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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): November 13, 1996
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EASTERN BANCORP, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
0-14853 03-0304472
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(Commission File Number) (IRS Employer Identification No.)
537 Central Avenue, P.O. Box 700, Dover, New Hampshire 03820
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(Address of principal executive offices) (Zip Code)
(802) 879-9000
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Registrant's Telephone Number, Including Area Code
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
On November 13, 1996, Eastern Bancorp, Inc., a Delaware corporation
("Eastern"), entered into an Agreement and Plan of Reorganization (the
"Merger Agreement") by and among Eastern, Vermont Financial Services Corp., a
Delaware corporation ("VFSC"), and Vermont Federal Bank, FSB, a federally
chartered stock savings bank and a wholly-owned subsidiary of Eastern
("Vermont Federal"). Pursuant to the Merger Agreement, Eastern will merge
with and into VFSC (the "Merger"), and Vermont Federal will become a
wholly-owned subsidiary of VFSC.
In connection with the Merger, each outstanding share of common stock,
$.01 par value per share, of Eastern ("Eastern Common Stock") will be
entitled to receive merger consideration, payable in cash or shares of common
stock, $.01 par value per share, of VFSC ("VFSC Common Stock") or a
combination of cash and VFSC Common Stock equal to the sum of (i) $7.25 plus
(ii) the product of 0.49 and the average closing bid price per share of VFSC
Common Stock on the Nasdaq Stock Market during the 20-trading-day period
ending on the fifth business day prior to the effective date of the Merger
(the "Average VFSC Closing Price"), subject to the maximum and minimum
collars described below. If the Average VFSC Closing Price is equal to or
greater than $39.96, the acquisition price per share of Eastern Common stock
will be fixed at $26.83 and if the Average VFSC Closing Price is equal to or
less than $29.54 but not less than $26.06, the acquisition price per share of
Eastern Common Stock will be fixed at $21.72. Assuming the Average VFSC
Closing Price is less than or equal to $39.96 and greater than or equal to
$29.54, the aggregate consideration to be paid in connection with the Merger
will consist of approximately $26.65 million and approximately 1.8 million
shares of VFSC Common Stock. The number of shares of VFSC Common Stock will
be decreased if the Average VFSC Closing Price equals or exceeds the $39.96
maximum and increased if the Average VFSC Closing Price equals or falls below
the $29.54 minimum. If the Average VFSC Closing Price is less than $26.06,
Eastern may terminate the Merger unless VFSC agrees to issue additional
shares of VFSC Common Stock such that the adjusted acquisition price per
share of Eastern Common Stock is equal to $21.72.
Eastern's stockholders may elect to receive cash, VFSC Common Stock or a
combination of cash and VFSC Common Stock, subject to PRO RATA adjustment as
set forth in the Merger Agreement to ensure that the total cash consideration
to be paid and the total number of shares of VFSC Common Stock to be issued
will equal the aggregate cash amount and share number referred to above.
The Merger is intended to constitute a tax-free reorganization, and no
gain or loss is expected to be recognized by VFSC, Eastern or Vermont
Federal. The Merger will be accounted for as a purchase.
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The consummation of the Merger and the transactions contemplated by the
Merger Agreement are subject to certain conditions customary in transactions
of this nature, including, among others, approval by the stockholders of each
of VFSC and Eastern and receipt of all necessary regulatory approvals. No
assurance can be given that the Merger will be consummated. Each party also
has the right to terminate the Merger Agreement under certain customary
circumstances, including failure to consummate the Merger by November 30,
1997.
In conjunction with the parties' signing of the Merger Agreement,
Eastern granted VFSC an option, exercisable under certain conditions, to
purchase up to 732,425 shares of Eastern Common Stock, at $21.00 per share
each, subject to adjustment in certain events. If the option becomes
exercisable, then Eastern would also be required to pay to VFSC a cash
payment of $1 million.
Four of Eastern's nine Directors, including Eastern's chairman, chief
executive officer and executive vice president, who currently hold in the
aggregate approximately 465,487 shares of Eastern Common Stock (not
including options to purchase additional shares), or approximately 12.66% of
the currently outstanding shares of Eastern Common Stock, have agreed in a
separate letter agreement to vote all of their shares in favor of the Merger
and against any other competing transaction.
Certain additional information regarding the Merger is contained in
Eastern's press release dated November 14, 1996, included as an exhibit
hereto and incorporated herein.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
See Index to Exhibits attached hereto.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: November 21, 1996 EASTERN BANCORP, INC.
(Registrant)
/s/ John A. Cobb
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By: John A. Cobb,
President and Chief
Executive Officer
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INDEX TO EXHIBITS
Exhibit
Number
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99.1 Press Release of Eastern Bancorp, Inc. dated November 14, 1996.
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EXHIBIT 99.1
EASTERN BANCORP, INC.
John Cobb, CEO or
Dave Humphrey, EVP
(802) 879-9000
FOR IMMEDIATE RELEASE:
VERMONT FINANCIAL SERVICES CORP. AND EASTERN BANCORP, INC.
ANNOUNCE MERGER
DOVER, NEW HAMPSHIRE/NOVEMBER 14, 1996...Vermont Financial Services
Corp. (NASDAW:VFSC) and Eastern Bancorp, Inc. (NASDAQ:EBCP) announced today
that they have signed a definitive agreement under which VFSC (VFSC) will
acquire EBCP in a tax-free merger involving an exchange of stock and cash.
EBCP is the holding company for Vermont Federal Bank, FSB, which operates 15
branches in Vermont and 10 branches in southern New Hampshire through First
Savings of New Hampshire, an operating division of Vermont Federal Bank.
The acquisition will result in VFSC becoming a $2.1 billion asset bank
holding company. The acquisition will add an additional $640 million in
retail and commercial deposits to VFSC's existing franchise. Significantly,
in Vermont the transaction will give VFSC a 19% statewide deposit market share
and a 17% deposit market share in Chittenden County, the state's largest
market. In southern New Hampshire, the combined company will continue to do
business as First Savings of New Hampshire, providing VFSC with attractive new
markets for the full range of its commercial banking products and services.
The acquisition, which is expected to close in the second quarter of 1997,
will be accounted for by the purchase method of accounting, and is expected to
be accretive to VFSC's earnings by 1997 calendar year end.
Under the terms of the agreement, EBCP shareholders will receive stock
and/or cash equal to the sum of $7.25 plus the product of 0.49 times the
average closing bid price of VFSC common stock for a twenty trading day
period ending shortly before the effective time of the merger. Prior to
closing each EBCP shareholder may elect to receive either stock or cash or a
combination of both in exchange for the EBCP shares. The acquisition price
will be identical without regard to whether a shareholder has elected to
receive stock or cash or a combination. Based on a twenty day average
closing bid price of VFSC common stock at November 13, 1996 of $34.66, the
transaction would be valued at $89.1 million and EBCP shareholders would be
entitled to
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receive stock and/or cash equal to approximately $24.23 for each share of
EBCP common stock. The total amount of cash to be paid and the number of
shares to be issued by VFSC in the acquisition are fixed, subject to certain
collar adjustments noted below.
Based upon EBCP's unaudited September 30, 1996 financial statements and
the transaction value indicated above, the price payable to EBCP shareholders
would represent 1.40 times book value and, excluding the one-time special
statutory assessment to be paid by EBCP to capitalize the Savings Association
Insurance Fund, 15.6 times trailing twelve month earnings.
John D. Hashagen, Jr., President and Chief Executive Officer of VFSC
said "This merger creates a $2 billion community banking company with a #1
position in Vermont and smaller positions in its two adjacent states. The
improved market position of the combined company, the improved operating
efficiencies and the cross-selling opportunities make this a compelling merger
story. On top of this, both companies have similar traditions of high quality
customer service and commitment to their employees. We are confident that
this merger will be beneficial to our customers, employees and shareholders."
John Cobb, President and Chief Executive Officer of Eastern Bancorp adds
"This merger with Vermont Financial Services Corp. represents a truly
extraordinary opportunity for the shareholders and employees of Eastern
Bancorp and its subsidiary, Vermont Federal Bank. In combining with VFSC our
organization will be recognized as a part of one of the strongest and most
profitable emerging regional bank holding companies in New England.
Vermont Federal Bank and First Savings customers will now have access to an
expanded array of financial services including commercial and small business
loans, trust services as well as additional service outlets in which to do
business. With a significant presence in Vermont, New Hampshire and western
Massachusetts, our current employees will have added opportunities for
continued personal and professional growth."
In terms of price adjustment provisions to the acquisition price, if VFSC's
average closing prices during the applicable twenty-trading day valuation
period is between $29.54 and $39.96, each share of EBCP common stock shall
become and be converted into stock or cash equal to the sum of $7.25 plus the
product of 0.49 times such average closing price of VFSC common stock. If the
average VFSC closing price during the valuation period is greater than or
equal to $39.96, then the acquisition price shall equal $26.83. If the
average VFSC closing price during the valuation period is less than or equal
to $29.54 but greater than or equal to $26.06, then the acquisition price
shall equal $21.72. If the average VFSC closing price during the valuation
period is below $26.06, the acquisition price shall equal the sum of $7.25
plus
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the product of 0.5553 times such average closing price of VFSC common stock.
Notwithstanding the foregoing, if VFSC's average closing price during the
valuation period is below $26.06, EBCP can terminate the transaction unless
VFSC agrees to adopt $21.72 as the adjusted acquisition price.
The definitive agreement has been unanimously approved by the boards of
directors of both VFSC and EBCP. The acquisition is now subject to approval
by the shareholders of both companies and regulatory authorities, including
the Federal Reserve Board, as well as usual and customary closing conditions.
EBCP has granted VFSC an option, exercisable under certain conditions, to
purchase a number of newly issued shares of EBCP common stock equal to 19.9
percent of the total number of currently outstanding EBCP shares. If the
option becomes exercisable, then EBCP would also be required to pay to VFSC a
cash payment of $1 million.
Tucker Anthony Incorporated is serving as financial adviser to Vermont
Financial Services Corp., and McConnell, Budd and Downes, Inc. is representing
Eastern Bancorp, in the transaction.
Vermont Financial Services Corp., headquartered in Brattleboro, Vermont is the
holding company for Vermont National Bank and United Bank, a Massachusetts
savings bank. Vermont National Bank and United Bank combined have 38 banking
offices extending from western Massachusetts to northern Vermont. VFSC,
through its banking subsidiaries, provides a full range of commercial and
personal banking products and services to individuals and businesses
throughout Vermont, western Massachusetts and adjacent markets.
Contacts: John D. Hashagen, President & CEO
Vermont Financial Services Corp. (802) 258-4000, or
John Cobb, CEO or
David Humphrey, EVP
Eastern Bancorp, Inc. (802) 879-9000
