
the Holding Company Merger and the other transactions contemplated hereby and
(ii) use all reasonable efforts to obtain such approval and adoption. The
Purchaser, the Company and the Bank shall coordinate and cooperate with respect
to the foregoing matters.
SECTION 6.02. Proxy Statement. As soon as practicable after the date
hereof, the Company shall file the Proxy Statement with the SEC under the
Exchange Act and shall use its reasonable best efforts to have the Proxy
Statement cleared by the SEC. Purchaser, Merger Sub, the Company and the Bank
shall cooperate with each other in the preparation of the Proxy Statement, and
the Company shall notify Purchaser of the receipt of any comments of the SEC
with respect to the Proxy Statement and of any requests by the SEC for any
amendment or
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supplement thereto or for additional information and shall provide to Purchaser
promptly copies of all correspondence between the Company or any representative
of the Company and the SEC. The Company shall give Purchaser and its counsel
adequate opportunity to review the Proxy Statement prior to its being filed with
the SEC and shall give Purchaser and its counsel adequate opportunity to review
all amendments and supplements to the Proxy Statement and all responses to
requests for additional information and replies to comments prior to their being
filed with, or sent to, the SEC. The Company, the Bank, Purchaser and Merger Sub
each agrees to use its reasonable best efforts, after consultation with the
other parties hereto to respond promptly to all such comments of and requests by
the SEC and to cause the Proxy Statement and all required amendments and
supplements thereto to be mailed to the holders of Shares entitled to vote at
the Stockholders' Meeting at the earliest practicable time.
SECTION 6.03. Regulatory Matters.
(a) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement and the Bank Merger Agreement (including without limitation the
Holding Company Merger and the Bank Merger). Purchaser, the Company and the Bank
shall have the right to review in advance, and to the extent practicable, each
will consult the other on, in each case subject to applicable laws relating to
the exchange of information, all the information relating to either of them, as
the case may be, and any of their respective subsidiaries, which appear in any
filing made with, or written materials submitted to, any third party or any
Governmental Entity in connection with the Holding Company Merger, the Bank
Merger and the other transactions contemplated by this Agreement and by the Bank
Merger Agreement. In exercising the foregoing right, each of the parties hereto
shall act reasonably and as promptly as practicable. The parties hereto agree
that they will consult with each other with respect to the obtaining of all
permits, consents, approvals and authorizations of all third parties and
Governmental Entities necessary or advisable to consummate the Holding Company
Merger, the Bank Merger and other transactions contemplated by this Agreement
and the Bank Merger Agreement and each party will keep the other apprised of the
status of matters relating to the completion of all of the transactions
contemplated hereby.
(b) Purchaser, the Company and the Bank shall, upon request, furnish each
other with all information concerning themselves, their respective subsidiaries,
directors, officers and stockholders and such other matters as may be reasonably
necessary or advisable in connection with any statement, filing, notice or
application made by or on behalf of Purchaser, the Company, the Bank or any of
their respective subsidiaries to any Governmental Entity in connection with the
Holding Company Merger, the Bank Merger or the other transactions contemplated
by this Agreement and the Bank Merger Agreement.
(c) Purchaser, the Company and the Bank shall promptly furnish each other
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with copies of written communications received by Purchaser or the Company, as
the case may be, or any of their respective subsidiaries, affiliates or
associates (as such terms are defined in Rule 12b-2 under the Exchange Act as in
effect on the date of this Agreement) from, or delivered by any of the foregoing
to, any Governmental Entity in respect of the Holding Company Merger, the Bank
Merger and the other transactions contemplated by this Agreement and the Bank
Merger Agreement.
SECTION 6.04. Access to Information.
(a) Upon reasonable notice and subject to applicable laws relating to the
disclosure or exchange of information, the Company and the Bank shall, and shall
cause each of their subsidiaries to, afford to the officers, employees,
accountants, counsel and other representatives of Purchaser, access, during
normal business hours during the period prior to the Effective Time, to all its
officers, employees, agents, properties, books, loan documentation and files,
contracts, commitments and records and, during such period, the Company and the
Bank shall, and shall cause their subsidiaries to, make available to Purchaser
(i) a copy of each report, schedule, registration statement and other document
filed or received by it during such period pursuant to the requirements of
federal securities laws or federal or state banking laws (other than reports or
documents which the Company or the Bank is not permitted to disclose under
applicable law), (ii) copies of all periodic reports to senior management,
including, without limitation, reports on non-performing loans and other asset
quality matters and all materials furnished to the Company Board or the Bank
Board relating to asset quality generally, and (iii) all other information
concerning the business, properties, assets and personnel of the Company and the
Bank as Purchaser may reasonably request. Neither the Company, the Bank nor any
of their subsidiaries shall be required to provide access to or to disclose
information where such access or disclosure would violate or prejudice the
rights of customers, jeopardize the attorney-client privilege of the institution
in possession or control of such information or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement or, in the event of any litigation or
threatened litigation between the Company, the Bank and Purchaser over the terms
of this Agreement where access to information will be adverse to the interests
of the Company and the Bank. The parties hereto will make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of the
preceding sentence apply. Purchaser will hold all such information in confidence
to the extent required by, and in accordance with, the provisions of the
confidentiality agreement, dated March 11, 1997, between Purchaser and the
Company (the "Confidentiality Agreement").
(b) All information furnished by Purchaser to the Company, the Bank or its
representatives pursuant hereto shall be treated as the sole property of
Purchaser and, if the Holding Company Merger shall not occur, the Company, the
Bank and its representatives shall return to Purchaser all of such written
information and all documents, notes, summaries or other materials containing,
reflecting or referring to, or derived from, such information. The Company and
the Bank shall, and shall use their reasonable best efforts to cause their
representatives to, keep confidential all such information, and shall not
directly or indirectly use such information
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for any competitive or other commercial purpose. The obligation to keep such
information confidential shall continue for five years from the date the
proposed Merger is abandoned and shall not apply to (i) any information which
(x) was already in the Company's or the Bank's possession prior to the
disclosure thereof by Purchaser; (y) was then generally known to the public; or
(z) was disclosed to the Company or the Bank by a third party not bound by an
obligation of confidentiality, or (ii) disclosures made as required by law.
(c) No investigation by any of the parties or their respective
representatives shall affect the representations and warranties of the other set
forth herein or any condition to the obligations of the parties hereto.
SECTION 6.05. No Solicitation. Neither the Company, the Bank nor any of
their subsidiaries shall, directly or indirectly, through any officer, director,
agent or otherwise, solicit or initiate the submission of any proposal or offer
from any person relating to any acquisition or purchase of all or (other than in
the ordinary course of business) any material portion of the assets of, or any
equity interest in, the Company, the Bank or any of their subsidiaries or any
business combination with the Company, the Bank or any of their subsidiaries or,
except to the extent determined by the Company Board, upon the opinion of its
independent counsel, to be required by fiduciary obligations under applicable
law, participate in any negotiations regarding, or furnish to any other person
any information with respect to, or otherwise cooperate in any way with, or
assist or participate in, facilitate, any effort or attempt by any other person
to do or seek any of the foregoing. The Company and the Bank immediately shall
cease and cause to be terminated all existing discussions or negotiations with
any parties conducted heretofore with respect to any of the foregoing. The
Company and the Bank shall notify Purchaser promptly if any such proposal or
offer, or any inquiry or contact with any person with respect thereto, is made
and shall, in any such notice to Purchaser, indicate in reasonable detail the
identity of the person making such proposal, offer, inquiry or contact and the
terms and conditions of such proposal, offer, inquiry or contact. The Company
and the Bank agree not to release any third party from, or waive any provision
of, any confidentiality or standstill agreement to which the Company or the Bank
is a party. Actions of the Company, the Bank or any of their subsidiaries
permitted by this Section 6.05 shall not be deemed to be a breach of this
Agreement.
SECTION 6.06. Employee Benefits Matters.
(a) Provision of Benefits. As soon as practicable after the Effective Time
and subject to applicable law, Purchaser shall provide the employees of the
Company and the Bank ("Company Employees") with the same health, dental,
pension, life insurance, disability, 401(k) plan and other benefits, if any,
which Purchaser then provides generally to its own employees. With respect to
the provision of such benefits to the Company Employees pursuant hereto, to the
extent Company Employees participate after the Effective Time in employee
benefit plans other than the Company Benefit Plans, all prior service of such
employees with the Company or the Bank shall be recognized under such plans for
all benefit plan for purposes of eligibility and vesting, but excluding benefit
accrual under any defined benefit pension plan. Purchaser shall not
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treat any Company Employee as a "new" employee for purposes of any exclusion
under any health plan or dental plan of Purchaser or any of its affiliates for a
preexisting medical condition. Nothing herein is intended or should be construed
to provide a commitment for continued employment or to confer any rights on any
officer or employee of the Bank except as herein expressly provided.
(b) Severance Payments and Benefits. Company Employees (excluding all
officers who are parties to employment or severance agreements with the Company
or the Bank) whose employment with the Surviving Corporation or the Surviving
Bank is terminated within one year after the Effective Time other than for cause
(which shall mean gross negligence or dereliction in the performance of such
employee's duties, dishonesty or commission of a crime) or as a result of a sale
of a business unit if Company Employees are offered the opportunity to continue
their employment with the purchaser of the business unit in substantially the
same capacity, location and salary and benefits, shall be provided by Purchaser
the severance and other benefits set forth below:
(i) severance payable on an installment basis pursuant to regular
payroll in an amount equal to two weeks' base salary for each full year of
service of such terminated Company Employee to the Company and the Bank;
provided, that all officers and employees shall be subject to a maximum
severance payment limitation of twenty six weeks' base salary; and
(ii) continuation of health benefits during the same period of time
that such terminated Company Employee is receiving severance payments
pursuant to (i) above after termination on the same terms and conditions as
though they had remained active employees, and thereafter shall be entitled
to COBRA benefits for an additional period of time determined as though
their employment had terminated at the end of such period.
(c) Parachute Payments. Notwithstanding anything to the contrary contained
in this Agreement, in no event shall the Company or the Bank take any action or
make any payments that would result, either individually or in the aggregate, in
the payment of an "excess parachute payment" within the meaning of Section 280G
of the Code or that would result, either individually or in the aggregate, in
payments that would be nondeductible pursuant to Section 162(m) of the Code.
SECTION 6.07. Directors' and Officers' Insurance and Indemnification.
(a) Purchaser shall use its reasonable best efforts to maintain in effect
for three years from the Effective Time, if available, the current directors'
and officers' liability insurance policy maintained by the Company (provided
that Purchaser may substitute therefor policies of at least the same coverage
containing terms and conditions which are not materially less favorable) with
respect to matters occurring prior to the Effective Time; provided, however,
that, unless otherwise agreed to by Purchaser, in no event shall Purchaser be
required to expend pursuant to
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this Section 6.07(a) more than the amount equal to 150% of the current annual
amount expended by the Company to maintain or procure insurance pursuant hereto.
In connection with the foregoing, the Company and the Bank each agrees to
provide such insurer or substitute insurer with such representations as such
insurer may request with respect to the reporting of any prior claims.
(b) For a period of six years from the Effective Time, the Purchaser shall
indemnify the directors and officers of the Company and the Bank to the same
extent that such persons are entitled to indemnification by the Company or the
Bank, as appropriate, as of the date of this Agreement. The indemnification by
Purchaser provided for hereunder shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would affect adversely the rights thereunder of individuals who were directors
or officers of the Company or the Bank as of the date of this Agreement, unless
such modification shall be required by law. In the event that any claim is
asserted or made by such director or officer within such six year period, the
right to indemnification in respect of such claim shall continue until the
disposition of such claim. The provisions of this Section 6.07(b) are
specifically for the benefit of those directors and officers entitled to
indemnification by the Company or the Bank as of the date of this Agreement.
SECTION 6.08. Financial and Other Statements. Notwithstanding anything to
the contrary in Section 6.04, during the term of this Agreement, the Company
shall provide to Purchaser the following documents and information:
(a) As soon as reasonably available, but in no event more than 45 days
after the end of each fiscal quarter ending after the date of this
Agreement, the Company will deliver to Purchaser its Quarterly Report on
Form 10-Q as filed under the Exchange Act and the Bank's Quarterly Call
Report as filed with the FDIC. As soon as reasonably available, but in no
event more than 90 days after the end of each fiscal year ending after the
date of this Agreement, the Company will deliver to Purchaser its Annual
Report on Form 10-K, as filed under the Exchange Act. The Company will also
deliver to Purchaser, contemporaneously with its being filed with the SEC,
a copy of all Current Reports on Form 8-K.
(b) Promptly upon receipt thereof, the Company will furnish to
Purchaser copies of all internal control reports submitted to the Company,
the Bank or their Subsidiaries by independent auditors in connection with
each annual, interim or special audit of the books of the Company, the Bank
or their subsidiaries made by such auditors.
(c) As soon as practicable, the Company and the Bank will furnish to
Purchaser copies of all such financial statements and reports as they or
any of their subsidiaries shall send to its stockholders, the SEC or any
other regulatory authority, to the extent any such reports furnished to any
such regulatory authority are not confidential and except as legally
prohibited thereby.
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(d) Promptly upon receipt thereof the Company will furnish to
Purchaser copies of each examination report of any federal or state
regulatory or examination authority with respect to the condition or
activities of the Company, the Bank or any of their subsidiaries, except to
the extent prohibited by law. With respect to any examination report the
disclosure of which is prohibited by law, the Company and the Bank will use
their reasonable best efforts to obtain authority to deliver to Purchaser
copies of such examination report, or to the extent practicable, provide
appropriate substitute disclosure arrangements.
(e) With reasonable promptness, the Company and the Bank will furnish
to Purchaser such additional financial data as Purchaser may reasonably
request.
SECTION 6.09. Further Action. Purchaser, the Company and the Bank each
shall, and shall cause its subsidiaries to, use its reasonable best efforts (a)
to take, or cause to be taken, all actions necessary, proper or advisable to
comply promptly with all legal requirements which may be imposed on such party
or its subsidiaries with respect to the Holding Company Merger or the Bank
Merger and, subject to the conditions set forth in Article VII hereof, to
consummate the transactions contemplated by this Agreement and the Bank Merger
Agreement and (b) to obtain (and to cooperate with the other party to obtain)
any consent, authorization, order or approval of, or any exemption by, any
Governmental Entity and any other third party which is required to be obtained
by the Company, the Bank or Purchaser or any of their respective subsidiaries in
connection with the Holding Company Merger or the Bank Merger and any of the
other transactions contemplated by this Agreement.
SECTION 6.10. Public Announcements. Purchaser, the Company and the Bank
shall consult with each other before issuing any press release or otherwise
making any public statements with respect to this Agreement, the Bank Merger
Agreement or any transaction contemplated hereby or thereby and shall not issue
any such press release or make any such public statement prior to such
consultation, except as may be required by law or any listing agreement with a
national or regional securities exchange to which Purchaser or the Company is a
party or any requirement of agreement with any automated interdealer quotation
system.
SECTION 6.11. Additional Agreements. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement or the Bank Merger Agreement, or to vest the
Surviving Corporation or the Surviving Bank with full title to all properties,
assets, rights, approvals, immunities and franchises of any of the parties to
the Holding Company Merger or the Bank Merger, the proper officers and directors
of each party to this Agreement and their respective subsidiaries shall take all
such necessary action as may be reasonably requested by Purchaser.
SECTION 6.12. Update of Disclosure Schedules. From time to time prior to
the Effective Time, the Company will promptly supplement or amend the Disclosure
Schedules to reflect any matter which, if existing, occurring or known at the
date of this Agreement, would
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have been required to be set forth or described in the Disclosure Schedules or
which is necessary to correct any information in the Disclosure Schedules which
has been rendered inaccurate thereby. No supplement or amendment to the
Disclosure Schedules shall have any effect for the purpose of determining
satisfaction of the conditions set forth in Sections 7.02(a) or 7.03(a) hereof,
as the case may be, or the compliance by the Company with the covenants set
forth in Article V hereof.
SECTION 6.13. Current Information.
(a) During the period from the date of this Agreement to the Effective
Time, the Company and the Bank will cause one or more of its designated
representatives (i) to confer on a regular and frequent basis (not less than
monthly) with representatives of Purchaser to report on (x) the general status
of the ongoing operations of the Company and the Bank, (y) the status of, and
the action proposed to be taken with respect to, those Loans held by the
Company, the Bank or any of their subsidiaries which, either individually or in
combination with one or more other Loans to the same borrower thereunder, have
an aggregate outstanding principal amount of $250,000 or more and are classified
or non-performing assets, and (z) the status of, and the action proposed to be
taken with respect to, foreclosed property and other real estate owned, and (ii)
to cooperate and communicate with respect to the manner in which the business of
the Company and the Bank are conducted and the disposition of certain assets
after the Effective Time, the type and mix of products and services, personnel
matters, branch alignment, the granting of credit, and problem loan management,
reserve adequacy and accounting. In order to facilitate the foregoing, the
Company, the Bank and Purchaser shall promptly establish a liaison committee
(the "Liaison Committee") which will be chaired by an officer designated by
Purchaser and which will meet on a regular basis to discuss these matters and
may establish sub-committees from time-to-time to pursue various issues. During
the period from the date of this Agreement to the Effective Time, the Company
and the Bank shall provide Purchaser prior to such extensions with sufficient
information to review new extensions of credit, renewals and restructurings
having an outstanding principal amount of $250,000 and information detailing
overall asset quality. The Bank shall also allow Purchaser to designate one of
its officers to attend the Bank's credit committee meetings and be a non-voting
attendee thereof.
(b) The Company and the Bank will promptly notify Purchaser of any material
change in the normal course of business or in the operation of the properties of
the Company, the Bank or any of their subsidiaries and of any governmental
complaints, investigations or hearings (or communications indicating that the
same may be contemplated), or the institution or the threat of significant
litigation involving the Company, the Bank or any of their subsidiaries, and
will keep Purchaser reasonably informed of such events.
(c) To the extent not covered by paragraphs (a) and (b) above, the Company
and the Bank shall give prompt notice to Purchaser, and Purchaser shall give
prompt notice to the Company, of (i) the occurrence, or non-occurrence, of any
event the occurrence, or non-occurrence, of which would be reasonably likely to
cause any representation or warranty
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contained in this Agreement to be untrue or inaccurate in any material respect
and (ii) any failure of the Company, the Bank, Purchaser or Merger Sub, as the
case may be, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement or the Bank Merger
Agreement; provided, however, that the delivery of any notice pursuant to this
paragraph (c) shall not let or otherwise affect Me remedies available hereunder
to the party receiving such notice.
SECTION 6.14. Bank Merger.
(a) Purchaser shall cause Citizens Financial Group, Inc. to approve the
Bank Merger Agreement as a stockholder of Purchaser and the Surviving
Corporation to approve the Bank Merger Agreement as a stockholder of the Bank.
(b) Unless otherwise determined by Purchaser prior to the Closing, at the
effective time of the Bank Merger the Articles of Organization and By-laws of
Purchaser, as in effect immediately prior thereto, shall be the Articles of
Organization and By-laws of the Surviving Bank until thereafter amended as
provided by law and such Articles of Organization and By-laws;
(c) The directors and officers of Purchaser immediately prior to the
effective time of the Bank Merger shall be the initial directors and officers of
the Surviving Bank, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Bank and until their respective
successors are duly elected or appointed and qualified. The Bank shall be
entitled to designate two of its directors (the "Designated Directors") to
become directors of the Surviving Bank. The Designated Directors of the Bank
shall be mutually agreed by the Bank and Purchaser.
(d) Promptly following the consummation of the Bank Merger, the Surviving
Bank shall establish an advisory committee (the "Advisory Committee") to the
Board of Directors of the Surviving Bank. The Advisory Committee shall be
comprised of the persons who are nonemployee directors of the Bank immediately
prior to the consummation of the Merger but who are not Designated Directors.
The Advisory Committee shall meet on a regular basis and shall advise the Board
of Directors of the Surviving Bank with respect to such matters as may be
identified by such Board of Directors to such Advisory Committee.
SECTION 6.15. Organization of Merger Sub.
(a) Prior to the Effective Time, Purchaser will take any and all necessary
action to cause (i) Merger Sub to be organized, (ii) Merger Sub to become a
direct or indirect wholly owned subsidiary of Purchaser, (iii) the directors and
stockholders of Merger Sub to approve the transactions contemplated by this
Agreement, (iv) Merger Sub to execute one or more counterparts to this Agreement
and to deliver at least one such counterpart so executed to the Company and the
Bank, whereupon Merger Sub shall become a party to and be bound by this
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Agreement, and (v) Merger Sub to take all necessary action to
complete the transactions contemplated hereby subject to the
terms and conditions hereof.
(b) On and as of the date Merger Sub becomes a party to this Agreement,
Purchaser and Merger Sub shall, jointly and severally, represent and warrant to
the Company and the Bank as follows:
(i) Merger Sub is a corporation duly organized, validly existing and
in good standing under the laws of the State of Connecticut and all of its
outstanding capital stock are owned, directly or indirectly, by Purchaser.
Since the date of its incorporation, Merger Sub has not engaged in any
activities other than in connection with or as contemplated by this
Agreement;
(ii) Merger Sub has all necessary corporate power and authority to
enter into this Agreement and to carry on its obligations hereunder. The
execution, delivery and performance of this Agreement by Merger Sub and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Merger Sub and
will not (A) conflict with or violate the Certificate of Incorporation or
By-laws of Merger Sub or (B) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to Merger Sub or by which
any of its properties or assets is bound or affected; and
(iii) Merger Sub has executed and delivered this Agreement and this
Agreement constitutes the legal, valid and binding obligation of Merger Sub
enforceable against Merger Sub in accordance with its terms.
ARTICLE VII
CONDITIONS TO THE HOLDING COMPANY MERGER
SECTION 7.01. Conditions to Each Party's Obligations to Effect the Holding
Company Merger. The respective obligations of each party to effect the Holding
Company Merger shall be subject to the satisfaction at or prior to the Effective
Time of the following conditions:
(a) Stockholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the affirmative
vote of the stockholders of the Company to the extent required by
Connecticut Law and the Certificate of Incorporation of the Company;
(b) Regulatory Approvals. All necessary approvals, authorizations and
consents of all Governmental Entities required to consummate the Holding
Company
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Merger and the Bank Merger shall have been obtained and remain in full
force and effect, and all waiting periods relating to such approvals,
authorizations and consents shall have expired or been terminated (all such
approvals and the expiration of all such waiting periods being referred to
herein as the "Requisite Regulatory Approvals").
(c) No Orders, Injunctions or Restraints; Illegality. No order,
injunction or decree (whether temporary, preliminary or permanent) issued
by federal or state governmental authority or other agency or commission or
federal or state court of competent jurisdiction or other legal restraint
or prohibition (an "Injunction") preventing the consummation of the Holding
Company Merger, the Bank Merger or any of the other transactions
contemplated by this Agreement or the Bank Merger Agreement shall be in
effect and no proceeding initiated by any governmental entity seeking an
Injunction shall be pending. No statute, rule, regulation, order,
injunction or decree (whether temporary, preliminary or permanent) shall
have been enacted, entered, promulgated or enforced by any federal or state
governmental authority or other agency or commission or federal or state
court of competent jurisdiction, which prohibits, restricts or makes
illegal the consummation of the Holding Company Merger, the Bank Merger or
any of the other transactions contemplated by this Agreement or the Bank
Merger Agreement.
SECTION 7.02. Conditions to Obligations of Purchaser and Merger Sub. The
obligations of Purchaser and Merger Sub to effect the Holding Company Merger are
also subject to the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company and the Bank in this Agreement which is qualified
as to materiality shall be true and correct and each such representation or
warranty that is not so qualified shall be true and correct in all material
respects, in each case as of the date of this Agreement, as applicable, and
(except to the extent such representations and warranties speak as of an
earlier date) as of the Effective Time, and Purchaser shall have received a
certificate to such effect signed by the Chief Executive Officer and the
Chief Financial Officer of the Company and the Bark dated as of the
Effective Date.
(b) Agreements and Covenants. The Company and the Bank shall have
performed in all material respects all obligations and complied in all
material respects with all agreements or covenants of the Company and the
Bank to be performed or complied with by it at or prior to the Effective
Date under the this Agreement and the Bank Merger Agreement, and Purchaser
shall have received a certificate to such effect signed by the Chief
Executive Officer and Chief Financial Officer of the Company and the Bank
dated as of the Effective Date.
(c) Consents Under Agreements. The consent, approval or waiver of each
person (other than Requisite Regulatory Approvals contemplated in Section
7.01(b)) whose consent or approval shall be required in order to permit the
lawful succession by the
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Surviving Company pursuant to the Holding Company Merger or the Surviving
Bank as survivor to the Bank Merger, as the case may be, to any material
obligation, right or interest of the Company, the Bank or any of their
subsidiaries under agreement or instrument shall have been obtained, and
none of such permits, consents, waivers, clearances, approvals and
authorizations shall contain any term or condition which would materially
impair the value of the Company and the Bank to Purchaser.
(d) No Material Burdensome Condition. None of the Requisite Regulatory
Approvals shall impose any material term, condition or restriction upon
Purchaser or the Surviving Bank that Purchaser reasonably determines would
materially and adversely affect the business, operations, financial
condition, property or assets of the Surviving Bank or otherwise impair the
value of the Bank to Purchaser in a manner which is material and adverse to
Purchaser and its subsidiaries taken as a whole (a "Burdensome Condition").
(e) Agreements regarding Company Option Plans. Agreements,
substantially in the form attached as Exhibit II hereto, shall have been
executed and delivered by directors, officers and employees of the Company
or the Bank who hold, as of the date of this Agreement, in the aggregate
not less than 90% of the outstanding stock options under the Company Option
Plans.
(f) Termination of Employment Agreement. The Employment Agreement,
dated as of May 1, 1993, by and between the Bank and F. Patrick McFadden,
Jr., shall have been terminated by all necessary action of each party
thereto, and none of the terms or provisions thereof shall be of any
further force or effect.
(g) Legal Opinion. Purchaser shall have received the opinion of
counsel to the Company and the Bank, dated the Closing Date, in a form that
is customary for transactions of this type.
SECTION 7.03. Conditions to Obligations of the Company and the Bank. The
obligations of the Company and the Bank to effect the Holding Company Merger are
also subject to the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Purchaser and Merger Sub in this Agreement which is qualified
as to materiality shall be true and correct and each such representation or
warranty that is not so qualified shall be true and correct in all material
respects, in each case as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as
of the Effective Date and the Company shall have received a certificate
signed by the Chief Executive or Chief Financial Officer of Purchaser to
such effect dated as of the Effective Date.
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(b) Agreements and Covenants. Purchaser and Merger Sub shall have
performed in all material respects all obligations and complied in all
material respects with all of the respective agreements or covenants to be
performed or complied by such party under this Agreement and the Company
shall have received a certificate signed by the Chief Executive or Chief
Financial Officer of Purchaser to such effect dated as of the Effective
Date.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated and the Holding
Company Merger, the Bank Merger and the other transactions contemplated by this
Agreement or the Bank Merger Agreement may be abandoned at any time prior to the
Effective Time, notwithstanding any requisite approval and adoption of this
Agreement and the transactions contemplated in this Agreement by the
stockholders of the Company:
(a) by mutual written consent duly authorized by the Boards of
Directors of Purchaser, Merger Sub, the Company and the Bank;
(b) by either Purchaser and Merger Sub or the Company and the Bank if
(i) the Effective Time shall not have occurred on or before December 31,
1997; provided, however, that the right to terminate this Agreement under
this Section 8.01(b) shall not be available to any party whose failure to
fulfill any material obligation under this Agreement has been the cause of,
or resulted in, the failure of the Effective Time to occur on or before
such date;
(c) by either Purchaser and Merger Sub or the Company and the Bank (i)
ninety days after the date on which any request or application for a
regulatory approval required to consummate the Holding Company Merger or
the Bank Merger shall have been denied or withdrawn at the request or
recommendation of the Governmental Entity which must grant such requisite
regulatory approval, unless within the ninety day period following such
denial or withdrawal a petition for rehearing or an amended application has
been filed with such Governmental Entity; provided, however, that no party
shall have the right to terminate this Agreement pursuant to this Section
8.01(c) (i) if such denial or request or recommendation for withdrawal
shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe the covenants and agreements of such party
set forth herein or (ii) if any court of competent jurisdiction or other
governmental authority shall have issued an order, decree, ruling or taken
any other action restraining, enjoining or otherwise prohibiting the
Holding Company Merger or the Bank Merger and such order, decree, ruling or
other action shall have become final and nonappealable;
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(d) by either Purchaser and Merger Sub or the Company and the Bank
(provided that the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained herein) if
there shall have been a material breach of any of the representations or
warranties set forth in this Agreement on the part of the other party,
which breach by its nature cannot be cured prior to the Effective Time or
within thirty business days following receipt by the breaching party of
written notice of such breach from the other party hereto;
(e) by either Purchaser and Merger Sub or the Company and the Bank
(provided that the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained herein) if
there shall have been a material breach of any of the covenants or
agreements set forth in this Agreement on the part of the other party,
which breach shall not have been cured within thirty business days
following receipt by the breaching party of written notice of such breach
from the other party hereto;
(f) by Purchaser and Merger Sub or the Company and the Bank (provided,
that if the terminating party is the Company or the Bank, the Company and
the Bank shall not be in material breach of any of their obligations under
Section 6.01) if any approval of the stockholders of the Company required
for the consummation of the Holding Company Merger shall not have been
obtained by reason of the failure to obtain the required vote at a duly
held meeting of stockholders or at any adjournment or postponement thereof;
or
(g) by Purchaser, if the Company Board shall not have publicly
recommended to the stockholders of the Company that such stockholders vote
in favor of the approval of this Agreement, the Holding Company Merger and
the other transactions contemplated hereby or shall have withdrawn,
modified or amended such recommendation in a manner adverse to Purchaser.
SECTION 8.02. Effect of Termination; Expenses.
(a) In the event of the termination of this Agreement pursuant to Section
8.01, this Agreement shall forthwith become void, and there shall be no
liability on the part of any party hereto, except (i) as set forth in Section
9.03 and (ii) nothing herein shall relieve any party from any liabilities or
damages arising out of its gross negligence or willful breach of any provision
of this Agreement.
(b) If this Agreement is terminated as a result of any breach of a
representation, warranty, covenant or other agreement which is caused by the
gross negligence or willful breach of a party hereto, such party shall be liable
to the other party for all out-of-pocket costs and expenses, including, without
limitation, the reasonable fees and expenses of lawyers, accountants and
investment bankers, incurred by such other party in connection with the entering
into of this Agreement and the carrying out of any and all acts contemplated
hereunder ("Expenses"). The payment of Expenses is not an exclusive remedy, but
is in addition to any other rights or remedies
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available the parties hereto at law or in equity.
(c) As a condition of Purchaser's willingness, and in order to induce
Purchaser, to enter into this Agreement and to reimburse Purchaser for incurring
the costs and expenses related to entering into this Agreement and consummating
the transactions contemplated by this Agreement, the Bank will make a cash
payment to Purchaser of $500,000 (the "Expense Fee") if and only if:
(i) (x) Purchaser or the Company and the Bank has terminated this
Agreement pursuant to Section 8.01(f), or (y) Purchaser has terminated this
Agreement pursuant to Section 8.01(g), or (z) Purchaser has terminated this
Agreement pursuant to Sections 8.01(d) or 8.01(e) and the breach of the
representation, warranty, covenant or agreement was caused by the willful
conduct or gross negligence of the Company or the Bank, and
(ii) (x) within twelve months of any such termination or other event
specified in (i) above, (A) the Company or the Bank shall have entered into
an agreement to engage in an Acquisition Transaction (as hereinafter
defined) with any person other than Purchaser or any affiliate of Purchaser
or (B) the Company Board or any committee thereof shall have authorized,
approved, recommended, publicly proposed or failed to publicly oppose an
Acquisition Transaction or recommended that stockholders of the Company
authorize, approve or accept any Acquisition Transaction with any person
other than Purchaser or any affiliate of Purchaser, or (y) in the case of
Sections 8.01(f) or 8.01(g), at the time of such termination or event
giving rise to such termination, it shall have been publicly announced that
any person (other than Purchaser or any affiliate of Purchaser) shall have
(A) made, or disclosed an intention to make, a bona tide offer to engage in
an Acquisition Transaction, or (B) filed an application (or given a
notice), whether in draft or final form, under the BHC Act or the Change in
Bank Control Act of 1978, for approval to engage in an Acquisition
Transaction.
If the Expense Fee is to be paid, it shall be subject to an upward
adjustment as set forth below:
In the event that the per share consideration to the Company, to the Bank
or to the stockholders of the Bank (including any dividend or distribution
following a sale of assets) in an Acquisition Transaction contemplated by
Section 8.02(c)(ii)(x) above (the "Acquisition Consideration") exceeds the Fixed
Consideration, then the Expense Fee shall be increased by an amount equal to the
product of 738,528 (the "Number") multiplied by the excess of the Acquisition
Consideration over the Fixed Consideration. The Number shall be subject to
equitable and proportionate adjustment in the event of any change in Company
Common Stock by reason of any stock issuance, stock dividend, stock split,
split-up, recapitalization, combination, exchange of shares or similar
transaction such that the Number shall equal 19.99% of the Company Common Stock
then outstanding after the occurrence of any such event. The Fixed Consideration
shall also be subject to equitable and proportionate adjustment in the event
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of any change in Company Common Stock by reason of any stock dividend, stock
split, split-up, recapitalization, combination, exchange of shares or similar
transaction.
Any payment required under this Section B.02(c) will be (i) payable by the
Company and the Bark to Purchaser (by wire transfer of immediately available
funds to an account designated by Purchaser) within five business days after
demand by Purchaser and (ii) net of any other payments made by the Company and
the Bank to Purchaser pursuant to the provisions of Section 8.02(b). In the
event of a termination under circumstances that would trigger a payment under
this Section 8.02(c), (i) in the absence of gross negligence or willful breach
of any provision of this Agreement by the Company, the Bank or any of their
subsidiaries, this Section 8.02(c) shall be the exclusive remedy of Purchaser,
and (ii) any standstill provisions contained in the Confidentiality Agreement
shall terminate.
For purposes of this Agreement, "Acquisition Transaction" shall mean (i) a
merger, consolidation or similar transaction involving the Company, the Bank or
any of their subsidiaries, (ii) the disposition, by sale, lease, exchange or
otherwise, of assets of the Company, the Bank or any of their subsidiaries
representing 14.9% or more of the consolidated assets of the Company, the Bank
or any of their subsidiaries, in a single transaction or series of transactions,
other than sales of mortgages into the secondary market in the ordinary course
of business consistent with past practice, (iii) the issuance, sale or other
disposition of (including by way of merger, consolidation, share exchange or any
similar transaction) securities by the Company or the Bank representing 14.9% or
more of the voting power of the Company, the Bank or any of their subsidiaries,
(iv) any person (other than Purchaser or any affiliate of Purchaser) shall have
commenced (as such term is defined in Rule 14d-2 under the Exchange Act) or
shall have filed a registration statement under the Securities Act, with respect
to, a tender offer or exchange offer to purchase any shares of Company Stock
such that, upon consummation of such offer, such person would own or control
14.9% or more of the then outstanding shares of Company Common Stock, or (v) any
person (other than Purchaser or any affiliate of Purchaser) shall have acquired
beneficial ownership (as such term is defined in Rule 13d-3 promulgated under
the Exchange Act) of, or the right to acquire beneficial ownership of, or any
"group" (as such term is defined under the Exchange Act) shall have been formed
which shall have acquired beneficial ownership of, or the right to acquire
beneficial ownership of, 14.9% or more of the then outstanding shares of Company
Common Stock.
(d) Except as otherwise provided in this Section 8.02, all costs and
expenses incurred in connection with this Agreement, the Bank Merger Agreement
and the transactions contemplated hereby and thereby shall be paid by the party
incurring such expenses, whether or not any of the transactions contemplated by
this Agreement is consummated.
SECTION 8.03. Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; provided, however, that, after the
approval and adoption of this Agreement and the transactions contemplated
hereby, no amendment may be made which would reduce the
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amount or change the type of consideration into which each Share shall be
converted upon consummation of the Holding Company Merger. This Agreement may
not be amended except by an instrument in writing signed by the parties hereto.
SECTION 8.04. Waiver. At any time prior to the Effective Time, any party
hereto may (i) extend the time for the performance of any obligation or other
act of any other party hereto, (ii) waive any inaccuracy in the representations
and warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions contained
herein; provided, however, that after the approval and adoption of this
Agreement and the approval of the transactions contemplated hereby by the
stockholders of the Company there may not be, without further approval of such
stockholders, any extension or waiver of this Agreement or any portion thereof
which would reduce the amount or change the form of the consideration into which
each Share shall be converted upon consummation of the Holding Company Merger
delivered to the Company's stockholders hereunder other than as contemplated by
this Agreement. Any such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party or parties to be bound thereby, but
such extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Closing. Subject to the terms and conditions of this
Agreement, the closing of the Holding Company Merger (the "Closing") will take
place at 9:00 a.m. on a date to be specified by the parties, within ten business
days after the satisfaction or waiver (subject to applicable law) of the latest
to occur of the conditions set forth in Article VII hereof, other than the
delivery of officers certificates which are expected to be delivered at the
Closing (the "Closing Date"), at the offices of Goodwin, Procter & Hoar LLP, One
Exchange Place, Boston, Massachusetts, unless another time, date or place is
agreed to in writing by the parties hereto.
SECTION 9.02. Alternative Structure. Notwithstanding anything to the
contrary contained in this Agreement, prior to the Effective Time, Purchaser
shall be entitled to revise the structure of the Holding Company Merger, the
Bank Merger and the other transactions contemplated hereby and thereby,
provided, that (i) there are no material adverse federal or state income tax
consequences to the Company, the Bank and its stockholders as a result of the
modification; (ii) the consideration to be paid to the holders of the Shares
under this Agreement is not thereby changed in kind or reduced in amount; and
(iii) such modification will not be likely to jeopardize receipt of any required
regulatory approvals relating to the consummation of the Holding Company Merger
and the Bank Merger. This Agreement and any related documents shall be
appropriately amended in order to reflect any such revised structure.
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SECTION 9.03. Non-Survival of Representations, Warranties and Agreements.
The representations, warranties and agreements in this Agreement shall terminate
at the Effective Time or upon the termination of this Agreement pursuant to
Section 8.01, as the case may be, except that the agreements set forth in
Articles I and II and Sections 6.06 and 6.07 shall survive the Effective Time
indefinitely and those set forth in the last sentence of Section 6.04(a) and in
Sections 6.04(b), Article VIII and Article IX hereof shall survive termination
indefinitely.
SECTION 9.04. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given in
accordance with this Section 9.04):
if to Purchaser or Merger Sub:
Citizens Bank of Connecticut
63 Eugene O'Neill Drive
New London, Connecticut 06320
Facsimile: (860) 444-3427
Attention: President
with a copy to:
Goodwin, Procter & Hoar LLP
One Exchange Place
Boston, MA 02109
Facsimile: (617) 523-1231
Attention: Regina M. Pisa, P.C.
and Paul W. Lee, P.C.
if to the Company or the Bank:
BNH Bancshares, Inc.
209 Church Street
New Haven, CT 06510
Facsimile: (203) 777-0918
Attention: President
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with a copy to:
Tyler, Cooper & Alcorn
205 Church Street
New Haven, CT 06510
Facsimile: (203) 777-1181
Attention: Richard G. Bell, Esq. and
William W. Bouton, III, Esq.
SECTION 9.05. Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliate" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by, or is
under common control with, such specified person, including, without limitation,
any partnership or joint venture in which the Company (either alone, or through
or together with any subsidiary) has, directly or indirectly, an interest of 5%
or more;
(b) "beneficial owner" with respect to any Shares means a person who shall
be deemed to be the beneficial owner of such Shares (i) which such person or any
of its affiliates or associates (as such term is deemed in Rule 12b-2
promulgated under the Exchange Act) beneficially owns, directly or indirectly,
(ii) which such person or any of its affiliates or associates has, directly or
indirectly, (A) the right to acquire (whether such right is exercisable
immediately or subject only to the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of consideration rights,
exchange rights, warrants or options, or otherwise, or (B) the right to vote
pursuant to any agreement, arrangement or understanding or (iii) which are
beneficially owned, directly or indirectly, by any other persons with whom such
person or any of its affiliates or associates or person with whom such person or
any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of any
Shares;
(c) "business day" means any day on which the principal offices of the SEC
in Washington, D.C. are open to accept filings, or, in the case of determining a
date when any payment is due, any day on which the Bank is open for business;
(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, as
trustee or executor, by contract or credit arrangement or otherwise;
(e) "knowledge" as used herein in the context of the Company shall mean
knowledge of the Company, the Bank and their subsidiaries.
(f) "Material Adverse Effect", when used in connection with the Company,
the
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Bank or any of their subsidiaries, shall mean any change or effect that is or,
in the reasonable judgment of the parties hereto, would be, materially adverse
to the business, assets, liabilities, financial condition or results of
operations of the Company, the Bank and their subsidiaries taken as a whole.
(g) "person" means an individual, corporation, partnership, limited
partnership, syndicate, person (including, without limitation, a "person" as
defined in Section 13(d)(3) of the Exchange Act), trust, association or entity
or government, political subdivision, agency or instrumentality of a government;
and
(h) "subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, the Bank, the Surviving Bank, Purchaser or any other person means
an affiliate controlled by such person, directly or indirectly, through one or
more intermediaries, except as otherwise defined herein.
SECTION 9.06. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated by this Agreement is not affected in
any manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated by this Agreement be
consummated as originally contemplated to the fullest extent possible.
SECTION 9.07. Entire Agreement. This Agreement (including the Disclosure
Schedule and the Exhibits) constitutes, and the Bank Merger Agreement when the
same is executed by Purchaser and the Bank will constitute, the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and undertakings, both written and oral, among the parties, or
any of them, with respect to the subject matter hereof except for the
Confidentiality Agreement.
SECTION 9.08. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
SECTION 9.09. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
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SECTION 9.10. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that the provisions contained in
this Agreement were not performed in accordance with its specific terms or was
overwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions thereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
SECTION 9.11. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Connecticut applicable to
contracts executed in and to be performed in that State. All actions and
proceedings arising out of or relating to this Agreement shall be heard and
determined in any state or federal court sitting in the City of Boston.
SECTION 9.12. Headings. The table of contents and descriptive headings
contained in this Agreement are included for convenience of reference only and
shall not affect in any way the meaning or interpretation of this Agreement.
SECTION 9.13. Interpretation. When a reference is made in this Agreement to
Sections, Exhibits, Annexes or Schedules, such reference shall be to a Section
of or Exhibit, Annex or Schedule to this Agreement unless otherwise indicated.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation." The phrases "the date of this Agreement," "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to be April 8, 1997.
SECTION 9.14. Counterparts. This Agreement may be executed (including by
facsimile) in one or more counterparts, and by the different parties hereto in
separate counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement.
* * * * *
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IN WITNESS WHEREOF, Purchaser, the Company and the Bank have caused this
Agreement to be executed as a sealed instrument as of the date first written
above by their respective officers thereunto duly authorized.
Attest: CITIZENS BANK OF CONNECTICUT
/s/ LUCIA M. GONSOWSKI By: /s/ ROBERT C. SANDERSON
- --------------------------- ------------------------------
Lucia M. Gonsowski Robert L. Sanderson
Secretary Title: President
Attest: BNH BANCSHARES, INC.
/s/ EVELYN R. MILLER By: /s/ F. PATRICK McFADDEN
- --------------------------- ------------------------------
Evelyn R. Miller F. Patrick McFadden
Secretary Title: President
Attest: BANK OF NEW HAVEN
/s/ EVELYN R. MILLER By: /s/ F. PATRICK MCFADDEN
- --------------------------- ------------------------------
Evelyn R. Miller F. Patrick McFadden
Secretary Title: President
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EXHIBIT I
AGREEMENT AND PLAN OF MERGER
(BANK MERGER)
AGREEMENT AND PLAN OF MERGER, dated as of ________, 1997 (the
"Agreement"), pursuant to the General Statutes of Connecticut (the "Connecticut
General Statutes"), by and between CITIZENS BANK OF CONNECTICUT, a Connecticut
chartered stock savings bank ("Purchaser"), and BANK OF NEW HAVEN, a Connecticut
chartered bank and trust company (the "Bank").
WHEREAS, Purchaser, BNH Bancshares, Inc., a Connecticut chartered
corporation (the "Company"), and the Bank have entered into an Agreement and
Plan of Merger, dated as of April 8, 1997, as such agreement may be subsequently
amended or modified (the "Acquisition Agreement"), providing for the merger of a
subsidiary of Purchaser with and into the Company (the "Holding Company
Merger"); and
WHEREAS, in connection with the Acquisition Agreement, this Agreement
provides for the merger (the "Bank Merger") of the Bank with and into Purchaser
in accordance with the Connecticut General Statutes, following the consummation
of the Holding Company Merger;
NOW, THEREFORE, Purchaser and the Bank hereby agree as follows:
ARTICLE I
THE BANK MERGER
1.01 THE BANK MERGER. The constituent corporations to the Bank Merger shall
be Purchaser and the Bank. Subject to the terms and conditions of this Agreement
and the Acquisition Agreement, in accordance with Section 36a - 125 of the
Connecticut General Statutes, at the Effective Time (as defined in Section 1.02
hereof), the Bank shall merge with and into Purchaser. Purchaser shall be the
surviving corporation (sometimes referred to herein as the "Surviving Bank") of
the Bank Merger and shall continue its corporate existence as a Connecticut
chartered stock savings bank under the Connecticut General Laws following the
Bank Merger. Upon consummation of the Bank Merger, the separate corporate
existence of the Bank shall cease.
1.02 EFFECTIVE TIME. The Bank Merger shall become effective at ___ p.m. on
the date that this Agreement and the approval of the Banking Commissioner of the
State of Connecticut (the "Approval") are filed with the Secretary of the State
of Connecticut ("Secretary of State"). The term "Effective Time" shall be the
date and time when the Bank Merger becomes effective.
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1.03 EFFECTS OF THE BANK MERGER. At and after the Effective Time, the Bank
Merger shall have the effects provided herein and set forth in the applicable
provisions of the Connecticut General Statutes. Without limiting the generality
of the foregoing and subject thereto, all the property, rights, privileges,
powers and franchises of the Bank and Purchaser shall vest in the Surviving
Bank, and all debts, liabilities, obligations, restrictions, disabilities and
duties of the Bank and Purchaser shall become the debts, liabilities,
obligations, restrictions, disabilities and duties of the Surviving Bank.
1.04 CERTIFICATE OF INCORPORATION. At the Effective Time, the Certificate
of Incorporation of Purchaser, as in effect immediately prior to the Effective
Time, shall be the Certificate of Incorporation of the Surviving Bank, until
thereafter amended in accordance with applicable law and such Certificate of
Incorporation.
1.05 BY-LAWS. At the Effective Time, the By-Laws of Purchaser, as in effect
immediately prior to the Effective Time, shall be the By-Laws of the Surviving
Bank until thereafter amended in accordance with applicable law, the Certificate
of Incorporation of the Surviving Bank and such By-Laws.
1.06 NAME. At the Effective Time, the name of the Surviving Bank shall be
"Citizens Bank of Connecticut," until thereafter amended in accordance with
applicable law and the Certificate of Incorporation of the Surviving Bank.
1.07 CAPITAL STOCK. Unless otherwise determined by Purchaser prior to the
Effective Time by delivery to the Bank of an addendum to this Agreement, from
and after the Effective Time, the total number of shares and the par value of
each class of stock that the Surviving Bank shall be authorized to issue shall
be eight million (8,000,000) shares of common stock, par value $.01 per share,
until thereafter amended in accordance with applicable law and the Certificate
of Incorporation of the Surviving Bank.
1.08 DIRECTORS AND OFFICERS. At the Effective Time, the initial directors
and officers of the Surviving Bank shall be the directors and officers of
Purchaser immediately prior to the Effective Time and those additional persons
set forth in Section 1.11 of Annex A hereto, each to hold office in accordance
with the Certificate of Incorporation and By-Laws of the Surviving Bank until
their respective successors are duly elected or appointed and qualified.
1.09 MAIN OFFICE. At the Effective Time, the main office of the Surviving
Bank shall be located in New London, Connecticut.
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ARTICLE II
CANCELLATION OF SHARES
Each share of common stock, par value $0.10 per share, of the Bank issued
and outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be canceled.
ARTICLE III
REPRESENTATIONS
Each of Purchaser and the Bank represents that this Agreement has been duly
authorized, executed and delivered by such party and constitutes a legal, valid
and binding obligation of such party, enforceable against it in accordance with
the terms hereof.
ARTICLE IV
TERMINATION
Consummation of the Merger contemplated hereunder is conditioned upon the
satisfaction of all conditions set forth in Article VII of the Acquisition
Agreement. This Agreement shall terminate and forthwith become void
automatically and without any action on the part of Purchaser or the Bank
immediately upon the termination of the Acquisition Agreement in accordance with
Article VIII thereof, and there shall be no further liability on the part of
Purchaser or the Bank upon such termination.
IN WITNESS WHEREOF, Purchaser and the Bank have each caused this Agreement
to be executed by not less than a majority of their respective directors, as of
the day and year first above written.
CITIZENS BANK OF CONNECTICUT
By:
-----------------------------
Director
By:
-----------------------------
Director
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By:
-----------------------------
Director
By:
-----------------------------
Director
By:
-----------------------------
Director
By:
-----------------------------
Director
By:
-----------------------------
Director
BANK OF NEW HAVEN
By:
-----------------------------
Chairman of the Board
By:
-----------------------------
Director
By:
-----------------------------
Director
By:
-----------------------------
Director
By:
-----------------------------
Director
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By:
-----------------------------
Director
By:
-----------------------------
Director
By:
-----------------------------
Director
By:
-----------------------------
Director
By:
-----------------------------
Director
By:
-----------------------------
Director
By:
-----------------------------
Director
By:
-----------------------------
Director
By:
-----------------------------
Director
By:
-----------------------------
Director
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LOGO
Appendix B
April 7, 1997
Board of Directors
BNH Bancshares, Inc.
209 Church Street
New Haven, Connecticut 06510
Board of Directors:
You have requested that Friedman, Billings, Ramsey & Co., Inc. ("FBR"), provide
you with its opinion as to the fairness from a financial point of view to
holders of common stock ("Stockholders") of BNH Bancshares, Inc. ("BNH" or the
"Company") of the Consideration (as hereinafter defined) to be received by them
pursuant to the Agreement and Plan of Reorganization and Merger between Citizens
Financial Group, Inc. ("Citizens") and BNH, dated April 7, 1997 (the "Merger
Agreement"), pursuant to which BNH will be merged with and into Citizens (the
"Merger"). The Agreement provides, among other things, that each issued and
outstanding share of common stock of BNH, par value $1.00 per share, (other than
subject to dissenters' rights) shall be converted into the right to receive from
Citizens $15.50 per share in cash (the "Consideration"). The Merger Agreement
will be considered at a special meeting of the Stockholders of BNH. The terms of
the Merger are more fully set forth in the Merger Agreement.
In delivering this opinion, FBR has completed the following tasks:
1. reviewed BNH's Annual Reports to Stockholders for the fiscal years ended
December 31, 1993 through 1995 and BNH's Annual Reports on Form 10-K filed
with the Securities and Exchange Commission (the "SEC") for the fiscal
years ended December 31, 1993 through 1996;
2. reviewed Citizens' Annual Report to Stockholders and audited financial
statements for the fiscal year ended September 30, 1996;
3. reviewed BNH's Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996 filed with the SEC;
4. discussed the operations and financial condition of BNH and Citizens with
the managements of BNH and Citizens;
5. compared the results of operations and financial condition of BNH with
those of certain publicly-traded financial institutions (or their holding
companies) that FBR deemed to be reasonably comparable to BNH;
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6. participated in discussions and negotiations among representatives of BNH
and representatives of Citizens;
7. reviewed the financial terms, to the extent publicly available, of certain
acquisition transactions that FBR deemed to be reasonably comparable;
8. reviewed the financial terms, to the extent publicly available, of certain
acquisition transactions entered into by Citizens;
9. reviewed a copy of the Merger Agreement; and
10. performed such other analyses and reviewed and analyzed such other
information as FBR deemed appropriate.
In rendering this opinion, FBR did not assume responsibility for independently
verifying, and did not independently verify, any financial or other information
concerning BNH furnished to it by BNH or the publicly-available financial and
other information regarding BNH, Citizens and other financial institutions (or
their holding companies). FBR has assumed that all such information is accurate
and complete. FBR has further relied on the assurances of management of BNH and
Citizens that they are not aware of any facts that would make such financial or
other information relating to such entities inaccurate or misleading. With
respect to financial forecasts for BNH provided to FBR by its management, FBR
has assumed, for the purposes of this opinion, that the forecasts have been
reasonably prepared on bases reflecting the best available estimates and
judgments of its management at the time of preparation as to the future
financial performance of BNH. FBR has assumed that there has been no material
change in BNH's assets, financial condition, result of operations, business or
prospects since December 31, 1996. FBR did not undertake an independent
appraisal of the assets or liabilities of BNH nor was FBR furnished with any
such appraisals. FBR is not an expert in the evaluation of allowances for loan
losses, was not requested to and did not review such allowances, and was not
requested to and did not review any individual credit files of BNH. FBR's
conclusions and opinion are necessarily based upon economic, market and other
conditions and the information made available to FBR as of the date of this
opinion. FBR expresses no opinion on matters of a legal, regulatory, tax or
accounting nature related to the Merger.
FBR, as part of its institutional brokerage, research and investment banking
practice, is regularly engaged in the valuation of securities and the evaluation
of transactions in connection with mergers and acquisitions of commercial banks,
savings institutions and financial institution holding companies, initial and
secondary offerings, mutual-to-stock conversions of savings institutions, as
well as business valuations for other corporate purposes for financial
institutions and real estate related companies. FBR has experience in, and
knowledge of, the valuation of bank and thrift securities in Connecticut, New
England and the rest of the United States.
FBR has acted as a financial advisor to BNH in connection with the Merger and
will receive a fee for services rendered which is contingent upon the
consummation of the Merger. In the ordinary course of FBR's business, it may
effect transactions in the securities of BNH or Citizens for its own account
and/or for the accounts of its customers and, accordingly, may at
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any time hold long or short positions in such securities. From time to time,
principals and/or employees of FBR may also have positions in the securities.
Based upon and subject to the foregoing, as well as any such other matters as we
consider relevant, it is FBR's opinion, as of the date hereof, that the
Consideration is fair, from a financial point of view, to the Stockholders of
BNH.
Very truly yours,
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
By: /s/ KAREN K. EDWARDS
-----------------------------------
Karen K. Edwards, CFA
Managing Director
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Appendix C
CONNECTICUT GENERAL STATUTES
TITLE 33. CORPORATIONS
CHAPTER 601. BUSINESS CORPORATIONS
PART XIII. DISSENTERS' RIGHTS
(A) RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SS. 33-855. DEFINITIONS
As used in sections 33-855 to 33-872, inclusive:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 33-856 and who exercises that right when and in
the manner required by sections 33-860 to 33-868, inclusive.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
(1994, P.A. 94-186, ss. 147, eff. Jan. 1, 1997.)
SS. 33-856. RIGHT TO DISSENT
(a) A shareholder is entitled to dissent from, and obtain payment of the
fair value of his shares in the event of, any of the following corporate
actions:
(1) Consummation of a plan of merger to which the corporation is a
party (A) if shareholder approval is required for the merger by section
33-817 or the certificate of incorporation and the shareholder is entitled
to vote on the merger or (B) if the corporation is a subsidiary that is
merged
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with its parent under section 33-818;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale will be distributed to
the shareholders within one year after the date of sale;
(4) An amendment of the certificate of incorporation that materially
and adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares; (B) creates,
alters or abolishes a right in respect of redemption, including a provision
respecting a sinking fund for the redemption or repurchase, of the shares;
(C) alters or abolishes a preemptive right of the holder of the shares to
acquire shares or other securities; (D) excludes or limits the right of the
shares to vote on any matter, or to cumulate votes, other than a limitation
by dilution through issuance of shares or other securities with similar
voting rights; or (E) reduces the number of shares owned by the shareholder
to a fraction of a share if the fractional share so created is to be
acquired for cash under section 33-668; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the certificate of incorporation, bylaws or a resolution of the
board of directors provides that voting or nonvoting shareholders are
entitled to dissent and obtain payment for their shares.
(b) Where the right to be paid the value of shares is made available
to a shareholder by this section, such remedy shall be his exclusive remedy
as holder of such shares against the corporate transactions described in
this section, whether or not he proceeds as provided in sections 33-855 to
33-872, inclusive.
(1994, P.A. 94-186, ss. 148, eff. Jan. 1, 1997.)
SS. 33-857. DISSENT BY NOMINEES AND BENEFICIAL OWNERS
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if: (1) He submits to the corporation the record
shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and (2) he does so with
respect to all shares of which he is the beneficial shareholder or over which he
has power to direct the vote.
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(1994, P.A. 94-186, ss. 149, eff. Jan. 1, 1997.)
SS.SS. 33-858, 33-859. RESERVED FOR FUTURE USE
(B) PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SS. 33-860. NOTICE OF DISSENTERS' RIGHTS
(a) If proposed corporate action creating dissenters' rights under section
33-856 is submitted to a vote at a shareholders' meeting, the meeting notice
shall state that shareholders are or may be entitled to assert dissenters'
rights under sections 33-855 to 33-872, inclusive, and be accompanied by a copy
of said sections.
(b) If corporate action creating dissenters' rights under section 33-856 is
taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in section 33-862.
(1994, P.A. 94-186, ss. 150, eff. Jan. 1, 1997.)
SS. 33-861. NOTICE OF INTENT TO DEMAND PAYMENT
(a) If proposed corporate action creating dissenters' rights under section
33-856 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights (1) shall deliver to the corporation before
the vote is taken written notice of his intent to demand payment for his shares
if the proposed action is effectuated and (2) shall not vote his shares in favor
of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
of this section is not entitled to payment for his shares under sections 33-855
to 33-872, inclusive.
(1994, P.A. 94-186, ss. 151, eff. Jan. 1, 1997.)
SS. 33-862. DISSENTERS' NOTICE
(a) If proposed corporate action creating dissenters' rights under section
33-856 is authorized at a shareholders' meeting, the corporation shall deliver a
written dissenters' notice to all shareholders who satisfied the requirements of
section 33-861.
(b) The dissenters' notice shall be sent no later than ten days after the
corporate action was taken and shall:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
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(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not he acquired beneficial ownership
of the shares before that date;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty nor more than sixty days
after the date the subsection (a) of this section notice is delivered; and
(5) Be accompanied by a copy of sections 33-855 to 33-872, inclusive.
(1994, P.A. 94-186, ss. 152, eff. Jan. 1, 1997.)
SS. 33-863. DUTY TO DEMAND PAYMENT
(a) A shareholder sent a dissenters' notice described in section 33-862
must demand payment, certify whether he acquired beneficial ownership of the
shares before the date required to be set forth in the dissenters' notice
pursuant to subdivision (3) of subsection (b) of said section and deposit his
certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) of this section retains all other rights of a shareholder
until these rights are cancelled or modified by the taking of the proposed
corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under sections 33-855 to 33-872,
inclusive.
(1994, P.A. 94-186, ss. 153, eff. Jan. 1, 1997.)
SS. 33-864. SHARE RESTRICTIONS
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under section 33-866.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
(1994, P.A. 94-186, ss. 154, eff. Jan. 1, 1997.)
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SS. 33-865. PAYMENT
(a) Except as provided in section 33-867, as soon as the proposed corporate
action is taken, or upon receipt of a payment demand, the corporation shall pay
each dissenter who complied with section 33-863 the amount the corporation
estimates to be the fair value of his shares, plus accrued interest.
(b) The payment shall be accompanied by: (1) The corporation's balance
sheet as of the end of a fiscal year ending not more than sixteen months before
the date of payment, an income statement for that year, a statement of changes
in shareholders' equity for that year and the latest available interim financial
statements, if any; (2) a statement of the corporation's estimate of the fair
value of the shares; (3) an explanation of how the interest was calculated; (4)
a statement of the dissenter's right to demand payment under section 33-860; and
(5) a copy of sections 33-855 to 33-872, inclusive.
(1994, P.A. 94-186, ss. 155, eff. Jan. 1, 1997.)
SS. 33-866. FAILURE TO TAKE ACTION
(a) If the corporation does not take the proposed action within sixty days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under section 33-862 and repeat the payment demand procedure.
(1994, P.A. 94-186, ss. 156, eff. Jan. 1, 1997.)
SS. 33-867. AFTER-ACQUIRED SHARES
(a) A corporation may elect to withhold payment required by section 33-865
from a dissenter unless he was the beneficial owner of the shares before the
date set forth in the dissenters' notice as the date of the first announcement
to news media or to shareholders of the terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a) of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
pay this amount to each dissenter who agrees to accept it in full satisfaction
of his demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares, an explanation of how the interest was
calculated and a statement of the dissenter's right to demand payment under
section 33-868.
(1994, P.A. 94-186, ss. 157, eff. Jan. 1, 1997.)
SS. 33-868. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER
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(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate, less any payment under section 33-865, or reject the
corporation's offer under section 33-867 and demand payment of the fair value of
his shares and interest due, if:
(1) The dissenter believes that the amount paid under section 33-865
or offered under section 33-867 is less than the fair value of his shares
or that the interest due is incorrectly calculated;
(2) The corporation fails to make payment under section 33-865 within
sixty days after the date set for demanding payment; or
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection (a)
of this section within thirty days after the corporation made or offered payment
for his shares.
(1994, P.A. 94-186, ss. 158, eff. Jan. 1, 1997.)
SS.SS. 33-869, 33-870. RESERVED FOR FUTURE USE
(C) JUDICIAL APPRAISAL OF SHARES
SS. 33-871. COURT ACTION
(a) If a demand for payment under section 33-868 remains unsettled, the
corporation shall commence a proceeding within sixty days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the sixty-day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding in the superior court for
the judicial district where a corporation's principal office or, if none in this
state, its registered office is located. If the corporation is a foreign
corporation without a registered office in this state, it shall commence the
proceeding in the superior court for the judicial district where the registered
office of the domestic corporation merged with or whose shares were acquired by
the foreign corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
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(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to it. The dissenters are
entitled to the same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment
(1) for the amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the corporation, or (2) for
the fair value, plus accrued interest, of his after-acquired shares for which
the corporation elected to withhold payment under section 33-867.
(1994, P.A. 94-186, ss. 159, eff. Jan. 1, 1997.)
SS. 33-872. COURT COSTS AND COUNSEL FEES
(a) The court in an appraisal proceeding commenced under section 33-871
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously or not
in good faith in demanding payment under section 33-868.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable: (1) Against
the corporation and in favor of any or all dissenters if the court finds the
corporation did not substantially comply with the requirements of sections
33-860 to 33-868, inclusive; or (2) against either the corporation or a
dissenter, in favor of any other party, if the court finds that the party
against whom the fees and expenses are assessed acted arbitrarily, vexatiously
or not in good faith with respect to the rights provided by sections 33-855 to
33-872, inclusive.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
(1994, P.A. 94-186, ss. 160, eff. Jan. 1, 1997.)
C-7
<PAGE>
BNH BANCSHARES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD
JULY 8, 1997
The undersigned hereby appoints THEODORE F. HOGAN, JR., CARL M. PORTO and
CHEEVER TYLER, and each of them, with power of substitution, proxies and agents
of the undersigned to vote at the Special Meeting of Shareholders of BNH
Bancshares, Inc. (the "Company"), to be held at The New Haven Lawn Club, 193
Whitney Avenue, New Haven, Connecticut 06511 on Thursday, August 14, 1997, at
10:00 a.m. and at any adjournment thereof, all shares of common stock of the
Company which the undersigned would be entitled to vote if personally present
for the following matter.
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL 1.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
THIS PROXY WILL BE VOTED FOR THE PROPOSAL UNLESS INSTRUCTIONS TO THE CONTRARY
ARE INDICATED. PLEASE NOTE THAT ABSTAINING FROM THE VOTE ON THE PROPOSAL WILL
HAVE THE SAME EFFECT AS A VOTE AGAINST THE PROPOSAL.
I plan to attend
the meeting
[ ]
PLEASE MARK YOUR VOTES
AS INDICATED IN THIS EXAMPLE [X]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSAL:
1. Approval of an Agreement and Plan of Merger, For Against Abstain
dated as of April 8, 1997, by and among [ ] [ ] [ ]
Citizens Bank of Connecticut ("Citizens"),
the Company and The Bank of New Haven (the
"Bank") pursuant to which (i) a subsidiary
of Citizens will be merged with and into the
Company (the "Holding Company Merger"), and
(ii) the holders of outstanding shares of
Company common stock will be entitled to receive
$15.50 in cash for each share that they hold,
subject to upward adjustment in certain
circumstances described in the Proxy Statement.
Immediately following the Holding Company Merger,
the Bank will be merged with and into
Citizens, with Citizens as the surviving bank.
Please mark
this box if you
plan to attend the
Special Meeting
in person.
[ ]
PLEASE SIGN EXACTLY AS NAME APPEARS ON THIS PROXY. JOINT OWNERS SHOULD EACH
SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE SIGN IN FULL CORPORATE
NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AN AUTHORIZED INDIVIDUAL.
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS AND RELATED PROXY STATEMENT.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
_____________________________________________________
_____________________________________________________
Signature(s) Date
