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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): JANUARY 26, 2000
ANDOVER BANCORP, INC.
(Exact name of Registrant as specified in charter)
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DELAWARE 000-16358 04-2952665
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(State or other jurisdiction (Commission file number) (IRS employer
of incorporation) identification no.)
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61 MAIN STREET, ANDOVER, MASSACHUSETTS 01810
(Address of principal executive offices) (Zip Code)
(978) 749-2000
(Registrant's telephone number, including area code)
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Item 5 - Other Events
On January 26, 2000, Andover Bancorp, Inc., a Delaware corporation (the
"Company"), and GBT Bancorp, a Massachusetts corporation ("GBT"), entered into
an Agreement and Plan of Merger (the "Merger Agreement"). GBT is the parent of
Gloucester Bank and Trust Company, a Massachusetts chartered trust company. The
Merger Agreement provides that GBT will be merged with and into the Company (the
"Merger"), with the Company being the surviving corporation. The Boards of
Directors of each of the Company and GBT approved the Merger Agreement, and the
transactions contemplated thereby, at their respective meetings held on January
26, 2000. The consummation of the Merger is subject to certain customary
conditions, including without limitation the approval of the stockholders of GBT
and certain regulatory approvals.
Under the Merger Agreement, at the Effective Time (as defined in the
Merger Agreement), each outstanding share of common stock, no par value, of GBT
(the "GBT Common Stock") will be converted into and exchangeable for the right
to receive, at the election of the holder in accordance with the procedures
provided in the Merger Agreement, either (i) cash in the amount of $20.50 (the
"Per Share Cash Consideration"), or (ii) 0.7543 shares of the Company's common
stock, $.10 par value per share (the "Company Common Stock") (such amount, the
"Per Share Stock Consideration") subject to adjustment as provided below;
provided that the aggregate amount of cash that shall be paid out as
consideration for the Merger shall be equal to $8,111,583.50. Accordingly, Per
Share Stock Consideration (or Adjusted Per Share Stock Consideration as
discussed below) shall be available to holders of GBT Common Stock only to the
extent Cash Consideration is not sufficient to pay the entire consideration due
to such holders. Shares of GBT Common Stock that qualify as dissenting shares
under the Massachusetts Business Corporation Law will be deemed to have received
Cash Consideration, and holders of GBT Common Stock who would otherwise be
entitled to receive a fractional share of Company Common Stock will receive cash
in lieu thereof. The Merger is intended to constitute as a reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as amended.
Notwithstanding the foregoing, if the Average Closing Price (as defined
below) is equal to or less than $19.02, GBT shall have the right, waivable by
it, to terminate the Merger Agreement pursuant to its terms unless the Company
elects, at its option, to adopt the "Adjusted Per Share Stock Consideration" in
lieu of the Per Share Stock Consideration, which shall be the number of shares
of Company Common Stock equivalent to $14.35 divided by the Average Closing
Price. The "Average Closing Price" shall be determined by averaging the closing
sale prices per share of Company Common Stock on Nasdaq (as reported by the Wall
Street Journal or, if not reported thereby, another authoritative source), for
the 10 consecutive Nasdaq trading days (each, a "Daily Closing Price") ending on
and including the fifth trading day immediately preceding (but not including)
the Effective Time, discarding the two highest and two lowest Daily Closing
Prices and averaging the remaining Daily Closing Prices.
2
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A copy of the Merger Agreement is attached hereto as Exhibit 2.1 and a
copy of the press release issued by the Company regarding the Merger is attached
hereto as Exhibit 99.1. Each such Exhibit is incorporated herein by reference.
In connection with the execution of the Merger Agreement, the Company
and GBT entered into a Stock Option Agreement, dated as of January 26, 2000,
pursuant to which GBT granted the Company an option to purchase, subject to
certain terms and conditions contained therein, up to an aggregate of 19.9% of
the outstanding shares of GBT Common Stock. The option was granted as an
inducement to the Company's willingness to enter into the Merger Agreement. A
copy of the Stock Option Agreement is attached hereto as Exhibit 10.1 and is
incorporated herein by reference.
3
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Item 7 - Financial Statements, Pro Forma Financial Information and Exhibits
2.1 Agreement and Plan of Merger, dated as of January 26, 2000, by and
between Andover Bancorp, Inc. and GBT Bancorp.
10.1 Stock Option Agreement, dated as of January 26, 2000, by and between
Andover Bancorp, Inc. and GBT Bancorp.
99.1 Text of Press Release issued by Andover Bancorp, Inc. on January 27,
2000.
4
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Company has duly caused this report to be filed on its behalf by
the undersigned thereunto duly authorized.
ANDOVER BANCORP, INC.
Dated: February 8, 2000 By: /s/ Joseph F. Casey
-------------------------------
Name: Joseph F. Casey
Title: Chief Financial Officer
and Treasurer
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EXHIBIT INDEX
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EXHIBIT NO. DESCRIPTION
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2.1 Agreement and Plan of Merger, dated as of January 26, 2000, by
and between Andover Bancorp, Inc. and GBT Bancorp.
10.1 Stock Option Agreement, dated as of January 26, 2000, by and
between Andover Bancorp, Inc. and GBT Bancorp.
99.1 Text of Press Release issued by Andover Bancorp, Inc. on
January 27, 2000.
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EXHIBIT 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
By and Between
ANDOVER BANCORP, INC.
and
GBT BANCORP
Dated as of January 26, 2000
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TABLE OF CONTENTS
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ARTICLE I THE MERGER................................................................................. 1
SECTION 1.01. THE MERGER.......................................................................... 1
SECTION 1.02. EFFECTIVE TIME...................................................................... 1
SECTION 1.03. EFFECT OF THE MERGER................................................................ 2
SECTION 1.04. CERTIFICATE OF INCORPORATION........................................................ 2
SECTION 1.05. BY-LAWS............................................................................. 2
SECTION 1.06. DIRECTORS AND OFFICERS.............................................................. 2
SECTION 1.07. TAX CONSEQUENCES.................................................................... 2
SECTION 1.08. GLOUCESTER BANK AND TRUST COMPANY................................................... 2
ARTICLE II CONVERSION OF SECURITIES................................................................... 3
SECTION 2.01. CONVERSION OF SECURITIES............................................................ 3
SECTION 2.02. ELECTION AND EXCHANGE PROCEDURES.................................................... 4
SECTION 2.03. RETURN OF EXCHANGE FUND............................................................. 7
SECTION 2.04. LOST OR STOLEN CERTIFICATES......................................................... 7
SECTION 2.05. DISSENTING SHARES................................................................... 8
SECTION 2.06. TERMINATION, NOTICE AND CURE........................................................ 8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER............................................... 9
SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES........................................ 9
SECTION 3.02. ARTICLES OF ORGANIZATION; BY-LAWS; CORPORATE RECORDS................................ 10
SECTION 3.03. CAPITALIZATION...................................................................... 10
SECTION 3.04. AUTHORITY........................................................................... 11
SECTION 3.05. NO CONFLICT......................................................................... 11
SECTION 3.06. CONSENTS AND APPROVALS.............................................................. 12
SECTION 3.07. COMPLIANCE.......................................................................... 12
SECTION 3.08. REPORTS............................................................................. 13
SECTION 3.09. FINANCIAL STATEMENTS................................................................ 13
SECTION 3.10. ABSENCE OF CERTAIN CHANGES OR EVENTS................................................ 14
SECTION 3.11. ABSENCE OF LITIGATION............................................................... 15
SECTION 3.12. EMPLOYEE BENEFIT PROGRAMS........................................................... 16
SECTION 3.13. LABOR MATTERS....................................................................... 19
SECTION 3.14. PROPERTY AND LEASES................................................................. 19
SECTION 3.15. TAXES AND TAX RETURNS............................................................... 20
SECTION 3.16. CERTAIN CONTRACTS................................................................... 22
SECTION 3.17. LOAN PORTFOLIO...................................................................... 23
SECTION 3.18. INVESTMENT SECURITIES............................................................... 24
SECTION 3.19. DERIVATIVE TRANSACTIONS............................................................. 24
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SECTION 3.20. INSURANCE........................................................................... 25
SECTION 3.21. ENVIRONMENTAL MATTERS............................................................... 25
SECTION 3.22. INTELLECTUAL PROPERTY............................................................... 27
SECTION 3.23. FIDUCIARY ACCOUNTS.................................................................. 27
SECTION 3.24. AGREEMENTS WITH BANK REGULATORS..................................................... 27
SECTION 3.25. MATERIAL INTERESTS OF CERTAIN PERSONS............................................... 27
SECTION 3.26. BROKERS' FEES; OPINIONS............................................................. 28
SECTION 3.27. PROXY STATEMENT..................................................................... 28
SECTION 3.28. SELLER INFORMATION.................................................................. 28
SECTION 3.29. STATE TAKEOVER LAWS................................................................. 28
SECTION 3.30. DISCLOSURE.......................................................................... 28
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER................................................ 29
SECTION 4.01. CORPORATE ORGANIZATION.............................................................. 29
SECTION 4.02. CAPITALIZATION...................................................................... 30
SECTION 4.03. AUTHORITY........................................................................... 30
SECTION 4.04. NO CONFLICT......................................................................... 30
SECTION 4.05. CONSENTS AND APPROVALS.............................................................. 31
SECTION 4.06. COMPLIANCE.......................................................................... 31
SECTION 4.07. FINANCIAL STATEMENTS................................................................ 32
SECTION 4.08. ABSENCE OF CERTAIN CHANGES OR EVENTS................................................ 32
SECTION 4.09. ABSENCE OF LITIGATION............................................................... 32
SECTION 4.10. AGREEMENTS WITH BANK REGULATORS..................................................... 33
SECTION 4.11. BUYER INFORMATION. ................................................................ 33
SECTION 4.12. CAPITAL, FINANCING.................................................................. 33
SECTION 4.13. SEC REPORTS......................................................................... 34
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER..................................................... 34
SECTION 5.01. COVENANTS OF THE SELLER............................................................. 34
SECTION 5.02. SYSTEM CONVERSIONS.................................................................. 38
SECTION 5.03. CERTAIN CHANGES AND ADJUSTMENTS..................................................... 38
SECTION 5.04. ALCO MANAGEMENT..................................................................... 38
SECTION 5.05. COVENANT OF THE BUYER............................................................... 39
ARTICLE VI ADDITIONAL AGREEMENTS...................................................................... 39
SECTION 6.01. REGULATORY MATTERS.................................................................. 39
SECTION 6.02. ACCESS TO INFORMATION............................................................... 40
SECTION 6.03. STOCKHOLDER MEETING................................................................. 42
SECTION 6.04. LEGAL CONDITIONS TO MERGER.......................................................... 42
SECTION 6.05. RESTRICTIONS ON RESALE.............................................................. 43
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SECTION 6.06. NASDAQ LISTING...................................................................... 43
SECTION 6.07. NO SOLICITATION..................................................................... 43
SECTION 6.08. EMPLOYEE BENEFIT MATTERS............................................................ 44
SECTION 6.09. DIRECTORS' AND OFFICERS' INSURANCE.................................................. 45
SECTION 6.10. FINANCIAL AND OTHER STATEMENTS...................................................... 45
SECTION 6.11. FURTHER ACTION...................................................................... 46
SECTION 6.12. PUBLIC ANNOUNCEMENTS................................................................ 46
SECTION 6.13. ADDITIONAL AGREEMENTS............................................................... 46
SECTION 6.14. UPDATE OF DISCLOSURE SCHEDULES...................................................... 46
SECTION 6.15. CURRENT INFORMATION................................................................. 47
SECTION 6.16. DIRECTORS OF SELLER'S BANK.......................................................... 48
SECTION 6.17. TERMINATION OF EMPLOYMENT AGREEMENT................................................. 48
SECTION 6.18. TERMINATION OF SPECIAL TERMINATION AGREEMENT........................................ 48
SECTION 6.19. EMPLOYMENT AGREEMENTS............................................................... 48
SECTION 6.20. VOTING AGREEMENTS................................................................... 48
ARTICLE VII CONDITIONS TO THE MERGER................................................................... 48
SECTION 7.01. CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER......................... 48
SECTION 7.02. CONDITIONS TO OBLIGATIONS OF THE BUYER.............................................. 49
SECTION 7.03. CONDITIONS TO OBLIGATIONS OF THE SELLER............................................. 51
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER.......................................................... 52
SECTION 8.01. TERMINATION......................................................................... 52
SECTION 8.02. EFFECT OF TERMINATION; EXPENSES..................................................... 53
SECTION 8.03. AMENDMENT........................................................................... 55
SECTION 8.04. WAIVER.............................................................................. 55
ARTICLE IX GENERAL PROVISIONS......................................................................... 56
SECTION 9.01. CLOSING............................................................................. 56
SECTION 9.02. ALTERNATIVE STRUCTURE............................................................... 56
SECTION 9.03. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.......................... 56
SECTION 9.04. NOTICES............................................................................. 56
SECTION 9.05. CERTAIN DEFINITIONS................................................................. 57
SECTION 9.06. SEVERABILITY........................................................................ 58
SECTION 9.07. ENTIRE AGREEMENT.................................................................... 59
SECTION 9.08. ASSIGNMENT.......................................................................... 59
SECTION 9.09. PARTIES IN INTEREST................................................................. 59
SECTION 9.10. SPECIFIC PERFORMANCE................................................................ 59
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SECTION 9.11. GOVERNING LAW....................................................................... 59
SECTION 9.12. HEADINGS............................................................................ 59
SECTION 9.13. INTERPRETATION...................................................................... 59
SECTION 9.14. COUNTERPARTS........................................................................ 60
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(iv)
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 26, 2000 (this
"Agreement"), by and between ANDOVER BANCORP, INC., a Delaware corporation (the
"Buyer") and GBT BANCORP, a Massachusetts corporation (the "Seller").
WHEREAS, the Boards of Directors of the Buyer and the Seller have each
determined that it is in the best interests of their respective companies and
their stockholders for the Seller to merge with and into the Buyer (the
"Merger"), subject to the terms and conditions set forth herein;
WHEREAS, as a condition and inducement to the Buyer to enter into, and
after the execution of, this Agreement, the Buyer and the Seller are entering
into the Stock Option Agreement (the "Stock Option Agreement"), attached hereto
as Exhibit I, pursuant to which the Seller has granted an option (the "Stock
Option") to purchase shares of its common stock, no par value (the "Seller
Common Stock") to the Buyer; and
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Merger and to prescribe certain conditions
to the Merger;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the Buyer and Seller agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Subject to the terms and conditions of this
Agreement, in accordance with the Delaware General Corporation Law (the "DGCL")
and the Massachusetts Business Corporation Law (the "MBCL"), at the Effective
Time (as defined in Section 1.02 hereof), the Seller shall merge with and into
the Buyer. Buyer shall be the surviving corporation (hereinafter sometimes
called the "Surviving Corporation") in the Merger, and shall continue its
corporate existence under the laws of the State of Delaware. The name of the
Surviving Corporation shall continue to be Andover Bancorp, Inc. Upon
consummation of the Merger, the separate corporate existence of the Seller shall
terminate.
SECTION 1.02. EFFECTIVE TIME. As promptly as practicable after all of
the conditions set forth in Article VII shall have been satisfied or, if
permissible, waived by the party entitled to the benefit of the same, the Buyer
and the Seller shall duly execute and file a certificate of merger (the
"Certificate of Merger") with the Secretary of State of the State of Delaware
(the "Delaware Secretary"), in accordance with the DGCL, and articles of merger
(the "Articles of Merger") with the Secretary of State of the Commonwealth of
Massachusetts (the "Massachusetts Secretary"), in accordance with the MBCL. The
Merger shall become effective on the date (the
<PAGE> 7
"Effective Date") and at such time (the "Effective Time") as set forth in the
Certificate of Merger and the Articles of Merger.
SECTION 1.03. EFFECT OF THE MERGER. At the Effective Time, the effect
of the Merger shall be as provided herein and in the applicable provisions of
the DGCL and the MBCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time all the property, rights, privileges,
powers and franchises of the Buyer and the Seller shall vest in the Surviving
Corporation, and all debts, liabilities, obligations, restrictions, disabilities
and duties of the Buyer and the Seller shall become the debts, liabilities,
obligations, restrictions, disabilities and duties of the Surviving Corporation.
SECTION 1.04. CERTIFICATE OF INCORPORATION. Unless otherwise determined
by the Buyer prior to the Effective Time, at the Effective Time, the Certificate
of Incorporation of the Buyer as in effect immediately prior to the Effective
Time 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 the Buyer prior
to the Effective Time, the By-Laws of the Buyer, 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 of the Buyer
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of the
Buyer immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
SECTION 1.07. TAX CONSEQUENCES. It is intended by the parties that the
Merger shall constitute a reorganization within the meaning of Section 368(a) of
the Code, and that this Agreement shall constitute a "plan of reorganization"
for the purposes of Section 368 of the Code.
SECTION 1.08. GLOUCESTER BANK AND TRUST COMPANY. The Buyer confirms
that it is the Buyer's current intention to maintain Gloucester Bank and Trust
Company in existence as a separate subsidiary for a period of at least two years
following the Effective Time; provided, however, that in no event shall such
current intention prevent the Buyer from taking any action in the reasonable
best interests of the Buyer or in accordance with or based upon regulatory
considerations, safe and sound banking practices, or the fiduciary duties of the
Buyer's directors.
2
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ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.01. CONVERSION OF SECURITIES.
(a) At the Effective Time, each share of the Seller Common
Stock issued and outstanding immediately prior to the Effective Time (other than
shares of Seller Common Stock to be cancelled pursuant to Section 2.01(c) and
any Dissenting Shares (as defined below)) shall be converted into and
exchangeable for the right to receive either:
(i) cash in the amount of $20.50 (the "Per Share Cash
Consideration"); or
(ii) the Per Share Stock Consideration (as defined below).
provided, that, the aggregate amount of cash that shall be paid out as Merger
Consideration (as defined below) shall be equal to $8,111,583.50. Accordingly,
consideration pursuant to Section 2.01(a)(ii) shall be available to holders of
Seller Common Stock only to the extent the consideration pursuant to Section
2.01(a)(i) is not sufficient to pay the entire consideration due under Section
2.01(a), it being understood that for purposes of calculating the total
consideration for the Merger, Dissenting Shares will be deemed to have received
the Per Share Cash Consideration.
The "Per Share Stock Consideration" shall be the number of shares of
Buyer Common Stock equivalent to $20.50 divided by the Signing Date Average
Closing Price, provided, however, that if the Average Closing Price is equal to
or less than 70% of the Signing Date Closing Price, the Seller shall have the
right, waivable by it, to terminate this Agreement pursuant to Sections 2.06 and
8.01(h) hereof, unless the Buyer elects, at its option, to adopt as the Per
Share Stock Consideration the "Adjusted Per Share Stock Consideration" which
shall be the number of shares of Buyer Common Stock equivalent to $14.35 divided
by the Average Closing Price. The "Signing Date Average Closing Price" shall be
determined by averaging the closing sale prices per share of Buyer Common Stock
on the Nasdaq National Market ("Nasdaq") (as reported by the Wall Street Journal
or, if not reported thereby, another authoritative source), for the 10
consecutive Nasdaq trading days ending on the date before the date of this
Agreement (the closing sale price for each such day is referred to as the "Daily
Closing Price"), discarding the two highest and two lowest Daily Closing Prices,
and averaging the remaining Daily Closing Prices. The "Average Closing Price"
shall be determined by averaging the closing sale prices per share of Buyer
Common Stock on Nasdaq (as reported by the Wall Street Journal or, if not
reported thereby, another authoritative source), for the 10 consecutive Nasdaq
trading days ending on and including the fifth trading day immediately preceding
(but not including) the Effective Time, discarding the two highest and two
lowest Daily Closing Prices, and averaging the remaining Daily Closing Prices.
The "Merger Consideration" for each share of Seller Common Stock shall consist
of the Per Share Cash Consideration and/or the Per Share Stock Consideration
received for such share pursuant to the election and exchange procedures set
forth in Section 2.02.
3
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(b) The Per Share Stock Consideration shall be subject to appropriate
adjustments in the event that, subsequent to the date as of which the Buyer
makes its representation as to capitalization but prior to the Effective Time,
the outstanding Buyer Common Stock shall have been increased, decreased, changed
into or exchanged for a different number or kind of shares or securities through
reorganization, recapitalization, reclassification, stock dividend, stock split,
or other like changes in Buyer's capitalization.
(c) At the Effective Time, all shares of Seller Common Stock that are
owned by the Seller as treasury stock and all shares of Seller Common Stock that
are owned directly or indirectly by the Buyer or the Seller or any of their
respective subsidiaries (other than shares of Seller Common Stock held directly
or indirectly in trust accounts, managed accounts and the like or otherwise held
in a fiduciary capacity that are beneficially owned by third parties (referred
to herein as "Trust Account Shares") and other than any shares of Seller Common
Stock held by Buyer or the Seller or any of their respective subsidiaries in
respect of a debt previously contracted (referred to herein as "DPC Shares"))
shall be canceled and shall cease to exist.
(d) As a result of the Merger and without any action on the part of the
holders thereof, all shares of Seller Common Stock shall cease to be
outstanding, shall be canceled and retired and shall cease to exist and each
holder of a certificate (a "Certificate" and, collectively, the "Certificates")
representing any shares of Seller Common Stock (other than those shares of
Seller Common Stock to be canceled pursuant to Section 2.01(c)) shall thereafter
cease to have any rights with respect to such shares of Seller Common Stock,
except the right to receive, without interest, the Merger Consideration upon the
surrender of such Certificate.
SECTION 2.02. ELECTION AND EXCHANGE PROCEDURES.
(a) As of the Effective Time, (i) the Buyer shall deposit, or shall
cause to be deposited, with an exchange agent selected by the Buyer on or prior
to the Effective Time (the "Exchange Agent"), for the benefit of the holders of
shares of Seller Common Stock, for exchange in accordance with this Section 2, a
certificate representing the shares of Buyer Common Stock and cash which
together constitute the consideration for the Merger (such certificates and
cash, together with any dividends or distributions with respect to such shares
of Buyer Common Stock shall hereinafter be referred to as the "Exchange Fund").
(b) As soon as practicable after the Effective Time, and in no event
later than three business days thereafter (which date shall be referred to as
the "Mailing Date"), Buyer shall cause the Exchange Agent to mail to each holder
of record of a Certificate or Certificates at the Effective Time (1) a form
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent) containing instructions for use in effecting
the surrender of the Certificates and (2) an election form (the "Election
Form"). The Seller shall have the right to approve the form of both the letter
of transmittal and the Election Form.
4
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(c) Each Election Form shall permit the holder (or in the case of
nominee record holders, the beneficial owner through appropriate and customary
documentation and instructions) to elect to receive Buyer Common Stock with
respect to each share of such holder's Seller Common Stock ("Stock Election
Shares"), to elect to receive cash with respect to each share of such holder's
Seller Common Stock ("Cash Election Shares") or to indicate that such holder
makes no election ("No Election Shares"). Any shares of Seller Common Stock with
respect to which the holder (or the beneficial owner, as the case may be) shall
not have submitted to the Exchange Agent, an effective, properly completed
Election Form on or before 5:00 p.m., on the 20th day following the Mailing Date
(or such other time and date as the Buyer and the Seller may mutually agree)
(the "Election Deadline") shall also be deemed to be "No Election Shares".
Any such election shall have been properly made only if the Exchange
Agent shall have actually received a properly completed Election Form by the
Election Deadline. An Election Form shall be deemed properly completed only if
accompanied by one or more Certificates representing all shares of Seller Common
Stock covered by such Election Form, together with duly executed transmittal
materials included with the Election Form. Any Election Form may be revoked or
changed by the person submitting such Election Form at or prior to the Election
Deadline by written notice to the Exchange Agent, which notice must be received
by the Exchange Agent at or prior to the Election Deadline. In the event an
Election Form is revoked prior to the Election Deadline, the shares of Seller
Common Stock represented by such Election Form shall become No Election Shares.
Subject to the terms of this Agreement and of the Election Form, the Buyer or
the Exchange Agent shall have reasonable discretion to determine whether any
election, revocation or change has been properly or timely made and to disregard
immaterial defects in the Election Forms, and any good faith decisions of the
Buyer or the Exchange Agent regarding such matters shall be binding and
conclusive. Neither the Buyer nor the Exchange Agent shall be under any
obligation to notify any person of any defect in an Election Form.
If the aggregate number of Stock Election Shares does not equal the
Stock Conversion Number (as defined below), within five business days after the
Election Deadline, the Buyer shall cause the Exchange Agent to allocate among
holders of Seller Common Stock the right to receive, with respect to each such
share, Buyer Common Stock or cash in the Merger as follows:
(i) if the number of Stock Election Shares is less than the
Stock Conversion Number, then
(A) all Stock Election Shares shall be converted into
the right to receive Buyer Common Stock,
(B) the Exchange Agent will select, on a pro rata
basis, first from among the holders of No-Election Shares and
then (if necessary) from among the holders of Cash Election
Shares, a sufficient number of such shares (collectively the
"Stock Designee Shares") such that the number of Stock
Designee Shares will, when added to the number of Stock
Election Shares, equal as closely as practicable
5
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the Stock Conversion Number, and all Stock Designee Shares
will be converted into the right to receive Buyer Common
Stock, and
(C) any Cash Election Shares and any No-Election
Shares not so selected as Stock Designee Shares will be
converted into the right to receive cash; or
(ii) if the aggregate number of Stock Election Shares is
greater than the Stock Conversion Number, then
(A) all Cash Election Shares will be converted into
the right to receive cash,
(B) the Exchange Agent will select, on a pro rata
basis, first from among the holders of No-Election Shares and
then (if necessary) from among the holders of Stock Election
Shares, a sufficient number of such shares (collectively the
"Cash Designee Shares") such that the number of Cash Designee
Shares will, when added to the number of Cash Election Shares,
equal as closely as practicable the Cash Conversion Number (as
defined below), and all Cash Designee Shares will be converted
into the right to receive cash, and
(C) any Stock Election Shares and any No-Election
Shares not so selected as Cash Designee Shares will be
converted into the right to receive Buyer Common Stock.
"Stock Conversion Number" means 395,687 and "Cash Conversion Number"
means 395,687.
Upon surrender of a Certificate for exchange and cancellation to the
Exchange Agent, together with the Election Form, duly executed, the holder of
such Certificates shall be entitled to receive in exchange therefor (x) a
certificate representing that number of whole shares of Buyer Common Stock to
which such holder of Seller Common Stock shall have become entitled pursuant to
the provisions of Articles I and II hereof, and/or (y) a check representing the
amount of cash, if any, which such holder has the right to receive in respect of
the Certificate surrendered pursuant to the provisions of Articles I and II.
(d) Notwithstanding any other provisions of this Agreement, dividends
or other distributions on Buyer Common Stock with respect to any shares of
Seller Common Stock represented by a Certificate that has not been surrendered
for exchange shall be paid only as provided herein. Any such dividend or
distribution amounts with a record date after the Effective Time and a payment
date prior to the surrender of such Certificate shall be deposited (less the
amount of any withholding taxes which may be required thereon) with the Exchange
Agent on the applicable payment date, to be held by the Exchange Agent in a
non-interest bearing account until the surrender of such Certificate. Following
surrender of any such Certificate, the holder thereof
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shall be entitled to receive for the whole shares of Buyer Common Stock issued
in exchange therefor, without interest, at the time of such surrender, the
amount of dividends or other distributions with a record date after the
Effective Time theretofore payable with respect to such whole shares of Buyer
Common Stock and not paid, less the amount of any withholding taxes which may be
required thereon.
(e) At and after the Effective Time, there shall be no transfers on the
stock transfer books of the Seller of the shares of Seller Common Stock which
were outstanding immediately prior to the Effective Time and if, after the
Effective Time, Certificates are presented for transfer, they shall be canceled
against delivery of the Merger Consideration as hereinabove provided.
Certificates surrendered for exchange by any person constituting an "affiliate"
of the Seller for purposes of Rule 145, as such rule may be amended from time to
time ("Rule 145"), of the rules and regulations promulgated under the Securities
Act of 1933, as amended (the "Securities Act"), shall not be exchanged until the
Buyer has received an affiliate letter (the "Affiliate Letter") from such person
as provided in Section 6.05.
(f) No fractional shares of Buyer Common Stock shall be issued pursuant
hereto. In lieu of the issuance of any fractional shares of Buyer Common Stock
pursuant to this Agreement, each holder of Seller Common Stock upon surrender of
a Certificate for exchange shall be paid an amount in cash (without interest),
rounded to the nearest cent, determined by multiplying (i) the Per Share Merger
Consideration by (ii) the fractional amount of the shares of Buyer Common Stock
which such holder would otherwise be entitled to receive under this Article II.
(g) The provisions of Sections 2.01 and 2.02 assume that there will be
791,374 shares of Seller Common Stock outstanding at the Effective Time. If
there is any change in this number as of the Effective Time, the provisions of
Sections 2.01 and 2.02, including the $8, 111,583.50 amount, the Per Share Cash
Consideration, the Per Share Stock Consideration, the Stock Conversion Number
and the Cash Conversion Number, will be appropriately adjusted.
SECTION 2.03. RETURN OF EXCHANGE FUND. Any portion of the Exchange Fund
that remains unclaimed by the former stockholders of the Seller six months after
the Effective Time shall be delivered to the Buyer. Any former stockholders of
the Seller who have not theretofore complied with this Article II shall
thereafter look only to the Buyer for payment of any consideration payable as a
result of the Merger pursuant to this Agreement, without any interest thereon.
None of the Buyer, the Seller, the Exchange Agent or any other person shall be
liable to any former holder of shares of Seller Common Stock for any shares of
stock or cash properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
SECTION 2.04. LOST OR STOLEN CERTIFICATES. 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 the Buyer, the posting by such person of a bond in
such reasonable amount as the Buyer may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
or the Buyer will issue in exchange for such lost, stolen or destroyed
Certificate the shares of Buyer
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Common Stock and cash in lieu of fractional shares of Buyer Common Stock, if
any, to which such person is entitled (and to the extent applicable, dividends
and distributions payable pursuant to Section 2.02).
SECTION 2.05. DISSENTING SHARES.
(a) Notwithstanding anything in this Agreement to the contrary and
unless otherwise provided by applicable law, shares of Seller Common Stock that
are issued and outstanding immediately prior to the Effective Time and that are
owned by stockholders who have properly perfected their rights of appraisal
within the meaning of Section 85 of the MBCL (the "Dissenting Shares"), shall
not be converted into the right to receive the Merger Consideration, unless and
until such stockholders shall have failed to perfect or shall have effectively
withdrawn or lost their right of payment under applicable law, but, instead, the
holders thereof shall be entitled to payment of the appraised value of such
Dissenting Shares in accordance with the provisions of MBCL Section 85 et seq.
If any such holder shall have failed to perfect or shall have effectively
withdrawn or lost such right of appraisal, each share of Seller Common Stock
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 2.02 hereof.
(b) The Seller shall give the Buyer (i) prompt notice of any objections
filed pursuant to MBCL Section 85 et seq. received by the Seller, withdrawals of
such objections, and any other instruments served in connection with such
objections pursuant to the Massachusetts General Laws and received by the Seller
and (ii) the opportunity to direct all negotiations and proceedings with respect
to objections under the Massachusetts General Laws consistent with the
obligations of the Seller thereunder. The Seller shall not, except with the
prior written consent of the Buyer, (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 the
Massachusetts General Laws.
SECTION 2.06. TERMINATION, NOTICE AND CURE. If the Average Closing
Price is equal to or less than 70% of the Signing Date Closing Price, the Seller
may elect by giving written notice to the Buyer prior to the third business day
immediately preceding the Closing Date to terminate this Agreement pursuant to
Section 8.01(h). Within two business days thereafter, the Buyer may elect to
increase the Per Share Stock Consideration to the Adjusted Per Share Stock
Consideration: In the event the Buyer makes such an election, this Agreement
shall not terminate and the Per Share Stock Consideration shall be the Adjusted
Per Share Stock Consideration. In the event the Buyer does not elect to increase
the Per Share Stock Consideration, this Agreement shall terminate on the date
established as the Closing Date with the consequences specified in Section
8.02(a) hereof.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Buyer that except,
with respect to any Section of this Article III, as specifically set forth in
the corresponding section of the Disclosure Schedule previously delivered by the
Seller to the Buyer (the "Seller Disclosure Schedule"):
SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) The Seller is a corporation, duly organized, validly existing and
in good standing under the laws of the Commonwealth of Massachusetts 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.
Gloucester Bank and Trust Company is a state chartered trust company and
wholly-owned subsidiary of the Seller (the "Seller's Bank") duly organized and
validly existing under the laws of the Commonwealth of Massachusetts. The
deposit accounts of the Seller's 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 Seller's Bank. Each subsidiary (as defined in Section 9.05(g) below) of the
Seller (other than the Seller's Bank) (collectively, the "Subsidiaries") 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 Seller, the Seller's Bank and the 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 have obtained such approval or 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 below).
(b) A true and complete list of all the Subsidiaries, together with the
jurisdiction of incorporation or organization of each Subsidiary and the
percentage of the outstanding capital stock or other ownership interest by the
Seller or the Seller's Bank of each Subsidiary, is set forth in Section 3.01 of
the Seller Disclosure Schedule. Except as set forth in Section 3.01 of the
Seller Disclosure Schedule, neither the Seller nor the Seller's Bank directly or
indirectly owns 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.
(c) When used in connection with the Seller, the Seller's Bank, or any
of the Subsidiaries, the term "Material Adverse Effect" means any change or
effect that is or would be materially adverse to (i) the business, assets,
liabilities, financial condition or results of operations of the Seller, the
Seller's Bank and the Subsidiaries taken as a whole, other than any such effect
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attributable to or resulting from (x) changes in interest rates or general
economic conditions affecting banks generally, (y) changes in federal or state
banking or tax laws or regulations affecting banks generally or (z) changes in
generally accepted or regulatory accounting principles applicable to banks or
their holding companies generally; or (ii) the ability of the Seller, the
Seller's Bank or the Subsidiaries to consummate the transactions contemplated
hereby.
SECTION 3.02. ARTICLES OF ORGANIZATION; BY-LAWS; CORPORATE RECORDS. The
Seller has heretofore made available to the Buyer a complete and correct copy of
the Articles of Organization and the By-Laws or equivalent organizational
documents, each as amended to date, of the Seller, the Seller's Bank and each of
the Subsidiaries. Such Articles of Organization, By-Laws and equivalent
organizational documents are in full force and effect. None of the Seller, the
Seller's Bank or any of the Subsidiaries is in violation of any provision of its
Articles of Organization or equivalent organizational documents or of its
By-Laws. The minute books of the Seller, the Seller's Bank and each of the
Subsidiaries contain in all material respects true and correct records of all
meetings held or true and complete records of all other corporate actions taken
since January 1, 1997 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 Seller consists of 4,000,000
shares of Seller Common Stock. As of the date hereof, (i) 791,374 shares of
Seller Common Stock are issued and outstanding, all of which are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights, with no personal liability attaching to the ownership thereof, (ii)
4,150 shares of Seller Common Stock are held in the treasury of the Seller,
(iii) no shares of Seller Common Stock are held by Seller's Bank or any of the
Subsidiaries, and (iv) 157,483 shares of Seller Common Stock are reserved for
future issuance pursuant to the Stock Option Agreement. Each issued and
outstanding share of capital stock of each Subsidiary is duly authorized,
validly issued, fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof. Each share of capital
stock of each Subsidiary owned by the Seller or the Seller's Bank or any of the
other Subsidiaries is free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements, limitations on the
Seller's, the Seller's Bank's or such other Subsidiary's voting rights, charges
and other encumbrances of any nature whatsoever.
(b) The authorized capital stock of the Seller's Bank consists of
1,000,000 shares of common stock, par value $5 per share (the "Seller's Bank
Common Stock") and 12,500 shares of Class B common stock, par value $0.25 per
share (the "Class B Stock"). As of the date hereof, (i) 115,820 shares of
Seller's Bank Common Stock are issued and outstanding, all of which are owned by
the Seller free and clear of any encumbrance or lien (except for directors'
qualifying shares, if any) and all of which are duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof, (ii) no shares of the Seller's
Bank Common Stock are held in the treasury of the Seller's
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Bank or are held by any of the Subsidiaries, and (iii) no shares of Class B
Stock are issued or outstanding.
(c) Except for the Stock Option Agreement, 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 Seller, the Seller's Bank or any of the Subsidiaries or
obligating the Seller, the Seller's Bank or any of the Subsidiaries to issue or
sell any shares of capital stock of, or other equity interests in, the Seller,
the Seller's Bank or any of the Subsidiaries. There are no outstanding
contractual obligations of the Seller, the Seller's Bank or any of the
Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock of, or other equity interests in, the Seller, the Seller's Bank or any of
the Subsidiaries or to provide funds to, or make any investment (in the form of
a loan, capital contribution or otherwise) in, any Subsidiary. Seller does not
have an employee stock option plan.
SECTION 3.04. AUTHORITY.
The Seller has full corporate power and authority to execute and
deliver this Agreement and, subject to the approval of the Seller's
stockholders, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly approved by unanimous vote of the
Board of Directors of the Seller (the "Seller Board"). The Seller Board has
directed that this Agreement and the transactions contemplated hereby be
submitted to the Seller's stockholders for approval at a meeting of such
stockholders and, except for the adoption of this Agreement by the requisite
vote of the Seller's stockholders, no other corporate proceedings on the part of
the Seller are necessary to approve this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Seller and constitutes a valid and binding
obligation of the Seller, enforceable against the Seller in accordance with its
terms.
SECTION 3.05. NO CONFLICT. Neither the execution, delivery and
performance of this Agreement by the Seller, nor the consummation by the Seller
of the transactions contemplated hereby, nor compliance by the Seller with any
of the terms or provisions hereof, will (i) conflict with, violate or result in
a breach of any provision of the Articles of Organization or By-Laws of the
Seller or the articles of organization, by-laws or equivalent organizational
documents of the Seller's Bank or any of the Subsidiaries, (ii) conflict with,
violate or result in a breach of any statute, code, ordinance, rule, regulation,
order, writ, judgment, injunction or decree applicable to the Seller, the
Seller's Bank or any of the Subsidiaries, or by which any property or asset of
the Seller, the Seller's Bank or any of the 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 Seller, the Seller's Bank or any of
the Subsidiaries pursuant to any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, contract,
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agreement, lease, license, permit, franchise or other instrument or obligation
to which the Seller, the Seller's Bank or any of the Subsidiaries is a party, or
by which the Seller, the Seller's Bank or any of the 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, either
individually or in the aggregate, have a Material Adverse Effect.
SECTION 3.06. CONSENTS AND APPROVALS. The execution, delivery and
performance of this Agreement by the Seller 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 instrumentality, domestic or foreign, including, without
limitation, any Bank Regulator (as defined below) (each a "Governmental Entity")
or with any third party, except (i) for applicable requirements, if any, of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), state takeover
laws, and filing and recordation of appropriate merger documents as required by
the laws of the Commonwealth of Massachusetts, (ii) for consents and approvals
of or filings, registrations or negotiations with the FRB, the FDIC, the
Massachusetts Board of Bank Incorporation (the "BBI"), and the Massachusetts
Housing Partnership Fund, (iii) the filings required by this Agreement and (iv)
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 Merger or otherwise prevent the Seller from performing
its obligations under this Agreement, or would not, either individually or in
the aggregate, have a Material Adverse Effect. The Seller is not aware of any
reason why the approvals, consents and waivers of Governmental Entities referred
to herein and in Section 7.01(c) should not be obtained.
SECTION 3.07. COMPLIANCE. The Seller, the Seller's Bank and each of the
Subsidiaries hold 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 or decree, published policies and
guidelines of any Governmental Entity, applicable to the Seller, the Seller's
Bank or any of the Subsidiaries or by which any property or asset of the Seller,
the Seller's Bank or any of the 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
Seller, the Seller's Bank or any of the Subsidiaries is a party or by which the
Seller, the Seller's Bank or any of the Subsidiaries or any property or asset of
the Seller, the Seller's Bank or any of the Subsidiaries is bound or affected,
except for any such non-compliance, conflicts, defaults or violations that would
not, either individually or in the aggregate, have a Material Adverse Effect;
and none of the Seller, the Seller's Bank or any of the Subsidiaries knows of,
or has received notice of, any material violations of any of the above. Without
limiting the generality of the foregoing, none of the Seller, the Seller's Bank
or any of the Subsidiaries has been advised of the existence of any facts or
circumstances which would cause the Seller's Bank to be deemed not to be in
satisfactory compliance with the Community Reinvestment Act of 1977, as amended,
and the regulations promulgated thereunder.
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SECTION 3.08. REPORTS.
(a) The Seller is not required and at all times since the filing of its
Registration Statement on Form S-4EF on March 25, 1998 (the "Seller's S-4EF")
has not been required to file any forms, reports or documents with the
Securities and Exchange Commission (the "SEC"). The Seller has heretofore
delivered to the Buyer all communications mailed by the Seller to its
stockholders since March 25, 1998 and such communications, including the
Seller's S-4EF, 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. No Subsidiary is required to file any form,
report or other document with the FDIC or with the SEC.
(b) The Seller, the Seller's Bank and each of the Subsidiaries has
timely filed and made available to the Buyer 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, Banking Commissioner of the
Commonwealth of Massachusetts (the "Massachusetts Commissioner"), the FRB, and
the FDIC (collectively, the "Bank Regulators") since January 1, 1997, and have
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 or promulgated
by such Bank Regulators. Except for normal periodic examinations conducted by
the FDIC, the Massachusetts Commissioner or any other Bank Regulator in the
regular course of the business of the Seller, the Seller's Bank and the
Subsidiaries (the "Bank Examinations"), no Bank Regulator has initiated any
proceeding or, to the best knowledge of the Seller, investigation into the
business or operations of the Seller, the Seller's Bank or any of the
Subsidiaries since December 31, 1996. Except as set forth on Section 3.08(b) of
the Seller Disclosure Schedule, the Seller, the Seller's Bank and the
Subsidiaries have not received any objection from any regulatory agency to any
of their responses to any violation, criticism or exception by any Bank
Regulator with respect to any report or statement relating to any examinations,
which objection remains unresolved.
SECTION 3.09. FINANCIAL STATEMENTS.
(a) The Seller has previously made available to the Buyer, for copying,
originals of (i) the consolidated financial statements of the Seller, the
Seller's Bank and the Subsidiaries as of December 31 for the years 1996, 1997
and 1998 including related statements of income, changes in stockholders'
equity, cash flows and the notes thereto, in each case accompanied by the audit
report of Shatswell MacLeod & Company, independent public accountants for the
Seller, and (ii) the unaudited consolidated financial statements of the Seller,
the Seller's Bank and the Subsidiaries as of November 30, 1999 and November 30,
1998, and the related unaudited consolidated statements of income, changes in
stockholders' equity and cash flows for the eleven month periods then ended. The
December 31, 1998 consolidated balance sheet ("Seller Balance Sheet") of the
Seller (including the related notes, where applicable) and each of the other
financial statements
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referred to in this Section 3.09 (including the related notes, where applicable)
fairly presents (subject, in the case of the unaudited statements, to audit
adjustments normal in nature and amount and the addition of customary notes),
and the financial statements referred to in Section 6.10 hereof each will fairly
present, the results of the consolidated operations and changes in stockholders'
equity and consolidated financial position of the Seller, the Seller's Bank and
the Subsidiaries for the respective periods or as of the respective dates
therein set forth; each of such statements (including the related notes, where
applicable) has been prepared, and the financial statements referred to in
Section 6.10 hereof will be prepared, in accordance with generally accepted
accounting principles ("GAAP") consistently applied during the periods involved,
except as indicated in the notes thereto. Each of the financial statements
referred to in this Section 3.09, including, in each case, the notes thereto,
comply, and the financial statements referred to in Section 6.10 hereof will
comply, with applicable accounting requirements and to the extent applicable
thereto with the published rules and regulations of the FDIC. Without limiting
the generality of the foregoing, (x) the allowance for possible loan losses
included in the financial statements referred to in this Section 3.09 was, and
the allowance for possible loan losses to be included in the financial
statements referred to in Section 6.10 hereof will be, determined in accordance
with GAAP. The books and records of the Seller, the Seller's Bank and the
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 sheet of the Seller, the Seller's Bank and
the Subsidiaries as of December 31, 1998 and as of November 30, 1999, including
the notes thereto, each makes adequate provision for all material liabilities
and obligations of every nature (whether accrued, absolute, contingent or
otherwise and whether due or to become due) of the Seller, the Seller's Bank and
the Subsidiaries as of December 31, 1998 and as of November 30, 1999,
respectively, and except as and to the extent set forth on such consolidated
balance sheet, none of the Seller, the Seller's Bank or any of the 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 reflected or disclosed on a balance sheet, or in the notes
thereto, prepared in accordance with GAAP.
SECTION 3.10. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
1998, except as contemplated by this Agreement, the Seller, the Seller's Bank
and the Subsidiaries have conducted their businesses only in the ordinary course
and in manners consistent with past practice and, since December 31, 1998, there
has not been (a) either individually or in the aggregate, any Material Adverse
Effect, (b) any material damage, destruction or loss with respect to any
property or asset of the Seller, the Seller's Bank or any of the Subsidiaries,
(c) any change by the Seller, the Seller's Bank or any of the 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 Seller's
independent accountants, (d) any revaluation by the Seller, the Seller's Bank or
any of the 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 Seller, the Seller's Bank or any of the
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Subsidiaries into any contract or commitment (other than with respect to Loans,
as hereinafter defined) of more than $200,000, (f) any declaration, setting
aside or payment of any dividend or distribution in respect of any capital stock
of the Seller, the Seller's Bank or any of the Subsidiaries except in the
ordinary course of business in an amount consistent with past practice or any
redemption, purchase or other acquisition of any of its securities, (g) except
as would have been permitted by Section 5.01(b)(xi) hereof, 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 Seller, the
Seller's Bank or any of the 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
other material action not in the ordinary course of business with respect to the
compensation or employment of directors, officers or employees of the Seller,
the Seller's Bank or any of the Subsidiaries, (h) any strike, work stoppage,
slowdown or other labor disturbance, (i) any material election made by the
Seller, the Seller's Bank or any of the Subsidiaries for federal or state income
tax purposes, (j) any change in the credit policies or procedures of the Seller,
the Seller's Bank or any of the Subsidiaries, the effect of which was or is to
make any such policy or procedure materially 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, other than in the
ordinary course of business consistent with past practice, (l) any forgiveness
or cancellation of any indebtedness or contractual obligation other than in the
ordinary course of business consistent with past practice, (m) except with
respect to funds borrowed by the Seller, the Seller's Bank or any of the
Subsidiaries, any mortgage, pledge, lien or lease of any assets, tangible or
intangible, of the Seller, the Seller's Bank or any of the Subsidiaries with a
value in excess of $25,000 in the aggregate (n) any acquisition or disposition
of any assets or properties having a value in excess of $200,000, or any
contract for any such acquisition or disposition entered into, other than the
acquisition or disposition of Loans in the ordinary course of business
consistent with past practice, 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. None of the Seller, the Seller's
Bank or any of the Subsidiaries is a party to any, and there are no pending, or
to the best knowledge of the Seller, threatened legal, administrative, arbitral
or other claims, actions, proceedings or investigations of any nature, against
the Seller, the Seller's Bank or any of the Subsidiaries or any property or
asset of the Seller, the Seller's Bank or any of the Subsidiaries, before any
court, arbitrator or administrative, governmental or regulatory authority or
body, domestic or foreign, which, either individually or in the aggregate, would
have a Material Adverse Effect and no facts or circumstances have come to the
Seller's attention which have caused it to believe that a material claim,
action, proceeding or investigation against or affecting the Seller, the
Seller's Bank or any of the Subsidiaries could reasonably be expected to occur.
None of the Seller, the Seller's Bank
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or any of the Subsidiaries, or any property or asset of the Seller, the Seller's
Bank or any of the Subsidiaries, is subject to any order, writ, judgment,
injunction, decree, determination or award which restricts its ability to
conduct business in any area in which it presently does business or has or could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.
SECTION 3.12. EMPLOYEE BENEFIT PROGRAMS.
(a) Section 3.12(a) of the Seller Disclosure Schedule sets forth a list
of every Employee Program that has been maintained by the Seller, the Seller's
Bank or an Affiliate at any time during the three years preceding this
Agreement.
(b) Each Employee Program which has ever been maintained by the Seller,
the Seller's Bank or an Affiliate and which has been intended to qualify under
Section 401(a) or 501(c)(9) of the Internal Revenue Code of 1986, as amended
(the "Code"), has received a favorable determination or approval letter from the
Internal Revenue Service ("IRS") regarding its qualification under such section
and has, in fact, been qualified under the applicable section of the Code from
the effective date of such Employee Program through and including the Closing
Date (or, if earlier, the date that all of such Employee Program's assets were
distributed). No event or omission has occurred which would cause any Employee
Program to lose its qualification or otherwise fail to satisfy the relevant
requirements to provide tax-favored benefits under the applicable Code Section
(including without limitation Code Sections 105, 125, 401(a) and 501(c)(9)).
Each asset held under any such Employee Program may be liquidated or terminated
without the imposition of any redemption fee, surrender charge or comparable
liability. No partial termination (within the meaning of Section 411(d)(3) of
the Code) has occurred with respect to any Employee Program that is qualified
under Section 401(a) of the Code.
(c) None of the Seller, the Seller's Bank or any Affiliate knows, nor
should any of them reasonably know, of any material failure of any party to
comply with any laws applicable with respect to the Employee Programs that are
currently maintained by the Seller, the Seller's Bank or any Affiliate. With
respect to any Employee Program currently maintained by the Seller, the Seller's
Bank or any Affiliate, there has been no (i) "prohibited transaction," as
defined in Section 406 of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or Code Section 4975, (ii) material failure to comply with
any provision of ERISA, other applicable law, or any agreement, or (iii)
non-deductible contribution, which, in the case of any of (i), (ii), or (iii),
could subject the Seller, the Seller's Bank or any Affiliate to material
liability either directly or indirectly (including, without limitation, through
any obligation of indemnification or contribution) for any damages, penalties,
or taxes, or any other loss or expense. No litigation or governmental
administrative proceeding (or investigation) or other proceeding (other than
those relating to routine claims for benefits) is pending or threatened with
respect to any such Employee Program. All payments and/or contributions required
to have been made (under the provisions of any agreements or other governing
documents or applicable law) with respect to all Employee Programs ever
maintained by the Seller, the Seller's Bank or any Affiliate, for all periods
prior to the Closing Date, either have been made or have been accrued
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(and all such unpaid but accrued amounts are described on Section 3.12(c) of the
Seller Disclosure Schedule).
(d) None of the Seller, the Seller's Bank nor any Affiliate has
incurred any liability under title IV of ERISA which has not been paid in full
prior to the Closing. There has been no "accumulated funding deficiency"
(whether or not waived) with respect to any Employee Program ever maintained by
the Seller, the Seller's Bank or any Affiliate and subject to Code Section 412
or ERISA Section 302. With respect to any Employee Program maintained by the
Seller, the Seller's Bank or an Affiliate and subject to title IV of ERISA,
there has been no (nor will be any as a result of the transaction contemplated
by this Agreement) (i) "reportable event," within the meaning of ERISA Section
4043, or the regulations thereunder (for which notice the notice requirement is
not waived under 29 C.F.R. Part 2615) and (ii) no event or condition which
presents a material risk of plan termination or any other event that may cause
the Seller, the Seller's Bank or any Affiliate to incur liability or have a lien
imposed on its assets under title IV of ERISA. No Employee Program maintained by
the Seller, the Seller's Bank or an Affiliate and subject to title IV of ERISA
(other than a Multiemployer Plan) has any "unfunded benefit liabilities" within
the meaning of ERISA Section 4001(a)(18), as of the Closing Date. Neither the
Seller, the Seller's Bank nor any Affiliate has ever maintained a Multiemployer
Plan. None of the Employee Programs ever maintained by the Seller, the Seller's
Bank or any Affiliate has ever provided health care or any other non-pension
benefits to any employees after their employment is terminated (other than as
required by part 6 of subtitle B of title I of ERISA) or has ever promised to
provide such post-termination benefits.
(e) With respect to each Employee Program maintained by the Seller, the
Seller's Bank or any Subsidiary within the three years preceding the Closing
Date, complete and correct copies of the following documents (if applicable to
such Employee Program) have previously been delivered to the Buyer: (i) all
documents embodying or governing such Employee Program, and any funding medium
for the Employee Program (including, without limitation, trust agreements) as
they may have been amended to the date hereof; (ii) the most recent IRS
determination or approval letter with respect to such Employee Program under
Code Section 401(a) or 501(c)(9), and any applications for determination or
approval subsequently filed with the IRS; (iii) the three most recently filed
IRS Forms 5500, with all applicable schedules and accountants' opinions attached
thereto; (iv) the three most recent actuarial valuation reports completed with
respect to such Employee Program; (v) the summary plan description for such
Employee Program (or other descriptions of such Employee Program provided to
employees) and all modifications thereto; (vi) any insurance policy (including
any fiduciary liability insurance policy or fidelity bond) related to such
Employee Program; and (vii) any registration statement or other filing made
pursuant to any federal or state securities law.
(f) Each Employee Program required to be listed on Section 3.12(a) of
the Seller Disclosure Schedule may be amended, terminated, or otherwise modified
by the Seller, the Seller's Bank or the Affiliate to the greatest extent
permitted by applicable law, including the elimination of any and all future
benefit accruals under any Employee Program and no employee communications or
provision of any Employee Program document has failed to effectively reserve
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the right of the Seller, the Seller's Bank or the Affiliate to so amend,
terminate or otherwise modify such Employee Program.
(g) Each Employee Program currently maintained by the Seller or the
Seller's Bank (including each non-qualified deferred compensation arrangement)
is maintained in compliance with all applicable requirements of federal and
state securities laws including (without limitation, if applicable) the
requirements that the offering of interests in such Employee Program be
registered under the Securities Act of 1933 and/or state "Blue Sky" laws.
(h) Each Employee Program currently maintained by the Seller, the
Seller's Bank or an Affiliate has complied with the applicable notification and
other applicable requirements of the Consolidated Omnibus Budget Reconciliation
Act of 1985, Health Insurance Portability and Accountability Act of 1996, the
Newborns' and Mothers' Health Protection Act of 1996, the Mental Health Parity
Act of 1996, and the Women's Health and Cancer Rights Act of 1998.
(i) For purposes of this section:
(i) "Employee Program" means (A) all employee benefit
plans within the meaning of ERISA Section 3(3), including, but
not limited to, multiple employer welfare arrangements (within
the meaning of ERISA Section 3(40)), plans to which more than
one unaffiliated employer contributes and employee benefit
plans (such as foreign or excess benefit plans) which are not
subject to ERISA; (B) all stock option plans, stock purchase
plans, bonus or incentive award plans, severance pay policies
or agreements, deferred compensation agreements, supplemental
income arrangements, vacation plans, and all other employee
benefit plans, agreements, and arrangements (including any
informal arrangements) not described in (A) above, including
without limitation, any arrangement intended to comply with
Code Section 120, 125, 127, 129 or 137; and (C) all plans or
arrangements providing compensation to employee and
non-employee directors. In the case of an Employee Program
funded through a trust described in Code Section 401(a) or an
organization described in Code Section 501(c)(9), or any other
funding vehicle, each reference to such Employee Program shall
include a reference to such trust, organization or other
vehicle.
(ii) An entity "maintains" an Employee Program if
such entity sponsors, contributes to, or provides benefits
under or through such Employee Program, or has any obligation
(by agreement or under applicable law) to contribute to or
provide benefits under or through such Employee Program, or if
such Employee Program provides benefits to or otherwise covers
employees of such entity (or their spouses, dependents, or
beneficiaries).
(iii) An entity is an "Affiliate" of the Seller if it
would have ever been considered a single employer with the
Seller under ERISA Section 4001(b) or part
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of the same "controlled group" as the Seller for purposes of
ERISA Section 302(d)(8)(C).
(iv) "Multiemployer Plan" means an employee pension
or welfare benefit plan to which more than one unaffiliated
employer contributes and which is maintained pursuant to one
or more collective bargaining agreements.
SECTION 3.13. LABOR MATTERS. No work stoppage involving the Seller, the
Seller's Bank or any of the Subsidiaries is pending or, to the best knowledge of
the Seller, threatened. None of the Seller, the Seller's Bank or any of the
Subsidiaries is involved in, or, to the best knowledge of the Seller, threatened
with or affected by, any dispute, arbitration, lawsuit or administrative
proceeding relating to labor or employment matters which might reasonably be
expected to interfere in any material respect with the respective business
activities of the Seller, the Seller's Bank or any of the Subsidiaries. No
employees of the Seller, the Seller's Bank or any of the Subsidiaries are
represented by any labor union, and, to the best knowledge of the Seller, no
labor union is attempting to organize employees of the Seller, the Seller's Bank
or any of the Subsidiaries.
SECTION 3.14. PROPERTY AND LEASES.
(a) The Seller, the Seller's Bank and each of the 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 Seller, the Seller's
Bank and the Subsidiaries included in audited financial statements for the
period ended December 31, 1998. Each parcel of real property, and each item of
personal property, owned or leased by the Seller, the Seller's Bank or any of
the 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 Seller, the Seller's 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
Seller, has any such condemnation, expropriation or taking been proposed. None
of the Seller, the Seller's Bank or any of the Subsidiaries has received any
notice of violation of any applicable zoning regulation, ordinance or other law,
order, regulation or requirement relating to its properties.
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(b) All leases of real property leased for the use or benefit of the
Seller, the Seller's Bank or any of the Subsidiaries to which the Seller, the
Seller's Bank or any of the Subsidiaries is a party requiring rental payments in
excess of $25,000 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 Seller, the Seller's Bank or any of the
Subsidiaries, nor, to the best knowledge of the Seller, any event which with
notice or lapse of time or both would constitute a material default thereunder
by the Seller, the Seller's Bank or any of the Subsidiaries.
SECTION 3.15. TAXES AND TAX RETURNS.
(a) Each of the Seller, the Seller's Bank and the Tax Subsidiaries has
filed all Tax Returns that it was required to file. All such Tax Returns were
correct and complete in all respects. All Taxes owed by Seller, the Seller's
Bank and the Tax Subsidiaries (whether or not shown on any Tax Return) have been
paid. None of the Seller, the Seller's Bank or the Tax Subsidiaries currently is
the beneficiary of any extension of time within which to file any Tax Return. No
claim has ever been made by an authority in a jurisdiction where the Seller, the
Seller's Bank or the Tax Subsidiaries do not file Tax Returns that it is or may
be subject to taxation by that jurisdiction. There are no Security Interests on
any of the assets of the Seller, the Seller's Bank or the Tax Subsidiaries that
arose in connection with any failure (or alleged failure) to pay any Tax.
(b) Each of the Seller, the Seller's Bank and the Tax Subsidiaries has
withheld and paid all material Taxes required to have been withheld and paid in
connection with amounts paid or owing or credited to the account of any
customer, employee, independent contractor, creditor, stockholder, or other
third party.
(c) No director or officer (or employee responsible for Tax matters) of
the Seller, the Seller's Bank or the Tax Subsidiaries expects any authority to
assess any additional material Taxes for any period for which Tax Returns have
been filed. There is no dispute or claim concerning any Tax Liability of the
Seller, the Seller's Bank or the Tax Subsidiaries either (A) claimed or raised
by any authority in writing or (B) as to which any of the directors and officers
(and employees responsible for Tax matters) of the Seller, the Seller's Bank or
the Tax Subsidiaries has knowledge based upon personal contact with any agent of
such authority. Section 3.15(c) of the Seller Disclosure Schedule lists all
federal, state, local, and foreign income Tax Returns filed with respect to the
Seller, the Seller's Bank or the Tax Subsidiaries for taxable periods ending on
or after December 31, 1992, indicates those income Tax Returns that have been
audited, and indicates those income Tax Returns that currently are the subject
of audit. Seller has delivered to the Buyer correct and complete copies of all
federal income Tax Returns, examination reports, and statements of deficiencies
against or agreed to by the Seller, the Seller's Bank or the Tax Subsidiaries
since December 31, 1992.
(d) None of the Seller, the Seller's Bank or any Subsidiary has waived
any statute of limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency.
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(e) None of the Seller, the Seller's Bank or any Tax Subsidiary has
filed a consent under Section 341(f) of the Code, concerning collapsible
corporations. No property of the Seller, the Seller's Bank or any Tax Subsidiary
is property that the Seller, the Seller's Bank or any Subsidiary 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 of 1954 (as in
effect prior to the Tax Reform Act of 1986) or is "tax-exempt use property"
within the meaning of Code Section 168(h). None of the Seller, the Seller's Bank
or any Tax Subsidiary has been required to include in income any adjustment
pursuant to Code Section 481 by reason of a voluntary change in accounting
method initiated by the Seller, the Seller's Bank or any Tax Subsidiary. None of
the Seller, the Seller's Bank or any Tax Subsidiary has made any payments, is
obligated to make any payments, or is a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code Section 280G or Code Section 162(m). None of the Seller,
the Seller's Bank or any Tax Subsidiary has been a United States real property
holding corporation within the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section 897(c)(1)(A)(ii). None of the
Seller, the Seller's Bank or any Tax Subsidiary is a party to any Tax allocation
or sharing agreement. None of the Seller, the Seller's Bank or any Tax
Subsidiary (A) has been a member of an Affiliated Group filing a consolidated
federal income Tax Return (other than a group the common parent of which was the
Seller) or (B) has any Liability for the Taxes of any person (other than the
Seller, the Seller's Bank or any Subsidiary) under Treasury Regulations Section
1.1506-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.
(f) The unpaid Taxes of the Seller, the Seller's Bank and each
Subsidiary (A) did not, as of November 30, 1999, exceed by any material amount
the reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set forth
on the face of the unaudited consolidated balance sheet of Seller and its
Subsidiaries as of November 30, 1999 (rather than in any notes thereto) and (B)
do not exceed by any material amount that reserve as adjusted for the passage of
time through the Closing Date.
(g) For purposes of this Section 3.15
"Affiliated Group" means any affiliated group within the meaning of
Code Section 1504(a).
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
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"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable, (c) purchase
money liens and liens securing rental payments under capital lease arrangements,
and (d) other liens arising in the Ordinary Course of Business and not incurred
in connection with the borrowing of money.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, net worth, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not,
and includes amounts for which the Seller, the Seller's Bank or any Subsidiary
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.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Tax Subsidiary" means a Subsidiary that is a corporation or a
partnership for United States federal income tax purposes and if, a corporation,
which is a member of an Affiliated Group that files consolidated federal income
tax returns with the Seller as common parent, or, if a partnership, in which the
Seller, the Seller's Bank or any of the Subsidiaries holds at least a 50 percent
capital or profits interest, and unless otherwise indicated thereon includes all
Subsidiaries listed on Section 3.01 of the Seller Disclosure Schedule.
SECTION 3.16. CERTAIN CONTRACTS.
(a) Except as set forth in Section 3.16(a) of the Seller Disclosure
Schedule, none of the Seller, the Seller's Bank or any Subsidiary 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, will result in any payment (whether of severance
pay or otherwise) becoming due from the Seller, the Seller's Bank, or any of its
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, (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 $50,000 per annum, (v)
which materially restricts the conduct of any line of business by the Seller,
the Seller's Bank, or any of the 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
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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 Seller has previously delivered to the Buyer true and
complete copies of all employment, consulting and deferred compensation
agreements which are in writing and to which the Seller, the Seller's Bank or
any of the 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(a) of the Seller Disclosure Schedule, is referred to herein as a
"Seller Contract".
(b) Except as set forth in Section 3.16(b) of the Seller Disclosure
Schedule, (i) to the best knowledge of the Seller, each Seller Contract is
legal, valid and binding upon the Seller, the Seller's Bank or such Subsidiary,
as the case may be, and in full force and effect, (ii) the Seller, the Seller's
Bank and each of the Subsidiaries has in all material respects performed all
obligations required to be performed by it to date under each such Seller
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 Seller, the Seller's Bank or any of the Subsidiaries under any such
Seller Contract.
SECTION 3.17. LOAN PORTFOLIO. Except as set forth in Section 3.17 of
the Seller Disclosure Schedule, none of the Seller, the Seller's Bank or any
Subsidiary is a party to any written or oral (a) loan agreement, note or
borrowing arrangement (including, without limitation, leases and credit
enhancements) (collectively, "Loans") as to which the obligor 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 Seller, five percent stockholder of the Seller, the Seller's Bank or any of
the Subsidiaries, or to the best knowledge of the Seller, any person,
corporation or enterprise controlling, controlled by or under common control
with any of the foregoing. To the best knowledge of the Seller, all of the Loans
originated and held on the date hereof and at the Effective Time by the Seller,
the Seller's Bank and the Subsidiaries, and any other Loans purchased and held
currently and at the Effective Time by the Seller, the Seller's Bank and the
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 Seller, the Seller's Bank and the Subsidiaries. Section 3.17
of the Seller Disclosure Schedule sets forth as of the date hereof, (i) all of
the Loans in original principal amount in excess of $50,000 of the Seller, the
Seller's Bank or any of the Subsidiaries that as of the date of this Agreement
are classified 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 Seller, the Seller's Bank and the 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 Massachusetts Commissioner
would agree with the loan classifications contained in Section 3.17 of the
Seller Disclosure Schedule. The Seller shall promptly inform the Buyer in
writing of any Loan the original principal balance of which exceeds $50,000 that
becomes classified in the
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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
Buyer by the Seller is true and complete in all material respects.
SECTION 3.18. INVESTMENT SECURITIES. Section 3.18(a) of the Seller
Disclosure Schedule sets forth the book and market value as of December 31, 1999
of the investment securities, mortgage backed securities and securities held for
sale by the Seller, the Seller's Bank and the Subsidiaries. Section 3.18(b) of
the Seller Disclosure Schedule sets forth the names of all the joint ventures in
which the Seller, the Seller's Bank or any of the 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 Seller Balance Sheet for the period
ended December 31, 1998, and none of the material investments made by the
Seller, the Seller's Bank or any of the Subsidiaries since December 31, 1998, 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 Seller and the Seller's Bank have
(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 Seller'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. None of the Seller, the Seller's
Bank or the Subsidiaries is engaged in transactions in or involving forwards,
futures, options on futures, swaps or similar off-balance sheet 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 Seller's Bank's past practices.
SECTION 3.20. INSURANCE. The Seller has made available to the Buyer
true and complete copies of all material policies of insurance of the Seller,
the Seller's Bank and the Subsidiaries currently in effect. All of the policies
relating to insurance maintained by each of the Seller, the Seller's Bank and
the 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 none of the Seller, the
Seller's Bank or the 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 of the Seller or the Seller's Bank which are maintained by
the Seller or the Seller's Bank or which are otherwise included as assets on the
books of the Seller or the Seller's Bank (i) are, or will at the Effective Time
be, owned by
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the Seller or the Seller's Bank, 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 Seller and the Seller's Bank agree that there will
not be an amendment prior to the Effective Time without the consent of the
Buyer, and (ii) are accounted for properly as assets on the books of the Seller
or the Seller's Bank, as applicable, in accordance with GAAP in all material
respects. None of the Seller, the Seller's Bank or the Subsidiaries has any
material liability for unpaid premiums or premium adjustments not properly
reflected on the Seller's consolidated financial statements described in Section
3.09 and Section 6.10.
SECTION 3.21. ENVIRONMENTAL MATTERS.
(a) Each of the Seller, the Seller's Bank and the Subsidiaries and, to
the best knowledge of the Seller, the Participation Facilities and the Loan
Properties (each defined below), 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 Seller, threatened, before the EPA or any other
Governmental Entity or other forum in which the Seller, the Seller's Bank or any
of the 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 defined below) of any Hazardous Materials (as defined below) or Oil (as
defined below) whether or not occurring at or on a site owned, leased or
operated by the Seller, the Seller's Bank or any of the Subsidiaries or any
Participation Facility except as have not been or are not reasonably likely to
be, either individually or in the aggregate, material.
(c) To the best knowledge of the Seller, the Seller's Bank and the
Subsidiaries, there is no suit, claim, action or proceeding pending or
threatened, before the EPA or any other 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 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 where such noncompliance or release has not been or is not reasonably
likely to be, either individually or in the aggregate, material.
(d) None of the Seller, the Seller's Bank, any of the 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 Seller's
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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 Seller's, the Seller's Bank's or any
of the Subsidiaries' ownership or operation of any of their respective current
properties, (ii) the Seller's, the Seller's Bank's or any of the Subsidiaries'
participation in the management of any Participation Facility, or (iii) the
Seller's, the Seller's Bank's or any of the Subsidiaries' holding of a security
interest in a Loan Property, there has been no release or presence in the
Environment of Hazardous Material or Oil in, on, under or affecting such
property or, to the best knowledge of the Seller, such Participation Facility or
Loan Property, except where such release or presence is not or is not reasonably
like to be, either individually or in the aggregate, material. To the best
knowledge of the Seller, prior to the period of (x) the Seller's, the Seller's
Bank's or any of the Subsidiaries' ownership or operation of any of their
respective current properties or any previously owned or operated properties,
(y) the Seller's, the Seller's Bank's or any of the Subsidiaries' participation
in the management of any Participation Facility, or (z) the Seller's, the
Seller's Bank's or any of the Subsidiaries' holding of a security interest in a
Loan Property, there was no release or presence of Hazardous Material or Oil in,
on, under or affecting any such property, Participation Facility or Loan
Property, except where such release or presence is not or is not reasonably
likely to be, either individually or in the aggregate, material.
(f) The following definitions apply for purposes of this Section 3.21:
(i) "Loan Property" means any property in which the Seller, the Seller's Bank or
any of the 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 Seller, the Seller's
Bank or any of the 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. Section 9601 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. Section 1251 et seq., or any other federal,
state, or local environmental law, regulation, or requirement; and (v)
"Environment" means any soil, surface waters, groundwaters, stream sediments,
surface or subsurface strata, and ambient air, and any other environmental
medium.
SECTION 3.22. INTELLECTUAL PROPERTY. The Seller, the Seller's Bank and
each of the 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 none of the Seller, the Seller's Bank or any of the Subsidiaries
has received any notice of conflict with respect thereto that asserts the right
of others. The Seller, the Seller's Bank and each of the Subsidiaries have
performed in all material respects all the obligations required to be performed
by them and are not in default under any contract, agreement, arrangement or
commitment relating to any of the foregoing.
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SECTION 3.23. FIDUCIARY ACCOUNTS. None of the Seller, the Seller's Bank
or the Subsidiaries serves as a fiduciary or maintains fiduciary accounts,
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.
SECTION 3.24. AGREEMENTS WITH BANK REGULATORS. None of the Seller, the
Seller's Bank or any of the 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 or directive 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 Seller, the Seller's Bank or any Subsidiary 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. None of the Seller,
the Seller's Bank or any of the 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 Seller,
the Seller's Bank or any of the Subsidiaries is entitled to receive financial
assistance or indemnification from any governmental agency.
SECTION 3.25. MATERIAL INTERESTS OF CERTAIN PERSONS. No officer or
director of the Seller, the Seller's Bank or any of the 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 Seller, the Seller's Bank or any of the 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. No broker, finder or investment
banker, other than McConnell, Budd & Downes, Inc. (the "Investment Banker"), is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement or the Stock Option
Agreement based upon arrangements made by or on behalf of the Seller. The fee
payable to the Investment Banker in connection with the transactions
contemplated by this Agreement is as described in an engagement letter between
the Seller and the Investment Banker, a true and complete copy of which has
heretofore been furnished to the Buyer. The Seller has previously received the
opinion of the Investment Banker to the effect that, as of the date of such
opinion, the Merger Consideration to be received by the stockholders of the
Seller pursuant to the Merger is fair, from a financial point of view, 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 Seller 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 Seller or at the time of the Stockholders' Meeting,
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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 Seller makes no
representation or warranty with respect to any information to be supplied by the
Buyer which is contained in any of the foregoing documents. To the extent
reasonably practicable, the Proxy Statement will comply in all material respects
as to form and content with the requirements of the Exchange Act and the rules
and regulations thereunder.
SECTION 3.28. SELLER INFORMATION. The information supplied by the
Seller or the Seller's Bank for inclusion in the Registration Statement on Form
S-4 referred to in Section 6.01 (the "S-4") (or any amendment or supplement
thereto) will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading.
SECTION 3.29. STATE TAKEOVER LAWS. The Board of Directors of the Seller
has approved the transactions contemplated by this Agreement and the Seller
Option Agreement and taken all other requisite action such that the provisions
of Ch. 110F of the Massachusetts General Laws and the provisions of the Seller's
Articles of Organization relating to special voting requirements for certain
business combinations will not apply to this Agreement or the Stock Option
Agreement or any of the transactions contemplated hereby or thereby.
SECTION 3.30. DISCLOSURE. No representation or warranty contained in
this Agreement, and no statement contained in any Schedule, certificate, list or
other writing furnished to the Buyer 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 Seller to be material to the 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 Seller, has been withheld
from, or has not been delivered in writing to, the Buyer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller that:
SECTION 4.01. CORPORATE ORGANIZATION.
(a) The Buyer is a corporation, duly organized, validly existing and in
good standing under the laws of the State of Delaware and a bank holding company
registered with the FRB
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under the Bank Holding Company Act of 1956, as amended. Andover Bank is a
savings bank and wholly-owned (except for directors qualifying shares)
subsidiary of the Buyer (the "Buyer's Bank") duly organized and validly existing
under the laws of the Commonwealth of Massachusetts. The deposit accounts of the
Buyer's Bank 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
the Buyer's Bank. The Buyer and the Buyer's Bank 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 Buyer Material Adverse Effect (as
defined below).
(b) When used in connection with the Buyer or the Buyer's Bank, the
term "Buyer Material Adverse Effect" means any change or effect that is or would
be materially adverse to (i) the business, assets, liabilities, financial
condition or results of operations of the Buyer and the Buyer's Bank taken as a
whole, other than any such effect attributable to or resulting from (x) changes
in interest rates or general economic conditions affecting banks generally, (y)
changes in federal or state banking or tax laws or regulations affecting banks
generally or (z) changes in generally accepted or regulatory accounting
principles applicable to banks or their holding companies generally; or (ii) the
ability of the Buyer to consummate the transactions contemplated hereby.
SECTION 4.02. CAPITALIZATION.
(a) The authorized capital stock of the Buyer consists of 15,000,000
shares of Buyer Common Stock and 3,000,000 shares of Preferred Stock, $.10 par
value (the "Preferred Stock"). As of January 14, 2000, (i) 6,521,572 shares of
Buyer Common Stock are issued and outstanding, all of which are duly authorized,
validly issued, fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof, (ii) 12,500 shares of
Buyer Common Stock are held in the treasury of the Buyer, (iii) no shares of
Buyer Common Stock are held by any subsidiaries of Buyer, (iv) 102,531 shares of
Buyer Common Stock are reserved for future issuance pursuant to the Buyer Option
Plan (v) 75,000 shares of Buyer Common Stock are reserved for future issuance
pursuant to Directors' Deferred Compensation Plan,, and (vi) 100,000 shares of
Preferred Stock have been designated and no shares are issued and outstanding as
Series B Junior Participating Cumulative Preferred Stock pursuant to the Buyer's
Shareholder Rights Agreement (the "Parent Rights").
(b) Except for the Buyer Option Plan, the Directors' Deferred
Compensation Plan and the Buyer's Dividend Reinvestment Plan, 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 Buyer or the Buyer's Bank or obligating the Buyer or the
Buyer's Bank to issue or sell any shares of capital stock of, or other equity
interests
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in, the Buyer or the Buyers's Bank. There are no outstanding contractual
obligations of the Buyer to repurchase, redeem or otherwise acquire any shares
of capital stock of, or other equity interests in the Buyer or to provide funds
to, or make any investment (in the form of a loan, capital contribution or
otherwise) in, any subsidiary of the Buyer.
SECTION 4.03. AUTHORITY.
The Buyer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of the Buyer (the "Buyer Board"). This Agreement has been
duly and validly executed and delivered by the Buyer and constitutes a valid and
binding obligation of the Buyer, enforceable against the Buyer in accordance
with its terms.
SECTION 4.04. NO CONFLICT. Neither the execution, delivery and
performance of this Agreement by the Buyer, nor the consummation by the Buyer of
the transactions contemplated hereby, nor compliance by the Buyer with any of
the terms or provisions hereof, will (i) conflict with, violate or result in a
breach of any provision of the Certificate of Incorporation or By-Laws of the
Buyer or the articles of organization or by-laws of the Buyer's Bank, (ii)
conflict with, violate or result in a breach of any statute, code, ordinance,
rule, regulation, order, writ, judgment, injunction or decree applicable to the
Buyer or the Buyer's Bank, or by which any property or asset of the Buyer or the
Buyer's Bank 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 Buyer or the Buyer's Bank 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 Buyer or the Buyer's Bank is a party, or by which the Buyer or the
Buyer's Bank 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, either individually or in the aggregate, have a Buyer Material
Adverse Effect.
SECTION 4.05. CONSENTS AND APPROVALS. The execution, delivery and
performance of this Agreement by the Buyer does not require any consent,
approval, authorization or permit of, or filing with or notification to any
Governmental Entity or with any third party, except (i) for the S-4 and
applicable requirements, if any, of the Exchange Act, state takeover laws, and
filing and recordation of appropriate merger documents as required by the laws
of the Commonwealth of Massachusetts and the State of Delaware, (ii) for
consents and approvals of or filings, registrations or negotiations with the
FRB, the FDIC, the BBI, and the Massachusetts Housing Partnership Fund, (iii)
the filings required by this Agreement and (iv) 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
Merger or otherwise prevent the Buyer
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from performing its obligations under this Agreement, or would not, either
individually or in the aggregate, have a Buyer Material Adverse Effect. The
Buyer is not aware of any reason why the approvals, consents and waivers of
Governmental Entities referred to herein and in Section 7.01(c) should not be
obtained.
SECTION 4.06. COMPLIANCE. The Buyer and the Buyer's Bank 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 or decree, published
policies and guidelines of any Governmental Entity, applicable to the Buyer or
the Buyer's Bank or by which any property or asset of the Buyer or the Buyer's
Bank 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 Buyer or the Buyer's Bank is a party or by
which the Buyer or the Buyer's Bank or any property or asset of the Buyer or the
Buyer's Bank is bound or affected, except for any such non-compliance,
conflicts, defaults or violations that would not, either individually or in the
aggregate, have a Buyer Material Adverse Effect; and neither the Buyer nor the
Buyer's Bank knows of, or has received notice of, any violation of any of the
above. Without limiting the generality of the foregoing, neither the Buyer nor
the Buyer's Bank has been advised of the existence of any facts or circumstances
which would cause the Buyer's Bank to be deemed not to be in satisfactory
compliance with the Community Reinvestment Act of 1977, as amended, and the
regulations promulgated thereunder.
SECTION 4.07. FINANCIAL STATEMENTS. The Buyer has previously made
available to the Seller copies of (i) the consolidated balance sheets of the
Buyer and its subsidiaries as of December 31 for the fiscal years 1997 and 1998
and the related consolidated statements of income, changes in shareholders'
equity and cash flows for the fiscal years 1996 through 1998, inclusive, as
reported in the Buyer's 1998 Annual Report on Form 10-K, and (ii) the unaudited
consolidated financial statements of the Buyer and its subsidiaries as of
September 30, 1999 and September 30, 1998 as reported on the Buyer's Quarterly
Report on Form 10Q for the quarter ended September 30, 1999, and the related
unaudited consolidated statements of income, changes in stockholders' equity and
cash flows for the nine month period then ended. The December 31, 1998
consolidated balance sheet of the Buyer (including the related notes, where
applicable) fairly presents in all material respects the consolidated financial
position of the Buyer and its subsidiaries as of the date thereof, and the other
financial statements referred to in this Section 4.07 (including the related
notes where applicable) fairly present in all material respects, (subject, in
the case of the unaudited statements, to audit adjustments normal in nature and
amount and the addition of customary notes) in all material respects, the
results of the consolidated operations and changes in shareholders' equity and
consolidated financial position of the Buyer for the respective fiscal periods
or as of the respective dates therein set forth and each of such statements
(including the related notes, where applicable) has been prepared in accordance
with GAAP consistently applied during the periods involved, except as indicated
in the notes thereto or, in the case of unaudited statements, as permitted by
Form 10-Q under the Exchange Act.
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SECTION 4.08. ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Since December 31, 1998:
(i) there has not been any Buyer Material Adverse Effect;
(ii) there has not been any incurrence by the Buyer of any
liability that has had, or to the knowledge of the Buyer could
reasonably be expected to have, a Buyer Material Adverse Effect;
(iii) there has not been any agreement, contract or commitment
entered into, or agreed to be entered into, except for those in the
ordinary course of business none of which has had a Buyer Material
Adverse Effect;
(iv) there has not been any change in any of the accounting
methods or practices of the Buyer or any of its subsidiaries other than
changes required by applicable law or generally accepted accounting
principles.
SECTION 4.09. ABSENCE OF LITIGATION. Neither the Buyer nor any of its
subsidiaries is a party to any, and there are no pending, or to the best
knowledge of the Buyer, threatened legal, administrative, arbitral or other
claims, actions, proceedings or investigations of any nature, against the Buyer
or any of its subsidiaries or any property or asset of the Buyer or any of its
subsidiaries, before any court, arbitrator or administrative, governmental or
regulatory authority or body, domestic or foreign, which, either individually or
in the aggregate, would have a Buyer Material Adverse Effect and no facts or
circumstances have come to the Buyer's attention which have caused it to believe
that a material claim, action, proceeding or investigation against or affecting
the Buyer or any of its subsidiaries could reasonably be expected to occur.
Neither the Buyer nor its subsidiaries, or any property or asset of the Buyer or
any of its subsidiaries, is subject to any order, writ, judgment, injunction,
decree, determination or award which restricts its ability to conduct business
in any area in which it presently does business or has or could reasonably be
expected to have, either individually or in the aggregate, a Buyer Material
Adverse Effect.
SECTION 4.10. AGREEMENTS WITH BANK REGULATORS. Neither the Buyer nor
the Buyer's Bank 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 or directive 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 Buyer or the Buyer's 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 Buyer or the
Buyer's Bank 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
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Buyer or the Buyer's Bank is entitled to receive financial assistance or
indemnification from any governmental agency.
SECTION 4.11. BUYER INFORMATION. The information contained in the
Prospectus relating to the offering of the Buyer Common Stock pursuant to this
Agreement, will not, on the date the Prospectus (or any amendment or supplement
thereto) is first mailed to stockholders of the Seller 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 omit 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 such offering which shall have become false or misleading.
Notwithstanding the foregoing, the Buyer makes and will make no representation
or warranty with respect to any information supplied by the Seller which is
contained in the Prospectus. The Prospectus and the related S-4 will comply in
all material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
SECTION 4.12. CAPITAL, FINANCING. On the date hereof, the Buyer 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. The Buyer
will have available to it sources of capital and financing sufficient to fulfill
its cash obligations hereunder.
SECTION 4.13. SEC REPORTS. Buyer has previously made available to the
Seller a true and complete, in all material respects, copy of each (a) final
registration statement, prospectus, report, schedule and definitive proxy
statement filed since January 1, 1997 by the Buyer with the SEC pursuant to the
Securities Act or the Exchange Act (the "Buyer Reports") and (b) communication
mailed by Buyer to its shareholders since January 1, 1997, and, as of their
respective dates, no such Buyer Reports contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. COVENANTS OF THE SELLER.
(a) The Seller covenants and agrees that, between the date of this
Agreement and the Effective Time, unless the Buyer shall otherwise agree in
writing, the business of the Seller, the Seller's Bank and the Subsidiaries
shall be conducted only in, and the Seller, the Seller's Bank and the
Subsidiaries shall not take any action except in, the usual, regular and
ordinary course of business and in a manner consistent with past 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 Seller's, the Seller's
Bank's
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or the Subsidiaries' loan portfolio. The Seller shall use its reasonable best
efforts to preserve substantially intact the business organization of the
Seller, the Seller's Bank and the Subsidiaries, to keep available the present
services of the officers, employees and consultants of the Seller, the Seller's
Bank and the Subsidiaries and to preserve the current relationships and goodwill
of the Seller, the Seller's Bank and the Subsidiaries with customers, suppliers
and other persons with which the Seller, the Seller's Bank or any of the
Subsidiaries have business relationships, including without limitation,
implementing a deposit retention program in furtherance thereof.
(b) By way of amplification and not limitation of clause (a) above,
except as contemplated by this Agreement and the Stock Option Agreement, the
Seller shall not, nor shall the Seller permit the Seller's Bank or any of the
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 the Buyer through its
representative Gerald T. Mulligan (which consent shall not be unreasonably
withheld):
(i) amend or otherwise change its Articles of
Organization 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 Seller, the Seller's Bank or any of the 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 Seller, the Seller's Bank or any of the
Subsidiaries, or enter into any agreement with respect to any of the
foregoing;
(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 except for the declaration and
payment of a regular quarterly cash dividend in an amount not to exceed
the amount of the most recent quarterly cash dividend declared by the
Seller prior to the date of this Agreement and at times consistent with
the Seller's past practice;
(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 Seller, the Seller's Bank or any of
the Subsidiaries, or any securities convertible into or exercisable for
any shares of the capital stock of the Seller, the Seller's Bank or any
of the Subsidiaries;
(vi) enter into any new line of business or
materially expand the business currently conducted by the Seller, the
Seller's Bank and the Subsidiaries or file any
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application to relocate or terminate the operations of any banking
office of the Seller's Bank;
(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;
(viii) except for advances from the Federal Home Loan
Bank in an amount not to exceed $20 million outstanding at any one
time, 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 any contract or other commitment (other than
contracts or commitments relating to Loans) involving an aggregate
payment by or to the Seller, the Seller's Bank or any of the
Subsidiaries under any such contract or commitment of more than $50,000
or having a term of one year or more from the time of execution;
(x) authorize any single capital expenditure which is
in excess of $25,000 or capital expenditures which are, in the
aggregate, in excess of $50,000 for the Seller, the Seller's Bank and
the Subsidiaries taken as a whole, except for written contractual
commitments entered into prior to the date of this Agreement as
disclosed in the Seller Disclosure Schedule;
(xi) (A) except as required by applicable law, (x)
adopt, amend, renew or terminate any plan or any agreement,
arrangement, plan or policy between the Seller, the Seller's Bank or
any of the 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 Seller or the Seller's Bank may grant salary increases to its
officers and employees at the regular review date of such officers and
employees in an aggregate amount for all officers and employees not to
exceed 4% of the aggregate current annualized base salaries of such
officers and employees or constitute more than a 10% increase with
respect to any one officer or employee; or (B) enter into, modify or
renew any employment, severance or other agreement with any director,
officer or employee of the Seller, the Seller's Bank or any of the
Subsidiaries, or establish, adopt, enter into or amend any collective
bargaining,
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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
Seller'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;
(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
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
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 Stock
Option 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 Seller, the Seller's Bank or any of
the 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
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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, (A) any contract, agreement or lease
for office space, operations space or branch space to which the Seller,
the Seller's Bank or any of the Subsidiaries is a party or by which the
Seller, the Seller's Bank or any of the Subsidiaries or its respective
properties is bound; (B) 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 Seller, the Seller's Bank
or any Subsidiary; (C) regardless of whether consistent with past
practices, any lease, contract, agreement or commitment, other than
Loans, involving an aggregate payment by or to the Seller, the Seller's
Bank or any of the Subsidiaries of more than $25,000 or requiring
performance by the Seller, the Seller's Bank or any of the Subsidiaries
of any obligations at any time more than one year after the time of
execution;
(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.
SECTION 5.02. SYSTEM CONVERSIONS. From and after the date hereof, the
Buyer and the Seller shall meet on a regular basis to discuss and plan for the
conversion of the Seller's and the Seller's Bank's data processing and related
electronic informational systems to those used by the Buyer and its affiliates,
which planning shall include, but not be limited to, discussion of the possible
termination by the Seller and the Seller's 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 Seller
or the Seller's Bank in connection with its systems operations and outsourcing,
as appropriate, of proprietary or self-provided system services, it being
understood that the Seller and the Seller's Bank shall not be obligated to take
any such action prior to the Effective Time and, unless the Seller and the
Seller's Bank otherwise agree, no conversion shall take place prior to the
Effective Time. In the event that the Seller or the Seller's Bank takes, at the
request of the Buyer, any action relative to third parties to facilitate the
conversion that results in the imposition of any termination fees or charges,
the Buyer shall indemnify the Seller or the Seller's Bank, as applicable on
terms reasonably satisfactory to such party for any such fees and expenses, and
the costs of reversing the conversion process, if for any reason the Merger is
not consummated in accordance with the terms of this Agreement; provided that
such indemnification shall not apply to the termination of the subservicing
agreements referred to in the next sentence. The Seller has confirmed to the
Buyer that it will provide by January 31, 2000 to Rockport National Bank and
Cape Ann Savings Bank the required six month notice, in proper form, of the
termination of its subservicing agreements with Rockport National Bank and Cape
Ann Savings Bank.
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SECTION 5.03. CERTAIN CHANGES AND ADJUSTMENTS. Prior to the Closing (as
defined in Section 9.01 hereof), the Buyer and the Seller shall consult and
cooperate with each other concerning the Seller's Bank's loan, litigation and
real estate valuation policies and practices (including loan classifications and
levels of reserves) to reflect Buyer's plans with respect to the conduct of the
Seller's Bank's business following the Merger; provided, however, that the
Seller and the Seller's Bank shall not be obligated to take any action pursuant
to this Section which is inconsistent with GAAP and unless and until the Buyer
acknowledges, and the Seller and the Seller's Bank are satisfied, that all
conditions to Seller's obligation to consummate the Merger have been satisfied.
No action taken by the Seller or the Seller's 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.
SECTION 5.04. ALCO MANAGEMENT. The Seller agrees that during the period
from the date of this Agreement through the Effective Time, the Seller will
consult with the Buyer in the development of a reasonable program to manage the
Seller's, Seller's Bank's and any Subsidiaries 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 Seller, the Seller's Bank or any Subsidiary if
such securities have a maturity date that is more than five years after the date
of acquisition thereof, unless otherwise agreed by the parties. The Buyer and
Seller agree to consult on investment programs to be administered by the Seller
and the Seller's Bank.
SECTION 5.05. COVENANT OF THE BUYER. During the period from the date of
this Agreement and continuing until the Effective Time, the Buyer 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 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
Stock Option Agreement, except, in every case, as may be required by applicable
law.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. REGULATORY MATTERS.
(a) The Seller shall promptly prepare the Proxy Statement and the Buyer
shall promptly prepare and file with the SEC the S-4, in which the Proxy
Statement will be included as a prospectus. The S-4 will constitute the
registration statement registering the issuance of the Buyer Common Stock
pursuant to this Agreement. Each of the Buyer and the Seller shall use their
reasonable best efforts to have the S-4 declared effective under the Securities
Act as promptly as practicable after such filing, and the Seller shall
thereafter promptly mail the Proxy Statement to
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its shareholders. Buyer shall also use its reasonable best efforts to obtain all
necessary state securities law or "Blue Sky" permits and approvals required to
carry out the transactions contemplated by this Agreement, and the Seller shall
furnish all information concerning the Seller and the holders of the Seller
Common Stock as may be reasonably requested in connection with any such action.
(b) 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 (including without limitation the Merger). The Seller and the Buyer
shall have the right to review in advance, and to the extent practicable each
will consult with the other on, in each case subject to applicable laws relating
to the exchange of information, all the information relating to the Seller or
the Buyer, 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 transactions
contemplated by this 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
transactions contemplated by this Agreement and each party will keep the other
apprised of the status of matters relating to completion of the transactions
contemplated herein.
(c) The Buyer and the Seller shall, upon request, furnish each other
with all information concerning themselves, their respective subsidiaries,
directors, officers and shareholders and such other matters as may be reasonably
necessary or advisable in connection with the Proxy Statement, the S-4 or any
other statement, filing, notice or application made by or on behalf of the
Buyer, the Seller or any of their respective subsidiaries to any Governmental
Entity in connection with the Merger and the other transactions contemplated
hereby.
(d) The Buyer and the Seller shall promptly furnish each other with
copies of written communications received by the Buyer or the Seller, as the
case may be, or any of their respective subsidiaries from, or delivered by any
of the foregoing to, any Governmental Entity in respect of the transactions
contemplated hereby.
SECTION 6.02. ACCESS TO INFORMATION.
(a) Upon reasonable notice and subject to applicable laws relating to
the exchange of information, the Seller shall, and shall cause the Seller's Bank
and each of the Subsidiaries to, afford to the officers, employees, accountants,
counsel and other representatives of the Buyer, access, during normal business
hours during the period prior to the Effective Time, to all its properties,
books, contracts, commitments and records and, during such period, the Seller
shall, and shall cause the Seller's Bank and the Subsidiaries to, make available
to the Buyer (i) a copy
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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 Seller 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 board of directors of the Seller or the Seller's
Bank relating to asset quality generally, and (iii) all other information
concerning its business, properties and personnel as the Buyer may reasonably
request (other than information which the Seller is not permitted to disclose
under applicable law). Neither the Seller nor the Seller's Bank nor any of the
Subsidiaries shall be required to provide access to or to disclose information
where such access or disclosure would violate or prejudice the rights of the
Seller's, the Seller's Bank's or the Subsidiaries' 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. The parties hereto will make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply.
(b) Without limiting the generality of the foregoing, the Seller shall
cooperate with the Buyer in compiling the following with respect to each of the
Seller, the Seller's Bank and each Subsidiary (or, in the case of clause (B)
below, with respect to the Seller's Bank and each Subsidiary) as of the most
recent practicable date (as well as on an estimated pro forma basis as of the
Effective Date giving effect to the consummation of the transactions
contemplated hereby): (A) the basis of the Seller, the Seller's Bank and each
Subsidiary in its assets; (B) the basis of the stockholder(s) of the Seller's
Bank and each Subsidiary in its stock, or the amount of any excess loss account
(as defined in Treasury Regulations Section 1.1502-19); (C) the amount of any
net operating loss, net capital loss, unused investment or other credit, unused
foreign tax, or excess charitable contribution allocable to the Seller, the
Seller's Bank and any Subsidiary; and (D) the amount of any deferred gain or
loss allocable to the Seller, the Seller's Bank or any Subsidiary arising out of
any deferred intercompany transaction (as defined in Treasury Regulations
Section 1.1502-13).
(c) All information furnished by the Seller to the Buyer or its
representatives pursuant hereto shall be treated as the sole property of the
Seller and, if the Merger shall not occur, the Buyer and its representatives
shall return to the Seller or destroy all of such written information and all
documents, notes, summaries or other materials containing, reflecting or
referring to, or derived from, such information. The Buyer shall, and shall use
its reasonable efforts to cause its representatives to, keep confidential all
such information, and shall not directly or indirectly use such information for
any competitive or other commercial purpose. The obligation to keep such
information confidential shall continue from the date the proposed Merger is
abandoned and shall not apply to (i) any information which (x) was already in
the Buyer's possession prior to the disclosure thereof by the Seller; (y) was
then generally known to the public; or (z) was disclosed to the Buyer by a third
party not bound by an obligation of confidentiality or (ii) disclosures made as
required by law. It is further agreed that, if in the absence of a protective
order or the receipt
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of a waiver hereunder the Buyer is nonetheless, in the opinion of its counsel,
compelled to disclose information concerning the Seller to any tribunal or
governmental body or agency or else stand liable for contempt or suffer other
censure or penalty, the Buyer may disclose such information to such tribunal or
governmental body or agency without liability hereunder.
(d) Upon reasonable notice and subject to applicable laws relating to
the exchange of information, Buyer shall, and shall cause the Buyer's Bank and
its subsidiaries to, afford to the officers, employees, accountants, counsel and
other representatives of the Seller and the Seller's Bank, access, during normal
business hours during the period prior to the Effective Time, to such
information regarding the Buyer and its subsidiaries as shall be reasonably
necessary for the Seller to fulfill its obligations pursuant to this Agreement
to prepare the Proxy Statement or which may be reasonably necessary for the
Seller to confirm that the representations and warranties of the Buyer contained
herein are true and correct and that the covenants of the Buyer contained herein
have been performed in all material respects. Neither the Buyer nor any of its
subsidiaries shall be required to provide access to or to disclose information
where such access or disclosure would violate or prejudice the rights of the
Buyer's 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. The parties hereto will make
appropriate substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply.
(e) All information furnished by the Buyer to the Seller or its
representatives pursuant hereto shall be treated as the sole property of the
Buyer and, if the Merger shall not occur, the Seller and its representatives
shall return to the Buyer or destroy all of such written information and all
documents, notes, summaries or other materials containing, reflecting or
referring to, or derived from, such information. The Seller shall, and shall use
its reasonable efforts to cause its representatives to, keep confidential all
such information, and shall not directly or indirectly use such information for
any competitive or other commercial purpose. The obligation to keep such
information confidential shall continue from the date the proposed Merger is
abandoned and shall not apply to (i) any information which (x) was already in
the Seller's possession prior to the disclosure thereof by the Buyer; (y) was
then generally known to the public; or (z) was disclosed to the Seller by a
third party not bound by an obligation of confidentiality or (ii) disclosures
made as required by law. It is further agreed that, if in the absence of a
protective order or the receipt of a waiver hereunder the Seller is nonetheless,
in the opinion of its counsel, compelled to disclose information concerning the
Buyer to any tribunal or governmental body or agency or else stand liable for
contempt or suffer other censure or penalty, the Seller may disclose such
information to such tribunal or governmental body or agency without liability
hereunder.
(f) 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.
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SECTION 6.03. STOCKHOLDER MEETING. The Seller shall take all steps
necessary to duly call, give notice of, convene and hold a meeting of its
stockholders to be held as soon as is reasonably practicable after the date on
which the S-4 becomes effective for the purpose of voting upon the approval of
this Agreement. The Seller will, through its Board of Directors, recommend to
its stockholders approval of this Agreement and the transactions contemplated
hereby and such other matters as may be submitted to its stockholders in
connection with this Agreement; provided, however, that nothing contained in
this Section 6.03 or elsewhere in this Agreement shall prohibit the Seller's
Board of Directors from failing to make such recommendation or modifying or
withdrawing its recommendation, if such Board shall have concluded in good faith
with the advice of counsel that such action is required to prevent such Board
from breaching its fiduciary duties to the stockholders of the Seller.
SECTION 6.04. LEGAL CONDITIONS TO MERGER. Each of the Buyer and the
Seller shall, and shall cause each of 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 Merger and, subject to the
conditions set forth in Article VII hereof, to consummate the transactions
contemplated by this 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 Seller or the Buyer or any of their respective
subsidiaries in connection with the Merger and the other transactions
contemplated by this Agreement.
SECTION 6.05. RESTRICTIONS ON RESALE. The Seller shall use all
reasonable efforts to cause each director, executive officer and other person of
the Seller who, at the time of the stockholder's meeting called by the Seller to
approve this Agreement, is an "affiliate" of the Seller (for purposes of Rule
145 under the Securities Act) and who has indicated to the Seller that such
person intends to elect to receive the Buyer Common Stock pursuant to the
Merger, to execute "affiliate letters" prior to the Effective Time providing
that such person will not sell, pledge, transfer or otherwise dispose of any
shares of the Buyer Common Stock received by such person in the Merger except in
compliance with the applicable provisions of the Securities Act and the rules
and regulations thereunder. The Buyer shall use all reasonable efforts to comply
with Rule 144(c) under the Securities Act in order that all such persons may
resell such Buyer Common Stock pursuant to Rule 145(d) under the Securities Act.
SECTION 6.06. NASDAQ LISTING. The Buyer shall cause the shares of Buyer
Common Stock to be issued in the Merger to be approved for listing on Nasdaq,
subject to official notice of issuance, prior to the Effective Time.
SECTION 6.07. NO SOLICITATION. The Seller shall not and shall cause the
Seller's Bank and the Subsidiaries to not, 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 Seller, the Seller's Bank or the
Subsidiaries
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or any business combination with the Seller, the Seller's Bank or the
Subsidiaries or, except to the extent determined by the Seller Board, with the
advice 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 Seller immediately shall
cease and cause to be terminated and shall cause the Seller's Bank and the
Subsidiaries to cease and cause to be terminated all existing discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing. The Seller shall notify the Buyer and cause the Seller's Bank or the
Subsidiaries to notify the Buyer 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 the Buyer, 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 Seller agrees and
shall cause the Seller's Bank and the Subsidiaries not to release any third
party from, or waive any provision of, any confidentiality or standstill
agreement to which the Seller, the Seller's Bank or the Subsidiaries is a party.
SECTION 6.08. EMPLOYEE BENEFIT MATTERS.
(a) PROVISION OF BENEFITS. As soon as practicable after the Effective
Time, the Buyer agrees to provide the employees of the Seller's Bank (the
"Seller Employees") who remain employed after the Effective Time (collectively,
the "Transferred Seller Employees") with the types and levels of employee
benefits maintained by the Buyer for similarly situated employees of the Buyer's
Bank. The Buyer will treat, and cause its applicable benefit plans to treat, the
service of Seller Employees with Seller or any Subsidiary as service rendered to
the Buyer or any Affiliate of Buyer for purposes of eligibility to participate,
vesting and for other appropriate benefits, including applicability of minimum
waiting periods for participation, but in no event for purposes of benefit
accrual (including minimum pension amount) attributable to any period before the
Effective Time. Without limiting the foregoing, the Buyer shall not treat any
employee of the Seller or any of its Subsidiaries as a "new" employee for
purposes of any exclusions under any health or similar plan of the Buyer or an
Affiliate for a pre-existing medical condition, and will make appropriate
arrangements with its insurance carrier(s) to ensure such result.
(b) COMPENSATION ARRANGEMENTS. Following the Effective Time, the Buyer
shall honor and shall cause its subsidiaries to honor the mutual agreement of
the Seller's Bank and David L. Marsh, in accordance with Section 6.18 of this
Agreement, with respect to the Special Termination Agreement by and between
David L. Marsh and the Seller's Bank, dated as of December 30, 1986 (the
"Special Termination Agreement").
(c) CONTINUATION OF PLANS. Notwithstanding anything to the contrary
contained herein, the Buyer shall have sole discretion with respect to the
determination as to whether or when to terminate, merge or continue any employee
benefit plans and programs of the Seller, the Seller's Bank or any of the
Subsidiaries; provided, however, that the Buyer shall continue to
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maintain the such plans (other than stock based or incentive plans or stock
funds in retirement plans) until the Seller Employees are permitted to
participate in the Buyer's or its Affiliates plans.
(d) SEVERANCE OBLIGATIONS. Employees of the Seller or the Seller's Bank
whose employment is terminated on or within one year after the Effective Time
will be provided with severance benefits to the extent as provided in Exhibit II
hereto.
(e) PARACHUTE PAYMENTS. Notwithstanding anything to the contrary
contained in this Agreement, in no event shall the Seller or any of the
Subsidiaries 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.
(f) RETENTION PAYMENTS. The Seller or the Seller's Bank shall pay to
those employees of the Seller's Bank designated by the mutual agreement of the
Seller and the Buyer retention payments not to exceed in the aggregate the
amount set forth in Exhibit II hereto. Such payments shall be payable at such
time and shall be allocated among such employees as mutually agreed by the
Seller and the Buyer, as promptly as practical after the date hereof.
SECTION 6.09. DIRECTORS' AND OFFICERS' INSURANCE.
(a) The Buyer 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 Seller
(provided that the Buyer may substitute therefor policies of at least the same
coverage containing terms and conditions which are not materially less
favorable) with respect to matters occurring prior to the Effective Time;
provided, however, that in no event shall the Buyer be required to expend
pursuant to this Section 6.09(a) more than the amount equal to 150% of the
current annual amount expended by the Seller to maintain or procure insurance
coverage pursuant hereto. In connection with the foregoing, the Seller 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) The Buyer agrees to indemnify current and former directors or
officers of the Seller to the same extent that such directors or officers are
entitled to indemnification as of the date of this Agreement under the Seller's
Articles of Organization and/or By-laws to the full extent permitted under
applicable law for a period of six years from the Effective Time, provided that
in the event that any claim is asserted or made by such current or former
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 6.09 are specifically for the benefit of those
present and former directors and officers entitled to indemnification as of the
date of this Agreement under the Seller's By-Laws.
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(c) In the event that the Buyer or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving bank or entity of such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets to any person,
then, and in each such case, proper provision shall be made so that the
successors and assigns of the Buyer shall assume the obligations set forth in
this Section 6.09.
SECTION 6.10. FINANCIAL AND OTHER STATEMENTS. Notwithstanding anything
to the contrary in Section 6.02, during the term of this Agreement, the Seller
shall provide to the Buyer 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 Seller will deliver to the Buyer the Seller Bank's
quarterly Call Report as filed with the appropriate Bank Regulator. 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 Seller will deliver to the Buyer the Seller Bank's consolidated and
audited financial statements for the fiscal year then ended.
(b) Promptly upon receipt thereof, the Seller will furnish to
the Buyer copies of all internal control reports submitted to the
Seller or the Seller's Bank by independent auditors in connection with
each annual, interim or special audit of the books of the Seller or the
Seller's Bank made by such auditors.
(c) As soon as practicable, the Seller and the Seller's Bank
will furnish to the Buyer copies of all such financial statements and
reports as they shall send to their stockholder(s), the Massachusetts
Commissioner, the FDIC, the FRB, 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 under applicable
laws and regulations.
(d) With reasonable promptness, the Seller and the Seller's
Bank will furnish to the Buyer such additional financial data as the
Buyer may reasonably request.
SECTION 6.11. FURTHER ACTION. The Buyer and the Seller each shall, and
shall cause their subsidiaries to, use 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 Merger and, subject to the conditions set forth
in Article VII hereof, to consummate the transactions contemplated by this
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 Seller or the Buyer or any of their respective subsidiaries in connection
with the Merger and any of the other transactions contemplated by this
Agreement.
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SECTION 6.12. PUBLIC ANNOUNCEMENTS. Except as otherwise required by law
or the rules of Nasdaq, so long as this Agreement is in effect, neither the
Buyer nor the Seller shall, or shall they permit any of their subsidiaries to,
issue or cause the publication of any press release or other public announcement
with respect to, or otherwise make any public statement concerning, the
transactions contemplated by this Agreement without the consent of the other
party, which consent shall not be unreasonably withheld.
SECTION 6.13. 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 to vest the Surviving Corporation with full title
to all properties, assets, rights, approvals, immunities and franchises of any
of the parties to the 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 the Buyer.
SECTION 6.14. UPDATE OF DISCLOSURE SCHEDULES. From time to time prior
to the Effective Time, the Seller will promptly supplement or amend the Seller
Disclosure Schedule to reflect any matter which, if existing, occurring or known
at the date of this Agreement, would have been required to be set forth or
described in the Seller Disclosure Schedule or which is necessary to correct any
information in the Seller Disclosure Schedule which has been rendered inaccurate
thereby. No supplement or amendment to the Seller Disclosure Schedule shall have
any effect for the purpose of determining satisfaction of the conditions set
forth in Section 7.02(a) hereof, as the case may be, or the compliance by the
Seller with the covenants set forth in Articles V and VI hereof.
SECTION 6.15. CURRENT INFORMATION.
(a) During the period from the date of this Agreement to the Effective
Time, the Seller will cause one or more of its designated representatives (i) to
confer on a regular and frequent basis (at least monthly) with representatives
of Buyer to report on (x) the general status of the ongoing operations of the
Seller and the Seller's Bank, (y) the status of, and the action proposed to be
taken with respect to, those Loans held by the Seller or the Seller's Bank
which, either individually or in combination with one or more other Loans to the
same borrower thereunder, have an aggregate original 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 by the Seller or the Seller's Bank, and (ii) to
cooperate and communicate with respect to the manner in which the business of
the Seller and the Seller's Bank is conducted, including but not limited to, the
disposition of certain assets after the Effective Time, the type and mix of
products and services, personnel matters, branches, the granting of credit, and
problem loan management, reserve adequacy, securities investments and
accounting. During the period from the date of this Agreement to the Effective
Time, the Seller and the Seller's Bank shall provide the Buyer with sufficient
information to review new extensions of credit, renewals and restructurings
having an original principal amount of $200,000 and information detailing
overall asset quality. The Seller shall also ensure that the Seller's Bank
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allows the Buyer to designate one of its officers to attend the Seller's Bank
credit committee meetings and be a non-voting attendee thereof.
(b) The Seller and the Seller's Bank will promptly notify the Buyer of
any material change in the normal course of business or in the operation of the
properties of the Seller or the Seller's Bank and of any governmental
complaints, investigations or hearings (or communications indicating that the
same may be contemplated), or the institution or the threat of litigation
involving them and will keep the Buyer reasonably informed of such events.
(c) To the extent not covered by paragraphs (a) and (b) above, the
Seller and the Seller's Bank shall give prompt notice to the Buyer, and the
Buyer shall give prompt notice to the Seller, 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 contained in this
Agreement to be untrue or inaccurate in any material respect, and (ii) any
failure of the Seller, the Seller's Bank or the Buyer, 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; provided, however, that the delivery of
any notice pursuant to this paragraph (c) shall not limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
SECTION 6.16. DIRECTORS OF SELLER'S BANK. As sole stockholder of
Seller's Bank immediately following the Effective Time, the Buyer agrees to
ensure that the Directors of the Seller's Bank immediately prior to the
Effective Time shall be the Directors of the Seller's Bank for a period of one
year following the Effective Time; provided, however, that immediately following
the Effective Time, the number of members of the Board of Directors of the
Seller's Bank shall be expanded by one member and the vacancy so created shall
immediately thereafter be filled by a person designated by the Buyer. The Seller
and the Buyer agree to cause the Seller's Bank to hold regular meetings of its
Board of Directors not more than one time per month. Loan Committee meetings,
which shall not be considered meetings of the Board of Directors, may be held as
frequently as the Seller's Bank deems appropriate.
SECTION 6.17. TERMINATION OF EMPLOYMENT AGREEMENT. The Seller agrees to
cause the Seller's Bank to cause the Employment Agreement by and between David
L. Marsh and the Seller's Bank, dated as of January 1, 1993 (the "Current
Employment Agreement") to be terminated by the mutual written agreement of the
parties thereto prior to the Effective Time.
SECTION 6.18. TERMINATION OF SPECIAL TERMINATION AGREEMENT. The Seller
agrees to cause the Special Termination Agreement to be terminated by the mutual
written agreement of the parties thereto prior to the Effective Time, which such
mutual agreement shall include as its only ongoing obligation a provision
accelerating the payment contemplated by Section 4 of the Special Termination
Agreement and providing for the payment to Mr. Marsh of such amount, by check,
within three (3) business days of the Effective Time.
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SECTION 6.19. EMPLOYMENT AGREEMENTS. The Seller agrees to cause the
Seller's Bank to execute and deliver and to cause David L. Marsh and Rick
Edelstein to execute and deliver prior to the Effective Time employment
agreements in the forms attached hereto as Exhibit III and Exhibit IV,
respectively (the "Employment Agreements").
SECTION 6.20. VOTING AGREEMENTS. The Seller agrees to cause each of its
directors and officers to execute and deliver (individually, and to the extent
applicable in their respective capacities as trustee) concurrently with the
execution of this Agreement or within twenty-one (21) days thereafter, a voting
agreement in the form of Exhibit V hereto.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE
MERGER. The respective obligation of each party to effect the Merger shall be
subject to the 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 Seller to the extent
required by Massachusetts Law and the Articles of Organization of the
Seller;
(b) NASDAQ LISTING. The shares of Buyer Common Stock which
shall be issued to shareholders of the Seller upon consummation of the
Merger shall have been authorized for listing on the Nasdaq, subject to
official notice of issuance.
(c) REGULATORY APPROVALS. All necessary approvals,
authorizations and consents of all Governmental Entities required to
consummate the 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").
(d) S-4. The S-4 shall have become effective under the
Securities Act and no stop order suspending the effectiveness of the
S-4 shall have been issued and no proceedings for that purpose shall
have been initiated or threatened by the SEC.
(e) 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 Merger or any of the other
transactions contemplated by this
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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 Merger or any of the other transactions
contemplated by this Agreement.
SECTION 7.02. CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligation of
the Buyer to effect the Merger is also subject to the satisfaction or waiver by
the Buyer at or prior to the Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of the Seller 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, it being understood that such representations and
warranties shall be deemed to be true and correct in all material
respects unless the failure or failures of such representations and
warranties to be so true and correct represent, either individually or
in the aggregate, a Material Adverse Effect on the Seller, provided,
however, that for purposes of determining satisfaction of this
condition, no effect shall be given to an exception in such
representations and warranties relating to materiality, a Material
Adverse Effect or the knowledge of the Seller. The Buyer shall have
received a certificate to such effect signed by the Chief Executive
Officer and the Chief Financial Officer of the Seller dated as of the
Effective Date.
(b) AGREEMENTS AND COVENANTS. The Seller shall have performed
in all material respects all obligations and complied in all material
respects with all agreements or covenants of the Seller to be performed
or complied with by it at or prior to the Effective Date under the this
Agreement, and the Buyer shall have received a certificate to such
effect signed by the Chief Executive Officer and Chief Financial
Officer of the Seller dated as of the Effective Date.
(c) CONSENTS UNDER AGREEMENTS. The Seller and the Seller's
Bank shall have obtained any and all material permits, authorizations,
consents, waivers, clearances or approvals required to be obtained by
the Seller or the Seller's Bank for the lawful consummation of the
Merger by the Seller.
(d) NO BURDENSOME CONDITION. None of the Requisite Regulatory
Approvals shall impose any term, condition or restriction upon the
Buyer, the Seller, the Surviving Corporation, or any of their
respective subsidiaries that would, in the good faith reasonable
judgment of the Board of Directors of the Buyer, materially and
adversely affect the
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business, operations, financial conditions, property or assets of the
combined enterprise or of the Seller or the Seller's Bank or otherwise
materially impair the value of the Seller or the Seller's Bank to the
Buyer; provided, however, that no term condition or restriction that
relates primarily to regulatory matters existing at the date hereof
with respect to the pre-Merger business or activities of the Buyer or
any of its subsidiaries shall be deemed to affect the business,
operations, financial condition, property or assets of the combined
enterprise or of the Seller or the Seller's Bank or otherwise
materially impair the value of the Seller to the Buyer.
(e) ACCOUNTANT'S LETTER. The Seller shall have caused to be
delivered to the Buyer letters from Shatswell MacLeod & Company,
independent public accountants with respect to the Seller, dated the
date on which the S-4 or last amendment thereto shall become effective,
and dated the date of the Closing, and addressed to the Buyer and the
Seller, with respect to the Seller's consolidated financial position
and results of operations, which procedures shall be consistent with
applicable professional standards for letters delivered by independent
accountants in connection with comparable transactions.
(f) INVESTMENT BANKER OPINION. The Buyer shall have received a
copy of the opinion of the Seller's Investment Banker, dated as of the
date of this Agreement, that the Merger Consideration to be received by
the stockholders of the Seller pursuant to the Merger is fair to such
shareholders from a financial point of view.
(g) EMPLOYMENT AGREEMENT TERMINATION. The Current Employment
Agreement shall have been terminated by the mutual written agreement of
the parties thereto.
(g) SPECIAL TERMINATION AGREEMENT TERMINATION. The Special
Termination Agreement shall have been terminated by the mutual written
agreement of the parties thereto.
(h) EMPLOYMENT AGREEMENTS. The Employment Agreements shall
have been executed and delivered by the stipulated parties thereto.
SECTION 7.03. CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligations
of the Seller to effect the Merger are also subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of the Buyer 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, it being understood that such representations and
warranties shall be deemed to be true and correct in all material
respects unless the failure
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or failures of such representations and warranties to be so true and
correct represent, either individually or in the aggregate, a Material
Adverse Effect on the Buyer, provided, however, that for purposes of
determining satisfaction of this condition, no effect shall be given to
any exception in such representations and warranties relating to
materiality, a Material Adverse Effect or the knowledge of the Buyer.
The Seller shall have received a certificate signed by the Chief
Executive Officer and Chief Financial Officer of the Buyer to such
effect dated as of the Effective Date.
(b) AGREEMENTS AND COVENANTS. The Buyer 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 Seller
shall have received a certificate signed by the Chief Executive Officer
and Chief Financial Officer of the Buyer to such effect dated as of the
Effective Date.
(c) INVESTMENT BANKER OPINION. The Seller shall have received
the opinion of the Seller's Investment Banker, dated as of the date of
this Agreement, that the Merger Consideration to be received by the
stockholders of the Seller pursuant to the Merger is fair to such
shareholders from a financial point of view.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION. This Agreement may be terminated and the
Merger and the other transactions contemplated by this 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 Seller:
(a) by mutual written consent duly authorized by the Boards of
Directors of the Buyer and the Seller;
(b) by either the Buyer or the Seller if (i) the Effective
Time shall not have occurred on or before September 30, 2000 or such
later date as the parties may have agreed upon (the "Expiration Date");
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 the Buyer or the Seller (i) ninety days after
the date on which any request or application for a regulatory approval
required to consummate the Merger shall have been denied or withdrawn
at the request or recommendation of the Governmental
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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 Merger and such order, decree, ruling or other action shall have
become final and nonappealable;
(d) by either the Buyer or the Seller (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 (for purposes
of this Section a material breach shall be deemed to be a breach which
has, either individually or in the aggregate, a Material Adverse Effect
on the party making such representations or warranties, provided, that
no effect shall be given to any qualification relating to materiality,
a Material Adverse Effect or knowledge in such representations and
warranties);
(e) by either the Buyer or the Seller (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 either the Buyer or the Seller (provided, that if the
terminating party is the Seller, the Seller shall not be in material
breach of any of its obligations under Section 6.03) if any approval of
the stockholders of the Seller required for the consummation of the
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 by the Buyer, if such meeting
of stockholders shall not have been held or shall have been canceled
prior to the Expiration Date;
(g) by the Buyer, if the Seller Board shall not have publicly
recommended to the stockholders of the Seller that such stockholders
vote in favor of the approval of this Agreement, the Merger and the
other transactions contemplated hereby or shall have withdrawn or
modified such recommendation in a manner adverse to the Buyer; or
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(h) by the Seller pursuant to the provisions of Section 2.06
hereof.
SECTION 8.02. EFFECT OF TERMINATION; EXPENSES.2
(a) In the event of the termination of this Agreement pursuant to
Section 8.01, this Agreement shall forthwith become void (except as set forth in
Section 9.03), and there shall be no liability on the part of any party hereto,
except (i) each party shall remain liable in any action at law or otherwise for
any liabilities or damages arising out of its gross negligence or willful breach
of any provision of this Agreement, and (ii) as otherwise provided in this
Section 8.02.
(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 (but in no event in
an amount in excess of $450,000), 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 available to the parties hereto at law or in equity.
(c) As a condition of the Buyer's willingness, and in order to induce
the Buyer, to enter into this Agreement and to reimburse the Buyer for incurring
the damages, costs and expenses related to entering into this Agreement and
consummating the transactions contemplated by this Agreement, the Seller will
make a cash payment to the Buyer of $800,000 (the "Special Payment") if and only
if:
(i) (x) the Buyer or the Seller has terminated this
Agreement pursuant to Section 8.01(f), or (y) the
Buyer has terminated this Agreement pursuant to
Section 8.01(g), or (z) the Buyer has terminated this
Agreement pursuant to Sections 8.01(d) or 8.01(e) and
the breach of the representation, warranty, covenant
or agreement under Sections 8.01(d) or 8.01(e) was
caused by the willful conduct or gross negligence of
the Seller, and
(ii) (x) within twelve months of any such termination or
other event specified in (i) above, (A) the Seller or
the Seller's Bank shall have entered into an
agreement to engage in an Acquisition Transaction (as
defined below) with any person other than the Buyer
or any affiliate of the Buyer or (B) the Seller 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 Seller
authorize, approve or accept any Acquisition
Transaction with any person other than the Buyer or
any affiliate of the Buyer, or (y) in the case of
Sections 8.01(f) or 8.01(g), at the time of such
termination or event giving
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rise to such termination, it shall have been publicly
announced that any person (other than the Buyer or
any affiliate of the Buyer) shall have (A) made, or
disclosed an intention to make, a bona fide 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.
Any payment required under this Section 8.02(c) will be (i) payable by
the Seller to the Buyer (by wire transfer of immediately available funds to an
account designated by the Buyer) within five business days after demand by the
Buyer and (ii) net of any other payments made by the Seller to the Buyer
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), 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 Seller, the
Seller's Bank or any of their Subsidiaries, (ii) the disposition, by sale,
lease, exchange or otherwise, of assets of the Seller, the Seller's Bank or any
of their Subsidiaries representing 24.9% or more of the consolidated assets of
the Seller, the Seller's Bank and 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
representing 24.9% or more of the voting power of the Seller, the Seller's Bank
or any of their Subsidiaries, (iv) any person (other than the Buyer or any
affiliate of the Buyer) 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 Seller Common Stock such that, upon consummation of such
offer, such person would own or control 24.9% or more of the then outstanding
shares of Seller Common Stock, or (v) any person (other than the Buyer or any
affiliate of the Buyer) 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, 24.9% or more of
the then outstanding shares of Seller Common Stock.
(d) Except as otherwise provided in this Section 8.02, all
costs and expenses incurred in connection with this 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 amount or change the
type of consideration into which each share of Seller Common Stock shall
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be converted upon consummation of the 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 Seller 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
Merger delivered to the Seller'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 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 Sections 7.01 (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, the Buyer
shall be entitled to revise the structure of the 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 Seller and its
stockholders as a result of the modification; (ii) the consideration to be paid
to the holders of shares of Seller Common Stock under this Agreement is not
thereby changed in kind or reduced in amount; (iii) there are no material
adverse changes to the benefits and other arrangements provided to or on behalf
of the Seller's directors, officers and other employees; and (iv) such
modification will not be likely to delay materially or jeopardize receipt of any
required regulatory approvals or other consents and approvals relating to the
consummation of the Merger. This Agreement and any related documents shall be
appropriately amended in order to reflect any such revised structure.
55
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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 6.08, 6.09 and 6.16 shall survive the
Effective Time indefinitely and those set forth in Section 6.02(c) and in
Sections 6.02(e), 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 the Buyer:
Andover Bancorp, Inc.
61 Main Street
Andover, Massachusetts 01810
Facsimile: (978) 475-3200
Attention: Gerald T. Mulligan
President and Chief Executive Officer
with a copy to:
Goodwin, Procter & Hoar
One Exchange Place
Boston, Massachusetts 02109
Facsimile: (617) 523-1231
Attention: Regina M. Pisa, P.C.
Paul W. Lee, P.C.
if to the Seller:
GBT Bancorp
2 Harbor Loop
Post Office Box 30
Gloucester, Massachusetts 01930-0030
Facsimile: (978) 283-5072
Attention: David L. Marsh
President and Chief Executive Officer
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with a copy to:
Foley Hoag & Eliot LLP
One Post Office Square
Boston, Massachusetts 02109
Facsimile: (617) 832-7000
Attention: Peter W. Coogan, 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 person (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 of Seller Common
Stock 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 defined 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
FDIC 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 banks are not
required or authorized to close in the City of Boston;
(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 Seller shall mean
knowledge of the Seller or its subsidiaries and as used herein in the context of
the Buyer shall mean knowledge of the Buyer or its subsidiaries.
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<PAGE> 63
(f) "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
(g) "subsidiary" or "subsidiaries" of the Surviving Corporation, the
Buyer, the Seller 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 Schedules and Exhibits) and the Stock Option Agreement 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 (other than Section 6.08), 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.
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
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions 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.
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SECTION 9.11. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Massachusetts
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 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. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." The phrases "the date of this Agreement," "the
date hereof" and terms of similar import, unless the context otherwise requires,
shall be deemed to be January 26, 2000.
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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<PAGE> 65
IN WITNESS WHEREOF, the Buyer and the Seller 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.
ANDOVER BANCORP, INC.
By:
Title: President and Chief Executive
Officer
Attest:
By:
Secretary Title: Chief Financial Officer and
Treasurer
GBT BANCORP
By:
Title: President and Chief Executive
Officer
Attest:
By:
Secretary Title: Treasurer
60
<PAGE> 1
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of January 26, 2000, between GBT
BANCORP, a Massachusetts corporation ("ISSUER"), and ANDOVER BANCORP, INC., a
Delaware corporation ("GRANTEE").
WITNESSETH:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger of even date herewith (the "MERGER AGREEMENT"), which agreement has been
executed by the parties hereto immediately prior to this Agreement; and
WHEREAS, as a condition to Grantee's entering into the Merger Agreement
and in consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "OPTION") to purchase, subject to the terms hereof, up to 157,483
fully paid and nonassessable shares of Issuer's Common Stock, no par value per
share ("COMMON STOCK"), at a price of $20.50 per share (the "OPTION PRICE");
PROVIDED FURTHER that in no event shall the number of shares of Common Stock for
which this Option is exercisable exceed 19.9% of the Issuer's issued and
outstanding shares of Common Stock without giving effect to any shares subject
to or issued pursuant to the Option. The number of shares of Common Stock that
may be received upon the exercise of the Option and the Option Price are subject
to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement), the number of shares of Common Stock subject
to the Option shall be increased so that, after such issuance, it equals 19.9%
of the number of shares of Common Stock then issued and outstanding without
giving effect to any shares subject or issued pursuant to the Option. Nothing
contained in this Section 1(b) or elsewhere in this Agreement shall be deemed to
authorize Issuer or Grantee to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, and from time to time, if, but only if, both an Initial
Triggering Event (as hereinafter defined) and a Subsequent Triggering Event (as
hereinafter defined) shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined); PROVIDED THAT the Holder shall have
sent the written notice of such exercise (as provided in subsection (e) of this
Section 2) within 100 days following such Subsequent Triggering Event. Each of
the following shall be an "Exercise Termination Event": (i) the Effective Time
(as defined in the Merger Agreement) of the Merger; (ii) termination of the
Merger Agreement in accordance with the provisions thereof if such termination
occurs prior to the occurrence of an Initial
<PAGE> 2
Triggering Event except a termination by Grantee pursuant to Sections 8.01(d) or
8.01(e) of the Merger Agreement (unless the breach by Issuer giving rise to such
right of termination is non-volitional); or (iii) the passage of twelve months
after termination of the Merger Agreement if such termination follows the
occurrence of an Initial Triggering Event or is a termination by Grantee
pursuant to Sections 8.01(d) or 8.01(e) of the Merger Agreement (unless the
breach by Issuer giving rise to such right of termination is non-volitional).
The "Last Triggering Event" shall mean the last Initial Triggering Event to
expire. The term "Holder" shall mean the holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an "ISSUER
SUBSIDIARY"), without having received Grantee's prior written consent, shall
have entered into an agreement to engage in an Acquisition Transaction (as
hereinafter defined) with any person (the term "person" for purposes of this
Agreement having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3)
of the Securities Exchange Act of 1934, as amended (the "1934 ACT"), and the
rules and regulations thereunder) other than Grantee or any of its Subsidiaries
(each a "GRANTEE SUBSIDIARY") or the Board of Directors of Issuer shall have
recommended that the stockholders of Issuer approve or accept any Acquisition
Transaction or shall have failed to publicly oppose an Acquisition Transaction,
in each case with any person other than Grantee or a Grantee Subsidiary. For
purposes of this Agreement, "Acquisition Transaction" shall mean (w) a merger or
consolidation, or any similar transaction, involving Issuer or any Significant
Subsidiary (as defined in Rule 1-02 of Regulation S-X promulgated by the
Securities and Exchange Commission (the "SEC") of Issuer, (x) a purchase, lease
or other acquisition of all or a substantial portion of the assets of Issuer or
any Significant Subsidiary of Issuer, (y) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
securities representing 10% or more of the voting power of Issuer or any
Significant Subsidiary of Issuer, or (z) any substantially similar transaction;
PROVIDED, HOWEVER, that in no event shall any (i) merger, consolidation, or
similar transaction involving Issuer or any Significant Subsidiary in which the
voting securities of Issuer outstanding immediately prior thereto continue to
represent (by either remaining outstanding or being converted into the voting
securities of the surviving entity of any such transaction) at least 65% of the
combined voting power of the voting securities of the Issuer or the surviving
entity outstanding immediately after the consummation of such merger,
consolidation, or similar transaction, or (ii) any merger, consolidation,
purchase or similar transaction involving only the Issuer and one or more of its
Subsidiaries or involving only any two or more of such Subsidiaries, be deemed
to be an Acquisition Transaction, PROVIDED any such transaction is not entered
into in violation of the terms of the Merger Agreement;
(ii) Issuer or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized, recommended, proposed or
publicly
2
<PAGE> 3
announced its intention to authorize, recommend or propose, to engage in an
Acquisition Transaction with any person other than Grantee or a Grantee
Subsidiary, or the Board of Directors of Issuer shall have publicly withdrawn or
modified, or publicly announced its intention to withdraw or modify, in any
manner adverse to Grantee, its recommendation that the stockholders of Issuer
approve the transactions contemplated by the Merger Agreement;
(iii) The shareholders of Issuer shall have voted and failed to
approve and adopt the Merger Agreement and the Merger at a meeting which has
been held for that purpose or any adjournment or postponement thereof, or such
meeting shall not have been held in violation of the Merger Agreement or shall
have been canceled prior to termination of the Merger Agreement if, prior to
such meeting (or if such meeting shall not have been held or shall have been
canceled, prior to such termination), any person (other than the Grantee or a
Grantee Subsidiary) shall have made a proposal to Issuer or its stockholders by
public announcement or written communication that is or becomes the subject of
public disclosure to engage in an Acquisition Transaction;
(iv) Any person other than Grantee, any Grantee Subsidiary or
any Issuer Subsidiary acting in a fiduciary capacity in the ordinary course of
its business shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 10% or more of the outstanding shares of Common Stock
(the term "beneficial ownership" for purposes of this Option Agreement having
the meaning assigned thereto in Section 13(d) of the 1934 Act, and the rules and
regulations thereunder);
(v) Any person other than Grantee or any Grantee Subsidiary
shall have made a bona fide proposal to Issuer or its stockholders by public
announcement or written communication that is or becomes the subject of public
disclosure to engage in an Acquisition Transaction;
(vi) After an overture is made by a person other than Grantee or
any Grantee Subsidiary to Issuer or its stockholders to engage in an Acquisition
Transaction, Issuer shall have breached any covenant or obligation contained in
the Merger Agreement and such breach (x) would entitle Grantee to terminate the
Merger Agreement and (y) shall not have been cured prior to the Notice Date (as
defined below); or
(vii) Any person other than Grantee or any Grantee Subsidiary,
other than in connection with a transaction to which Grantee has given its prior
written consent, shall have filed an application or notice with the Federal
Reserve Board, or other federal or state bank regulatory authority, whether in
draft or final form, for approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
3
<PAGE> 4
(i) The acquisition by any person of beneficial ownership of 20%
or more of the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
clause (i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (y) shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event
(together, a "TRIGGERING EVENT"), it being understood that the giving of such
notice by Issuer shall not be a condition to the right of the Holder to exercise
the Option.
(e) In the event the Holder is entitled to and wishes to exercise
the Option, it shall send to Issuer a written notice (the date of which being
herein referred to as the "NOTICE DATE") specifying (i) the total number of
shares it will purchase pursuant to such exercise and (ii) a place and date not
earlier than three business days nor later than 60 business days from the Notice
Date for the closing of such purchase (the "CLOSING DATE"); PROVIDED that if
prior notification to or approval of the Federal Reserve Board or any other
regulatory agency is required in connection with such purchase, the Holder shall
promptly file the required notice or application for approval and shall
expeditiously process the same and the period of time that otherwise would run
pursuant to this sentence shall run instead from the date on which any required
notification periods (including any extensions thereof) have expired or been
terminated or such approvals have been obtained and any requisite waiting period
or periods (including any extensions thereof) shall have passed. Any exercise of
the Option shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2,
the Holder shall pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer,
PROVIDED that failure or refusal of Issuer to designate such a bank account
shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder, and the Holder
shall deliver to Issuer a copy of this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing hereunder
may be endorsed with a restrictive legend that shall read substantially as
follows:
4
<PAGE> 5
"The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement between the registered holder
hereof and Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such agreement is on file
at the principal office of Issuer and will be provided to the holder
hereof without charge upon receipt by Issuer of a written request
therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 ACT"), in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions to this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference; and (iii) the legend shall be removed
in its entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may be
required by law.
(i) Upon the giving by the Holder to Issuer of the written
notice of exercise of the Option provided for under subsection (e) of this
Section 2 and the tender of the applicable purchase price in immediately
available funds, the Holder shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered to
the Holder. Issuer shall pay all expenses, and any and all United States
federal, state and local taxes and other charges that may be payable in
connection with the preparation, issue and delivery of stock certificates under
this Section 2 in the name of the Holder or its assignee, transferee or
designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all premerger notification, reporting and waiting
period requirements specified in 15 U.S.C. sec. 18a and regulations promulgated
thereunder and (y) in the event, under the Bank Holding Company Act of 1956, as
amended (the "BHCA"), or the Change in Bank Control Act of 1978, as amended, or
any state banking law, prior approval of or notice to the Federal Reserve Board
or to any other federal or state regulatory authority
5
<PAGE> 6
is necessary before the Option may be exercised, cooperating fully with the
Holder in preparing such applications or notices and providing such information
to the Federal Reserve Board or such other federal or state regulatory authority
as they may require) in order to permit the Holder to exercise the Option and
Issuer duly and effectively to issue shares of Common Stock pursuant hereto; and
(iv) promptly to take all action provided herein to protect the rights of the
Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common
Stock that are purchasable upon exercise of the Option pursuant to Section 1 of
this Agreement, the number of shares of Common Stock purchasable upon the
exercise of the Option and the Option Price shall be subject to adjustment from
time to time as provided in this Section 5. In the event of any change in, or
distributions in respect of, the Common Stock by reason of stock dividends,
split-ups, mergers, recapitalizations, combinations, subdivisions, conversions,
exchanges of shares, distributions on or in respect of the Common Stock that
would be prohibited under the terms of the Merger Agreement, or the like, the
type and number of shares of Common Stock purchasable upon exercise hereof and
the Option Price shall be appropriately adjusted in such manner as shall fully
preserve the economic benefits provided hereunder and proper provision shall be
made in any agreement governing any such transaction to provide for such proper
adjustment and the full satisfaction of the Issuer's obligations hereunder.
6. The obligations set forth in this Section 6 shall apply during such
time as securities of the Issuer (or its successors or assigns) are registered
under the 1934 Act. Upon the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Event, Issuer shall, at the request of
Grantee delivered within 100 day after such Subsequent Triggering Event (whether
on its own behalf or on behalf of any subsequent holder of this Option (or part
thereof) or any of the shares of Common Stock issued pursuant hereto), promptly
prepare, file and keep current a shelf registration statement under the 1933 Act
6
<PAGE> 7
covering the resale of this Option and any shares issued pursuant to this Option
and the issuance of any shares issuable pursuant to this Option to the extent
then permitted under the rules, regulations or policies of the SEC and, to the
extent not so permitted, the resale of such shares issuable pursuant to this
Option. The Issuer shall use its reasonable best efforts to cause such
registration statement to become effective and remain current in order to permit
the sale or other disposition of this Option and any shares of Common Stock
issued upon total or partial exercise of this Option ("OPTION SHARES") in
accordance with any plan of disposition requested by Grantee. Issuer will use
its reasonable best efforts to cause such registration statement first to become
effective and then to remain effective for such period not in excess of 180 days
from the day such registration statement first becomes effective or such longer
time as may be reasonably necessary to effect such sales or other dispositions.
Grantee shall have the right to demand two such registrations. The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
the Option or Option Shares as provided above, Issuer is in registration with
respect to an underwritten public offering of shares of Common Stock, and if in
the good faith judgment of the managing underwriter or managing underwriters,
or, if none, the sole underwriter or underwriters, of such offering, the
inclusion of the Holder's Option or Option Shares would interfere with the
successful marketing of the shares of Common Stock offered by Issuer, the number
of Option Shares otherwise to be covered in the registration statement
contemplated hereby may be reduced; and PROVIDED, HOWEVER, that after any such
required reduction the number of Option Shares to be included in such offering
for the account of the Holder shall constitute at least 25% of the total number
of shares to be sold by the Holder and Issuer in the aggregate; and PROVIDED
FURTHER, however, that if such reduction occurs, then the Issuer shall file a
registration statement for the balance as promptly as practical and no reduction
shall thereafter occur. Each such Holder shall provide all information
reasonably requested by Issuer for inclusion in any registration statement to be
filed hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating itself in
respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements for the Issuer. Upon
receiving any request under this Section 6 from any Holder, Issuer agrees to
send a copy thereof to any other person known to Issuer to be entitled to
registration rights under this Section 6, in each case by promptly mailing the
same, postage prepaid, to the address of record of the persons entitled to
receive such copies. Notwithstanding anything to the contrary contained herein,
in no event shall Issuer be obligated to effect more than two registrations
pursuant to this Section 6 by reason of the fact that there shall be more than
one Grantee as a result of any assignment or division of this Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase Event (as
defined below), (i) following a request of the Holder, delivered prior to an
Exercise Termination Event, Issuer (or any successor thereto) shall repurchase
the Option from the Holder at a price (the "OPTION REPURCHASE PRICE") equal to
the amount by which (A) the market/offer price (as defined below) exceeds (B)
the Option Price, multiplied by the number of shares for which this Option may
then be exercised and (ii) at the request of the owner of Option Shares from
7
<PAGE> 8
time to time (the "OWNER") delivered within 100 days after such occurrence (or
such later period as provided in Section 10), Issuer shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "OPTION SHARE REPURCHASE PRICE") equal to the market/offer price
multiplied by the number of Option Shares so designated. The term "market/offer
price" shall mean the highest of (i) the price per share of Common Stock at
which a tender offer or exchange offer therefor has been made, (ii) the price
per share of Common Stock to be paid by any third party pursuant to an agreement
with Issuer, (iii) the highest closing price for shares of Common Stock within
the six-month period immediately preceding the date the Holder gives notice of
the required repurchase of this Option or the Owner gives notice of the required
repurchase of Option Shares, as the case may be, or (iv) in the event of a sale
of all or a substantial portion of Issuer's assets, the sum of the price paid in
such sale for such assets and the current market value of the remaining assets
of Issuer as determined by a nationally recognized investment banking firm
selected by the Holder or the Owner, as the case may be, divided by the number
of shares of Common Stock of Issuer outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking firm selected
by the Holder or Owner, as the case may be, and reasonably acceptable to the
Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and any Option Shares pursuant
to this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. Within the later to occur of (x) five business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto and (y) the time that is
immediately prior to the occurrence of a Repurchase Event, Issuer shall deliver
or cause to be delivered to the Holder the Option Repurchase Price and/or to the
Owner the Option Share Repurchase Price therefor or the portion thereof that
Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full, Issuer
shall immediately so notify the Holder and/or the Owner and thereafter deliver
or cause to be delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the Option Share
Repurchase Price, respectively, that it is no longer prohibited from delivering,
within five business days after the date on which Issuer is no longer so
prohibited; PROVIDED, HOWEVER, that if Issuer at any time after delivery of a
notice of repurchase pursuant to paragraph (b) of this Section 7 is prohibited
under applicable law or regulation from delivering to the Holder and/or the
Owner, as appropriate, the Option Repurchase Price and the Option Share
Repurchase Price, respectively, in full (and Issuer hereby undertakes to use its
best efforts to obtain all required regulatory and legal approvals and to file
any required
8
<PAGE> 9
notices as promptly as practicable in order to accomplish such repurchase), the
Holder or Owner may revoke its notice of repurchase of the Option or the Option
Shares either in whole or to the extent of the prohibition, whereupon, in the
latter case, Issuer shall promptly (i) deliver to the Holder and/or the Owner,
as appropriate, that portion of the Option Repurchase Price or the Option Share
Repurchase Price that Issuer is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to the Holder, a new Stock Option Agreement
evidencing the right of the Holder to purchase that number of shares of Common
Stock obtained by multiplying the number of shares of Common Stock for which the
surrendered Stock Option Agreement was exercisable at the time of delivery of
the notice of repurchase by a fraction, the numerator of which is the Option
Repurchase Price less the portion thereof theretofore delivered to the Holder
and the denominator of which is the Option Repurchase Price, or (B) to the Owner
a certificate for the Option Shares it is then so prohibited from repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall be
deemed to have occurred (i) upon the consummation of any merger, consolidation
or similar transaction involving Issuer or any purchase, lease or other
acquisition of all or a substantial portion of the assets of Issuer, other than
any such transaction which would not constitute an Acquisition Transaction
pursuant to the proviso to Section 2 (b) (i) hereof or (ii) upon the acquisition
by any person of beneficial ownership of 50% or more of the then outstanding
shares of Common Stock, PROVIDED THAT no such event shall constitute a
Repurchase Event unless a Subsequent Triggering Event shall have occurred prior
to an Exercise Termination Event. The parties hereto agree that Issuer's
obligations to repurchase the Option or Option Shares under this Section 7 shall
not terminate upon the occurrence of an Exercise Termination Event unless no
Subsequent Triggering Event shall have occurred prior to the occurrence of an
Exercise Termination Event.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or one of its Subsidiaries, and shall not be the continuing
or surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge into Issuer and
Issuer shall be the continuing or surviving corporation, but, in connection with
such merger, the then outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other person or cash or any
other property or the then outstanding shares of Common Stock shall after such
merger represent less than 50% of the outstanding voting shares and voting share
equivalents of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of its
Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "SUBSTITUTE
OPTION"), at the election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
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<PAGE> 10
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other than
Issuer), (ii) Issuer in a merger in which Issuer is the continuing or surviving
person, and (iii) the transferee of all or substantially all of Issuer's assets.
(2) "Substitute Common Stock" shall mean the common stock issued
by the issuer of the Substitute Option upon exercise of the Substitute Option.
(3) "Assigned Value" shall mean the market/offer price, as
defined in Section 7.
(4) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding such
consolidation, merger or sale; PROVIDED THAT if Issuer is the issuer of the
Substitute Option, the Average Price shall be computed with respect to a share
of common stock issued by the person merging into Issuer or by any company which
controls or is controlled by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to the Holder. The issuer of the Substitute Option shall
also enter into an agreement with the then Holder or Holders of the Substitute
Option in substantially the same form as this Agreement, which shall be
applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number
of shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of the Substitute
Option per share of Substitute Common Stock shall then be equal to the Option
Price multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock for which the Option is then exercisable and the
denominator of which shall be the number of shares of Substitute Common Stock
for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs,
shall the Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute Option.
In the event that the Substitute Option would be exercisable for more than 19.9%
of the shares of Substitute Common Stock outstanding prior to exercise but for
this clause (e), the issuer of the Substitute Option (the "SUBSTITUTE OPTION
ISSUER") shall make a cash payment to Holder equal to the excess of (i) the
10
<PAGE> 11
value of the Substitute Option without giving effect to the limitation in this
clause (e) over (ii) the value of the Substitute Option after giving effect to
the limitation in this clause (e). This difference in value shall be determined
by a nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to the Acquiring
Corporation.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"SUBSTITUTE OPTION HOLDER"), the issuer of the Substitute Option (the
"SUBSTITUTE OPTION ISSUER") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "SUBSTITUTE OPTION REPURCHASE PRICE")
equal to (x) the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by
the number of shares of Substitute Common Stock for which the Substitute Option
may then be exercised plus (y) Grantee's Out-of-Pocket Expenses (to the extent
not previously reimbursed), and at the request of the owner (the "SUBSTITUTE
SHARE OWNER") of shares of Substitute Common Stock (the "SUBSTITUTE SHARES"),
the Substitute Option Issuer shall repurchase the Substitute Shares at a price
(the "SUBSTITUTE SHARE REPURCHASE PRICE") equal to (x) the Highest Closing Price
multiplied by the number of Substitute Shares so designated plus (y) Grantee's
Out-of-Pocket Expenses (to the extent not previously reimbursed). The term
"Highest Closing Price" shall mean the highest closing price for shares of
Substitute Common Stock within the six-month period immediately preceding the
date the Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as
the case may be, may exercise its respective right to require the Substitute
Option Issuer to repurchase the Substitute Option and the Substitute Shares
pursuant to this Section 9 by surrendering for such purpose to the Substitute
Option Issuer, at its principal office, the agreement for such Substitute Option
(or, in the absence of such an agreement, a copy of this Agreement) and
certificates for Substitute Shares accompanied by a written notice or notices
stating that the Substitute Option Holder or the Substitute Share Owner, as the
case may be, elects to require the Substitute Option Issuer to repurchase the
Substitute Option and/or the Substitute Shares in accordance with the provisions
of this Section 9. As promptly as practicable, and in any event within five
business days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase Price
and/or to the Substitute Share Owner the Substitute Share Repurchase Price
therefor or the portion thereof which the Substitute Option Issuer is not then
prohibited under applicable law and regulation from so delivering.
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<PAGE> 12
(c) To the extent that the Substitute Option Issuer is prohibited
under applicable law or regulation from repurchasing the Substitute Option
and/or the Substitute Shares in part or in full, the Substitute Option Issuer
shall immediately so notify the Substitute Option Holder and/or the Substitute
Share Owner and thereafter deliver or cause to be delivered, from time to time,
to the Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the portion of the Substitute Share Repurchase Price, respectively,
which it is no longer prohibited from delivering, within five business days
after the date on which the Substitute Option Issuer is no longer so prohibited;
PROVIDED, HOWEVER, that if the Substitute Option Issuer is at any time after
delivery of a notice of repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or regulation from delivering to the Substitute
Option Holder and/or the Substitute Share Owner, as appropriate, the Substitute
Option Repurchase Price and the Substitute Share Repurchase Price, respectively,
in full (and the Substitute Option Issuer shall use its best efforts to receive
all required regulatory and legal approvals as promptly as practicable in order
to accomplish such repurchase), the Substitute Option Holder or Substitute Share
Owner may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, the Substitute Option Issuer shall promptly (i)
deliver to the Substitute Option Holder or Substitute Share Owner, as
appropriate, that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Option Shares it is then so prohibited
from repurchasing.
10. The 100-day period for exercise of certain rights under Sections 2,
6, 7 and 13 shall be extended: (i) to the extent necessary to obtain all
regulatory approvals for the exercise of such rights, and for the expiration of
all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly
12
<PAGE> 13
executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
(c) Issuer has taken all action (including if required redeeming all
of the Rights or amending or terminating the Rights Agreement) so that the
entering into of this Option Agreement, the acquisition of shares of Common
Stock hereunder and the other transactions contemplated hereby do not and will
not result in the grant of any rights to any person under the Rights Agreement
or enable or require the Rights to be exercised, distributed or triggered.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Grantee. This Agreement has been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or other
securities acquired by Grantee upon exercise of the Option will not be, acquired
with a view to the public distribution thereof and will not be transferred or
otherwise disposed of except in a transaction registered or exempt from
registration under the Securities Act.
13. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except
that in the event a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express provisions hereof,
may assign in whole or in part its rights and obligations hereunder within 90
days following such Subsequent Triggering Event (or such later period as
provided in Section 10); PROVIDED, HOWEVER, that until the date 15 days
following the date on which the Federal Reserve Board approves an application by
Grantee under the BHCA to acquire the shares of Common Stock subject to the
Option, Grantee may not assign its rights under the Option except in (i) a
widely dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares of
Issuer, (iii)
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<PAGE> 14
an assignment to a single party (e.g., a broker or investment banker) for the
purpose of conducting a widely dispersed public distribution on Grantee's
behalf, or (iv) any other manner approved by the Federal Reserve Board.
14. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including without limitation making application to list the
shares of Common Stock issuable hereunder on the Nasdaq National Stock Market
upon official notice of issuance and applying to the Federal Reserve Board under
the BHCA for approval to acquire the shares issuable hereunder, but Grantee
shall not be obligated to apply to state banking authorities for approval to
acquire the shares of Common Stock issuable hereunder until such time, if ever,
as it deems appropriate to do so.
15. (a) Grantee may, at any time during which Issuer would be required
to repurchase the Option or any Option Shares pursuant to Section 7, surrender
the Option (together with any Option Shares issued to and then owned by Grantee)
to Issuer in exchange for a cash fee equal to the Surrender Price (as defined
below); provided, however, that Grantee may not exercise its rights pursuant to
this Section 15 if Issuer has repurchased the Option (or any portion thereof) or
any Option Shares pursuant to Section 7. The "Surrender Price" shall be equal to
(i) $1 million, plus (ii) if applicable, the aggregate purchase price previously
paid pursuant hereto by Grantee with respect to any Option Shares, minus (iii)
if applicable, the sum of (A) the excess of (1) the net cash amounts, if any,
received by Grantee pursuant to the arms' length sale of Option Shares (or any
other securities into which such Option Shares were converted or exchanged) to
any party not affiliated with Grantee, over (2) the aggregate purchase price
previously paid pursuant hereto by Grantee with respect to such Option Shares
and (B) the net cash amounts, if any, received by Grantee pursuant to an arms'
length sale of a portion of the Option to any party not affiliated with Grantee.
(b) Grantee may exercise its right to surrender the Option and any
Option Shares pursuant to this Section 15 by surrendering to Issuer, at its
principal office, this Agreement together with certificates for Option Shares,
if any, accompanied by a written notice stating (i) that Grantee elects to
surrender the Option and Option Shares, if any, in accordance with the
provisions of this Section 15 and (ii) the Surrender Price. The Surrender Price
shall be payable in immediately available funds on or before the second business
day following receipt of such notice by Issuer.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from paying the Surrender Price to Grantee in full, Issuer shall
immediately so notify Grantee and thereafter deliver or cause to be delivered,
from time to time, to Grantee, the portion of the Surrender Price that Issuer is
no longer prohibited from paying, within five business days after the date on
which Issuer is no longer so prohibited, PROVIDED, HOWEVER, that if Issuer at
any time after delivery of a notice of surrender pursuant to paragraph (b) of
this Section 15 is
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<PAGE> 15
prohibited under applicable law or regulation from paying to Grantee the
Surrender Price in full (i) Issuer shall (A) use its reasonable best efforts to
obtain all required regulatory and legal approvals and to file any required
notices as promptly as practicable in order to make such payments, (B) within
five days of the submission or receipt of any documents relating to any such
regulatory and legal approvals, provide Grantee with copies of the same, and (C)
keep Grantee advised of both the status of any such request for regulatory and
legal approvals, as well as any discussions with any relevant regulatory or
other third party reasonably related to the same and (ii) Grantee may revoke
such notice of surrender by delivery of a notice of revocation to Issuer and,
upon delivery of such notice of revocation, the Exercise Termination Date shall
be extended to a date six months from the date on which the Exercise Termination
Date would have occurred if not for the provisions of this Section 15(c) (during
which period Grantee may exercise any of its rights hereunder, including any and
all rights pursuant to this Section 15).
(d) Grantee shall have rights substantially identical to those set
forth in paragraphs (a), (b) and (c) of this Section 15 with respect to the
Substitute Option and the Substitute Option Issuer during any period in which
the Substitute Option Issuer would be required to repurchase the Substitute
option pursuant to Section 9.
16. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
17. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5
hereof), it is the express intention of Issuer to allow the Holder to acquire or
to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
18. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
19. This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
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<PAGE> 16
20. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
21. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
22. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
23. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
* * *
16
<PAGE> 17
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
GBT BANCORP
By:_________________________________
Name: David L. Marsh
Title: President and Chief Executive
Officer
ANDOVER BANCORP, INC.
By:_________________________________
Name: Gerald T. Mulligan
Title: President and Chief Executive
Officer
17
<PAGE> 1
EXHIBIT 99.1
Immediate Media: Gerald T. Mulligan (978) 749-2211
Investors: Joseph F. Casey (978) 749-2213
ANDOVER BANCORP, INC.
ANNOUNCES PLANS TO ACQUIRE
GLOUCESTER BANK AND TRUST COMPANY
This press release contains certain statements that are forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Andover Bancorp, Inc.'s actual results could differ materially from those
projected in the forward-looking statements as a result, among other factors, of
the risk factors set forth in its filings with the Securities and Exchange
Commission and of changes in general economic conditions, changes in interest
rates and changes in the assumptions used in making such forward-looking
statements.
Andover, Massachusetts, January 27, 2000. Andover Bancorp, Inc. (NASDAQ:ANDB)
(www.AndoverBank.com) announced that it has signed a definitive agreement to
acquire GBT Bancorp, Inc. ("GBT") and its wholly-owned subsidiary, Gloucester
Bank and Trust Company ("Gloucester"), a Massachusetts-chartered commercial bank
with assets of $131.5 million. Under the terms of the agreement, Gloucester Bank
and Trust Company will continue to operate, under its own name, as a commercial
bank subsidiary of Andover Bancorp, Inc.
"Andover Bank ("Andover") and Gloucester Bank and Trust Company are ideal
partners," stated Gerald T. Mulligan, Andover's CEO. "We are both
customer-focused community banks with headquarters and operations in Essex
County. Andover will benefit by Gloucester's success as a community commercial
bank while Gloucester will benefit from Andover's expertise in residential and
construction lending. Andover has been successful in growing its commercial loan
and deposit base; the combination with Gloucester will further that goal. In
addition, Gloucester's lower cost deposits should benefit the combined interest
margin."
David Marsh, President of Gloucester Bank and Trust, stated, "We are extremely
pleased to join Andover. Andover Bank is an excellent, highly profitable
community bank, with a solid reputation, and an outstanding array of
complementary products and services."
Mr. Mulligan also stated, "I am grateful that the Directors of Gloucester have
agreed to continue to serve the Bank, its customers and community. Additionally,
I am pleased that David Marsh, an original organizer of the Bank and central to
its success, will continue as CEO."
Continued........
<PAGE> 2
Under the terms of the agreement, GBT shareholders may elect to receive cash of
$20.50 per share or .7543 shares of Andover Bancorp, Inc. common stock, or a
combination thereof to the extent available. Based on yesterday's closing price
of $26.75 per share of Andover Bancorp common stock, the transaction has a total
value of approximately $16.2 million of which $8.1 million will be paid in cash.
This price represents a deposit premium of 7.4%.
In accordance with the agreement, GBT granted Andover Bancorp an option to
acquire, under certain terms and conditions, up to 19.9% of GBT's common stock
at $20.50 per share. The option was granted as an inducement for Andover to
enter into the agreement. The purchase, which is expected to be completed late
in the second quarter of 2000, is subject to approval by GBT's shareholders as
well as state and federal banking regulators. To the extent that they receive
Andover Bancorp shares, the transaction is expected to be tax free to GBT
shareholders.
Andover Bancorp, Inc. is the holding company parent of Andover Bank. Andover
Bank is a Massachusetts-chartered savings bank organized in 1834 and
headquartered in Andover, Massachusetts, approximately 25 miles north of
downtown Boston. Andover Bank operates 12 banking offices in Andover, Lawrence,
Methuen, North Andover and Tewksbury, Massachusetts, as well as Salem and
Londonderry, New Hampshire.
ANDOVER/GLOUCESTER
FACT SHEET
(INFORMATION AS OF DECEMBER 31, 1999)
<TABLE>
<CAPTION>
ANDOVER BANCORP, INC. GBT BANCORP
--------------------- -----------
<S> <C> <C>
Total Assets $1,491.1 million $131.2 million
Total Deposits $ 968.5 million $103.6 million
Net Loans $1,121.7 million $ 88.9 million
Shareholders' Equity $ 130.3 million $ 8.4 million
Net Income $ 18.9 million $ .7 million
Earnings per Share Diluted $ 2.82 $ 0.92
</TABLE>
