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Rule Number: 424(b)(3)
Registration Number: 33-51993
New Dartmouth Bank
P.O. Box 9524
Manchester, NH 03108-9524
(LOGO OF NEW DARTMOUTH BANK APPEARS HERE) Telephone 603/634-1500
February 4, 1994
Dear Fellow Stockholders:
In December 1993, New Dartmouth Bank ("New Dartmouth") and Shawmut
National Corporation ("SNC") amended the Merger Agreement (defined below) to
provide for, among other things, an extension of time until June 30, 1994 for
SNC to complete its proposed acquisition of New Dartmouth. In exchange for the
extension of time, SNC agreed to increase the amount of consideration that
holders of New Dartmouth common stock will receive upon consummation of the
Merger. The Merger Agreement was amended because on November 15, 1993 the
Board of Governors of the Federal Reserve System, in a tie vote, declined to
approve SNC's application to acquire New Dartmouth. Because SNC was unable to
obtain by November 15, 1993 all regulatory approvals necessary to consummate
the Merger, New Dartmouth had the right to abandon the Merger Agreement. In
addition, the Federal Reserve Board's action meant, as a practical matter,
that it was unlikely the Merger could be consummated on or before December 31,
1993 as originally contemplated.
The changes to the Merger Agreement require the approval of New Dartmouth
stockholders. You are cordially invited to attend a Special Meeting of
Stockholders of New Dartmouth on March 9, 1994 beginning at 2:00 p.m. local
time, at which New Dartmouth stockholders will be asked to approve and adopt
the Agreement and Plan of Merger, as amended (the "Merger Agreement') and the
related Contract for Union, as amended. As I previously reported to you, the
approval of the Merger Agreement and Contract for Union at the Special Meeting
of Stockholders held on August 26, 1993 was nearly unanimous, with the 97% of
New Dartmouth common stock that was represented at the meeting having been
voted in favor.
The accompanying Proxy Statement/Prospectus is very similar to the July
23, 1993 version that was distributed in connection with the 1993 Special
Meeting. The basic structure of the proposed Merger remains the same. SNC will
acquire New Dartmouth through the merger (the "Merger") of New Dartmouth with
a wholly owned subsidiary of SNC. Upon consummation of the Merger, you will
receive for each share of New Dartmouth common stock which you own at the
effective time of the Merger a number of shares of SNC common stock as shall
be equal to the Exchange Ratio (as such term is defined in the accompanying
Proxy Statement/Prospectus). The principal change to the Merger Agreement is a
modification of the manner in which the Exchange Ratio will be calculated. The
modification will have the effect of increasing the price SNC will pay for
each share of New Dartmouth common stock. The Merger Agreement previously was
designed to provide $310 in value of SNC common stock for each share of New
Dartmouth. As amended, the Merger Agreement now provides for an escalating
purchase price based upon New Dartmouth's earnings from October 1, 1993.
Under the revised Exchange Ratio formula, a base price of $310.95 will be
increased by 177.0% of New Dartmouth's net earnings per share from October 1,
1993 to the closing, subject to certain adjustments. For purposes of
calculating New Dartmouth's net earnings per share, all shares subject to
warrants and options will be deemed to be outstanding. The increase in the
base price to $310.95 over the previous price per share of $310.00 is intended
to reflect the after-tax amount of the reimbursable out-of-pocket expenses
that SNC would have been obligated to pay to New Dartmouth under the terms of
the original Merger Agreement if the Merger had been abandoned because of
SNC's failure to obtain all necessary regulatory approvals on or before
November 15, 1993. For a tabular presentation of possible Exchange Ratios
under the amended formula at several hypothetical levels of adjusted net
earnings from October 1, 1993, please refer to the section of the Proxy
Statement/Prospectus titled "THE MERGER -- Exchange Ratio."
The other significant change in the financial terms of the Merger
Agreement is that the "collar" and "cap" (which were referred to as the
Minimum and Maximum Exchange Ratios in the July 23, 1993 Proxy
Statement/Prospectus) have been reset to $17.11 and $23.14, respectively (from
$19,975 and $27,025, respectively). If the Average Closing Price (as defined
in the accompanying Proxy Statement/Prospectus) of SNC common stock exceeds
$23.14, the Average Closing Price will be deemed to be $23.14 for purposes of
computing the Exchange Ratio. Moreover, pursuant to the December amendment to
the Merger Agreement, SNC no longer has the right to refuse to proceed with
the Merger if the Average Closing Price exceeds the "cap." Conversely, if the
Average Closing Price is below $17.11, the Average Closing Price will be
deemed to be $17.11 for purposes of calculating the Exchange Ratio, but New
Dartmouth still has the right not to proceed with the Merger if the Average
Closing Price is less than $17.11, unless SNC waives the benefit of the
"collar."
The amended Merger Agreement also permits New Dartmouth to increase the
amount of retention bonuses to New Dartmouth employees, allows New Dartmouth
to issue up to $20.0 million of non-convertible preferred stock (provided the
issuance of such preferred stock does not prevent the satisfaction of any
conditions to consummation of the Merger), and permits New Dartmouth to
exercise slightly greater discretion in making certain operating decisions
pending the Merger. Each of these changes is described in greater detail in
the accompanying Proxy Statements/Prospectus under the captions "THE
MERGER--Conduct of Business Pending the Merger" and "Walver and Amendment:
Abandonment."
Your Board of Directors believes the Merger under the terms of the
amended Merger Agreement is in the best interest of New Dartmouth and its
stockholders, and recommends unanimously that you vote FOR its approval. For
information concerning the factors which the Board considered in making its
recommendation, please read carefully the sections in the enclosed Proxy
Statement/Prospectus titled "THE MERGER-Background of the Merger," and
"-Recommendation of the New Dartmouth Board; Reasons for the Merger." Approval
of the Merger requires the affirmative vote of the holders of at least 66 2/3%
of all of the outstanding shares of New Dartmouth common stock and preferred
stock, voting together as a single class, which affirmative vote must include
the approval of the holders of majority of the outstanding shares of New
Dartmouth common stock.
For your convenience, we have also included a copy of SNC's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1993.
We urge you to read the enclosed materials carefully. Should you have
questions concerning the upcoming meeting, please call either me (at (603)
634-1400) of Dennis Beaulieu, Senior Vice President and Chief Financial
Officer (at (603) 634-1490).
Please complete and sign the enclosed proxy card and return it as soon as
possible in the enclosed postage paid envelope so that your shares will be
represented at the Special Meeting. It is important that your shares be
represented at the Special Meeting, whether or not you plan to attend
personally.
Sincerely,
Robert P. Keller
President and Chief Executive Officer
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 9, 1994
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of New
Dartmouth Bank ("New Dartmouth") will be held at 1155 Elm Street, 3rd Floor,
Manchester, New Hampshire on Wednesday, March 9, 1994, beginning at 2:00
p.m., local time (the "Special Meeting"), for the following purposes, all of
which are more fully described in the accompanying Proxy Statement/Prospectus:
1. To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Merger, dated as of March 23, 1993, as amended by Amendment No.
1 dated as of July 21, 1993 and Amendment No. 2 dated as of December 20,
1993 (the "Merger Agreement"), between New Dartmouth and Shawmut National
Corporation ("SNC"), a Contract for Union and the procedures and
transactions contemplated thereby, including the submission of a petition
for union to the Bank Commissioner of the State of New Hampshire (or,
alternatively, a petition for a decree from the New Hampshire Superior
Court), the merger (the "Merger") of a wholly owned subsidiary of SNC with
New Dartmouth and the issuance of shares of common stock, par value $.01
per share, of SNC to the holders of shares of common stock, par value $.01
per share, of New Dartmouth ("New Dartmouth Common Stock") in connection
therewith (the "Merger Proposal"). The Merger Agreement and Contract for
Union are set forth in Annex A and Annex B, respectively, of the
accompanying Proxy Statement /Prospectus.
2. To transact such other business as may properly come before the Special
Meeting or any adjournments or postponements thereof.
The New Dartmouth Board of Directors has fixed the close of business on
February 4, 1994 as the record date for the determination of stockholders
entitled to notice of and to vote at the Special Meeting and any adjournments or
postponements thereof. Only holders of record of New Dartmouth Common Stock and
preferred stock at the close of business on such date are entitled to notice of
and to vote at the Special Meeting. A list of New Dartmouth stockholders
entitled to vote at the Special Meeting will be available, during ordinary
business hours, at New Dartmouth's executive offices, 1155 Elm Street,
Manchester, New Hampshire, 03101, for 10 days prior to the Special Meeting for
examination by any New Dartmouth stockholder for purposes germane to the Special
Meeting.
Holders of New Dartmouth Common Stock have a right to dissent from the
Merger and, if the Merger is consummated, to obtain payment for their shares by
complying with the provisions of New Hampshire Revised Statutes Annotated
("RSA") 388:13 and RSA 293-A:13.01 through RSA 293-A:13.31. Copies of the
foregoing sections of the RSA are attached as Annex H to the accompanying Proxy
Statement/Prospectus. SNC will not be obligated to consummate the Merger if the
holders of more than 7.5% of New Dartmouth Common Stock have perfected and not
abandoned their statutory dissenters' rights.
Your vote is important regardless of the number of shares you own. Each
stockholder, even though he or she may plan to attend the Special Meeting, is
requested to sign, date and return the enclosed Proxy without delay in the
enclosed postage-paid envelope. You may revoke your Proxy at any time prior to
its exercise. Any stockholder present at the Special Meeting or at any
adjournments or postponements thereof may revoke his or her Proxy and vote
personally on each matter brought before the Special Meeting.
By Order of the Board of Directors,
Dennis P. Beaulieu
Secretary and Assistant Clerk
February 4, 1994
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE MERGER PROPOSAL AT THE
SPECIAL MEETING. PLEASE DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN
THE ENCLOSED POSTAL RETURN ENVELOPE
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NEW DARTMOUTH BANK PROXY STATEMENT
----------------------------------
SHAWMUT NATIONAL CORPORATION PROSPECTUS
---------------------------------------
This Proxy Statement/Prospectus (the "Proxy Statement/Prospectus") is being
furnished to holders of New Dartmouth Bank ("New Dartmouth") common stock
("New Dartmouth Stockholders") in connection with the solicitation of proxies by
the Board of Directors of New Dartmouth for use at the Special Meeting of
Stockholders of New Dartmouth , including any adjournments or postponements
thereof (the "Special Meeting"), to be held on March 9, 1994. This Proxy
Statement/Prospectus relates to the proposed acquisition of New Dartmouth by
Shawmut National Corporation ("SNC") through the merger of a wholly owned
subsidiary of SNC with New Dartmouth (the "Merger") pursuant to the Agreement
and Plan of Merger between New Dartmouth and SNC dated as of March 23, 1993, as
amended by Amendment No. 1 dated as of July 21, 1993 and Amendment No. 2 dated
as of December 20, 1993 (the "Merger Agreement"), and the Contract for Union,
which are included in this Proxy Statement/Prospectus as Annex A and Annex B,
respectively. As used herein, the term "Merger Agreement" includes the Contract
for Union.
This Proxy Statement/Prospectus also constitutes a prospectus of SNC with
respect to up to 9,357,458 shares of common stock, par value $.01 per share,
of SNC ("SNC Common Stock") issuable to holders of common stock, par value $.01
per share, of New Dartmouth ("New Dartmouth Common Stock") in the Merger. Upon
consummation of the Merger, each outstanding share of New Dartmouth Common Stock
will, with certain exceptions, be converted into that number of shares of SNC
Common Stock as shall be equal to the Exchange Ratio (as hereinafter defined).
The Proposed Merger And The Other Matters To Be Acted Upon At The Special
Meeting Are Described In Detail In This Proxy Statement/Prospectus. The Proposed
Merger Is A Complex Transaction. New Dartmouth Stockholders Are Strongly Urged
To Read and Consider Carefully This Proxy Statement/Prospectus In Its Entirety.
--------------------------------
THE SHARES OF SNC COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS
OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER
GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
--------------------------------
The date of this Proxy Statement/Prospectus is February 4, 1994
This Proxy Statement/Prospectus and the accompanying form of proxy are
first being mailed to New Dartmouth Stockholders on or about February 7, 1994.
No persons have been authorized to give any information or to make any
representations other than those contained in this Proxy Statement/Prospectus in
connection with the solicitations of proxies or the offering of securities made
hereby, and if given or made, such information or representations must not be
relied upon as having been authorized by SNC or New Dartmouth. This Proxy
Statement/Prospectus does not constitute an offer to sell, or a solicitation of
an offer to buy, any securities, or the solicitation of a proxy, in any
jurisdiction to or from any person to whom it is not lawful to make any such
offer or solicitation in such jurisdiction. Neither the delivery of this Proxy
Statement/Prospectus nor any distribution of securities made hereunder shall,
under any circumstances, create an implication that there has been no change in
the affairs of SNC or New Dartmouth since the date of this Proxy
Statement/Prospectus or that the information herein is correct as of any time
subsequent to such date. All information contained in this Proxy
Statement/Prospectus relating to SNC and its subsidiaries has been supplied by
SNC, and all information contained in this Proxy Statement/Prospectus relating
to New Dartmouth and its subsidiaries has been supplied by New Dartmouth.
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TABLE OF CONTENTS
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PAGE
<S> <C>
AVAILABLE INFORMATION ....................................................
INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE ...........................................................
SUMMARY ..................................................................
SPECIAL MEETING OF STOCKHOLDERS ..........................................
Purposes ...............................................................
Shares Entitled to Vote; New Dartmouth Stockholder Approval ............
Voting; Solicitation and Revocation of Proxies .........................
THE MERGER ...............................................................
General ................................................................
Prior Stockholder Approval and Amendment No. 2 to Merger Agreement .....
Exchange Ratio .........................................................
Background of the Merger ...............................................
Recommendation the New Dartmouth Board; Reasons for the Merger .........
Opinion of New Dartmouth's Financial Advisor ...........................
SNC's Reasons for the Merger ...........................................
Interests of Certain Persons in the Merger .............................
Effective Time .........................................................
Surrender of Certificates; No Fractional Shares ........................
Conditions to the Merger ...............................................
Required Stockholder Approval; Voting Agreements .......................
Regulatory Approvals Required for the Merger ...........................
Conduct of Business Pending the Merger .................................
No Solicitation ........................................................
Waiver and Amendment; Abandonment ......................................
Resales of SNC Common Stock Received in the Merger;
Resales by Affiliates ................................................
New Dartmouth Employees ................................................
Indemnification; Insurance .............................................
Stock Exchange Listing .................................................
Anticipated Accounting Treatment .......................................
Alternative Structures .................................................
Certain Federal Income Tax Consequences ................................
Dissenters' Rights .....................................................
Stock Option Agreement .................................................
Unaudited Pro Forma Condensed Financial Information ....................
Management's Discussion and Analysis of New Dartmouth's
Financial Condition and Results of Operations ........................
Business of New Dartmouth ..............................................
Business of SNC ........................................................
Description of New Dartmouth Capital Stock .............................
Description of SNC Capital Stock .......................................
Comparison of Rights of Holders of New Dartmouth Common Stock
and SNC Common Stock .................................................
Market Prices and Dividend History .....................................
Principal Holders of New Dartmouth Common Stock ........................
Directors and Management of New Dartmouth ..............................
LEGAL OPINIONS ...........................................................
EXPERTS ..................................................................
ANNEXES ..................................................................
Annex A -- Agreement and Plan of Merger, dated March 23, 1993, Amendment
No. 1 dated as of July 21, 1993, and Amendment No. 2 dated as of December
20, 1993
Annex B - Contract For Union
Annex C - Fairness Opinion of New Dartmouth's Financial Advisor
Annex D - Voting Agreement dated as of March 23, 1993 as amended as of
December 20, 1993
Annex E - Stock Option Agreement
Annex F - New Dartmouth Bank Consolidated Financial Statements as of June 30,
1993 and 1992 and for the Year Ended June 30, 1993 and the Period October
10, 1991 (Commencement of Operations) to June 30, 1992
Annex G - New Dartmouth Bank Consolidated Financial Statements as of and for
the Three Months Ended September 30, 1993
Annex H - New Hampshire Revised Statutes Annotated ("RSA") Sections RSA
388:13 and RSA 293-A:13.01 through RSA 293-A:13.31
</TABLE>
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AVAILABLE INFORMATION
SNC is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). The reports, proxy statements and other
information filed by SNC with the Commission can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
at 75 Park Place, 14th Floor, New York, New York 10007 and Northwestern Atrium
Center, 500 West Madison, Suite 1400, Chicago, Illinois 60661. Copies of such
material also can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, material filed by SNC can be inspected at the offices of
the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
SNC has filed with the Commission Registration Statements on Form S-4
(together with any amendments thereof, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
shares of SNC Common Stock to be issued pursuant to the Merger Agreement. This
Proxy Statement/Prospectus does not contain all the information set forth in the
Registration Statements and the exhibits thereto. Such additional information
may be inspected and copied as set forth above. Statements contained in this
Proxy Statement/Prospectus or in any document incorporated in this Proxy
Statement/Prospectus by reference as to the contents of any contract or other
document referred to herein or therein are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statements or such other document, each such
statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by SNC (File No. 1-10102)
are incorporated by reference in this Proxy Statement/Prospectus:
1. SNC's Annual Report on Form 10-K for the fiscal year ended December 31,
1992 (the "1992 Form 10-K").
2. SNC's Annual Report on Form 11-K for the fiscal year ended December 31,
1992.
3. SNC's Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1993.
4. SNC's Quarterly Report on Form 10-Q for the quarterly period ended June
30, 1993.
5. SNC's Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1993.
6. SNC's Current Report on Form 8-K, dated March 23, 1993; SNC's Current
Report on Form 8-K, dated April 19, 1993; SNC's Current Report on
Form 8-K, dated April 21, 1993; SNC's Current Report on Form 8-K,
dated July 14, 1993; SNC's Current Report on Form 8-K, dated
November 16, 1993; SNC's Current Report on Form 8-K, dated December 1,
1993; and SNC's Current Report on Form 8-K, dated December 20, 1993.
7. The description of SNC Common Stock and SNC Series A Junior
Participating Preferred Stock and Preferred Stock Purchase Rights set
forth in SNC's Registration Statements on Form S-3 dated February 13,
1992 and on Form 8-A dated March 7, 1989.
8. The portions of SNC's Proxy Statement for the Annual Meeting of
Shareholders held April 22, 1993 that have been incorporated by
reference in the 1992 Form 10-K.
All documents and reports filed by SNC pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Proxy Statement/Prospectus
and prior to the date of the Special Meeting shall be deemed to be incorporated
by reference in this Proxy Statement/Prospectus and to be a part hereof from the
dates of filing of such documents or reports. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Proxy
Statement/Prospectus to
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the extent that a statement contained herein or in any other subsequently filed
document which also is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Proxy Statement/Prospectus.
New Dartmouth is not required to file any documents with the Commission
under the Securities Act or the Exchange Act, and accordingly, no information
or documents relating to New Dartmouth are incorporated herein by reference.
This Proxy Statement/Prospectus incorporates documents by reference which
are not presented herein or delivered herewith. Such documents (other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference) are available, without charge, to any person, including any New
Dartmouth stockholder and any beneficial owner of New Dartmouth Common Stock, to
whom this Proxy Statement/Prospectus is delivered, on written or oral request to
SNC at 777 Main Street, MSN309, Hartford, Connecticut 06115, Attention:
Shareholder Relations, telephone number (203) 728-2028. In order to ensure
timely delivery of the documents, requests should be received by February 22,
1994.
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SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus. As this summary is necessarily incomplete,
reference is made to, and this summary is qualified in its entirety by, the more
detailed information contained or incorporated by reference in this Proxy
Statement/Prospectus and the Annexes hereto. Stockholders are urged to read
this Proxy Statement/Prospectus and the Annexes hereto in their entirety.
Certain capitalized terms which are used but not defined in this summary are
defined elsewhere in this Proxy Statement/Prospectus.
The Special Meeting
The Special Meeting will be held at 1155 Elm Street, 3rd Floor, Manchester,
New Hampshire on Wednesday, March 9, 1994 beginning at 2:00 p.m. local time.
The purpose of the Special Meeting is to consider and vote upon a proposal to
approve the Merger Agreement and to act upon such other matters as may properly
be brought before the Special Meeting and any adjournments or postponements
thereof. See "SPECIAL MEETING OF STOCKHOLDERS -- Purposes." New Dartmouth
Stockholders approved the Merger on terms similar to those presented in this
Proxy Statement/Prospectus at a Special Meeting of Stockholders on August 26,
1993. See "-- Prior Stockholder Approval and Reasons for Subsequent Amendment."
Only holders of record of New Dartmouth Common Stock and Preferred Stock at
the close of business on February 4, 1994 will be entitled to notice of and to
vote at the Special Meeting. As of February 4, 1994 there were 424,200 shares
of New Dartmouth Common Stock outstanding and entitled to vote. There are
approximately 70 holders of record of New Dartmouth Common Stock. The FDIC is
the sole holder of all of the 170,073 shares of New Dartmouth Preferred Stock.
THE MERGER
Parties to the Merger
SNC. SNC is a multibank holding company, registered under the Bank Holding
Company Act of 1956, as amended ("BHCA"). It was organized under the laws of
the State of Delaware in October 1987 and became a bank holding company on
February 29, 1988 through the consummation of a plan of reorganization between
Hartford National Corporation ("HNC") and Shawmut Corporation ("SC") pursuant to
which both HNC and SC became wholly owned subsidiaries of SNC. SNC maintains
dual headquarters in the States of Connecticut and Massachusetts. The principal
executive offices of SNC are located at 777 Main Street, Hartford, Connecticut
06115 and One Federal Street, Boston, Massachusetts 02211. Its telephone
numbers in Connecticut and Massachusetts are (203) 728-2000 and (617) 292-2000,
respectively.
The principal business of SNC is to provide, through its bank subsidiaries,
comprehensive corporate, commercial, correspondent and individual banking
services, and personal and corporate trust services through its network of
approximately 275 branches located throughout Connecticut, Massachusetts and
Rhode Island. SNC's principal banking subsidiaries are Shawmut Bank
Connecticut, National Association, Hartford, Connecticut and Shawmut Bank,
National Association, Boston, Massachusetts.
SNC provides other financial services through its other subsidiaries,
including Shawmut Mortgage Company ("SMC"). With its principal office in West
Hartford, Connecticut, SMC originates substantially all of the residential
mortgages among SNC and its subsidiaries. It also funds, sells and services
residential mortgage loans through its network of 10 offices in Connecticut,
Massachusetts, Rhode Island and New Hampshire.
At September 30, 1993, SNC had assets of $27.0 billion, deposits of $15.4
billion, loans of $15.3 billion and shareholders' equity of $1.7 billion.
New Dartmouth. New Dartmouth is a state-chartered guaranty savings bank,
formed in 1991 under the laws of the State of New Hampshire to acquire certain
assets and assume certain liabilities from the FDIC, as Receiver of Dartmouth
Bank, New Hampshire Savings Bank and Numerica Savings Bank, FSB. New Dartmouth
is the third largest bank in New Hampshire with deposits of $1.5 billion and
assets of $1.7 billion as of September 30, 1993. Its principal businesses
consist of attracting deposits from the public and using such deposits, with
other funds, to
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make various types of loans and investments, including residential mortgage
loans, commercial loans, small business loans and investments in securities.
New Dartmouth conducts its banking operations through 37 branch banking offices,
all of which are located in New Hampshire.
New Dartmouth's executive offices are located at 1155 Elm Street,
Manchester, New Hampshire 03101 (Telephone: (603) 634-1500).
Prior Stockholder Approval and Reasons for Subsequent Amendment
At a Special Meeting of Stockholders on August 26, 1993, New Dartmouth
Stockholders approved the Merger on terms similar to those presented herein. The
approval was almost unanimous with the 97% of New Dartmouth Common Stock that
was represented at the meeting having been voted in favor of the Merger. On
November 15, 1993, the Federal Reserve Board, in a tie vote, declined to approve
SNC's application to acquire New Dartmouth. Those Governors who voted not to
approve the application cited a then-pending investigation of possible
discriminatory lending at Shawmut Mortgage Company by the United States
Department of Justice and the Federal Trade Commission. The investigation was
undertaken pursuant to a referral from the Federal Reserve Board. Those
Governors indicated that while SNC had taken steps to address the regulatory
concerns, the measures had not been in place for a sufficient period of time for
the Federal Reserve Board to evaluate their effectiveness. See "THE MERGER --
Regulatory Approvals Required for the Merger." Because SNC was unable to obtain
by November 15, 1993 all regulatory approvals necessary to consummate the
Merger, New Dartmouth was entitled under the terms of the Merger Agreement in
effect at the time to abandon the Merger and pursue other strategic
alternatives.
Effective December 20, 1993, New Dartmouth and SNC entered into Amendment
No. 2 to the Merger Agreement, which provides for an extension of time until
June 30, 1994 for SNC to consummate the Merger. In exchange for the extension of
time, SNC agreed, among other things, to modify the manner in which the Exchange
Ratio is calculated to increase the consideration that New Dartmouth
Stockholders will receive upon consummation of the Merger and to lower the
Maximum and Minimum Reference Prices. Due to the nature of these changes, the
approval of New Dartmouth Stockholders is required.
The terms of the amended Merger Agreement, including the changes effected
by Amendment No. 2, are described below in this Proxy Statement/Prospectus. (The
terms of Amendment No. 1 to the Merger Agreement, dated July 21, 1993, were also
reflected in the description of the Merger Agreement contained in the Proxy
Statement/Prospectus for the August 1993 Special Meeting of Stockholders.)
Required Stockholder Approval; Voting Agreements
New Hampshire law requires the affirmative approval of the holders of
66 2/3% of all of the outstanding shares of New Dartmouth Common Stock and
Preferred Stock, voting together as a single class, in order to obtain the
permission of the Bank Commissioner of the State of New Hampshire to consummate
the Merger. In addition, New Dartmouth's Articles of Agreement separately
require that the Merger be approved by the holders of a majority of the
outstanding shares of New Dartmouth Common Stock. As of February 4, 1994,
directors of New Dartmouth and their affiliates may be deemed to be beneficial
owners of 202,427 shares or approximately 47.7% of the shares of New Dartmouth
Common Stock outstanding. The directors have agreed to vote or direct the vote
of 189,927 shares, or approximately 44.8% of the shares of New Dartmouth Common
Stock FOR approval and adoption of the Merger Agreement and against the approval
of any competing transaction. In addition, the FDIC has agreed to vote all of
the 170,073 shares of New Dartmouth Preferred Stock in favor of the Merger
Proposal in exchange for New Dartmouth's agreement to redeem such Preferred
Stock prior to the Merger. See "THE MERGER -- Required Stockholder Approval;
Voting Agreements."
Effect of the Merger
Pursuant to the Merger Agreement, at the Effective Time (as defined below),
a wholly owned subsidiary of SNC will be merged with New Dartmouth, and the
surviving entity (the "Surviving Bank") will be a wholly owned
6
<PAGE>
subsidiary of SNC. New Dartmouth Stockholders will become shareholders of SNC.
See "THE MERGER -- General."
Effective Time
The Merger will become effective on the date and at the time that the
Contract for Union is accepted for filing by the Secretary of State of the State
of New Hampshire in accordance with applicable law or on such later date as the
Contract for Union may specify (the "Effective Time"). The Contract for Union
will be submitted for filing as soon as possible after all conditions contained
in the Merger Agreement have been satisfied or, if permissible, waived,
including receipt of all regulatory approvals and termination of all statutory
waiting or notice periods.
Exchange Ratio
The terms of the Merger Agreement summarized below and described in greater
detail elsewhere in this Proxy Statement/Prospectus are intended to provide, for
each share of New Dartmouth Common Stock, SNC Common Stock having value of
$310.95 plus 177.0% of New Dartmouth's net earnings per share from October 1,
1993 to the closing, subject to potential adjustments as noted below. See "THE
MERGER -- Exchange Ratio." In calculating New Dartmouth's net earnings per share
for purposes of the Merger Agreement, all shares subject to New Dartmouth
Options and Warrants will be deemed to be outstanding.
Under the Exchange Ratio formula set forth in Amendment No. 2 to the
Merger Agreement, subject to potential adjustments as described below (see "THE
MERGER--Exchange Ratio--Minimum and Maximum Reference Prices"), upon
consummation of the Merger, each issued and outstanding share of New Dartmouth
Common Stock (other than shares held, directly or indirectly, by New Dartmouth
or SNC (other than shares held in a fiduciary capacity or in respect of a debt
previously contracted) and shares held by any stockholder properly exercising
dissenters' rights) will become, and be converted into the right to receive, a
number of shares of SNC Common Stock equal to the "Exchange Ratio," which is
defined as the quotient, rounded to the nearest thousandth (1/1000th) of a
share, obtained by DIVIDING
(I) the sum of:
(x) $310.95 PLUS
(y) 177.0% of New Dartmouth's "Adjusted Earnings Per Share,"
which is defined as the quotient obtained by DIVIDING
(i) New Dartmouth's Adjusted Earnings (as defined
below; see "THE MERGER -- Exchange Ratio") by
(ii) the sum of (a) the total number of shares of New
Dartmouth Common Stock issued and outstanding immediately
prior to the Effective Time (including shares of New
Dartmouth Common Stock held by New Dartmouth or SNC or any
of their respective subsidiaries and including shares of
New Dartmouth Common Stock held by stockholders who perfect
their dissenters' rights) PLUS (b) the number of shares of
New Dartmouth Common Stock subject to options or warrants
that are issued and outstanding immediately prior to the
Effective Time,
by (II) the Average Closing Price (as defined below) of SNC Common
Stock.
If the Average Closing Price is less than $17.11, then the Average Closing
Price will be deemed to be $17.11 (the "Minimum Reference Price"), unless SNC
waives the applicability of the Minimum Reference Price. If the Minimum
Reference Price is greater than $23.14, then the Average Closing Price will be
deemed to be $23.14 (the "Maximum Reference Price"). As used in this Proxy
Statement/Prospectus, "Average Closing Price" means the average of the daily
closing sales price of a share of SNC Common Stock as reported on the New York
Stock Exchange ("NYSE") Composite Transactions reporting system (as reported by
The Wall Street Journal or, if not reported thereby, by another authoritative
source chosen by SNC) for the 15 consecutive full trading days in which such
shares are traded on the NYSE ending on the later of (x) the date of approval of
the Merger Agreement by New Dartmouth Stockholders and (y) the date of the
receipt of all regulatory approvals required to consummate the Merger and the
expiration of any required waiting periods (the "Pricing Period"). For a
tabular presentation of possible Exchange Ratios at several hypothetical levels
of Adjusted Earnings, see "THE MERGER--Exchange Ratio--Illustrative Exchange
Ratios."
7
<PAGE>
The Merger Agreement provides that New Dartmouth will not be obligated to
consummate the Merger if the Average Closing Price is less than $17.11, unless
SNC waives the applicability of the Minimum Reference Price. See "THE MERGER --
Conditions to the Merger." Assuming the Merger is approved by New Dartmouth
Stockholders, the New Dartmouth Board may elect to consummate the Merger without
resoliciting New Dartmouth Stockholders if the Average Closing Price is less
than $17.11, even though, as a result of the application of the Minimum
Reference Price, the aggregate Average Closing Price of SNC Common Stock
exchanged for each share of New Dartmouth Common Stock would be less than
$310.95 plus 177.0% of New Dartmouth's Adjusted Earnings Per Share. In such a
situation, in considering whether to consummate the Merger without the
resolicitation of New Dartmouth Stockholders, the New Dartmouth Board will take
into account, consistent with its fiduciary duties, all relevant facts and
circumstances that exist subsequent to the Pricing Period, including, without
limitation, the advice of counsel.
Recommendation of the Board of Directors of New Dartmouth; Reasons for the
Merger
The New Dartmouth Board of Directors believes that the terms of the Merger
Agreement and the transactions contemplated thereby are in the best interest of
New Dartmouth and are fair to and in the best interests of the New Dartmouth
Stockholders and unanimously recommends that New Dartmouth Stockholders vote to
approve the Merger Agreement and the transactions contemplated thereby.
Late in 1992, the New Dartmouth Board began evaluating various possible
financial or strategic alternatives intended to maximize stockholder value and
to provide New Dartmouth Stockholders with liquidity for their investment. In
November 1992, after evaluating several different alternatives, the New
Dartmouth Board unanimously directed management to pursue the sale of New
Dartmouth. New Dartmouth retained the services of Goldman Sachs to assist in
the sale of New Dartmouth on December 3, 1992.
Prior to entering into Amendment No. 2 to the Merger Agreement, the New
Dartmouth Board completely re-evaluated whether the proposed Merger was in the
best interests of New Dartmouth Stockholders. See "THE MERGER -- Background of
the Merger." In reaching its determination to approve Amendment No. 2 to the
Merger Agreement, the New Dartmouth Board consulted with management, Goldman
Sachs and New Dartmouth's legal advisors, and considered a number of factors,
including, without limitation, the following: New Dartmouth's near term
business prospects as an independent entity; the level of interest expressed by
various potential acquirors; the relative merits of other strategic
alternatives; other recent bank acquisitions; the opinion and presentation of
Goldman Sachs, that the consideration to be received by the holders of New
Dartmouth Common Stock under the Merger Agreement was fair to such holders; the
conditions to the Merger and the risks to New Dartmouth if the Merger was not
consummated; certain information concerning SNC's financial condition, results
of operations and prospects; liquidity and recent market prices for shares of
SNC Common Stock and the possible effects of changes in the market price for SNC
Common Stock on the Exchange Ratio; the terms of the Stock Option Agreement; and
the possible impact of the Merger on New Dartmouth's business, prospects,
employees, customers and communities. See "THE MERGER -- Recommendation of the
New Dartmouth Board; Reasons for the Merger."
Opinion of New Dartmouth's Financial Advisor
Goldman Sachs has delivered its written opinion to the New Dartmouth Board that
as of December 16, 1993, and as of the date of this Proxy Statement/Prospectus,
the consideration to be received by the holders of New Dartmouth Common Stock
under the Merger Agreement was fair to such holders. The full text of the
opinion of Goldman Sachs dated the date of this Proxy Statement/Prospectus (the
"Fairness Opinion"), which sets forth the assumptions made and the matters
considered in connection with such opinion, is attached as Annex C to this Proxy
Statement/Prospectus. New Dartmouth Stockholders are urged to read the Fairness
Opinion in its entirety. The Fairness Opinion is directed only to the Exchange
Ratio and does not constitute a recommendation to any New Dartmouth Stockholder
as to how such stockholder should vote at the Special Meeting. See "THE MERGER
- -- Opinion of New Dartmouth's Financial Advisor."
Interests of Certain Persons in the Merger
If the Merger is consummated, the non-vested portion of the New Dartmouth
Warrant held by Robert P. Keller, New Dartmouth's President and Chief Executive
Officer, for 5,891 shares of New Dartmouth Common Stock, will become fully
vested as of the Effective Time. In addition, Mr. Keller, Dennis Beaulieu, New
Dartmouth's
8
<PAGE>
Senior Vice President and Chief Financial Officer, and other senior executives
of New Dartmouth may receive additional compensation under certain Employment
Agreements and the New Dartmouth 1992 Stock Option Plan if, after the Merger,
their employment with New Dartmouth is terminated under certain circumstances.
See "THE MERGER -- Interest of Certain Persons in the Merger."
Pursuant to the Merger Agreement, SNC has agreed to indemnify, defend and
hold harmless the present and former directors, officers and (subject to certain
limitations) employees of New Dartmouth and its subsidiaries and to secure
directors' and officers' liability insurance for New Dartmouth's present and
former directors and officers. See "THE MERGER -- Indemnification; Insurance"
for a description of SNC's indemnification and insurance obligations under the
Merger Agreement.
Conditions; Regulatory Approvals
Consummation of the Merger is subject to various conditions, including,
among others, receipt of the stockholder approval solicited hereby, receipt of
the necessary regulatory approvals, receipt of a letter from SNC's independent
accountants that the Merger qualifies for pooling of interests accounting
treatment and receipt of an opinion of New Dartmouth's independent accountants
regarding certain federal income tax consequences of the Merger. In addition,
if the Average Closing Price is less than $17.11, New Dartmouth will not be
obligated to consummate the Merger unless SNC waives the applicability of the
Minimum Reference Price. Certain of the conditions to the Merger cannot be
waived. See "THE MERGER -- Conditions to the Merger" and "-- Exchange Ratio."
The regulatory approvals and consents necessary to consummate the Merger
include the approval of the Federal Reserve Board, the FDIC, the Bank
Commissioner of the State of New Hampshire, the Board of Trust Company
Incorporation of the State of New Hampshire and the Board of Bank Incorporation
of the Commonwealth of Massachusetts. Prior to the execution of Amendment No. 2
to the Merger Agreement, SNC had received all required regulatory approvals
other than the approval of the Federal Reserve Board. The Federal Reserve
Board, in a tie vote, on November 15, 1993 declined to approve SNC's application
to acquire New Dartmouth. SNC has been granted permission to request
reconsideration of the prior action. Alternately, SNC could submit a new
application. See "THE MERGER -- Regulatory Approvals Required for the Merger."
There can be no assurance that such regulatory approvals will be obtained, and,
if the Merger is approved, there can be no assurance as to the date of any such
approval. There can also be no assurance that any such approvals will not
contain a condition or requirement that causes such approvals to fail to satisfy
the conditions set forth in the Merger Agreement and described under "THE MERGER
- -- Conditions to the Merger." There also can be no assurance that the U.S.
Department of Justice will not challenge the Merger on antitrust grounds, or if
such a challenge is made, as to the result thereof.
Abandonment of the Merger Agreement
The Merger Agreement may be abandoned at any time prior to the Effective
Time by the mutual consent of SNC and New Dartmouth and by either of them
individually under certain specified circumstances, including if (i) on or
before May 30, 1994, SNC has not received the approvals (excluding any waiting
or notice periods) of the Federal Reserve Board, the FDIC and the Bank
Commissioner of the State of New Hampshire to consummate the Merger or (ii) the
closing does not occur on or before June 30, 1994. Under the terms of the Merger
Agreement and a related Escrow Agreement (as hereinafter defined), if the
Merger Agreement is abandoned, New Dartmouth will be entitled to a payment of up
to $10.0 million under certain circumstances. See "THE MERGER -- Waiver and
Amendment; Abandonment."
No Solicitation
New Dartmouth has agreed in the Merger Agreement that neither it nor any of
its subsidiaries will solicit or encourage inquiries or proposals with respect
to, or, subject to the fiduciary duties of its Board of Directors (as advised in
writing by its counsel), furnish any non-public information relating to or
participate in any negotiations or discussions concerning, any acquisition or
purchase of all or a substantial portion of its assets (whether owned by it
directly or owned by any of its subsidiaries), or of a substantial equity
interest in it or any of its subsidiaries, or any merger or other business
combination with it or any of its subsidiaries, other than as contemplated by
the Merger Agreement, except that New Dartmouth may communicate information
about any such proposal to its stockholders if and to the extent that the
fiduciary duties of its Board of Directors require it to do so (as advised in
writing by its counsel); New Dartmouth also agreed in the Merger Agreement that
it would immediately cease and
9
<PAGE>
cause to be terminated any existing activities, discussions or negotiations
previously conducted with any parties other than SNC with respect to any of the
foregoing; it would notify SNC immediately if any such inquiries or proposals
are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated with, it or any of its
subsidiaries and will promptly inform SNC in writing of the details with
respect to the foregoing; and it would instruct its officers, directors, agents,
advisors and affiliates to comply with the same restrictions.
Stock Exchange Listing
The SNC Common Stock is listed on the NYSE. SNC has agreed to use its best
efforts to list on the NYSE the shares of SNC Common Stock to be issued in the
Merger and the shares of SNC Common Stock reserved for issuance upon exercise of
the New Dartmouth Options and the New Dartmouth Warrants. The obligation of New
Dartmouth to consummate the Merger is subject to approval for listing by the
NYSE of such shares. See "THE MERGER -- Conditions to the Merger."
Anticipated Accounting Treatment
The Merger is expected to qualify as a pooling of interests for accounting
and financial reporting purposes. It is a condition to SNC's obligation to
consummate the Merger that SNC receives a letter from its independent
accountants to the effect that the Merger qualifies for pooling of interests
accounting treatment. If SNC intends to waive this condition, it must publicly
announce such intention at least 48 hours prior to the commencement of the
Pricing Period. In addition, if SNC waives this condition, New Dartmouth
Stockholders will be given another opportunity to vote on approval and adoption
of the Merger Agreement after pro forma financial information reflecting
purchase accounting treatment of the Merger has been provided. See "THE MERGER
- -- Conditions to the Merger" and "-- Anticipated Accounting Treatment."
Alternative Structures
The Merger Agreement provides that the Merger may be effected using one of
two basic structures. Under one structure, New Dartmouth would merge with and
into a direct wholly owned subsidiary of SNC, and immediately thereafter, as
part of a single plan of reorganization, SNC would contribute the voting stock
of the Surviving Bank resulting from such Merger to another wholly owned direct
subsidiary of SNC, which would result in the Surviving Bank becoming an indirect
wholly owned subsidiary of SNC (collectively, the "Forward Merger Structure").
Under the alternative structure, which may be utilized if certain income tax
regulations become effective prior to consummation of the Merger, an indirect
wholly owned subsidiary of SNC would merge with and into New Dartmouth (the
"Reverse Merger Structure"), which would result in New Dartmouth becoming an
indirect wholly owned subsidiary of SNC. Under either structure, New Dartmouth
Stockholders would become shareholders of SNC. SNC and New Dartmouth have agreed
to use whichever of the two transaction structures described above provides, in
the opinion of New Dartmouth's advisors, the greatest level of assurance that
the Merger will constitute a tax-free reorganization under the applicable law in
effect as of the consummation of the Merger. See "THE MERGER -- Alternative
Structures" and "-- Certain Federal Tax Consequences."
Certain Federal Income Tax Consequences
Under the Merger Agreement, New Dartmouth's obligation to consummate the
Merger is conditioned upon its receipt of an opinion of Price Waterhouse, New
Dartmouth's independent accountants, which opinion may be no less favorable to
New Dartmouth Stockholders than an opinion to the effect that, based upon
representations contained in certificates of officers of SNC, New Dartmouth and
others, under current law and assuming that the Merger and related transactions
will take place as described in the Merger Agreement and certain related
instruments described therein, it is more likely than not that no gain or loss
will be recognized for Federal income tax purposes by any New Dartmouth
Stockholder upon the receipt of SNC Common Stock exchanged for New Dartmouth
Common Stock, except in respect of cash received in lieu of fractional shares.
For the reasons described below (see "THE MERGER -- Certain Federal Tax
Consequences"), Price Waterhouse has advised New Dartmouth that it is unable to
issue an unqualified opinion that the Merger will qualify as a tax-free
reorganization if the Merger and the related transactions take place as
currently contemplated in the Merger Agreement. Price Waterhouse has delivered,
however, as of the date of this Proxy Statement/Prospectus,
10
<PAGE>
a qualified opinion to New Dartmouth with respect to the Forward Merger
Structure, which satisfies the closing condition described above.
Based in part on the private letter ruling described below, as well as on
the representations described above, Price Waterhouse has stated in its opinion
to New Dartmouth that it is highly confident that the Forward Merger Structure
will qualify as a tax-free reorganization for Federal income tax purposes and
therefore no gain or loss will be recognized by New Dartmouth Stockholders who
receive SNC Common Stock solely in exchange for shares of New Dartmouth Common
Stock upon consummation of the Merger (other than with respect to cash received
in lieu of fractional shares). The Internal Revenue Service (the "IRS") has
issued a private letter ruling to New Dartmouth holding that, assuming that the
Forward Merger Structure would otherwise qualify as a tax-free reorganization,
the contribution by SNC of the stock of the Surviving Bank to another wholly
owned direct subsidiary of SNC would not preclude the Forward Merger Structure
from so qualifying.
New Dartmouth will not elect to use the Reverse Merger Structure unless
Price Waterhouse is able to deliver an unqualified opinion that the Reverse
Merger Structure will qualify as a tax-free reorganization. Certain regulations
that have been proposed by the IRS would clarify that the New Dartmouth
Preferred Stock (as hereinafter defined) that was issued to the FDIC is not
treated as "stock" for Federal income tax purposes and that, therefore, the
redemption of the New Dartmouth Preferred Stock prior to the closing, as
required by the Merger Agreement, will not preclude the Reverse Merger Structure
from qualifying as a tax-free reorganization. If these regulations become
effective prior to the consummation of the Merger, Price Waterhouse has advised
New Dartmouth that it may be able to issue an unqualified opinion that the
Reverse Merger Structure will qualify as a tax-free reorganization. If the
proposed regulations become effective and Price Waterhouse is able to deliver
such an unqualified opinion, New Dartmouth would likely elect to utilize the
Reverse Merger Structure.
The New Dartmouth Board's decision to consummate the Merger will be
conditioned upon New Dartmouth's receipt, prior to the Effective Time, of either
written confirmation of Price Waterhouse's prior opinion or, alternatively, a
new opinion, in either case covering the form of the Forward or Reverse Merger
Structure actually utilized.
Dissenters' Rights
Under New Hampshire law, holders of New Dartmouth Common Stock outstanding
and entitled to vote at the Special Meeting who do not vote in favor of the
Merger Agreement and who comply with certain notice requirements and other
procedures will have the right to dissent from the Merger and to be paid cash
for the fair value of their shares. New Hampshire law defines "fair value" to
mean the value of the shares immediately before the effectuation of the Merger,
excluding any appreciation or depreciation in anticipation of the Merger, unless
such exclusion would be inequitable. In order for a New Dartmouth Stockholder
to perfect dissenters' rights, such stockholder must file with New Dartmouth,
prior to or at the Special Meeting, a written notice of intent to demand payment
for his shares. Neither a delivery of a proxy directing a vote against the
Merger Agreement nor a failure to vote for the Merger Agreement will constitute
such written notice. Certain additional procedures must be followed in order
for a New Dartmouth Stockholder to exercise dissenters' rights. Any deviation
from such procedures may result in the forfeiture of dissenters' rights.
Accordingly, stockholders wishing to dissent from the Merger Agreement are urged
to read carefully "THE MERGER -- Dissenters' Rights" and Annex H attached to
this Proxy Statement/Prospectus and should consult with their own legal
advisors.
SNC will not be obligated to consummate the Merger if New Dartmouth
Stockholders holding in excess of 7.5% of the shares of New Dartmouth Common
Stock outstanding immediately prior to the consummation of the Merger have
perfected their statutory dissenters' rights.
Stock Option Agreement
Execution of the Stock Option Agreement was a condition to SNC's merger
proposal. Pursuant to the Stock Option Agreement, New Dartmouth granted SNC an
option to purchase shares of New Dartmouth Common Stock representing
approximately 14.9% of the issued and outstanding shares of such common stock.
The option may only be exercised upon the occurrence of certain events (none of
which has occurred). Pursuant to the Stock Option Agreement, New Dartmouth
granted to SNC an option to purchase up to 74,275 shares of New Dartmouth Common
Stock at an exercise price of $310 per share, subject to the terms and
conditions set forth therein. See "THE
11
<PAGE>
MERGER -- Stock Option Agreement."
The Stock Option Agreement is intended to increase the likelihood that the
Merger will be consummated in accordance with the terms of the Merger Agreement.
Consequently, certain aspects of the Stock Option Agreement may have the effect
of discouraging persons who might now or prior to the Effective Time be
interested in acquiring all of or a significant interest in New Dartmouth from
considering or proposing such an acquisition, even if such persons were prepared
to pay a higher price per share for New Dartmouth Common Stock than the price
per share implicit in the Exchange Ratio.
Certain Differences in Shareholders' Rights
At the Effective Time, New Dartmouth Stockholders, except stockholders who
may perfect dissenters' rights in accordance with New Hampshire law,
automatically will become shareholders of SNC and their rights as shareholders
of SNC will be governed by the Delaware General Corporation Law and by SNC's
Articles of Incorporation and By-laws. The rights of shareholders of SNC differ
from rights of the stockholders of New Dartmouth with respect to certain
important matters, including, among others, with respect to the calling of
special meetings, nominations of directors by shareholders, preemptive rights,
restrictions on certain business combinations, the applicability and effect of
state antitakeover statutes, the SNC Shareholder Rights Plan, and the payment of
dividends. For a summary of these differences, see "THE MERGER -- Comparison
of Rights of Holders of New Dartmouth Common Stock and SNC Common Stock."
MARKET PRICES
SNC Common Stock is listed and traded principally on the New York Stock
Exchange. New Dartmouth Common Stock is not registered under the Securities
Exchange Act of 1934, and is not listed on any stock exchange or quoted in the
NASDAQ System. The following table sets forth the high and low sales price for
SNC Common Stock as reported on the New York Stock Exchange.
<TABLE>
<CAPTION>
SNC
------------------
Year High Low
- ---- ---- ---
<S> <C> <C> <C>
1992 .......................................... $ 19.50 $ 8.88
1993 .......................................... 26.38 17.88
1994 (First Quarter through January 31, 1994).. 23.88 22.00
</TABLE>
On March 23, 1993, the last business day preceding public announcement of
the execution of the Merger Agreement, the closing sales price per share of SNC
Common Stock was $22.38. On February 2, 1994, the last practicable date prior
to the mailing of this Proxy Statement/Prospectus, the closing sales price per
share of SNC Common Stock was $23.38.
12
<PAGE>
NEW DARTMOUTH BANK
SELECTED FINANCIAL DATA
The following table sets forth certain condensed historical financial data
of New Dartmouth and is based on the audited consolidated financial statements
of New Dartmouth as of and for the fiscal period from October 10, 1991
(inception) through June 30, 1992 and for the fiscal year from July 1, 1992 to
June 30, 1993, including the notes thereto and as of and for the three months
ended September 30, 1993, and should be read in conjunction therewith. Interim
unaudited financial data for the three months ended September 30, 1993 reflect,
in the opinion of New Dartmouth's management, all adjustments (consisting only
of normal recurring adjustments) necessary for a fair presentation of such data.
Results for the three months ended September 30, 1993 are not necessarily
indicative of the results which may be expected for any other interim period or
for the year ending June 30, 1994.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
For the Period
------------------------------------------------------
July 1, 1993 July 1, 1992 October 10, 1991
SELECTED FINANCIAL DATA to to to
(Dollars in millions, except per share data) September 30, 1993 June 30, 1993 June 30, 1992
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RESULTS OF OPERATIONS:
Interest and dividend income $ 28.7 $ 125.9 $ 104.0
Interest expense 13.8 58.8 54.6
------- ------- -------
Net interest income 14.9 67.1 49.4
Provision for loan losses 4.1 16.1 3.2
------- ------- -------
Net interest income after provision for loan
losses 10.8 51.0 46.2
Noninterest income 7.3 23.3 13.0
Noninterest expenses 10.5 43.8 32.8
------- ------- -------
Income before income taxes 7.6 30.5 26.4
Income taxes 2.9 11.1 10.9
------- ------- -------
Net income $ 4.7 $ 19.4 $ 15.5
======= ======= =======
Earnings per share:
Primary $ 10.57 $ 43.63 $ 36.10
Fully diluted 6.84 23.85 17.77
Weighted average common shares outstanding:
Primary 446,579 444,282 429,093
Fully diluted 690,149 812,496 871,655
Dividends declared $ 0.00 $ 0.00 $ 0.00
PERIOD END BALANCES:
Total assets $1,735.2 $1,700.5 $1,703.3
Federal Home Loan Bank advances 52.5 50.0 0.0
Total stockholders' equity 94.1 94.5 86.9
Redeemable preferred stock 15.2 18.8 31.0
Common stockholders' equity 78.9 75.7 55.9
AVERAGE BALANCES:
Total assets $1,715.1 $1,707.2 $1,691.5
Federal Home Loan Bank advances 50.4 40.5 0.0
Total stockholders' equity 94.5 91.9 79.0
Redeemable preferred stock 17.4 26.2 31.0
Common stockholders' equity 77.1 65.7 48.0
- ------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
The following table sets forth certain selected historical consolidated
financial data of SNC. The table is based on and should be read in conjunction
with SNC's historical financial statements and notes thereto incorporated by
reference in this Proxy Statement/Prospectus. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE." Interim unaudited data for the nine months ended
September 30, 1993 and 1992 reflect, in the opinion of the management of SNC,
all adjustments necessary for a fair presentation of such data. Results for the
nine months ended September 30, 1993 are not necessarily indicative of results
which may be expected for any other interim period or for the year as a whole.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Selected Financial Data Nine months ended
(Dollars in millions, September 30 Year ended December 31,
except per share data) --------------------- -----------------------------------------------------------
1993 1992 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Interest and dividend
income $ 1,163.9 $ 1,155.6 $ 1,545.7 $ 1,813.9 $ 2,275.2 $ 2,625.4 $ 2,368.6
Interest expense 481.8 556.1 720.4 1,076.6 1,515.7 1,736.9 1,448.8
-------- -------- ------- ------- -------- -------- --------
Net interest income 682.1 599.5 825.3 737.3 759.5 888.5 919.8
Provision for loan losses 24.2 160.7 189.5 466.4 434.3 625.8 123.8
-------- -------- ------- ------- -------- -------- --------
Net interest income after 657.9 438.8 635.8 270.9 325.2 262.7 796.0
provision for loan losses
Noninterest income 274.3 305.4 392.2 451.5 439.6 355.1 423.5
Securities gains, net 5.3 79.6 85.9 78.2 26.2 39.9 8.4
Noninterest expenses 798.8 756.9 1,036.4 969.7 918.3 877.4 899.0
-------- -------- ------- ------- -------- -------- --------
Income (loss) before
income taxes,
extraordinary credit and
cumulative effect of
accounting change 138.7 66.9 77.5 (169.1) (127.3) (219.7) 328.9
Income taxes (benefit) 27.8 17.2 20.7 1.5 5.7 (90.8) 86.4
-------- -------- ------- ------- -------- -------- --------
Income (loss) before
extraordinary credit and
cumulative effect of
accounting change 110.9 49.7 56.8 (170.6) (133.0) (128.9) 242.5
Extraordinary credit 15.2 18.4
Cumulative effect of
change in method of
accounting for income
taxes 52.8
-------- -------- ------- ------- -------- -------- --------
Net income (loss) $ 163.7 $ 64.9 $ 75.2 $ (170.6) $ (133.0) $ (128.9) $242.5
======== ======== ======= ======= ======== ======== ========
Net income (loss)
applicable to common
stock $ 152.1 $ 63.4 $ 70.4 $ (172.9) $ (135.3) $ (131.3) $240.1
======== ======== ======= ======= ======== ======== ========
COMMON SHARE DATA:
Income (loss) before
cumulative effect of
accounting change and
extraordinary credit $ 1.06 $ .57 $ .60 $ (2.35) $ (1.84) $ (1.77) $ 3.28
Net income (loss) 1.63 .75 .81 (2.35) (1.84) (1.77) 3.28
Dividends declared .30 .75 1.40 1.32
PERIOD END BALANCES:
Total assets $ 26,957 $ 25,288 $ 25,288 $ 22,816 $ 23,703 $ 27,855 $ 28,414
Notes and debentures 874 810 810 665 679 699 745
Total shareholders'
equity 1,666 1,482 1,482 1,040 1,192 1,398 1,703
AVERAGE BALANCES:
Total assets $ 24,973 $ 21,979 $ 22,450 $ 22,391 $ 25,461 $ 27,275 $ 26,475
Notes and debentures 848 665 668 669 687 714 752
Total shareholders'
equity 1,569 1,223 1,256 1,092 1,394 1,739 1,602
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
COMPARISON OF CERTAIN PER SHARE DATA
The following tables show unaudited comparative historical per share data
for SNC and New Dartmouth, unaudited pro forma per share and per share
equivalent data for SNC and New Dartmouth combined, and SNC, New Dartmouth,
Peoples Bancorp of Worcester, Inc. ("Peoples") and Gateway Financial Corporation
("Gateway") combined (1). New Dartmouth commenced operations on October 10, 1991
and adopted a June 30 year-end. For the purpose of this schedule, New
Dartmouth's results of operations have been adjusted to coincide with SNC's
December 31 year-end. The range of values presented reflects the minimum and
maximum number of shares of SNC Common Stock that may be issued pursuant to the
Merger calculated as of September 30, 1993 (see "--Exchange Ratio") and the
acquisition of Peoples and Gateway. The information presented should be read in
conjunction with the consolidated historical financial statements and notes
thereto of New Dartmouth, which appear elsewhere in this Proxy
Statement/Prospectus and of SNC, Peoples and Gateway, which are incorporated by
reference in this Proxy Statement/Prospectus, and the unaudited pro forma
financial information including the notes thereto, which appear elsewhere in
this Proxy Statement/Prospectus. The pro forma data is presented for comparative
purposes only and is not necessarily indicative of the combined financial
position or results of operations in the future or of the combined financial
position or results of operation that would have been realized had the Merger or
the acquisitions been consummated during the periods or as of the dates for
which the pro forma data are presented. See "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE," and "THE MERGER -- Unaudited Pro Forma Condensed Financial
Information."
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Nine months ended
September 30 Year ended December 31,
-------------------- ----------------------------------------------------------
1993 1992 1992 1991 1990 1989 1988
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OF SNC COMMON STOCK:
Income (loss) before extraordinary
credit and cumulative effect of
accounting change:
Historical $ 1.06 $ .57 $ .60 $ (2.35) $ (1.84) $ (1.77) $ 3.28
Pro forma:
SNC and New Dartmouth 1.14 .70 .78 (2.24) (1.84) (1.77) 3.28
to 1.12 to .69 to .77 to (2.22)
SNC, New Dartmouth
Peoples and Gateway 1.13 .63 .60 (2.07) (1.92) (1.48) 3.10
to 1.09 to .61 to .58 to (2.02) to (1.88) to (1.45) to 3.02
Cash dividends declared:
Historical .30 .75 1.40 1.32
Book Value (as of end of period):
Historical 15.76
Pro Forma:
SNC and New Dartmouth 15.64
to 15.33
SNC, New Dartmouth,
Peoples and Gateway 15.38
to 14.84
PER SHARE OF NEW DARTMOUTH COMMON STOCK:
Income (loss) before extraordinary
credit and cumulative effect of
accounting change:
Historical $ 31.62 $ 35.08 $ 46.45 $ 12.31
Pro forma:
SNC and New Dartmouth 15.32 9.41 10.48 (30.10)
to 20.35 to 12.54 to 13.99 to (40.35)
SNC, New Dartmouth,
Peoples and Gateway 15.18 8.47 8.06 (27.82)
to 19.81 to 11.09 to 10.54 to (36.71)
Cash dividends declared:
Historical
Book value (as of end of period):
Historical 185.91
Pro forma:
SNC and New Dartmouth 210.17
to 278.61
SNC, New Dartmouth,
Peoples and Gateway 206.68
to 269.70
</TABLE>
(1) On August 26, 1993, SNC entered into an agreement to acquire Peoples in a
transaction to be accounted for as a pooling of interests. On November 5, 1993,
SNC entered into an agreement to acquire Gateway in a transaction to be
accounted for as a pooling of interests.
15
<PAGE>
NEW DARTMOUTH BANK
SUMMARY OF QUARTERLY DATA
Unaudited quarterly financial data for the periods indicated are presented
below:
<TABLE>
<CAPTION>
________________________________________________________________________________
(Dollars in millions, Three months ended
except per share data) September 30, 1993
- --------------------------------------------------------------------------------
<S> <C>
Interest income $ 28.7
Interest expense 13.8
--------
Net interest income 14.9
--------
Provision for loan losses 4.1
Noninterest income 7.3
Noninterest expense 10.5
--------
Income before taxes 7.6
Income taxes 2.9
--------
Net income $ 4.7
========
Earnings per share:
Primary $ 10.57
Fully diluted 6.84
Weighted average common
shares outstanding:
Primary 446,579
Fully diluted 690,149
<CAPTION>
- ------------------------------------------------------------------------------------------------
(Dollars in millions, Three months ended
---------------------------------------------------------------------
except per share data) June 30, 1993 March 31, 1993 December 31, 1992 September 30, 1992
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fiscal year ending June
30, 1993:
Interest income $ 29.1 $ 30.5 $ 33.3 $ 32.9
Interest expense 13.8 14.1 15.1 15.7
-------- -------- -------- --------
Net interest income 15.3 16.4 18.2 17.2
-------- -------- -------- --------
Provision for loan losses 7.8 3.0 2.8 2.5
Noninterest income 10.5 4.6 4.4 3.9
Noninterest expense 10.8 10.6 11.7 10.8
-------- -------- -------- --------
Income before taxes 7.2 7.4 8.1 7.8
Income taxes 2.6 2.6 3.1 2.8
-------- -------- -------- --------
Net income $ 4.6 $ 4.8 $ 5.0 $ 5.0
======== ======== ======== ========
Earnings per share:
Primary $ 10.19 $ 10.81 $ 11.34 $ 11.27
Fully diluted 6.40 6.20 5.73 5.66
Weighted average common
shares outstanding:
Primary 447,429 446,792 444,717 439,480
Fully diluted 712,424 778,691 879,379 874,146
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Three months ended October 10, 1991
(Dollars in millions) ------------------------------ to
except per share data) June 30, 1992 March 31, 1992 December 31, 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Fiscal year ended June 30,
1992:
Interest income $ 32.4 $ 35.7 $ 35.9
Interest expense 16.5 17.9 20.2
-------- -------- --------
Net interest income 15.9 17.8 15.7
-------- -------- --------
Provision for loan losses 2.5 .3 .4
Noninterest income 6.3 3.8 2.9
Noninterest expense 11.4 12.1 9.3
-------- -------- --------
Income before taxes 8.3 9.2 8.9
Income taxes 3.4 3.8 3.7
-------- -------- --------
Net income $ 4.9 $ 5.4 $ 5.2
======== ======== ========
Earnings per share:
Primary $ 11.32 $ 12.63 $ 12.31
Fully diluted 5.63 6.24 6.08
Weighted average common
shares outstanding:
Primary 433,474 424,688 424,200
Fully diluted 871,655 859,889 858,041
</TABLE>
17
<PAGE>
SPECIAL MEETING OF STOCKHOLDERS
This Proxy Statement/Prospectus is being furnished to holders of New
Dartmouth Bank ("New Dartmouth") common stock, $.01 par value per share ("New
Dartmouth Common Stock"), in connection with the solicitation of proxies by the
New Dartmouth Board of Directors (the "New Dartmouth Board") for use at the
Special Meeting of Stockholders of New Dartmouth to be held at 1155 Elm Street,
3rd Floor, Manchester, New Hampshire on Wednesday, March 9, 1994, beginning
at 2:00 p.m. local time, and at any adjournments or postponements thereof (the
"Special Meeting").
Purposes
At the Special Meeting, the holders of New Dartmouth Common Stock ("New
Dartmouth Stockholders") and the FDIC, as holder of all of the outstanding
shares of New Dartmouth Preferred Stock (as hereinafter defined), will be asked
to consider and vote upon the Agreement and Plan of Merger between New Dartmouth
and Shawmut National Corporation ("SNC"), dated as of March 23, 1993, as
amended by Amendment No. 1 dated as of July 21, 1993 and Amendment No. 2 dated
as of December 20, 1993 (the "Merger Agreement"), and the Contract for Union
attached as Annex A and Annex B hereto, respectively, and more fully described
herein (the "Merger Proposal"). The Merger Agreement and the Contract for Union
provide for the acquisition of New Dartmouth by SNC through the merger (the
"Merger") of a wholly owned subsidiary of SNC with New Dartmouth. Except as
described below, in connection with the Merger each share of New Dartmouth
Common Stock will be converted into that number of shares of common stock, par
value $.01 per share of SNC ("SNC Common Stock") as shall be equal to the
Exchange Ratio (as hereinafter defined). The Exchange Ratio and related
provisions of the Merger Agreement are intended to provide SNC Common Stock
having an aggregate value of $310.95 plus 177.0% of New Dartmouth's Adjusted
Earnings Per Share (as hereinafter defined) for each share of New Dartmouth
Common Stock.
New Dartmouth Stockholders will also consider and vote upon such other
matters as may properly be brought before the Special Meeting.
THE NEW DARTMOUTH BOARD UNANIMOUSLY RECOMMENDS THAT NEW DARTMOUTH
STOCKHOLDERS VOTE FOR THE MERGER PROPOSAL.
SHARES ENTITLED TO VOTE;
NEW DARTMOUTH STOCKHOLDER APPROVAL
The New Dartmouth Board has fixed February 4, 1994 as the record date (the
"Record Date") for the determination of the holders of New Dartmouth stock
entitled to notice of and to vote at the Special Meeting. Only holders of
record of New Dartmouth Common Stock and Preferred Stock at the close of
business on the Record Date will be entitled to notice of and to vote at the
Special Meeting. As of the Record Date, there were 424,200 shares of New
Dartmouth Common Stock outstanding and entitled to vote. There are approximately
70 New Dartmouth Stockholders of record. Each New Dartmouth Stockholder on the
Record Date will be entitled to cast one vote per share on each of the Merger
Proposal and any other matter properly submitted for a vote at the Special
Meeting. The presence, either in person or by properly executed proxy, of the
holders of a majority of the outstanding shares of New Dartmouth Common Stock
entitled to vote at the Special Meeting is necessary to constitute a quorum at
the Special Meeting. Shares of New Dartmouth Common Stock which are present in
person or by proxy but abstain from voting with respect to one or more proposals
voted upon at the Special Meeting will be included for purposes of determining a
quorum at such meeting.
The approval and adoption of the Merger Agreement and the Contract for
Union -- the Merger Proposal -- by New Dartmouth Stockholders will generally
require the affirmative vote of the holders of at least 66-2/3% of all of the
outstanding shares of New Dartmouth Common Stock and Preferred Stock, voting
together as a single class, which affirmative vote must include the approval of
the holders of a majority of the outstanding shares of New Dartmouth Common
Stock. The FDIC, which holds all of the 170,073 shares of New Dartmouth
Preferred Stock, and which will be entitled to cast one vote per share of New
Dartmouth Preferred Stock on the Merger Proposal, has agreed to vote in favor
of the Merger Proposal. See "THE MERGER -- Required Stockholder Approval; Voting
Agreements." Under applicable New Hampshire law, in determining whether the
Merger Proposal has received the requisite number of affirmative votes,
abstentions will have the same effect as a vote against the proposal. As
described in "THE MERGER -- Conditions to the Merger," such approval is a
condition to consummation of the
18
<PAGE>
Merger. As of February 4, 1994, directors of New Dartmouth and their affiliates
may be deemed to be beneficial owners of 202,427 shares or approximately 47.7%
of the shares of New Dartmouth Common Stock outstanding. Certain of the
directors have agreed to vote or direct the vote of 189,927 shares, or
approximately 44.8% of the shares of New Dartmouth Common Stock, FOR approval
and adoption of the Merger Agreement. See "THE MERGER -- Required Stockholder
Approval; Voting Agreements."
Voting; Solicitation and Revocation of Proxies
All shares of New Dartmouth Common Stock which are entitled to vote and are
represented at the Special Meeting by properly executed proxies received prior
to or at the meeting, and not revoked, will be voted at such meeting in
accordance with the instructions indicated on such proxies. If no instructions
are indicated, such proxies will be voted FOR approval and adoption of the
Merger Agreement and the Contract for Union.
If any other matters are properly presented at the Special Meeting for
consideration, including, among other things, consideration of a motion to
adjourn the meeting to another time and/or place (including, without limitation,
for the purpose of soliciting additional proxies), the persons named in the
relevant form of proxy enclosed herewith and acting thereunder will have
discretion to vote on such matters in accordance with their best judgment. New
Dartmouth does not have any knowledge of any matters to be presented at the
Special Meeting other than the matter set forth above under "-- Purposes."
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Clerk of New Dartmouth, at or before the taking of the vote at the
Special Meeting, a written notice of revocation bearing a later date than the
proxy, (ii) duly executing a later-dated proxy relating to the same shares and
delivering it to the Clerk of New Dartmouth before the taking of the vote at the
Special Meeting, or (iii) attending the Special Meeting and voting in person
(although attendance at the Special Meeting will not in and of itself constitute
a revocation of a proxy). Any written notice of revocation or subsequent proxy
should be sent to New Dartmouth Bank, 1155 Elm Street, Manchester, New Hampshire
03101 Attention: President, or hand delivered to the Clerk of New Dartmouth at
or before the taking of the vote at the Special Meeting.
All expenses of this solicitation, including the cost of mailing this Proxy
Statement/ Prospectus, will be borne by New Dartmouth. In addition to
solicitation by use of the mails, proxies may be solicited by directors,
officers and employees of New Dartmouth in person or by telephone, telegram or
other means of communication. Such directors, officers and employees will not
be additionally compensated, but may be reimbursed for reasonable out-of-pocket
expenses in connection with such solicitation.
NEW DARTMOUTH STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR
PROXY CARDS.
19
<PAGE>
THE MERGER
The following information concerning the Merger, insofar as it relates to
matters contained in the Merger Agreement and the Contract for Union, is
qualified in its entirety by reference to the Merger Agreement and the Contract
for Union which are incorporated herein by reference and attached hereto as
Annex A and Annex B, respectively. New Dartmouth Stockholders are urged to read
and consider carefully the Merger Agreement and the Contract for Union. As used
in this Proxy Statement/Prospectus, the term "Merger Agreement" includes the
Contract for Union.
General
Pursuant to the terms of the Merger Agreement, subject to the satisfaction
or waiver (where permissible) of certain conditions, including, among other
things, the receipt of all necessary regulatory approvals, the expiration of all
waiting periods in respect thereof, and the requisite approval of the Merger
Agreement by the holders of New Dartmouth Common Stock and Preferred Stock, SNC
will acquire New Dartmouth through the merger (the "Merger") of a wholly owned
subsidiary of SNC (the "Merger Sub") with New Dartmouth. As a result of the
Merger, New Dartmouth Stockholders will become SNC shareholders and the entity
resulting from the Merger of New Dartmouth and the Merger Sub (the "Surviving
Bank") will continue as a wholly owned subsidiary of SNC.
Prior Stockholder Approval and Amendment No. 2 to Merger Agreement
At a Special Meeting of Stockholders on August 26, 1993, New Dartmouth
Stockholders approved the Merger on terms similar to those presented herein. The
approval was almost unanimous with the 97% of New Dartmouth Common Stock that
was represented at the meeting having been voted in favor of the Merger. On
November 15, 1993, the Federal Reserve Board, in a tie vote, declined to approve
SNC's application to acquire New Dartmouth. Those Governors who voted not to
approve the application cited a then-pending investigation of possible
discriminatory lending at Shawmut Mortgage Company by the United States
Department of Justice and the Federal Trade Commission. The investigation was
undertaken pursuant to a referral from the Federal Reserve Board. Those
Governors indicated that while SNC had taken steps to address the regulatory
concerns, the measures had not been in place for a sufficient period of time for
the Federal Reserve Board to evaluate their effectiveness. See "--Regulatory
Approvals Required for the Merger" below. Because SNC was unable to obtain by
November 15, 1993 all regulatory approvals necessary to consummate the Merger,
New Dartmouth was entitled under the terms of the Merger Agreement in effect at
the time to abandon the Merger and pursue other alternatives.
Effective December 20, 1993, New Dartmouth and SNC entered into Amendment
No. 2 to the Merger Agreement, which provides for an extension of time until
June 30, 1994 for SNC to consummate the Merger. In exchange for the extension
of time, SNC agreed, among other things, to modify the manner in which the
Exchange Ratio is calculated to increase the consideration that New Dartmouth
Stockholders will receive upon consummation of the Merger and to lower the
Maximum and Minimum Reference Prices (as defined below). Due to the nature of
these changes, the approval of New Dartmouth Stockholders is required.
The terms of the amended Merger Agreement, including the changes effected
by Amendment No. 2, are described below in this Proxy Statement/Prospectus. (The
terms of Amendment No. 1 to the Merger Agreement, dated July 21, 1993, were also
reflected in the description of the Merger Agreement contained in the Proxy
Statement/Prospectus for the August 1993 Special Meeting of Stockholders.)
Exchange Ratio
General. The terms of the Merger Agreement are intended to provide a base
price of $310.95 plus 177.0% of New Dartmouth's Adjusted Earnings Per Share in
value of SNC Common Stock for each share of New Dartmouth Common Stock, subject
to potential adjustments as noted below. In calculating New Dartmouth's net
earnings per share for purposes of the Merger Agreement, all shares subject to
New Dartmouth Options and Warrants (each as defined below) will be deemed to be
outstanding.
Under the Exchange Ratio formula set forth in Amendment No. 2 to the Merger
Agreement, subject to potential adjustments as described below (see "--Minimum
and Maximum Reference Prices"), upon consummation of the Merger, the Merger Sub
will merge with New Dartmouth and each issued and outstanding share of New
Dartmouth Common Stock
20
<PAGE>
(other than shares held, directly or indirectly, by New Dartmouth or SNC, unless
such shares are held in a fiduciary capacity or in respect of a debt previously
contracted, and shares held by any stockholder properly exercising dissenters'
rights) will become, and be converted into the right to receive, a number of
shares of SNC Common Stock equal to the "Exchange Ratio," which is defined as
the quotient, rounded to the nearest thousandth (1/1000th) of a share, obtained
by DIVIDING
(I) the sum of:
(x) $310.95 PLUS
(y) 177.0% of New Dartmouth's "Adjusted Earnings Per Share,"
which is defined as the quotient obtained by DIVIDING
(i) New Dartmouth's Adjusted Earnings (as defined
below; see "THE MERGER -- Exchange Ratio") by
(ii) the sum of (a) the total number of shares of New
Dartmouth Common Stock issued and outstanding immediately
prior to the Effective Time (including shares of New
Dartmouth Common Stock held by New Dartmouth or SNC or any
of their respective subsidiaries and including shares of
New Dartmouth Common Stock held by stockholders who perfect
their dissenters' rights) PLUS (b) the number of shares of
New Dartmouth Common Stock subject to options or warrants
that are issued and outstanding immediately prior to the
Effective Time,
by (II) the Average Closing Price (as defined below) of SNC Common
Stock.
In addition, at the Effective Time (as defined below), each outstanding and
unexercised option to purchase shares of New Dartmouth Common Stock (a "New
Dartmouth Option") and each outstanding and unexercised warrant to purchase
shares of New Dartmouth Common Stock (a "New Dartmouth Warrant") will be assumed
by SNC. After the Effective Time, each New Dartmouth Option and each New
Dartmouth Warrant will be deemed to constitute an option or warrant, as the case
may be, to acquire, on the same terms and conditions as were applicable under
such New Dartmouth Option or New Dartmouth Warrant immediately prior to the
Effective Time, the same number of shares of SNC Common Stock as the holder of
such New Dartmouth Option or New Dartmouth Warrant would have been entitled to
receive pursuant to the Merger had such holder exercised such option or warrant
in full (assuming the full vesting thereof) immediately prior to the Effective
Time, at a price per share equal to (x) the aggregate exercise price for the
shares of New Dartmouth Common Stock otherwise purchasable pursuant to such New
Dartmouth Option or New Dartmouth Warrant, as the case may be, divided by (y)
the number of full shares of SNC Common Stock deemed purchasable pursuant to
such New Dartmouth Option or New Dartmouth Warrant, as the case may be.
The Merger Agreement provides that, in the event that SNC changes the
number of shares of SNC Common Stock issued and outstanding between the date of
the Merger Agreement and the Effective Time as a result of a stock split, stock
dividend, recapitalization, reclassification or other similar transaction, the
Exchange Ratio will be adjusted proportionately.
Pursuant to the Merger Agreement, New Dartmouth has agreed that, subject to
the receipt of all necessary regulatory approvals, it will redeem, prior to the
closing of the Merger, all of the then outstanding shares of its Class A
Preferred Stock, par value $.01 per share that was issued to the FDIC (the "New
Dartmouth Preferred Stock"), in accordance with the terms thereof.
Minimum and Maximum Reference Prices. The Merger Agreement provides that
shares of New Dartmouth Common Stock will be converted to shares of SNC Common
Stock according to the Exchange Ratio provided that if (x) the Average Closing
Price is less than $17.11, then the Average Closing Price will be deemed to be
$17.11 (the "Minimum Reference Price"), unless SNC waives the applicability of
the Minimum Reference Price and (y)
21
<PAGE>
the Average Closing Price is greater than $23.14, then the Average Closing Price
will be deemed to be $23.14 (the "Maximum Reference Price"). As used in this
Proxy Statement/Prospectus, "Average Closing Price" means the average of the
daily closing sales price of a share of SNC Common Stock as reported on the New
York Stock Exchange ("NYSE") Composite Transactions reporting system (as
reported by The Wall Street Journal or, if not reported thereby, by another
authoritative source chosen by SNC) for the 15 consecutive full trading days
that such shares are traded on the NYSE ending on the later of (x) the date of
approval of the Merger Agreement by New Dartmouth Stockholders and (y) the date
of the receipt of all regulatory approvals required to consummate the Merger,
including the expiration of any required waiting periods (the "Pricing Period").
The Merger Agreement provides that New Dartmouth will not be obligated to
consummate the Merger if the Average Closing Price is less than $17.11, unless
SNC waives the applicability of the Minimum Reference Price. See " -- Conditions
to the Merger" below. Assuming the Merger is approved by holders of New
Dartmouth Common Stock and Preferred Stock, the New Dartmouth Board may elect to
consummate the Merger without resoliciting New Dartmouth Stockholders if the
Average Closing Price is less than $17.11, even though, as a result of the
application of the Minimum Reference Price, the aggregate Average Closing Price
of the SNC Common Stock exchanged for each share of New Dartmouth Common Stock
would be less than $310.95 plus 177.0% of New Dartmouth's Adjusted Earnings Per
Share. In such a situation, in considering whether to consummate the Merger
without the resolicitation of New Dartmouth Stockholders, the New Dartmouth
Board will take into account, consistent with its fiduciary duties, all relevant
facts and circumstances that exist subsequent to the Pricing Period, including,
without limitation, the advice of legal counsel.
Adjusted Earnings. The formula pursuant to which the Exchange Ratio is
calculated is intended to reflect 177.0% of New Dartmouth's net earnings per
share from October 1, 1993 to closing. The concept of Adjusted Earnings is
designed to eliminate the effect of extraordinary or non-recurring income or
expense items. Under the Merger Agreement, the term "New Dartmouth's Adjusted
Earnings" is defined to mean the sum of (I) the Adjusted Reference Period
Earnings (as defined below) PLUS (II) the Adjusted Interim Earnings (as defined
below).
The term "Adjusted Reference Period Earnings" is defined to mean an amount
equal to the net income reflected on the Reference Period Income Statement (as
defined below), adjusted by (a) SUBTRACTING (i) the after-tax amount of any
gains on the sale of securities during the Reference Period (as defined below)
after deducting the after-tax amount of any losses attributable to hedging
instruments relating to such securities, (ii) the after-tax amount of any gains
on the sale of assets outside of the ordinary course of business during the
Reference Period, (iii) the after-tax amount of any gains (or reductions in
expenses) attributable to any change in accounting methods or policies adopted
for all or any portion of the Reference Period, (iv) the after-tax amount of any
gains attributable to any extraordinary items during the Reference Period, (v)
the after-tax amount of any gain attributable to any elimination of the reserve
established prior to October 1, 1993 for the retention bonuses to be awarded to
New Dartmouth's employees, as contemplated by the Merger Agreement
(collectively, the "Retention Bonuses"), (vi) the after-tax amount of any gain
(or reduction in expenses) attributable to any elimination of any reserves of a
non-operating nature which were established prior to October 1, 1993, (vii) the
after-tax amount of any gains (or reductions in expenses) during the Reference
Period attributable to any changes in estimates relating to certain depreciable
assets, (viii) the after-tax amount of any amounts accreted into interest income
during the Reference Period from certain loan purchase discounts established by
New Dartmouth in connection with the loans acquired pursuant to the P&A
Agreements (as defined below), and (ix) the after-tax amount of any gains (or
reductions in expenses) during the Reference Period attributable to the
correction of accounting errors, which errors were made prior to October 1,
1993, and (b) ADDING (i) the after-tax amount of any losses on the sale of
securities during the Reference Period after adding the after-tax amount of any
gains attributable to hedging instruments related to such securities, (ii) the
after-tax amount of any losses (or increases in expenses) attributable to any
change in accounting methods or policies adopted for all or any portion of the
Reference Period, (iii), the after-tax amount of any losses attributable to any
extraordinary items during the Reference Period, (iv) the after-tax amount of
any losses (or increases in expenses) during the Reference Period attributable
to any changes in estimates relating to certain depreciable assets, (v) the
after-tax amount of any losses (or increases in expenses) during the Reference
Period attributable to the correction of accounting errors, which errors were
made prior to October 1, 1993, (vi) the after-tax amount of any portion of the
Retention Bonuses that Seller may recognize as an expense during the Reference
Period, (vii) the after-tax amount of any direct expenses incurred by New
Dartmouth during the Reference Period in respect of actions taken during the
Reference Period to reduce or eliminate the necessity for certain identified
special reserves (including without limitation, the allocable portion of the
payroll cost of personnel dedicated to such matters), to the extent that
22
<PAGE>
such expenses are not charged against such special reserves and (viii) the
after-tax amount of any provisions to the allowance for loan losses of up to
$700,000 per month (on a pre-tax basis) during the Reference Period allocated to
the gross amount of loans acquired pursuant to the P&A Agreements. For purposes
of calculating the Adjusted Reference Period Earnings, the amount of Seller's
net income and the amount and classification of any gains or losses shall be
determined in accordance with generally accepted accounting principles. The
term "Reference Period" shall mean the period from October 1, 1993 through and
including the last day of the month immediately preceding the month in which the
Closing occurs (the "Balance Sheet Date").
The term "Adjusted Interim Earnings" is defined to mean the product of (I)
the number of days from but not including the Balance Sheet Date to but not
including the Closing Date (provided, however, that in the event that there is a
disagreement between New Dartmouth and SNC regarding the determination of New
Dartmouth's Adjusted Reference Period Earnings, for purposes of determining
Adjusted Interim Earnings, such number of days referred to in this clause shall
be deemed not to exceed 30 days), multiplied by (II) the quotient obtained by
dividing (a) the cumulative Adjusted Reference Period Earnings attributable to
the three months ending as of the Balance Sheet Date by (b) the number of days
in such three-month period.
Illustrative Exchange Ratios. For the reasons described above, the actual
Exchange Ratio will depend on three variables: (i) the timing of the closing
date for the Merger, (ii) New Dartmouth's Adjusted Earnings during the Reference
Period, and (iii) the Average Closing Price of SNC Common Stock. The closing
date for the Merger is dependent upon the timing of receipt of the required
regulatory approvals and, therefore, cannot be predicted.
New Dartmouth believes that it had Adjusted Earnings for the three months
ended December 31, 1993 of approximately $3.4 million. SNC has not had an
opportunity to review New Dartmouth's determination for purposes of the Merger
Agreement, and therefore the calculation of Adjusted Earnings for such period is
subject to change. Moreover, because New Dartmouth's actual Adjusted Earnings
for purposes of computing the Exchange Ratio are inherently subject to
significant economic and competitive uncertainties and contingencies, many of
which will be beyond New Dartmouth's control, New Dartmouth's estimate of
Adjusted Earnings for the three months ended December 31, 1993 is not
necessarily indicative of the actual Adjusted Earnings which may be expected for
the entire Reference Period.
The following table sets forth examples of possible Exchange Ratios at
various hypothetical levels of Adjusted Earnings, assuming in each case that the
Average Closing Price is neither less than the Minimum Reference Price of $17.11
nor greater than the Maximum Reference Price of $23.14. This table is presented
for illustrative purposes only, and there can be no assurance that the actual
Exchange Ratio will not be less or greater than the hypothetical Exchange Ratios
set forth below.
<TABLE>
<CAPTION>
Exchange Ratio
-------------------------------- Aggregate Value of SNC
Minimum Maximum Common Stock
Hypothetical Reference Price Reference Price Per Share of New Dartmouth
Adjusted Earnings ($17.11) ($23.14) Common Stock
- ----------------- --------------- ---------------- --------------------------
<S> <C> <C> <C>
$ 6,100,000 19.534 14.444 $ 334.22
7,800,000 19.913 14.724 340.71
9,500,000 20.292 15.004 347.20
</TABLE>
Background of the Merger
The execution of the Merger Agreement between New Dartmouth and SNC marked
the culmination of a process that began late in 1992. At that time, the New
Dartmouth Board commenced a formal review of New Dartmouth's principal strategic
alternatives, which included (i) remaining independent and continuing to
implement New Dartmouth's original business plan, taking advantage of selected
in-market acquisition opportunities when available, (ii) making significant
out-of-state acquisitions, (iii) being acquired now or remaining independent for
the next one to three years with a view toward being acquired in the future,
(iv) engaging in a merger of equals transaction, and (v) undertaking an initial
public offering ("IPO") of shares of New Dartmouth Common Stock. In
conjunction with this review, the New Dartmouth Board also considered the
desirability of forming a holding company, which would have provided more
versatility in raising capital to leverage the returns on New Dartmouth Common
Stock and would have enhanced New Dartmouth's ability to diversify by
facilitating out-of-state acquisitions and nonbank operations.
Four investment banking firms were asked to make presentations to the New
Dartmouth Board regarding how New Dartmouth could maximize value to, and provide
liquidity for, New Dartmouth Stockholders. Specifically, the New Dartmouth
Board asked each firm to address whether New Dartmouth should stay its present
course or provide liquidity to its stockholders through the sale of New
Dartmouth or an IPO. The consensus of the investment banking firms was that the
sale of New Dartmouth would likely be preferable to the other alternatives they
were asked to consider. They cited, among other factors, the improvement during
1992 in the market price of the stock of potential acquirors, favorable stock
market reactions to mergers that are expected to produce operational synergies,
a perception that asset quality deterioration had slowed in New England, and the
improved profitability of banks in the interest rate environment prevailing
during 1992. In general, the investment banking firms advised that it would be
difficult to sustain the increase in value that New Dartmouth Stockholders had
experienced in the first year of operations following the formation of New
Dartmouth through the consolidation of the operations of the Failed Banks (as
hereinafter defined). They also noted that in the current economic environment
New Dartmouth lacked attractive opportunities for raising new capital.
Consequently, they advised that an IPO would be less likely to provide as
favorable a level of returns to New Dartmouth Stockholders as might be obtained
through the pursuit of the other strategic alternatives. Furthermore, they
reported that an IPO might not offer sufficient liquidity to many of the New
Dartmouth Stockholders who owned a relatively large percentage of New Dartmouth
Common Stock.
On November 19, l992, following these presentations, the New Dartmouth
Board unanimously directed management to pursue the sale of New Dartmouth. The
Board delegated to New Dartmouth's Strategic Planning Committee (the
"Committee") the authority to make a final selection of the investment banking
firm to represent New Dartmouth. On November 24, 1992, following further
presentations by Goldman, Sachs & Co. ("Goldman Sachs") and another investment
banking firm, the Committee voted to retain Goldman Sachs. New Dartmouth
formally engaged Goldman Sachs as of December 3, l992. See "-- Opinion of New
Dartmouth's Financial Advisor" below for a description of the qualifications of
Goldman Sachs.
Beginning in December 1992, Goldman Sachs, at the direction of New
Dartmouth, solicited indications of interest to acquire New Dartmouth from
organizations which Goldman Sachs believed might have such an interest. New
Dartmouth placed no limits on Goldman Sachs' ability to contact potential
acquirors. Several
23
<PAGE>
prospective acquirors, including SNC, expressed an interest.
On February 25, 1993, Goldman Sachs apprised the New Dartmouth Board of the
status of the proposed sale and the various levels of interest, expressed by
prospective acquirors. Also on that date, Nutter, McClennen & Fish, New
Dartmouth's legal counsel, reviewed for the Board the structure of the
prospective acquisition and the material terms of the proposed merger agreement
that was provided to prospective acquirors.
After a preliminary evaluation of the expressions of interest received, New
Dartmouth's management directed Goldman Sachs to pursue negotiations directly
with SNC. On March 17, 1993, following such negotiations, SNC communicated an
offer of $310 per share of New Dartmouth Common Stock, payable in shares of SNC
Common Stock.
The Committee met on March 18, 1993 to review SNC's offer. At that time,
New Dartmouth's management and representatives of Goldman Sachs reviewed for the
Committee their evaluation of SNC's offer and their assessment of the intrinsic
value of New Dartmouth. After evaluating the terms of SNC's offer, as well as
indications of interest expressed by other prospective acquirors, and after
taking into account various other monetary and non-monetary factors, the
Committee authorized management to negotiate definitive terms of a proposed
acquisition by SNC for full consideration by the New Dartmouth Board.
Representatives of New Dartmouth and SNC negotiated such terms between March 18
and March 23. The New Dartmouth Board met on March 23 to consider the terms so
negotiated. Following presentations by New Dartmouth's management, Goldman
Sachs and Nutter, McClennen & Fish, including a summary of their due diligence
findings, financial and valuation analyses and the terms of the proposed
acquisition and regulatory matters, the New Dartmouth Board (with two directors
absent) voted unanimously to authorize the execution of the Merger Agreement
and the Stock Option Agreement.
Prior to entering into Amendment No. 2 to the Merger Agreement, the New
Dartmouth Board completely re-evaluated whether the proposed Merger was in the
best interests of New Dartmouth Stockholders. As the first element of this
re-evaluation process, the Committee met on October 28, 1993, having been
advised by New Dartmouth's counsel that there was a reasonable possibility SNC
might not be able to obtain by November 15, 1993 all regulatory approvals
necessary to consummate the Merger, as originally contemplated in the Merger
Agreement. With the assistance of New Dartmouth's management and Goldman Sachs,
the Committee considered generally whether the sale of New Dartmouth continued
to be preferable to the other strategic alternatives available to it.
On November 15, 1993, the Federal Reserve Board, in a tie vote, declined to
approve SNC's application to acquire New Dartmouth. Those Governors who voted
not to approve the application cited a then-pending investigation of possible
discriminatory lending practices at Shawmut Mortgage Company by the United
States Department of Justice and the Federal Trade Commission. The
investigation was undertaken pursuant to a December 1992 referral from the
Federal Reserve Board. Those Governors indicated that because of such
regulatory concerns, in order for SNC to secure their votes for approval of
the Merger, it would have to submit strong evidence that it has programs in
place to ensure compliance with the Equal Credit Opportunity Act and has a
demonstrated record that the programs are adequate and working well. Although
those Governors found that SNC had recently taken steps to improve its record
of lending to minorities and to address regulatory concerns that it may have
engaged in discriminatory lending practices in the past, they stated that such
steps were relatively new and had not been in place for a sufficient period of
time to allow an adequate evaluation of either their effectiveness or
sufficiency. See "--Regulatory Approvals Required for the Merger" below.
Because SNC did not obtain by November 15, 1993 all regulatory approvals
necessary to consummate the Merger, New Dartmouth was entitled under the terms
of the Merger Agreement in effect at the time to abandon the Merger and pursue
other strategic alternatives. New Dartmouth chose not to abandon the Merger
Agreement and instead commenced negotiations with SNC on November 15, 1993
regarding the terms of an extension of the Merger Agreement. The New Dartmouth
Board met on November 18, 1993, and following presentations by management
regarding the status of negotiations with SNC and by Goldman Sachs regarding,
among other things, its assessment of the interest that other potential
acquirors might have in acquiring New Dartmouth, the Board authorized management
to continue to negotiate exclusively with SNC.
While New Dartmouth's negotiations with SNC continued, New Dartmouth's
management and its advisors updated their assessment of SNC's condition and
prospects. New Dartmouth also independently evaluated the likelihood that SNC
could secure Federal Reserve Board approval of the Merger during the first half
of 1994. This evaluation included interviews of senior SNC officers, joint
meetings with SNC representatives and representatives of the Federal Reserve
System, and a review by an independent consultant, with experience assessing
Equal Credit Opportunity Act compliance programs, of the actions taken by SNC to
address the issues cited by the Federal Reserve Board Governors who opposed
SNC's application. New Dartmouth's management and its advisors also reviewed
the terms of the consent decree that Shawmut Mortgage
24
<PAGE>
Company entered into with the U.S. Department of Justice and the Federal Trade
Commission on December 13, 1993. The consent decree ended the investigation
into alleged discriminatory lending practices by Shawmut Mortgage Company that
was initiated following the referral from the Federal Reserve Board. See " --
Regulatory Approvals Required for the Merger" below.
On December 16, 1993, the New Dartmouth Board evaluated the terms of an
amendment to the Merger Agreement, at which time the Board considered reports by
New Dartmouth's management, Goldman Sachs, Nutter, McClennen & Fish and the
independent bank consultant, which included (i) a detailed description of the
manner in which the Exchange Ratio would be determined pursuant to the amended
Merger Agreement, (ii) various other financial and valuation analyses, (iii) a
summary of the other terms of the proposed amendment, including the provision
for a payment of up to $10.0 million to New Dartmouth if, through no fault of
New Dartmouth, the Merger is not consummated during the first half of 1994, (see
"-- Waiver and Amendment; Abandonment" below) and (iv) a report by the
independent consultant on the prospects for SNC securing Federal Reserve Board
approval in a timely manner. Following such presentations, the New Dartmouth
Board (with one director absent) voted unanimously to authorize the execution of
Amendment No. 2 to the Merger Agreement. New Dartmouth and SNC executed
Amendment No. 2 on December 20, 1993.
Recommendation of the New Dartmouth Board; Reasons for the Merger.
The New Dartmouth Board believes that the overall terms of the Merger
Agreement and the transactions contemplated thereby are in the best interests of
New Dartmouth and are fair to and in the best interests of its stockholders and
unanimously recommends that New Dartmouth Stockholders vote to approve the
Merger Agreement, the Contract for Union and the procedures and transactions
contemplated thereby, including, without limitation, the submission of a
petition for union to the New Hampshire Bank Commissioner (or, alternatively, a
petition for a decree from the New Hampshire Superior Court) and the
consummation of the Merger. New Dartmouth's directors have agreed to vote or
direct the vote of 44.8% of the shares of New Dartmouth Common Stock
outstanding in favor of the Merger. See " -- Required Stockholder Approval;
Voting Agreements" below.
In reaching its determination, the New Dartmouth Board consulted with
management, Goldman Sachs and New Dartmouth's legal advisors, and considered a
number of factors, including, without limitation, the following:
New Dartmouth's near-term business prospects. The New Dartmouth Board
reviewed New Dartmouth's financial condition, earnings and prospects. The
Board was aware of the view expressed by several investment banking firms
that it would be difficult to sustain the increase in value that New
Dartmouth Stockholders had experienced during the first year of operations
following the formation of New Dartmouth. This view was consistent with
management's projections that, assuming operations consistent with New
Dartmouth's original business plan, its return on average assets was
expected to decline during the next three years from 1.2% for the twelve
months ended February 28, 1993 to approximately 1.0% for the twelve months
ending February 28, 1995 (without regard to any accretion of the $39
million loan discount established in connection with the 1991 P&A
Transaction (as hereinafter defined)). See "-- Management's Discussion and
Analysis of New Dartmouth's Financial Condition and Results of Operations"
below.
Active solicitation of various potential acquirors. The New Dartmouth
Board was aware of the efforts of Goldman Sachs to solicit indications of
interest from likely prospective acquirors during the first quarter of
1993, and was advised by Goldman Sachs of the level of interest expressed
by each party which it contacted.
Other strategic alternatives less attractive. The New Dartmouth Board
also considered the relative merits of certain other alternatives to the
Merger including the alternatives of remaining independent as a private
company and growing internally or through strategic acquisitions in New
Hampshire and contiguous states, remaining independent for a time and then
seeking to sell New Dartmouth, and creating a market for New Dartmouth
Common Stock through an IPO. The New Dartmouth Board considered, based in
part on the advice of Goldman Sachs, possible values to New Dartmouth
Stockholders that could potentially be obtained through implementation of
such alternatives and the likelihood of actually receiving such values
within various time periods. In particular, the New Dartmouth Board was
aware of the general view of Goldman Sachs that the market value of New
Dartmouth
25
<PAGE>
upon completion of an IPO would likely be less than the aggregate
consideration to be paid by SNC under the terms of the Merger Agreement.
Moreover, the Board was advised that it would be difficult to sell a
substantial portion of the shares of New Dartmouth Common Stock currently
outstanding in conjunction with an IPO, and that the market for New
Dartmouth Common Stock after an IPO would likely be limited. Regarding
possible targeted acquisitions, the Board was aware that such a strategy
could materially affect New Dartmouth's risk profile and therefore,
depending on the circumstances, might be viewed by certain New Dartmouth
Stockholders as a deviation from the business plan presented to New
Dartmouth Stockholders in connection with New Dartmouth's organization in
1991.
Comparison of recent acquisitions. The New Dartmouth Board also
considered that in selected acquisitions of banks and thrifts in 1993 where
the value of the disclosed consideration was greater than $100 million, the
median earnings multiple paid by the acquiror was 16.3 times the selling
company's earnings per share ("EPS") for the last 12 months and the median
multiple of tangible book value paid by the acquiror was 2.1 times.
At the hypothetical levels of Adjusted Earnings of $6.0 million and $9.5
million presented above for illustrative purposes and assuming the Average
Closing Price is not less than the Minimum Reference Price of $17.11 or
greater than the Maximum Reference Price of $23.14 (see "-- Exchange Ratio"
above), the aggregate consideration to be paid by SNC in the Merger would
range between approximately $150 million (approximately $334 per share of
New Dartmouth Common Stock) and $156 million (approximately $347 per share
of New Dartmouth Common Stock) or between 8.5 times and 8.9 times New
Dartmouth's net earnings for the 12 months ended September 30, 1993 and
between 1.9 times and 2.0 times New Dartmouth's common equity at September
30, 1993. With regard to the net earnings multiple, the New Dartmouth Board
considered, in part, New Dartmouth's current balance sheet configuration,
with a relatively large percentage of liquid investments, the trend of New
Dartmouth's return on average assets noted above and general economic
conditions.
Presentations and Fairness Opinion of Goldman Sachs. The New
Dartmouth Board took into account presentations made by Goldman Sachs on
December 16, 1993 and previously and its oral opinion, which was
subsequently confirmed in writing, that the consideration to be received by
the holders of New Dartmouth Common Stock under the Merger Agreement was
fair to such holders. See "-- Opinion of New Dartmouth's Financial Advisor"
and Annex C below.
The conditions to the Merger. The New Dartmouth Board was aware of
the terms of the Merger Agreement including, without limitation, the
conditions to the Merger. The Board also considered the various regulatory
approvals that would be necessary to consummate the Merger, the likelihood
that such approvals would be obtained, and the risks to New Dartmouth if
such approvals were not obtained.
Certain information concerning SNC's financial condition, results of
operations and prospects. The New Dartmouth Board considered, based in part
on due diligence conducted by management and Goldman Sachs, SNC's
financial condition, historical earnings and prospects. The Board also
noted that if the market value of SNC Common Stock declined, resulting in
an Average Closing Price of less than $l7.11, New Dartmouth would have the
right under the Merger Agreement not to proceed with the Merger unless SNC
waived the applicability of the Minimum Reference Price. See "-- Exchange
Ratio."
Liquidity. The New Dartmouth Board reviewed the degree to which the
Merger would provide New Dartmouth Stockholders with a liquid investment
and noted, among other factors, (i) the number of shares of SNC Common
Stock that would be outstanding after the Merger and the percentage of
such shares that the shares of SNC Common Stock to be issued in the Merger
would represent and (ii) that the shares of SNC Common Stock to be issued
in connection with the Merger will be listed on the New York Stock
Exchange. See "-- Resales of SNC Common Stock Received in the Merger;
Resales by Affiliates."
The number of shares of SNC Common Stock to be issued to New Dartmouth
Stockholders pursuant to the acquisition will depend upon the Exchange
Ratio. Based upon the number of shares of SNC Common Stock outstanding as
of September 30, 1993, (which does not take into account the shares of SNC
Common Stock which may be issued in connection with the Peoples and Gateway
transactions) and assuming the Average Closing Price will be between the
Maximum and Minimum Reference Prices, at the hypothetical levels of
Adjusted Earnings of $6.1 million and $9.5 million presented above (See "--
Exchange Ratio"), on a pro forma basis, New Dartmouth Stockholders'
ownership of SNC Common Stock outstanding immediately after the Merger is
expected to
26
<PAGE>
range between 6.50% and 8.90%, after taking into account the shares of SNC
Common Stock to be issued upon exercise of outstanding New Dartmouth
Warrants.
The terms of the Stock Option Agreement. The New Dartmouth Board was
aware that the existence of the Stock Option Agreement would make it
significantly more expensive for a third party to offer a price per share
higher than the price New Dartmouth's Stockholders will receive under the
Merger Agreement. The Board also was aware that the Stock Option Agreement
might make it impossible for another bidder to account for an acquisition
of New Dartmouth on a pooling of interests basis. The Board was thus aware
that the Stock Option Agreement would significantly deter, if not
completely preclude, a potential competing acquiror from making an offer.
See "-- The Stock Option Agreement" below. The Board also considered that
such stock option agreements are typical in transactions such as the Merger
and, significantly, that SNC had stipulated that the Stock Option Agreement
was a necessary condition of its offer.
Voting Agreement. The New Dartmouth Board was also aware that the
agreement of certain of New Dartmouth's directors, who exercise voting
control over approximately 44.8% of the outstanding shares of New Dartmouth
Common Stock, to vote in favor of the Merger further reduced the likelihood
that a third party would make a competing offer to acquire New Dartmouth.
The possible impact of the Merger on New Dartmouth's business
prospects, employees, customers and communities. The New Dartmouth Board
considered, generally, the impact of the Merger on New Dartmouth's business
prospects, employees, customers and communities. The Board also was aware
that the Merger Agreement obligated SNC to provide New Dartmouth employees
with benefits generally comparable to those provided to other SNC
employees, but did not otherwise limit SNC's personnel policies.
After reviewing various factors, including those noted above, the New
Dartmouth Board concluded that the overall terms of the Merger Agreement
and the transactions contemplated thereby are fair to and in the best
interests of New Dartmouth Stockholders. In view of the wide variety of
factors considered, the Board did not find it practicable to, and did not,
quantify or otherwise assign relative weights to the individual factors
considered in reaching its determination.
New Dartmouth's pro forma total assets and total shareholders' equity
at September 30, 1993, assuming that the Merger had occurred at that date,
would have represented approximately 6.0% and 4.4%, respectively, of the
pro forma combined total assets and total shareholders' equity. New
Dartmouth's pro forma earnings before taxes based on financial data for the
nine months ended September 30, 1993 would have represented approximately
13.8% of the pro forma combined earnings before taxes for that period.
Opinion of New Dartmouth's Financial Advisor
General. Goldman Sachs has delivered its opinion to the New Dartmouth
Board that, subject to certain assumptions and qualifications, as of December
16, 1993 and as of the date of this Proxy Statement/Prospectus, the consider-
ation to be received by the holders of New Dartmouth Common Stock under the
Merger Agreement was fair to such holders. No limitations were imposed by the
New Dartmouth Board upon Goldman Sachs with respect to the investigations made
or procedures followed by it in rendering its opinion. Goldman Sachs, as part of
its investment banking business, is continuously engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for estate,
corporate and other purposes. The New Dartmouth Board selected Goldman Sachs as
its financial advisor on the basis of the firm's experience and expertise in
transactions similar to the transaction contemplated by the Merger Agreement and
its presentations to the New Dartmouth Board. Goldman Sachs is familiar with New
Dartmouth and the terms of the Merger Agreement, having acted as its financial
advisor in connection with and having participated in certain of the
negotiations leading to the Merger Agreement. Goldman Sachs also has provided
certain investment banking services to SNC from time to time, including acting
as co-manager of SNC's Subordinated Note Offerings in December 1992 and in April
1993, and acting as SNC's financial advisor in connection with the pending
acquisition of Gateway Financial Corporation, and it may provide investment
banking services to SNC in the future.
The full text of the opinion of Goldman Sachs dated as of the date of this
Proxy Statement/Prospectus (the "Fairness Opinion"), which sets forth
assumptions made, matters considered and limits on the review undertaken
27
<PAGE>
in connection with such opinion, is attached hereto as Annex C to this Proxy
Statement/Prospectus. The Fairness Opinion is directed only to the New
Dartmouth Board of Directors and relates only to the consideration to be
received by holders of New Dartmouth Common Stock and does not constitute a
recommendation to any New Dartmouth Stockholder as to how such stockholder
should vote at the Special Meeting. The summary of the Fairness Opinion in this
Proxy Statement/Prospectus is qualified in its entirety by reference to the full
text of the Fairness Opinion. New Dartmouth stockholders are urged to read the
opinion in its entirety for a description of the procedures followed,
assumptions made, matters considered and limitations on the reviews undertaken
by Goldman Sachs.
In connection with delivering the Fairness Opinion, Goldman Sachs reviewed,
among other things, (a) the Merger Agreement and the Stock Option Agreement,
(b) SNC's Registration Statement on Form S-4 including a draft Proxy
Statement/Prospectus, (c) the Audited Annual Reports for the period October
10, 1991 to June 30, 1992 and the year ended June 30, 1993, respectively, to New
Dartmouth Stockholders, and Annual Reports to Shareholders and Annual Reports on
Form 10-K for the five years ended December 31, 1992 for SNC, (d) certain
unaudited interim reports to New Dartmouth Stockholders, certain interim reports
to shareholders and Quarterly Reports on Form 10-Q of SNC and certain other
communications from New Dartmouth and SNC to their respective stockholders, (e)
certain internal financial analyses and forecasts for New Dartmouth and SNC
prepared by their respective managements and (f) the Purchase and Assumption
Agreements each dated October 10, 1991 between New Dartmouth and the FDIC, as
Receiver of the Failed Banks. Goldman Sachs also held discussions with members
of the senior managements of New Dartmouth and SNC and with independent
consultants and legal advisors to New Dartmouth and SNC regarding past and
current business operations, regulatory matters, financial condition and future
prospects of New Dartmouth and SNC. Goldman Sachs also held discussions with the
independent accountants of New Dartmouth and SNC. Goldman Sachs also reviewed
with New Dartmouth's management the results of New Dartmouth's due diligence
examination of SNC. In addition, Goldman Sachs reviewed the reported price and
trading activity for SNC Common Stock, compared certain financial information
for New Dartmouth and SNC and stock market information for SNC with similar
information for certain other companies, the securities of which are publicly
traded, reviewed the financial terms of certain recent business combinations in
the thrift and commercial banking industries specifically and other industries
generally, and performed such other studies and analyses as it considered
appropriate.
Goldman Sachs relied without independent verification upon the accuracy and
completeness of all the financial and other information reviewed by it for
purposes of the Fairness Opinion. In issuing the Fairness Opinion Goldman Sachs
assumed, with the consent of the New Dartmouth Board, that the financial and
operating forecasts provided to Goldman Sachs (including, without limitation,
projected cost savings and operating synergies resulting from the Merger and
projections regarding underperforming and non-performing assets and net
charge-offs) had been reasonably prepared on a basis reflecting the best
currently available judgments and estimates of New Dartmouth and SNC. In
particular, Goldman Sachs assumed, with the consent of the New Dartmouth Board,
and without independent verification, that the aggregate allowances for loan
losses of each of New Dartmouth and SNC were and are in the aggregate adequate
to cover all such losses. Goldman Sachs did not make an independent evaluation
or appraisal of the assets and liabilities of New Dartmouth or SNC or any of
their subsidiaries, Goldman Sachs was not furnished with any such evaluation or
appraisal, and Goldman Sachs did not review any individual credit files. After
consulting with New Dartmouth and its counsel, Goldman Sachs assumed, with New
Dartmouth's consent, that issues previously raised in connection with SNC's
failure to obtain the approval of the Federal Reserve Board for the Merger
would be satisfactorily addressed and that SNC would receive in a timely manner
all regulatory approvals necessary for consummation of the Merger. Goldman Sachs
was informed by New Dartmouth and assumed for purposes of its opinions, with the
consent of New Dartmouth, that the Merger would be recorded as a pooling of
interests under generally accepted accounting principles.
The following is a brief summary of the report presented by Goldman Sachs
to the New Dartmouth Board on December 16, 1993 (the "Goldman Sachs Report") in
connection with its opinion that, as of December 16, 1993, the Exchange Ratio
was fair to New Dartmouth Stockholders.
Present Value Analysis. Goldman Sachs estimated the future value of
New Dartmouth Common Stock under various assumptions and discounted each of
those values to a present value as of the twelve months ended June 30, 1993
using three different discount rates (10%, 15% and 20%), selected to
reflect different assumptions regarding the required rate of return of
holders or prospective buyers of New
28
<PAGE>
Dartmouth Common Stock, and a range of five different price-to-earnings
multiples (ranging from 6 times to 14 times). Those assumptions also
included a range of four EPS scenarios (ranging from a 5% annual decline in
EPS to a 10% annual increase in EPS). On the basis of such assumptions
Goldman Sachs estimated that the present value of one share of New
Dartmouth Common Stock on a stand alone basis would range from $60.00 to
$567.00. As indicated below, this analysis is not necessarily indicative
of actual values or actual future results and does not purport to predict
the price or prices at which any securities might be valued at the present
time or at any time in the future.
Comparison with Selected Companies. Goldman Sachs compared selected
historical earnings, reserves, annualized returns, non-performing assets
and market capitalization data and financial ratios for New Dartmouth to
the corresponding data and ratios for a selected group of five banks and
thrifts based in New Hampshire (Bank of New Hampshire, Cheshire Financial
Corp., Great Bay Bankshares, NFS Financial Corp. and Portsmouth Bank
Shares), a selected group of six banks and thrifts in New England generally
comparable to New Dartmouth (Centerbank, Chittenden Corp., Neworld Bancorp,
Inc., People's Bank, Inc., Sterling Bancshares and UST Corp.) and the same
factors for SNC to a selected group of five large regional bank holding
companies in the Northeast (Bank of Boston Corporation, BayBanks, Inc.,
First Empire State Corporation, Fleet Financial Group, Inc. and KeyCorp).
Analysis of Selected Bank and Thrift Mergers and Acquisitions.
Goldman Sachs reviewed acquisitions of banks and thrifts valued at greater
than $100 million announced since January 1, 1993. Goldman Sachs calculated
the percentage premiums of the offer value over the market value of the
acquired company, the price/last twelve-month ("LTM") EPS multiple, and the
price/ tangible book value multiple. The calculations yielded a range of
percentage of offer values to market values from 100% to 188% with a median
percentage of 127%; a price/LTM EPS multiple range of 7.2 times to 54.7
times with a median of 16.3 times; and a price/tangible book value multiple
range of 1.2 times to 2.7 times with a median of 2.1 times. Goldman Sachs
presented an analysis of the consideration to be paid by SNC as a multiple
of LTM net earnings and as a multiple of New Dartmouth common equity, in
each case assuming different amounts of consideration to be paid by SNC per
share of New Dartmouth Common Stock, depending on the closing date,
including $330 and $360. At those levels, and assuming the Average Closing
Price is not less than $17.11 or greater than $23.14 (see "-- Exchange
Ratio"), the multiple of price to LTM net earnings through September 30,
1993 would be 8.8 times and 9.6 times, respectively, and the multiple of
price to New Dartmouth common equity would be 1.9 times and 2.1 times,
respectively. No company or transaction used in the above analyses as a
comparison is identical to New Dartmouth, SNC or the proposed transaction.
Accordingly, an analysis of the results of the foregoing is not
mathematical; rather, it involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
companies and other factors that could affect the public trading value of
the companies to which they are being compared. Mathematical analysis (such
as determining an average or median value) is not, by itself, a meaningful
method of using comparable company or transaction data.
Stock Trading History. Goldman Sachs examined the history of the
trading prices and volume for SNC Common Stock, and the relation between
movements of SNC Common Stock and movements of the Standard & Poor's 500
and Standard & Poor's Financial indices.
Pro Forma Acquisition Analysis. Goldman Sachs analyzed, using
different future earnings scenarios and several Exchange Ratio scenarios,
certain pro forma effects on SNC resulting from the Merger. The Goldman
Sachs analysis included, among other factors, estimates of EPS, the change
in tangible book value per share and the change in the ratio of tangible
common equity to tangible assets. This analysis, based on the factors and
assumptions noted below, showed that if New Dartmouth Stockholders receive
$330 in value of SNC Common Stock for each share of New Dartmouth Common
Stock, at an assumed Average Closing Price equal to the Maximum Reference
Price of $23.14, the Merger would be accretive to SNC's earnings per share
in 1994 by approximately 0.5% . The Goldman Sachs analysis also showed
that the Merger would be dilutive to SNC's 1994 earnings per share by
approximately 1.4% and 0.3%, respectively, if the Average Closing Price was
either the Minimum Reference Price of $17.11 or $20.13, the median between
the Maximum and Minimum Reference Prices (the "Median Reference Price").
The reduction in SNC's tangible book value per share caused by the Merger,
if New Dartmouth Stockholders were to receive $330 in value of SNC Common
Stock, would be 0.9%, 1.7% and 2.7% at the Maximum, Median and Minimum
Reference Prices, respectively, according to the Goldman Sachs
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analysis. The Goldman Sachs presentation also indicated that the reduction
in SNC's ratio of tangible common equity to tangible assets would be
approximately .06% in such a scenario.
Goldman Sachs also provided the New Dartmouth Board with the same pro
forma analysis assuming New Dartmouth Stockholders receive $360 in value of
SNC common Stock for each share of New Dartmouth Common Stock. Under this
scenario, the Merger would be neither accretive nor dilutive to SNC's 1994
earnings per share if the Average Closing Price equaled the Maximum
Reference Price and would be dilutive to SNC's 1994 earnings per share by
approximately 0.9% and 2.0% at the Median and Minimum Reference Prices,
respectively. The reduction in SNC's tangible book value per share caused
by the Merger, if New Dartmouth Stockholders were to receive $360 in value
of SNC Common Stock, would be 1.4%, 2.2% and 3.4% at the Maximum, Median
and Minimum Reference Prices, respectively, according to the Goldman Sachs
analysis. The Goldman Sachs presentation also indicated that the reduction
in SNC's ratio of tangible common equity to tangible assets would be
approximately .06% in such a scenario.
Goldman Sachs made its estimates based on financial data at September
30, 1993 and after taking into account certain information supplied by New
Dartmouth and SNC and obtained from public sources including, among other
factors, the following: (a) the estimate of SNC shares outstanding; (b)
certain financial projections of the respective managements of SNC and New
Dartmouth; and (c) published estimates of bank and thrift stock analysts.
In addition, Goldman Sachs' estimates assumed that 15% of New Dartmouth's
noninterest expense could be reduced after the Merger, which assumption was
based in part on information supplied by SNC, and also assumed that 100% of
the estimated cost savings would be realized in 1994.
In connection with the Fairness Opinion, Goldman Sachs confirmed the
appropriateness of its reliance on the analyses in the Goldman Sachs Report
described above by performing procedures to update certain of such analyses and
by reviewing the assumptions on which such analyses were based and the factors
considered in connection therewith.
The summary set forth above does not purport to be a complete description
of the presentation by Goldman Sachs to the New Dartmouth Board or of the
analysis performed by Goldman Sachs. The preparation of a fairness opinion is
not necessarily susceptible to a partial analysis or summary description.
Goldman Sachs believes that its analyses and the summary set forth above must be
considered as a whole and that selecting portions of its analyses and the
factors considered by it, without considering all analyses or factors, or
selecting part or all of the above summary, without considering all analyses and
factors, could create an incomplete view of the processes underlying the
preparation of the Fairness Opinion. None of the analyses performed by Goldman
Sachs was indicated by Goldman Sachs to have a greater significance than any
other. The ranges of valuations resulting from any particular analysis
described above should not be taken to be Goldman Sachs' view of the actual
value of New Dartmouth or the combined company.
In performing its analyses, Goldman Sachs made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of New Dartmouth. The
analyses performed by Goldman Sachs are not necessarily indicative of actual
values or actual future results, which may be significantly more or less
favorable than suggested by such analyses. Additionally, the analyses do not
purport to be appraisals or to reflect the prices at which a company might
actually be sold or the prices at which any securities may trade at the present
time or at any time in the future. Goldman Sachs used in its analyses various
projections of future performance prepared by the managements of New Dartmouth
and SNC. The projections are based on numerous variables and assumptions which
are inherently unpredictable and must be considered uncertain of occurrence as
projected. Accordingly, actual results could vary significantly from those set
forth in such projections.
As described above, the Goldman Sachs Report and Goldman Sachs' opinion
were among many factors taken into account by the New Dartmouth Board in making
its determination to approve the Merger Agreement. The
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Fairness Opinion does not address the relative merits of the Merger Agreement as
compared to any alternative business strategies that might exist for New
Dartmouth or the effect of any other business combination in which New Dartmouth
might engage.
The terms of the engagement of Goldman Sachs were set forth in an
engagement letter dated as of December 3, 1992. Pursuant to that letter, if the
Merger is consummated, New Dartmouth will pay to Goldman Sachs a transaction fee
equal to 1.0% of the aggregate consideration paid by SNC in the Merger. Whether
or not the Merger is consummated, New Dartmouth has agreed to reimburse Goldman
Sachs for its reasonable out-of-pocket expenses, including all fees and
disbursements of counsel, up to $50,000, and to indemnify Goldman Sachs against
certain liabilities relating to or arising out of its engagement.
SNC's Reasons for the Merger
In reaching its determination to enter into the Merger Agreement, the Board
of Directors of SNC (the "SNC Board") considered a number of factors, including
the following: (i) the SNC Board's familiarity with and review of SNC's
business, operations, financial condition, earnings and prospects; (ii) the SNC
Board's review, based in part on the advice of its financial advisor and a
presentation by SNC management regarding its due diligence on New Dartmouth, of
the business, operations, earnings and financial condition of New Dartmouth on a
historical, prospective and pro forma basis, and the enhanced opportunities for
growth that the Merger makes possible; (iii) a variety of factors affecting and
relating to the overall strategic focus of SNC, including the geographical
proximity and regional similarities of New Dartmouth's New Hampshire market
areas to SNC's existing market areas; (iv) the current and prospective economic
environment facing financial institutions, including SNC; (v) the terms of the
Merger Agreement, the Stock Option Agreement and the other documents executed in
connection with the Merger; and (vi) the financial and other obligations owed by
the FDIC to New Dartmouth pursuant to certain purchase and assumption
agreements. The SNC Board did not assign any specific or relative weight to the
factors in its consideration.
Interests of Certain Persons In The Merger
If the Merger is consummated, the non-vested portion of the New Dartmouth
Warrant held by Robert P. Keller, New Dartmouth's President and Chief Executive
Officer, for 5,891 shares of New Dartmouth Common Stock, will become fully
vested as of the Effective Time. Absent a change in control of New Dartmouth,
Mr. Keller's warrant, which is currently two-thirds vested, will be fully vested
on October 10, 1994. In addition, Mr. Keller, Dennis Beaulieu, a Senior Vice
President and the Chief Financial Officer of New Dartmouth, and other senior
executives of New Dartmouth will receive additional compensation under certain
circumstances after the Merger pursuant to the Employment Agreements and the New
Dartmouth 1992 Stock Option Plan.
Executive Employment Agreements. Messrs. Keller and Beaulieu each entered
into employment agreements with New Dartmouth as of October 10, 1991
(collectively, the "Employment Agreements"). Each Employment Agreement has a
term of three years, expiring in October 1994, and is extended automatically for
successive one-year periods unless either New Dartmouth or the officer gives
notice at least one year prior to the expiration of the initial term or any
extension.
Mr. Keller's Employment Agreement provides that if his employment is
terminated by New Dartmouth without cause or by him due to a material change in
the nature or scope of his responsibilities or duties, or a material breach by
New Dartmouth of the Employment Agreement, New Dartmouth would generally be
obligated to pay Mr. Keller his base salary for the remainder of the term of the
Agreement or 18 months, whichever is greater. During such period, New Dartmouth
would also be obligated to continue certain employee benefits, such as life,
health, accident and disability insurance coverage, which Mr. Keller was
receiving immediately preceding his termination. In addition, upon the events
described above, Mr. Keller's supplemental retirement benefits would become
fully vested and, upon his attainment of age 65, New Dartmouth would be
obligated to pay him an amount sufficient to assure that he receives the amount
to which he would have been entitled under the Supplemental Retirement
Arrangement had he not been terminated, and all warrants (and options if any)
granted to Mr. Keller to purchase Common Stock would become fully vested and
exercisable. The Employment Agreement also provides that if New Dartmouth
terminates Mr. Keller's employment upon the expiration of the Employment
Agreement, Mr. Keller
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<PAGE>
would be entitled to a payment equal to six times his monthly base salary, and
New Dartmouth would also be obligated to continue for six months the employee
benefits which Mr. Keller was receiving immediately prior to such termination.
Mr. Keller's annual base salary under the Agreement is $240,000.
Payments to which Mr. Keller would be entitled upon termination will be
reduced by amounts earned by Mr. Keller for services provided to another party.
Under the terms of the Employment Agreement, upon termination of employment
following the expiration of the Employment Agreement, Mr. Keller would be
obligated to mitigate any payments he is entitled to receive from New Dartmouth
by seeking employment comparable in terms of compensation, position and location
to his employment by New Dartmouth. Mr. Keller would have no obligation,
however, to mitigate any payments he would be entitled to receive upon
termination by New Dartmouth without cause or termination by Mr. Keller for
cause.
Mr. Keller has agreed not to compete with New Dartmouth during the term of
the Agreement and for a period of one year thereafter by, among other things,
participating or engaging in any business within the States of New Hampshire,
Maine, Massachusetts and Vermont which is comparable to New Dartmouth's
business.
Mr. Beaulieu's Employment Agreement provides that if his employment is
terminated by New Dartmouth without cause, New Dartmouth will generally be
obligated to pay Mr. Beaulieu his base salary for the remainder of the term of
the Employment Agreement (or any extension thereof) or 6 months, whichever is
greater. During such period, New Dartmouth would also be obligated to continue
certain employee benefits, such as life, health, accident and disability
insurance coverage, which Mr. Beaulieu was receiving immediately preceding his
termination. In addition, any New Dartmouth Options granted to Mr. Beaulieu
would become fully vested and exercisable. Payments to which Mr. Beaulieu would
be entitled upon termination would be reduced by amounts earned by Mr. Beaulieu
for services provided to another party. Mr. Beaulieu would have no obligation,
however, to mitigate any payments by seeking employment or otherwise. Mr.
Beaulieu's annual base salary under the Agreement is $110,000.
Mr. Beaulieu has agreed not to compete with New Dartmouth during the term
of the Employment Agreement and for a period of one year thereafter by, among
other things, participating or engaging in any business comparable to the
business of New Dartmouth (i) which has a principal place of business in New
Hampshire, Maine or Vermont within a 100-mile radius of Manchester, New
Hampshire or (ii) which has a principal place of business in Massachusetts
within a 60-mile radius of Manchester, New Hampshire (excluding any business
which has its principal place of business in Boston, Massachusetts and which
does not have a branch or affiliate located in New Hampshire).
In addition, Messrs. Keller and Beaulieu have each entered into a
Supplemental Agreement that, under certain circumstances, would reduce the
amount of payments made under the Employment Agreement if, after applying the
excise tax provisions to such payments, the net economic benefit to the employee
of such payments would be increased by effecting such a reduction.
Executive Warrant and Options. Mr. Keller holds a New Dartmouth Warrant
that was granted as of October 10, 1991 with respect to 17,675 shares of New
Dartmouth Common Stock. The New Dartmouth Warrant Plan, as amended (the
"Warrant Plan") provides that if there is a change in control of New Dartmouth,
the New Dartmouth Warrants granted thereunder will become immediately
exercisable in full. Pursuant to the Merger Agreement, SNC has agreed that the
Merger will constitute a change in control of New Dartmouth for purposes of the
Warrant Plan.
In 1992 New Dartmouth granted each of Mr. Beaulieu and five other New
Dartmouth executive officers listed in the table below a New Dartmouth Option
pursuant to the Option Plan. The New Dartmouth Options vest in one-third
increments on the third, fourth and fifth anniversaries of the date of grant.
As of the date of this Proxy Statement/Prospectus, none of the New Dartmouth
Options is exercisable for any shares of New Dartmouth Common Stock. The Option
Plan provides that a New Dartmouth Option will become fully vested and
exercisable in full if (i) there is a change in control of New Dartmouth and
(ii) within two years following a change in control, the holder's employment is
terminated without cause. Pursuant to the Merger Agreement, SNC has agreed that
the Merger will constitute a change in control of New Dartmouth for purposes of
the Option Plan.
For purposes of the Option Plan, the New Dartmouth Board has interpreted a
termination "without cause" to include circumstances in which the holder of a
New Dartmouth Option is constructively terminated within two years after a
change in control as a result of (i) New Dartmouth or its successor informing
the holder that it intends
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to change the nature or scope of the holder's responsibilities, title,
authority, powers, functions or duties, which, from the holder's perspective,
would represent a material adverse change from the responsibilities, title,
authority, power, functions or duties that the holder had prior to the change of
control, or (ii) an involuntary relocation by New Dartmouth or its successor of
the office of the holder to any place outside a twenty-five mile radius from
Manchester, New Hampshire. Based upon SNC's interpretation of the Option terms,
it is expected that SNC's post-Merger New Hampshire operations will result in
constructive termination of the Option holders for purposes of the Option Plan.
The following table sets forth certain information regarding the number and
value of Options and Warrant, as the case may be, held by the New Dartmouth
executive officers named below at December 31, 1993. The respective values of
unexercised in-the-money Options and Warrants at December 31, 1993 shown below
are presented pursuant to Commission rules, assuming the market value of New
Dartmouth Common Stock is equal to $345.00 per share, which is the median
between $335 and $355 per share of New Dartmouth Common Stock, which New
Dartmouth's management expects will be the range of consideration received by
New Dartmouth Stockholders per share of New Dartmouth Common Stock. See " --
Recommendation of New Dartmouth Board; Reasons for the Merger" above. If the
Merger is consummated, the actual before-tax amount, if any, realized upon
exercise of Options and Warrants will depend upon the excess, if any, of the
market price of SNC Common Stock over the exercise price per share of SNC Common
Stock subject to the Option or Warrant, as the case may be, at the time of
exercise. Accordingly, there can be no assurance that the values of
in-the-money Options and Warrants reflected in the following table will actually
be realized.
OPTION/WARRANT VALUES
AT DECEMBER 31, 1993
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Number of Unexercised Exercise Value of Unexercised
Options/Warrants Price In-The-Money Options/Warrants
at December 31, 1993 Per Share at December 31, 1993 (1)
-------------------------------- ------------ -----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C>
Robert P. Keller 11,784 5,891 $ 109.06 $ 2,780,317 $ 1,389,923
Dennis P. Beaulieu 0 3,250 129.82 0 699,335
Mark Collins 0 1,500 129.82 0 322,770
T. Ronald Pilot 0 1,500 129.82 0 322,770
William H. Maurhoff 0 1,500 149.83 0 292,755
Deborah R. Smith 0 1,500 129.82 0 322,770
Raymond P. Smith 0 1,500 129.82 0 322,770
</TABLE>
(1) Based on the difference between the exercise price and $345.00 per share.
Effect of Prior Stockholder Approval of Certain Compensation Arrangements.
Current Federal income tax law imposes certain penalties if the sum of payments
in the nature of compensation to or for the benefit of officers, stockholders or
other highly compensated individuals that are contingent on a change in control
of a corporation exceeds a certain threshold. In such circumstances, the
recipient will be deemed to receive a "parachute payment" and there will be
adverse tax consequences to both the recipient and the corporation. In the case
of a corporation such as New Dartmouth that does not have any stock which is
readily tradeable on an established securities market or otherwise, any payment
that has been approved by the holders of more than 75% of the corporation's
voting stock will not be taken into account for purposes of determining whether
the recipient has received a parachute payment.
At the Special Meeting of Stockholders held on August 26, 1993, New
Dartmouth Stockholders approved the potential payments that may be made or
deemed to be made in certain circumstances after the Merger pursuant to the
Employment Agreements, the Warrant Plan and the Option Plan (collectively, the
"Compensation Arrangements"). Accordingly, New Dartmouth believes that its
executive officers named above and SNC, New Dartmouth's successor for Federal
income tax purposes, may take the position that any payments made or deemed to
be made after the Merger pursuant to the Compensation Arrangements should not be
taken into account for purposes of determining whether the recipient has
received a parachute payment.
Indemnification; Insurance. Pursuant to the Merger Agreement, SNC has
agreed to indemnify, defend and
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hold harmless the present and former directors, officers and (subject to certain
limitations) employees of New Dartmouth and its subsidiaries and to secure
directors' and officers' liability insurance for New Dartmouth's present and
former directors and officers. See "-- Indemnification; Insurance" below for a
detailed description of SNC's indemnification and insurance obligations under
the Merger Agreement.
Effective Time
The Merger will become effective on the date and at the time that the
Contract for Union is accepted for filing by the Secretary of State of the State
of New Hampshire in accordance with applicable law or on such later date as the
Contract for Union may specify (the "Effective Time"). The Merger Agreement
provides that the Contract for Union will be submitted for filing as soon as
possible after all conditions contained in the Merger Agreement have been
satisfied or, if permissible, waived, including receipt of all regulatory
approvals and termination of all statutory waiting periods.
Surrender of Certificates; No Fractional Shares
As promptly as practicable after the Effective Time, Chemical Bank, acting
in the capacity of exchange agent (the "Exchange Agent"), will mail to each
former holder of record of New Dartmouth Common Stock a form of letter of
transmittal, together with instructions for the exchange of such holder's
certificates representing shares of New Dartmouth Common Stock for certificates
representing shares of SNC Common Stock.
NEW DARTMOUTH STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS FROM THE EXCHANGE AGENT.
Upon surrender to the Exchange Agent of one or more certificates for New
Dartmouth Common Stock together with a properly completed letter of transmittal,
there will be issued and mailed to the New Dartmouth Stockholders surrendering
such items a certificate or certificates representing the number of shares of
SNC Common Stock to which such holder is entitled, if any, and, where
applicable, a check for the amount representing any fractional share determined
in the manner described above, without interest.
No dividend or other distribution payable after the Effective Time with
respect to SNC Common Stock will be paid to the holder of any unsurrendered New
Dartmouth certificate until the holder surrenders such certificate(s), at which
time the holder will be entitled to receive all previously withheld dividends
and distributions, without interest. No holder of an unsurrendered New
Dartmouth certificate will be entitled, until the surrender of such certificate,
to vote the shares of SNC Common Stock into which his New Dartmouth Common Stock
has been converted.
After the Effective Time, there will be no transfers on New Dartmouth's
stock transfer books of shares of New Dartmouth Common Stock issued and
outstanding at the Effective Time. If certificates representing shares of New
Dartmouth Common Stock are presented for transfer after the Effective Time, they
will be returned to the presenter together with a form of letter of transmittal
and exchange instructions.
Neither SNC nor New Dartmouth nor any other person will be liable to any
former holder of New Dartmouth Common Stock for any amount properly delivered to
a public official pursuant to applicable abandoned property, escheat or similar
laws.
If a certificate for New Dartmouth Common Stock has been lost, stolen or
destroyed, the Exchange Agent will issue the consideration properly payable in
accordance with the Merger Agreement upon receipt of appropriate evidence as to
such loss, theft or destruction, appropriate evidence as to the ownership of
such certificate by the claimant, and appropriate and customary indemnification.
No fractional shares of SNC Common Stock will be issued in the Merger.
Instead, the Merger Agreement provides that each New Dartmouth Stockholder who
would otherwise have been entitled to receive a fraction of a share of SNC
Common Stock will receive, in lieu thereof, cash in an amount equal to such
fractional part of a share of SNC Common Stock multiplied by the Average Closing
Price. No such holder will be entitled to dividends, voting rights or any other
rights as a shareholder in respect of any fractional share.
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Shares of SNC capital stock (including SNC Common Stock) issued and
outstanding immediately prior to the Effective Time will remain issued and
outstanding after the Merger.
Conditions to the Merger
The respective obligations of SNC and New Dartmouth to effect the Merger
are subject to the satisfaction of the following conditions at or prior to the
Effective Time, none of which may be waived: (i) approval of the Merger
Agreement, the Contract for Union and the procedures and transactions
contemplated thereby by the requisite affirmative vote of the holders of the
outstanding shares of New Dartmouth Common Stock and Preferred Stock entitled to
vote thereon (see "-- Required Stockholder Approval; Voting Agreements" below);
(ii) approval of the Merger Agreement and the transactions contemplated thereby
by (a) the Federal Reserve Board, (b) the FDIC, (c) the Bank Commissioner of the
State of New Hampshire (the "Bank Commissioner") or, alternatively, the New
Hampshire Superior Court, (d) the Board of Trust Company Incorporation of the
State of New Hampshire (the "BTCI"), and (e) the Board of Bank Incorporation of
the Commonwealth of Massachusetts, and the expiration of any statutory waiting
periods (provided, however, that no such consent or approval referred to herein
shall have imposed any condition or requirement which, in the reasonable opinion
of SNC, would so materially and adversely affect the economic or business
benefits to SNC of the transactions contemplated by the Merger Agreement, taken
as a whole, so as to render inadvisable the consummation of the Merger); (iii)
the Registration Statements of which this Proxy Statement/Prospectus is a part
shall have become effective and no stop order suspending the effectiveness of
either of the Registration Statements shall have been issued and no proceedings
for that purpose shall have been initiated or threatened by the Commission, and
SNC shall have received all necessary state securities laws and "blue sky"
permits and other authorizations required in connection with the issuance of SNC
Common Stock in the Merger and upon exercise of the New Dartmouth Options and
the New Dartmouth Warrants; (iv) none of SNC, the Merger Sub or New Dartmouth
shall be subject to any order, decree or injunction of a court or agency of
competent jurisdiction which enjoins or prohibits the consummation of the
Merger; and (v) no statute, rule, regulation, order, injunction or decree shall
have been enacted, entered, promulgated or enforced by any governmental
authority which prohibits, restricts or makes illegal consummation of the
Merger.
The obligations of SNC to effect the Merger are further subject to the
satisfaction, or waiver by SNC, of the following conditions: (i) the
representations and warranties of New Dartmouth contained in the Merger
Agreement (including without limitation New Dartmouth's representation that no
Material Adverse Effect (as hereinafter defined) has occurred since December 31,
1992) shall be true and correct in all material respects as of the date of the
Merger Agreement and at the Effective Time (except to the extent they relate to
an earlier date or as expressly contemplated by the Merger Agreement); provided,
however, that the representations and warranties of New Dartmouth (other than
those relating to its organization, capitalization and corporate power, the
authorization of the Merger Agreement, certain violations of its Articles of
Agreement and By-laws and of law, recent operations, the absence of any Material
Adverse Effect, certain regulatory matters, certain matters relating to employee
benefit plans, pooling of interests treatment and the applicability of state
takeover laws) will be deemed true and correct in all material respects unless
the failure of such representations and warranties to be so true and correct,
together with the failure of any other representations and warranties of New
Dartmouth set forth in the Merger Agreement to be so true and correct, in the
aggregate, represent a material adverse change from the business, assets,
financial condition or results of operations of New Dartmouth as represented in
the Merger Agreement considered as a whole, other than an adverse change
resulting from (w) a change in interest rates or governmental regulatory
policies, (x) changes in generally accepted accounting principles as applied to
New Dartmouth's financial statements, (y) other matters affecting the banking
industry generally or (z) the transactions contemplated by the Merger Agreement,
including the expenses incurred in connection therewith (collectively, the
"Exempt Changes"); (ii) New Dartmouth shall have duly performed and complied
with, in all material respects, each and all of the agreements and covenants of
New Dartmouth to be performed and complied with pursuant to the Merger Agreement
and the other agreements contemplated thereby prior to the Effective Time; (iii)
SNC shall have received from New Dartmouth's independent accountants certain
letters with respect to certain financial information of New Dartmouth; (iv) SNC
shall have received a letter, dated as of the Effective Time, from its
independent accountants to the effect that the Merger shall qualify for pooling
of interests accounting treatment; (v) the aggregate number of shares of New
Dartmouth Common Stock owned by New Dartmouth Stockholders who have perfected
and not abandoned dissenters' rights of appraisal shall not constitute more than
7.5% of the shares of New Dartmouth Common Stock outstanding immediately prior
to the Effective Time; (vi) SNC and its directors and officers who sign the
Registration Statement shall have received a customary legal opinion, dated the
date of closing, from counsel to New Dartmouth; (vii) SNC shall have received
from each affiliate of New Dartmouth an agreement regarding sales of securities
of SNC and
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<PAGE>
New Dartmouth by such affiliates (see "--Resales of SNC Common Stock
Received in the Merger" below); (viii) all of the obligations of the FDIC set
forth in certain specified purchase and assumption agreements between the FDIC
and New Dartmouth shall survive the Merger and continue to be binding upon and
enforceable against the FDIC as if the Merger had not occurred, and SNC shall
have received written assurances from the FDIC to such effect; (ix) New
Dartmouth shall have redeemed all of the outstanding shares of New Dartmouth
Preferred Stock (which term does not include any shares of Additional Preferred
Stock (as defined below) that New Dartmouth may issue); and (x) SNC shall have
received certificates from New Dartmouth's officers and such other documents to
evidence fulfillment of the conditions described in this paragraph as SNC may
reasonably request.
For purposes of the condition described in clause (i) of the preceding
paragraph, a "material adverse change" to New Dartmouth's "results of
operations" will not be deemed to have occurred unless the adverse impact on
such results exceeds, or will exceed during the next twelve months, $4,250,000
(the "Materiality Floor"); provided, however, that any individual breach of a
representation or warranty in the Merger Agreement with respect to which the
adverse financial impact on New Dartmouth's results of operations is, or will be
during the next twelve months, less than $200,000 will not be considered for
purposes of determining whether the Materiality Floor has been exceeded,
provided, further that failures of certain representations and warranties of New
Dartmouth pertaining to its financial statements and its loan portfolio will be
aggregated for each such representation and warranty for purposes of determining
whether such $200,000 threshold has been reached. In the event the adverse
impact on results of operations of a breach or breaches of New Dartmouth's
representations and warranties contained in the Merger Agreement exceeds or will
exceed the Materiality Floor, the determination as to whether a material adverse
change has occurred to New Dartmouth's results of operations under the
applicable section of the Merger Agreement will be made by reference to whether
such breach or breaches has or have a Material Adverse Effect on New Dartmouth
without regard to the existence or level of the Materiality Floor. The Merger
Agreement defines a "Material Adverse Effect" when applied to a party to the
Merger Agreement, as an event, occurrence or circumstance (including without
limitation (i) the making of any provisions for possible loan and lease losses,
write-downs of other real estate and taxes and (ii) any breach of a
representation or warranty by such party) which (a) has or is reasonably likely
to have a material adverse effect on the assets, financial position, results of
operations or business of such party or (b) would materially impair such party's
ability to perform its obligations under the Merger Agreement. For purposes of
measuring whether an event, occurrence or circumstance has a material adverse
effect on a party's results of operations, the term "results of operations" will
mean net interest income plus non-interest income (less securities gains) less
gross expenses (excluding provisions for possible loan and lease losses,
write-downs of other real estate and taxes); provided, however, that in the
event the failure of the representations of New Dartmouth regarding tax matters
to be true and correct results in a restatement of New Dartmouth's statements of
operations for any periods referred to by New Dartmouth's representations and
warranties regarding its financial statements, the definition of results of
operations will take into account New Dartmouth's after tax income as restated.
The obligations of New Dartmouth to effect the Merger are further subject
to the satisfaction, or waiver by New Dartmouth, of the following conditions:
(i) the representations and warranties of SNC contained in the Merger Agreement
shall be true and correct in all material respects as of the date of the Merger
Agreement and at the Effective Time (except to the extent they relate to an
earlier date or as expressly contemplated by the Merger Agreement); provided,
however, that such representations and warranties (other than those relating to
its organization, capitalization and corporate power, the shares of SNC Common
Stock to be issued in the Merger, the authorization of the Merger Agreement,
certain violations of its charter and By-laws and of law, recent operations,
certain regulatory matters and the obtainability of necessary regulatory
approvals) will be deemed true and correct in all material respects unless the
failures of such representations and warranties to be so true and correct,
together with the failure of any other representations and warranties of SNC set
forth in the Merger Agreement to be so true and correct, in the aggregate,
represents a material adverse change from the business, assets, financial
condition or results of operations of SNC as represented in the Merger
Agreement considered as a whole, other than an Exempt Change; (ii) SNC shall
have duly performed and complied with, in all material respects, each and all of
the agreements and covenants of SNC to be performed and complied with pursuant
to the Merger Agreement and the other agreements contemplated thereby prior to
the Effective Time; (iii) New Dartmouth shall have received from SNC's
independent accountants certain letters with respect to certain financial
information of SNC; (iv) the Average Closing Price of the SNC Common Stock will
not be less than $17.11 per share; provided, however, that this condition will
not apply if SNC waives the Minimum Reference Price; (v) New Dartmouth shall
have received an opinion from its independent accountants regarding certain
federal income tax consequences of the Merger (see "-- Certain Federal Income
Tax Consequences" below); (vi) New Dartmouth shall have received a legal
opinion, dated the date of closing, from counsel to SNC; (vii) the shares of SNC
Common Stock issuable in the Merger and reserved for
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issuance upon exercise of the New Dartmouth Options and the New Dartmouth
Warrants shall have been approved for listing on the NYSE, subject to official
notice of issuance; (viii) New Dartmouth shall have received from SNC's
independent accountants a letter, dated shortly prior to the commencement of the
Pricing Period, stating the method of accounting to be applied to the Merger,
and if such letter states that the Merger will be accounted for using the
"purchase" method of accounting and SNC intends to waive its condition that the
Merger be accounted for as a pooling of interests, SNC must have publicly
announced such intention at least 48 hours prior to the commencement of the
Pricing Period; and (ix) New Dartmouth shall have received certificates from
SNC's officers and such other documents to evidence fulfillment of the
conditions described in this paragraph as New Dartmouth may reasonably request.
No assurance can be provided as to when, or whether, all regulatory
consents and approvals necessary to consummate the Merger will be obtained (or,
if so obtained, that such consents and approvals will satisfy the conditions to
the Merger) or whether all of the other conditions precedent to the Merger will
be satisfied or waived by the party permitted to do so. See "--Regulatory
Approvals Required for the Merger" below. If the Merger is not effected on or
before June 30, 1994 or if all necessary regulatory approvals required to
consummate the Merger (excluding any waiting or notice periods) have not been
received by May 30, 1994), the Merger may be abandoned by a vote of a majority
of the Board of Directors of either SNC or New Dartmouth, unless the failure to
effect the Merger by such date is due to the breach of the Merger Agreement by
the party seeking to terminate the Merger Agreement.
Required Stockholder Approval; Voting Agreements
New Hampshire law requires the affirmative approval of the Contract for
Union by the holders of 66-2/3% of all of the outstanding shares of New
Dartmouth Common Stock and Preferred Stock, voting together as a single class,
in order to obtain the permission of the Bank Commissioner of the State of New
Hampshire to consummate the Merger. In addition, New Dartmouth's Articles of
Agreement separately require that the Merger be approved by the holders of a
majority of the outstanding shares of New Dartmouth Common Stock.
In connection with the execution of the Merger Agreement, holders of
189,927 shares of New Dartmouth Common Stock, representing approximately 44.8%
of the outstanding New Dartmouth Common Stock, entered into an agreement with
SNC (the "Voting Agreement"), pursuant to which each such stockholder agreed,
among other things, (i) to vote all shares of New Dartmouth Common Stock such
stockholder is entitled to vote (a) in favor of the approval of the Merger
Agreement and (b) against the approval of any competing transaction, and (ii)
subject to certain exceptions, not to dispose of any shares of New Dartmouth
Common Stock. The foregoing description of the Voting Agreement is qualified in
its entirety by reference to the Voting Agreement, a copy of which is attached
hereto as Annex D and is incorporated herein by reference. In addition, the
FDIC has agreed to vote all of the 170,073 shares of New Dartmouth Preferred
Stock in favor of the Merger Proposal in exchange for New Dartmouth's agreement
to redeem such Preferred Stock prior to the Merger.
Regulatory Approvals Required for the Merger
The Merger is subject to prior approval by (i) the Federal Reserve Board
under Section 3 of the Bank Holding Company Act of 1956, as amended (the
"BHCA"), and (ii) the FDIC under the Bank Merger Act, as amended (the "BMA").
Applications for such approvals under the BHCA and BMA will be filed with the
Federal Reserve Board and the FDIC, respectively. The BHCA and the BMA prohibit
the Federal Reserve Board and the FDIC, respectively, from approving the Merger
(i) if it would result in a monopoly or be in furtherance of any combination or
conspiracy to monopolize or to attempt to monopolize the business of banking in
any part of the United States, or (ii) if its effect in any section of the
country may be substantially to lessen competition or to tend to create a
monopoly, or if it would in any other manner be a restraint of trade, unless
such regulatory authority finds that the anticompetitive effects of the Merger
are clearly outweighed by the public interest and by the probable effect of the
transaction in meeting the convenience and needs of the communities to be
served. In addition, the BHCA prohibits the Federal Reserve Board from approving
a merger if the applicant has failed to provide the Federal Reserve Board with
adequate assurances that it will make available such information on the
operations or activities of the applicant and its affiliates that the Federal
Reserve Board deems appropriate to determine and enforce compliance with the
BHCA and other applicable federal banking laws and regulations. Under the BHCA
and BMA, the Merger may not be consummated until the thirtieth day following the
date of each of Federal Reserve Board and FDIC approval of the Merger, during
which time the United States Department of Justice may challenge the Merger
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on antitrust grounds. The commencement of an antitrust action during the
waiting period would stay the effectiveness of such approval unless a court
specifically orders otherwise.
In addition, the BHCA requires that the Federal Reserve Board, and the BMA
requires that the FDIC, take into consideration, among other factors, the
financial and managerial resources and future prospects of the institutions and
the convenience and needs of the communities to be served. Each of the Federal
Reserve Board and the FDIC has the authority to deny an application if it
concludes that the combined organization would have an inadequate capital
position or if the requirements of the Community Reinvestment Act of 1977 (the
"CRA") are not satisfied. In addition, under the BHCA the Federal Reserve Board
cannot approve the acquisition by SNC of the control of New Dartmouth unless New
Hampshire statutory law expressly authorizes such an acquisition. In this
regard, the applicable provisions of the RSA are discussed below.
On November 15, 1993, the Federal Reserve Board issued an order not
approving SNC's application to acquire New Dartmouth. Three Governors of the
Federal Reserve Board voted to approve the acquisition, three Governors voted
not to approve, and one Governor abstained. In their statement, those Governors
who voted not to approve the application cited a then-pending investigation of
possible discriminatory lending practices at Shawmut Mortgage Company by the
United States Department of Justice (the "DOJ") and the Federal Trade
Commission (the "FTC"). The investigation was undertaken pursuant to a
December 1992 referral from the Federal Reserve Board. Those Governors stated
that in order for SNC to obtain their votes for approval of the Merger, SNC
would have to submit "strong evidence that [it] has programs in place to
ensure compliance with the Equal Credit Opportunity Act and has a demonstrated
record that the programs are adequate and working well." Those Governors also
expressed concern over inaccuracies in data reported by the mortgage company
under the Home Mortgage Disclosure Act (the "HMDA") and the structure of its
mortgage lending operation. The three Governors of the Federal Reserve Board
who voted to approve SNC's acquisition of New Dartmouth said that the record
showed that SNC had "identified and implemented a number of steps that already
have resulted in tangible improvements" to Shawmut Mortgage Company's lending
practices.
On December 13, 1993, without admitting any wrongdoing, Shawmut Mortgage
Company entered into a consent decree with the DOJ and the FTC regarding past
lending practices. In connection with the consent decree, the subsidiary
agreed, among other things, to establish a $960,000 pool to compensate minority
loan applicants who were denied mortgages between 1990 and October 1992 but
whose applications would be approved under SNC's more recent flexible
underwriting criteria. According to a press release issued by the DOJ, the DOJ
agreed to settle the case because SNC had initiated efforts to ensure that
minority and white applicants are treated equally. The DOJ noted that those
efforts, which included changes to SNC's underwriting process, were initiated
prior to the joint investigation into the mortgage company's lending practices
by the DOJ and the FTC. In recognition of the self-corrective steps undertaken
by the mortgage company, and stating that "[t]he United States believes that
this fair lending compliance program . . . is now working well and is adequate
to ensure the lender's compliance with the fair lending [laws]," the consent
decree did not impose any punitive sanctions on the mortgage company, SNC, or
any of SNC's other subsidiaries.
By letter dated December 17, 1993, the Secretary of the Federal Reserve
Board, acting under authority delegated by the Federal Reserve Board, granted to
SNC an extension of the time period within which to request reconsideration of
the Federal Reserve Board's November 15, 1993 decision not to approve SNC's
application to acquire New Dartmouth. The granting of the extension for the
filing period for a request for reconsideration does not in any way obligate the
Federal Reserve Board to reconsider its action on SNC's application to acquire
New Dartmouth. As an alternative to seeking reconsideration, SNC could file a
new application to acquire New Dartmouth.
In light of the initiatives undertaken by SNC, SNC believes that it will
be able to demonstrate to the Federal Reserve Board SNC's compliance with the
Equal Credit Opportunity Act, and that it will be able to satisfy the other
concerns expressed, including those with respect to data reported under the
HMDA. Accordingly, although there can be no assurances in this regard, SNC
believes that Federal Reserve Board approval of its acquisition of New
Dartmouth, as well as the approval of the other bank regulatory authorities
referred to herein, will be obtained in due course and in any event prior to the
Abandonment Date (as hereinafter defined) See "--Waiver and Amendment;
Abandonment" below.
SNC's acquisition of control of New Dartmouth is also subject to approval
by the BTCI and, due to SNC's control of a banking institution located in
Massachusetts, by the Board of Bank Incorporation of the Commonwealth of
Massachusetts (the "MABBI"). RSA 384:47 authorizes an acquisition of a New
Hampshire bank by an out-of-state bank holding company following the issuance by
the BTCI of an affiliation certificate. Under Sections 2 and
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4 of Chapter 167A of the Massachusetts General Laws, approval by the MABBI is
dependent upon the MABBI making a finding that competition among banking
institutions would not be unreasonably affected and that the public convenience
and advantage would be promoted. The Merger is also subject to approval by the
Bank Commissioner, except as noted below. Pursuant to RSA 388:9, the Bank
Commissioner may only approve the Merger if he finds that it will promote the
public convenience and advantage and the interest of the merging institutions
and their stockholders and depositors.
Prior to the execution of Amendment No. 2 to the Merger Agreement, SNC had
received all required regulatory approvals other than the approval of the
Federal Reserve Board. The BTCI issued an affiliation certificate on September
8, 1993, and SNC will apply to the Bank Commissioner, pursuant to RSA 384:48,
for an extension of time within which to commence the affiliation beyond March
8, 1994, on which date the certificate would otherwise expire. A request for
amended approval or, if necessary, a petition for approval of the Merger and
Contract for Union will be filed with the Bank Commissioner, who approved the
Merger on October 28, 1993. (Alternatively, if the holders of a majority (even
though less than 66-2/3%) of the outstanding shares of New Dartmouth Common
Stock and Preferred Stock, voting together as a single class, vote in favor of
the Merger, and if such majority includes a majority of the outstanding shares
of New Dartmouth Common Stock, then New Dartmouth and SNC would be permitted
under New Hampshire law and the terms of New Dartmouth's Articles of Agreement
to petition the New Hampshire Superior Court pursuant to RSA 388:1 for a decree
authorizing the Merger.)
The Merger will not be consummated unless all of the requisite regulatory
approvals for such transactions are obtained without the imposition of any
condition or requirement that, in the reasonable opinion of SNC, would so
materially adversely affect the economic or business benefits to SNC of the
Merger as to render consummation of the Merger inadvisable. See "-- Conditions
to the Merger" above.
There can be no assurance that the regulatory authorities described above
will approve the Merger, and if the Merger is approved, there can be no
assurance as to the date of such approvals. There can also be no assurance that
any such approvals will not contain a condition or requirement which causes such
approvals to fail to satisfy the conditions to consummation of the Merger set
forth in the Merger Agreement. There can also be no assurance that the
Department of Justice will not challenge the Merger or, if such a challenge is
made, as to the result thereof.
New Dartmouth received a rating of "needs to improve" in a CRA examination
that the FDIC completed in early 1993. New Dartmouth has taken a number of
actions to address the areas of weakness noted by the FDIC, and no additional
regulatory action has resulted from the examination. Although there can be no
assurance in this regard, neither SNC nor New Dartmouth believes that New
Dartmouth's current CRA rating will delay the receipt of the regulatory
approvals necessary to consummate the Merger.
Conduct of Business Pending the Merger
Pursuant to the Merger Agreement, New Dartmouth has agreed that until the
Effective Time it and its subsidiaries will carry on their respective businesses
in the usual, regular and ordinary course consistent with prudent banking
practices. New Dartmouth has agreed to use reasonable efforts to (x) preserve
its business organization and that of its subsidiaries intact, (y) keep
available to itself and SNC the present services of its and its subsidiaries'
employees and (z) preserve for itself and SNC the goodwill of its and its
subsidiaries' customers and others with whom business relationships exist.
The Merger Agreement also contains certain restrictions on the conduct of
New Dartmouth's business pending consummation of the Merger. In particular, the
Merger Agreement provides that, without the prior written consent of SNC, New
Dartmouth may not, among other things, (i) make, declare or pay any dividend on
any of its capital stock, (ii) issue or sell shares of its capital stock, except
that New Dartmouth may issue shares of New Dartmouth Common Stock in accordance
with the terms of the New Dartmouth Options, the New Dartmouth Warrants and the
Stock Option Agreement and except that New Dartmouth may issue up to $20.0
million of a new series of non-convertible Additional Preferred Stock as
described below, (iii) subject to certain exceptions, enter into or amend any
employment contracts or consulting agreements with, increase the rate of
compensation of, or pay or agree to pay any bonus to any person except that New
Dartmouth may implement a Retention Bonus plan within the parameters set forth
in the Merger Agreement, (see "-- New Dartmouth Employees" below) (iv) enter
into or modify (except as may be required by law) any employee benefit plan for
its directors, officers and employees, (v) dispose of, or discontinue any
portion of its assets, business or properties, or merge or consolidate with, or
acquire all or any substantial portion of, the business or property of any other
entity except that New Dartmouth may close branches with SNC's consent, which
consent may not be unreasonably withheld, conditioned or delayed, (vi) subject
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to certain exceptions amend its Articles of Agreement or By-laws, (vii) take
certain actions with respect to material agreements or (viii) agree to do any of
the foregoing. In addition, the Merger Agreement prohibits New Dartmouth from,
among other things, taking any action (i) that would cause the transactions
contemplated by the Merger Agreement to be subject to any applicable state
takeover laws, (ii) that would cause the Merger to fail to qualify (a) for
pooling of interests accounting treatment or (b) as a tax-free reorganization
under Section 368 of the Internal Revenue Code of 1986, as amended (the "Code");
provided, however, that nothing contained in the Merger Agreement will limit the
ability of SNC to exercise its rights under the Stock Option Agreement, (iii)
that might cause the revocation of New Dartmouth's authority to act as a
guaranty savings bank in the State of New Hampshire, or (iv) that is intended or
may reasonably be expected to result in any of its representations and
warranties set forth in the Merger Agreement being or becoming untrue, or in any
of the conditions to the Merger not being satisfied, or in a violation of any
provision of the Merger Agreement.
Under the terms of Amendment No. 2 to the Merger Agreement, New Dartmouth
may issue up to $20.0 million of a new series of New Dartmouth Preferred Stock
("Additional Preferred Stock"), provided that prior to issuing such new series
of Additional Preferred Stock, New Dartmouth consults with SNC and that the
issuance of such shares will not prevent the satisfaction of any of the
conditions to the Merger. SNC has a right of first refusal with respect to all,
and only all, of the shares of Additional Preferred Stock that New Dartmouth
proposes to sell.
The Merger Agreement also provides, among other things, that SNC will not
(i) enter into any transaction or make any agreement or commitment, and will use
its best efforts not to permit any event to occur, which could reasonably be
anticipated to result in (x) a material delay of receipt, or denial, of any
necessary regulatory approvals or (y) the imposition of any condition or
requirement that would materially adversely affect the economic or business
benefits to SNC of the transactions contemplated by the Merger Agreement or (ii)
adopt any plan or arrangement, or take or cause to be taken any action, that
would adversely affect New Dartmouth Stockholders in a disproportionate manner
after the Effective Time, including any action, either before or after the
Effective Time, that would cause the Merger to fail to qualify (x) as a tax-free
reorganization under Section 368 of the Code or (y) for pooling of interests
accounting treatment.
No Solicitation
New Dartmouth has agreed in the Merger Agreement that neither it nor any
of its subsidiaries will solicit or encourage inquiries or proposals with
respect to, or, subject to the fiduciary duties of its Board of Directors (as
advised in writing by its counsel), furnish any non-public information relating
to or participate in any negotiations or discussions concerning, any acquisition
or purchase of all or a substantial portion of its assets (whether owned by it
directly or owned by any of its subsidiaries), or of a substantial equity
interest in it or any of its subsidiaries, or any merger or other business
combination with it or any of its subsidiaries, other than as contemplated by
the Merger Agreement, except that New Dartmouth may communicate information
about any such proposal to its stockholders if and to the extent that the
fiduciary duties of its Board of Directors require it to do so (as advised in
writing by its counsel). New Dartmouth also agreed to cease and cause to be
terminated immediately any existing activities, discussions or negotiations
previously conducted with any parties other than SNC with respect to any of the
foregoing and agreed to notify SNC immediately if any such inquiries or
proposals are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated with, it or any of its
subsidiaries and to promptly inform SNC in writing of the details with respect
to the foregoing; and it will instruct its officers, directors, agents, advisers
and affiliates to comply with the same restrictions.
Waiver and Amendment; Abandonment
Prior to the Effective Time, any provision of the Merger Agreement may be
waived by the party benefited by the provision or amended or modified (including
the structure of the transaction) by an agreement in writing approved by the
Boards of Directors of SNC and New Dartmouth, provided that after the vote of
the New Dartmouth Stockholders the Merger Agreement may not be amended to reduce
the amount of the consideration to be received by New Dartmouth Stockholders.
The Merger may be abandoned at any time prior to the Effective Time, either
before or after its approval by the New Dartmouth Stockholders, as follows: (i)
by the mutual consent of SNC and New Dartmouth if the Boards of Directors of
each so determines; (ii) by either SNC or New Dartmouth in the event of (a) a
breach by the other
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of any of its representations or warranties contained in the Merger Agreement,
which is not cured or curable within 30 days after written notice of such breach
is given to the breaching party, and which breach, individually or in the
aggregate with other such breaches, materially adversely affects the Merger and
the other transactions contemplated by the Merger Agreement, or (b) a material
breach of any of the covenants or agreements contained in the Merger Agreement
by the other which is not cured or curable within 30 days after written notice
of such breach is given to the breaching party; (iii) by either SNC or New
Dartmouth if its Board of Directors so determines, in the event that (a) on or
before May 30, 1994, SNC has not received the approvals (excluding any waiting
or notice periods) of the Federal Reserve Board, the FDIC and the Bank
Commissioner to consummate the Merger or (b) the closing does not occur on or
before June 30, 1994, which date may be extended under certain circumstances as
described below, (the "Abandonment Date"), unless the failure to consummate the
Merger is due to a breach of the Merger Agreement by the party seeking to
abandon the Merger, (iv) by either SNC or New Dartmouth, if the New Dartmouth
Stockholders fail to approve the Merger Agreement (provided that if New
Dartmouth is the abandoning party, it is not in breach of its obligations in
the Merger Agreement with respect to the Special Meeting ); (v) by either SNC or
New Dartmouth, upon written notice to the other, if it has become reasonably,
objectively certain that any condition to the Merger (other than approval of the
Merger Agreement by the requisite vote of New Dartmouth Stockholders) will not
be satisfied on or before the Abandonment Date and such condition has not been
waived by the appropriate party and (vi) by New Dartmouth if SNC breaches the
provisions of the Merger Agreement regarding the funding of an escrow account
(described below), which breach is not cured within three business days after
New Dartmouth or the escrow agent provides written notice thereof. The
Abandonment Date will be extended by one day for each calendar day beyond
eight business days after the Balance Sheet Date that New Dartmouth does not
deliver its preliminary income statement and adjustment schedule for the
Reference Period as required by the Merger Agreement or in the event there
is a disagreement between New Dartmouth and SNC with respect to the calculation
of New Dartmouth's Adjusted Earnings, to the date which is five business days
after the final resolution of such disagreement. See "-- Exchange Ratio --
Adjusted Net Earnings" above.
In the event of the abandonment of the Merger by either SNC or New
Dartmouth, neither SNC nor New Dartmouth will have any further obligations under
the Merger Agreement except as set forth below. If the Merger Agreement is
abandoned pursuant to the provisions described in clauses (i), (iii), (iv) or
(v) of the immediately preceding paragraph, such abandonment will be without
costs, expense or liability to either party, except as provided in the Escrow
Agreement (defined below). In the case of an abandonment by SNC pursuant to the
provision described in clause (ii) above, if New Dartmouth's breach of a
representation or warranty, breach of a covenant or failure to satisfy a
condition is caused by New Dartmouth's willful conduct or gross negligence New
Dartmouth will be liable to SNC for all its out-of-pocket costs and expenses
incurred in connection with the Merger Agreement. The Merger Agreement provides
that the payment of expenses described above is not an exclusive remedy, and
that no party will be relieved or released from any liabilities or damages
arising out of its willful breach of any provisions of the Merger Agreement.
Pursuant to the terms of the Merger Agreement, as amended, and a related
Escrow Agreement, dated as of January 20, 1994 (the "Escrow Agreement"), SNC has
deposited $6.0 million into an escrow account and is obligated to deposit an
additional $1.0 million on the first business day of each succeeding month
through May 1994 up to a total of $10.0 million, so long as New Dartmouth has
not committed a Material Breach (as defined below). Under the terms of the
Escrow Agreement, if the Merger Agreement is abandoned, New Dartmouth will be
entitled to receive the entire amount of the escrow fund plus the earnings
thereon, provided (a) New Dartmouth Stockholders have not failed to approve the
Merger Agreement and (b) New Dartmouth has not committed a Material Breach. If
the Merger Agreement is abandoned because New Dartmouth Stockholders do not
approve the Merger Agreement and New Dartmouth has not committed a Material
Breach, New Dartmouth will be entitled to receive from the escrow fund only the
amount of its Merger-related expenses plus a proportionate share of any earnings
on the escrow fund. For purposes of the escrow arrangement, the term "Material
Breach" means a willful, material breach by New Dartmouth of any of its
covenants or agreements contained in the Merger Agreement, which breach (a)
materially adversely affects the economic or business benefits to SNC of the
transactions contemplated by the Merger Agreement, taken as a whole, and (b) is
not reasonably capable of being cured by New Dartmouth or, where such breach is
reasonably capable of being cured, has not been cured after reasonable notice of
such breach.
Resales of SNC Common Stock Received in the Merger; Resales by Affiliates
Generally. The shares of SNC Common Stock to be issued in the Merger will
be registered under the Securities Act and will be freely transferable under the
Securities Act, except for shares issued to any New Dartmouth
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Stockholder who may be deemed to be an "affiliate" of New Dartmouth for purposes
of Rule 145 under the Securities Act.
Resales by New Dartmouth Affiliates. Affiliates may not sell their shares
of SNC Common Stock acquired in connection with the Merger except pursuant to an
effective registration statement under the Securities Act covering such shares
or in compliance with Rule 145 or another applicable exemption from the
registration requirements of the Securities Act. This Proxy
Statement/Prospectus does not cover any resales of SNC Common Stock received by
persons who may be deemed to be affiliates of New Dartmouth. Persons who may be
deemed to be affiliates of New Dartmouth generally include individuals or
entities that control, are controlled by or under common control with New
Dartmouth, and may include certain officers and directors of New Dartmouth as
well as holders of more than 10.0% of New Dartmouth Common Stock. Commission
guidelines regarding qualifying for the pooling of interests method of
accounting also limit sales by affiliates of the acquiring and acquired company
in a business combination. Commission guidelines indicate further that the
pooling of interests method of accounting will generally not be challenged on
the basis of sales by affiliates of the acquiring or acquired company if they do
not dispose of any of the shares of the corporation they own or shares of a
corporation they receive in connection with a merger during the period beginning
30 days before the merger and ending when financial results covering at least 30
days of post-merger operations of the combined entity have been published.
New Dartmouth has agreed in the Merger Agreement to use all reasonable
efforts to cause each person who is an affiliate (for purposes of Rule 145) of
New Dartmouth to deliver to SNC a written agreement intended to ensure
compliance with the Securities Act and to preserve the ability to account for
the Merger as a pooling of interests. SNC's receipt of such agreements from New
Dartmouth's affiliates is a condition to SNC's obligation to consummate the
Merger. The stock certificates representing SNC Common Stock issued to
affiliates in the Merger will bear a legend summarizing the foregoing
restrictions. See "--Conditions to the Merger" above.
SNC has agreed in the Merger Agreement that it will use its best efforts to
publish financial results covering at least 30 days of post-Merger operations no
later than 30 days after the end of the first month after the Effective Time in
which there are at least 30 days of post-Merger combined operations (which month
may be the month in which the Effective Time occurs).
New Dartmouth Employees
All employees of New Dartmouth and its subsidiaries immediately prior to
the Effective Time ("New Dartmouth Employees") shall continue to be employees of
the Surviving Bank immediately after the Merger. Pursuant to the Merger
Agreement, SNC has agreed to (i) provide to New Dartmouth Employees group
hospitalization, medical, life and disability insurance comparable to that
provided to SNC's employees, (ii) provide severance benefits to New Dartmouth
Employees for a period of at least one year after the Merger that are no less
favorable than those benefits set forth in New Dartmouth's severance benefits
policy as of March 23, 1993, (iii) permit New Dartmouth Employees to participate
in SNC's employee stock ownership plan and stock purchase plan and other
qualified retirement plans in which similarly situated employees of SNC
participate, to the same extent as comparable employees of SNC, (iv) permit, as
soon as administratively practicable after the Effective Time, New Dartmouth
Employees to participate in SNC's defined benefit pension plan, thrift plan,
severance, and similar plans on the same terms and conditions as employees of
SNC and its subsidiaries, giving effect to years of service with New Dartmouth
and its subsidiaries (and service with the Failed Banks to the extent New
Dartmouth gave effect, as of the date of the Merger Agreement, to such service,
provided that with respect to SNC's defined benefit pension plan, New Dartmouth
Employees' prior service will be credited for purposes of participation and
vesting, but not benefit accrual, and with respect to SNC's defined contribution
savings plan, New Dartmouth Employees' prior service will be credited for all
purposes, except determination of the level of SNC's matching contributions),
(v) merge New Dartmouth's defined contribution profit-sharing and 401(k) into a
similar-type defined contribution plan of SNC with respect to which the accrued
benefit immediately following the plan merger of each participant in the SNC
plan who was a New Dartmouth Employee shall be no less than the accrued benefit
of such New Dartmouth Employee in New Dartmouth's plans immediately prior to the
plan merger, and (vi) honor, and cause its subsidiaries to honor, at all times
after the Effective Time, in accordance with their terms as in effect on the
date of the Merger Agreement, or as amended thereafter with SNC's prior written
consent, and not cause or permit any of its subsidiaries to challenge the
validity of any obligation of New Dartmouth under, any employment, severance,
consulting, supplemental retirement or other compensation contract or
arrangement with any current or former director, officer or employee of New
Dartmouth in effect as of the date of the Merger Agreement. In addition,
Amendment No. 2
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to the Merger Agreement increased to $1.0 million from $620,000 the amount of
Retention Bonuses that may be granted by New Dartmouth to provide an incentive
to approximately 80 employees to remain with New Dartmouth through the Merger.
SNC is obligated to pay such Retention Bonuses, if any, after the Effective
Time.
All rights with respect to New Dartmouth Common Stock pursuant to New
Dartmouth Options and New Dartmouth Warrants will be converted into
corresponding rights to purchase shares of SNC Common Stock. See "--Exchange
Ratio" above for a more detailed description of the effect of the Merger on the
New Dartmouth Options and New Dartmouth Warrants.
Indemnification; Insurance
Pursuant to the Merger Agreement SNC has agreed to indemnify, defend and
hold harmless each person who is now, has been or becomes prior to the Effective
Time a director, officer or (subject to the limitation described below) employee
of New Dartmouth or any of its subsidiaries (the "Indemnified Parties") against
all losses, claims, damages, costs, expenses, liabilities or judgments, or
amounts that are paid in settlement with the approval of SNC, in connection with
any claim, action, suit, proceeding or investigation based in whole or in part
on or arising in whole or in part out of the fact that such person is or was a
director, officer or employee of New Dartmouth or any of its subsidiaries,
whether pertaining to any matter existing or occurring at or prior to the
effective date of the Merger and whether asserted or claimed prior to, or at or
after such effective date ("Indemnified Liabilities"), in each case to the
fullest extent New Dartmouth would have been permitted under the law of the
State of New Hampshire to indemnify such person. SNC has also agreed pursuant
to the Merger Agreement to pay expenses incurred by the Indemnified Parties in
advance of the final disposition of any such action or proceeding unless such
advancement of expenses is expressly prohibited by law. SNC has agreed,
pursuant to the Merger Agreement, to indemnify any New Dartmouth employee who is
not a director or officer of New Dartmouth or any of its subsidiaries to the
extent indemnification of such employee is mandatory under New Dartmouth's
By-laws as in effect as of March 23, 1993.
All limitations of liability existing in favor of the Indemnified Parties
as provided in New Dartmouth's Articles of Agreement and By-laws, or similar
governing documents of any of its subsidiaries, as in effect immediately prior
to the Effective Time, with respect to claims or liabilities arising from facts
or events existing or occurring prior to the Effective Time, shall continue in
full force and effect, without any amendment thereto, for a period of six years
from the Effective Time.
Pursuant to the Merger Agreement, SNC has agreed to maintain in effect
for a period of six years after the Effective Time the policies of directors'
and officers' liability insurance maintained by New Dartmouth in effect as of
March 23, 1993 with respect to claims arising from facts or events which
occurred before the Effective Time (provided that SNC may substitute therefor
policies of at least the same coverage and amounts, with insurers of no lesser
financial standing, containing terms and conditions which are no less
advantageous to the directors and officers).
If SNC or any of its successors or assigns (i) consolidates with or merges
into any other person and shall not be the continuing or surviving corporation
or entity of such consolidation or merger, or (ii) transfers or conveys all or
substantially all of its properties and assets to any person, SNC has agreed
pursuant to the Merger Agreement that, in each such case, to the extent
necessary, proper provision shall be made so that the successors and assigns of
SNC will assume SNC's indemnification and insurance obligations summarized
above.
Stock Exchange Listing
The SNC Common Stock is listed on the NYSE. SNC has agreed to use its best
efforts to list on the NYSE the shares of SNC Common Stock to be issued in the
Merger and the shares of SNC Common Stock reserved for issuance upon exercise of
the New Dartmouth Options and the New Dartmouth Warrants. The obligation of New
Dartmouth to consummate the Merger is subject to approval for listing by the
NYSE of such shares. See "--Conditions to the Merger" above.
Anticipated Accounting Treatment
The Merger is expected to qualify as a pooling of interests for accounting
and financial reporting purposes. Under this method of accounting, the recorded
assets and liabilities of SNC and New Dartmouth will be combined
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at the effective date of the Merger and carried forward at their previously
recorded amounts and the stockholders' equity accounts of SNC and New Dartmouth
will be combined on SNC's consolidated balance sheet. Income and other
financial statements of SNC issued after consummation of the Merger will be
restated retroactively to reflect the consolidated operations of SNC and New
Dartmouth as if the Merger had taken place prior to the periods covered by such
financial statements.
The unaudited pro forma condensed financial information contained in this
Proxy Statement/Prospectus has been prepared using the pooling of interests
accounting method to account for the Merger. See "-- Unaudited Pro Forma
Condensed Financial Statements" below.
The Merger Agreement provides that a condition to SNC's obligation to
consummate the Merger is the receipt of a letter from its independent
accountants to the effect that the Merger qualifies for pooling of interests
accounting treatment. If SNC intends to waive this condition, it must publicly
announce such intention at least 48 hours prior to the commencement of the
Pricing Period. If SNC waives this condition, New Dartmouth Stockholders will be
given another opportunity to vote on approval and adoption of the Merger
Agreement after pro forma financial information reflecting purchase accounting
treatment of the Merger has been provided. See "--Conditions to the Merger"
above.
Alternative Structures
The Merger Agreement provides that the Merger may be effected using one of
two basic structures. Under one structure, New Dartmouth would merge with and
into a direct wholly owned subsidiary of SNC, and immediately thereafter, as
part of a single plan of reorganization, SNC would contribute the voting stock
of the Surviving Bank resulting from such Merger to another wholly owned direct
subsidiary of SNC, which would result in the Surviving Bank becoming an indirect
wholly owned subsidiary of SNC (collectively, the "Forward Merger Structure").
Under the alternative structure, which may be utilized if certain income tax
regulations become effective prior to the consummation of the Merger, an
indirect wholly owned subsidiary of SNC would merge with and into New Dartmouth
(the "Reverse Merger Structure"), which would result in New Dartmouth becoming
an indirect wholly owned subsidiary of SNC. Under either structure, New
Dartmouth Stockholders would become shareholders of SNC. SNC and New Dartmouth
have agreed to use whichever of the two transaction structures described above
provides, in the opinion of New Dartmouth's advisors, the greatest level of
assurance that the Merger will constitute a tax-free reorganization under the
applicable law in effect as of the consummation of the Merger.
Certain Federal Income Tax Consequences
Under the Merger Agreement, New Dartmouth's obligation to consummate the
Merger is conditioned on its receipt prior to the Effective Time of the opinion
of Price Waterhouse, independent accountants of New Dartmouth, which opinion may
be no less favorable to New Dartmouth Stockholders than an opinion to the effect
that for Federal income tax purposes, under current law and assuming that the
Merger and related transactions will take place as described in the Merger
Agreement and certain related instruments described therein (including the
Contract for Union), it is more likely than not that the Merger will qualify as
a reorganization within the meaning of Section 368(a) of the Code, and that SNC
and New Dartmouth each will be a party to the reorganization within the meaning
of Section 368(b) of the Code.
If the Merger qualifies as such a reorganization, the following would be
the material Federal income tax consequences of the Merger to New Dartmouth
Stockholders: (a) no gain or loss will be recognized by New Dartmouth
Stockholders upon their receipt of SNC Common Stock in exchange for New
Dartmouth Common Stock, except that a New Dartmouth Stockholder who receives
cash proceeds for fractional share interests in New Dartmouth Common Stock, or
who receives cash upon exercise of dissenters' rights, will generally recognize
a gain or loss equal to the difference between such proceeds and the tax basis
allocated to the fractional share interests or shares redeemed, and such gain or
loss will generally constitute capital gain or loss if such stockholder's New
Dartmouth Common Stock is held as a capital asset at the Effective Time; (b) the
tax basis of the shares of SNC Common Stock received by a New Dartmouth
Stockholder will be the same as the tax basis of the New Dartmouth Common Stock
exchanged therefor, decreased by the tax basis allocated to any such fractional
share interests; and (c) the holding period for Federal income tax purposes of
the SNC Common Stock in the hands of a New Dartmouth Stockholder will include
the holding period of the New Dartmouth Common Stock exchanged therefor,
provided such New Dartmouth Common Stock is held as a capital asset at the
Effective Time.
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For the reasons described below, Price Waterhouse has advised New Dartmouth
that it is unable to issue an unqualified opinion that the Merger will qualify
as a tax-free reorganization if the Merger and the related transactions take
place as currently contemplated in the Merger Agreement. Price Waterhouse has
delivered, however, as of the date of this Proxy Statement/Prospectus, a
qualified opinion to New Dartmouth with respect to the Forward Merger Structure,
which satisfies the closing condition described above.
Based in part on the private letter ruling, described below, as well as on
the representations described above, Price Waterhouse has stated its opinion to
New Dartmouth that it is highly confident the Forward Merger Structure will
qualify as a tax-free reorganization under Section 368(a) of the Code. The
Internal Revenue Service (the "IRS") has issued a private letter ruling to New
Dartmouth holding that, assuming that the Forward Merger Structure would
otherwise qualify as a tax-free reorganization, the contribution by SNC of the
stock of the Surviving Bank to another wholly owned direct subsidiary of SNC
would not preclude the Forward Merger Structure from so qualifying.
In order for the Forward Merger Structure to qualify as a tax-free
reorganization, it must satisfy, among other conditions, a requirement that the
Surviving Bank acquire "substantially all" of the properties of New Dartmouth.
For this purpose, the IRS will likely take the position that amounts paid by New
Dartmouth for expenses relating to the reorganization, including accounting,
investment banking and legal fees, and to any dissenting stockholders, as well
as all amounts paid by New Dartmouth in any redemption of New Dartmouth
Preferred Stock made by New Dartmouth subsequent to the date of the Merger
Agreement, must be considered as assets held by New Dartmouth immediately prior
to the Merger. Even though the Forward Merger Structure would not satisfy the
IRS requirement for the "substantially all" criterion for IRS advance ruling
purposes because the redemption of the New Dartmouth Preferred Stock and the
other payments referred to above would be deemed to reduce the assets acquired
by the Surviving Bank, Price Waterhouse is highly confident that the
"substantially all" requirement should be satisfied because, by operation of the
Merger, all of New Dartmouth's business assets will be transferred to the
Surviving Bank and New Dartmouth has represented, among other things, that after
taking into account the redemption of the New Dartmouth Preferred Stock and any
other payments of the type referred to above, the Surviving Bank will have
capital ratios as of the Effective Time in excess of all minimum regulatory
requirements applicable to New Dartmouth without any contribution of cash or
other property by SNC or any affiliate to the capital of New Dartmouth or the
Surviving Bank.
New Dartmouth will not elect to use the Reverse Merger Structure unless
Price Waterhouse is able to deliver an unqualified opinion that the Reverse
Merger Structure will qualify as a tax-free reorganization. Certain regulations
that have been proposed by the IRS would clarify that the New Dartmouth
Preferred Stock that was issued to the FDIC is not treated as "stock" for
Federal income tax purposes and that, therefore, the redemption of the New
Dartmouth Preferred Stock prior to closing, as required by the Merger Agreement,
will not preclude the Reverse Merger Structure from qualifying as a tax-free
reorganization. If these regulations become effective prior to the consummation
of the Merger, Price Waterhouse has advised New Dartmouth that it may be able to
issue an unqualified opinion that the Reverse Merger Structure will qualify as a
tax-free reorganization. If the proposed regulations become effective and Price
Waterhouse is able to deliver such an unqualified opinion, New Dartmouth would
likely elect to utilize the Reverse Merger Structure.
The New Dartmouth Board's decision to consummate the Merger will be
conditioned upon New Dartmouth's receipt, prior to the Effective Time, of
written confirmation of Price Waterhouse's prior opinion or, alternatively, a
new opinion, in either case covering the actual form of the Forward or Reverse
Merger Structure actually utilized.
In rendering its opinions, Price Waterhouse has required and is relying
upon appropriate and customary representations contained in certificates of
officers of SNC, New Dartmouth and others. Such representations have been made
to the best of the knowledge of the management of said corporations based upon
the information that has been made available to management. The representations
include, among others, that (i) SNC has no plan or intention to cause the
Surviving Bank to issue additional shares of stock that would result in SNC
losing control of the Surviving Bank within the meaning of Section 368(c) of the
Code (the "control" requirement), (ii) the Surviving Bank will continue New
Dartmouth's historic business or use a significant portion of its assets in a
business (the "continuity of business" requirement), and (iii) New Dartmouth
Stockholders will hold an amount of SNC Common Stock following the Merger that
represents a substantial part of the value of New Dartmouth capital stock
outstanding at the Effective Time (the "continuity of shareholder interest"
requirement).
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The IRS has maintained for advance ruling purposes that in order for the
continuity of shareholder interest requirement to be satisfied, the stock
received by shareholders of an acquired corporation must have a value at the
time it is first received equal to at least 50% of the value of the acquired
corporation's capital stock outstanding as of the acquisition. Courts have held
under certain circumstances, however, that a continuing stock interest as low as
38% of the value of the acquired corporation's outstanding stock may satisfy
this requirement. In the case of the Merger, the IRS will likely take the
position that the New Dartmouth Preferred Stock outstanding as of the date of
the Merger Agreement will be deemed to be outstanding capital stock of New
Dartmouth as of the Merger for purposes of determining whether the continuity of
shareholder interest requirement has been satisfied, regardless of whether such
stock has been previously redeemed (although the IRS may not take this position
if the income tax regulations referred to above have become effective prior to
the effective date of the Merger). In addition, New Dartmouth Common Stock held
by any dissenting New Dartmouth Stockholder would be deemed outstanding as of
the Merger for purposes of the continuity of shareholder interest requirement.
The receipt of SNC Common Stock by New Dartmouth Stockholders in exchange
for New Dartmouth Common Stock pursuant to the Merger will satisfy the IRS's 50%
advance ruling requirement, even if all of the shares of New Dartmouth Preferred
Stock outstanding as of the date of the Merger Agreement, as well as all of the
shares of New Dartmouth Common Stock held by dissenting New Dartmouth
Stockholders (assuming such stockholders do not hold more than 7.5% of the New
Dartmouth Common Stock as of the Effective Time), are treated as outstanding
capital stock of New Dartmouth immediately prior to the Merger. Nonetheless,
the continuity of shareholder interest requirement will not be satisfied if
various New Dartmouth Stockholders are found to have had a plan or intent at the
Effective Time to dispose of SNC Common Stock received pursuant to the Merger
and such dispositions reduce the remaining shares of SNC Common Stock held by
all New Dartmouth Stockholders to an amount that does not represent a
substantial part of the value of the New Dartmouth capital stock outstanding at
the Effective Time. The management of New Dartmouth has represented to Price
Waterhouse as a condition of the latter's tax opinion that, to the best of
management's knowledge, no plan or intent to make such dispositions will exist
on the part of New Dartmouth Stockholders as of the Effective Time. If,
however, such dispositions of SNC Common Stock actually occur subsequent to the
Merger, the IRS could take the position on the basis of all the facts and
circumstances that there was a plan or intent on the part of certain New
Dartmouth Stockholders at the time of the Merger to dispose of an amount of SNC
Common Stock and that therefore the continuity of shareholder interest
requirement was not satisfied.
The longer that SNC Common Stock is held by a New Dartmouth Stockholder
prior to its disposition, and the greater the number of facts in existence to
indicate a change in circumstances after the Merger which could have caused the
Stockholder to decide to dispose of the SNC Common Stock, generally the less
likely it is that the Stockholder would be deemed to have had a plan or intent
to dispose of such stock at the Effective Time. Such determinations are,
however, highly fact specific. Therefore, even if Price Waterhouse delivers the
requisite opinion, there can be no assurance that the Merger will ultimately
satisfy the continuity of shareholder interest requirement. Violation of the
continuity of shareholder interest requirement would result in the Merger being
taxable in the manner described below to all New Dartmouth Stockholders who
receive SNC Common Stock pursuant to the Merger.
If the Merger does not qualify as a tax-free reorganization within the
meaning of Section 368(a) of the Code, then the following would be the material
Federal income tax consequences of the Merger to New Dartmouth Stockholders: (a)
taxable gain or loss will be recognized by New Dartmouth Stockholders upon their
receipt of SNC Common Stock in exchange for New Dartmouth Common Stock in the
year in which the Merger occurs equal to the difference between the fair market
value of the SNC Common Stock received and such stockholder's tax basis in the
shares of New Dartmouth Common Stock surrendered in the Merger, and such gain or
loss will generally constitute capital gain or loss if such stockholder's New
Dartmouth Common Stock is held as a capital asset at the Effective Time; (b) the
tax basis of the shares of SNC Common Stock received by a New Dartmouth
Stockholder will be equal to the fair market value of the SNC Common Stock; and
(c) the holding period for Federal income tax purposes of the SNC Common Stock
in the hands of a New Dartmouth Stockholder will not include the holding period
of the New Dartmouth Common Stock exchanged therefor.
The discussion set forth above is a summary of the material Federal income
tax consequences of the Merger to New Dartmouth Stockholders. It may not
address, however, Federal income tax considerations that may affect the
treatment of particular stockholders, such as, for example, a stockholder who
acquired New Dartmouth Common Stock pursuant to a New Dartmouth Warrant or
Option, and it does not address the state, local or foreign tax aspects
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of the Merger. The discussion is based on currently existing provisions of the
Code, existing and proposed Treasury regulations thereunder and current
administrative rulings and court decisions. All of the foregoing are subject to
change and any such change could affect the continuing validity of this
discussion. New Dartmouth Stockholders should consult their own tax advisors
with respect to the specific tax consequences of the Merger to them, including
the application and effect of state, local and foreign tax laws, and the
treatment of the receipt of cash by the dissenters in lieu of SNC Common Stock.
Dissenters' Rights
Any New Dartmouth Stockholder has the right to assert dissenters' rights
with respect to the Merger and to receive payment of the fair value of his
shares of New Dartmouth Common Stock upon compliance with the applicable
provisions of New Hampshire Revised Statues Annotated ("RSA") 293-A:13.01
through RSA 293-A:13.31 (a copy of which is set forth as Annex H to this Proxy
Statement/Prospectus). A stockholder may not dissent as to less than all of the
shares that he beneficially owns. A nominee or fiduciary may not dissent on
behalf of any beneficial owner as to less than all of the shares of such
beneficial owner held of record by such nominee or fiduciary. Such nominee or
fiduciary must notify New Dartmouth in writing of the name and address of each
person on whose behalf he asserts dissenters' rights. A beneficial owner
asserting dissenters' right to shares held on his behalf must submit to New
Dartmouth the record owner's written consent to the dissent not later than the
time such beneficial owner asserts dissenters' rights. Any New Dartmouth
Stockholder intending to enforce this right may not vote in favor of the Merger
Agreement and must file a written notice of intent to demand payment for his
shares (an "Objection Notice") with New Dartmouth either before the Special
Meeting or before the vote on the Merger is taken at the Special Meeting. An
Objection Notice must state that the New Dartmouth Stockholder intends to demand
payment for his shares of New Dartmouth Common Stock if the Merger is effected.
By properly executing a proxy card with no voting instructions indicated
thereon, a New Dartmouth Stockholder will vote in favor of the approval and
adoption of the Merger Agreement and, accordingly, will not be entitled to
exercise dissenters' rights in connection with the Merger. A vote against
approval of the Merger Agreement will not, by itself, constitute an Objection
Notice satisfying the requirements of RSA 293-A:13.21.
If the Merger Agreement is approved by New Dartmouth Stockholders at the
Special Meeting, within 10 days after the Special Meeting New Dartmouth will
send to each New Dartmouth Stockholder who has satisfied the requirements of RSA
293-A:13.21 a notice of such approval (the "Dissenters' Notice"). The
Dissenters' Notice will (i) state where dissenting stockholder must (a) send the
Payment Demand (as defined below) and (b) deposit their New Dartmouth Common
Stock Certificates (the "Certificates"), (ii) inform holders of uncertificated
shares of New Dartmouth Common Stock, if any, of the extent of any restrictions
on the transferability of such shares, (iii) be accompanied by a form for
demanding payment that includes the date of the first announcement to the news
media or to stockholders of the terms of the proposed Merger (March 24, 1993),
(iv) set a date by which New Dartmouth must receive the Payment Demand, which
may not be fewer than 30 or more than 60 days after the date the Dissenters'
Notice is delivered, and (v) be accompanied by a copy of RSA 388:13 and RSA
293-A:13.01 through RSA 293-A:13.31. Within the time prescribed in the
Dissenters' Notice, a stockholder electing to dissent must make a demand for
payment (the "Payment Demand"), certify whether he (or the beneficial
stockholder on whose behalf he is asserting dissenters' rights) acquired
beneficial ownership of the shares of New Dartmouth Common Stock before March
24, 1993, and deposit his Certificates in accordance with the terms of the
Dissenters' Notice. Upon filing the Payment Demand and depositing the
Certificates, the New Dartmouth Stockholder will retain all other rights of a
New Dartmouth Stockholder until these rights are cancelled or modified by
consummation of the Merger. Failure to comply with these procedures will cause
the New Dartmouth Stockholder to lose his dissenters' rights to payment for the
shares. Consequently, any New Dartmouth Stockholder who desires to exercise his
rights to payment for his shares is urged to consult his legal advisor before
attempting to exercise such rights.
The Merger Agreement provides that a condition to SNC's obligation to
effect the Merger is that the aggregate number of shares of New Dartmouth Common
Stock owned by New Dartmouth Stockholders who have perfected and not abandoned
their dissenters' rights of appraisal under RSA 293-A:13.01 through RSA
293-A:13.31 shall not constitute more than 7.5% of the shares of New Dartmouth
Common Stock outstanding immediately prior to the Effective Time.
As soon as the Merger is consummated, or upon receipt of a Payment Demand,
New Dartmouth shall, pursuant to RSA 293-A:13.25, pay to each dissenting
stockholder who has complied with the requirements of RSA 293-A:13.23, the
amount that New Dartmouth estimates to be the fair value of the shares of New
Dartmouth
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Common Stock, plus accrued interest. RSA 293-A:13.25 requires the payment to be
accompanied by (i) certain of New Dartmouth's financial statements, (ii) a
statement of New Dartmouth's estimate of the fair value of the shares and an
explanation of how the interest was calculated, (iii) notification of rights to
demand additional payment, and (iv) a copy of RSA 388:13 and RSA 293-A:13.01
through RSA 293-A:13.31. As authorized by RSA 293-A:13.27, New Dartmouth
intends to delay any payments with respect to any shares (the "after-acquired
shares") held by a dissenting stockholder which were not held by such
stockholder on March 24, 1993, the date of the first public announcement of the
terms of the Merger Agreement, unless the beneficial ownership devolved upon him
by operation of law from a person who was the beneficial owner as of such date.
Where payments are so withheld, RSA 293-A:13.27(b) will require New Dartmouth,
after the Merger, to send to the holder of the after-acquired shares an offer to
pay the holder an amount equal to New Dartmouth's estimate of the fair value of
such shares, plus accrued interest, together with an explanation of the
calculation of fair value and interest and a statement of the holder's right to
demand additional payment under RSA 293-A:13.28. Pursuant to RSA 293-A:13.27,
New Dartmouth will pay the amount of such offer to each holder of after-acquired
shares who agrees to accept such payment in full satisfaction of his demand.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing Certificates, New Dartmouth shall return the
deposited Certificates and release the transfer restrictions imposed on
uncertificated shares. If, after returning deposited Certificates and releasing
transfer restrictions, the Merger is consummated, New Dartmouth must send a new
Dissenters' Notice and repeat the payment demand procedure.
If a dissenting stockholder believes that the amount paid by New Dartmouth
pursuant to RSA 293-A:13.25 or offered under RSA 293-A:13.27 is less than the
fair value of his shares or that the interest due is calculated incorrectly, or
if New Dartmouth fails to make payment (or, if the Merger has not been
consummated, New Dartmouth does not return the deposited Certificates or release
the transfer restrictions imposed on uncertificated shares) within 60 days after
the date set forth in the Dissenters' Notice, then the dissenting stockholder
may, within 30 days after New Dartmouth made or offered payment for the shares,
notify New Dartmouth in writing of his own estimate of the fair value of such
shares (including interest due) and demand payment of such estimate (less any
payment previously received), or reject New Dartmouth's offer with respect to
after-acquired shares and demand payment of the fair value of such shares and
interest due. Failure to notify New Dartmouth in writing of any demand for
additional payment within 30 days after New Dartmouth made or offered payment
for such shares will constitute a waiver of the right to demand additional
payment.
If New Dartmouth and the dissenting stockholder cannot agree on a fair
price within 60 days after New Dartmouth receives such a demand for additional
payment, RSA 293-A.13.30 provides that New Dartmouth will institute judicial
proceedings in the New Hampshire Superior Court in the County of Hillsborough
(the "Court") to fix (i) the fair value of the shares immediately before
consummation of the Merger, excluding any appreciation or depreciation in
anticipation of the Merger, unless such exclusion would be inequitable, and (ii)
the accrued interest. The "fair value" of the New Dartmouth Common Stock could
be more than, the same as, or less than the consideration to be received in the
Merger. New Dartmouth must make all dissenters whose demands for additional
payment remain unsettled parties to the proceeding and all such parties must be
served with a copy of the petition. The Court may, in its discretion, appoint
an appraiser to receive evidence and recommend a decision on the question of
fair value. The Court is required to issue a judgment for the amount, if any,
by which the fair value of the shares, as determined by the Court, plus
interest, exceeds the amount paid by New Dartmouth or, in the case of
after-acquired shares for which New Dartmouth elects to withhold payment under
RSA 293-A:13.27, the fair value of such shares, plus accrued interest. If New
Dartmouth does not institute such proceedings within such 60 day period, New
Dartmouth shall pay each dissenting stockholder whose demand remains unsettled
the respective amount demanded by such stockholder.
The Court will assess the costs and expenses of such proceeding (including
reasonable compensation for and the expenses of the appraiser) against New
Dartmouth, except that the Court may assess such costs and expenses as it deems
appropriate against any or all of the dissenting stockholders if it finds that
their demand for additional payment was arbitrary, vexatious or otherwise not in
good faith. The Court may award fees and expenses of counsel and experts in
amounts the Court finds equitable: (i) against New Dartmouth if the Court finds
that New Dartmouth did not comply substantially with the relevant requirements
of the RSA or (ii) against either New Dartmouth or any dissenting stockholder,
if the Court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously or not in good faith. If the Court
finds that the services of counsel for any dissenting stockholder were of
substantial benefit to other dissenting stockholders similarly situated, and
that the fees for those
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services should not be assessed against New Dartmouth, the Court may award to
such counsel reasonable fees to be paid out of the amounts awarded to the
dissenting stockholders who were benefited.
The foregoing summary of the applicable provisions of RSA 388:13 and RSA
293-A:13.01 through RSA 293-A:13.31 is not intended to be a complete statement
of such provisions, and is qualified in its entirety by reference to such
sections, which are attached hereto as Annex H.
For a discussion of certain tax consequences in connection with dissenting,
see "--Certain Federal Income Tax Consequences" above.
Stock Option Agreement
The following is a brief summary of certain provisions of the Stock Option
Agreement, dated as of March 23, 1993 (the "Stock Option Agreement"), by and
between New Dartmouth and SNC, which is attached hereto as Annex E. The
following summary is qualified in its entirety by reference to the Stock Option
Agreement.
Execution of the Stock Option Agreement was a condition to SNC's merger
proposal. Pursuant to the Stock Option Agreement, New Dartmouth granted to SNC
an option to purchase up to 74,275 shares of New Dartmouth Common Stock
(representing approximately 14.9% of the issued and outstanding shares of such
New Dartmouth Common Stock after taking into account the shares issued upon
exercise of such option) at an exercise price of $310 per share, subject to the
terms and conditions set forth therein . The option may only be exercised upon
the occurrence of certain "Purchase Events" which are described below (none of
which has occurred).
The option is exercisable only upon the occurrence of one of the following
events (each a "Purchase Event"):
(a) a material breach by New Dartmouth of any of its covenants and
agreements contained in the Merger Agreement which remains uncured for more than
20 business days after notice thereof;
(b) New Dartmouth fails to publicly oppose a tender offer or an exchange
offer to purchase shares of New Dartmouth Common Stock or authorizes,
recommends, publicly proposes or publicly announces an intention to authorize,
recommend or propose, or enters into an agreement with any person (other than
SNC or any of its subsidiaries) to (i) effect a merger, consolidation or similar
transaction involving New Dartmouth or any of its subsidiaries (other than
internal mergers, reorganizations, consolidations or dissolutions involving only
existing subsidiaries), (ii) sell, lease, exchange or otherwise dispose of 10%
or more of the consolidated assets of New Dartmouth and its subsidiaries other
than in the ordinary course of business, or (iii) issue, sell or otherwise
dispose of (including by merger, consolidation, share exchange or similar
transaction) securities representing 10% or more of the voting power of New
Dartmouth or any of its subsidiaries, except pursuant to any presently
outstanding options, warrants or other securities (any of the foregoing an
"Acquisition Transaction");
(c) any person (other than SNC or its subsidiaries) shall have acquired
beneficial ownership (as defined under the Exchange Act) of, or the right to
acquire beneficial ownership of, or any group (as defined in the Exchange Act)
shall have been formed which beneficially owns or has the right to acquire
beneficial ownership of, 10% or more of the outstanding New Dartmouth Common
Stock (other than by automatic conversion of the New Dartmouth Preferred Stock);
(d) any person who, as of March 23, 1993, owns or controls 10% or more of
the outstanding shares of New Dartmouth Common Stock shall have acquired since
such date beneficial ownership of, or the right to acquire beneficial ownership
of, an additional 2% or more of the then outstanding shares of New Dartmouth
Common Stock;
(e) New Dartmouth Stockholders shall not have approved the Merger
Agreement at the meeting of such stockholders held for the purpose of voting on
the Merger Agreement, or such meeting shall not have been held or shall have
been canceled prior to the abandonment of the Merger Agreement, in each case
after it shall have been publicly announced that any person (other than SNC or
any subsidiary of SNC) shall have (i) made, or disclosed an intention to make, a
proposal to engage in an Acquisition Transaction, or (ii) filed an application
(or given a notice), whether in draft or final form, under the BHCA or the
Change in Bank Control Act of 1978, for approval to engage in an Acquisition
Transaction; or
49
<PAGE>
(f) New Dartmouth's Board of Directors shall not have recommended to New
Dartmouth Stockholders that such stockholders vote in favor of approval of the
Merger Agreement, or shall have withdrawn or modified such recommendation in a
manner adverse to SNC.
The option expires upon the earliest to occur of (i) the Effective Time,
(ii) twelve months after the first occurrence of a Purchase Event, (iii)
abandonment of the Merger in accordance with the terms of the Merger Agreement
prior to the occurrence of a Purchase Event (other than an abandonment resulting
from a material breach of New Dartmouth's covenants under the Merger Agreement),
or (iv) twelve months after the termination of the Merger Agreement if such
termination results from a breach of the Merger Agreement by New Dartmouth
(provided, however, that if within twelve months after such termination of the
Merger Agreement a Purchase Event occurs, then the option will terminate twelve
months after the first occurrence of such event). The closing of a purchase of
shares pursuant to the Stock Option Agreement is subject to the obtaining of all
necessary governmental approvals, including approval of the FDIC as required by
the New Dartmouth Preferred Stock Purchase Agreement if the then outstanding
shares of New Dartmouth Preferred Stock represent 10% or more of the New
Dartmouth Common Stock, after giving effect to the conversion of such New
Dartmouth Preferred Stock at the then applicable conversion rate.
The number and type of securities subject to the options and the purchase
price of shares will be adjusted for any change in the New Dartmouth Common
Stock by reason of a stock dividend, stock split, recapitalization, combination,
exchange of shares or similar transaction, such that SNC will receive (upon
exercise of the option) the same number and type of securities as if the option
had been exercised immediately prior to the occurrence of such event (or the
record date therefor). The number of shares of New Dartmouth Common Stock
subject to the option will also be adjusted in the event New Dartmouth issues
additional shares of New Dartmouth Common Stock such that the number of shares
of New Dartmouth Common Stock subject to the option, together with shares
previously purchased pursuant thereto, represents 14.9% of the New Dartmouth
Common Stock then issued and outstanding, without giving effect to shares
subject to or issued pursuant to the option.
In the event New Dartmouth enters into any agreement (i) to merge or
consolidate with any person other than SNC or one of its subsidiaries such that
New Dartmouth is not the surviving corporation, (ii) to permit any person, other
than SNC or one of its subsidiaries, to merge into New Dartmouth and New
Dartmouth is the surviving corporation, but, in connection with such merger, the
outstanding shares of New Dartmouth Common Stock are changed into or exchanged
for stock or other securities of New Dartmouth or any other person or cash or
any other property or the outstanding shares of New Dartmouth Common Stock prior
to such merger shall after such merger represent less than 50% of the
outstanding shares and 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 SNC or one of its subsidiaries, then, and in each such case, the agreement
governing the transaction must provide that, upon consummation of the
transaction, the option will be converted into or exchanged for an option to
purchase securities of either the acquiring person, a person that controls the
acquiring person or New Dartmouth (if New Dartmouth is the surviving entity), in
all cases at the option of SNC.
SNC has the right to require New Dartmouth to repurchase the option and any
shares acquired pursuant to exercise of the option of which SNC has beneficial
ownership in the following circumstances (each a "Repurchase Event"):
(a) any person (other than New Dartmouth or any of its subsidiaries) shall
have acquired beneficial ownership (as defined under the Exchange Act) of or the
right to acquire beneficial ownership of, or any group (as defined under the
Exchange Act) shall have been formed which beneficially owns, or has the right
to acquire beneficial ownership of, 50% or more of the then outstanding shares
of New Dartmouth Common Stock; or
(b) the consummation of any of the transactions described in clauses (i) -
(iii) of the preceding paragraph.
Such repurchase will be at an aggregate price equal to the sum of (i) the
aggregate exercise price paid by SNC for any shares of New Dartmouth Common
Stock acquired pursuant to the option with respect to which SNC then has
beneficial ownership; (ii) the excess, if any, of (x) the Applicable Price (as
defined below) for each share of New Dartmouth Common Stock over (y) the
exercise price of the option, multiplied by the number of shares of New
Dartmouth Common Stock with respect to which the option has not been exercised;
and (iii) the excess, if any, of the Applicable Price over the exercise price of
the option paid by SNC for each share of New Dartmouth Common Stock with respect
to which the option has been exercised and with respect to which SNC then has
beneficial
50
<PAGE>
ownership, multiplied by the number of such shares. SNC's right to require such
repurchase expires 12 months after the first occurrence of a Repurchase Event.
For purposes of the Stock Option Agreement, "Applicable Price" means the
highest of (i) the highest price per share of New Dartmouth Common Stock paid
for any such share by any person or group described in subsection (a) of the
second preceding paragraph, (ii) the price per share of New Dartmouth Common
Stock received by New Dartmouth Stockholders in connection with any merger or
other business combination described in subsection (b) of the second preceding
paragraph and (iii) the highest closing sales price per share quoted on the
National Association of Securities Dealers Automated Quotation/National Market
System (the "NASDAQ/NMS") (or, if the New Dartmouth Common Stock is not quoted
on the NASDAQ/NMS, the highest bid price per share as quoted on the principal
trading market or securities exchange on which such shares are traded as
reported by a recognized source) during the 60 days prior to SNC's exercise of
its right to require New Dartmouth to repurchase the option or the shares
acquired by exercise thereof; provided, however, that in the event of a sale of
less than all of New Dartmouth's assets, the Applicable Price shall be the sum
of the price paid in such sale for such assets and the current market value of
the remaining assets of New Dartmouth as determined by a nationally recognized
investment banking firm selected by SNC, divided by the number of shares of New
Dartmouth Common Stock outstanding at the time of such sale.
New Dartmouth has granted SNC certain registration rights with respect to
shares of New Dartmouth Common Stock acquired by SNC upon exercise of the
option. These rights include that New Dartmouth will file up to two
registration statements under the Securities Act if requested by SNC within
three years of the date the option first becomes exercisable provided such
registration is necessary in order to permit the sale or other disposition of
the shares acquired by SNC. Any such registration statement, and any sale
covered thereby, will be at New Dartmouth's expense other than underwriting
discounts or commissions, brokers' fees and the fees and disbursements of SNC's
counsel related thereto. In addition, in the event New Dartmouth effects a
registration under the Securities Act of its common stock (other than on Form
S-4 or Form S-8 or any form with respect to a dividend reinvestment or similar
plan), New Dartmouth will allow SNC to participate in such registration. In
connection with any registration described above, New Dartmouth and SNC will
provide to each other and any underwriter of the offering customary
representations, warranties, covenants, indemnifications and contributions.
The Stock Option Agreement is intended to increase the likelihood that the
Merger will be consummated in accordance with the terms of the Merger Agreement.
Consequently, certain aspects of the Stock Option Agreement may have the effect
of discouraging persons who might now or prior to the Effective Time be
interested in acquiring all of or a significant interest in New Dartmouth from
considering or proposing such an acquisition, even if such persons were prepared
to pay a higher price per share for New Dartmouth Common Stock than the price
per share to be paid in the Merger. The acquisition of New Dartmouth or an
interest in New Dartmouth, or an agreement to do either, could cause the option
to become exercisable. The existence of such option could significantly
increase the cost to a potential acquiror of acquiring New Dartmouth compared to
its cost had the Stock Option Agreement not been entered into. Such increased
cost might discourage a potential acquiror from considering or proposing an
acquisition or might result in a potential acquiror proposing to pay a lower per
share price to acquire New Dartmouth than it might otherwise have proposed to
pay. Based on the advice of Price Waterhouse, New Dartmouth's independent
accountants, the management of New Dartmouth believes that the exercise of the
Stock Option Agreement is likely to prohibit any acquiror of New Dartmouth from
accounting for any acquisition of New Dartmouth using the pooling of interests
accounting method for a period of two years. Accordingly, the existence of this
Stock Option Agreement is likely to deter significantly, if not completely
preclude, an acquisition of New Dartmouth by other banking organizations. The
New Dartmouth Board took this factor into account before approving the Stock
Option Agreement. See "-- Recommendation of New Dartmouth Board; Reasons for the
Merger."
51
<PAGE>
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
NEW DARTMOUTH BANK
PEOPLES BANCORP OF WORCESTER, INC. AND SUBSIDIARIES
GATEWAY FINANCIAL CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINING BALANCE SHEET
September 30, 1993
The following Unaudited Pro Forma Condensed Combining Balance Sheet
presents the combined financial position of Shawmut National Corporation ("SNC")
and New Dartmouth Bank ("New Dartmouth") as of September 30, 1993, assuming the
Merger had occurred as of September 30, 1993. The Unaudited Pro Forma
Condensed Combining Balance Sheet also gives effect to the pending acquisitions
of Peoples Bancorp of Worcester, Inc. ("Peoples") and Gateway Financial
Corporation ("Gateway") (Pro Forma Pending Acquisitions). Such pro forma
information is based on historical balance sheet data of SNC, New Dartmouth,
Peoples and Gateway as of that date, giving effect to the proposed mergers under
the pooling of interests method of accounting. This Unaudited Pro Forma
Condensed Combining Balance Sheet should be read in conjunction with the
Unaudited Pro Forma Condensed Combined Statement of Income appearing elsewhere
in this Proxy Statement/Prospectus and the historical financial statements and
notes thereto of New Dartmouth, which appear elsewhere in this Proxy
Statement/Prospectus and of SNC, Peoples and Gateway, which are incorporated by
reference in this Proxy Statement/Prospectus. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE." The Unaudited Pro Forma Condensed Combining Balance
Sheet is presented for informational purposes only and is not necessarily
indicative of the combined financial position that would have occurred if the
proposed mergers had been consummated on September 30, 1993 or at the beginning
of the periods indicated or which may be obtained in the future.
52
<PAGE>
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
NEW DARTMOUTH BANK
PEOPLES BANCORP OF WORCESTER, INC. AND SUBSIDIARIES
GATEWAY FINANCIAL CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINING BALANCE SHEET
September 30, 1993
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Pro Forma
-----------
Pro Forma Combined
New Pro Forma Pro Forma Pending ----------
(Dollars in thousands) SNC Dartmouth Adjustments Combined Acquisitions Total
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 1,030,981 $ 46,176 $ (17,480) $ 1,059,677 $ 48,964 $ 1,108,641
Interest-bearing deposits in other
banks, federal funds sold and
securities purchased under agreements
to resell 718,141 3 718,144 54,579 772,723
Trading account securities 46,669 46,669 46,669
Residential mortgages held for sale 289,443 17,703 307,146 22,979 330,125
Securities:
At lower of aggregate cost or
market value 3,805,020 320,401 4,125,421 390,986 4,516,407
At amortized cost 5,019,929 425,844 5,445,773 193,552 5,639,325
Loans, less reserve for loan losses 14,615,762 872,493 15,488,255 1,364,199 16,852,454
Premises and equipment 319,491 5,746 325,237 20,748 345,985
Foreclosed properties 74,989 2,428 77,417 32,204 109,621
Customers' acceptance liability 44,205 44,205 44,205
Other assets 991,958 44,419 1,036,377 40,087 1,076,464
------------ ----------- --------- ------------ ----------- ------------
Total assets $ 26,956,588 $ 1,735,213 $ (17,480) $ 28,674,321 $ 2,168,298 $ 30,842,619
============ =========== ========= ============ =========== ============
LIABILITIES
Deposits:
Demand $ 4,238,241 $ 78,760 $ 4,317,001 $ 79,695 $ 4,396,696
Savings, money market and
N.O.W. accounts 7,335,504 622,494 7,957,998 1,032,467 8,990,465
Domestic and foreign time 3,829,949 802,681 4,632,630 841,943 5,474,573
------------ ----------- --------- ------------ ----------- ------------
Total deposits 15,403,694 1,503,935 16,907,629 1,954,105 18,861,734
------------ ----------- --------- ------------- ----------- ------------
Other borrowings 8,789,948 92,796 8,882,744 14,061 8,896,805
Acceptances outstanding 44,205 44,205 44,205
Accrued taxes and other liabilities 179,032 44,402 223,434 15,553 238,987
Notes and debentures 873,657 873,657 873,657
------------ ----------- --------- ------------- ------------ ------------
Total liabilities 25,290,536 1,641,133 26,931,669 1,983,719 28,915,388
------------ ----------- --------- ------------ ----------- ------------
SHAREHOLDERS' EQUITY
Preferred stock:
SNC 178,750 178,750 178,750
New Dartmouth 15,215 $ (15,215) 0 0
Common Stock:
SNC 944 57 to 1,001 to 136 to 1,137 to
77 1,021 158 1,179
New Dartmouth 4 (4) 0 0
Surplus 1,050,027 40,350 (53) to 1,090,324 to 121,710 to 1,212,034 to
(73) 1,090,304 121,688 1,211,992
Retained earnings 436,924 38,511 (2,265) 473,170 62,733 535,903
Treasury stock, common stock at cost (593) (593) (593)
------------ ----------- --------- ------------ ----------- ------------
Total shareholders' equity 1,666,052 94,080 (17,480) 1,742,652 184,579 1,927,231
------------ ----------- --------- ------------ ---------- ------------
Total liabilities and
shareholders' equity $ 26,956,588 $ 1,735,213 $ (17,480) $ 28,674,321 $2,168,298 $ 30,842,619
============ =========== ========= ============ ========== ============
</TABLE>
See accompanying notes to unaudited pro forma condensed financial information
53
<PAGE>
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
NEW DARTMOUTH BANK
PEOPLES BANCORP OF WORCESTER, INC. AND SUBSIDIARIES
GATEWAY FINANCIAL CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINING BALANCE SHEET
PRO FORMA PENDING ACQUISITIONS
September 30, 1993
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Pro Forma
Pro Forma Pro Forma Pending
(Dollars in thousands) Peoples Adjustments Gateway Adjustments Acquisitions
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 17,969 $ (9,351) $ 40,346 $ $ 48,964
Interest-bearing deposits in other
banks, federal funds sold and
securities purchased under
agreements to resell 14,279 40,300 54,579
Residential mortgages held for sale 22,979 22,979
Securities:
At lower of aggregate cost or
market value 262,171 128,815 390,986
At amortized cost 122,732 70,820 193,552
Loans, less reserve for loan losses 462,868 901,331 1,364,199
Premises and equipment 10,550 10,198 20,748
Foreclosed properties 2,218 29,986 32,204
Other assets 14,810 25,277 40,087
--------- --------- ---------- ---------- ----------
Total assets $ 907,597 $ (9,351) $ 1,270,052 $ $ 2,168,298
========= ========= ========== ========== ==========
LIABILITIES
Deposits:
Demand $ 33,225 $ (9,351) $ 55,821 $ 79,695
Savings, money market and
N.O.W. accounts 493,947 538,520 1,032,467
Domestic and foreign time 270,616 571,327 841,943
--------- --------- ---------- ----------
Total deposits 797,788 (9,351) 1,165,668 1,954,105
--------- --------- ---------- ----------
Other borrowings 1,166 12,895 14,061
Accrued taxes and other liabilities 6,539 5,000 4,014 15,553
--------- --------- ---------- ----------
Total liabilities 805,493 (4,351) 1,182,577 1,983,719
--------- --------- ---------- ----------
SHAREHOLDERS' EQUITY
Common stock:
SNC 62 to $ 74 136 to
84 158
Peoples 332 (332) 0
Gateway 138 (138) 0
Surplus 39,581 270 to 84,771 (2,912) 121,710 to
248 121,688
Retained earnings 62,191 (5,000) 5,542 62,733
Treasury stock, common stock at cost (2,976) 2,976 0
--------- --------- ---------- ---------- ----------
Total shareholders' equity 102,104 (5,000) 87,475 0 184,579
--------- --------- ---------- ---------- ----------
Total liabilities and
shareholders' equity $ 907,597 $ (9,351) $ 1,270,052 $ 0 $ 2,168,298
--------- --------- ---------- ---------- ----------
</TABLE>
See accompanying notes to unaudited pro forma
condensed financial information.
54
<PAGE>
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
NEW DARTMOUTH BANK
PEOPLES BANCORP OF WORCESTER, INC. AND SUBSIDIARIES
GATEWAY FINANCIAL CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
September 30, 1993
The following Unaudited Pro Forma Condensed Combined Statement of Income
gives effect to SNC's proposed acquisition of New Dartmouth by combining the
results of operations of SNC for the nine months ended September 30, 1993 and
1992 and the three years ended December 31, 1992 with the results of operations
of New Dartmouth for the nine months ended September 30, 1993 and 1992, the year
ended December 31, 1992 and the period from October 10, 1991 (the date
operations commenced) through December 31, 1991 on a pooling of interests basis,
assuming the Merger had occurred as of September 30, 1993. Also
presented is the Unaudited Pro Forma Condensed Combined Statement of Income of
SNC, New Dartmouth, Peoples and Gateway for the same periods. Income before
extraordinary credit and cumulative effect of accounting change per common share
and weighted average common shares outstanding are based on the exchange ratios
as specified in the respective merger agreements. The Unaudited Pro Forma
Condensed Combined Statements of Income should be read in conjunction with the
Unaudited Pro Forma Condensed Combining Balance Sheet appearing elsewhere in
this Proxy Statement/Prospectus and the historical financial statements and
notes thereto of New Dartmouth, which appear elsewhere in this Proxy
Statement/Prospectus and of SNC, Peoples and Gateway, which are incorporated by
reference in this Proxy Statement/Prospectus. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE." The Unaudited Pro Forma Condensed Combined Statements
of Income are presented for informational purposes only and are not necessarily
indicative of the combined results of operations that would have occurred if the
proposed mergers had been consummated on September 30, 1993 or at the beginning
of the periods indicated or which may be obtained in the future.
55
<PAGE>
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
NEW DARTMOUTH BANK
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Nine months
ended September 30, Year ended December 31,
(Dollars in thousands, ---------------------------- --------------------------------------------------
except per share data) 1993 1992 1992 1991 1990
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest and dividend
income:
Loans $ 849,822 $ 877,824 $ 1,167,588 $ 1,333,765 $ 1,725,248
Securities:
At lower of aggregate
cost or market value 160,820 111,816 210,733 18,996 33,531
At amortized cost 207,876 230,326 253,447 436,628 345,707
Residential mortgages
held for sale 23,615 19,487 27,312 19,243 22,437
Interest-bearing deposits
in other banks, federal
funds sold and
securities purchased
under agreement to
resell 9,126 15,898 19,427 38,978 145,121
Trading account
securities 1,083 1,227 1,564 2,176 3,202
---------- ---------- ---------- ---------- ----------
Total 1,252,342 1,256,578 1,680,071 1,849,786 2,275,246
---------- ---------- ---------- ---------- ----------
Interest expense:
Interest on deposits:
Savings, money market and
N.O.W. accounts 123,677 187,883 237,980 361,992 455,699
Domestic and foreign time
deposits 156,802 235,723 298,912 468,247 656,308
---------- ---------- ---------- ---------- ----------
Total 280,479 423,606 536,892 830,239 1,112,007
Other borrowings 188,410 138,210 189,402 206,148 340,650
Notes and debentures 54,775 44,390 59,321 60,436 63,105
---------- ---------- ---------- ---------- ----------
Total 523,664 606,206 785,615 1,096,823 1,515,762
---------- ---------- ---------- ---------- ----------
Net interest income: 728,678 650,372 894,456 752,963 759,484
Provision for loan losses 39,078 166,174 197,700 466,791 434,293
---------- ---------- ---------- ---------- ----------
Net interest income after
provision for loan
losses 689,600 484,198 696,756 286,172 325,191
---------- ---------- ---------- ---------- ----------
Noninterest income:
Customer service fees 134,206 134,863 174,710 172,112 151,277
Trust and agency fees 87,305 86,109 115,103 112,030 106,520
Securities gains, net 7,698 79,657 85,912 78,154 26,180
Other 72,775 98,391 120,714 170,292 181,859
---------- ---------- ---------- ---------- ----------
Total 301,984 399,020 496,439 532,588 465,836
---------- ---------- ---------- ---------- ----------
Noninterest Expenses:
Compensation and benefits 353,219 333,251 447,923 429,753 450,194
Occupancy and equipment 118,406 126,266 167,641 159,050 168,134
Foreclosed properties
provision and expense 87,641 113,409 167,113 110,057 27,400
Other 271,398 218,174 299,649 280,050 272,603
---------- ---------- ---------- ---------- ----------
Total 830,664 791,100 1,082,326 978,910 918,331
---------- ---------- ---------- ---------- ----------
Income (loss) before
income taxes,
extraordinary credit and
cumulative effect of
accounting change 160,920 92,118 110,869 (160,150) (127,304)
Income taxes 35,917 27,179 33,774 5,273 5,679
---------- ---------- ---------- ---------- ----------
Income (loss) before
extraordinary credit and
cumulative effect of
accounting change $ 125,003 $ 64,939 $ 77,095 $ (165,423) $ (132,983)
========== ========== ========== ========== ==========
Income (loss) before
extraordinary credit and
cumulative effect of
accounting change
applicable to common
shares $ 113,401 $ 63,354 $ 72,312 $ (167,685) $ (135,310)
========== ========== ========== ========== ==========
Income (loss) before
extraordinary credit and
cumulative effect of
accounting change per
common share $ 1.14 to $ 0.70 to $ 0.78 to $ (2.24) to $ (1.84) to
$ 1.12 $ 0.69 $ 0.77 $ (2.22) $ (1.84)
Weighted average common
shares outstanding 99,168,310 to 90,404,736 to 92,265,414 to 75,012,303 to 73,371,599 to
101,177,321 92,413,747 94,274,425 75,469,911 73,371,599
</TABLE>
See accompanying notes to unaudited pro forma condensed financial information.
56
<PAGE>
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
NEW DARTMOUTH BANK
PEOPLES BANCORP OF WORCESTER, INC. AND SUBSIDIARIES
GATEWAY FINANCIAL CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Nine months
ended September 30, Year ended December 31,
(Dollars in thousands, -------------------------------- ------------------------------------------------
except per share data) 1993 1992 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest and dividend
income:
Loans $ 933,970 $ 982,077 $ 1,301,564 $ 1,468,113 $ 1,878,531
Securities:
At lower of aggregate
cost or market value 180,292 132,620 238,442 44,079 58,385
At amortized cost 214,279 240,200 265,978 452,804 361,031
Residential mortgages
held for sale 23,615 19,487 27,312 19,243 22,437
Interest-bearing deposits
in other banks, federal
funds sold and
securities purchased
under agreement to
resell 10,715 17,524 21,666 41,655 151,543
Trading account
securities 1,083 1,227 1,564 2,176 3,202
---------- ---------- ---------- ---------- ----------
Total 1,363,954 1,393,135 1,856,526 2,028,070 2,475,129
---------- ---------- ---------- ---------- ----------
Interest expense:
Interest on deposits:
Savings, money market and
N.O.W. accounts 143,882 214,789 272,351 399,903 490,933
Domestic and foreign time
deposits 184,215 276,056 349,771 533,146 733,299
---------- ---------- ---------- ---------- ----------
Total 328,097 490,845 622,122 933,049 1,224,232
Other borrowings 189,196 140,911 192,554 218,355 370,027
Notes and debentures 54,775 44,390 59,321 60,436 63,105
---------- ---------- ---------- ---------- ----------
Total 572,068 676,146 873,997 1,211,840 1,657,364
---------- ---------- ---------- ---------- ----------
Net interest income: 791,886 716,989 982,529 816,230 817,765
Provision for loan losses 41,128 185,869 235,566 481,511 471,773
---------- ---------- ---------- ---------- ----------
Net interest income after
provision for loan
losses 750,758 531,120 746,963 334,719 345,992
---------- ---------- ---------- ---------- ----------
Noninterest income:
Customer service fees 137,105 137,706 178,496 175,805 154,698
Trust and agency fees 87,305 86,109 115,103 112,030 106,520
Securities gains, net 10,962 85,523 94,103 80,063 23,382
Other 80,265 109,081 133,559 175,955 188,604
---------- ---------- ---------- ---------- ----------
Total 315,637 418,419 521,261 543,853 473,204
---------- ---------- ---------- ---------- ----------
Noninterest Expenses:
Compensation and benefits 375,053 353,283 474,725 455,250 475,766
Occupancy and equipment 126,500 135,850 179,507 169,251 178,949
Foreclosed properties
provision and expense 100,217 128,205 184,810 125,257 32,797
Other 287,700 234,763 321,730 297,074 287,356
---------- ---------- ---------- ---------- ----------
Total 889,470 852,101 1,160,772 1,046,832 974,868
---------- ---------- ---------- ---------- ----------
Income (loss) before
income taxes,
extraordinary credit and
cumulative effect of
accounting change 176,925 97,438 107,452 (168,260) (155,672)
Income taxes 40,298 32,493 40,898 4,076 564
---------- ---------- ---------- ---------- ----------
Income (loss) before
extraordinary credit and
cumulative effect of
accounting change $ 136,627 $ 64,945 $ 66,554 $ (172,336) $ (156,236)
========== ========== ========== ========== ==========
Income (loss) before
extraordinary credit and
cumulative effect of
accounting change
applicable to common
shares $ 125,025 $ 63,360 $ 61,771 $ (174,598) $ (158,563)
========== ========== ========== ========== ==========
Income (loss) before
extraordinary credit and
cumulative effect of
accounting change per
common share $ 1.13 to $ 0.63 to $ 0.60 to $ (2.07) to $ (1.92) to
$ 1.09 $ 0.61 $ 0.58 $ (2.02) $ (1.88)
Weighted average common
shares outstanding 110,358,922 to 100,072,230 to 102,126,150 to 84,301,315 to 82,613,162 to
114,606,614 104,030,246 106,152,261 86,573,198 84,358,595
</TABLE>
See accompanying notes to unaudited pro forma
condensed financial information.
57
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
NOTE 1:
Certain reclassifications have been made to the accounts of New Dartmouth,
Peoples and Gateway in the accompanying Unaudited Pro Forma Condensed Combining
Balance Sheet and Unaudited Pro Forma Condensed Combined Statements of Income to
conform to SNC presentation. Pro Forma results of operations do not reflect
nonrecurring items of income and expense resulting directly from the proposed
mergers. In addition, the accompanying Unaudited Pro Forma Condensed Combined
Statements of Income do not reflect the following: extraordinary credits of SNC
from the utilization of federal tax loss carryforwards of $18,378,000 for the
year ended December 31, 1992 and $15,229,000 for the nine months ended September
30, 1992; the cumulative effect of an accounting change due to the adoption of
Statement of Financial Accounting Standards No. 109 of $52,800,000 for SNC for
the nine months ended September 30, 1993 and $1,544,000 for Peoples for the year
ended December 31, 1992; extraordinary charges of Gateway relating to debt
prepayment penalties of $371,000 and $2,250,000 for the year ended December 31,
1992 and 1991, respectively; and the extraordinary credit of Peoples for a stock
distribution of $1,287,000 for the year ended December 31, 1991. Intercompany
cash and due from bank balances of $9,351,000 have been eliminated between SNC
and Peoples.
NOTE 2:
NEW DARTMOUTH
The pro forma shareholders' equity accounts of SNC and New Dartmouth have
been adjusted in the accompanying Unaudited Pro Forma Condensed Combining
Balance Sheet to reflect the issuance of shares of SNC Common Stock in exchange
for all of the outstanding shares of New Dartmouth Common Stock. The number of
shares of SNC Common Stock to be issued pursuant to the acquisition of New
Dartmouth (in the range between 5,700,400 and 7,709,411 shares) is based upon
the number of shares of New Dartmouth Common Stock outstanding as of September
30, 1993 and assumes an exchange ratio of 13.438 to 18.174 shares of SNC Common
Stock for each share of New Dartmouth Common Stock, calculated as of September
30, 1993. The New Dartmouth exchange ratio reflected in the pro forma financial
information at September 30, 1993 is based on a value of $310.95 per share. As
further discussed above (see "-- Exchange Ratio"), the Merger Agreement provides
for an increase in this amount based on 177.0% of New Dartmouth's Adjusted
Earnings Per Share from October 1, 1993 to the closing date, subject to certain
potential adjustments. For a tabular presentation of possible Exchange Ratios at
several hypothetical levels of Adjusted Earnings, see "-- Exchange Ratio--
Illustrative Exchange Ratios" above. The excess of the par value of the SNC
Common Stock to be issued over the par value of the New Dartmouth Common Stock
outstanding ($53,000 to $73,000 at September 30, 1993) has been charged to
surplus. The equity accounts of New Dartmouth reflect the expected retirement
of outstanding New Dartmouth Preferred Stock prior to consummation of the
Merger at the September 30, 1993 redemption price of $102.78 per share
($17,480,000). The excess ($2,265,000) of redemption price over the stated value
of New Dartmouth Preferred Stock ($15,215,000) has been charged to retained
earnings.
PRO FORMA PENDING ACQUISITIONS
The pro forma shareholders' equity accounts of SNC, as adjusted for New
Dartmouth, have been further adjusted to reflect the issuance of shares of SNC
Common Stock in exchange for all of the outstanding shares of Peoples Common
Stock and Gateway Common Stock (Pro Forma Pending Acquisitions). The number of
shares of SNC Common Stock to be issued pursuant to the acquisition of Peoples
(in the range between 6,221,603 and 8,419,416 shares) is based upon the number
of shares of Peoples Common Stock outstanding as of September 30, 1993 and the
exchange ratios specified in the Peoples merger agreement. The difference
between the par value of the SNC Common Stock to be issued over the par value of
the Peoples Common Stock outstanding ($270,000 to $248,000 at September 30,
1993) has been credited to surplus. The number of shares of SNC Common Stock to
be issued pursuant to the acquisition of Gateway (7,406,789 shares) is based
upon the number of shares of Gateway Common Stock outstanding as of September
30, 1993 and the exchange ratio specified in the Gateway merger agreement. The
difference between the par value of the SNC Common Stock to be issued over the
par value of the Gateway Common Stock outstanding ($64,000 at September 30,
1993) has been credited to surplus. The equity accounts of Gateway reflect the
retirement of Gateway Treasury Stock ($2,976,000) upon consummation of the
Gateway merger with a charge to surplus.
NOTE 3:
Pro forma earnings per share amounts in the accompanying Unaudited Pro Forma
Condensed Combined Statements of Income are based on the weighted average number
of common shares of the constituent companies outstanding during each period, as
adjusted for the minimum and maximum exchange ratios as specified in the
respective merger agreements.
58
<PAGE>
NEW DARTMOUTH
Shares of New Dartmouth Common Stock have been adjusted to the equivalent
shares of SNC Common Stock for each period assuming an exchange ratio of 13.438
to 18.174 shares of SNC Common Stock for each share of New Dartmouth Common
Stock, calculated as of September 30, 1993 (see NOTE 2).
PRO FORMA PENDING ACQUISITIONS
Shares of Peoples Common Stock have been adjusted to the equivalent shares of
SNC Common Stock for each period assuming an exchange ratio of 1.874 to 2.536
shares of SNC Common Stock for each share of Peoples Common Stock. Shares of
Gateway Common Stock have been adjusted to the equivalent shares of SNC Common
Stock for each period assuming an exchange ratio of 0.559 shares of SNC Common
Stock for each share of Gateway Common Stock.
NOTE 4:
The expenses associated with the proposed acquisitions are not reflected in
the accompanying Unaudited Pro Forma Condensed Combined Statements of Income.
These expenses are not reflected in the accompanying Unaudited Pro Forma
Condensed Combining Balance Sheet as such expenses are not considered material.
NOTE 5:
Retained earnings of Peoples includes approximately $11,500,000 which is
classified for federal income tax purposes as a reserve for loan losses.
Deferred income taxes were not provided on such amounts because Peoples Savings
Bank ("Peoples Bank"), a wholly-owned subsidiary of Peoples, is a savings bank.
Upon the merger of Peoples Bank with and into Shawmut Bank, National
Association, an indirect wholly-owned subsidiary of SNC, Peoples Bank will lose
its status as a savings bank and income taxes previously not provided will
become payable. An adjustment of $5,000,000 has been reflected in the
accompanying Unaudited Pro Forma Condensed Combining Balance Sheet to reflect
this, which represents taxes payable at a combined federal and state tax rate of
43 percent. This adjustment is not reflected in the accompanying Unaudited Pro
Forma Condensed Combined Statement of Income.
59
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF NEW DARTMOUTH'S FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations for the Three Months Ended September 30, 1993 compared to
the Three Months Ended September 30, 1992
New Dartmouth reported net income for the three months ended September 30,
1993 of $4.7 million compared to $5.0 million for the three months ended
September 30, 1992. The decline in net income is primarily attributable to a
$2.3 million reduction in New Dartmouth's net interest income. A $1.5 million
increase in New Dartmouth's provision for possible loan losses was offset by
receipt of the FDIC Small Loan protection payment which is included as a
component of noninterest income. The FDIC Small Loan protection payment for the
three months ended September 30, 1993 exceeded the amount of such payment
received during the comparable period of 1992 by $2.2 million. In addition, a
gain of $1.1 million was recorded on the sale of securities held for sale.
NET INTEREST INCOME
Net interest income for the three months ended September 30, 1993 was $14.9
million at an annualized net interest margin on earning assets of 3.61% compared
to net interest income for the three months ended September 30, 1992 of $17.2
million at an annualized net interest margin on earning assets of 4.18%.
The following table presents New Dartmouth's consolidated average balance
sheets, interest income and interest expense, annualized yields on earning
assets and cost of funds for the periods indicated:
60
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Three months ended Three months ended
September 30, 1993 September 30, 1992
New Dartmouth Bank ----------------------------------- ----------------------------
Average Balance Sheets Average Interest Yield/ Average Interest Yield/
(Dollars in thousands) Balance Inc/Exp Rate Balance Inc/Exp Rate
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Interest bearing deposits in other banks and
federal funds sold $ 68,363 $ 512 2.97% $ 28,136 $ 226 3.19%
Securities purchased under agreements to
resell 0 0 0.00 33,913 284 3.32
Securities held for sale:
US Government and federal agency securities 140,102 1,165 3.30 0 0 0.00
Mortgage backed securities and collateralized
mortgage obligations 142,527 1,627 4.57 0 0 0.00
Investment securities:
US Government and federal agency securities 103,823 1,358 5.19 221,910 2,726 4.87
Federal Home Loan Bank stock 14,929 304 8.08 14,929 295 7.84
Other securities 6,354 71 4.46 9,648 105 4.33
Mortgage backed securities and collateralized
mortgage obligations 244,336 3,198 5.24 233,328 3,191 5.47
Loans:
Real estate -- residential 555,689 11,263 8.09 647,499 14,540 8.96
Real estate -- commercial 224,164 5,263 9.39 295,083 7,081 9.60
Real estate -- construction 5,459 127 9.23 10,062 258 10.17
Commercial 37,230 631 6.72 35,383 751 8.42
Consumer 138,296 3,225 9.25 143,489 3,457 9.56
Discount on loans acquired from the FDIC (42,086) 0 0.00 (42,723) 0 0.00
--------- ------ ----- --------- ------ -----
Total interest earning assets 1,639,186 28,744 6.99 1,630,657 32,914 8.05
--------- ------ ----- --------- ------ -----
Noninterest earning assets 87,277 72,559
Allowance for possible loan losses (11,336) (12,674)
--------- ---------
Total assets $1,715,127 $l,690,542
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing liabilities:
N.O.W. and money market accounts $ 253,577 1,475 2.31 $ 277,859 2,142 3.06%
Savings 364,894 2,660 2.89 313,684 2,779 3.51
Time deposits of $100,000 or more 5,971 60 3.99 13,664 155 4.50
Other time deposits 797,268 8,552 4.26 868,795 10,382 4.74
Short-term borrowed funds 43,872 380 3.44 16,574 143 3.76
Federal Home Loan Bank advances 50,352 694 5.47 12,228 132 4.28
--------- ------ ----- --------- ------ -----
Total interest bearing liabilities 1,515,934 13,821 3.62 1,502,804 15,733 4.16
--------- ------ ----- --------- ------ -----
Noninterest bearing liabilities:
Demand deposits 69,779 59,684
Other liabilities 34,882 38,657
--------- ---------
Total liabilities 1,620,595 1,601,145
Stockholders' equity 94,532 89,397
--------- ---------
Total liabilities and stockholders' equity $1,715,127 $1,690,542
========= =========
Net interest income $14,923 $17,181
====== ======
Net interest spread 3.38% 3.89%
===== =====
Net interest margin on average earning assets 3.61% 4.18%
===== =====
</TABLE>
61
<PAGE>
INTEREST AND LOAN FEE INCOME
Interest and loan fee income for the three months ended September 30, 1993
totaled $28.7 million reflecting a decline of $4.2 million from the $32.9
million recorded for the same period last year. Average earning assets for the
three months ended September 30, 1993 were $1.6 billion with an annualized
weighted average yield of 6.99% compared to average earning assets of $1.6
billion at an annualized weighted average yield of 8.05% for the same period
last year. The decline in yields and the corresponding decline in interest
income is attributable to a change in mix within New Dartmouth's earning asset
portfolio, as described below, and a general decline in interest rates.
Loans, net of discount on loans acquired from the FDIC, averaged $918.8
million at an annualized weighted average yield of 8.90% for the three months
ended September 30, 1993 compared to $1.1 billion at an annualized weighted
average yield of 9.56% for the same period last year. Average loans, net of
discount on loans acquired from the FDIC, experienced a decline of $170.0
million, $73.7 million in the commercial and commercial real estate loan
portfolios and $96.3 million in the residential real estate, home equity and
consumer loan portfolios. Commercial loans that became classified since
September 30, 1992 totaling $65.2 million were transferred to the FDIC, as
permitted under the terms of the Purchase and Assumption Agreements
(collectively, the "1991 P&A Agreements") by and between New Dartmouth and the
FDIC, as Receiver of Dartmouth Bank, New Hampshire Savings Bank, and Numerica
Savings Bank, FSB (collectively, the "Failed Banks"). Also, transferred to the
FDIC during the period was $6.6 million of blanket mortgages passed to New
Dartmouth as part of the Somersworth acquisition that, according to the terms
of the Somersworth Purchase and Assumption Agreement (the "Somersworth P&A
Agreement"), should have been retained by the FDIC. In the current economic
environment, highlighted by declining interest rates, New Dartmouth is
experiencing an acceleration in loan prepayments. This acceleration in loan
prepayments is especially evident in New Dartmouth's residential real estate
portfolio which has experienced a significant amount of refinancing, primarily
to the fixed rate product. To avoid assumption of interest rate risk, New
Dartmouth is selling its real estate loan originations and refinancing into the
secondary market. During the quarter ended September 30, 1993, New Dartmouth
originated and refinanced $32.2 million in residential real estate loans and
sold $26.0 million in residential real estate loans into the secondary market.
Loan yields were also affected by the general decline in interest rates.
Residential and commercial real estate loans, amounting to approximately $458.7
million, are generally one-year adjustable rate products that have repriced to
lower rates.
Offsetting the decline in average loans was an increase in the average
securities and liquid asset portfolios of $178.6 million. New Dartmouth is
investing its excess liquid funds in its securities portfolio, primarily U.S.
Treasury and agency obligations, mortgage backed securities, and collateralized
mortgage obligations. For the three months ended September 30, 1993, the
securities portfolio averaged $652.1 million at an annualized weighted average
yield of 4.73% compared to an average of $513.7 million at an annualized average
yield of 5.12% for the same period last year. On September 30, 1993, the
securities and liquid asset portfolios comprised approximately 43% of New
Dartmouth's assets.
Interest rates are at or near their lowest level in approximately thirty
years. To avoid assuming interest rate and market risk, New Dartmouth is
limiting the maturity of its securities and liquid asset portfolios. At
September 30, 1993, approximately 86.0% of its securities and liquid asset
portfolios mature or reprice within two years. This strategy, while limiting
interest rate and market risk, adversely effects New Dartmouth's earning
potential.
INTEREST EXPENSE
Interest expense for the three months ended September 30, 1993 totaled
$13.8 million compared to $15.7 million for the period ended September 30, 1992.
Average interest bearing liabilities for the three months ended September 30,
1993 were $1.5 billion with an annualized weighted average cost of funds of
3.62% compared to average interest bearing liabilities of $1.5 billion at an
annualized weighted average cost of funds of 4.16% for the same period last
year. For the three months ended September 30, 1993, core transaction accounts
and regular savings accounts averaged $618.5 million at a weighted average cost
of funds of 2.65% compared to $591.5 million with a weighted average cost of
funds of 3.30% at September 30, 1992. For the three months ended September 30,
1993, certificates of deposits averaged $803.2 million at an annualized weighted
average cost of funds of 4.26%. This compares with $882.5 million at an
62
<PAGE>
annualized average cost of funds of 4.74% for the same period last year. New
Dartmouth is benefiting from both a general decline in interest rates and a
reduced reliance on certificates of deposit to support its earning asset base.
For the three months ended September 30, 1993, total deposits increased
$13.2 million reversing a trend that started with New Dartmouth's inception on
October 10, 1991. The following table presents the changes in New Dartmouth's
deposit base for the period:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
Deposit September 30, June 30,
Type 1993 1993 Variance
- -------------------------------------------------------------------
<S> <C> <C> <C>
Core Deposits:
Demand deposits $ 78.7 $ 70.8 $ 7.9
N.O.W. accounts 153.0 146.4 6.6
Money market accounts 103.8 107.3 (3.5)
Savings accounts 365.7 363.2 2.5
Retail CD's 756.3 758.8 (2.5)
Volatile Deposits:
CD's greater than $100,000 46.4 44.2 2.2
---------- ---------- -------
Total deposits $ 1,503.9 $ 1,490.7 $ 13.2
========== ========== =======
</TABLE>
New Dartmouth experienced an increase in its total core demand deposits,
N.O.W. accounts and savings accounts of $17.0 million. Retail certificates of
deposit and money market accounts declined by $6.0 million. Management
attributes the decline in retail certificates of deposit and money market
accounts to the general decline in interest rates, particularly short-term
rates, during the reporting period. Management believes customers are seeking
higher returns by reinvesting deposits in mutual funds and the stock market.
Certificates of deposit over $100,000 increased by $2.2 million. Although the
runoff of New Dartmouth's retail certificates of deposit and money market
accounts has slowed, if rates remain at or near historically low levels,
management believes the reduction in retail certificates of deposit and money
market accounts may continue although at a reduced rate. For the three months
ended September 30, 1993, retail certificates of deposit and money market
accounts declined by $3.8 million or 0.4% compared to $60.3 million or 5.7% for
the same period last year. New Dartmouth is not offering brokered deposits.
Partially offsetting the decline in the deposit base, was an increase in New
Dartmouth's repurchase agreements of $8.5 million due to New Dartmouth's
aggressive marketing of its cash management program. Under New Dartmouth's
repurchase agreement program, excess funds in a depositor's demand deposit
account are transferred daily into a collateralized interest bearing obligation
of New Dartmouth. Borrowings under this program totaled $40.3 million at
September 30, 1993 compared to $31.8 million at June 30, 1993.
During the quarter, New Dartmouth borrowed $2.5 million in five year Federal
Home Loan Bank of Boston ("FHLBB") advances. Proceeds from the advance were
used to match fund a loan of equal maturity.
PROVISION FOR POSSIBLE LOAN LOSSES
For the three months ended September 30, 1993, New Dartmouth recorded a
provision for possible loan losses of $4.1 million compared to a provision of
$2.6 million for the same period last year. The increase in the provision for
possible loan losses was more than offset by an increase in the FDIC Small Loan
protection payments received during the period, which exceeded the amount of
such payment received during the same period last year by $2.2 million. The
FDIC Small Loan protection payments are included as a component of noninterest
income and offset by a corresponding increase in the provision for possible loan
losses.
NONINTEREST INCOME
Noninterest income for the three months ended September 30, 1993 totaled $7.3
million compared to $3.9 million for the three months ended September 30, 1992.
Fees for services rendered to customers amounted to $1.8 million for both
periods. Other operating income, consisting primarily of residential real
estate loan servicing fees and credit card fees amounted to $883,000 compared to
$740,000 for the same period last year.
63
<PAGE>
At September 30, 1993, New Dartmouth was servicing a portfolio of residential
real estate loans of approximately $346.9 million compared to $336.0 million at
September 30, 1992.
During the period ending September 30, 1993, in addition to its normal
operating income, New Dartmouth received $3.5 million in FDIC Small Loan
protection payments. This compares with receipt of $1.3 million for the three
months ended September 30, 1992. FDIC Small Loan protection payments are
offset by a corresponding increase in the provision for possible loan losses.
For the three months ended September 30, 1993, New Dartmouth recorded gains
on the sale of securities held for sale of $1.1 million. No such security gains
or losses were incurred for the same period last year.
NONINTEREST EXPENSE
Total noninterest expense for the three months ended September 30, 1993
amounted to $10.5 million compared to $10.8 million for the three months ended
September 30, 1992. Total salaries and benefits for the three months ended
September 30, 1993 and 1992 amounted to $4.4 million and $4.7 million
respectively. At September 30, 1993 New Dartmouth had a total staff complement
of 578 full-time equivalent employees and 34 temporary employees in comparison
to 575 full-time and 26 temporary employees at September 30, 1992. Employee
benefits for the period totaled $749,000 and amounted to approximately 20.8% of
total salaries. This expense is consistent with the same period last year.
Total occupancy and equipment expense for the three month period ended September
30, 1993 amounted to $1.8 million in comparison to $1.7 million for the three
months ended September 30, 1992.
At September 30, 1993, New Dartmouth serviced its market area through a
network of thirty-seven branches and thirty-six automated teller machines. One
of the branches located at 1155 Elm Street, Manchester, New Hampshire, serves as
New Dartmouth's headquarters. New Dartmouth leases thirty-six branches from
third-party landlords with the terms of these leases ranging from one to ten
years. All leases are classified as operating leases. New Dartmouth owns one
drive-up facility and one branch located in Somersworth, New Hampshire. Both
facilities were purchased from the FDIC at appraised value.
New Dartmouth's data and item processing services are provided through a five
year non-cancellable facilities management contract with an unaffiliated vendor.
The minimum annual commitment under this contract is approximately $3.0 million.
Items processed in excess of monthly base volumes are charged on a per item
basis. Expenses incurred under this contract for the three months ended
September 30, 1993 and September 30, 1992 amounted to $852,000 and $858,000
respectively. Other operating expenses for the three months ended September 30,
1993 amounted to $3.5 million and include $401,000 in postage and $823,000 in
FDIC insurance assessments. For the same period last year, other operating
expense amounted to $3.5 million and include $401,000 in postage and $874,000 in
FDIC insurance assessments.
PROVISION FOR INCOME TAXES
New Dartmouth recognized income tax expense of $2.9 million for the three
month period ended September 30, 1993, constituting 37.7% of pre-tax earnings.
The effective income tax rate differed from the federal statutory rate of 35%
primarily due to state income taxes.
The Internal Revenue Service has not issued final tax accounting rules for
federally assisted acquisitions such as those pursuant to the 1991 P&A Agree-
ment and the Somersworth P&A Agreement. Please refer to "--Results of Operations
for the Period October 10, 1991 to June 30, 1992 -- Income Taxes" below for a
further description of New Dartmouth's deferred tax asset and other tax matters.
64
<PAGE>
Results of Operation for the Period July 1, 1992 through June 30, 1993 compared
to the Period October 10, 1991 through June 30, 1992
New Dartmouth was formed on October 10, 1991 and has adopted a June 30 fiscal
year. As a result, the period from October 10, 1991 to June 30, 1992 ("Fiscal
1992") reflects operations based on a 264-day period as compared to the period
from July 1, 1992 to June 30, 1993 ("Fiscal 1993") which reflects operations
based on a 365-day period. During the first six months of its existence, New
Dartmouth experienced a significant restructuring of its balance sheet and
downsizing of its operations. Highlights of these activities included the
following: (i) the reconfiguration of New Dartmouth's branch network, which
resulted in the closure of eighteen branch offices, to eliminate unnecessary
market redundancy and unprofitable branch offices; (ii) the consolidation of
four separate data processing systems and other functional areas of the Failed
Banks; (iii) the realignment of the Failed Banks' workforce that achieved a 50%
reduction in personnel; and (iv) the repricing of all above market rate
liabilities of the Failed Banks which resulted in an immediate decline in the
cost of funds and a deposit outflow of approximately $500 million. Consequently,
a meaningful comparison between the results of operations for Fiscal 1993 and
Fiscal 1992 cannot always be made.
New Dartmouth reported net income of $19.4 million for Fiscal 1993 compared
to $15.5 million for Fiscal 1992. New Dartmouth's return on average assets for
Fiscal 1993 and Fiscal 1992 was 1.14% and an annualized 1.27%, respectively. New
Dartmouth reported primary earnings per share of $43.63 in Fiscal 1993 compared
to primary earnings per share of $36.10 in Fiscal 1992. The increase in reported
net income for Fiscal 1993 compared to Fiscal 1992 is primarily attributable to
an increase in the number of days in the reporting period.
Total assets at June 30, 1993 were $1.7 billion reflecting a decline of $2.8
million since June 30, 1992. Gross loans at June 30, 1993 were $954.7 million,
down $201.3 million from June 30, 1992 due primarily to the $57.8 million in
loans "put" to the FDIC in Fiscal 1993, an acceleration in loan prepayments as
borrowers refinance their loans to take advantage of lower interest rates, and
weak loan demand. To avoid interest rate risk, New Dartmouth is selling its
refinanced fixed rate real estate loans into the secondary market. Offsetting
this decline in gross loans was a $199.0 million increase in New Dartmouth's
portfolio of liquid securities, securities held for sale and securities held to
maturity.
During 1993, as a result of changing industry practice and management's
evaluation of the investment securities portfolio, New Dartmouth segregated its
investment portfolio into securities held to maturity and those held for sale.
Securities held for sale are to be held for an indefinite period of time and can
be used for asset/liability management and may be sold in response to changes in
interest rates, prepayment risk or other factors.
In May 1993, the Financial Accounting Standards Board issued Statement No.
115, "Accounting for Certain Investments in Debt and Equity Securities" ("FAS
115"). FAS 115 requires that debt and equity securities be classified as
trading, available for sale or held to maturity. Securities classified as
trading are reported at fair value with unrealized gains and losses included in
income. Securities classified as held for sale are reported at fair value with
unrealized gains and losses included as a separate component of stockholders'
equity. Securities classified as held to maturity are reported at amortized
cost. In order to classify securities as held to maturity, management must have
the positive intent and ability to hold securities to maturity.
New Dartmouth adopted FAS 115 effective June 30, 1993 and on June 30, 1993
recorded a total unrealized gain of $2.6 million ($1.6 million, net of tax) as a
separate component of stockholders' equity. At June 30, 1993, securities
aggregating $363.3 million were carried in the securities held for sale
portfolio and securities aggregating $331.1 million with a market value of
$333.8 million were carried in the held to maturity portfolio.
Total deposits at June 30, 1993 were $1.5 billion, down $74.2 million from
June 30, 1992 due primarily to a general decline in interest rates and customers
reinvesting their money in mutual funds and the stock market in search of
higher returns. In Fiscal 1993, short-term borrowed funds and Federal Home Loan
Bank ("FHLB") advances increased by $70.6 million offsetting the decline in New
Dartmouth's deposit base.
During the year ended June 30, 1993, New Dartmouth redeemed 137,000 shares of
its preferred stock outstanding at an aggregate price of $13.4 million.
65
<PAGE>
NET INTEREST INCOME
New Dartmouth recorded net interest income in Fiscal 1993 of $67.1 million,
and a net interest margin on average earning assets of 4.08%, compared to net
interest income of $49.4 million, and an annualized net interest margin on
average earning assets of 4.21% in Fiscal 1992. The increase in net interest
income in Fiscal 1993 as compared to Fiscal 1992 is primarily attributable to a
difference in the number of days within each reporting period. The decrease in
New Dartmouth's net interest margin on average earning assets reflects the lower
interest rate environment and the loan attrition discussed above. In Fiscal
1993, average earning assets totaled $1.6 billion with an annualized weighted
average yield of 7.66% compared to average earning assets of $1.6 billion with
an annualized weighted average yield of 8.87% in Fiscal 1992. In Fiscal 1993,
average interest bearing liabilities totaled $1.5 billion with an annualized
average cost of funds of 3.88% compared to average interest bearing liabilities
of $1.5 billion with an annualized average cost of funds of 5.00% in Fiscal
1992.
66
<PAGE>
The following table presents New Dartmouth's consolidated average balance
sheets, interest income and interest expense, yields on earning assets and cost
of funds for the periods indicated:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
For the period
----------------------------------------------------------------------
July 1, 1992 to June 30, 1993 October 10, 1991 to June 30, 1992
--------------------------------- ---------------------------------
Average Balance Sheet Average Interest Yield/ Average Interest Yield/
(Dollars in thousands) Balance(1) Inc/Exp Rate Balance(1) Inc/Exp Rate(2)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest earning assets:
Interest bearing deposits
in other banks and
federal funds sold $ 41,087 $ 1,241 3.02% $ 69,914 $ 2,678 5.31%
Securities purchased
under agreements to resell 18,055 581 3.22 15,235 442 4.02
Securities held for sale:
U.S. Government and
federal agency securities 23,549 934 3.97 0 0 0.00
Mortgage-backed securities
and collateralized
mortgage obligations 44,606 2,305 5.17 0 0 0.00
Other securities 1,557 65 4.17 0 0 0.00
Securities held to maturity:
U.S. Government and federal
agency securities 166,424 7,990 4.80 173,416 6,779 5.42
Federal Home Loan Bank stock 14,929 1,098 7.35 14,929 863 8.01
Other securities 6,415 316 4.93 18,901 732 5.37
Mortgage-backed securities
and collateralized
mortgage obligations 315,826 16,075 5.09 67,161 3,045 6.18
Loans:
Residential real estate 610,949 52,215 8.55 668,283 43,799 9.09
Commercial real estate 265,393 25,611 9.65 366,122 26,039 9.86
Construction 8,288 774 9.34 8,420 579 9.53
Commercial 33,623 2,803 8.34 75,537 4,584 8.41
Consumer 135,904 13,906 10.23 186,872 14,417 10.70
Discount on loans
acquired from the FDIC (42,441) 0 0.00 (39,091) 0 0.00
----------- ------- ----- ----------- ------ -----
Total interest earning
assets 1,644,164 125,914 7.66 1,625,699 103,957 8.87
----------- ------- ----- ----------- ------ -----
Noninterest earning assets 76,109 82,323
Allowance for possible
loan losses (13,092) (16,495)
----------- -----------
Total assets $1,707,181 $1,691,527
=========== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Interest bearing
liabilities:
N.O.W. accounts $ 144,360 3,315 2.30 $ 139,981 3,627 3.59
Money market accounts 123,567 3,839 3.11 165,994 5,542 4.63
Savings 347,127 11,252 3.24 236,473 7,689 4.51
Time deposits of $100,000
and over 44,511 1,985 4.46 28,614 1,071 5.19
Other time deposits 785,576 35,197 4.48 935,551 36,349 5.39
Securities sold under
agreements to repurchase 30,469 1,048 3.44 8,603 307 4.95
Federal Home Loan Bank
advances 40,479 2,178 5.38 0 0 0.00
----------- ------- ----- ----------- ------ -----
Total interest bearing
liabilities 1,516,089 58,814 3.88 1,515,216 54,585 5.00
----------- ------- ----- ----------- ------ -----
Noninterest bearing
liabilities:
Demand deposits 61,600 49,785
Other liabilities 37,630 47,514
----------- -----------
Total liabilities 1,615,319 1,612,515
Stockholders' equity 91,862 79,012
----------- -----------
Total liabilities and
stockholders' equity $1,707,181 $1,691,527
=========== ===========
Net interest income $ 67,100 $ 49,372
========== ========
Net interest spread 3.78% 3.87%
====== ======
Net yield on average
earning assets 4.08% 4.21%
====== ======
</TABLE>
(1) For purposes of this table, non-accruing loans are included in average
loan balances.
(2) Computed on an annualized basis.
67
<PAGE>
The following table reflects the changes in net interest income resulting
from changes in interest rates, changes in asset and liability volume, and
changes in the number of days in the reporting period. The change in interest
attributable to both rate and volume has been allocated to the changes in the
rate and the volume on a pro rata basis.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Year ended June 30, 1993 compared to
Period October 10, 1991 to June Changes due to
30, 1992 Increase -------------------------------
(In thousands) (Decrease) Rate Volume Days
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest earning assets:
Interest bearing deposits in other
banks and federal funds sold $ (1,437) $(1,036) $ (747) $ 346
Securities purchased under
agreement to resell 139 (96) 74 161
Total securities held for sale 3,304 0 3,304 0
Total securities held to maturity 14,060 (1,677) 8,697 7,040
Total loans 5,891 (3,680) (16,968) 26,539
------- -------- -------- -------
Total interest earning assets 21,957 (6,489) (5,640) 34,086
------- -------- -------- -------
Interest bearing liabilities:
N.O.W. accounts (312) (1,346) 110 924
Money market accounts (1,703) (1,560) (1,212) 1,069
Savings 3,563 (2,539) 2,966 3,136
Time deposits of $100,000 and over 914 (122) 482 554
Other time deposits (1,152) (5,612) (5,349) 9,809
Securities sold under agreements to
repurchase 741 (115) 560 296
Federal Home Loan Bank advances 2,178 0 2,178 0
------- -------- -------- -------
Total interest bearing liabilities 4,229 (11,294) (265) 15,788
------- -------- -------- -------
Change in net interest income $ 17,728 $ 4,805 $ (5,375) $ 18,298
======= ======== ======== =======
</TABLE>
New Dartmouth recorded net interest income in Fiscal 1993 of $67.1 million,
at a weighted net yield on average earning assets of 4.08% compared to $49.4
million, at an annualized weighted net yield on average earning assets of 3.87%.
The increase of $17.7 million in New Dartmouth's net interest margin is due to:
(i) an increase of $4.8 million resulting from a change in interest rates, (ii)
a decrease of $5.4 million resulting from a change in the mix of earning assets,
and (iii) an increase of $18.3 million resulting from the difference in the
number of days in the period.
The decline in interest rates, especially short-term rates, since June 30,
1992, has had a favorable impact on New Dartmouth's net interest income.
Although New Dartmouth's yield on earning assets declined by 121 basis points to
7.66% in Fiscal 1993, the resulting $6.5 million reduction in interest income
was more than offset by a reduction in New Dartmouth's cost of funds. In Fiscal
1993, New Dartmouth's cost of funds was 3.88%, 112 basis points below the 5.00%
recorded in Fiscal 1992 and resulted in an $11.3 million increase in New
Dartmouth's net interest margin.
INTEREST AND LOAN FEE INCOME
The change in New Dartmouth's earning asset structure is primarily
responsible for the $5.4 million decline in the net interest margin due to a
change in volume. During 1993, New Dartmouth continued to experience an
acceleration in loan prepayments as borrowers refinanced their loans to take
advantage of lower interest rates. To avoid interest rate risk, New Dartmouth
sold its refinanced fixed rate real estate loans into the secondary market. This
excess liquidity has been reinvested in the securities portfolios, mainly in
mortgage-backed securities and collateralized mortgage obligations. At June 30,
1993, New Dartmouth's short-term investments, securities held for sale and
securities held to maturity totaled $694.8 million, or 40.9% of total assets,
compared to $495.8 million, or 29.1% of total assets, at June 30, 1992. During
the same period, gross loans declined from $1.2 billion, 67.9%
68
<PAGE>
of total assets, at June 30, 1992 to $1.0 billion, 56.1% of total assets, at
June 30, 1993.
New Dartmouth's average securities portfolio including its short-term
investments, securities held for sale and securities held to maturity averaged
$632.4 million, at an average yield of 4.84%, in Fiscal 1993, up $272.8 million
from Fiscal 1992's average of $359.6 million, at an annualized average yield of
5.59%. At June 30, 1993, approximately 74% of New Dartmouth's securities
portfolio was scheduled to mature or reprice within one year and approximately
84% of the portfolio was scheduled to mature or reprice within two years. While
this strategy protects the value of New Dartmouth's securities portfolio against
interest rate fluctuations, it has an adverse impact on portfolio yields.
In Fiscal 1993, gross loans, net of the discount on loans acquired from the
FDIC, averaged $1.0 billion, reflecting a decline of $254.4 million compared to
Fiscal 1992's average of $1.3 billion. As permitted under the terms of the 1991
P&A Agreements, New Dartmouth transferred $57.8 million of loans to the FDIC
that became classified since July 1, 1992. The Fiscal 1993 "puts" bring to
$182.6 million the total pool of loans transferred to the FDIC since October 10,
1991. Also transferred in Fiscal 1993 were $6.6 million of blanket mortgages
passed to New Dartmouth as part of the Somersworth acquisition that, according
to the terms of the Somersworth P&A Agreement, should have been retained by the
FDIC.
As a result of the low interest rate environment prevailing during Fiscal
1993, New Dartmouth experienced an acceleration in loan prepayments as borrowers
refinanced their loans to take advantage of lower interest rates. In Fiscal
1993, loan amortization and loan prepayments totaled approximately $227.1
million compared to $154.4 million in Fiscal 1992. This acceleration of loan
prepayments was especially evident in New Dartmouth's residential real estate
portfolio which has experienced a significant amount of refinancings, primarily
to the fixed rate product. To avoid interest rate risk, New Dartmouth sold its
fixed rate real estate loans (acquired and refinanced) into the secondary
market. In addition, in Fiscal 1993, New Dartmouth sold $10.4 million of loans
to Sallie Mae.
Loan demand remained weak during Fiscal 1993, although management did notice
some improvement over Fiscal 1992 as New Dartmouth strengthened its competitive
position. In Fiscal 1993, New Dartmouth originated approximately $123.6 million
in consumer and small business loans for its own portfolio and an additional
$102.2 million in residential real estate loans for resale in the secondary
market. In Fiscal 1992, consumer and small business loans originated for its
own portfolio and residential real estate loans originated for resale in the
secondary market totaled $40.9 million and $19.3 million, respectively.
Loan yields were also affected by the general decline in interest rates.
Residential and commercial real estate loans, amounting to approximately $460.8
million, are generally one-year adjustable rate products that have repriced to
lower rates in Fiscal 1993.
At June 30, 1993, New Dartmouth was servicing a portfolio of $345.3 million
of residential real estate loans sold into the secondary market. Of this total,
approximately $63.9 million was sold with recourse wherein New Dartmouth remains
contingently liable for losses incurred in this portfolio. In addition, New
Dartmouth also remains contingently liable for a portfolio of $80.2 million of
residential real estate loans sold, with recourse, into the secondary market,
with servicing released. Under the terms of the 1991 P&A Transaction, New
Dartmouth acquired the servicing rights and the recourse obligations associated
with these portfolios. Losses incurred under these recourse obligations are
covered under the Small Loan loss protection provisions contained in the 1991
P&A Agreements.
As part of its purchase accounting adjustments for the 1991 P&A Transaction,
New Dartmouth allocated $39.0 million of the financial assistance it received
from the FDIC, as a discount against the acquired loan portfolio under the 1991
P&A Agreements. During Fiscal 1993 and Fiscal 1992, New Dartmouth did not record
any accretion of this discount.
INTEREST EXPENSE
New Dartmouth recorded interest expense in Fiscal 1993 of $58.8 million, and
a weighted average cost of funds of 3.88%, compared to $54.6 million, and an
annualized weighted average cost of funds of 5.00% in Fiscal 1992. In Fiscal
1993, New Dartmouth experienced a decrease in its total average deposits of
$49.7 million. Average demand deposits, N.O.W. accounts and savings accounts
increased by $126.8 million. Average retail certificates of deposit, including
time deposits of $100,000 and over, and money market accounts declined by $176.5
million. Management attributes the decline in retail certificates of deposit
and money market accounts to the general decline
69
<PAGE>
in interest rates, particularly short-term rates, during the reporting period.
Management believes customers are seeking higher returns by reinvesting deposits
in mutual funds and the stock market. As shown in the following table, the
runoff of New Dartmouth's deposit base has slowed in recent periods; however, if
rates remain at historically low levels, the reduction in retail certificates of
deposit and money market accounts may continue, although at a reduced rate. The
following table summarizes the changes in New Dartmouth's deposit base by
quarter for Fiscal 1993:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Quarter Ended
Deposit Analysis -----------------------------------------------
Increase (Decrease) Sept. 30, Dec. 31, March 31, June 30, Fiscal 1993
(In millions) 1992 1992 1993 1993 Total
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Transaction accounts:
Demand deposits $ 0.7 $ 5.0 $ (3.8) $ 7.0 $ 8.9
N.O.W. accounts 1.2 7.5 (7.1) 2.3 3.9
Money market accounts (2.8) (12.8) (8.7) (6.9) (31.2)
Savings 18.4 31.5 10.4 .8 61.1
Time deposits:
Retail certificates of
deposit (53.6) (45.0) (3.8) (9.2) (111.6)
CD's greater than $100,000 (3.9) (3.5) 1.4 0.7 (5.3)
--------- --------- --------- -------- ----------
Total deposits $ (40.0) $ (17.3) $ (11.6) $ (5.3) $ (74.2)
========= ========= ========= ======== ==========
</TABLE>
The decline in New Dartmouth's deposit base was partially offset by an
increase in New Dartmouth's securities sold under agreements to repurchase. Due
to New Dartmouth's aggressive marketing of its cash management sales program
implemented in Fiscal 1993, securities sold under agreements to repurchase
increased to $31.8 million at June 30, 1993 compared to $10.9 million at June
30, 1992. In Fiscal 1993, securities sold under agreements to repurchase
averaged $30.5 million at a cost of 3.44% compared to $8.6 million at a cost of
4.95% in Fiscal 1992. Under New Dartmouth's repurchase agreement program,
excess funds in a depositor's demand deposit account are transferred daily into
a collateralized interest bearing obligation of New Dartmouth.
New Dartmouth has the ability to borrow up to 30% of its total assets ($510.1
million at June 30, 1993), from the FHLBB on a collateralized basis. In Fiscal
1993, New Dartmouth had taken advantage of declining interest rates and FHLBB
special offerings on advances by borrowing $50.0 million in two and ten year
advances. These advances were used to fund purchases in New Dartmouth's
mortgage-backed and collateralized mortgage portfolio. FHLBB borrowings
averaged $40.5 million in Fiscal 1993 at an average cost of funds of 5.38%. At
June 30, 1992, there were no outstanding advances from the FHLBB. New Dartmouth
has no other outstanding lines of credit with any financial institution.
PROVISION FOR POSSIBLE LOAN LOSSES
New Dartmouth recorded a provision for possible loan losses of $16.1 million
in Fiscal 1993, an increase of $12.9 million over the $3.2 million recorded in
Fiscal 1992. Of the total increase, $4.2 million reflects (i) an increase in
loan originations during the period, which are not subject to FDIC Small Loan or
"put" protection, (ii) an increase in the proportion of commercial loan
originations as a percent of total loan originations, which have, on average,
larger loan balances and greater risk characteristics than New Dartmouth's loan
portfolio generally, and (iii) a continuing weak economic environment. The
remaining increase of $8.7 million reflects the FDIC Small Loan protection
payments received during the period. These payments are included as a component
of noninterest income and offset by a corresponding provision for possible loan
losses. In Fiscal 1993, New Dartmouth experienced net charge-offs of Small Loans
of $16.1 million and received a reimbursement from the FDIC of $10.9 million
compared to net charge-offs on Small Loans of $6.6 million and a reimbursement
from the FDIC of $2.2 million in Fiscal 1992.
NONINTEREST INCOME
New Dartmouth recorded noninterest income of $23.3 million in Fiscal 1993
compared to $13.0 million in Fiscal 1992.
Fees for services rendered to customers amounted to $7.4 million in Fiscal
1993 compared to $5.6 million for Fiscal 1992. In addition to the increase in
fees for services attributable to the difference in the number of days in the
period, New Dartmouth's loan servicing fees increased to $2.0 million in Fiscal
1993 compared to $1.4 million in Fiscal 1992 due primarily to an increase in
residential real estate loans originated. In Fiscal 1993, New Dartmouth
70
<PAGE>
originated $102.2 million of residential real estate loans compared to $19.3
million in Fiscal 1992. At June 30, 1993, New Dartmouth and its subsidiary, NMC,
were servicing a portfolio of $345.3 million of residential real estate loans
compared to $301.5 million at June 30, 1992.
Other operating income recorded in Fiscal 1993 amounted to $3.7 million
compared to $2.2 million in Fiscal 1992. The increase is primarily attributable
to the receipt of $926,000 from the FDIC as interest income relating to
settlement issues under the 1991 P&A Agreements and gains on the sale of
mortgages of $990,000. The interest income received from the FDIC was partially
offset with interest expense incurred relating to settlement issues of $548,000.
In Fiscal 1993, in addition to its normal operating income, New Dartmouth
received $10.9 million in FDIC Small Loan protection payments as a reimbursement
against net charge-offs of Small Loans of $16.1 million compared to $2.2 million
received as a reimbursement against net charge-offs of Small Loans of $6.6
million in Fiscal 1992. As noted above (see "Provision for Possible Loan
Losses"), the FDIC Small Loan protection payments are offset by a corresponding
increase in New Dartmouth's provision for possible loan losses.
In Fiscal 1992, New Dartmouth earned $3.0 million in fees for managing the
pool of non-performing assets of the Failed Banks for the FDIC on an interim
basis. Management of this pool of non-performing assets was transferred to
another servicer in March 1992.
In Fiscal 1993, New Dartmouth recorded gains on the sale of securities of
$1.4 million. These gains resulted primarily from the sale of mortgage-backed
securities and collateralized mortgage obligations to avoid the accelerated
prepayment risk in a period of declining rates.
NONINTEREST EXPENSE
Noninterest expenses for Fiscal 1993 totaled $43.8 million compared to $32.7
million for Fiscal 1992. New Dartmouth's net efficiency ratio (defined as total
noninterest expenses divided by total interest and loan fee income plus total
noninterest income, net of FDIC Small Loan protection payments and securities
gains) increased to 32.0% in Fiscal 1993 compared to 28.5% in Fiscal 1992. This
increase is primarily attributable to a decline in interest revenues, on an
annualized basis, discussed above rather than an increase, on an annualized
basis, in noninterest expenses. New Dartmouth's net overhead ratio (defined as
total noninterest expense, net of expenses incurred for managing the pool
assets, minus total noninterest income, net of gains on the sale of securities,
Small Loan protection payments, and fees collected from the FDIC for managing
pool assets, divided by average assets) remained constant at 1.92%.
Total salaries and benefits for Fiscal 1993 amounted to $18.0 million, or
12.0% of gross revenues, compared to $11.6 million, or 9.9% of gross revenues in
Fiscal 1992. At June 30, 1993, New Dartmouth had a total staff complement of 587
full-time equivalent employees and 72 temporary employees compared to 548
full-time equivalent employees and 65 temporary employees, respectively at June
30, 1992. Employee benefits in Fiscal 1993 totaled $3.3 million, or 22.4% of
total salaries, compared to $2.4 million, or 26.1% of total salaries in Fiscal
1992.
In Fiscal 1993, New Dartmouth recorded total occupancy and equipment expense
of $7.0 million compared to $5.9 million in Fiscal 1992. The increase is due
primarily to an increase in the number of days in the reporting period. New
Dartmouth services its market area through a network of 37 branches and 36
automated teller machines. New Dartmouth leases 36 branch offices from third
party landlords with the original terms of these leases ranging from one to ten
years. All leases are classified as operating leases. New Dartmouth owns one
drive-up facility and one branch located in Somersworth, New Hampshire. Both
facilities were purchased from the FDIC at appraised value. New Dartmouth has
entered into a five year non-cancelable facilities management contract with an
unaffiliated vendor for its data and item processing services. The minimum
annual commitment under this contract is approximately $3.0 million. Items
processed in excess of monthly base volumes are charged on a per item basis. New
Dartmouth's data processing expense for Fiscal 1993 and Fiscal 1992 totaled $3.4
million and $2.1 million, respectively.
Other operating expenses for Fiscal 1993 amounted to $15.5 million compared
to $13.1 million for Fiscal 1992. The increase is due primarily to an increase
in the number of days in the reporting period. In Fiscal 1993, other operating
expenses included $3.5 million of FDIC insurance assessments and $1.9 million in
printing and mailing expense compared to $2.6 million and $1.3 million,
respectively, in Fiscal 1992.
71
<PAGE>
Included in noninterest expenses for Fiscal 1993 are approximately $528,000
in expenses incurred by New Dartmouth in conjunction with the proposed Merger
with SNC. Included in noninterest expenses for Fiscal 1992 are $1.5 million in
non-recurring expenses incurred in managing the pool of non-performing assets of
the Failed Banks for the FDIC.
ASSET QUALITY AND PROVISION FOR LOAN LOSSES
Under the terms of the 1991 P&A Agreements, the FDIC provides New Dartmouth
with several types of protection against the default of loans and extensions of
credit originated by the Failed Banks prior to October 10, 1991. Initially, the
FDIC retained all classified loans (other than classified "Small Loans" as
described below) and other real estate owned by the Failed Banks. Classified
loans are defined as those loans that (a) as of October 10, 1991 were (i)
classified as "substandard", "doubtful" or "loss" by the Failed Bank's primary
regulator, (ii) 90 days or more past due as to payment of principal or interest
(collectively, a "classified loan"), or (iii) classified as "in substance
foreclosure" or (b) subsequently becomes a classified loan. As part of the 1991
P&A Transaction, the FDIC funded New Dartmouth's initial allowance for
possible loan losses of $17.5 million, 1.25% of gross loans outstanding on
October 10, 1991. In addition, as part of its purchase accounting adjustments,
New Dartmouth allocated approximately $39.0 million in financial assistance it
received from the FDIC as a discount against the acquired loan portfolio
representing New Dartmouth's estimate of potential future losses in excess of
the protection provided by the FDIC.
For a period of three years commencing October 10, 1991, New Dartmouth is
entitled to make unlimited additional transfers to the FDIC of classified
commercial loans and loans that do not constitute Small Loans. Loans are
transferred net of the initial 1.25% allowance for possible loan losses funded
by the FDIC. Commencing October 10, 1992, loans transferred are subject to a
discount of 2%. After October 10, 1993, the discount increases to 4%. New
Dartmouth is entitled to transfer classified commercial loans to the FDIC on the
first day of each month. When the transfer of classified commercial loans
occurs, New Dartmouth is reimbursed for the outstanding principal, interest due
up to 90 days and expenses associated with collection efforts on these loans.
From July 1, 1993 to September 30, 1993, New Dartmouth has transferred or "put"
approximately $20.0 million to the FDIC. Loans subject to the "put" provisions
of the Agreements totaled $255.5 million and $285.2 million at September 30,
1993 and June 30, 1993, respectively.
The following table summarizes the loans "put" to the FDIC under the terms of
the 1991 P&A Agreements for the periods indicated below:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
July 1, 1993 July 1, 1992 October 10, 1991
to to to
September 30, 1993 June 30, 1993 June 30, 1992
(In thousands)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Loans "put" to the FDIC $ 19,979 $ 57,808 $ 124,778
Less: 1.25% initial allowance and 2%
discount for loans "put" to the FDIC
during the period 409 1,101 1,578
-------- -------- ---------
FDIC reimbursement $ 19,570 $ 56,707 $ 123,200
========= ========= ==========
</TABLE>
The following table summarizes the loans subject to the "put" protection
provisions of the 1991 P&A Agreements as of the dates indicated below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
September 30, June 30, June 30,
(In thousands) 1993 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial real estate $ 197,157 $ 220,340 $ 300,449
Construction 4,983 5,076 10,431
Commercial 20,554 26,220 34,029
Residential real estate 32,801 33,339 44,352
Consumer 0 231 307
--------- --------- ---------
Total loans subject to FDIC
"put" protection $ 255,495 $ 285,206 $ 389,568
========= ========= =========
</TABLE>
72
<PAGE>
Loans that are secured by mortgages on residential properties with October
10, 1991 balances of $191,250 or less and installment loans with October 10,
1991 balances of $100,000 or less (collectively, "Small Loans") cannot be
transferred to the FDIC. Under the 1991 P&A Agreements, the FDIC provides
partial protection against Small Loan losses, including interest for up to 90
days, by reimbursing New Dartmouth for 90% of net losses on Small Loans in
excess of a minimum threshold amount. The minimum threshold amount is
calculated on a quarterly basis to be equal to 0.0875% of residential real
estate loans and 0.25% of installment loans outstanding at the beginning of each
quarter. The minimum threshold amount is calculated after deducting the initial
1.25% allowance for possible loan losses funded by the FDIC. Loans sold by the
Failed Banks or their subsidiaries with recourse are subject to the same Small
Loan protection provisions as loans held in portfolio. At September 30, 1993,
loans sold with recourse amounted to approximately $125.3 million compared to
$144.1 million at June 30, 1993. New Dartmouth is entitled to Small Loan
protection through October 10, 1994. For the three month period ended September
30, 1993, New Dartmouth experienced total Small Loan net charge-offs of $4.3
million and received $3.5 million from the FDIC under the Small Loan protection
provision. At September 30, 1993, approximately $484.3 million in Small Loans
are subject to Small Loan protection provision as compared to $523.3 million at
June 30, 1993.
The following table summarizes New Dartmouth's net charge-offs and the
payments received from the FDIC under the Small Loan protection provisions of
the 1991 P&A Agreements for the periods indicated:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
July 1, 1993 July 1, 1992 October 10, 1991
to to to
(In thousands) September 30, 1993 June 30,1993 June 30, 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Small loan net charge-offs $ 4,295 $ 16,090 $ 6,560
FDIC Small Loan protection
payments 3,506 10,903 2,216
</TABLE>
The following table summarizes the loans subject to the Small Loan protection
provisions of the 1991 P&A Agreements as of the dates indicated below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
September 30, June 30, June 30,
(In thousands) 1993 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Residential real estate $ 327,339 $ 466,251 $ 566,674
Consumer 156,997 57,097 129,549
-------- -------- --------
Total loans subject to FDIC
Small Loan protection $ 484,336 $ 523,348 $ 696,223
======== ======== ========
</TABLE>
In addition to retaining all classified loans and other real estate owned by
the Failed Banks and providing protection against the default of loans and
extensions of credit originated by the Failed Banks prior to October 10, 1991,
the FDIC paid New Dartmouth $400.8 million for the assumption of net liabilities
and $55.3 million to complete the 1991 P&A Transaction. New Dartmouth allocated
approximately $39.0 million in financial assistance it received from the FDIC as
a discount against the acquired loan portfolio representing New Dartmouth's
estimate of potential future losses in excess of the protection provided by the
FDIC.
On June 26, 1992, New Dartmouth and the FDIC, as Receiver of The Somersworth
Bank, Somersworth, New Hampshire ("Somersworth"), entered into a Purchase and
Assumption Agreement (the "Somersworth P&A Agreement"), whereby New Dartmouth
purchased certain assets and assumed deposits and certain other liabilities (the
"Somersworth Transaction"). Under the terms of the Somersworth P&A Agreement,
the FDIC retained the initial pool of classified assets and paid New Dartmouth
$4.5 million to complete the Somersworth Transaction and $48.7 million for the
assumption of net liabilities. New Dartmouth allocated approximately $3.6
million in financial assistance it received from the FDIC as part of the
Somersworth Transaction as a discount against the acquired loan portfolio. The
FDIC will not reimburse New Dartmouth on any losses from the Somersworth
acquired loan portfolio.
73
<PAGE>
In fiscal 1993, New Dartmouth returned to the FDIC approximately $6.6 million
of the loans acquired as part of the Somersworth Transaction ($6.0 million net
of discount). These loans should have been retained by the FDIC under the terms
of the Somersworth P&A Agreement.
The following table summarizes New Dartmouth's assets that were not
performing under their original contractual terms as of the dates indicated
below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
September 30, June 30, June 30,
(Dollars in thousands) 1993 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Non-accrual loans $ 32,471 $ 32,815 $ 84,133
Loans 90 days or more past due
on accrual 200 886 1,231
---------- ---------- ------------
Total non-performing loans 32,671 33,701 85,364
Other real estate owned 2,428 1,729 1,068
---------- ---------- ------------
Total non-performing assets $ 35,099 $ 35,430 $ 86,432
========== ========== ============
Allowance for possible loan losses $ 11,766 $ 12,398 $ 13,151
========== ========== ============
Gross loans, net of discount on loans
acquired from the FDIC $ 884,259 $ 912,637 $ 1,113,383
========== ========== ============
Allowance for possible loan losses as a
percent of:
Total non-accrual loans 36.24% 37.78% 15.63%
Total non-performing loans 36.01% 36.79% 15.41%
Gross loans, net of discount on loans
acquired from the FDIC 1.33% 1.36% 1.18%
</TABLE>
The following table presents an analysis of non-performing loans by type:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
September 30, June 30, June 30,
(Dollars in thousands) 1993 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Loans subject to Small Loan protection:
Real estate $ 19,292 $ 19,101 $ 36,348
Consumer 701 733 2,953
---------- ---------- ------------
Sub-total 19,993 19,834 39,301
========== ========== ============
Loans subject to "put" protection:
Real estate 9,335 8,223 41,668
Commercial 1,854 2,945 4,375
---------- ---------- ------------
Sub-total 11,189 11,168 46,063
---------- ---------- ------------
Total non-performing loans $ 31,182 $ 31,002 $ 85,364
========== ========== ============
Other real estate owned $ 2,373 $ 1,673 $ 816
========== ========== ============
</TABLE>
Included in non-accrual loans at September 30, 1993 are $3.4 million in loans
that are performing under original contractual terms but for which management
has concern as to the complete recovery of principal. Also included in non-
accrual loans at September 30, 1993, are $3.0 million in loans that are past
maturity and are in the
74
<PAGE>
process of being renegotiated. If these loans become classified, they would be
transferable to the FDIC under the terms of the Agreements.
The following table summarizes the activity in New Dartmouth's allowance for
possible loan losses for the periods indicated:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
September 30, September 30,
(Dollars in thousands) 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C>
Average loans outstanding, net of discount on
loans acquired from the FDIC $ 918,752 $ 1,088,793
========== ============
Allowance for possible loan losses at beginning of
period $ 12,398 $ 13,151
Provision for possible loan losses 4,106 2,563
Loans charged off subject to "Small Loan"
protection:
Residential (4,296) (1,716)
Consumer (445) (1,688)
Other loans charged-off:
Consumer (43) 0
---------- ------------
Total loans charged-off (4,784) (3,404)
Recovery of loans subject to "Small Loan"
protection previously charged-off:
Residential 312 140
Consumer 134 223
Recovery of other loans:
Consumer 9 0
---------- ------------
Total loan recoveries 455 363
---------- ------------
Net loans charged-off (4,329) (3,041)
Other adjustments:
1.25% initial allowance for loans "put" to FDIC
during the period (409) (20)
FDIC settlement adjustments 0 518
---------- ------------
Total adjustments (409) 498
---------- ------------
Allowance for possible loan losses at end of period $ 11,766 $ 13,171
========== ============
Ratio of net charge-offs to average loans
outstanding, net of discount on loans acquired
from the FDIC 0.47% 0.28%
</TABLE>
For the three month period ended September 30, 1993, New Dartmouth originated
approximately $52.3 million in consumer and small business loans for its own
portfolio. In addition, New Dartmouth generated approximately $32.2 million in
residential real estate loans for resale into the secondary market. All such
loans, with the exception of $17.9 million in indirect installment loans, were
originated through New Dartmouth's branch network. To insure adherence to New
Dartmouth's credit standards, loan originations are subject to a centralized
credit review, underwriting and approval process. Residential loans must meet
criteria for sale into the secondary market. Loans in excess of $500,000 are
approved by New Dartmouth's Credit Committee, which is comprised of New
Dartmouth's President, Senior Lending Officers and Senior Credit Review Officer.
Loans to a borrower whose total obligation to New Dartmouth exceeds $1.0 million
must be approved by the Investment/Loan Committee of New Dartmouth's Board of
Directors.
LIQUIDITY
Liquidity is New Dartmouth's ability to meet known near-term and projected
long-term maturing obligations and customer funding commitments while supporting
selective business expansion in accordance with New Dartmouth's strategic
objectives. Liquidity is provided by New Dartmouth's ability to raise deposits
and issue liabilities and by the selected, non-forced sale of assets and
maturing assets.
75
<PAGE>
New Dartmouth's portfolios of liquid assets and securities held for sale are
its primary sources of liquidity and its strongest hedges against unforeseen
demand on liquidity. Liquid assets consist of interest bearing deposits in
other banks, federal funds sold, and securities purchased under agreements to
resell. Securities held for sale consist of United States Treasury and
government agency securities and other marketable securities. As of September
30, 1993, New Dartmouth's unencumbered liquid assets and securities held for
sale portfolios had a market value of $280.7 million.
In addition to its portfolio of securities held for sale, at September 30,
1993 New Dartmouth's portfolio of securities held to maturity totaled $425.8
million. While these securities cannot be sold to meet liquidity needs, funds
are derived from maturities within the portfolio. As of September 30, 1993, New
Dartmouth's portfolio of securities held to maturity had an average maturity of
3.2 years. Approximately $91.6 million of the held to maturity portfolio is
expected to mature within one year.
New Dartmouth's deposit base accounted for approximately 86.7% of its funding
sources at September 30, 1993. The effective use of New Dartmouth's branch
network to generate stable deposits is a primary management goal. New Dartmouth
emphasizes the generation of local retail market deposits. Brokered deposits
have been eliminated, and the issuance of certificates of deposit over $100,000
is limited to New Dartmouth's retail customer base. Total deposits at September
30, 1993 were $1.5 billion, an increase of $13.2 million since June 30, 1993.
Under New Dartmouth's repurchase agreement program, excess funds in a
depositor's demand deposit account are transferred daily into a collateralized
interest bearing obligation of New Dartmouth. As of September 30, 1993,
borrowings under this program totaled $40.3 million, an increase of $8.5 million
from the June 30, 1993 balance.
To enhance its liquidity and reduce its borrowing needs, New Dartmouth
maintains a policy of originating and selling conforming residential real estate
loans into the secondary market. New Dartmouth currently retains servicing
rights to all loans sold and generates fee income from the origination and
servicing of these loans. From July 1, 1993 to September 30, 1993, New
Dartmouth originated a total of $32.3 million in residential real estate loans
and sold $26.0 million into the secondary market.
In addition to its ability to raise deposits, New Dartmouth has the ability
to borrow up to 30% of its total assets from the FHLBB on a collateralized
basis. At September 30, 1993, New Dartmouth had $52.5 million of outstanding
advances, collateralized by $86.8 million of marketable securities, from the
FHLBB out of total availability of $520.6 million. New Dartmouth has no
outstanding lines of credit with any unaffiliated financial institution.
New Dartmouth's current liquidity position exceeds its minimum standards. If
current economic conditions continue, with limited loan demand and accelerating
loan prepayments due to low interest rates, New Dartmouth anticipates that its
liquidity position will continue to increase as a percentage of its total
assets.
Interest Rate Sensitivity
One of management's primary goals is to limit New Dartmouth's exposure to
interest rate risk by minimizing the impact of interest rate fluctuations on New
Dartmouth's net interest margin. This is accomplished by the formulation of
policies and guidelines that carefully monitor the repricing characteristics of
all balance sheet items.
Generally, an excess of interest rate sensitive liabilities over rate
sensitive assets should result in increased net interest income in a period of
declining rates and a decrease in net interest income in a period of rising
interest rates. At September 30, 1993, New Dartmouth's rate sensitive
liabilities exceeded rate sensitive assets in the one year time period by $271.5
million.
The maturity structure of New Dartmouth's deposit base is a reflection of the
current interest rate environment. Interest rates paid on deposits are at the
lowest point in many years. As a result, a majority of depositors continue to
invest funds in savings, money market accounts, and six month or less maturing
time deposits in expectation of higher deposit rates in the future. To
counteract depositor behavior, New Dartmouth is investing its excess liquidity
in assets that mature or reprice within one year.
The following table provides a profile of the interest rate sensitivity of
New Dartmouth's earnings to change
76
<PAGE>
in interest rates at September 30, 1993. Adjustable rate mortgage-backed
securities and collateralized mortgage obligations are reflected in the time
periods in which the rates are subject to adjustment. Fixed rate
mortgage-backed securities and collateralized mortgage obligations are
categorized based on their expected prepayment patterns. Adjustable rate
mortgages are reflected in the time periods in which the rates are subject to
adjustment. The table does not reflect partial or full prepayment of loans
prior to contractual maturity. Based upon experience, partial or full
prepayment of fixed rate loans, principally real estate loans, prior to
contractual maturity can be expected, particularly in periods of declining
interest rates. N.O.W. accounts and savings accounts are categorized based on
their repricing characteristics. Although these accounts have historically been
immune to interest rate fluctuations, the recent decline in interest rates has
made it imperative that New Dartmouth lower the interest rates paid on these
accounts to sustain its net interest margin. For purposes of the presentation
set forth, these accounts are assumed to reprice in less than six months.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Interest Rate Sensitivity
September 30, 1993 Less than 6 Months 1 to 2 2 to 3 Over 3
(Dollars in thousands) 6 Months to 1 Year Years Years Years Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets subject to interest rate adjustments:
Interest bearing deposits in other banks $ 3 $ 0 $ 0 $ 0 $ 0 $ 3
Securities held for sale:
U.S. Treasury 99,379 0 0 0 0 99,379
Collateralized mortgage obligations 28,003 11,769 5,099 0 0 44,871
Mortgage-backed securities 21,179 154,972 0 0 0 176,151
Investment Securities:
U.S. Treasury 28,899 15,247 34,817 9,995 10,544 99,502
Collateralized mortgage obligations 56,104 39,479 74,366 44,582 36,628 251,159
Mortgage-backed securities 19,452 24,227 2,241 0 0 45,920
Other securities 21,879 2,604 4,777 0 3 29,263
Mortgage loans held for sale 17,703 0 0 0 0 17,703
Adjustable rate real estate loans 291,286 167,428 42,378 39,304 22,944 563,340
Fixed rate real estate loans 10,691 13,050 26,581 14,281 117,274 181,877
Commercial & consumer loans 52,201 24,429 32,961 25,351 46,186 181,128
-------- --------- ---------- --------- -------- ----------
Total 646,779 453,205 223,220 133,513 233,579 1,690,296
Liabilities subject to interest rate
adjustments:
N.O.W. accounts 152,970 0 0 0 0 152,970
Regular savings accounts 365,725 0 0 0 0 365,725
Money market accounts 103,799 0 0 0 0 103,799
Time deposits 523,556 157,360 60,527 37,893 23,345 802,681
Borrowed funds 40,296 25,000 0 0 27,500 92,796
-------- --------- ---------- --------- -------- ----------
Total 1,186,346 182,360 60,527 37,893 50,845 1,517,971
-------- --------- ---------- --------- -------- ----------
Excess (deficiency) of rate sensitive assets
over rate sensitive liabilities ($ 539,567) $ 270,845 $ 162,693 $ 95,620 $182,734 $ 172,325
========== ========= ========== ========= ======== ==========
Cumulative excess ($ 539,567) ($268,722) ($106,029) ($ 10,409) $172,325
========== ========= ========== ========= ========
Cumulative rate sensitive assets as a percent
of cumulative rate sensitive liabilities 54.52% 80.37% 92.58% 99.29% 111.35%
========== ========= ========== ========= ========
Cumulative excess as a percent of total rate
sensitive assets -31.92% -15.90% -6.27% -0.62% 10.19%
========== ========= ========== ========= ========
</TABLE>
77
<PAGE>
While N.O.W. accounts and savings accounts are categorized based on their
expected repricing characteristics, these accounts are subject to interest rate
caps and are generally considered by management to be core deposits having
significantly longer effective maturities. If these products are treated as
such and assumed to mature after three years, and the growth in these products
after October 10, 1991 is treated as volatile and recorded in the less than six
months time frame, the table would change as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Interest Rate Sensitivity
September 30, 1993 Less than 6 Months 1 to 2 2 to 3 Over 3
(Dollars In Thousands) 6 Months to 1 Year Years Years Years Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets subject to interest rate adjustments:
Interest bearing deposits in other banks $ 3 $ 0 $ 0 $ 0 $ 0 $ 3
Securities held for sale:
U.S. Treasury 99,379 0 0 0 0 99,379
Collateralized mortgage obligations 28,003 11,769 5,099 0 0 44,871
Mortgage-backed securities 21,179 154,972 0 0 0 176,151
Investment Securities:
U.S. Treasury 28,899 15,247 34,817 9,995 10,544 99,502
Collateralized mortgage obligations 56,104 39,479 74,366 44,582 36,628 251,159
Mortgage-backed securities 19,452 24,227 2,241 0 0 45,920
Other securities 21,879 2,604 4,777 0 3 29,263
Mortgage loans held for sale 17,703 0 0 0 0 17,703
Adjustable rate real estate loans 291,286 167,428 42,378 39,304 22,944 563,340
Fixed rate real estate loans 10,691 13,050 26,581 14,281 117,274 181,877
Commercial & consumer loans 52,201 24,429 32,961 25,351 46,186 181,128
--------- -------- -------- -------- -------- ----------
Total 646,779 453,205 223,220 133,513 233,579 1,690,296
Liabilities subject to interest rate
adjustments:
N.O.W. accounts 5,421 0 0 0 147,549 152,970
Regular savings accounts 165,763 0 0 0 199,962 365,725
Money market accounts 103,799 0 0 0 0 103,799
Time deposits 523,556 157,360 60,527 37,893 23,345 802,681
Borrowed funds 40,296 25,000 0 0 27,500 92,796
--------- -------- -------- -------- -------- ----------
Total 838,835 182,360 60,527 37,893 398,356 1,517,971
Excess (deficiency) of rate sensitive assets
over rate sensitive liabilities ($ 192,056) $ 270,845 $162,693 $ 95,620 ($ 164,777) $ 172,325
========== ========= ======== ========= ========== ==========
Cumulative excess ($ 192,056) $ 78,789 $241,482 $ 337,102 $ 172,325
========== ========= ======== ========= =========
Cumulative rate sensitive assets as a percent
of cumulative rate sensitive liabilities 77.10% 107.72% 122.32% 130.11% 111.35%
========= ======== ======== ======== ========
Cumulative excess as a percent of total rate
sensitive assets 11.36% 4.66% 14.29% 19.94% 10.19%
========= ======== ======== ======== ========
</TABLE>
Capital Resources
Total stockholders' equity at September 30, 1993 was $94.1 million, or 5.42%
of total assets, compared to $94.5 million, or 5.56% of total assets at June 30,
1993. During the three months ended September 30, 1993, New Dartmouth redeemed
40,000 shares of New Dartmouth Preferred Stock for an aggregate price of $4.1
million. At September 30, 1993, 170,073 shares of preferred stock, 49% of the
original 347,073 shares issued, remain outstanding. Common stockholders' equity
at September 30, 1993 was $78.9 million, or $185.91 per common share compared to
$75.7 million, or $178.49 per common share at June 30, 1993.
In connection with its organization, New Dartmouth agreed to maintain a
tangible equity to asset ratio of 4.00%. However, under the FDIC's capital
guidelines as contained in the FDIC Improvement Act of 1991, in order for New
Dartmouth to be characterized as a "well capitalized" institution, its
respective capital ratios must not be less than the following: a tangible
equity to asset ratio of 5.00%, a ratio of tier 1 capital (generally tangible
equity) to risk weighted assets of 6.00% and a ratio of total capital to risk
weighted assets of 10.00%.
78
<PAGE>
New Dartmouth's equity composition, leverage and risk based capital ratios at
September 30, 1993 and June 30, 1993 were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
September 30, June 30,
(Dollars in thousands) 1993 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Preferred Stock $15,215 $18,794
Common equity 78,865 75,715
Total stockholders equity 94,080 94,509
Tangible equity 94,080 94,509
Common equity to assets 4.54% 4.45%
Tangible equity to assets 5.42% 5.56%
Tier 1 capital to risk weighted assets 17.34% 19.75%
Total capital to risk weighted assets 18.60% 20.98%
</TABLE>
As part of the 1991 P&A Transaction, New Dartmouth issued 347,073 shares of
New Dartmouth Preferred Stock to the FDIC at a price of $89.46 per share. The
shares of New Dartmouth Preferred Stock are redeemable at New Dartmouth's option
at a price that increases by approximately 7.2% per year for the first four
years, by 22.1% in year five and by 12.6% per year thereafter. The redemption
price increases quarterly. At September 30, 1993, the redemption price was
$102.78 per share. The New Dartmouth Preferred Stock is convertible into common
stock beginning on October 10, 1994 if held by, or immediately on transfer to,
anyone other than the FDIC. The conversion ratio will be 1.00 share of common
stock for each share of preferred stock in year four and 1.10 shares of common
stock for each share of preferred stock in year five and 1.25 shares of common
stock for each share of preferred stock thereafter.
New Dartmouth redeemed 177,000 shares of preferred stock in three
installments on January 25, 1993, April 8, 1993 and August 27, 1993
respectively. On January 25, 1993, New Dartmouth redeemed 112,000 shares of New
Dartmouth Preferred Stock for $10.9 million at a redemption price of $96.95 per
share. On April 8, 1993, 25,000 shares of New Dartmouth Preferred Stock were
redeemed for $2.5 million at a redemption price of $99.28 per share. On August
27, 1993, New Dartmouth redeemed an additional 40,000 shares of New Dartmouth
Preferred Stock for $4.1 million at a redemption price of $102.42.
A holder of preferred stock is entitled to receive dividends paid on common
stock. There were no dividends declared or paid for the period October 10, 1991
to September 30, 1993. It is New Dartmouth's intention not to pay dividends
until all shares of preferred stock are redeemed.
79
<PAGE>
Business of New Dartmouth
New Dartmouth is a New Hampshire chartered guaranty savings bank with its
headquarters in Manchester, New Hampshire. New Dartmouth was formed on October
10, 1991 to acquire certain assets and assume certain liabilities from the FDIC,
as Receiver of the failed Dartmouth Bank, Numerica Savings Bank, FSB and New
Hampshire Savings Bank (collectively, the "Failed Banks"). New Dartmouth was
initially capitalized through the private placement of $40.4 million of New
Dartmouth Common Stock to accredited investors and the issuance of $31.0 million
of New Dartmouth Preferred Stock to the FDIC. New Dartmouth's primary
regulators are the FDIC and the Bank Commissioner. New Dartmouth is a member of
the Federal Home Loan Bank of Boston.
New Dartmouth commenced banking operations on October 10, 1991.
On October 10, 1991, banking regulators declared the Failed Banks insolvent
and appointed the FDIC as Receiver. Simultaneous with New Dartmouth's
capitalization and the FDIC's appointment as Receiver, New Dartmouth entered
into three separate Purchase and Assumption Agreements (collectively the "1991
P&A Agreements") with the FDIC as Receiver of the Failed Banks. Under the terms
of the 1991 P&A Agreements, New Dartmouth acquired $1.7 billion in selected
assets and assumed $2.1 billion in deposits and certain other liabilities
(collectively the "1991 P&A Transaction") from the FDIC.
Under the terms of the 1991 P&A Agreements, the FDIC (i) retained the
initial pool of the Failed Banks' classified assets, (ii) agreed to repurchase,
subject to certain conditions, any commercial loan acquired by New Dartmouth as
part of the 1991 P&A Transaction that becomes classified before October 10,
1994, (iii) agreed to reimburse New Dartmouth during the first three years for
90% of consumer and certain residential loan charge-offs in excess of specified
thresholds, (iv) paid New Dartmouth $55.3 million to complete the 1991 P&A
Transaction in addition to a payment of $400.8 million to New Dartmouth for the
assumption of net liabilities, and (v) agreed to indemnify New Dartmouth with
respect to certain matters.
As part of the 1991 P&A Transaction, New Dartmouth acquired Consulting
Systems and Management Corporation ("CSM"), National Mortgage Company ("NMC")
and United Savers Acceptance Corporation ("USAC"), all non-bank subsidiaries of
the Failed Banks. CSM, a data processing subsidiary, ceased active operations in
March 1992. USAC and NMC are currently engaged in servicing portfolios of
automobile and residential real estate loans, respectively, that were sold into
the secondary market.
In connection with the 1991 P&A Transaction, New Dartmouth agreed to maintain
a minimum tangible capital to asset ratio of 4.0%. At September 30, 1993, New
Dartmouth's equity to asset ratio and its tangible capital to asset ratio was
5.42%.
On June 26, 1992, New Dartmouth and the FDIC, as Receiver of The Somersworth
Bank, Somersworth, New Hampshire ("Somersworth"), entered into a Purchase and
Assumption Agreement (the "Somersworth P&A Agreement"), whereby New Dartmouth
assumed Somersworth's deposits and certain other liabilities totaling
approximately $102.7 million and purchased certain assets totaling approximately
$54.0 million from the FDIC.
Under the terms of the Somersworth P&A Agreement, the FDIC retained the
initial pool of classified assets and paid New Dartmouth $4.5 million to
complete the transaction in addition to a payment of $48.7 million to New
Dartmouth for the assumption of net liabilities. The FDIC will not reimburse New
Dartmouth for any losses on the acquired loan portfolio. New Dartmouth accounted
for the Somersworth transaction using the purchase method of accounting.
New Dartmouth is the third largest bank in New Hampshire with deposits of
$1.5 billion and assets of $1.7 billion as of September 30, 1993. Its principal
business consists of attracting deposits from the public and using such deposits
with other funds to make various types of loans and investments including
residential mortgage loans, commercial loans, small business loans and
investments in securities. New Dartmouth conducts its operations through 37
branches, all of which are located in New Hampshire. Based on deposit data as
of June 30, 1992, New Dartmouth has the leading deposit share in 10 of the 27
communities it serves and is among the top three financial institutions in 22 of
those communities. Since October 10, 1991, management has consolidated 18 branch
outlets, renegotiated branch leases, combined back office systems of the Failed
Banks into one system, and streamlined management. In addition, management has
consolidated New Dartmouth's deposit base by focusing its strategy on
80
<PAGE>
attracting lower cost deposits and shedding higher cost brokered and
out-of-state funds.
At September 30, 1993, New Dartmouth was servicing its market area through a
network of 37 branches and 37 automated teller machines. One of the branches
located at 1155 Elm Street, Manchester, New Hampshire, serves as New Dartmouth's
headquarters. New Dartmouth leases thirty-six branches from third-party
landlords with the terms of these leases ranging from one to ten years. All
leases are classified as operating leases. New Dartmouth owns one drive-up
facility and one branch located in Somersworth, New Hampshire. Both facilities
were purchased from the FDIC at appraised value. New Dartmouth has entered into
a five year non-cancelable facilities management contract with an unaffiliated
vendor for its data and item processing services. The minimum annual commitment
under this contract is approximately $3.0 million. Items processed in excess of
monthly base volumes are charged on a per item basis.
Based on data as of 1992, the State of New Hampshire has approximately 1.1
million residents, with approximately 52% of the population concentrated in
southern Hillsborough and Rockingham counties. The two largest cities,
Manchester and Nashua, are located in this region of the State.
In 1992, New Hampshire ranked third among the 50 states in per capita income
($20,889) and fourth in household income ($39,614). Additionally, the State
ranked second in the nation for the lowest poverty rate (8.6%).
New Hampshire serves as the home base for several major manufacturing
employers - Cabletron Systems, HADCO Corporation, Nashua Corporation, Tyco
Laboratories, and Markem Corporation. Key manufacturing facilities are also
operated in the State by such firms as Lockheed Corporation, Digital Equipment
Corporation, General Electric, James River Corporation, Siemens AG (Sylvania's
parent company), The Timken Company, Sturm Ruger & Company and Teradyne.
Firms with 2,000 or more employees as of December, 1992 include the
following:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
Employment Number of
Company Sector Employees
- ----------------------------------------------------------------------------
<S> <C> <C>
Digital Equipment Corporation Manufacturing 6,290
Shaw's Supermarkets Service 4,000
Demoulas/Market Basket Service 3,800
Dartmouth College Service 3,684
Hannaford Brothers Service 3,300
Liberty Mutual Group Service 2,800
Walmart Service 2,577
Bank of Ireland Service 2,360
NYNEX Corporation Service 2,073
Dartmouth-Hitchcock Medical Center Service 2,028
Cabletron Manufacturing 2,000
</TABLE>
More than three-quarters of the employment base works for firms having less
than 500 employees. In addition, the State's Department of Resource & Economic
Development estimates that 10% of New Hampshire's total work force commutes to
high-tech jobs located in northern Massachusetts.
Tourism and associated industries located primarily in the State's northern
mountains, central lakes region, and seacoast area, represent a vital part of
New Hampshire's economy. Approximately 13% of all jobs in the State are related
to travel and tourism, representing 9.3% of total State payrolls. Travel and
tourism expenditures in 1992 totaled $3.3 billion, 12.7% of New Hampshire's
gross state product.
The banking industry in New Hampshire is highly competitive. New Dartmouth
actively competes with local, regional, national, and international providers of
financial services, state-chartered banks, savings banks, savings and loan
associations, credit unions, finance companies, money market funds, mortgage
banks, insurance companies, investment banking firms, and other nonbank
institutions that provide one or more of the services offered
81
<PAGE>
by New Dartmouth.
As is broadly recognized, the economies of New England generally and New
Hampshire specifically are in a recession, occasioned in part by the collapse of
a speculative binge of commercial (and residential) real estate development. A
number of New England banks have suffered substantial losses from real estate
lending and several have failed and have been sold or liquidated by the
regulators.
Business of SNC
SNC is a multibank holding company, registered under the Bank Holding Company
Act of 1956, as amended ("BHCA"). It was organized under the laws of the State
of Delaware in October 1987 and became a bank holding company on February 29,
1988 through the consummation of a plan of reorganization between Hartford
National Corporation ("HNC") and Shawmut Corporation ("SC") pursuant to which
both HNC and SC became wholly owned subsidiaries of SNC (the "Reorganization").
SNC maintains dual headquarters in the States of Connecticut and Massachusetts.
The principal business of SNC is to provide, through its bank subsidiaries,
comprehensive corporate, commercial, correspondent and individual banking
services, and personal and corporate trust services through its network of
approximately 275 branches located throughout Connecticut, Massachusetts and
Rhode Island. SNC's principal subsidiaries are Shawmut Bank Connecticut,
National Association ("SBC"), Hartford, Connecticut and Shawmut Bank, National
Association ("SBM"), Boston, Massachusetts.
SBC is among the oldest banks in the United States, having opened for
business on August 9, 1792 under a charter granted by the State of Connecticut
to its first predecessor on May 29, 1792. In 1865 SBC converted into a national
banking association, in 1969 it became a subsidiary of HNC, and in 1993, its
present name was adopted. At September 30, 1993, SBC had assets of $13.5
billion and deposits of $8.0 billion. SBC had trust assets under management
totaling $8.3 billion as of September 30, 1993.
SBM, also among the oldest banks in the United States, was established in
1836, under a charter granted by the Commonwealth of Massachusetts to its first
predecessor. In 1864 it converted to a national banking association, in 1964 it
became a subsidiary of SC, and in 1986 its present name was adopted. At
September 30, 1993, SBM had assets of $13.4 billion and deposits of $7.9
billion. SBM had trust assets under management totaling $3.9 billion as of
September 30, 1993.
SNC provides other financial services through its other subsidiaries,
including Shawmut Mortgage Company ("SMC"). With its principal office in West
Hartford, Connecticut, SMC originates substantially all of the residential
mortgages among SNC and its subsidiaries. It also funds, sells and services
residential mortgage loans through its network of 10 offices in Connecticut,
Massachusetts, Rhode Island and New Hampshire.
At September 30, 1993, SNC had assets of $27.0 billion, deposits of $15.4
billion, loans of $15.3 billion and shareholders' equity of $1.7 billion.
The banking business in New England is highly competitive. All of SNC's
subsidiary banks and related financial services subsidiaries compete actively
with national and state banks, savings banks, savings and loan associations,
credit unions, finance companies, money market funds, mortgage banks, insurance
companies, investment banking firms, brokerage firms and other nonbank
institutions that provide one or more of the services offered by SNC's
subsidiaries.
In addition to national and regional economic problems, the banking industry
is in a period of consolidation and regulatory reform that will affect banks in
all regions of the country.
SNC does not believe that there will be any material effect on capital
expenditures, results of operations, financial condition or the competitive
position of itself or any of its subsidiaries with regard to compliance with
federal, state or local requirements related to the general protection of the
environment.
82
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Description of New Dartmouth Capital Stock
General. The authorized capital stock of New Dartmouth consists of 960,000
shares of New Dartmouth Common Stock and 193,000 shares of New Dartmouth
Preferred Stock. As of the date of this Proxy Statement/Prospectus, there were
issued and outstanding 424,200 shares of New Dartmouth Common Stock and 170,073
shares of New Dartmouth Preferred Stock.
As of the date of this Proxy Statement/Prospectus, 40,208 shares of New
Dartmouth Common Stock were reserved for issuance upon the exercise of
outstanding options and warrants and pursuant to New Dartmouth employee benefit
plans, and 293,842 shares of New Dartmouth Common Stock were reserved for
issuance upon conversion of all of the outstanding shares of New Dartmouth
Preferred Stock.
The following summary does not purport to be complete and is subject in all
respects to the applicable provisions of New Hampshire law and is qualified in
its entirety by reference to the Amended and Restated Articles of Agreement of
New Dartmouth (the "New Dartmouth Articles"). New Dartmouth will provide a copy
of the New Dartmouth Articles upon request to any New Dartmouth Stockholder.
Common Stock. Subject to the rights and preferences of the holders of New
Dartmouth Preferred Stock, the holders of New Dartmouth Common Stock are
entitled to dividends when and as declared by the New Dartmouth Board out of
funds legally available therefor. New Dartmouth is also subject to certain
regulatory restrictions on the payment of dividends.
New Dartmouth Stockholders are entitled to one vote for each share held on
all matters as to which stockholders are entitled to vote. The New Dartmouth
Common Stock is the only security of New Dartmouth entitled to vote for
directors.
Subject to the rights and preferences of the holders of New Dartmouth
Preferred Stock, upon any liquidation, dissolution or winding up of New
Dartmouth, whether voluntary or involuntary, the holders of New Dartmouth Common
Stock shall be entitled to share ratably in the assets of New Dartmouth
available for distribution.
The New Dartmouth Articles contain certain restrictions on beneficial
ownership of shares of New Dartmouth Common Stock. The New Dartmouth Articles
prohibit any individual, entity, trust or unincorporated association (a
"person") who beneficially owns 15% or more of the outstanding shares of New
Dartmouth Common Stock from offering to purchase all of the remaining shares of
New Dartmouth Common Stock unless the payment for such shares is to be in cash
or the offer provides a cash alternative. In addition, the New Dartmouth
Articles prohibit any person, subject to certain exceptions, from acquiring
beneficial ownership of more than 29.9% of the outstanding shares of New
Dartmouth Common Stock unless such person has made a written offer to purchase
all of the remaining shares of New Dartmouth Common Stock in compliance with
certain "fair price" criteria. The New Dartmouth Articles also prohibit New
Dartmouth from taking any action which would have the effect of increasing the
percentage of beneficial ownership of New Dartmouth Common Stock of any person
to more than 29.9% unless such action has been approved in advance by the
holders of two-thirds of the New Dartmouth Common Stock voting on such matter
(but not less than a majority of the shares entitled to vote on such matter).
New Dartmouth Stockholders are entitled to preemptive rights with respect to
any increases in the number of shares of capital stock that are authorized to be
issued. New Dartmouth Stockholders are not entitled to cumulative voting
rights. Outstanding shares of New Dartmouth Common Stock are fully paid and
nonassessable.
Description of SNC Stock
General. The authorized capital stock of SNC consists of 150,000,000 shares
of SNC Common Stock and 10,000,000 shares of Preferred Stock, without par value
(the "SNC Preferred Stock"), issuable in one or more series with such terms and
at such times and for such consideration as the SNC Board of Directors
determines. As of September 30, 1993, there were issued 94,351,913 shares of
SNC Common Stock (including 31,426 shares of treasury stock), 575,000 shares of
SNC Preferred Stock designated as 9.30% Cumulative Preferred Stock (the "9.30%
Cumulative Preferred") and 700,000 shares of SNC Preferred Stock designated as
Preferred Stock with Cumulative and Adjustable Dividends (the "Adjustable
Preferred").
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As of December 31, 1993, approximately 7,725,000 shares of SNC Common Stock
were reserved for issuance upon the exercise of outstanding stock options under
various employee incentive and purchase plans, 13,500,966 shares of SNC Common
Stock were reserved for issuance pursuant to SNC's dividend reinvestment and
stock purchase plans, and 16,080,746 shares of SNC Common Stock were reserved
for issuance upon consummation of the acquisition of Peoples and Gateway. In
addition, 1,500,000 shares of a series of SNC Preferred Stock designated as
Series A Junior Participating Preferred Stock (the "Series A Preferred") were
reserved for issuance as provided in the Rights Plan described below. In
connection with the settlement of certain litigation, SNC entered into a Warrant
Agreement between SNC and Chemical Bank, as Warrant Agent, dated as of January
7, 1994, which provides for the issuance of up to 1,329,115 shares of SNC Common
Stock pursuant to the terms and conditions contained therein.
The following description contains a summary of all the material features of
the capital stock of SNC but does not purport to be complete and is subject in
all respects to the applicable provisions of the Delaware General Corporate Law
and is qualified in its entirety by reference to the Restated Certificate of
Incorporation of SNC (the "SNC Articles"), including the Certificate of
Designation pursuant to which the Adjustable Preferred was issued, the
Certificate of Designation pursuant to which the 9.30% Cumulative Preferred was
issued and the terms of the Rights Agreement (the "Rights Agreement"), dated as
of February 28, 1989, described below. A copy of each of the SNC Articles, each
of the Certificates of Designation and the Rights Agreement is incorporated in
this Proxy Statement/Prospectus by reference.
Common Stock. The holders of SNC Common Stock are entitled to dividends when
and as declared by the SNC Board of Directors out of funds legally available
therefor. Each series of SNC Preferred Stock has preference over the SNC Common
Stock with respect to the payment of dividends. SNC is also subject to certain
regulatory restrictions on the payment of dividends. See "--Market Prices and
Dividend History" and "--Comparison of Rights of Holders of New Dartmouth
Common Stock and SNC Common Stock."
The holders of SNC Common Stock are entitled to one vote for each share held
on all matters as to which shareholders are entitled to vote. The SNC Common
Stock is the only security of SNC entitled to vote for directors, unless and
until SNC is in default on the equivalent of six quarterly dividends payable on
any series of SNC Preferred Stock. See "--SNC Preferred Stock" below.
Except as otherwise provided in the resolution providing for the issue of any
series of SNC Preferred Stock, in the event of any liquidation, dissolution or
winding up of SNC, whether voluntary or involuntary, after payment shall have
been made to the holders of all series of SNC Preferred Stock of the full
preferential amounts to which such holders are entitled, the holders of shares
of SNC Common Stock shall be entitled, to the exclusion of the holders of SNC
Preferred Stock, to share, ratably according to the number of shares of SNC
Common Stock held by them, in all remaining assets of SNC available for
distribution to its shareholders.
Certain business combinations involving SNC and any beneficial owner of 10
percent or more of the outstanding voting stock of SNC, any affiliate of SNC or
any affiliate of such owner must be approved by the holders of 80 percent of the
outstanding voting stock, unless approved by a majority of continuing directors
or certain minimum price and procedural requirements are met. These provisions
may have the effect of delaying, deferring or preventing a change in control of
SNC.
Holders of SNC Common Stock are not entitled to cumulative voting rights, or
any preemptive, preferential or subscriptive rights with respect to any
securities of SNC, except as described below under "Rights Plan." Outstanding
shares of SNC Common Stock are fully paid and nonassessable. Manufacturers
Hanover Trust Company is the transfer agent, registrar and dividend disbursement
agent for SNC Common Stock.
Rights Plan. On February 28, 1989, the SNC Board of Directors declared a
dividend distribution of one right (a "Right") for each outstanding share of SNC
Common Stock to shareholders of record at the close of business on March 13,
1989. Subsequent to that date and prior to the occurrence of a Distribution
Date (described below), Rights shall be deemed to be delivered with each share
of SNC Common Stock issued by SNC, including in connection with the issuance of
the shares of SNC Common Stock to be issued in the Merger. Each Right entitles
the registered holder to purchase from SNC a unit consisting of one
one-hundredth of a share (a "Unit") of Series A Preferred, at a Purchase Price
of $100 per Unit, subject to adjustment. The description and terms of the
Rights are summarized below and are set forth in the Rights Agreement between
SNC and Manufacturers Hanover Trust Company, as Rights Agent.
At the present time, the Rights are attached to all SNC Common Stock
certificates representing outstanding shares, and no separate Rights
Certificates will be distributed. The Rights will separate from the SNC Common
Stock and a Distribution Date will occur upon the earliest of (i) 10 business
days following a public announcement that a person or group of affiliated or
associated persons (as "Acquiring Person") has acquired, or obtained the right
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to acquire, beneficial ownership of 20 percent or more of the outstanding shares
of SNC Common Stock (the "Stock Acquisition Date"), (ii) 10 business days (or
such later date as may be determined by the SNC Board of Directors) following
the commencement of a tender offer or exchange offer that would result in a
person or group beneficially owning 20 percent or more of such outstanding
shares of SNC Common Stock and (iii) 10 business days following the
determination by the SNC Board of Directors, upon a determination of at least a
majority of the unaffiliated "Continuing Directors" who are not officers of SNC,
that, with respect to any person who has, alone or together with his affiliates
or associates, become the beneficial owner of 10 percent or more of the shares
of SNC Common Stock outstanding (a) such beneficial ownership by such person is
intended to cause SNC to repurchase the SNC Common Stock beneficially owned by
such person or to cause pressure on SNC to take action or enter into a
transaction or series of transactions intended to provide such person with
short-term financial gain under circumstances where such Directors determine
that the best long-term interests of SNC and its shareholders would not be
served by taking such action or entering into such transactions or series of
transactions at that time or (b) such beneficial ownership is causing or
reasonably likely to cause a material adverse impact (including, but not limited
to, impairment of relationships with customers, impairment of SNC's ability to
maintain its competitive position or impairment of SNC's business reputation or
ability to deal with governmental agencies) on the business or prospects of SNC
(any such person being referred to herein and in the Rights Agreement as an
"Adverse Person").
The Rights are not exercisable until the Distribution Date and will expire at
the close of business on March 13, 1999 unless earlier redeemed by SNC as
described below.
In the event that (i) a person becomes the beneficial owner of 20 percent or
more of the then outstanding shares of SNC Common Stock (except pursuant to an
offer for all outstanding shares of SNC Common Stock which a majority of the
unaffiliated Continuing Directors who are not officers of SNC determines to be
fair to and otherwise in the best interests of SNC and its shareholders), or
(ii) the Board of Directors determines, upon the determination by at least a
majority of the unaffiliated Continuing Directors who are not officers of SNC,
that a person is an Adverse Person, each holder of a Right will thereafter have
the right to receive upon exercise SNC Common Stock (or, in certain
circumstances, cash, property or other securities of SNC) having a value (based
on the lowest closing price of the SNC Common Stock during the twelve-month
period preceding such event) equal to two times the exercise price of the Right.
Notwithstanding any of the foregoing, following the occurrence of any of the
events set forth in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person or Adverse Person will be null and void. However, Rights are
not exercisable following the occurrence of either of the events set forth above
until such time as the Rights are no longer redeemable by SNC as set forth
below.
In the event that, at any time following the Stock Acquisition Date or the
determination that someone is an Adverse Person (i) SNC is acquired in a merger
or other business combination transaction in which SNC is not the surviving
company or in which it is the surviving company but the SNC Common Stock is
changed or exchanged (other than a merger which follows an offer described in
the preceding paragraph) or (ii) more than 50 percent of SNC's assets, cash flow
or earning power is sold or transferred, each holder of a Right (except Rights
which previously have been voided as set forth above) shall thereafter have the
right to receive, upon exercise, common stock of the acquiring company having a
value equal to two times the exercise price of the Right. The events set forth
in this paragraph and in the preceding paragraph are referred to as the
"Triggering Events".
In general, at any time until 10 business days following the Stock
Acquisition Date, SNC may redeem the Rights in whole, but not in part, at a
price of $.01 per Right (payable in cash, SNC Common Stock or other
consideration deemed appropriate by the SNC Board of Directors). Under certain
circumstances set forth in the Rights Agreement, the decision to redeem the
Rights will require the concurrence of a majority of the Continuing Directors.
SNC may not redeem the Rights if the SNC Board of Directors has previously
declared a person to be an Adverse Person. Immediately upon the action of the
SNC Board of Directors ordering redemption of the Rights, the Rights will
terminate and the only right of the holders of Rights will be to receive the
$.01 redemption price.
The term "Continuing Directors" means any member of the Board of Directors of
SNC who was a member of the Board prior to the date of the Rights Agreement, and
any person who is subsequently elected to the Board if such person is
recommended or approved by a majority of the Continuing Directors, but will not
include an Acquiring Person, an Adverse Person, or an affiliate or associate of
any such Person or any representative of any of the foregoing.
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Until a Right is exercised, the holder thereof, as such, will have no rights
as a shareholder of SNC including, without limitation, the right to vote or to
receive dividends.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the SNC
Board of Directors prior to the Distribution Date. After the Distribution Date,
the provisions of the Rights Agreement may be amended by the Board (in certain
circumstances, with the concurrence of the Continuing Directors) in order to
cure any ambiguity, to make changes which do not adversely affect the interest
of holders of Rights, or to shorten or lengthen any time period under the Rights
Agreement; provided, however, that no amendment to adjust the time period
governing redemption shall be made at such time as the Rights are not
redeemable.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire SNC in a
manner defined as a Triggering Event unless the offer is conditioned on a
substantial number of Rights being acquired. The Rights, however, should not
affect any prospective offeror willing to make an offer for all outstanding
shares of SNC Common Stock and other voting securities at a fair price and
otherwise in the best interests of SNC and its shareholders as determined by the
SNC Board of Directors or affect any prospective offeror willing to negotiate
with the SNC Board of Directors. The Rights should not interfere with any
merger or other business combination approved the SNC Board of Directors since
the SNC Board of Directors may, at its option, at any time until ten business
days following the Stock Acquisition Date, redeem all, but not less than all, of
the then outstanding Rights at the $.01 redemption price.
SNC Preferred Stock. The SNC Board of Directors is authorized in the SNC
Articles to issue up to 10,000,000 shares of Preferred Stock, without par value,
in series and to determine the designation of each series, dividend rate,
redemption provisions, liquidation preferences, sinking fund provisions and all
other rights pertaining to the SNC Preferred Stock. The following is a brief
description of the Adjustable Preferred and the 9.30% Cumulative Preferred, the
only series of SNC Preferred Stock of the SNC outstanding. The Adjustable
Preferred and the 9.30% Cumulative Preferred have preference over the SNC Common
Stock with respect to the payment of dividends and the distribution of assets in
the event of liquidation, winding up or dissolution of SNC.
Dividends on the outstanding Adjustable Preferred and 9.30% Cumulative
Preferred are cumulative. The dividend rate on the Adjustable Preferred is
established quarterly at the rate of 2.25 percent below the highest of (a) the
three-month U.S. Treasury Bill rate, (b) the U.S. Treasury ten-year constant
maturity rate and (C) the U.S. Treasury twenty-year constant maturity rate, in
each case as defined in the terms of the Adjustable Preferred, but may not be
less than 6 percent per annum or greater than 12 percent per annum.
If the equivalent of six quarterly dividends payable on one or more series of
SNC Preferred Stock, including the Adjustable Preferred and the 9.30% Cumulative
Preferred are in default, the number of directors of SNC will be increased by
two and the holders of all outstanding series of SNC Preferred Stock, voting as
a single class without regard to series, will be entitled to elect two
additional directors until all accrued dividends have been paid. In addition,
the vote of the holders of two-thirds of each of the Adjustable Preferred and
the 9.30% Cumulative Preferred, each voting as a separate class, is required in
order to amend or alter the SNC Articles in a manner which would adversely
affect the preferences, rights, powers or privileges of the Adjustable Preferred
or the 9.30% Cumulative Preferred, respectively, and the vote of two-thirds of
the Adjustable Preferred, the 9.30% Cumulative Preferred and all of the series
of SNC Preferred Stock ranking on a parity with the Adjustable Preferred and the
9.30% Cumulative Preferred, voting together as a single class, is required in
order to reclassify stock of SNC into stock ranking prior to the Adjustable
Preferred and the 9.30% Cumulative Preferred, or authorize the creation or
issuance of stock, or of a security convertible into or evidencing a right to
purchase stock, ranking prior to the Adjustable Preferred and the 9.30%
Cumulative Preferred.
In the event of any liquidation, dissolution or winding up of the SNC, the
holders of the Adjustable Preferred are entitled to receive $50.00 per share
plus accrued and unpaid dividends and the holders of 9.30% Cumulative Preferred
are entitled to receive $250.00 per share plus accrued and unpaid dividends.
Shares of Adjustable Preferred may be redeemed at the option of SNC at a
redemption price per share of $50.00 per share, plus accrued and unpaid
dividends.
The shares of 9.30% Cumulative Preferred are represented by Depositary Shares
(the "Depositary Shares"). The Depositary Shares represent a one-tenth interest
in a share of 9.30% Cumulative Preferred and are
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not subject to any mandatory redemption or sinking fund provisions. The 9.30%
Cumulative Preferred will be redeemable on at least 30 but not more than 60 days
notice, at the option of SNC, as a whole or in part, at any time on and after
October 15, 1997 at a redemption price equal to $250 per share plus accrued and
unpaid dividends.
COMPARISON OF RIGHTS OF HOLDERS OF NEW DARTMOUTH COMMON STOCK AND SNC COMMON
STOCK
The rights of holders of New Dartmouth Common Stock who receive SNC Common
Stock in the Merger will be governed by the corporate law of Delaware, the state
in which SNC is incorporated, and by the SNC Articles. The rights presently
enjoyed by New Dartmouth Stockholders under the relevant provisions of New
Hampshire law and the New Dartmouth Articles and By-laws of New Dartmouth differ
in some respects from the rights they would have as shareholders of SNC. This
summary contains a list of the material differences but is not meant to be
relied upon as an exhaustive list or a detailed description of the provisions
discussed and is qualified in its entirety by reference to the SNC Articles, the
SNC By-laws, the New Dartmouth Articles, the New Dartmouth By-laws, the Delaware
General Corporation Law (the "DGCL"), the applicable provisions of New Hampshire
law and the Rights Agreement.
Action by Written Consent
SNC. The DGCL provides that, unless otherwise provided in the certificate of
incorporation, shareholders may act by written consent if consents are signed
representing not less than the minimum number of votes that would be necessary
to take such action at a meeting where all shares entitled to vote were present
and voted. The SNC Articles do not provide otherwise.
New Dartmouth. The New Dartmouth By-laws provide that stockholders may act
by written consent only if consents are signed by all stockholders entitled to
vote with respect to the subject matter thereof.
Special Meetings of Shareholders
SNC. Pursuant to SNC's By-laws, special meetings of shareholders may be
called by the Board of Directors or the Chairman of the Board, or upon the
written request of seven or more shareholders holding not less than 30% of the
outstanding shares of SNC Common Stock.
New Dartmouth. Pursuant to New Dartmouth's By-laws, special meetings of
stockholders may be called by the Board of Directors or the Chairman of the
Board, or upon the request of holders of at least 10% of the outstanding shares
of New Dartmouth Common Stock.
Shareholder Nominations
SNC. The SNC By-laws establish procedures that must be followed for
shareholders to nominate directly individuals to the Board of Directors of SNC.
A shareholder must provide timely notice of such nomination in writing to the
secretary of SNC and a written statement by the candidate of his or her
willingness to serve. Such notice must include the information required to be
disclosed in solicitations for proxies for election of directors pursuant to
Regulation 14A under the Exchange Act, along with the name, record address,
class and number of shares of SNC Common Stock beneficially owned by the
shareholder giving such notice. To be timely, notice must be delivered to SNC
not less than 50 nor more than 75 days prior to the meeting at which directors
are to be elected, or, if SNC gives less than 65 days' notice of the meeting,
then notice by the shareholder must be received by the close of business on the
15th day following the earlier of the date notice of the meeting was mailed or
public disclosure of the meeting was made.
New Dartmouth. The New Dartmouth Articles and the New Dartmouth By-laws
contain no provisions regarding the ability of stockholders to nominate
individuals for election to the Board of Directors of New Dartmouth.
FDIC Powers
SNC. Neither the SNC Articles nor the SNC By-laws contain any provision
granting any rights to the FDIC as a shareholder of SNC.
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New Dartmouth. The New Dartmouth Articles provide that so long as the FDIC
owns any combination of shares of New Dartmouth Common Stock and New Dartmouth
Preferred Stock that, assuming the full conversion of such preferred stock into
New Dartmouth Common Stock at the applicable conversion rate, constitutes at
least 10% of the outstanding shares of New Dartmouth Common Stock, the FDIC, in
its sole discretion, may (a) veto the nomination, election or appointment of any
person to serve as a director of New Dartmouth, and (b) require the removal of
any director of New Dartmouth.
Preemptive Rights
SNC. Holders of shares of SNC Common Stock do not have any preemptive
rights.
New Dartmouth. The New Dartmouth Articles provide New Dartmouth Stockholders
are entitled to preemptive rights with respect to any increase in the number of
shares of capital stock that are authorized to be issued.
Certain Business Combinations
SNC. The SNC Articles provide that any "Business Combination" involving SNC
and a person who beneficially owns 10% or more of SNC's capital stock (an "SNC
Related Person") must be approved by the holders of at least 80% of the
outstanding shares of SNC voting stock (the "Voting Requirement") voting
together as a single class. The Voting Requirement does not apply if (i) the
Business Combination is approved by a majority of the Continuing Directors
(defined generally to include any person who is unaffiliated with, and not a
representative of, the SNC Related Person and who either was a director
immediately prior to the time the SNC Related Person in the Business Combination
became such a person or was recommended or elected to succeed a Continuing
Director by a majority of the Continuing Directors) or (ii) certain "fair price"
and other criteria are met. As defined in the SNC Articles, a Business
Combination includes, among other things, (i) any merger or consolidation of SNC
with any SNC Related Person or affiliate or associate thereof, (ii) the sale by
SNC of assets having a fair market value equal to 10% or more of the total
shareholders' equity of SNC ("Substantial Assets") to an SNC Related Person or
an affiliate or associate thereof, (iii) the acquisition by SNC of Substantial
Assets from an SNC Related Person or an affiliate or associate thereof, (iv) the
adoption of a plan or proposal or the liquidation or dissolution of SNC prepared
by or on behalf of an SNC Related Person or an affiliate or associate thereof,
(v) any transaction that has the effect of increasing the proportionate share of
any class of equity security of SNC that is beneficially owned by an SNC Related
Person or any affiliate or associate thereof, and (vi) any agreement or
arrangement providing for any of the foregoing. This provision of the SNC
Articles can only be amended or repealed upon the vote of at least 80% of the
voting stock entitled to vote unless such amendment or repeal is unanimously
recommended by the Board of Directors of SNC and all of such directors are
Continuing Directors.
New Dartmouth. The New Dartmouth Articles contain certain restrictions on
acquisitions of New Dartmouth Common Stock. See "--Description Of New Dartmouth
Capital Stock" above. In addition, the New Dartmouth Articles provide that for
a period of 60 days after a good faith offer is made to acquire all of the
outstanding shares of New Dartmouth Common Stock, New Dartmouth may not
voluntarily initiate any new material transactions that are not in the ordinary
course of business. For purposes of this provision, the redemption of the New
Dartmouth Preferred Stock is not deemed to be a new material transaction.
State Antitakeover Statute
SNC. Under Delaware law, a corporation may not engage in any "business
combination" (as defined in the DGCL) with an interested shareholder for three
years after such shareholder becomes an interested shareholder. An interested
shareholder is any person who is the beneficial owner of 15 percent or more of
the outstanding voting stock of the corporation. A corporation may enter into a
business combination with an interested shareholder if (i) the Board approves
the transaction before the shareholder becomes an interested shareholder; (ii)
upon consummation of the transaction resulting in the shareholder reaching the
15 percent threshold, he owned 85% of the outstanding voting shares not owned by
directors who are also officers or employee stock plans where the participants
do not have the right to determine confidentially whether shares subject to the
plan will be tendered in a tender or exchange offer; or (iii) on or subsequent
to becoming an interested stockholder, the transaction is approved by the Board
and authorized by an affirmative vote at a meeting of at least two-thirds of the
outstanding shares not owned by the interested shareholder. These restrictions
will not apply if the corporation's certificate of incorporation contains a
provision expressly electing not to be governed by these rules. The SNC
Articles do not contain a provision electing not to be covered by these
provisions. Upon consummation of the Merger, existing
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stockholders of New Dartmouth, as shareholders of SNC, will be subject to the
provisions of Delaware law regarding transactions with interested shareholders.
These provisions may prevent consummation of certain transactions, including
transactions which a shareholder may deem to be in the shareholder's best
interest.
New Dartmouth. The New Dartmouth Articles require the Board of Directors of
New Dartmouth, to the extent allowed under applicable law, to take appropriate
action to waive the applicability of any law, whether existing now or hereafter
adopted, which is intended to restrict or dissuade corporate acquisitions or
which has such effect.
Rights Plans
SNC. On February 28, 1989, the SNC Board of Directors declared a dividend
distribution of one Right for each outstanding share of SNC Common Stock to
shareholders of record at the close of business on March 13, 1989. For a
description of the Rights and the related Rights Agreement, see "--Description
of SNC Capital Stock" above.
New Dartmouth. New Dartmouth has no Rights Plan.
Payment of Dividends
SNC. Principal sources of revenues for SNC are dividends received from its
banks and other subsidiaries and interest earned on short-term investments and
advances to subsidiaries. Federal law imposes limitations on the payment of
dividends by the subsidiaries of SNC that are national banks. Two different
calculations are performed to measure the amount of dividends that may be paid:
a recent earnings test and an undivided profits test. Under the recent earnings
test, a dividend may not be paid if the total of all dividends declared by a
national bank in any calendar year is in excess of the current year's net
profits combined with the retained net profits of the two preceding years unless
the bank obtains the approval of the Office of the Comptroller of the Currency
("OCC"). Under the undivided profits test, a dividend may not be paid in excess
of a bank's undivided profits then on hand, after deducting bad debts in excess
of the reserve for loan losses. Under the recent earnings test, which is the
more restrictive of the two tests, at September 30, 1993 SBM could pay
dividends to SNC without prior approval of the OCC of $124.4 million. At
September 30, 1993, SBC could not pay any dividends to SNC without prior
approval of the OCC. SBC had a deficit with respect to its net profits of $69.1
million at September 30, 1993. SBM and SBC had undivided profits of $415.7
million and $195.0 million, respectively, at September 30, 1993.
New Dartmouth. New Dartmouth can pay dividends out of retained earnings from
net earnings, if, as and when declared by the Board of Directors. The payment of
dividends is subject to limitations that are imposed by the laws and the
applicable regulations of the State of New Hampshire and the FDIC. The holders
of New Dartmouth Common Stock will be entitled to receive and share equally in
such dividends as may be declared by the Board of Directors out of funds legally
available therefor.
New Hampshire law specifies that, after providing for the guaranty fund
(which is considered to be any excess of capital stock up to $100,000), New
Dartmouth may pay dividends from its net income, but not in excess of 3-1/2% per
year unless the total value of New Dartmouth's assets (as determined by the Bank
Commissioner) exceeds the amount due to its depositors by at least 5%.
As long as the FDIC owns New Dartmouth Preferred Stock that, assuming the
full conversion thereof into New Dartmouth Common Stock at the then applicable
conversion rate, constitutes at least 10% of the then outstanding shares of New
Dartmouth Common Stock, New Dartmouth may not declare or pay dividends on any
shares of its capital stock without the FDIC's prior written consent. (As of
the date of this Proxy Statement/Prospectus, assuming the full conversion of the
outstanding New Dartmouth Preferred Stock into shares of New Dartmouth Common
Stock at the then applicable conversion rate, the New Dartmouth Preferred Stock
constituted 33.1% of the then outstanding shares of New Dartmouth Common
Stock.) A holder of the New Dartmouth Preferred Stock is entitled to receive
dividends per share equal to dividends per share, if any, paid on New Dartmouth
Common Stock.
Dissenters' Rights
SNC. Under Delaware law, dissenting shareholders who follow prescribed
statutory procedures are, in certain circumstances, entitled to appraisal rights
in the case of a merger, except that such rights are not provided
89
<PAGE>
when, among other things, shares of the corporation are listed on a national
securities exchange or are held by 2,000 shareholders and are to be exchanged
solely for shares of stock of another corporation which are listed on a national
securities exchange or are held by more than 2,000 shareholders. The prescribed
statutory procedures differ in certain respects from those required under New
Hampshire law.
New Dartmouth. Under New Hampshire law, New Dartmouth Stockholders are
entitled to dissenters' rights only in the event of a merger, consolidation or
other union of banks under RSA 388. The procedures to be followed to perfect
dissenters' rights under New Hampshire law are summarized under "-- Dissenters'
Rights" above.
Market Prices and Dividend History
SNC Common Stock is listed and traded principally on the NYSE under the
symbol "SNC." New Dartmouth Common Stock is privately held and there is no
established trading market for such stock.
The following table sets forth the high and low sales prices for SNC Common
Stock as reported on the NYSE, for the years ended December 31, 1993 and 1992
and the period ended January 31, 1994. SNC did not pay dividends on SNC Common
Stock during 1992. In the first quarter of 1993, SNC reinstated its dividend on
the SNC Common Stock. A dividend of $.10 per share was declared in the first,
second and third quarters of 1993. A quarterly dividend of $.20 per share was
declared in the fourth quarter of 1993. No cash dividends have been declared by
New Dartmouth. See "-- Comparison of Rights of Holders of New Dartmouth Common
Stock and SNC Common Stock" above.
<TABLE>
<CAPTION>
SNC
----------------------
Year High Low
- ---- ---- ------
<S> <C> <C>
1992:
First Quarter $15.88 $ 8.88
Second Quarter 19.25 12.13
Third Quarter 18.75 13.38
Fourth Quarter 19.50 14.50
1993:
First Quarter $23.88 $17.88
Second Quarter 25.13 19.50
Third Quarter 26.38 22.50
Fourth Quarter 25.13 19.38
1994:
First Quarter (through January 31, 1994 23.88 22.00
</TABLE>
On March 23, 1993, the last business day preceding public announcement of the
execution of the Merger Agreement, the closing sales price per share of SNC
Common Stock was $22.38. On February 2, 1994, the last practicable date prior to
the mailing of this Proxy Statement/Prospectus, the closing sales price per
share of SNC Common Stock was $23.38.
Stockholders are advised to obtain current market quotations for SNC Common
Stock. No assurance can be given as to the market price of SNC Common Stock at
or after the effective time of the Merger. It is expected that the market price
of SNC Common Stock will fluctuate between the date of this Proxy
Statement/Prospectus and the date on which the Merger is consummated and
thereafter. Because the value of the consideration to be received by New
Dartmouth stockholders in the Merger is dependent upon the Average Closing Price
of the SNC Common Stock during the Pricing Period, and because the market price
of the SNC Common Stock is subject to fluctuation, the number of shares of SNC
Common Stock that holders of New Dartmouth Common Stock would receive in the
Merger may increase or decrease prior to the Merger.
On January 31, 1994, there were approximately 30,945 record holders of SNC
Common Stock.
90
<PAGE>
Principal Holders of New Dartmouth Common Stock
Set forth in the following table are the names and addresses of all
stockholders known to New Dartmouth to own beneficially more than five percent
of the outstanding New Dartmouth Common Stock as of December 31, 1993. The
following table includes the pro forma number of shares of SNC Common Stock that
would be issued upon consummation of the Merger at the hypothetical levels of
Adjusted Earnings of $6.1 million and $9.5 million presented above for
illustrative purposes and assuming the Average Closing Price of SNC Common Stock
is not less than $17.11 or greater than $23.14. See "-- Exchange Ratio" above.
<TABLE>
<CAPTION>
New Dartmouth Shares Owned Pro Forma Ownership of SNC Shares
--------------------------------- ----------------------------------------------
Number of Percentage of Number of Percentage of
Name and Address Shares Outstanding Shares Outstanding
of Beneficial Owner Beneficially Owned Shares Beneficially Owned Shares
- ------------------ ------------------ ----------- ----------------------------- ---------------
From To From To
<S> <C> <C> <C> <C> <C> <C>
John J. Byrne (1) 74,000 17.44% 1,068,782 1,501,608 1.06% 1.46%
The Fund American Companies, Inc.
1820 House, Main Street
Norwich, Vermont 05055
Ernest J. Boch 50,000 11.79% 722,150 1,014,600 * *
Subaru of New England, Inc.
95 Morse Street
Norwood, Massachusetts 02062
New Hampshire Retirement System 42,391 9.99% 612,253 860,198 * *
54 Regional Drive
Concord, New Hampshire 03301
Farm Bureau Life Insurance Co. 35,000 8.25% 505,505 710,220 * *
5400 University Avenue
West DesMoines, Iowa 50265
All Shareholders as a Group (2 & 3) 453,658 100.00% 6,552,182 9,205,628 6.50% 8.90%
</TABLE>
(*) Less than 1%
(1) Includes 73,988 shares of New Dartmouth Common Stock held of record by
BYRNE & sons, l.p. of which Mr. Byrne is the sole general partner.
(2) Includes 29,458 shares purchasable upon the exercise of outstanding New
Dartmouth Warrants.
(3) As described in Note 2 of the Notes to Unaudited Pro Forma Condensed
Financial Information, the pro forma presentation set forth in that
section assumes the shares of SNC Common Stock to be issued in the
Merger will range between 5,700,400 and 7,709,411. The impact of the
issuance of the greater number of shares of SNC Common Stock shown in
the table above on SNC's pro forma data would be negligible. See
"Unaudited Pro Forma Condensed Financial Information."
91
<PAGE>
Directors and Management of New Dartmouth
The following table sets forth information with respect to beneficial
ownership of New Dartmouth Common Stock as of December 31, 1993 by each director
of New Dartmouth and by all directors and executive officers of New Dartmouth as
a group. The following table includes the pro forma number of shares of SNC
Common Stock that would be issued upon consummation of the Merger at the
hypothetical levels of Adjusted Earnings of $6.1 million and $9.5 million
presented above for illustrative purposes and assuming the Average Closing Price
of SNC Common Stock is not less than $17.11 or greater than $23.14. See
"-- Exchange Ratio" above.
<TABLE>
<CAPTION>
New Dartmouth Shares Owned Pro Forma Ownership of SNC Shares
----------------------------------------- ------------------------------------------
Number of Percentage Number of Percentage
Name and Address Shares of Shares of
of Beneficial Owner Beneficially Owned Outstanding Shares Beneficially Owned Outstanding Shares
- ------------------- ------------------- ------------------- -------------------- -------------------
From To From To
---- -- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ernest J. Boch 50,000 11.79% 772,150 1,014,600 * *
John J. Byrne 74,000 17.44% 1,068,782 1,501,608 1.06% 1.46%
Richard A. Charpentier 12 * 173 244 * *
John Constable 4,012 (1) * 57,945 81,412 * *
William F. Craig 28,117 (2) 6.45% 406,094 570,550 * *
Edward A. Fox 15,000 3.54% 216,645 304,380 * *
Lola N. Grace 12,512 (3) 2.95% 180,711 253,894 * *
Charles Hoyt 5,340 1.26% 77,126 108,359 * *
Charles E. Hugel 17,500 4.13% 252,753 355,110 * *
Robert P. Keller 18,711 (4) 4.23% 270,243 379,684 * *
K. Thomas Kemp 1,500 * 21,655 30,438 * *
Jefferson W. Kirby 5,181 1.22% 74,829 105,133 * *
All Directors and
Executive Officers as a Group
(13 persons)(5) 231,897 51.12% 3,349,288 4,705,654 3.33% 4.57%
</TABLE>
(*) Less than 1%
(1) Includes 4,000 shares owned or controlled by Constable Partners, of which
Mr. Constable is a managing partner.
(2) Includes 11,783 shares purchasable upon the exercise of currently
exercisable New Dartmouth Warrants.
(3) Includes 12,500 shares owned or controlled by Sterling Grace Capital
Management L.P. of which Ms. Grace is a managing director but as to which
Ms. Grace disclaims beneficial ownership.
(4) Includes 17,675 shares purchasable upon the exercise of New Dartmouth
Warrants.
(5) Includes 29,458 shares purchasable upon the exercise of New Dartmouth
Warrants.
92
<PAGE>
LEGAL OPINIONS
The legality of the shares of SNC Common Stock and associated Rights to be
issued in connection with the Merger will be passed upon by Skadden, Arps,
Slate, Meagher & Flom, 919 Third Avenue, New York, New York 10022.
EXPERTS
The consolidated financial statements incorporated in this Proxy
Statement/Prospectus by reference to SNC's Annual Report on Form 10-K for the
year ended December 31, 1992, have been so incorporated in reliance upon the
report of Price Waterhouse, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The consolidated financial statements of New Dartmouth as of June 30, 1993
and 1992 and for the year ended June 30, 1993 and the period October 10, 1991
(date of commencement of operations) through June 30, 1992 set forth herein have
been audited by Price Waterhouse, independent accountants, and have been so
included in reliance upon the report of Price Waterhouse set forth herein, given
on the authority of said firm as experts in auditing and accounting.
93
<PAGE>
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
dated as of March 23, 1993
by and between
SHAWMUT NATIONAL CORPORATION
and
NEW DARTMOUTH BANK
as amended by
Amendment No. 1
dated as of July 21, 1993
and
Amendment No. 2
dated as of December 20, 1993
- --------------------------------------------------------------------------------
<PAGE>
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
RECITALS 1
- --------
ARTICLE I: THE MERGER
- ---------
1.1 Closing 1
1.2 Effective Time of Merger 2
1.3 Effect of Merger; Surviving Bank 2
1.4 Charter; Bylaws; Directors; Officers 2
1.5 Tax Consequences 2
ARTICLE II: MERGER CONSIDERATION
- ----------
2.1 Outstanding Acquiror Sub Common Stock 2
2.2 Outstanding Seller Common Stock 2
2.3 Stockholder Rights; Stock Transfers 3
2.4 Fractional Shares 3
2.5 Dissenting Stockhloders 3
2.6 Exchange Procedures 3
2.7 Options and Warrants 4
2.8 Anti-Dilution Provisions 4
2.9 Shares Held by Seller or Buyer 5
2.10 Unclaimed Merger Consideration 5
2.11 Lost, Stolen or Destroyed Certificates 5
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF SELLER
- -----------
3.1 Recitals 5
3.2 Outstanding Shares 5
3.3 Corporate Power 5
3.4 Authorization; Consents and Approvals 5
3.5 No Violation 6
3.6 Financial Reports 6
3.7 Asset Classification 6
3.8 Operations Since December 31, 1992 7
3.9 Litigation; Regulatory Issues 7
3.10 Material Contracts 7
3.11 Employee Benefit Plans 7
3.12 Labor Agreements 8
3.13 Taxes 8
3.14 Environment 8
3.15 Subsidiaries 10
3.16 Affiliates 10
3.17 Pooling of Interests Treatment 10
3.18 State Takeover Laws 10
3.19 Brokers 10
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
3.20 Corporate Records 10
3.21 Loan Portfolio 10
3.22 Intellectual Property 10
3.23 Undisclosed Liabilities 11
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF BUYER
- ----------
4.1 Recitals 11
4.2 Outstanding Shares 11
4.3 Capital Structure 11
4.4 Merger Shares 12
4.5 Corporate Power 12
4.6 Authorization; Consents and Approvals 12
4.7 No Violation 12
4.8 Financial Reports 12
4.9 Asset Classification 13
4.10 Operations Since December 31, 1992 13
4.11 Litigation; Regulatory Issues 13
4.12 Material Contracts 13
4.13 Employee Benefits Plans 13
4.14 Labor Agreements 14
4.15 Taxes 14
4.16 Environmental 15
4.17 Acquisition of Regulatory Approvals 15
4.18 Pooling of Interests Treatment 15
4.19 Post-Merger Intentions 15
4.20 Brokers 16
ARTICLE V: COVENANTS OF SELLER
- ---------
5.1 Further Assurances 16
5.2 Capital Stock 16
5.3 Employment Contracts; Bonuses 16
5.4 Employee Benefit Plans 16
5.5 Disposition of Assets 17
5.6 Articles of Agreement; Bylaws 17
5.7 Preparation of Proxy Statement 17
5.8 Registration Statement--Seller Information 17
5.9 Inspection; Confidentiality 17
5.10 No Solicitation 17
5.11 Affiliates Letter 18
5.12 State Takeover Laws 18
5.13 Pooling of Interests 18
5.14 Tax-Free Reorganization 18
5.15 No Revocation of Authority 18
5.16 Preferred Stock Redemption 18
5.17 Conduct of Business 18
5.18 Notice of Adverse Changes 18
5.19 FDIC Letter 18
5.20 Seller Agreements 18
5.21 Buyer Review of Documents 18
5.22 Breach of Representation 18
5.23 No Encumbrances 19
5.24 Branches 19
5.25 Equity Investments 19
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
5.26 Material Contracts 19
5.27 Advice of Changes 19
5.28 Current Information 19
ARTICLE VI: COVENANTS OF BUYER
- ----------
6.1 Further Assurances 19
6.2 Registration Statement 20
6.3 Blue Sky Permits 20
6.4 NYSE Listing 20
6.5 Conversion of Seller Opinions and Seller Warrants 20
6.6 Inspection; Confidentiality 21
6.7 Seller Review of Documents 21
6.8 No Inconsistent Actions 21
6.9 Notice of Adverse Changes 22
6.10 Seller Employees 22
6.11 Buyer Employee Benefit Plans 22
6.12 Indemnification; Director and Officer Insurance 22
6.13 Restrictions on Buyer Purchases of Buyer Common Stock 23
6.14 Publication of Combined Financial Results 23
6.15 Breach of Representation 24
6.16 Advice of Changes 24
6.17 Current Information 24
ARTICLE VII: CONDITIONS TO CONSUMMATION OF THE MERGER
- -----------
7.1 Conditions to Each Party's Obligations 24
(A) Stockholder Approval 24
(B) Regulatory Approvals 24
(C) Registration Statement Effective; Blue Sky Permits 24
(D) No Injunction or Restraint; Illegality 24
7.2 Conditions to the Obligations of Buyer 24
(A) Accuracy of Seller's Representations 24
(B) Buyer Comfort Letter 25
(C) Average Closing Price 25
(D) Pooling of Interests Opinion 25
(E) Dissenting Stockholders 25
(F) Opinion of Seller's Counsel 26
(G) Receipt of Affiliate Letter 26
(H) P&A Agreements 26
(I) Redemption of Seller Preferred Stock 26
(J) Certificates 26
7.3 Conditions to the Obligations of Seller 26
(A) Accuracy of Buyer's Representation 26
(B) Seller Comfort Letter 26
(C) Average Closing Price 27
(D) Tax Opinion 27
(E) Opinion of Buyer's Counsel 27
(F) NYSE Listing of Shares 27
(G) Accounting Treatment 27
(H) Certificates 27
</TABLE>
(iii)
<PAGE>
<TABLE>
<S> <C>
ARTICLE VIII: ABANDONMENT
- ------------
8.1 Mutual Consent 27
8.2 Breach 27
8.3 Abandonment Date 27
8.4 No Stockholder Approval 28
8.5 Failure of Conditions 28
8.6 Effect of Abandonment; Expenses 28
ARTICLE IX: OTHER MATTERS
- ----------
9.1 Survival 28
9.2 Waiver; Amendment 28
9.3 Publicity 29
9.4 Counterparts 29
9.5 Governing Law 29
9.6 Notices 29
9.7 Definitions 29
9.8 Entire Understanding; Third Party Beneficiaries 30
9.9 Alternative Structure 30
9.10 Table of Contents; Headings 31
9.11 Interpretation 31
9.12 Consents 31
9.13 Disclosures 31
9.14 Assignment 31
</TABLE>
(iv)
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of the 23rd day of March, 1993 (the
"Agreement"), by and between SHAWMUT NATIONAL CORPORATION ("Buyer") and NEW
DARTMOUTH BANK ("Seller").
RECITALS:
(A) Buyer. Buyer is a corporation duly organized and validly existing in
good standing under the laws of the State of Delaware, with its principal
executive offices located in Hartford, Connecticut and Boston, Massachusetts.
As of the date hereof, Buyer has 150,000,000 authorized shares of common stock,
each of $0.01 par value ("Buyer Common Stock"), of which 94,186,394 shares of
Buyer Common Stock are issued and outstanding.
(B) Seller. Seller is an insured depository institution duly organized and
validly existing in good standing under the laws of the State of New Hampshire,
with its principal executive offices located in Manchester, New Hampshire.
Seller's deposit liabilities are insured by the Federal Deposit Insurance
Corporation (the "FDIC") through the Bank Insurance Fund to the fullest extent
permitted by law, and all premiums and assessments required in connection
therewith have been paid by Seller. As of the date hereof, Seller has 960,000
authorized shares of common stock, each of $0.01 par value ("Seller Common
Stock"), and 370,000 authorized shares of Class A Preferred Stock, each of $0.01
par value ("Seller Preferred Stock") (no other class of capital stock being
authorized). As of the date hereof, 424,200 shares of Seller Common Stock and
235,073 shares of Seller Preferred Stock are issued and outstanding, and 29,458
shares of Seller Common Stock are reserved for issuance upon the exercise of
outstanding warrants, 12,250 shares of Seller Common Stock are reserved for
issuance upon the exercise of outstanding stock options, 5,425 shares of Seller
Common Stock are reserved for issuance pursuant to the Seller 1992 Stock Option
Plan, and 293,842 shares of Seller Common Stock are reserved for issuance upon
the conversion of all of the outstanding shares of Seller Preferred Stock.
(C) Rights, Etc. Except as described in Paragraph (B) above, there are no
shares of Seller Common Stock or Seller Preferred Stock authorized and reserved
for issuance or held in Seller's treasury, and Seller has no commitment to
authorize, issue or sell any such shares or any other equity security of Seller
or any securities or obligations convertible into or exchangeable for, or giving
any person any right to subscribe for or acquire from such party, any such
shares or other securities and no securities or obligations representing any
such rights are outstanding, except 74,275 shares of Seller Common Stock
reserved for issuance upon exercise of the option issued to Buyer pursuant to
the Stock Option Agreement dated March 23, 1993 between Buyer and Seller (the
"Option Agreement").
(D) Approvals. The Board of Directors of each of Seller and Buyer has
approved this Agreement and has authorized the execution hereof in counterparts.
In consideration of the foregoing and the respective representations,
warranties, covenants and agreements set forth herein, the parties hereto agree
that Buyer shall acquire all of the outstanding Seller Common Stock pursuant to
a merger of a de novo depository institution to be organized by Buyer or a
-- ----
subsidiary (the "Acquiror Sub") with and into Seller (the "Merger"), subject to
the terms and conditions set forth in this Agreement.
ARTICLE I
THE MERGER
1.1 Closing. Provided that all the conditions set forth in Article VII
hereof have been met or waived, the closing (the "Closing") of the Merger shall
take place at the office of Nutter, McClennen & Fish commencing at 10:00 a.m.,
local time, on such date (the "Closing Date") as the parties may mutually agree.
Except as the parties may otherwise mutually agree, the Closing Date shall be no
more than five (5) days after the Determination Date. As used herein, the term
"Determination Date" shall mean the later of:
(A) the date of the approval of this Agreement and the Merger by the
stockholders of Seller as set forth in Section 7.1 hereof; or
1
<PAGE>
(B) the date of receipt of all required regulatory approvals as set forth in
Section 7.1 (and the expiration of any required waiting periods under statute
or incorporated into such required approvals).
All documents required by the terms of this Agreement to be delivered at or
prior to consummation of the Merger will be exchanged by the parties at the
Closing. Seller and Acquiror Sub shall execute and deliver to the necessary
regulatory authorities, prior to the Closing if necessary, a certificate of
merger, contract for union or other comparable document (the "Contract for
Union") in such form as shall be required in order to effect the Merger on the
terms and subject to the conditions set forth herein.
1.2 Effective Time of Merger. As soon as practicable, but in any event not
later than one (1) business day after the Closing Date, Buyer shall cause the
Contract for Union or charter, as the case may be, of the Surviving Bank (as
defined in Section 1.3 hereof) to be submitted to the Secretary of State of the
State of New Hampshire (the "Secretary of State"), for filing, as provided under
applicable law. The Merger shall become effective on the date (the "Merger
Effective Date") and at the time (the "Effective Time") such Contract for Union
or charter is accepted for filing by the Secretary of State.
1.3 Effect of Merger; Surviving Bank. (A) At the Effective Time, Acquiror
Sub shall merge with and into Seller, the separate existence of Acquiror Sub
shall cease, and Seller shall continue its corporate existence as a wholly-owned
subsidiary (the "Surviving Bank") of Buyer.
(B) Upon the consummation of the Merger, the Surviving Bank shall thereupon
and thereafter possess all of the rights, privileges, immunities and
franchises, of a public as well as of a private nature, of each of the
merging corporations; and all property, real, personal and mixed, and all
debts due on whatever account, and all other choses in action, and all and
every other interest, of or belonging to or due to each of the corporations
so merged, shall be deemed to be vested in the Surviving Bank without further
act or deed; and the title to any real estate or any interest therein, vested
in any of such corporations, shall not revert or be in any way impaired by
reason of the Merger as provided by the laws of the State of New Hampshire.
(C) Upon the consummation of the Merger, the Surviving Bank shall
thenceforth be responsible and liable for all the liabilities, obligations
and penalties of each of the corporations so merged.
1.4 Charter; Bylaws; Directors; Officers. The charter and bylaws of the
Surviving Bank shall be those of Acquiror Sub, as in effect immediately prior to
the Effective Time. The directors and officers of Acquiror Sub in office
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Bank, together with such additional directors and officers as may
thereafter be elected, who shall hold office until such time as their successors
are elected and qualified.
1.5 Tax Consequences. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended, (the "Code"), and that this Agreement shall constitute a
"plan of reorganization" for the purposes of Section 368 of the Code.
ARTICLE II
MERGER CONSIDERATION
2.1 Outstanding Acquiror Sub Common Stock. Each share of the common stock
of Acquiror Sub (the "Acquiror Sub Common Stock") issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger,
automatically and without any action on the part of Buyer, become and be
converted into one (1) share of Seller Common Stock.
2.2 Outstanding Seller Common Stock. (A) Each share of Seller Common Stock
issued and outstanding immediately prior to the Effective Time (excluding shares
held by Seller or any of its subsidiaries or by Buyer or any of its
subsidiaries, in each case other than in a fiduciary capacity or as a result of
debts previously contracted, and excluding shares held by stockholders who
perfect their dissenters' rights as provided under Section 2.5 below) shall, by
virtue of the Merger, automatically and without any action on the part of the
holder thereof, become and be converted into the right to receive that number of
shares of Buyer Common Stock as shall be equal to the Exchange Ratio, together
with any associated Buyer Rights (as defined in Section 4.3 hereof). As used
herein, the term "Exchange Ratio" shall mean the quotient obtained by dividing
(i) Three Hundred Ten Dollars ($310.00) by (ii) the
2
<PAGE>
Average Closing Price (as defined in Section 9.7 hereof), rounded to the nearest
thousandth (1/1,000th) of a share, subject to adjustment as provided in this
Section 2.2.
(B) If the Average Closing Price is less than $19.975 then the Average
Closing Price shall be deemed to be $19.975; provided, however, that Buyer
-------- -------
may waive this Section 2.2(B).
(C) If the Average Closing Price exceeds $27.025, then the Average Closing
Price shall be deemed to be $27.025; provided, however, that Seller may waive
-------- -------
this Section 2.2(C).
2.3 Stockholder Rights; Stock Transfers. At the Effective Time, holders of
Seller Common Stock shall cease to be, and shall have no rights as, stockholders
of Seller, other than the right to receive the Merger consideration provided
under Section 2.2 above and Section 2.4 below (or to elect to pursue their
statutory dissenters' rights as provided under Section 2.5 below). After the
Effective Time, there shall be no transfers on the stock transfer books of
Seller of the shares of Seller Common Stock which were issued and outstanding
immediately prior to the Effective Time, and all such shares of Seller Common
Stock outstanding immediately prior to the Effective Time shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and each certificate previously representing shares of Seller Common
Stock shall thereafter represent the right to receive (i) the number of whole
shares of Buyer Common Stock and (ii) cash in lieu of fractional shares (as set
forth in Section 2.4 hereof) into which such Seller Common Stock has been
converted. Certificates previously representing shares of Seller Common Stock
shall be exchanged for certificates representing whole shares of Buyer Common
Stock and cash in lieu of fractional shares issued in consideration therefor
upon the surrender of such certificates in accordance with Section 2.6 below,
without any interest thereon. No dividends or other distributions declared
after the Effective Time with respect to Buyer Common Stock and payable to the
holders of record thereof shall be paid to the holder of any unsurrendered
Certificate (as defined below) until the holder thereof shall surrender such
Certificate in accordance with this Article II. After the surrender of a
Certificate in accordance with this Article II, the record holder thereof shall
be entitled to receive any such dividends or other distributions, without any
interest thereon, which theretofore had become payable with respect to shares of
Buyer Common Stock represented by such Certificates. No holder of an
unsurrendered Certificate shall be entitled, until the surrender of such
Certificate, to vote the shares of Buyer Common Stock into which his Seller
Common Stock shall have been converted.
2.4 Fractional Shares. Notwithstanding any other provision hereof, no
fractional shares of Buyer Common Stock and no certificates or scrip therefor,
or other evidence of ownership thereof, will be issued in the Merger; instead,
Buyer shall pay to each holder of Seller Common Stock who would otherwise be
entitled to a fractional share an amount in cash determined by multiplying such
fractional share by the Average Closing Price.
2.5 Dissenting Stockholders. Any holder of shares of Seller Common Stock
who perfects his dissenter's rights of appraisal in accordance with and as
contemplated by New Hampshire Revised Statutes Annotated Chapter 388:13 shall be
entitled to receive the value of such shares in cash as determined pursuant to
such provision of law; provided, however, that no such payment shall be made to
-------- -------
any dissenting stockholder unless and until such dissenting stockholder has
complied with the applicable provisions of said law and duly surrendered the
certificate or certificates representing the shares for which payment is being
made. In the event that a dissenting stockholder fails to perfect, or
effectively withdraws or loses, his right to appraisal and of payment for his
shares, after the Merger Effective Date, Buyer shall issue and deliver the
consideration to which such holder of shares of Seller Common Stock is entitled
under this Article II (without interest) upon surrender by such holder of the
certificate or certificates representing shares of Seller Common Stock.
2.6 Exchange Procedures. (A) As of the Effective Time, Buyer shall deposit,
or shall cause to be deposited, with State Street Bank and Trust Company, or
such other bank or trust company designated by Buyer (and reasonably acceptable
to Seller) (the "Exchange Agent"), for the benefit of the holders of shares of
Seller Common Stock for exchange in accordance with this Article II, (i)
certificates representing shares of Buyer Common Stock issuable pursuant to
Section 2.2 hereof in exchange for the outstanding shares of Seller Common Stock
and (ii) cash sufficient to meet Buyer's obligation under Section 2.4 hereof
(such cash and certificates being hereinafter referred to as the "Exchange
Fund").
(B) As promptly as practicable after the Effective Time, the Exchange Agent
shall mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
Seller Common Stock (the "Certificates") whose shares were converted into
shares of Buyer
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Common Stock pursuant to Section 2.2 hereof, (i) a letter of transmittal,
which shall be in such form and have such provisions as Buyer and Seller may
reasonably specify (and which shall specify that delivery shall be effected,
and risk of loss and title to a Certificate shall pass, only upon delivery of
the Certificate to the Exchange Agent) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Buyer Common Stock. Upon surrender of a Certificate
for cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled
to receive in exchange therefor (x) a certificate representing that number of
whole shares of Buyer Common Stock which such holder has the right to receive
in respect of the Certificate surrendered pursuant to the provisions of
Section 2.2 hereof and (y) a check representing the amount of cash in lieu of
any fractional share interest, if any, in accordance with Section 2.4 hereof
(collectively, the "Merger Consideration"), and the Certificate so
surrendered shall forthwith be cancelled. If any certificate representing
shares of Buyer Common Stock is to be issued in a name other than that in
which the Certificate surrendered in exchange therefor is registered (as a
result of a transfer of the certificate after the Effective Date), it shall
be a condition of the issuance thereof that the Certificate so surrendered
shall be properly endorsed (or accompanied by an appropriate instrument of
transfer) and otherwise in proper form for transfer, and that the person
requesting such exchange shall pay to the Exchange Agent in advance any
transfer or other taxes required by reason of the issuance of a certificate
representing shares of Buyer Common Stock in any name other than that of the
registered holder of the Certificate surrendered, or required for any other
reason, or shall establish to the reasonable satisfaction of the Exchange
Agent that such tax has been paid or is not payable. Until surrendered as
contemplated by this Section, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration. Any fractional share checks which a
holder of Seller Common Stock shall be entitled to receive in exchange for a
Certificate will be delivered to such stockholder only upon delivery of the
Certificate to the Exchange Agent. No interest will be paid or accrued on
any such fractional share checks to which the holder of such shares of Seller
Common Stock may be entitled to receive upon such delivery.
2.7 Options and Warrants. At the Effective Time, each outstanding and
unexercised option to purchase shares of Seller Common Stock (a "Seller Option")
and each outstanding and unexercised warrant to purchase shares of Seller Common
Stock (a "Seller Warrant") shall be assumed by Buyer. After the Effective Time,
each Seller Option shall be deemed to constitute an option to acquire, on the
same terms and conditions as were applicable under such Seller Option
immediately prior to the Effective Time, the same number of shares of Buyer
Common Stock as the holder of such Seller Option would have been entitled to
receive pursuant to the Merger had such holder exercised such option in full
(assuming the full vesting thereof) immediately prior to the Effective Time, at
a price per share equal to (x) the aggregate exercise price for the shares of
Seller Common Stock otherwise purchasable pursuant to such Seller Option divided
by (y) the number of full shares of Buyer Common Stock deemed purchasable
pursuant to such Seller Option. Each Seller Warrant shall be deemed to
constitute a warrant to acquire, on the same terms and conditions as were
applicable under such Seller Warrant immediately prior to the Effective Time,
the same number of shares of Buyer Common Stock as the holder of such Seller
Warrant would have been entitled to receive pursuant to the Merger had such
holder exercised such warrant in full (assuming the full vesting thereof)
immediately prior to the Effective Time, at a price per share equal to (x) the
aggregate exercise price for the shares of Seller Common Stock otherwise
purchasable pursuant to such Seller Warrant divided by (y) the number of full
shares of Buyer Common Stock deemed purchasable pursuant to such Seller
Warrant. The maximum number of shares of Seller Common Stock which are issuable
upon the exercise of all Seller Options and Seller Warrants, as of the date
hereof, have been Previously Disclosed. Notwithstanding the foregoing
provisions of this Section, Buyer acknowledges and agrees that the Merger shall
constitute a "change of control" of Seller for purposes of Section 14 of
Seller's 1992 Stock Option Plan (the "Seller Option Plan") and Section 14 of
Seller's Amended and Restated 1991 Management Warrant Plan (the "Seller Warrant
Plan"), respectively, such that (i) a Seller Option shall be exercisable in
full, if within a specified time period, as Previously Disclosed, after the
Effective Time, the employment of the holder thereof is directly or
constructively terminated without cause as provided under Section 14 of the
Seller Option Plan or option letter granted thereunder, and (ii) after the
Effective Time each Seller Warrant shall be exercisable in full as provided in
Section 14 of the Seller Warrant Plan.
2.8 Anti-Dilution Provisions. If Buyer changes the number of shares of
Buyer Common Stock issued and outstanding prior to the Merger Effective Date as
a result of a stock split, stock dividend, recapitalization or similar
transaction with respect to the outstanding Buyer Common Stock and the record
date therefor shall be prior to the Merger Effective Date, the Exchange Ratio
shall be appropriately adjusted to reflect such change.
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2.9 Shares Held by Seller or Buyer. Any shares of Seller Common Stock held
by Seller or any of its subsidiaries (as defined in Section 3.3 hereof) or by
Buyer or any of its subsidiaries (as defined in Section 4.5 hereof), in each
case other than in a fiduciary capacity or as a result of debts previously
contracted, shall be cancelled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.
2.10 Unclaimed Merger Consideration. Any portion of the Exchange Fund that
remains unclaimed by the holders of shares of Seller Common Stock for six months
after the Effective Time shall be paid to Buyer. Any holders of shares of
Seller Common Stock who have not theretofore complied with this Article II shall
thereafter look only to Buyer for payment of the Merger Consideration as
determined pursuant to this Agreement, without any interest thereon.
Notwithstanding the foregoing, neither the Buyer nor any other person shall be
liable to any holder of shares of Seller Common Stock for any amount properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
2.11 Lost Stolen or Destroyed 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 Buyer, the posting by such person of a bond in
such amount as Buyer may reasonably require as an indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration deliverable in respect thereof pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
3.1 Recitals; Capital Stock. The facts set forth in Paragraphs (B), (C),
and so much of (D) that relates to Seller, of the Recitals of this Agreement are
true and correct. Without limiting the scope of the immediately preceding
sentence, except as Previously Disclosed pursuant to Section 2.7 hereof, and
except as set forth in Paragraph (B) of the Recitals of this Agreement, Seller
has not issued or granted any options, warrants, calls or commitments related to
its capital stock or any securities or obligations convertible into exchangeable
form, or give any person any right to subscribe for or acquire from it shares of
its capital stock or any securities or obligations convertible into exchangeable
form shares of its capital stock.
3.2 Outstanding Shares. Seller's issued and outstanding shares of capital
stock have been duly authorized and are validly issued, fully paid and
nonassessable, with no personal liability attaching to the ownership thereof
under the New Hampshire Revised Statutes Annotated.
3.3 Corporate Power. Seller and each of its subsidiaries has the corporate
power and authority to carry on its business as it is now being conducted and to
own or lease all its properties and assets. Except as Previously Disclosed,
each of Seller's subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of New Hampshire. Seller and each of its
subsidiaries is duly licensed or qualified to do business in each jurisdiction
in which the nature of the business conducted by it or the character or location
of the properties and assets owned or leased by it makes such licensing or
qualification necessary. As used in this Agreement, the term "subsidiary" when
used with respect to Seller means any corporation, partnership or other
organization, whether incorporated or unincorporated, which is consolidated with
Seller as reflected in the consolidated balance sheets of Seller and its
subsidiaries as of June 30, 1992, as reported in Seller's Annual Report to
Stockholders.
3.4 Authorization; Consents and Approvals. (A) Seller has full corporate
power and authority to execute and deliver this Agreement and the Contract of
Union and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the Contract of Union and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly approved by Seller's Board of Directors. Seller's Board of
Directors has directed that this Agreement and the Contract of Union and the
transactions contemplated hereby and thereby be submitted to the holders of
Seller Common Stock for approval at a meeting of such stockholders, and except
for the adoption of this Agreement and the Contract of Union by its
stockholders, no other corporate proceedings on the part of Seller are necessary
to consummate the transactions so contemplated. This Agreement has been and the
Contract of Union will be duly and validly executed and delivered by Seller and
constitutes a valid and binding obligation of Seller, enforceable against Seller
in accordance with its terms.
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(B) Except for consents and approvals of or filings or registrations with,
as applicable, the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), the FDIC, the Bank Commissioner of the State of New
Hampshire (the "Bank Commissioner"), the Board of Trust Company Incorporation
of the State of New Hampshire (the "BTCI"), the Securities and Exchange
Commission (the "SEC"), certain state "Blue Sky" or securities commissioners,
the stockholders of Seller and of Acquiror Sub, or as has been Previously
Disclosed, no consents or approvals of, or filings or registrations with, any
court, administrative agency or commission or other governmental authority or
instrumentality (each, a "Governmental Entity") or with any other third party
are necessary in connection with (i) the execution and delivery by Seller of
this Agreement and the Contract of Union and (ii) the consummation by Seller
of the Merger and the other transactions contemplated hereby and thereby.
3.5 No Violation. Except as Previously Disclosed, neither the execution and
delivery of this Agreement or the Contract of Union by Seller nor the
consummation by Seller of the transactions contemplated hereby or thereby, nor
compliance by Seller with any of the terms or provisions hereof or thereof, will
(i) violate any provision of Seller's Articles of Agreement or Bylaws or (ii)
(x) assuming that the consents and approvals referred to in Section 3.4 hereof
are duly obtained, violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to Seller or any of its
properties or assets, or (y) violate, conflict with, result in a breach of any
provisions of or 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,
result in the termination of or a right of termination or cancellation under,
accelerate the performance required by, or result in the creation of any lien,
pledge, security interest, charge or other encumbrance upon any of the
properties or assets of Seller under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement
or other instrument or obligation to which Seller is a party, or by which its
properties or assets may be bound or affected.
3.6 Financial Reports. Seller has previously delivered to Buyer copies of
(a) the consolidated balance sheets of Seller and its subsidiaries as of June
30, 1992, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the period October 10, 1991 to June 30,
1992, inclusive, as reported in Seller's Annual Report to Stockholders,
accompanied by the audit report of Price Waterhouse, independent public
accountants with respect to Seller, and (b) the unaudited consolidated balance
sheets of Seller and its subsidiaries as of December 31, 1992 and December 31,
1991 and the related unaudited consolidated statements of income and cash flows
for the period from formation to December 31, 1991 and the three- and six-month
periods ended December 31, 1992. The June 30, 1992 consolidated balance sheet
of Seller (including the related notes, where applicable) fairly presents the
consolidated financial position of Seller and its subsidiaries as of the date
thereof. The other financial statements referred to in this Section 3.6
(including the related notes, where applicable) fairly present (subject, in the
case of unaudited statements, to recurring audit adjustments normal in nature
and amount), the results of the consolidated operations and consolidated
financial position of Seller and its subsidiaries for the respective fiscal
periods or as of the respective dates therein set forth; each of such statements
(including the related notes, where applicable) comply in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, except as Previously Disclosed; and
each of such statements (including the related notes, where applicable) has been
prepared in accordance with generally accepted accounting principles ("GAAP")
consistently applied during the periods involved, except as indicated in the
notes thereto or except as Previously Disclosed. Without limiting the
generality of the foregoing, (x) the allowance for credit losses reflected in
Seller's consolidated balance sheets as of June 30, 1992 and December 31, 1992,
respectively, was determined in accordance with GAAP to be adequate to provide
for losses relating to or inherent in the loan and lease portfolios of Seller
and its subsidiaries (including, without limitation, commitments to extend
credit), and (y) except as Previously Disclosed, the Other Real Estate Owned (as
defined in Section 9.7 hereof) reflected in Seller's consolidated balance sheets
as of June 30, 1992 and December 31, 1992, respectively, was carried net of
reserves at the lower of cost or market value based on reasonably current
independent appraisals and net of estimated disposal costs. The books and
records of Seller, and to Seller's knowledge, each of its subsidiaries, have
been, and are being, maintained in accordance with applicable legal and
accounting requirements and reflect only actual transactions.
3.7 Asset Classification. Seller has previously made available to Buyer a
list, accurate and complete in all material respects, of the aggregate amounts
of loans, extensions of credit or other assets of Seller and its subsidiaries as
of December 31, 1992 that have been rated by Seller as a "4," "5," "6," or "7"
according to its internal grading system (the "Asset Classification"); and
except as Previously Disclosed, no amounts of loans, extensions of credit or
other assets that have been classified as of December 31, 1992 by any regulatory
examiner as "Other Loans Specially Mentioned," "Substandard," "Doubtful,"
"Loss," or words of similar import, or that it had been
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recommended for classification by Seller's independent accountants, are excluded
from the amounts disclosed in the Asset Classification, other than amounts of
loans, extensions of credit or other assets that were charged off by Seller
prior to December 31, 1992, and except as Previously Disclosed, Seller did not
have any unresolved disagreements with any regulatory examiners or independent
accountants regarding Seller's internal classification of any Loan or other
asset as of December 31, 1992.
3.8 Operations Since December 31, 1992. Except as Previously Disclosed,
since December 31, 1992, no event has occurred which has had a Material Adverse
Effect on Seller.
3.9 Litigation; Regulatory Issues. (A) Except as Previously Disclosed, no
litigation, proceeding or controversy before any court, governmental agency,
arbitrator or other tribunal is pending and, to the best of Seller's knowledge,
no such litigation, proceeding or controversy has been threatened.
(B) Except as Previously Disclosed, the businesses of Seller and its
subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any governmental entity. Except for routine examinations by a
Federal or state governmental agency or authority charged with the
supervision or regulation of depository institutions or engaged in the
insurance of deposits ("Bank Regulators"), as of the date hereof, to the
knowledge of Seller no investigation of any governmental entity with respect
to Seller or any of its subsidiaries is pending or threatened. Except as
Previously Disclosed, neither Seller nor any of its subsidiaries or
properties is a party to or is subject to any order, decree, directive,
agreement, memorandum of understanding or similar arrangement with, or a
commitment letter or similar submission to, or is the recipient of any
extraordinary supervisory letter from, any Bank Regulator which restricts or
purports to restrict in any material respect the conduct of the business of
Seller or any of its subsidiaries or properties, or in any manner relates to
the capital, liquidity, credit policies or management of Seller or any of its
subsidiaries or to its or their compliance with applicable statutes and
regulations, including, without limitation, the Community Reinvestment Act of
1977 or any comparable state law; and except as Previously Disclosed neither
Seller nor any of its subsidiaries has been advised by any Bank Regulator
that such Bank Regulator is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
decree, agreement, memorandum of understanding, extraordinary supervisory
letter, commitment letter or similar submission.
3.10 Material Contracts. Except as Previously Disclosed or as previously
disclosed in Seller's Financial Report, as of the date hereof neither Seller nor
any of its subsidiaries is bound by any material contract (as to it and its
subsidiaries taken as a whole) to be performed after the date hereof or any
employment, termination or consulting contract, agreement, arrangement or
understanding (whether written or oral).
3.11 Employee Benefit Plans. (A) All "employee benefit plans" within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), covering employees or former employees of Seller and its
subsidiaries (the "Seller Employees") have been Previously Disclosed, and true
and complete copies thereof have been made available to Buyer.
(B) Except as Previously Disclosed, all employee benefit plans covering
Seller Employees, to the extent subject to ERISA (the "Seller ERISA Plans"),
are and have been in compliance with ERISA, including Section 404(a)(1)
thereof; each Seller ERISA Plan which is an "employee pension benefit plan"
within the meaning of Section 3(2) of ERISA ("Pension Plan") and which is
intended to be qualified under Section 401(a) of the Code, has either (1)
received a favorable determination letter from the Internal Revenue Service
(the "IRS"), or (2) is or will be the subject of an application for a
favorable determination letter, and Seller is not aware of any circumstances
likely to result in the revocation or denial of any such favorable
determination letter; there is no pending or, to Seller's knowledge,
threatened litigation or administrative action relating to the Seller ERISA
Plans; and neither Seller nor any of its subsidiaries has engaged in a
transaction with respect to any Seller ERISA Plan that, assuming the taxable
period of such transaction expired as of the date hereof, would subject
Seller or any of its subsidiaries to a tax or penalty imposed by either
Section 4975 of the Code or Section 502(i) of ERISA.
(C) No ERISA Plan currently or formerly maintained by Seller or any of its
subsidiaries or by any entity which is considered one "employer" with Seller
under Section 4001(a)(14) of ERISA or Section 414 of the Code (an "ERISA
Affiliate") is subject to Title IV of ERISA.
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(D) Except as Previously Disclosed, all contributions required to be made
under the terms of each Seller ERISA Plan, its subsidiaries, or an ERISA
Affiliate of Seller during the current plan year and the immediately
preceding plan year of such Seller ERISA Plan have been timely made; and no
Pension Plan of Seller, its subsidiaries, or an ERISA Affiliate of Seller has
an "accumulated funding deficiency" (whether or not waived) within the
meaning of Section 412 of the Code or Section 302 of ERISA.
(E) Except as Previously Disclosed, consummation of the transactions
contemplated hereby, either individually or together with any other act or
event, will not cause any amounts payable under the ERISA Plans or any other
employee benefits plan (within the meaning of Section 3(3) of ERISA), program
or agreement to fail to be deductible for federal income tax purposes by
virtue of Section 280G of the Code.
(F) Except as Previously Disclosed, there are no material current or
projected liabilities for retiree health or life insurance benefits.
3.12 Labor Agreements. Neither Seller nor any of its subsidiaries is a party
to, or is bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is
Seller or any of its subsidiaries the subject of a proceeding asserting that it
or any such subsidiary has committed an unfair labor practice (within the
meaning of the National Labor Relations Act (the "NLRA")) or seeking to compel
it or such subsidiary to bargain with any labor organization as to wages and
conditions of employment, nor is there any strike involving it or any of its
subsidiaries pending or, to Seller's knowledge, threatened, nor is it aware of
any activity involving it or any of its subsidiaries' employees seeking to
certify a collective bargaining unit or engaging in any other organization
activity regulated by the NLRA.
3.13 Taxes. Except as Previously Disclosed, (i) all reports and returns with
respect to Taxes (as defined below) that are required to be filed by or with
respect to Seller or its subsidiaries, including without limitation consolidated
Federal and state income tax returns of Seller and its subsidiaries
(collectively, the "Tax Returns"), have been duly filed, or requests for
extensions have been timely filed and have not expired, for periods ended on or
prior to December 31, 1992, and on or prior to the date of the most recent
fiscal year end immediately preceding the Merger Effective Date, and each such
Tax Return was, as of the date it was filed, true, complete and accurate in all
material respects, (ii) all Federal, state, local or foreign income, gross
receipts, windfall profits, severance, property, ad valorem, production, sales,
use, license, excise, franchise, employment, withholding or similar taxes
imposed on Seller or its subsidiaries, together with any interest, additions, or
penalties with respect thereto and any interest in respect of such additions or
penalties (collectively, the "Taxes"), shown to be due on the Tax Returns have
been paid in full, (iii) the Tax Returns have been examined by the IRS or the
appropriate state or local taxing authority or the period for assessment of the
Taxes in respect of which such Tax Returns were required to be filed has
expired, (iv) all Taxes due with respect to completed and settled examinations
have been paid in full, (v) to the best of Seller's knowledge, no issues have
been missed by the relevant taxing authority in connection with the examination
of any of the Tax Returns, except as reserved against in Seller's financial
statements, (vi) no waivers of statutes of limitations (excluding such statutes
that relate to years currently under examination by the IRS) have been given by
or requested with respect to any Taxes of Seller or its subsidiaries, and (vii)
in the reasonable opinion of the management of Seller, the amounts set up as
reserves for Taxes on Seller's financial statements are sufficient in the
aggregate for the payment of all unpaid Taxes, whether or not disputed, accrued
or applicable, for the period ended December 31, 1992 or for any year or period
prior thereto.
3.14 Environmental. (A) Except as Previously Disclosed, to Seller's
knowledge, Seller and each of its subsidiaries and the Participation Facilities
(as defined below) are, and have been, in compliance with all Environmental Laws
(as defined below).
(B) Except as Previously Disclosed, there is no proceeding, investigation or
request for information pending or, to Seller's knowledge, threatened by or
before any Governmental Entity or other forum in which Seller or any of its
subsidiaries or any Participation Facility has been, or with respect to
threatened proceedings, reasonably would be expected to be, named as a
defendant or potentially responsible party (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law or (ii) relating to
the release or threatened release into the environment of any Hazardous
Material (as defined below), whether or not occurring at or on a site
currently or formerly owned, leased or operated by Seller or any of its
subsidiaries or any Participation Facility.
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(C) Except as Previously Disclosed, there is no proceeding, investigation or
request for information pending or, to Seller's knowledge, threatened by or
before any Governmental Entity or other forum in which Seller or any of its
subsidiaries in respect of any Loan Property has been, or with respect to
threatened proceedings, reasonably would be expected to be, named as a
defendant or potentially responsible party (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law or (ii) relating to
the release or threatened release into the environment of any Hazardous
Material at or on a Loan Property.
(D) To Seller's knowledge, there is no reasonable basis for any proceeding,
investigation or request for information of a type described in subsections
(B) or (C) above, except as has been Previously Disclosed. Seller has
Previously Disclosed all studies, reports, documents and other information in
its or any of its subsidiaries' possession or control relating to (i) any
potential proceeding, investigation or request for information of the type
described in subsections (B) and (C) above and (ii) any remedial, response or
cleanup action any of them has undertaken (except for actions that have been
approved as complete by a governmental agency or court of competent
jurisdiction and that do not require additional monitoring, operation or
maintenance), with respect to any Loan Properties currently or formerly
owned, leased or operated properties or Participation Facilities, or other
assets having a carrying value as reflected on the consolidated balance
sheets of Seller as of December 31, 1992.
(E) To Seller's knowledge, except as Previously Disclosed, during the period
of (i) Seller's or any of its subsidiaries' ownership, possession, control or
operation of any of their respective currently or formerly owned, leased or
operated properties or (ii) Seller's or any of its subsidiaries'
participation in the management of any Participation Facility, there have
been no releases of Hazardous Material in, on, under or affecting any such
property or Participation Facility.
(F) To Seller's knowledge, except as Previously Disclosed, prior to the
period of (i) Seller's or any of its subsidiaries' ownership lease or
operation of any of their respective owned properties or (ii) Seller's or any
of its subsidiaries' participation in the management of any Participation
Facility, there were no releases of Hazardous Material in, on, under or
affecting any such property or Participation Facility.
(G) Except as Previously Disclosed, to Seller's knowledge (without having
made any inquiry or investigation), during, or prior to, the period in which
Seller or any of its subsidiaries held an interest in a Loan Property, there
have not been, nor were, any releases of Hazardous Material in, on, under or
affecting any such Loan Property.
(H) The following definitions apply for purposes of this Section 3.14 and
Section 4.16 hereof: "Loan Property" means any property in which either
Seller or Buyer or any of their subsidiaries holds a security interest,
provided, however, that with respect to Seller only, the term "Loan Property"
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shall not include property that secures a loan which Seller is entitled to
require the FDIC to repurchase in its capacity as a receiver pursuant to any
of those several Purchase and Assumption Agreements dated October 10, 1991,
and, where required by the context, includes the owner or operator of such
property, but only with respect to such property; "Participation Facility"
means any facility in which Seller or Buyer or any of their subsidiaries
participates or participated in the management of, while holding indicia of
ownership principally to protect its security interest and, where required by
the context, includes the owner or operator or such property, but only with
respect to such property; "Environmental Law" means (i) any Federal, state
and local law, statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, legal doctrine, order, judgment, decree,
injunction, requirement or agreement with any Governmental Entity, relating
to (a) the protection, preservation or restoration of the environment,
(including, without limitation, air, water vapor, surface water, groundwater,
drinking water supply, surface land, subsurface land, plant and animal life
or any other natural resource), or to human health or safety, or (b) the
exposure to, or the use, storage, recycling treatment, generation,
transportation, processing, handling, labeling, production, release or
disposal of Hazardous Material, including, without limitation, the Federal
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
("CERCLA"), the Superfund Amendments and Reauthorization Act, the Federal
Water Pollution Control Act of 1972, the Federal Clean Air Act, the Federal
Clean Water Act, the Federal Resource Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste Amendments thereto) ("RCRA"), the
Federal Solid Waste Disposal and the Federal Toxic Substances Control Act,
and the Federal Insecticide, Fungicide and Rodenticide Act ("FIFRA"), the
Federal Occupational Safety and Health Act of 1970, each as amended and as
now in effect, and (ii) any common law
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or equitable doctrine (including, without limitation, injunctive relief and
tort doctrines such as negligence, nuisance, trespass and strict liability)
that may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any Hazardous
Material; and "Hazardous Material" means any substance presently listed,
defined, designated or classified as hazardous, toxic, radioactive or
dangerous, or otherwise regulated, under any Environmental Law, whether by
type or quantity, and includes, without limitation, any oil or other
petroleum product, toxic waste, pollutant, contaminant, hazardous substance,
toxic substance, hazardous waste, special waste or petroleum or any
derivative or by-product thereof, radon, radioactive material, asbestos,
asbestos containing material, urea formaldehyde foam insulation, lead and
polychlorinated biphenyl.
3.15 Subsidiaries. Seller has no subsidiaries other than those Previously
Disclosed. Seller owns, directly or indirectly, all of the issued and
outstanding shares of capital stock of each of the Seller subsidiaries, free and
clear of all liens, charges, encumbrances and security interests whatsoever, and
all of such shares are duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights. No Seller subsidiary has, or is
bound by, any outstanding subscriptions, options, warrants, calls, commitments
or agreements of any character calling for the purchase or issuance of any
shares of capital stock or any other equity security of such subsidiary or any
securities representing the right to purchase or otherwise receive any shares of
capital stock or any other equity security of such subsidiary.
3.16 Affiliates. Except as Previously Disclosed, to the best of Seller's
knowledge, there is no person who, as of the date of this Agreement, may be
deemed to be an "affiliate" of Seller as that term is used in Rule 145 under the
Securities Act of 1933, as amended (together with the rules and regulations
thereunder, the "Securities Act").
3.17 Pooling of Interests Treatment. To Seller's knowledge, it has not taken
any action that would cause the Merger to fail to qualify for pooling of
interests accounting treatment.
3.18 State Takeover Laws. Except as Previously Disclosed, the transactions
contemplated by this Agreement are not subject to any applicable state takeover
laws in effect as of the date hereof.
3.19 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by Seller directly with
the other parties hereto and no action has been taken by Seller or any of its
subsidiaries or any of their respective officers or directors that would give
rise to any valid claim against any party hereto for a brokerage commission,
finder's fee or other like payment, excluding a fee to be paid by the Surviving
Bank to Goldman, Sachs & Co., who have acted as financial advisors to Seller
pursuant to an agreement which has been Previously Disclosed.
3.20 Corporate Records. The minute books of Seller, and to Seller's
knowledge each of its subsidiaries, contain true, complete and accurate records
of all meetings and other corporate actions held or taken by their respective
stockholders and Boards of Directors (including committees of the Boards of
Directors).
3.21 Loan Portfolio. Except as Previously Disclosed, neither Seller nor any
of its subsidiaries is a party to any written or oral loan agreement, note or
borrowing arrangement (including without limitation, any lease, credit
enhancement, commitment or guarantee) (collectively, "Loans"), with any
director, Executive Officer (as defined in Section 9.7(A) hereof) or holder of
ten percent (10%) or more of the shares of Seller Common Stock outstanding as of
the date hereof, or any person, corporation or enterprise controlling,
controlled by or under common control with any of the foregoing. Except as
Previously Disclosed, all of the Loans originated by Seller and its subsidiaries
after October 10, 1991 were solicited, originated and exist in material
compliance with all applicable Seller loan policies. Except as Previously
Disclosed, each Loan having an original principal amount in excess of $250,000,
which was originated by Seller or any of its subsidiaries after October 10, 1991
and is reflected as an asset in Seller's financial statements, is in all
material respects a binding obligation of the respective obligors named therein
and no amount thereof is subject to any valid defenses which may be asserted
against Seller or any of its subsidiaries.
3.22 Intellectual Property. Seller and each of its subsidiaries owns or
possesses valid and binding licenses and other rights to use without payment all
material patents, copyrights, trade secrets, trade names, servicemarks and
trademarks (the "Intellectual Property") used in its businesses; and except as
Previously Disclosed, neither Seller nor any of its subsidiaries has received
any notice of conflict with respect thereto that asserts the right of others.
Seller
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and each of its subsidiaries have in all material respects performed all the
obligations required to be performed and are not in default in any material
respect under any contract, agreement, arrangement or commitment relating to the
Intellectual Property.
3.23 Undisclosed Liabilities. Except as Previously Disclosed, neither Seller
nor any of its subsidiaries has any liabilities or obligations of any nature
(absolute, accrued, contingent or otherwise) which are not adequately reserved
or reflected on Seller's unaudited consolidated balance sheet as of December 31,
1992, except for liabilities or obligations which in the aggregate do not exceed
$750,000.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
4.1 Recitals. The facts set forth in Paragraphs (A), and so much of (D)
that relates to Buyer, of the Recitals of this Agreement are true and correct.
4.2 Outstanding Shares. Buyer's outstanding shares of capital stock are
validly issued, fully paid and nonassessable and are free of preemptive rights,
with no personal liability attaching to the ownership thereof.
4.3 Capital Structure. (A) The total authorized capital stock of Buyer
consists of 150,000,000 shares of Buyer Common Stock and 10,000,000 shares of
Preferred Stock of Buyer, no-par value ("Buyer Preferred Stock").
(B) As of March 2, 1993, 6,314,470 shares of Buyer Common Stock were
reserved for issuance pursuant to Buyer's dividend reinvestment and stock
purchase plans, 50,894 shares of Buyer Common Stock were reserved for
issuance upon the exercise of stock options pursuant to the Stock Option and
Restricted Stock Plan and the 1989 Nonemployee Directors' Restricted Stock
Plan (collectively, the "Buyer Stock Plans"), no shares of Buyer Common Stock
were reserved for issuance upon the conversion of the Buyer Preferred Stock,
1,145,087 shares of Buyer Common Stock were held by Buyer in its treasury or
by its subsidiaries (other than trust account shares) and 1,500,000 shares of
Buyer Series A Junior Participating Preferred Stock were reserved for
issuance upon exercise of the rights (the "Buyer Rights") distributed to
holders of Buyer Common Stock pursuant to the Shareholder Rights Agreement,
dated as of February 28, 1989, between Buyer and Manufacturers Hanover Trust
Company, as Rights Agent (the "Buyer Rights Agreement").
(C) As of March 2, 1993, 5,750,000 shares of Buyer Depository Shares (each
representing a one-tenth interest in a share of 9.30% Cumulative Preferred
Stock ($250 stated value) were issued and outstanding and shares of Buyer
Preferred Stock (of stated value of $50.00 per share) were issued and
outstanding and no shares of Buyer Preferred Stock were held by Buyer in its
treasury or by its subsidiaries (other than trust account shares).
(D) As of the date hereof no voting debt of Buyer was issued or outstanding.
(E) As of the date hereof, except as Previously Disclosed and except for
this Agreement, the Buyer Rights Agreement and the Buyer Stock Plans, there
are no options, warrants, calls, rights, commitments or agreements of any
character to which Buyer or any of its subsidiaries is a party or by which it
is bound obligating Buyer or any of its subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock or any voting debt of Buyer or of any of its subsidiaries or obligating
Buyer or any of its subsidiaries to grant, extend or enter into any such
option, warrant, call, right, commitment or agreement. As of the date
hereof, except as Previously Disclosed, there are no outstanding contractual
obligations of Buyer or any of its subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of Buyer or any of its
subsidiaries.
(F) Since December 31, 1992, except as Previously Disclosed, Buyer has not
(i) issued or permitted to be issued any shares of capital stock, or
securities exercisable for or convertible into shares of capital stock, of
Buyer or any of its subsidiaries, other than pursuant to and as required by
the terms of the [Buyer Stock Plans]; (ii) repurchased, redeemed or otherwise
acquired, directly or indirectly through one or more of its subsidiaries, any
shares of capital stock of Buyer or any of its subsidiaries (other than the
acquisition of trust
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account shares); or (iii) declared, set aside, made or paid to the
stockholders of Buyer dividends or other distributions on the outstanding
shares of capital stock of Buyer, other than regular quarterly cash
dividends.
4.4 Merger Shares. The shares of Buyer Common Stock to be issued in
exchange for shares of Seller Common Stock upon consummation of the Merger will
have been duly authorized and, when issued in accordance with the terms of this
Agreement, will be validly issued, fully paid and nonassessable, with no
personal liability attaching to the ownership thereof, and subject to no
preemptive rights and will be identical in all respects to the shares of Buyer
Common Stock issued and outstanding as of the date hereof.
4.5 Corporate Power. Buyer and each of its subsidiaries has the corporate
power and authority to carry on its business as it is now being conducted and to
own or lease all its properties and assets. Buyer and each of its subsidiaries
(other than inactive subsidiaries) is duly licensed or qualified to do business
in each jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary. As used in this Agreement, the term
"subsidiary" when used with respect to Buyer means any corporation, partnership
or other organization, whether incorporated or unincorporated, which is
consolidated with Buyer for financial reporting purposes, other than any
inactive corporation, partnership or other organization.
4.6 Authorization; Consents and Approvals. (A) 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 Buyer. Except for the adoption of
this Agreement by the Board of Directors and stockholders of Acquiror Sub, no
other corporate proceedings by Buyer or Acquiror Sub are necessary to consummate
the transactions contemplated herein. This Agreement has been duly and validly
executed and delivered by Buyer and constitutes its valid and binding
obligation, enforceable against it in accordance with its terms.
(B) Except for consents and approvals of or filings or registrations with,
as applicable, the FDIC and the Office of Comptroller of Currency, the
Federal Reserve Board, the Bank Commissioner, the BTCI, the SEC, certain
state "Blue Sky" or securities commissioners, the stockholders of Seller and
of Acquiror Sub, or as has been Previously Disclosed, no consents or
approvals of, or filings or registrations with, any Governmental Entity or
with any third party are necessary in connection with (i) the execution and
delivery by Buyer of this Agreement and (ii) the consummation by Buyer and
Acquiror Sub of the Merger and the other transactions contemplated hereby.
4.7 No Violation. Except as Previously Disclosed, neither the execution and
delivery of this Agreement by Buyer nor the consummation by Buyer and Acquiror
Sub of the transactions contemplated hereby, nor compliance by Buyer or Acquiror
Sub with any of the terms or provisions hereof, will (i) violate any provision
of Buyer's charter or bylaws or (ii) to the knowledge of Buyer, (x) assuming
that the consents and approvals referred to in Section 4.6 hereof are duly
obtained, violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to Buyer or any of its subsidiaries
or any of its or their properties or assets, or (y) violate, conflict with,
result in a breach of any provisions of or 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, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the properties or assets of Buyer or any of its
subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Buyer or any of its subsidiaries is a party,
or by which its or their properties or assets may be bound or affected.
4.8 Financial Reports. Except as Previously Disclosed, Buyer's Annual
Report on Form 10-K for the fiscal year ended December 31, 1992, and all other
documents, as amended prior to the date of this Agreement, filed or to be filed
subsequent to December 31, 1992 under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended (together with the rules and
regulations thereunder, the "Exchange Act"), in the form filed with the SEC (in
each such case, its "Financial Reports"), did not and will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading; and each of the
balance sheets in or incorporated by reference into the Financial Reports
(including the related notes and schedules thereto) fairly
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presents and will fairly present the financial position of the entity or
entities to which it relates as of its date and each of the statements of income
and changes in stockholders' equity and cash flows or equivalent statements in
the Financial Reports (including any related notes and schedules thereto) fairly
presents and will fairly present the results of operations, changes in
stockholders' equity and changes in cash flows, as the case may be, of the
entity or entities to which it relates for the periods set forth therein, in
each case in accordance with GAAP applied to bank holding companies during the
periods involved, which in the case of unaudited statements shall reflect all
adjustments necessary for a fair presentation of such information. Without
limiting the generality of the foregoing, (a) the allowance for credit losses
reflected in the consolidated financial statements of Buyer included in its Form
10-K for the period ended December 31, 1992 was determined in accordance with
GAAP to be adequate to provide for losses relating to or inherent in the loan
and lease portfolios of Buyer and its subsidiaries (including without limitation
commitments to extend credit), and (b) the Other Real Estate Owned reflected in
the consolidated financial statements of Buyer included in its Form 10-K for the
period ended December 31, 1992 was carried net of reserves at the lower of cost
or market value based on current independent appraisals and net of estimated
disposal costs. The books and records of Buyer and its subsidiaries have been,
and are being, maintained in accordance with applicable legal and accounting
requirements and reflect only actual transactions.
4.9 Asset Classification. Except as Previously Disclosed, none of Buyer's
Loans or other assets that have been classified by any regulatory examiners as
"Other Loans Specially Mentioned," "Substandard," "Doubtful," "Loss," or words
of similar import, or that have been recommended for classification by Buyer's
independent accountants, are excluded from the amounts of Loans and other assets
of Buyer and its subsidiaries that have been classified by Buyer as of December
31, 1992, other than amounts of loans, extensions of credit or other assets that
were charged off by Buyer or its subsidiaries prior to December 31, 1992, and
except as Previously Disclosed, Buyer did not have any unresolved disagreements
with any regulatory examiners or its independent accountants regarding Buyer's
internal classifications of any Loan or other asset as of December 31, 1992.
4.10 Operations Since December 31, 1992. Except as Previously Disclosed,
since December 31, 1992, no event has occurred which is reasonably likely to
have a Material Adverse Effect on Buyer.
4.11 Litigation; Regulatory Issues. (A) Except as Previously Disclosed, no
litigation, proceeding or controversy before any court, governmental agency,
arbitrator or other tribunal is pending and, to the best of Buyer's knowledge,
no such litigation, proceeding or controversy has been threatened.
(B) Except as Previously Disclosed, the businesses of Buyer and its
subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any governmental entity. Except for routine examinations by
Bank Regulators, as of the date hereof, to Buyer's knowledge, no
investigation of any Governmental Entity with respect to Buyer or any of its
subsidiaries is pending or threatened. Except as Previously Disclosed
neither Buyer nor any of its subsidiaries or properties is a party to or is
subject to any order, decree, directive agreement, memorandum of
understanding or similar arrangement with, or a commitment letter or similar
submission to, or is the recipient of any extraordinary supervisory letter
from, any Bank Regulator which restricts or purports to restrict in any
material respect the conduct of the business of Buyer or any of its
subsidiaries or properties, or in any manner relates to the capital,
liquidity, credit policies or management of Buyer or any of its subsidiaries
or to its or their compliance with applicable statutes and regulations,
including, without limitation, the Community Reinvestment Act of 1977 or any
comparable state law; and except as Previously Disclosed neither Buyer nor
any of its subsidiaries has been advised by any Bank Regulator that such
authority is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree, directive,
agreement, memorandum of understanding, extraordinary supervisory letter,
commitment letter or similar submission.
4.12 Material Contracts. Except as Previously Disclosed or as previously
disclosed in the Financial Reports and except for this Agreement and agreements,
understandings or arrangements made in the ordinary course of business, neither
Buyer nor any of its subsidiaries is bound by any material contract (as to Buyer
and its subsidiaries taken as a whole) to be performed after the date hereof.
4.13 Employee Benefit Plans. (A) All "employee benefit plans" within the
meaning of Section 3(3) of ERISA, covering employees or former employees of
Buyer and its subsidiaries ("Buyer Employees") are Previously Disclosed, true
and complete copies of which have been made available to Seller.
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(B) Except as Previously Disclosed, all employee benefit plans covering
Buyer Employees, to the extent subject to ERISA (a "Buyer ERISA Plan"), are
and have been in compliance with ERISA, each Buyer ERISA Plan which is a
Pension Plan and which is intended to be qualified under Section 401(a) of
the Code, has either (1) received a favorable determination letter from the
IRS, or (2) is or will be the subject of an application for a favorable
determination letter, and Buyer is not aware of any circumstances likely to
result in the revocation or denial of any such favorable determination
letter; there is no pending or threatened litigation or administrative action
relating to the Buyer ERISA Plans and neither Buyer nor any of its
subsidiaries has engaged in a transaction with respect to any Buyer ERISA
Plan that, assuming the taxable period of such transaction expired as of the
date hereof, would subject Buyer or any of its subsidiaries to a tax or
penalty imposed by either Section 4975 of the Code or Section 502(i) of
ERISA.
(C) Except as Previously Disclosed, no liability under Subtitle C or D of
Title IV of ERISA has been or is expected to be incurred by Buyer or any of
its subsidiaries with respect to any ongoing frozen or terminated
"single-employer plan", within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any of them or any entity which is
considered an "ERISA Affiliate"; Buyer and its subsidiaries have not incurred
and do not expect to incur any withdrawal liability with respect to a
multiemployer plan under Subtitle E of Title IV of ERISA; no notice of a
"reportable event" within the meaning of Section 4043 of ERISA, for which the
30-day reporting requirement has not been waived, has been required to be
filed for any Pension Plan or the Pension Plan of an ERISA Affiliate within
the 12-month period ending on the date hereof.
(D) Except as Previously Disclosed, all contributions required to be made
under the terms of such ERISA Plan of Buyer, its subsidiaries, or an ERISA
Affiliate of Buyer during the current plan year and the immediately preceding
three plan years of any ERISA Plan have been timely made; and no Pension Plan
of Buyer, its subsidiaries, or an ERISA Affiliate of Buyer has an
"accumulated funding deficiency" (whether or not waived) within the meaning
of Section 412 of the Code or Section 302 of ERISA.
(E) Except as Previously Disclosed, under each Pension Plan which is a
single-employer plan within the meaning of Section 4001(a)(15) of ERISA, as
of the last day of the most recent plan year ended prior to the date hereof,
the actuarially determined present value of all "benefit liabilities", within
the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of
the actuarial assumptions contained in the ERISA Plan's most recent actuarial
valuation) did not exceed the then current value of the assets of such ERISA
Plan, and there has been no material adverse change in the financial position
of such ERISA Plan since the last day of the most recent plan year.
(F) Except as Previously Disclosed, there are no material current or
projected liabilities for retiree health or life insurance benefits.
4.14 Labor Agreements. Except as Previously Disclosed, neither Buyer nor any
of its subsidiaries is a party to, or is bound by, any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor is Buyer or any of its subsidiaries the subject of a
proceeding asserting that it or any such subsidiary has committed an unfair
labor practice (within the meaning of the NLRA) or seeking to compel it or such
subsidiary to bargain with any labor organization as to wages and conditions of
employment, nor is there any strike involving Buyer or any of its subsidiaries,
pending or, to the best of Buyer's knowledge, threatened, nor is Buyer aware of
any activity involving it or any of its subsidiaries' employees seeking to
certify a collective bargaining unit or engaging in any other organization
activity regulated by the NLRA.
4.15 Taxes. Except as Previously Disclosed, (i) all Tax Returns (as defined
in Section 3.13 above) that are required to be filed by or with respect to Buyer
or its subsidiaries, including without limitation consolidated Federal income
tax returns of it and its subsidiaries, have been duly filed, or requests for
extensions have been timely filed and have not expired, for periods ended on or
prior to December 31, 1992, and on or prior to the date of the most recent
fiscal year end immediately preceding the Merger Effective Date, and each such
Tax Return was, as of the date it was filed, true, complete and accurate in all
material respects, (ii) all Taxes (as defined in Section 3.13 above) shown to be
due on the Tax Returns of Buyer or its subsidiaries have been paid in full,
(iii) the Tax Returns have been examined by the IRS or the appropriate state,
local or foreign taxing authority or the period for assessment of the Taxes in
respect of which such Tax Returns were required to be filed has expired, (iv)
all Taxes due with respect to completed and settled examinations have been paid
in full, (v) to the best of Buyer's knowledge, no issues have
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been missed by the relevant taxing authority in connection with the examination
of any of the Tax Returns except as reserved against in its Financial Reports,
(vi) no waivers of statutes of limitations (excluding such statutes that relate
to years currently under examination by the IRS) have been given by or requested
with respect to any Taxes of Buyer or its subsidiaries, and (vii) in the
reasonable opinion of the management of Buyer, the amounts set up as reserves
for Taxes reflected in its Financial Reports are sufficient in the aggregate for
the payment of all unpaid Taxes (including any interest or penalties thereon),
whether or not disputed, accrued or applicable, for the period ended December
31, 1992 or for any year or period prior thereto, and for which Buyer may be
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.
4.16 Environmental. (A) Except as Previously Disclosed, to Buyer's
knowledge, Buyer and each of its subsidiaries and the Participation Facilities
(as defined in Section 3.14(H) above) are, and have been, in compliance with all
Environmental Laws (as defined in Section 3.14(H) above).
(B) Except as Previously Disclosed, there is no proceeding, investigation or
request for information pending or, to Buyer's knowledge, threatened by or
before any Governmental Entity or other forum in which Buyer or any of its
subsidiaries or any Participation Facility has been, or with respect to
threatened proceedings, reasonably would be expected to be, named as a
defendant or potentially responsible party (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law or (ii) relating to
the release or threatened release into the environment of any Hazardous
Material whether or not occurring at or on a site currently or formerly
owned, leased or operated by Buyer or any of its subsidiaries (other than a
Loan Property) or any Participation Facility.
(C) Except as Previously Disclosed, there is no proceeding, investigation or
request for information pending or, to Buyer's knowledge, threatened by or
before any Governmental Entity or other forum in which Buyer or any of its
subsidiaries in respect of any Loan Property has been, or with respect to
threatened proceedings, reasonably would be expected to be, named as a
defendant or potentially responsible party (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law or (ii) relating to
the release or threatened release into the environment of any Hazardous
Material.
(D) To Buyer's knowledge, there is no reasonable basis for any proceeding,
investigation or request for information of a type described in subsections
(B) or (C) above, except as Previously Disclosed.
(E) To Buyer's knowledge, except as Previously Disclosed, during the period
of (i) Buyer's or any of its subsidiaries' ownership, possession, control or
operation of any of their respective current owned, leased or operated
properties (other than a Loan Property), or (ii) Buyer's or any of its
subsidiaries' management of any Participation Facility there have not been
any releases of Hazardous Material in, on, under or affecting any such
property or Participation Facility.
(F) To Buyer's knowledge, except as Previously Disclosed, prior to the
period of (i) Buyer's or any of its subsidiaries' ownership or operation of
any of their respective current properties (other than a Loan Property), or
(ii) Buyer's or any of its subsidiaries' participation in the management of
any Participation Facility there were no releases of Hazardous Material in,
on, under or affecting any such property or Participation Facility.
(G) Except as Previously Disclosed, to Buyer's knowledge (without having
made any inquiry or investigation), during, or prior to, the period in which
Buyer or any of its subsidiaries held an interest in a Loan Property, there
have not been, nor were, any releases of Hazardous Material in, on, under or
affecting any such Loan Property.
4.17 Acquisition of Regulatory Approvals. To Buyer's knowledge, there is no
reasonable basis why the regulatory approvals referred to in Section 7.1(B)
should not be obtained without the imposition of any condition of the type
referred to in the proviso therein.
4.18 Pooling of Interests Treatment. To Buyer's knowledge, it has not taken
any action that would cause the Merger to fail to qualify for pooling of
interests accounting treatment.
4.19 Post-Merger Intentions. Buyer has no present plan or intention to (i)
reacquire any Buyer Common Stock
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issued in the Merger; (ii) liquidate the Surviving Bank or merge the Surviving
Bank with or into another corporation; (iii) sell or otherwise dispose of the
stock of the Surviving Bank except for transfers of stock to corporations
controlled by Buyer; or (iv) cause the Surviving Bank to sell or otherwise
dispose of any of its assets or of any of the assets acquired from Acquiror Sub,
except for dispositions made in the ordinary course of business or transfers of
assets to a corporation controlled by the Surviving Bank. Following the Merger,
the Surviving Bank will continue Seller's historic business or use a significant
portion of Seller's historic business assets in a business. Buyer has never
owned any shares of Seller Common Stock (other than shares of Seller Common
Stock held in fiduciary capacity).
4.20 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by Buyer directly with
Seller or Seller's representatives and no action has been taken by it that would
give rise to any valid claim against any party hereto for a brokerage
commission, finder's fee or other like payment, excluding a fee to be paid by
Buyer to Morgan Stanley & Co. Incorporated, who has acted as financial advisor
to Buyer.
ARTICLE V
COVENANTS OF SELLER
Seller hereby covenants to Buyer as follows:
5.1 Further Assurances. Subject to the terms and conditions of this
Agreement, Seller shall use its best efforts in good faith to take, or cause to
be taken, all actions, and to do, or cause to be done, all things necessary,
proper or desirable, or advisable under applicable laws, as promptly as
practicable so as to permit consummation of the Merger at the earliest possible
date and to otherwise enable consummation of the transactions contemplated
hereby and shall cooperate fully with Buyer and Acquiror Sub to that end,
including (i) cooperating with Buyer in supplying such information as Buyer may
reasonably request in connection with any public offerings of securities by
Buyer prior to the Merger Effective Date, and (ii) using all reasonable efforts
to lift or rescind any order adversely affecting its ability to consummate the
transactions contemplated herein and to cause to be satisfied the conditions
referred to in Article VII, and Seller shall use, and shall cause each of its
respective subsidiaries to use, all reasonable efforts to obtain all consents
(governmental or other) necessary for the consummation of the transactions
contemplated by this Agreement.
5.2 Capital Stock. Without the prior written consent of Buyer, Seller will
not make, declare or pay any dividend on, or declare or make any distribution
on, or directly or indirectly split, combine, redeem, reclassify, purchase or
otherwise acquire, any shares of its capital stock (other than Seller Preferred
Stock, the redemption of which is expressly permitted hereunder, and other than
in a fiduciary capacity in the ordinary course of its business and consistent
with past practice or in connection with stock received on a debt previously
contracted basis) or authorize the creation or issuance of, or issue, any
additional shares of its capital stock, or any options, calls or commitments
relating to its capital stock or any securities or obligations convertible into
or exchangeable for, or giving any person any right to subscribe for or acquire
from it shares of its capital stock or any securities or obligations convertible
into or exchangeable for shares of its capital stock; provided, however, that
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Seller may issue shares of Seller Common Stock in accordance with Seller Options
and Seller Warrants outstanding prior to the date of this Agreement, in each
case in accordance with their present terms, and pursuant to the Option
Agreement.
5.3 Employment Contracts; Bonuses. Except for normal increases and benefit
changes in the ordinary course of business consistent with past practices and
bonuses paid under existing policies consistent with past practice (which
bonuses shall not exceed $500,000 in the aggregate between the date hereof and
the Effective Time), and except as Previously Disclosed, without the prior
written consent of Buyer, Seller will not enter into or amend any employment
contracts or consulting agreements with, increase the rate of compensation of,
or pay or agree to pay any bonus to any person.
5.4 Employee Benefit Plans. Except as Previously Disclosed, without the
prior written consent of Buyer, Seller will not enter into or modify (except as
may be required by applicable law) any pension, retirement, stock option, stock
purchase, savings, profit sharing, deferred compensation, consulting, bonus,
retention bonus, group insurance, severance plan or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers or other
employees, including without limitation taking any action that (i) accelerates
the vesting or exercise of any benefits payable thereunder, or the right to
exercise Seller Options or Seller Warrants outstanding thereunder, or (ii)
results in the payment of cash or other consideration in
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satisfaction of any Seller Options or Seller Warrants.
5.5 Disposition of Assets. Except in the ordinary course of business or
except as Previously Disclosed, without the prior written consent of Buyer,
Seller will not dispose of or discontinue any portion of its assets, business or
properties, or merge or consolidate with, or acquire all or any substantial
portion of, the business or property of any other entity.
5.6 Articles of Agreement; Bylaws. Without the prior written consent of
Buyer, Seller will not amend its Articles of Agreement or Bylaws, except for
such amendments that Seller has Previously Disclosed.
5.7 Preparation of Proxy Statement. Seller shall promptly prepare a proxy
statement (the "Proxy Statement") to be mailed to the holders of Seller Common
Stock in connection with the Merger and to be filed by Buyer in a registration
statement (the "Registration Statement") with the SEC, which shall conform to
all applicable legal requirements, and Seller shall take all steps necessary to
duly call, give notice of, convene and hold a special meeting (the "Meeting") of
the holders of Seller Common Stock to be held as soon as practicable after the
date on which the Registration Statement becomes effective for purposes of
voting upon this Agreement, the Contract for Union and the Merger contemplated
hereby and thereby, and, subject to the fiduciary duties of Seller's Board of
Directors (as advised in writing by its counsel), Seller shall recommend to its
stockholders approval of such matters and shall use all reasonable efforts to
solicit and obtain votes of the holders of Seller Common Stock in favor of the
above proposals.
5.8 Registration Statement - Seller Information. When the Registration
Statement or any post-effective amendment or supplement thereto shall become
effective, and at all times subsequent to such effectiveness, up to and
including the date of the Meeting, such Registration Statement and all
amendments or supplements thereto, with respect to all information set forth
therein furnished or to be furnished by Seller relating to Seller or its
subsidiaries (including, without limitation, the information furnished by Seller
in the Proxy Statement), (i) will comply in all material respects with the
provisions of the Securities Act and any other applicable statutory or
regulatory requirements, and (ii) will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading; provided, however,
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that Seller shall be liable only for any untrue statement of a material fact or
omission to state a material fact in the Registration Statement made in reliance
upon, and in conformity with, written information concerning Seller furnished by
Seller specifically for use in the Registration Statement.
5.9 Inspection; Confidentiality. Upon reasonable notice, Seller shall
afford Buyer, and its officers, employees, counsel, accountants and other
authorized representatives, access, during normal business hours throughout the
period prior to the Effective Time, to all of Seller's properties, books,
contracts, commitments and records and, during such period, Seller shall furnish
promptly to Buyer (i) a copy of each material report, schedule and other
document filed by Seller pursuant to the requirements of Federal or state
banking laws, and (ii) all other information concerning its business, properties
and personnel as Buyer may reasonably request, and Buyer will hold any such
information which is non-public in confidence to the extent required by, and in
accordance with, that certain agreement dated January 9, 1993 between Buyer and
Goldman, Sachs & Co., as agent for Seller (the "Confidentiality Agreement");
provided, however, that no investigation pursuant to this Section 5.9 by Buyer
- -------- -------
shall affect or be deemed to modify or waive any representation or warranty made
by Seller or the conditions to the obligation of Buyer to consummate the
transactions contemplated by this Agreement.
5.10 No Solicitation. Seller shall not, and shall cause its subsidiaries not
to, solicit or encourage inquiries or proposals with respect to, or, except as
required by the fiduciary duties of Seller's Board of Directors (as advised in
writing by its counsel), furnish any non-public information relating to or
participate in any negotiations or discussions concerning, any acquisition or
purchase of all or a substantial portion of the assets of, or a substantial
equity interest in, Seller or any of its subsidiaries or any merger or other
business combination with Seller or any of its subsidiaries other than as
contemplated by this Agreement, provided that Seller may communicate information
about such proposal to its stockholders if and to the extent that the fiduciary
duties of Seller's Board of Directors require it to do so (as advised in writing
by its counsel); Seller will immediately cease and cause to be terminated any
existing activities, discussions or negotiations previously conducted with any
parties other than Buyer with respect to any of the foregoing; Seller shall
notify Buyer immediately if any such inquiries or proposals are received by, or
any such negotiations or discussions are sought to be initiated with, Seller or
any of its subsidiaries and shall promptly inform Buyer in writing of all of the
relevant details with respect to the foregoing; and Seller shall instruct
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its, and its subsidiaries', officers, directors, agents, advisors and affiliates
to refrain from doing any of the foregoing.
5.11 Affiliates Letter. Seller will use all reasonable efforts to cause each
person Previously Disclosed pursuant to Section 3.16 hereof who may be deemed to
be an "affiliate" of Seller for purposes of Rule 145 under the Securities Act
(collectively, the "Seller Affiliates") to execute and deliver to Buyer on or
before the mailing of the Proxy Statement for the Meeting an agreement,
substantially in the form attached hereto as Exhibit 5.11, restricting the
------------
disposition of each such Seller Affiliate's shares of Seller Common Stock and
the shares of Buyer Common Stock to be received by such Seller Affiliate in
exchange for such person's shares of Seller Common Stock.
5.12 State Takeover Laws. Seller shall not take any action that would cause
the transactions contemplated by this Agreement to be subject to any applicable
state takeover statute in effect as of the date of this Agreement, other than
such statutes as Seller has Previously Disclosed, and Seller shall take all
necessary steps to exempt (or ensure the continued exemption of) the
transactions contemplated by this Agreement from any applicable state takeover
law, as now or hereafter in effect.
5.13 Pooling of Interests. Seller shall take no action which would cause the
Merger to fail to qualify for pooling of interests accounting treatment;
provided, however, that nothing contained herein shall limit the ability of
- -------- -------
Buyer to exercise its rights under the Option Agreement.
5.14 Tax-Free Reorganization. Seller shall take no action which would cause
the Merger to fail to qualify as a tax-free reorganization under Section 368 of
the Code; provided, however, that nothing contained herein shall limit the
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ability of Buyer to exercise its rights under the Option Agreement.
5.15 No Revocation of Authority. Seller shall not take or agree to take any
action which might cause the Bank Commissioner to revoke the authority of Seller
to act as a guaranty savings bank in the State of New Hampshire.
5.16 Preferred Stock Redemption. Subject to receipt of all necessary
regulatory approvals, Seller shall redeem, prior to the Closing, all of the
outstanding shares of Seller Preferred Stock, in accordance with the terms
thereof.
5.17 Conduct of Business. During the period from the date of this Agreement
and continuing until the Effective Time, except as expressly contemplated or
permitted by this Agreement or the Option Agreement or with the prior written
consent of Buyer, Seller and its subsidiaries shall carry on their respective
businesses in the usual, regular and ordinary course and consistent with prudent
banking practice. Seller will use all reasonable efforts to (x) preserve its
business organization and that of its subsidiaries intact, (y) keep available to
itself and Buyer the present services of the employees of Seller and its
subsidiaries, and (z) preserve for itself and Buyer the good will of the
customers of Seller and its subsidiaries and others with whom business
relationships exist.
5.18 Notice of Adverse Changes. Seller will promptly advise Buyer in
writing, and keep Buyer fully informed, of (i) any inability or perceived
inability by Seller to perform or comply with the terms or conditions of this
Agreement or (ii) any event which may reasonably be expected to result in any of
its representations and warranties set forth in this Agreement being or becoming
untrue, or in any of the conditions to the Merger set forth in Article VII not
being satisfied, or in a violation of any provision of this Agreement.
5.19 FDIC Letter. Seller shall cooperate fully with Buyer in seeking to
obtain the letter referred to in Section 7.2(H) hereof.
5.20 Seller Agreements. Seller will not enter into any agreement, whether
written or oral, to effectuate any of the transactions set forth in Section 5.2,
5.3, 5.4, 5.5, 5.6, 5.23, 5.24, 5.25 or 5.26 hereof.
5.21 Buyer Review of Documents. Buyer shall have the right to review and
approve in advance, which approval shall not be unreasonably withheld or
conditioned, all characterizations of the information relating to Buyer and its
subsidiaries, and Buyer shall have the right to review in advance, and to the
extent practicable Seller will consult with Buyer on, in each case subject to
applicable laws relating to the exchange of information, all information
relating to Buyer and any of its subsidiaries, as the case may be, and any of
their respective subsidiaries, which appear in any filing made with any
Governmental Entity or third party in connection with the transactions
contemplated by this Agreement. In exercising its rights under this Section,
Buyer shall act reasonably and as promptly as practicable.
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5.22 Breach of Representations. Seller will not take any action that is
intended or may reasonably be expected to result in any of its representations
and warranties set forth in this Agreement being or becoming untrue, or in any
of the conditions to the Merger set forth in Article VII not being satisfied, or
in a violation of any provision of this Agreement.
5.23 No Encumbrances. Except in the ordinary course of business, with prior
notice to Buyer, or except as Previously Disclosed, Seller will not incur any
indebtedness for borrowed money, assume, guarantee, endorse or otherwise as an
accommodation become responsible for the obligations of any other individual,
corporation or other entity.
5.24 Branches. Seller will not file any application to relocate or terminate
the operations of any banking office.
5.25 Equity Investments. Seller will not make any equity investment or
commitment to make such an investment, including in any real estate or 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 prudent banking practices.
5.26 Material Contracts. Except in the ordinary course of business or except
as Previously Disclosed, Seller will not create, renew, amend or terminate or
give notice of a proposed renewal, amendment or termination of, any material
contract, agreement or lease for goods, services or office space to which Seller
or any of its subsidiaries is a party or by which Seller or any of its
subsidiaries or their respective properties is bound without Buyer's consent.
5.27 Advice of Changes. From time to time prior to the Effective Time,
Seller will disclose any matter which, if existing, occurring or known at the
date of this Agreement, would have been required to be disclosed or which is
necessary to correct any information which has been rendered inaccurate thereby.
No information disclosed pursuant to this Section shall affect or be deemed to
modify or waive any representation or warranty made by Seller or the conditions
to the obligation of Buyer to consummate the transactions contemplated by this
Agreement.
5.28 Current Information. During the period from the date of this Agreement
to the Effective Time, Seller will cause one or more of its designated
representatives to confer on a regular and frequent basis (not less than weekly)
with representatives of Buyer and to report (a) the general status of the
ongoing operations of Seller and its subsidiaries, (b) the status of, and the
action proposed to be taken with respect to, those Loans originated by Seller or
any of its subsidiaries after October 10, 1991, which, individually or in
combination with one or more other Loans to the same borrower thereunder, have
an original principal amount of $250,000 or more and are non-performing assets,
(c) any amendment to, or further advance under any Loan originated prior to
October 10, 1991 which advance or amendment, would not constitute a "Permitted
Advance" or "Permitted Amendment," as the case may be, each as defined in the
P&A Agreements as defined in Section 7.2(H) hereof. Seller will promptly notify
Buyer of any material change in the normal course of business or in the
operation of the properties of Seller or any of its subsidiaries and of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the institution or the threat
of significant litigation involving Seller or any of its subsidiaries, and will
keep Buyer fully informed of such events.
ARTICLE VI
COVENANTS OF BUYER
Buyer hereby covenants to Seller as follows:
6.1 Further Assurances. Subject to the terms and conditions of this
Agreement, Buyer shall use its best efforts in good faith to take, or cause to
be taken, all actions, and to do, or cause to be done, all things necessary,
proper or desirable, or advisable under applicable laws, as promptly as
practicable so as to permit consummation of the Merger at the earliest possible
date and to otherwise enable consummation of the transactions contemplated
hereby and shall cooperate fully with Seller to that end (it being understood
that any amendments to the Registration Statement or a resolicitation of proxies
as a consequence of an acquisition agreement by Buyer or any of its subsidiaries
shall not violate this covenant), including using all reasonable efforts to lift
or rescind any order adversely affecting its ability to consummate the
transactions contemplated herein and to cause to be satisfied the conditions
referred to in Article VII, and Buyer shall use, and shall cause each of its
subsidiaries to use, all reasonable efforts to obtain all consents
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(governmental or other) necessary or desirable for the consummation of the
transactions contemplated by this Agreement, including, without limitation, the
approval, as applicable, of the Federal Reserve Board under the Bank Holding
Company Act of 1956, as amended, the FDIC under the Bank Merger Act, the Bank
Commissioner pursuant to New Hampshire Revised Statutes Annotated Chapter 388,
and the BTCI pursuant to New Hampshire Revised Statutes Annotated Chapter
384:44-55; provided, however, that nothing contained in this Agreement shall be
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construed to require Buyer to comply with any condition or requirement imposed
by any regulatory approval which, in the reasonable opinion of Buyer, would so
materially adversely affect the economic or business benefits to Buyer of the
transactions contemplated by this Agreement, taken as a whole, as to render
inadvisable the consummation of the Merger.
6.2 Registration Statement. (A) Buyer shall, as promptly as practicable
following the date of this Agreement, prepare and file the Registration
Statement with the SEC in which the Proxy Statement will be included as a
prospectus. Buyer shall use its best efforts to cause the Registration
Statement to be declared effective as soon as practicable after the filing
thereof.
(B) When the Registration Statement or any post-effective amendment or
supplement thereto shall become effective, and at all times subsequent to
such effectiveness, up to and including the date of the Meeting, such
Registration Statement and all amendments or supplements thereto, with
respect to all information set forth therein furnished or to be furnished by
Buyer relating to Buyer or its subsidiaries, (i) will comply in all material
respects with the provisions of the Securities Act and any other applicable
statutory or regulatory requirements, and (ii) will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading;
provided, however, in no event shall Buyer be liable for any untrue statement
-------- -------
of a material fact or omission to state a material fact in the Registration
Statement made in reliance upon, and in conformity with, written information
concerning Seller furnished by Seller specifically for use in the
Registration Statement.
(C) Buyer will advise Seller, promptly after Buyer receives notice thereof,
of the time when the Registration Statement has become effective or any
supplement or amendment has been filed or the issuance of any stop order or
the suspension of the qualification of the Buyer Common Stock for offering or
sale in any jurisdiction, of the initiation or threat of any proceeding for
any such purpose, or of any request by the SEC for the amendment or
supplement of the Registration Statement or for additional information.
6.3 Blue Sky Permits. Buyer shall use its best efforts to obtain, prior to
the effective date of the Registration Statement, all necessary state securities
laws or "blue sky" permits and approvals required in connection with the
issuance of Buyer Common Stock in the Merger and upon the exercise of Seller
Options and Seller Warrants, provided that Buyer shall not be required by virtue
thereof to submit to general jurisdiction in any state.
6.4 NYSE Listing. Buyer shall use its best efforts to list, prior to the
Merger Effective Date, on the New York Stock Exchange (the "NYSE"), upon
official notice of issuance, (i) the shares of Buyer Common Stock to be issued
pursuant to the Merger and (ii) the shares of Buyer Common Stock reserved for
issuance upon the conversion of the Seller Options and Seller Warrants.
6.5 Conversion of Seller Options and Seller Warrants. (A) As soon as
practicable after the Merger Effective Date, Buyer shall deliver to the holders
of Seller Options and Seller Warrants (as those terms are defined in Section 2.7
above) appropriate notices setting forth such holders' rights as provided under
Section 2.7 hereof, and the agreement evidencing the grants of such Seller
Options and Seller Warrants, as the case may be, shall continue in effect on the
same terms and conditions (subject to the adjustments required by Section 2.7
after giving effect to the Merger and the assumption by Buyer as set forth above
and until otherwise determined). Buyer shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of Buyer Common
Stock for delivery upon exercise of the Seller Options and Seller Warrants
assumed by it in accordance with Section 2.7 hereof and this Section 6.5.
(B) As soon as practicable after the Merger Effective Date, Buyer shall file
a registration statement on Form S-3 or Form S-8, as the case may be (or any
successor or other appropriate forms), or another appropriate form, with
respect to the shares of Buyer Common Stock subject to such Seller Options
and Seller Warrants and shall use its best efforts to maintain the
effectiveness of such registration statement or registration statements
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(and maintain the current status of the prospectus or prospectuses contained
therein) for so long as such Seller Options and Seller Warrants remain
outstanding. With respect to those holders of Seller Options or Seller
Warrants, if any, who subsequent to the Merger will be subject to the
reporting requirements under Section 16(a) of the Exchange Act, where
applicable, Buyer shall comply with Rule 16b-3 promulgated under the Exchange
Act as it pertains to such derivative securities.
6.6 Inspection; Confidentiality. (A) Upon reasonable notice, Buyer shall
afford Seller, and its officers, employees, counsel, accountants and other
authorized representatives, access, during normal business hours throughout the
period prior to the date of the Meeting, to such information regarding Buyer and
its subsidiaries as shall be reasonably necessary for Seller to fulfill its
obligations pursuant to this Agreement to prepare the Proxy Statement. In
addition to the foregoing, Buyer shall, within a reasonable period of time prior
to the Closing, afford Seller and its officers, employees, counsel, accountants
and other authorized representatives, such access as is reasonably necessary to
confirm that the representations and warranties of Buyer made herein are true
and correct in all material respects. Buyer shall furnish promptly to Seller a
copy of each application, report, schedule, correspondence and other document
filed by Buyer with or received by Buyer from any Governmental Entity in
connection with the transactions contemplated hereunder, and Buyer agrees to
notify Seller by telephone within 24 hours of receipt of any adverse oral
communication from any Governmental Entity regarding the outcome of any
regulatory applications required in connection with the Merger. Neither Buyer
nor any of its subsidiaries shall be required to provide access to or to
disclose information where such access or disclosure would jeopardize the
attorney-client privilege of the institution in possession or control of such
information or would 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. No investigation pursuant to this Section 6.6 by Seller shall
affect or be deemed to modify or waive any representation or warranty made
herein by Buyer or the conditions to the obligation of Seller to consummate the
transactions contemplated by this Agreement.
(B) All information furnished by Buyer to Seller or its representatives
pursuant hereto shall be treated as the sole property of Buyer and, if the
Merger shall not occur, Seller and its representatives shall return to Buyer
all of such written information and all documents, notes, summaries or other
materials containing, reflecting or referring to, or derived from, such
information. Seller shall, and shall use its best 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 not apply to (i) any information which (x) was already in Seller's
possession prior to the disclosure thereof by Buyer; (y) was then generally
known to the public; or (z) was disclosed to 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 Seller is nonetheless,
in the opinion of its counsel, compelled to disclose information concerning
Buyer to any tribunal or governmental body or agency or else stand liable for
contempt or suffer other censure or penalty, Seller may disclose such
information to such tribunal or governmental body or agency without liability
hereunder.
6.7 Seller Review of Documents. Seller shall have the right to review and
approve in advance, which approval shall not be unreasonably withheld or
conditioned, all characterizations of the information relating to Seller and its
subsidiaries, and Seller shall have the right to review in advance, and to the
extent practicable Buyer will consult with Seller on, in each case subject to
applicable laws relating to the exchange of information, all information
relating to Buyer and any of its subsidiaries, as the case may be, and any of
their respective subsidiaries, which appear in any filing made with any
Governmental Entity or third party in connection with the transactions
contemplated by this Agreement. In exercising its rights under this Section,
Seller shall act reasonably and as promptly as practicable.
6.8 No Inconsistent Actions. Prior to the Effective Time, Buyer will not
(i) enter into any transaction or make any agreement or commitment and will use
its best efforts not to permit any event to occur, which could reasonably be
anticipated to result in (x) a material delay of receipt, or denial, of the
regulatory approvals referred to in Section 7.1(B) or (y) the imposition of any
condition or requirement that would materially adversely affect the economic or
business benefits to Buyer of the transactions contemplated by this Agreement or
(ii) adopt any plan or arrangement, or take or cause to be taken any action,
that would adversely affect holders of Seller Common Stock in a disproportionate
manner after the Effective Time. Without limiting the scope of the immediately
preceding sentence, Buyer shall not, and shall not permit any of its
subsidiaries to take or cause to be taken any action, either before or after the
Effective Time, that would (i) disqualify the Merger as a "reorganization"
within the meaning of
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Section 368(a) of the Code, or (ii) cause the Merger to fail to qualify for the
pooling of interests accounting treatment.
6.9 Notice of Adverse Changes. Buyer will promptly advise Seller in
writing, and keep Seller fully informed, of (i) any inability or perceived
inability by Buyer to perform or comply with the terms or conditions of this
Agreement, or (ii) any event which may reasonably be expected to result in any
of its representations and warranties set forth in this Agreement being or
becoming untrue, or in any of the conditions to the Merger set forth in Sections
7.1, 7.2 or 7.3 not being satisfied, or in a violation of any provision of this
Agreement.
6.10 Seller Employees. All employees of Seller and its subsidiaries
immediately prior to the Effective Time ("Current Employees") shall be employees
of the Surviving Bank immediately after the Effective Time. Buyer shall provide
to Current Employees group hospitalization, medical, life and disability
insurance comparable to that provided to Buyer's present employees. For a
period of at least one (1) year after the Merger Effective Date, Buyer shall
provide severance benefits to Current Employees no less favorable than those
benefits set forth in the Seller's Severance Benefits Policy, giving effect to
years of service with Seller and its subsidiaries (and service with the failed
depository institutions listed in Section 7.2(H) hereof to the extent Seller
gave effect, as of the date hereof, to such service as Previously Disclosed
pursuant to Section 3.11 hereof.
6.11 Buyer Employee Benefit Plans. Current Employees shall be entitled to
participate in Buyer's employee stock ownership plan and stock purchase plan and
other qualified retirement plans in which similarly situated employees of Buyer
participate, to the same extent as comparable employees of Buyer. As soon as
administratively practicable after the Effective Time, Buyer shall permit
Current Employees to participate in Buyer's defined benefit pension plan, thrift
plan, severance, and similar plans on the same terms and conditions as employees
of Buyer and its subsidiaries, giving effect to years of service with Seller and
its subsidiaries (and service with the failed depository institutions listed in
Section 7.2(H) hereof to the extent Seller gave effect, as of the date hereof,
to such service, as Previously Disclosed pursuant to Section 3.11 hereof) as if
such service ("Prior Service") were with Buyer, subject to the qualification of
the following sentence. Notwithstanding the immediately preceding sentence,
with respect to Buyer's defined benefit pension plan, Current Employees' Prior
Service shall be credited for purposes of participation and vesting, but not
benefit accrual, and with respect to Buyer's defined contribution savings plan,
Current Employees' Prior Service shall be credited for all purposes, except
determination of the level of Buyer's matching contributions. Seller's defined
contribution profit-sharing and 401(k) plan ("Seller Plan") will be merged into
a similar-type defined contribution plan of Buyer ("Buyer Plan") and the accrued
benefit immediately following the plan merger of each participant in the Buyer
Plan who was a Current Employee shall be no less than the accrued benefit of
such Current Employee in the Seller's Plans immediately prior to the plan
merger. At all times after the Effective Time, Buyer will, and will cause its
subsidiaries to, honor in accordance with their terms as in effect on the date
hereof, or as amended after the date hereof with the prior written consent of
Buyer, and Buyer will not, and will not cause or permit any of its subsidiaries
to, challenge the validity of any obligation of Seller under, any employment,
severance, consulting, supplemental retirement or other compensation contracts
or arrangement with any current or former director, officer or employee of
Seller, provided such contract or arrangement was Previously Disclosed to Buyer.
6.12 Indemnification; Director and Officer Insurance. (A) From and after
the Merger Effective Date, Buyer shall indemnify, defend and hold harmless each
person who is now, or has been at any time prior to the date hereof or who
becomes prior to the Effective Time, an officer, director or employee (to the
extent indemnification of employees is mandatory under Seller's Bylaws as in
effect as of the date hereof) of Seller or any of its subsidiaries (the
"Indemnified Parties") against all losses, claims, damages, costs, expenses,
liabilities or judgments, or amounts that are paid in settlement with the
approval of Buyer (which approval shall not be unreasonably withheld), in
connection with any claim, action, suit, proceeding or investigation based in
whole or in part on or arising in whole or in part out of the fact that such
person is or was a director, officer or employee of Seller or any of its
subsidiaries, whether pertaining to any matter existing or occurring at or prior
to the Merger Effective Date and whether asserted or claimed prior to, or at or
after, the Merger Effective Date ("Indemnified Liabilities"), in each case to
the fullest extent Seller would have been permitted under the law of the State
of New Hampshire to indemnify such person, and Buyer shall pay expenses in
advance of the final disposition of any such action or proceeding to each
Indemnified Party unless such advancement of expenses is expressly prohibited by
law. If, under applicable law, the permissibility of indemnification or the
advancement of expenses is contingent upon the Indemnified Party having met a
requisite standard of conduct, the determination as to whether the Indemnified
Party has met such standard of conduct shall be made by independent counsel
selected by Buyer and reasonably satisfactory to the Indemnified Party (which
approval shall not be unreasonably withheld). Without limiting the foregoing,
in the event any such
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claim, action, suit, proceeding or investigation is brought against any
Indemnified Party (whether arising before or after the Merger Effective Date),
the Indemnified Parties may retain counsel reasonably satisfactory to them after
consultation with Buyer; provided, however, that (i) Buyer shall have the right
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to assume the defense thereof and upon such assumption Buyer shall not be liable
to any Indemnified Party for any legal fees or expenses of other counsel or any
other fees or expenses subsequently incurred by any Indemnified Party in
connection with the defense thereof, except that if Buyer elects not to assume
such defense or counsel for the Indemnified Parties reasonably advises that
there are issues which raise conflicts of interest between Buyer and the
Indemnified Parties, the Indemnified Parties may retain counsel reasonably
satisfactory to Buyer (which approval shall not be unreasonably withheld), it
being agreed in advance that Nutter, McClennen & Fish and McLane, Graf,
Raulerson & Middleton will be satisfactory for purposes of this Section 6.12,
and Buyer shall pay the reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received; (ii) Buyer
shall be obligated pursuant to clause (i) immediately above to pay for only one
firm of counsel for all Indemnified Parties, unless there is, under applicable
standards of professional conduct, a conflict on any significant issue between
any two or more Indemnified Parties; (iii) Buyer shall not be liable for any
settlement effected without its prior written consent (which consent shall not
be unreasonably withheld); (iv) Buyer shall have no obligation hereunder to any
Indemnified Party when and if a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final and nonappealable,
that indemnification of such Indemnified Party in the manner contemplated hereby
is prohibited by applicable law; and (v) after the Merger Effective Date, Buyer
will use all reasonable efforts to assist in the vigorous defense of any matter
with respect to which an Indemnified Party is entitled to indemnification
hereunder. Any Indemnified Party wishing to claim indemnification under this
Section 6.12, upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify Buyer. Failure of the Indemnified Party to
give promptly such notice shall not relieve Buyer of its obligations to
indemnify under this Section 6.12, but as a result of any such failure, the
Indemnified Party shall be liable to the Indemnifying Party for the amount of
actual damages caused by such failure.
(B) All limitations of liability existing in favor of the Indemnified
Parties as provided in Seller's Articles of Agreement and Bylaws, or similar
governing documents of any of its subsidiaries, as in effect immediately
prior to the Effective Date, with respect to claims or liabilities arising
from facts or events existing or occurring prior to the Effective Time shall
be incorporated into the charter and bylaws of the Surviving Bank and shall
continue in full force and effect, without any amendment thereto, for a
period of six (6) years from the Merger Effective Date; provided, however,
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that all rights to indemnification in respect of any claim asserted or made
within such period shall continue until the final disposition of such claim.
(C) For a period of six (6) years after the Merger Effective Date, Buyer
shall maintain in effect the current policies of directors' and officers'
liability insurance maintained by Seller (provided that Buyer may substitute
therefor policies of at least the same coverage and amounts, with insurers of
no lesser financial standing, containing terms and conditions which are no
less advantageous to the directors and officers) with respect to claims
arising from facts or events which occurred before the Effective Time.
(D) If 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
corporation or entity of such consolidation or merger, or (ii) transfers or
conveys all or substantially all of its properties and assets to any person,
then, and in each such case, to the extent necessary, proper provision shall
be made so that the successors and assigns of Buyer assume the obligations
set forth in this Section 6.12.
6.13 Restrictions on Buyer Purchases of Buyer Common Stock. Buyer shall not,
and shall cause its directors, executive officers and any other "affiliated
purchasers" (as such term is defined in Rule 10b-6 promulgated by the SEC under
the Exchange Act) not to, bid for, or purchase for any account in which such
party has a beneficial interest, any shares of Buyer Common Stock during the
fifteen (15) consecutive full trading days ending on the Determination Date,
except that Buyer and its directors, executive officers and any other affiliated
purchasers shall not be prohibited from purchasing Buyer Common Stock in
connection with or pursuant to Buyer's Dividend Reinvestment Plan, 401(k) Plan
or Stock Option Plan.
6.14 Publication of Combined Financial Results. Buyer shall use its best
efforts to publish no later than thirty (30) days after the end of the first
month after the Merger Effective Date in which there are at least thirty (30)
days of post-Merger combined operations (which month may be the month in which
the Merger Effective Date occurs), combined sales and net income figures as
contemplated by and in accordance with the terms of SEC Accounting
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Series Release No. 135.
6.15 Breach of Representation. Buyer will not take any action that is
intended or may reasonably be expected to result in any of its representations
and warranties set forth in this Agreement being or becoming untrue, or in any
of the conditions to the Merger set forth in Article VII not being satisfied, or
in a violation of any provision of this Agreement.
6.16 Advice of Changes. From time to time prior to the Effective Time, Buyer
will disclose any matter which, if existing, occurring or known at the date of
this Agreement, would have been required to be disclosed or which is necessary
to correct any information which has been rendered inaccurate thereby. No
information disclosed pursuant to this Section 6.16 shall affect or be deemed to
modify or waive any representation or warranty made by Buyer or the conditions
to the obligation of Seller to consummate the transactions contemplated by this
Agreement.
6.17 Current Information. During the period from the date of this Agreement
to the Effective Time, Buyer will cause one or more of its designated
representatives to confer on a regular and frequent basis (not less than weekly)
with representatives of Seller and to report on the status of efforts to secure
the regulatory approvals required under Section 7.1(B) hereof, as well as
general status of the ongoing operations of Buyer.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is conditioned upon:
7.1 Conditions to Each Party's Obligations. The respective obligations of
Buyer and Seller under this Agreement shall be subject to the fulfillment at or
prior to the Closing of the following conditions, none of which may be waived:
(A) Stockholder Approval. This Agreement, the Merger and the transactions
contemplated hereby shall have been approved by the affirmative vote of the
holders of at least two-thirds of the outstanding shares of Seller Common
Stock and by the holders of at least two-thirds of the outstanding shares of
Acquiror Sub Common Stock, in accordance with applicable law.
(B) Regulatory Approvals. All necessary regulatory approvals required to
consummate the Merger and the other transactions contemplated hereby shall
have been obtained and shall remain in full force and effect and all
statutory or other required waiting periods in respect thereof shall have
expired; provided, however, that no regulatory approval shall have imposed
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any condition or requirement which, in the reasonable opinion of Buyer, would
so materially adversely affect the economic or business benefits to Buyer of
the transactions contemplated by this Agreement, taken as a whole, as to
render inadvisable the consummation of the Merger.
(C) Registration Statement Effective; Blue Sky Permits. The Registration
Statement shall have become effective under the Securities Act and no stop
order suspending the effectiveness of the Registration Statement shall have
been issued, and no proceedings for that purpose shall have been initiated or
threatened by the SEC or any other regulatory authority; and Buyer shall have
received all necessary state securities laws and "blue sky" permits and other
authorizations required in connection with the issuance of Buyer Common Stock
in the Merger and upon exercise of the Seller Options and Seller Warrants.
(D) No Injunction or Restraint; Illegality. Neither Buyer, Acquiror Sub nor
Seller shall be subject to any order, decree or injunction of any
Governmental Entity which enjoins or prohibits the consummation of the Merger
nor shall any proceeding by any Governmental Entity seeking any such order,
decree or injunction be pending. No statute, rule, regulation, order or
decree shall have been enacted, entered or promulgated by any Governmental
Entity which prohibits, restricts or makes illegal consummation of the
Merger.
7.2 Conditions to the Obligations of Buyer. The obligations of Buyer under
this Agreement shall be further subject to the satisfaction, at or prior to the
Closing, of the following conditions, any one or more of which may be waived by
Buyer:
(A) Accuracy of Seller's Representations. (i) The representations and
warranties contained herein of
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Seller shall be true and correct in all material respects as of the date of
this Agreement and on the Closing Date with the same effect as though all
such representations and warranties had been made on the Closing Date, except
(x) for any such representations and warranties made as of a specified date,
which shall be true and correct as of such date, or (y) as expressly
contemplated by this Agreement. The representations and warranties set forth
herein of Seller (other than as set forth in Sections 3.1, 3.2, the first
sentence of Section 3.3, and Sections 3.4(A), 3.5(i), 3.5(ii)(x) and 3.8, the
last sentence of Section 3.9(B), and Sections 3.11(A), 3.11(D), 3.17 and
3.18) shall be deemed true and correct in all material respects unless the
failures of such representations and warranties to be so true and correct,
together with the failure of any other representations and warranties of
Seller set forth herein to be so true and correct, in the aggregate,
represents a material adverse change from the business, assets, financial
condition or results of operations of Seller, as represented herein
considered as a whole, other than an adverse change resulting from a change
in interest rates, governmental regulatory policies, changes in generally
accepted accounting principles as such would apply to the financial
statements of Seller, or other matters affecting the banking industry
generally or the transactions contem- plated by this Agreement, including
the expenses incurred or to be incurred in connection therewith;
(ii) For purposes of this Section 7.2(A), a "material adverse change" to
Seller's "results of operations" (as defined in Section 9.7(B) hereof)
will not be deemed to have occurred unless the adverse impact on the
Seller's results of operation exceeds, or will exceed during the next
twelve (12) months, Four Million Two Hundred Fifty Thousand Dollars
($4,250,000) (the "Materiality Floor"); provided, however, that any
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individual breach of a representation or warranty in this Agreement with
respect to which the adverse financial impact on Seller's results of
operations is, or will be during the next twelve (12) months, less than Two
Hundred Thousand Dollars ($200,000) shall not be aggregated for purposes of
this sentence; it being understood and agreed that, in the event the
adverse impact on results of operations of a breach or breaches of Seller's
representations and warranties herein exceeds or will exceed the Materialty
Floor, the determination as to whether a material adverse change has
occurred to Seller's results of operations under this Section 7.2(A) shall
be made by reference to whether such breach or breaches has or have a
Material Adverse Effect on Seller without regard to the existence or level
of the Materiality Floor; and it being further understood and agreed that
(x) for purposes of assessing the impact of the failure of any statement
contained in Section 3.6 hereof to be true and correct, all failures within
any financial statement referred to therein shall be aggregated and
considered one individual item for purposes of identifying an individual
representation or warranty, provided, however, that failures affecting two
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or more financial statements but arising out of the same error or
misapplication of GAAP or a published rule or regulation of the SEC shall
be aggregated and considered one individual item, and (y) for purposes of
assessing the impact of any failure of any statement contained in Section
3.21 hereof to be true or correct, all failures within such Section shall
be aggregated and considered one individual item for purposes of
identifying an individual breach of representation or warranty.
(iii) Each and all of the agreements and covenants of Seller to be
performed and complied with pursuant to this Agreement and the other
agreements contemplated hereby prior to the Closing Date shall have been
duly performed and complied with in all material respects.
(B) Buyer Comfort Letter. Buyer shall have received from Price Waterhouse
letters, dated the date on which the Registration Statement or last amendment
thereto shall become effective, and dated the Closing Date, in form and
substance reasonably satisfactory to Buyer and its counsel, with respect to
Seller's consolidated financial position and results of operation, which
letters shall be based upon agreed upon procedures to be specified by Buyer,
which procedures shall be consistent with applicable professional standards
for letters delivered by independent accountants in connection with
comparable transactions, and Buyer shall have received from Price Waterhouse
a letter, dated as of the Closing Date in form and substance reasonably
satisfactory to Buyer, to the effect that the merger will qualify for pooling
of interests accounting treatment.
(C) Average Closing Price. The Average Closing Price shall not be more than
$27.025; provided, however, that this Section 7.2(C) shall not apply if
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Seller has waived the provisions of Section 2.2(C).
(D) Pooling of Interests Opinion. Buyer and Seller shall have received a
letter, dated as of the Merger Effective Date, in form and substance
reasonably acceptable to Buyer, from Price Waterhouse to the effect that the
Merger will qualify for pooling of interests accounting treatment.
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(E) Dissenting Stockholders. The aggregate number of shares of Seller
Common Stock owned by stockholders of Seller who have perfected and not
abandoned dissenters' rights of appraisal (consistent with the terms of
Section 2.5 hereof) shall not constitute more than seven and one-half percent
(7.5%) of the shares of Seller Common Stock outstanding immediately prior to
the Closing.
(F) Opinion of Seller's Counsel. Buyer and its directors and officers who
sign the Registration Statement shall have received an opinion, dated the
Closing Date, of Nutter, McClennen & Fish, Seller's counsel, in form and
substance reasonably satisfactory to Buyer.
(G) Receipt of Affiliate Letter. Buyer shall have received from each Seller
Affiliate an executed agreement in substantially the form attached hereto as
Exhibit 5.11.
(H) P&A Agreements. All of the obligations of the FDIC, including without
limitation, obligations to repurchase or make payments in respect of certain
assets of Seller under certain circumstances and to indemnify Seller under
certain circumstances, as set forth in (i) the Purchase and Assumption
Agreement dated as of October 10, 1991, among the FDIC, as receiver of
Dartmouth Bank, the FDIC and Seller, (ii) the Purchase and Assumption
Agreement dated as of October 10, 1991, among the FDIC, as receiver of
Numerica Savings Bank, F.S.B., the FDIC and Seller, (iii) the Purchase and
Assumption Agreement dated as of October 10, 1991, among the FDIC, as
receiver of New Hampshire Savings Bank, the FDIC and Seller, and (iv) the
Purchase and Assumption Agreement dated as of June 22, 1992 between the FDIC,
as the liquidating agent of The Somersworth Bank and Seller (collectively,
the "P&A Agreements"), shall survive the Merger and continue to be binding
upon and enforceable against the FDIC and inure to the Surviving Bank as the
successor to the Seller's rights and interests under the P&A Agreements; and
Buyer shall have received from the FDIC a letter in form and substance
reasonably satisfactory to Buyer substantially to the foregoing effect.
(I) Redemption of Seller Preferred Stock. Seller shall have redeemed all of
the Seller Preferred Stock, in accordance with the terms thereof.
(J) Certificates. Seller will furnish Buyer with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in this Section 7.2 as Buyer may reasonably request.
7.3 Conditions to the Obligations of Seller. The obligations of Seller under
this Agreement shall be further subject to the satisfaction, at or prior to the
Closing, of the following conditions, any one or more of which may be waived by
Seller:
(A) Accuracy of Buyer's Representations. (i) The representations and
warranties contained herein of Buyer shall be true and correct in all
material respects as of the date of this Agreement and on the Closing Date
with the same effect as though all such representations and warranties had
been made on the Closing Date, except (x) for any such representations and
warranties made as of a specified date, which shall be true and correct as
of such date, or (y) as expressly contemplated by this Agreement. The
representations and warranties set forth herein of Buyer (except as set forth
in Sections 4.1, 4.2, 4.3, 4.4, the first sentence of Section 4.5, and
Sections 4.6(A), 4.7(i), 4.7(ii)(x), and 4.10, the last sentence of 4.11(B),
and Sections 4.17 and 4.18) shall be deemed true and correct in all material
respects unless the failure of such representations and warranties, together
with the failure of any other representations and warranties of Buyer set
forth herein to be so true and correct, in the aggregate, represent a
material adverse change from the business, assets, financial condition or
results of operations of Buyer, as represented herein considered as a whole,
other than an adverse change resulting from a change in interest rates,
governmental regulatory policies, changes in generally accepted accounting
principles as such would apply to the financial statements of Buyer, or other
matters affecting the banking industry generally or the transactions
contemplated by this Agreement, including the expenses incurred or to be
incurred in connection therewith.
(ii) Each and all of the agreements and covenants of Buyer to be performed
and complied with pursuant to this Agreement and the other agreements
contemplated hereby prior to the Closing Date shall have been duly
performed and complied with in all material respects.
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(B) Seller Comfort Letter. Seller and its directors shall have received
from Price Waterhouse, Buyer's independent accountant, letters, dated the
date of or shortly prior to (i) the mailing of the Proxy Statement, and (ii)
the Closing Date, in form and substance reasonably satisfactory to Seller and
its counsel, with respect to Buyer's financial position and results of
operations, which letters shall be based upon agreed upon procedures to be
specified by Buyer, which procedures shall be consistent with applicable
professional standards for letters delivered by independent accountants in
connection with comparable transactions.
(C) Average Closing Price. The Average Closing Price shall not be less than
$19.975; provided, however, that this Section 7.3(C) shall not apply if Buyer
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has waived the provisions of Section 2.2(B).
(D) Tax Opinion. Seller shall have received an opinion from Price
Waterhouse, in form and substance reasonably satisfactory to Seller, which
opinion shall expressly state that it may be relied upon by the holders of
Seller Common Stock as of the Merger Effective Date, to the effect that, on
the basis of facts, representations and assumptions set forth in such opinion
which are consistent with the state of facts existing at the Effective Time,
(i) the Merger constitutes a reorganization under Section 368(a) of the Code,
(ii) each of Buyer and Seller will be a "party" to that reorganization within
the meaning of Section 368(b) of the Code, and (iii) for Federal income tax
purposes, no gain or loss will be recognized by stockholders of Seller who
receive shares of Buyer Common Stock in exchange for their shares of Seller
Common Stock, except that gain, loss or dividend income may be recognized as
to cash received in lieu of fractional share interests. In rendering their
opinion, Price Waterhouse may require and rely upon appropriate and customary
representations contained in certificates of officers of Buyer, Acquiror Sub,
Seller and others.
(E) Opinion of Buyer's Counsel. Seller shall have received an opinion,
dated the Merger Effective Date, of Skadden, Arps, Slate, Meagher & Flom,
counsel for Buyer and Acquiror Sub, in form and substance reasonably
satisfactory to Seller.
(F) NYSE Listing of Shares. The shares of Buyer Common Stock issuable
pursuant to the Merger, and the shares of Buyer Common Stock reserved for
issuance upon exercise of Seller Options and Seller Warrants shall have been
approved for listing on the NYSE, subject to official notice of issuance.
(G) Accounting Treatment. Seller shall have received from Price Waterhouse,
Buyer's independent accountant, a letter, dated shortly prior to the
commencement of the Pricing Period (as defined in Section 9.7(E) hereof),
stating the method of accounting to be applied to the Merger (i.e., "pooling
of interests" or "purchase"), which letter may state that it is subject to
the absence of any actions taken subsequent to the date of the letter and
prior to the Effective Time that would alter the conclusions expressed
therein; and if such letter states that the Merger is to be accounted for
using the purchase method of accounting and if Buyer intends to waive Section
7.2(D) hereof, Buyer shall have publicly announced the same at least
forty-eight (48) hours prior to the commencement of the Pricing Period.
(H) Certificates. Buyer will furnish Seller with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in this Section 7.3 as Seller may reasonably request.
ARTICLE VIII
ABANDONMENT
This Agreement may be abandoned prior to the Closing, either before or after
receipt of required stockholder approvals, under the following conditions:
8.1 Mutual Consent. By the mutual consent of Buyer and Seller, if the Board
of Directors of each so determines.
8.2 Breach. By Buyer or Seller, in the event of (i) a breach by the other
party of any representation or warranty contained herein, which breach cannot be
or has not been cured within thirty (30) days after the giving of written notice
to the breaching party of such breach and which breaches, individually or in the
aggregate, materially adversely affect the Merger and the other transactions
contemplated by this Agreement, or (ii) a material breach by the other party of
any of the covenants or agreements contained herein, which breach cannot be or
has not been cured within thirty (30) days after the giving of written notice to
the breaching party of such breach.
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8.3 Abandonment Date. By Buyer or Seller, if its Board of Directors so
determines, if the Closing does not occur on or before November 15, 1993, which
date (the "Abandonment Date") shall be extended to December 31, 1993 if all
necessary regulatory approvals required to consummate the Merger and the other
transactions contemplated hereby (excluding any required waiting periods) have
been received by November 15, 1993; provided, however, that the right to abandon
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under this Section 8.3 shall not be available to any party whose failure to
perform an obligation hereunder has been the cause of, or has resulted in, the
failure of the Closing to occur on or before the Abandonment Date.
8.4 No Stockholder Approval. By Seller or Buyer (provided that if the
abandoning party is Seller, Seller shall not be in material breach of any
obligations under Section 5.7 hereof), if the approval by the holders of Seller
Common Stock contemplated by Section 7.1(A) is not obtained by reason of the
failure to obtain the required vote at a duly held meeting called for the
purpose of obtaining such approval or at any adjournment or postponement
thereof.
8.5 Failure of Conditions. By Seller or Buyer, upon written notice to the
other, if it has become reasonably, objectively certain that any condition
required to be satisfied under Section 7.1 (other than subsection (A) thereof),
Section 7.2 (if by Buyer) or Section 7.3 (if by Seller) will not be satisfied on
or prior to the Abandonment Date and such condition has not been waived by Buyer
(for a condition in Section 7.2) or Seller (for a condition in Section 7.3).
8.6 Effect of Abandonment; Expenses. If this Agreement is abandoned by
either Seller or Buyer, as provided above, neither Buyer nor Seller shall have
any further obligations under Articles V or VI hereof except as set forth in
Section 6.6 hereof. If this Agreement is abandoned, expenses of the parties
hereto shall be determined as follows:
(A) Any abandonment of this Agreement pursuant to Section 8.1 or Section 8.4
hereof shall be without costs, expense or liability on the part of any party
to the other. Any abandonment of this Agreement pursuant to Section 8.2
hereof shall also be without cost, liability or expense on the part of any
party to the others, unless the breach of a representation or warranty, the
------
breach of a covenant or the failure to satisfy a condition precedent to the
Closing is caused by the willful conduct or gross negligence of a party in
which event said party shall be liable to the other party for all
out-of-pocket costs and expenses, including, without limitation, reasonable
legal, accounting and investment banking fees and expenses, incurred by such
other party in connection with the entering into of this Agreement and the
carrying out of any and all acts contemplated hereunder ("Expenses").
(B) If this Agreement is abandoned pursuant to Section 8.3 or Section 8.5 or
the transaction contemplated hereby otherwise fails to be consummated, in any
such case because of the failure to receive any required regulatory approval
or in the event Buyer shall elect to abandon this Agreement notwithstanding
the receipt of the required regulatory approvals due to the form thereof,
Buyer shall reimburse Seller for all Expenses; provided, however, that such
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Expenses shall only be reimbursed to a maximum of $750,000.
(C) 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 and notwithstanding anything to the contrary contained herein, no
party shall be relieved or released from any liabilities or damages arising
out of its willful breach of any provisions of this Agreement.
(D) Except as expressly provided in this Section 8.6, each of Buyer and
Seller will bear all expenses incurred by it in connection with this
Agreement and the transactions contemplated hereby.
ARTICLE IX
OTHER MATTERS
9.1 Survival. If the Merger Effective Date occurs, the agreements of the
parties which by their terms apply in whole or in part after the Merger
Effective Date shall survive the Merger Effective Date; all other
representations, warranties, agreements and covenants contained in this
Agreement shall be deemed to be conditions of the Merger and shall not survive
the Merger Effective Date.
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9.2 Waiver; Amendment. Prior to the Merger Effective Date, any provision of
this Agreement may be (i) waived by the party benefited by the provision, or
(ii) amended or modified at any time (including the structure of the
transaction), by an instrument in writing among the parties hereto approved by
their respective Boards of Directors and executed in the same manner as this
Agreement, except that, after the vote by the stockholders of Seller, the
consideration to be received by the stockholders of Seller for each share of
Seller Common Stock shall not thereby be decreased.
9.3 Publicity. At all times prior to the Effective Time, neither Seller nor
Buyer shall, without the prior consent of the other, issue, or permit any of its
directors, officers, employees or agents to issue, any press release or other
information to the press or any third party with respect to this Agreement or
the Merger or the transactions contemplated herein, except as required by law or
applicable stock exchange rule.
9.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same instrument, each
being deemed to constitute an original, and shall be effective when one or more
counterparts have been signed by each party hereto and delivered to the other
party hereto, which delivery may be made by facsimile transmission.
9.5 Governing Law. This Agreement shall be governed by, and interpreted in
accordance with, the laws of the State of Massachusetts, without regard to any
applicable conflicts of law.
9.6 Notices. Any notice, request, demand, consent, approval or other
communication to any party hereto shall be effective when received and shall be
given in writing, and delivered in person against receipt therefor, or sent by
-------
certified mail, postage prepaid, courier service, or facsimile transmission to
such party at its address set forth below or at such other address as it shall
hereafter furnish in writing to the other parties. All such notices and other
communications shall be deemed given on the date received by the addressee.
If to Buyer or the Shawmut National Corporation
Acquiror Sub, to: 777 Main Street
Hartford, CT 06115
Fax: (203) 728-4205
Attn: Chief Executive Officer
Copy to: Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Fax: (212) 735-2000
Attn: William S. Rubenstein, Esq.
Alan C. Myers, Esq.
If to Seller, to: New Dartmouth Bank
1155 Elm Street
Manchester, New Hampshire 03101
Fax: (603) 666-4585
Attn: Chief Executive Officer
Copy to: Nutter, McClennen & Fish
One International Place
Boston, MA 02110-2699
Fax: (617) 973-9748
Attn: John P. Driscoll, Jr., Esq.
Michael K. Krebs, Esq.
9.7 Definitions. Any term defined anywhere in this Agreement shall have the
meaning ascribed to it for all purposes of this Agreement (unless expressly
noted to the contrary). In addition:
(A) the term "knowledge" when used with respect to a party shall mean the
knowledge, after reasonable inquiry (except where otherwise noted), of any
"Executive Officer" of such party, as such term is defined in
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Regulation O of the Federal Reserve Board;
(B) the term "Material Adverse Effect," when applied to a party, shall mean
an event, occurrence or circumstance (including without limitation (i) the
making of any provisions for possible loan and lease losses, write-downs of
other real estate and taxes and (ii) any breach of a representation or
warranty by such party) which (a) has or is reasonably likely to have a
material adverse effect on the assets, financial position, results of
operations or business of the party and its subsidiaries, taken as a whole,
or (b) would materially impair the party's ability to perform its obligations
under this Agreement or the consummation of the Merger and the other
transactions contemplated by this Agreement; provided, however, that, solely
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for purposes of measuring whether an event, occurrence or circumstance has a
material adverse effect on such party's results of operations, the term
"results of operations" shall mean net interest income plus non-interest
income (less securities gains) less gross expenses (excluding provisions for
possible loan and lease losses, write-downs of other real estate and taxes);
and provided, further, that material adverse effect and material impairment
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shall not be deemed to include the impact of (i) changes in banking and
similar laws of general applicability or interpretations thereof by courts or
governmental authorities, (ii) changes in generally accepted accounting
principles or regulatory accounting requirements applicable to banks and bank
holding companies generally, (iii) a change in interest rates, governmental
policy or other matters affecting the banking industry generally, and (iv)
the expenses incurred or to be incurred under this Agreement on the operating
performance of the parties to this Agreement; and provided, further,
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notwithstanding anything herein to the contrary, in the event the failure of
the representations set forth in Section 3.13 hereof to be true and correct
results in a restatement of Seller's statements of income for any periods
referred to in Section 3.6 hereof, the definition of results of operations in
Section 9.7 hereof shall take into account Seller's after tax income as
restated.
(C) the terms "Other Real Estate Owned" or "OREO" shall mean real estate
acquired through foreclosure or by acceptance of a deed in lieu of
foreclosure or which is in substance repossessed;
(D) the term "Previously Disclosed" by a party shall mean information set
forth in a written disclosure letter that is delivered by that party to the
other party contemporaneously with the execution of this Agreement and
specifically designated as information "Previously Disclosed" pursuant to
this Agreement; and
(E) the term "Average Closing Price" shall mean the average of the daily
closing sales prices of Buyer Common Stock as reported on the NYSE Composite
Transactions reporting system (as reported by The Wall Street Journal or, if
not reported thereby, by another authoritative source as chosen by Buyer) for
the fifteen (15) consecutive full trading days in which such shares are
traded on the NYSE ending at the close of trading on the Determination Date
(the "Pricing Period").
9.8 Entire Understanding; Third Party Beneficiaries. This Agreement and the
Option Agreement represent the entire understanding of the parties hereto with
reference to the transactions contemplated hereby and supersedes any and all
other oral or written agreements heretofore made; provided, however, that the
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Confidentiality Agreement (other than the seventh paragraph thereof) shall
continue in full force and effect. Nothing in this Agreement expressed or
implied, is intended to confer upon any person, other than the parties hereto or
their respective successors, any rights, remedies, obligations or liabilities
under or by reason of this Agreement, except that holders of Seller Common Stock
are intended third party beneficiaries with respect to the provisions set forth
in Sections 2.2, 2.3, 2.4, 2.5, 2.6, 2.8, 2.11, 4.4 and 6.13, holders of Seller
Options and Seller Warrants are intended third party beneficiaries with respect
to the provisions set forth in Sections 2.7 and 6.5, Current Employees are
intended third party beneficiaries with respect to the provisions set forth in
Sections 6.10, 6.11 and 6.12(B), Seller's current and former officers, directors
and employees (to the extent provided in Section 6.12) are intended third party
beneficiaries with respect to the provisions set forth in Section 6.12 and
Seller Affiliates are intended third party beneficiaries with respect to the
provisions set forth in Section 6.14 and the provisions of such Sections may be
enforced after the Effective Time by such persons as intended third-party
beneficiaries.
9.9 Alternative Structure. Notwithstanding anything to the contrary
contained in this Agreement, subject to the final sentence of this Section 9.9,
Buyer may, at its sole option, elect to merge Seller with and into Acquiror Sub
such that the separate corporate existence of Seller shall cease and Acquiror
Sub shall be the Surviving Bank with Buyer the sole shareholder of the common
stock of the Surviving Bank, on the same terms and conditions contained herein
(except for such conversion); provided, however, that Buyer may not make such an
-------- -------
election if it would result in failure to satisfy any of the conditions set
forth in either Section 7.1 or 7.3. In the event Buyer makes an election
30
<PAGE>
pursuant to the prior sentence, Seller shall take all actions reasonably
requested by Buyer (including without limitation obtaining any requisite
corporate and stockholder approvals in connection therewith; provided, however,
-------- -------
that if Buyer exercises its rights under this Section 9.9 after Seller's
stockholders have approved this Agreement, Seller shall not have any obligation
to seek further stockholder approval unless Buyer first agrees to reimburse
Seller for any expenses incurred in connection therewith). In the event that
Buyer makes an election pursuant to the first sentence of this Section 9.9, the
parties hereto agree promptly to amend this Agreement (including the Contract
for Union) as Buyer may reasonably deem necessary or appropriate. If Buyer
reasonably determines that the Merger cannot be effected pursuant to this
Agreement (other than pursuant to this Section 9.9) and Buyer also reasonably
determines that the transactions contemplated by this Agreement can be effected
if one or more of the actions contemplated by this Section 9.9 are taken, then
Buyer shall elect to take one or more of the actions contemplated by this
Section 9.9; provided, however, that Buyer shall not be required to take any
-------- -------
such action if, in Buyer's reasonable judgment, it is probable that such action
would result in the failure of any of the conditions set forth in Article VII.
9.10 Table of Contents; Headings. The table of contents and section headings
herein have been inserted for convenience of reference only and shall in no way
modify or restrict any of the terms or provisions hereof.
9.11 Interpretation. When a reference is made in this Agreement to Sections
or Exhibits, such reference shall be to a Section of or Exhibit to this
Agreement unless otherwise indicated. Unless the context otherwise requires,
the words "hereof," "herein," "hereto," "hereby," and "hereunder" refer to this
entire Agreement; words importing persons include firms, associations and
corporations; all words importing the singular number include the plural number
and vice versa; and all words importing the masculine gender include the
feminine gender. 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 phrase "made available" in this Agreement shall mean
that the information referred to has been made available if requested by the
party to whom such information is to be made available. The phrases "the date
of this Agreement," "the date hereof" and terms of similar import, unless the
context otherwise requires, shall be deemed to refer to March 23, 1993.
9.12 Consents. For purposes of any provision of this Agreement requiring,
permitting or providing for the consent of Buyer or Seller, the written consent
of the Chief Executive Officer of Buyer or Seller, as the case may be, shall be
sufficient to constitute such consent.
9.13 Disclosures. No fact or event shall be deemed to have been disclosed by
one party to the other party for purposes of this Agreement unless such fact or
event is disclosed in a writing delivered to such party.
9.14 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
party. 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.
[Remainder of page intentionally left blank.]
31
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed, under seal, in counterparts by their duly authorized officers, all as
of the day and year first above written.
CORPORATE SHAWMUT NATIONAL CORPORATION
SEAL
ATTEST: By: /s/ Joel B. Alvord
--------------------
/s/ Raymond A. Guenter Name: Joel B. Alvord
----------------------
Raymond A. Guenter Title: Chairman and Chief
Secretary Executive Officer
CORPORATE NEW DARTMOUTH BANK
SEAL
ATTEST: By: /s/ Robert P. Keller
----------------------
/s/ Dennis P. Beaulieu Name: Robert P. Keller
----------------------
Dennis P. Beaulieu Title: President & Chief
Secretary and Assistant Clerk Executive Officer
32
<PAGE>
- --------------------------------------------------------------------------------
AMENDMENT No. 1
dated as of July 21, 1993
to
AGREEMENT AND PLAN OF MERGER
dated as of March 23, 1993
by and between
SHAWMUT NATIONAL CORPORATION
and
NEW DARTMOUTH BANK
- --------------------------------------------------------------------------------
<PAGE>
Amendment No. 1
AMENDMENT, dated as of July 21, 1993, by and between Shawmut National
Corporation, a Delaware corporation ("Buyer"), and New Dartmouth Bank, a New
Hampshire chartered guaranty savings bank ("Seller"), to the Agreement and Plan
of Merger, dated as of March 23, 1993 (the "Merger Agreement"), by and between
Seller and Buyer. Capitalized terms which are not otherwise defined herein
shall have the meaning set forth in the Merger Agreement.
WHEREAS, pursuant to Section 1.5 of the Merger Agreement each of Buyer
and Seller expressed its intention that the Merger constitute a reorganization
within the meaning of Section 368(a) of the Code; and
WHEREAS, in order to achieve such desired result, the parties hereto
have determined that it is advisable to provide for alternative structures for
the acquisition of Seller by Buyer; and
WHEREAS, Buyer and Seller desire to amend the Merger Agreement to
provide for alternative structures to consummate the Merger; and
WHEREAS, the Board of Directors of each of Buyer and Seller has approved
this Amendment and authorized the execution hereof in counterparts.
NOW, THEREFORE, in consideration of the foregoing and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Section 1.1 of the Merger Agreement is hereby amended in its entirety
to read as follows:
1.1 Closing. Provided that all the conditions set forth in Article
VII hereof have been met or waived, the closing (the "Closing") of the
Merger shall take place at the office of Nutter, McClennen & Fish
commencing at such time and on such date (the "Closing Date") as the
parties may mutually agree. Except as the parties may otherwise
mutually agree, the Closing Date shall be no more than five (5) days
after the Determination Date. As used herein, the term "Determination
Date" shall mean the later of:
(A) the date of the approval of this Agreement and the Merger by
the stockholders of Seller as set forth in Section 7.1 hereof; or
-----------
(B) the date of receipt of all required regulatory approvals as
set forth in Section 7.1 (and the expiration of any required waiting
-----------
periods under statute or incorporated into such required approvals);
or
(C) the earlier of December 24, 1993 and the date of receipt of
the Letter Ruling (as defined in Section 5.29 hereof) or written
------------
notice from the Internal Revenue Service ("IRS") to the effect that
the IRS does not intend to issue the Letter Ruling; provided, however,
-------- -------
that this Clause (C) may be waived by Seller.
All documents required by the terms of this Agreement to be
delivered at or prior to consummation of the Merger will be exchanged
by the parties at the Closing. Seller and Acquiror Sub shall execute
and deliver to the necessary regulatory authorities, prior to the
Closing if necessary, a certificate of merger, contract for union or
other comparable document (the "Contract for Union") in such form as
shall be required in order to effect the Merger on the terms and
subject to the conditions set forth herein.
2. Section 1.2 of the Merger Agreement is hereby amended in its entirety to
read as follows:
1.2 Effective Time of Merger. As soon as practicable, but in
any event not later than one (1) business day after the Closing Date,
Buyer shall cause the Contract for Union or charter, as the case may
be, of the Surviving Bank (as defined in Section 1.3 hereof) to be
-----------
submitted to the Secretary of State of the State of New Hampshire (the
"Secretary of State"), for filing, as provided
1
<PAGE>
under applicable law. The Merger shall become effective on the date
(the "Merger Effective Date") and at the time (the "Effective Time")
such Contract for Union or charter is accepted for filing by the
Secretary of State or on such other date and at such other time as the
Contract for Union shall specify.
3. Section 1.3(A) of the Merger Agreement is hereby amended in its
entirety to read as follows:
(A) At the Effective Time, at the election of Seller either (i)
Seller shall merge with and into Acquiror Sub (the "Forward Merger"),
the separate existence of Seller shall cease, and Acquiror Sub shall
continue its corporate existence as a wholly-owned subsidiary of Buyer
(the "Forward Merger Structure") or (ii) Acquiror Sub shall merge
with and into Seller (the "Reverse Merger"), the separate existence of
Acquiror Sub shall cease, and Seller shall continue its corporate
existence as a wholly-owned subsidiary of Buyer (the "Reverse Merger
Structure"). In the event the Forward Merger Structure is utilized,
then immediately following the Forward Merger, Buyer shall contribute
all of the capital stock of Acquiror Sub to a direct New Hampshire
business corporation subsidiary of Buyer. As used in this Agreement,
the term "Surviving Bank" shall refer to Acquiror Sub in the case of
the Forward Merger Structure and Seller in the case of the Reverse
Merger Structure.
4. Section 2.1 of the Merger Agreement is hereby amended in its entirety to
read as follows:
2.1 Outstanding Acquiror Sub Common Stock. Each share of the
common stock of Acquiror Sub (the "Acquiror Sub Common Stock") issued
and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger, (A) remain issued and outstanding following the
Merger if the Forward Merger Structure is utilized and (B)
automatically and without any action on the part of Buyer, become and
be converted into one (1) share of Seller Common Stock if the Reverse
Merger Structure is utilized.
5. Section 3.4(A) of the Merger Agreement is hereby amended in its
entirety to read as follows:
(A) Seller has full corporate power and authority to execute
and deliver this Agreement and the Contract of Union and to consummate
the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Contract of Union and the
consummation of the transactions contemplated hereby and thereby have
been duly and validly approved by Seller's Board of Directors.
Seller's Board of Directors has directed that this Agreement and the
Contract of Union and the transactions contemplated hereby and thereby
be submitted to the holders of Seller Common Stock and the holders of
Seller Preferred Stock for approval at a meeting of such stockholders,
and except for the adoption of this Agreement and the Contract of
Union by its stockholders as required under New Hampshire law, no
other corporate proceedings on the part of Seller are necessary to
consummate the transactions so contemplated. This Agreement has been
and the Contract for Union will be duly and validly executed and
delivered by Seller and this Agreement constitutes, and the Contract
for Union will constitute, a valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms.
6. Section 5.7 of the Merger Agreement is hereby amended in its entirety to
read as follows:
5.7 Preparation of Proxy Statement. Seller shall promptly
prepare a proxy statement (the "Proxy Statement") to be mailed to the
holders of Seller Common Stock and the holders of Seller Preferred
Stock in connection with the Merger and to be filed by Buyer in a
registration statement (the "Registration Statement") with the SEC,
which shall conform to all applicable legal requirements, and Seller
shall take all steps necessary to duly call, give notice of, convene
and hold a special meeting (the "Meeting") of the holders of Seller
Common Stock and the holders of Seller Preferred Stock to be held as
soon as practicable after the date on which the Registration Statement
becomes effective for purposes of voting upon this Agreement, the
Contract for Union and the Merger contemplated hereby and thereby,
and, subject to the fiduciary duties of Seller's Board of Directors
(as advised in writing by its counsel), Seller shall recommend to its
stockholders approval of such matters and shall use all reasonable
efforts to solicit and obtain votes of the
2
<PAGE>
holders of Seller Common Stock and the holders of Seller Preferred
Stock in favor of the above proposals.
7. The following Section 5.29 is hereby added in its entirety immediately
following Section 5.28 of the Merger Agreement:
5.29 Letter Ruling. Seller shall use its best efforts to obtain,
and shall cooperate with Buyer in obtaining, a private letter ruling
(the "Letter Ruling") from the Internal Revenue Service as promptly as
practicable, to the effect that the contribution by Buyer immediately
after the Effective Time of the Forward Merger of the capital stock of
Acquiror Sub to another first-tier wholly-owned subsidiary of Buyer
does not disqualify the Forward Merger as a reorganization under such
section; provided, however, this Section 5.29 shall not be applicable
-------- -------
if Seller has waived Clause (C) of Section 1.1 hereof.
-----------
Buyer and Seller further agree that the phrase "as promptly as practicable" as
used in Section 5.29 of the Merger Agreement shall mean as promptly as
practicable after the date of this Amendment.
8. The following Section 6.18 is hereby added in its entirety immediately
following Section 6.17 of the Merger Agreement:
6.18 Letter Ruling; Alternative Structures. (A) Buyer shall use
its best efforts to cooperate with Seller in obtaining the Letter
Ruling (as defined in Section 5.29 hereof).
------------
(B) If Seller elects to utilize the Forward Merger Structure,
Buyer shall cooperate with Seller and shall use its best efforts prior
to the Effective Time to effect the related transactions contemplated
hereby, in a manner which, in the reasonable opinion of Seller's legal
and tax advisors, will provide the greatest degree of certainty that
the Forward Merger will constitute a reorganization within the meaning
of Section 368(a) of the Code; provided, however, that this Section
-------- -------
6.18(B) shall not be deemed to require Buyer to take any action that,
in the reasonable opinion of Buyer's counsel, would require prior
regulatory approval.
9. Section 7.1(A) of the Merger Agreement is hereby amended in its entirety
to read as follows:
(A) Stockholder Approval. This Agreement, the Contract for
Union, the Merger and the transactions contemplated hereby shall have
been approved by the affirmative vote of the holders of at least
two-thirds of the outstanding shares of capital stock of each of
Seller and Acquiror Sub, in accordance with applicable law and by the
affirmative vote of the holders of a majority of the outstanding
shares of Seller Common Stock in accordance with Seller's Articles of
Agreement.
10. Section 7.03(D) of the Merger Agreement is hereby amended in its
entirety to read as follows:
(D) Tax Opinion. Seller shall have received an opinion of Price
Waterhouse covering the structure to be used to effect the Merger and
the related transactions contemplated thereby and stating a conclusion
that is no less favorable in either form or substance to the holders
of Seller Common Stock than (i) Exhibit 7.03(D)(i) attached hereto if
the Forward Merger Structure is to be utilized pursuant to Section
1.4(a)(i) hereof and (ii) Exhibit 7.03(D)(ii) attached hereto if the
Reverse Merger Structure is to be utilized pursuant to Section
1.4(A)(ii) hereof.
11. Section 8.3 of the Merger Agreement is hereby amended in its entirety to
read as follows:
8.3 Abandonment Date. By Buyer or Seller, if its Board of
Directors so determines, if the Closing does not occur on or before
November 15, 1993, which date (the "Abandonment Date") (i) shall
automatically be extended to December 31, 1993 if all necessary
regulatory approvals required to consummate the Merger and the other
transactions contemplated hereby (excluding any required waiting
periods) have been received by November 15, 1993 and (ii) may be
extended by Seller at its sole discretion to a date not later than
December 31, 1993 if, by November 15, 1993,
3
<PAGE>
the Letter Ruling has not been issued but all necessary regulatory
approvals required to consummate the Merger and the other transactions
contemplated hereby have been received and any required waiting
periods have expired; provided, however, that the right to abandon
-------- -------
under this Section 8.3 shall not be available to any party whose
failure to perform an obligation hereunder has been the cause of, or
has resulted in, the failure of the Closing to occur on or before the
Abandonment Date.
12. Section 8.4 of the Merger Agreement is hereby amended in its entirety to
read as follows:
8.4 No Stockholder Approval. By Seller or Buyer (provided that if
the abandoning party is Seller, Seller shall not be in material breach
of any obligations under Section 5.7 hereof), if the approval by the
holders of Seller Common Stock and Seller Preferred Stock contemplated
by Section 7.1(A) is not obtained by reason of the failure to obtain
the required vote at a duly held meeting called for the purpose of
obtaining such approval or at any adjournment or postponement thereof.
13. Section 9.7 of the Merger Agreement is hereby amended by adding the
following subsection (F):
(F) The term "Merger" shall mean either the Forward Merger or
------
the Reverse Merger, as the case may be.
14. Section 9.8 of the Merger Agreement is hereby amended in its entirety to
read as follows:
9.8 Entire Understanding; Third Party Beneficiaries. This
Agreement and the Option Agreement represent the entire understanding
of the parties hereto with reference to the transactions contemplated
hereby and supersedes any and all other oral or written agreements
heretofore made; provided, however, that the Confidentiality Agreement
-------- -------
(other than the seventh paragraph thereof) shall continue in full
force and effect. Nothing in this Agreement expressed or implied, is
intended to confer upon any person, other than the parties hereto or
their respective successors, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except that holders
of Seller Common Stock are intended third party beneficiaries with
respect to the provisions set forth in Sections 2.2, 2.3, 2.4, 2.5,
2.6, 2.8, 2.11, 4.4, 6.8 and 6.13, holders of Seller Options and
Seller Warrants are intended third party beneficiaries with respect to
the provisions set forth in Sections 2.7 and 6.5, Current Employees
are intended third party beneficiaries with respect to the provisions
set forth in Sections 6.10, 6.11 and 6.12(B), Seller's current and
former officers, directors and employees (to the extent provided in
Section 6.12) are intended third party beneficiaries with respect to
the provisions set forth in Section 6.12 and Seller Affiliates are
intended third party beneficiaries with respect to the provisions set
forth in Section 6.14 and the provisions of such Sections may be
enforced after the Effective Time by such persons as intended
third-party beneficiaries.
15. Section 9.9 of the Merger Agreement is hereby amended in its entirety to
read as follows:
9.9 Alternative Structure. [Reserved]
16. Each of the parties hereto represents to the other that (i) it has full
corporate power and authority to execute and deliver this Amendment and to
consummate the transactions contemplated hereby, (ii) the execution and delivery
of this Amendment by such party have been duly and validly approved by the Board
of Directors of such party and no other corporate proceedings on the part of
such party are necessary in connection with such Amendment and (iii) this
Amendment has been duly and validly executed and delivered by such party and
constitutes a valid and binding obligation of such party, enforceable against
such party in accordance with its terms.
17. Except as expressly amended by this Amendment, the Merger Agreement is
hereby ratified and confirmed in all respects.
18. This Amendment may be executed in counterparts, all of which shall be
considered one and the same instrument, each being deemed to constitute an
original, and shall be effective when one or more counterparts have
4
<PAGE>
been signed by each party hereto and delivered to the other party hereto, which
delivery may be made by facsimile transmission.
19. This Agreement shall be governed by, and interpreted in accordance with,
the laws of the Commonwealth of Massachusetts, without regard to any applicable
conflicts of law.
20. In the event of any inconsistency between the terms of this Amendment
and the Merger Agreement, this Amendment shall govern.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed, under seal, in counterparts by their duly authorized officers, all as
of the day and year first above written.
CORPORATE SHAWMUT NATIONAL CORPORATION
SEAL
ATTEST:
By: /s/ Raymond A. Guenter
/s/ Linda J. Kelly -----------------------
------------------- Name: Raymond A. Guenter
Linda J. Kelly Title: Executive Vice President
Assistant Secretary
CORPORATE NEW DARTMOUTH BANK
SEAL
ATTEST: By: /s/ Robert P. Keller
--------------------
/s/ Dennis P. Beaulieu Name: Robert P. Keller
----------------------- Title: President & Chief
Dennis P. Beaulieu Executive Officer
Secretary and Assistant Clerk
5
<PAGE>
- --------------------------------------------------------------------------------
AMENDMENT No. 2
dated as of December 20, 1993
to
AGREEMENT AND PLAN OF MERGER
dated as of March 23, 1993
by and between
SHAWMUT NATIONAL CORPORATION
and
NEW DARTMOUTH BANK
- --------------------------------------------------------------------------------
<PAGE>
Amendment No. 2
AMENDMENT, dated as of December 20, 1993, by and between Shawmut
National Corporation, a Delaware corporation ("Buyer"), and New Dartmouth Bank,
a New Hampshire chartered guaranty savings bank ("Seller"), to the Agreement and
Plan of Merger, dated as of March 23, 1993, as amended as of July 21, 1993 (the
"Merger Agreement"), by and between Seller and Buyer. Capitalized terms which
are not otherwise defined herein shall have the meaning set forth in the Merger
Agreement.
WHEREAS, Buyer and Seller desire to amend the Merger Agreement to, among
other things, extend the Abandonment Date and to increase the consideration to
be paid to the stockholders of Seller; and
WHEREAS, the Board of Directors of each of Buyer and Seller has approved this
Amendment and authorized the execution hereof in counterparts.
NOW, THEREFORE, in consideration of the foregoing and intending to be legally
bound hereby, the parties hereto agree as follows:
1. Section 2.2 of the Merger Agreement is hereby amended in its entirety
to read as follows:
2.2 Outstanding Seller Common Stock. (A) Each share of Seller Common
Stock issued and outstanding immediately prior to the Effective Time
(excluding shares held by Seller or any of its subsidiaries or by Buyer
or any of its subsidiaries, in each case other than in a fiduciary
capacity or as a result of debts previously contracted, and excluding
shares held by stockholders who perfect their dissenters' rights as
provided under Section 2.5 below) shall, by virtue of the Merger,
automatically and without any action on the part of the holder thereof,
become and be converted into the right to receive that number of shares
of Buyer Common Stock as shall be equal to the Exchange Ratio, together
with any associated Buyer Rights (as defined in Section 4.3 hereof). As
used herein, the term "Exchange Ratio" shall mean the quotient obtained
by dividing (I) the sum of (x) three hundred ten dollars and ninety-five
cents ($310.95) plus (y) the quotient obtained by dividing (i) the
----
product of 1.77 and Seller's Adjusted Earnings (as defined below) by
(ii) the sum of (a) the total number of shares of Seller Common Stock
issued and outstanding immediately prior to the Effective Time
(including shares of Seller Common Stock held by Seller or Buyer or any
of their respective subsidiaries and including shares of Seller Common
Stock held by stockholders who perfect their dissenters' rights as
provided under Section 2.5 below) plus (b) the number of shares of
----
Seller Common Stock subject to Seller Options and Seller Warrants that
are issued and outstanding immediately prior to the Effective Time, by
(II) the Average Closing Price (as defined in Section 9.7 hereof),
rounded to the nearest thousandth (1/1,000th) of a share, subject to
adjustment as provided in this Section 2.2. As used herein, the term
"Seller's Adjusted Earnings" shall mean the sum of (I) the Adjusted
---------------------------
Reference Period Earnings (as defined below) plus (II) the Adjusted
Interim Earnings (as defined below). As used herein, the term "Adjusted
--------
Reference Period Earnings" shall mean an amount equal to the net income
-------------------------
reflected on the Reference Period Income Statement (as defined below),
adjusted by (a) subtracting (i) the after-tax amount of any gains on the
sale of securities during the Reference Period (as defined below) after
deducting the after-tax amount of any losses attributable to hedging
instruments relating to such securities, (ii) the after-tax amount of
any gains on the sale of assets outside of the ordinary course of
business during the Reference Period, (iii) the after-tax amount of any
gains (or reductions in expenses) attributable to any change in
accounting methods or policies adopted for all or any portion of the
Reference Period, (iv) the after-tax amount of any gains attributable to
any extraordinary items during the Reference Period, (v) the after-tax
amount of any gain attributable to any elimination of the reserve
established prior to October 1, 1993 for the retention bonuses
contemplated by Section 5.4 of this Agreement, (vi) the aftertax amount
of any gain (or reduction in expense) attributable to any elimination of
any reserves of a non-operating nature which were established prior to
October 1, 1993, (vii) the after-tax amount of any gains (or reductions
in expenses) during the Reference Period attributable to any changes in
estimates relating to the items set forth on Schedule 2.2-A1 hereto,
---------------
(viii) the after-tax amount of any amounts accreted into interest income
during the Reference Period from certain loan purchase discounts
established by Seller and identified on Schedule 2.2-A2 hereto, and (ix)
---------------
the after-tax amount of any gains (or reductions in expenses) during the
Reference Period attributable to the correction of accounting errors,
which errors were made prior to October 1, 1993, and (b) adding (i) the
after-tax amount of any losses on the sale of securities during the
Reference Period after adding the after-tax amount of any gains
attributable to hedging instruments related to such securities, (ii) the
after-tax amount of any losses
1
<PAGE>
(or increases in expenses) attributable to any change in accounting
methods or policies adopted for all or any portion of the Reference
Period, (iii) the after-tax amount of any losses attributable to any
extraordinary items during the Reference Period, (iv) the after-tax
amount of any losses (or increases in expenses) during the Reference
Period attributable to any changes in estimates relating to the items
set forth on Schedule 2.2-A1 hereto, (v) the after-tax amount of any
---------------
losses (or increases in expenses) during the Reference Period
attributable to the correction of accounting errors, which errors were
made prior to October 1, 1993, (vi) the after-tax amount of any portion
of the retention bonus contemplated by Section 5.4 of this Agreement
that Seller may recognize as an expense during the Reference Period,
(vii) the after-tax amount of any direct expenses incurred by Seller
during the Reference Period in respect of actions taken during the
Reference Period to reduce or eliminate the necessity for the Special
Reserves listed on Schedule 2.2-A3 hereto (including, without
---------------
limitation, the allocable portion of the payroll cost of personnel
dedicated to such matters, which consists of two (2) persons as of
December 20, 1993), to the extent that such expenses are not charged
against such Special Reserves and (viii) the after-tax amount of any
provisions to the allowance for loan losses of up to $700,000 per month
(on a pre-tax basis) during the Reference Period allocated to the P&A
Loans (as hereinafter defined). For purposes of calculating the
Adjusted Reference Period Earnings, the amount of Seller's net income
and the amount and classification of any gains or losses shall be
determined in accordance with GAAP (as hereinafter defined). The term
"Reference Period" shall mean the period from October 1, 1993 through
and including the last day of the month immediately preceding the month
in which the Closing occurs (the "Balance Sheet Date"). As used herein,
the term "Adjusted Interim Earnings" shall mean the product of (I) the
-------------------------
number of days from but not including the Balance Sheet Date to but not
including the Closing Date (provided, however, that in the event that
-------- -------
there is a Disagreement (as defined in Section 5.30 hereof), for
purposes of determining Adjusted Interim Earnings, such number of days
referred to in this clause (I) shall be deemed not to exceed thirty (30)
days), multiplied by (II) the quotient obtained by dividing (a) the
----------
cumulative Adjusted Reference Period Earnings attributable to the three
months ending as of the Balance Sheet Date by (b) the number of days in
such three-month period.
(B) If the Average Closing Price is less than $17.11, then the
Average Closing Price shall be deemed to be $17.11; provided, however,
-------- -------
that Buyer may waive this Section 2.2(B).
(C) If the Average Closing Price exceeds $23.14, then the Average
Closing Price shall be deemed to be $23.14.
2. The following Section 3.24 is hereby added in its entirety immediately
following Section 3.23 of the Merger Agreement:
3.24 Allowance for Loan Losses. Set forth in Schedule 3.24-A hereto
---------------
is an accurate list of the following amounts at the end of each of the
months of June through and including November, 1993: (i) Seller's gross
Loans, (ii) the gross amount of Loans acquired pursuant to the P&A
Agreements (as defined in Section 7.2(H) hereof)(the "P&A Loans"), (iii)
---------
the amount of Seller's allowance for possible loan losses (the
"Allowance") and (iv) the ratio of the Allowance to the difference
between Seller's gross Loans and the P&A Loans.
3. Section 4.3(F) of the Merger Agreement is hereby deleted in its
entirety.
4. Section 4.17 of the Merger Agreement is hereby amended in its entirety
to read as follows:
4.17 Acquisition of Regulatory Approvals. As of December 20, 1993, to
the best of Buyer's knowledge and belief, there is no reasonable basis
to believe that it is more likely than not that the regulatory approvals
referred to in Section 7.1(B) hereof will not be obtained by May 30,
1994 without the imposition of any condition of the type referred to in
the proviso therein. As of December 20, 1993, to the best of Buyer's
knowledge and belief, Buyer (i) is in compliance in all material
respects with the provisions of the Equal Credit Opportunity Act, and
(ii) has implemented sufficient programs and procedures to ensure (a)
the submission of Home Mortgage Disclosure Act data which is accurate
and complete in all material respects, and (b) continuing compliance in
all material respects with its obligations under such laws and the
regulations promulgated pursuant thereto and under the Fair Housing Act
and the Community Reinvestment Act; provided, however, that in no event
-------- -------
shall any settlement by Buyer with the U.S Department of Justice and the
Federal Trade Commission or any other governmental agency of the matter
referred to in Schedule 4.17 hereto be deemed to constitute, or result
-------------
in, a breach of this representation.
2
<PAGE>
5. Section 5.2 of the Merger Agreement is hereby amended by redesignating
the existing text of Section 5.2 as subsection (A) of Section 5.2, adding the
phrase "and except as provided in Section 5.2(B) hereof" immediately after the
phrase "Without the prior written consent of Buyer" in Section 5.2(A), and
adding the following subsection to Secton 5.2:
(B) Seller may, subject to the terms of this Agreement, issue up to
$20.0 million of a new series of non-convertible Seller Preferred Stock
("Additional Seller Preferred Stock"); provided, however, that prior to
--------------------------------- -------- -------
issuing any such Additional Seller Preferred Stock, Seller shall consult
with Buyer; and provided further, however, that Seller may not issue any
---------------- -------
shares of Additional Seller Preferred Stock if such issuance would
prevent the satisfaction of any of the conditions set forth in Article
VII hereof. Seller hereby grants to Buyer the right to purchase, on the
terms and conditions set forth in this Section 5.2(B), all, and only
all, of the Additional Seller Preferred Stock that Seller may propose to
sell. In the event Seller intends to sell Additional Seller Preferred
Stock, it shall give Buyer written notice of such intention, describing
the type of Additional Seller Preferred Stock to be sold, the price
thereof and the terms upon which Seller proposes to effect such sale.
Upon reaching final terms regarding the financing, Seller shall provide
an additional notice to Buyer indicating any changes from the tentative
terms set forth in the initial notice. Buyer shall have ten (10) days
from the date of the mailing of such notice to purchase all of the
Additional Seller Preferred Stock for the price and upon the terms and
conditions and at the time and place specified in Seller's notice. It
shall not be a prerequisite to Seller's delivery of the notice
contemplated by the fourth sentence of this Section 5.2(B) that Seller
shall obtain from a third party a bona fide offer to purchase the
Additional Seller Preferred Stock.
6. Section 5.3 of the Merger Agreement is hereby amended in its entirety to
read as follows:
5.3 Employment Contracts; Bonuses. Except (i) for normal
increases and benefit changes in the ordinary course of business
consistent with past practices including, without limitation, those
increases and changes set forth on Schedule 5.3-A1 hereto, (ii) for
---------------
bonuses paid under existing policies consistent with past practice,
including, without limitation, the payments made and projected to be
made under Seller's Senior Management Incentive and Profit Sharing
Programs as summarized on Schedule 5.3-A2 hereto, and (iii) as
---------------
Previously Disclosed, without the prior written consent of Buyer, Seller
will not enter into or amend any employment contracts or consulting
agreements with, increase the rate of compensation of, or pay or agree
to pay any bonus to, any person.
7. Section 5.4 of the Merger Agreement is hereby amended by adding the
phrase "and except as contemplated in the next sentence of this Section 5.4"
immediately after the phrase "Except as Previously Disclosed" and by adding the
following text to the end of Section 5.4 of the Merger Agreement:
Schedule 5.4-A attached hereto sets
--------------
forth the parameters of a retention bonus plan that Seller in its
discretion may implement providing for the payment by the Surviving Bank
of bonuses to certain employees after the Effective Time; provided,
--------
however, that Seller may in its sole discretion, subject to the
-------
parameters described in Schedule 5.4-A hereto, pay all or any portion of
--------------
such bonuses prior to the Effective Time to one or more of its
employees.
8. Section 5.6 of the Merger Agreement is hereby amended by adding the
following text after the phrase "Previously Disclosed":
and except as may be necessary in order to issue the Additional Seller
Preferred Stock.
9. Section 5.7 of the Merger Agreement is hereby amended in its entirety to
read as follows:
5.7 Preparation of Proxy Statement. If Seller determines that
it is necessary under applicable law to solicit the approval of the
holders of Seller Common Stock and Seller Preferred Stock of the
Agreement, as amended, Seller shall promptly prepare a proxy statement
(the "Proxy Statement") to be mailed to the holders of Seller Common
Stock and the holders of Seller Preferred Stock in connection with such
solicitation and to be filed by Buyer in a registration statement (the
"Registration Statement") with the SEC, which shall conform to all
applicable legal requirements, and Seller shall take all steps necessary
to duly call, give notice of, convene and hold a special meeting (the
"Meeting") of the holders of Seller Common Stock and the holders of
Seller Preferred Stock to be held as soon as practicable after the date
on which the Registration Statement becomes effective
3
<PAGE>
for purposes of voting upon this Amendment, the Contract for Union and
the Merger contemplated hereby and thereby, and, subject to the
fiduciary duties of Seller's Board of Directors (as advised in writing
by its counsel), Seller shall recommend to its stockholders approval of
such matters and shall use all reasonable efforts to solicit and obtain
votes of the holders of Seller Common Stock and the holders of Seller
Preferred Stock in favor of the above proposals.
10. The following text is hereby added to Section 5.9 of the Merger
Agreement after the phrase "transactions contemplated by this Agreement":
, provided further, however, that all access to Seller's employees,
---------------- -------
properties, business records, customers and vendors must be coordinated
in advance through Seller's Chief Executive Officer or his designee.
11. Section 5.16 of the Merger Agreement is hereby amended by adding the
phrase "which are held by the FDIC on the date of this Agreement" immediately
after the phrase "Seller Preferred Stock".
12. The following text is hereby added to Section 5.24 of the Merger
Agreement after the phrase "any banking office":
without Buyer's prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed.
13. The following text is hereby added to Section 5.26 of the Merger
Agreement after the phrase "without Buyer's consent":
, which consent shall not be unreasonably withheld, conditioned or
delayed.
14. The following Section 5.30 is hereby added immediately following Section
5.29 of the Merger Agreement:
5.30 Reference Period Income Statement. In order to determine
the calculation of Seller's Adjusted Earnings as contemplated in Section
2.2 hereof, the parties shall proceed as follows:
(A) Seller shall use all reasonable efforts to deliver the
following items to Buyer within eight (8) business days after the
Balance Sheet Date: (i) an unaudited consolidated statement of income
of Seller for the Reference Period (the "Preliminary Reference Period
----------------------------
Income Statement"), which Preliminary Reference Period Income Statement
----------------
shall be prepared in accordance with GAAP consistent with the accounting
principles used in connection with the preparation of the June 30, 1993
audited consolidated statement of income of Seller prepared by Seller,
except as contemplated in Section 5.30(B) hereof, and (ii) a schedule
(the "Adjustment Schedule") setting forth the adjustments to Seller's
net income contemplated by Section 2.2 hereof. With such Preliminary
Reference Period Income Statement and Adjustment Schedule, Seller shall
request Price Waterhouse, independent public accountants to Seller, to
deliver to Buyer copies of all work papers, if any, of Price Waterhouse
created in connection with the preparation of the Preliminary Reference
Period Income Statement and Adjustment Schedule. In the event that
Seller does not deliver such Preliminary Reference Period Income
Statement and Adjustment Schedule within eight (8) business days after
the Balance Sheet Date, the Abandonment Date (as defined in Section 8.3
hereof) shall be extended by one (1) day for each calendar day beyond
such eight business day period that such documents are not delivered.
Seller shall use all reasonable efforts to cause any such work papers to
be finalized and delivered prior to or concurrent with the delivery of
the Preliminary Reference Period Income Statement. In addition, Seller
shall use all reasonable efforts to facilitate the availability of
representatives of Price Waterhouse to assist Buyer in its review of
such work papers.
(B) Notwithstanding anything in this Agreement to the
contrary, neither the Preliminary Reference Period Income Statement nor
the Reference Period Income Statement shall reflect (i) any income
attributable to the reimbursability by Buyer of any Expenses (as defined
in Section 8.6 hereof) incurred by Seller (without regard to when such
Expenses were incurred) or (ii) any Expenses incurred by Seller after
September 30, 1993.
(C) Within four (4) business days after delivery of the
Preliminary Reference Period Income Statement and the Adjustment
Schedule to Buyer (together with any related work papers), Buyer may
dispute the Preliminary Reference Period Income Statement and/or the
Adjustment
4
<PAGE>
Schedule by giving written notice to Seller setting forth in
reasonable detail the basis for such dispute (hereinafter called a
"Disagreement"). If the aggregate impact of the Disagreement on the
calculation of the Adjusted Reference Period Earnings does not exceed
one hundred fifty thousand dollars ($150,000), the Preliminary Reference
Period Income Statement and the Adjustment Schedule shall be deemed to
constitute the final Reference Period Income Statement and Adjustment
Schedule. Without limiting the generality of the foregoing, in the
event that the Allowance allocated to Loans other than the P&A Loans
(the "Originations Allowance") as of the Balance Sheet Date is at least
----------------------
2.50 percent of the total amount of such Loans at the Balance Sheet
Date, such Originations Allowance shall be deemed to be adequate. If
such Originations Allowance is less than 2.50 percent of the total
amount of such Loans at the Balance Sheet Date, then Buyer and Seller
shall enter into good faith discussions to determine the adequacy of
such Originations Allowance. If the parties are not able to agree on
the adequacy of such Originations Allowance, then such adequacy shall
constitute a Disagreement for purposes of this Section 5.30. The parties
shall promptly commence good faith negotiations with a view to resolving
all such Disagreements within four (4) business days after Buyer
notifies Seller of a disagreement. In the event of any Disagreement,
the Abandonment Date shall be deemed to be the later of (i) June 30,
1994 (as may be extended pursuant to Section 5.30(A) hereof) and (ii)
the date which is five (5) business days after the final resolution of
such Disagreement pursuant to this Section 5.30.
(D) If Buyer or Seller delivers a written notice to the
other party that a Disagreement cannot be resolved, such Disagreement
shall be referred to such nationally recognized accounting firm as the
Price Waterhouse engagement partners for Buyer and Seller, respectively,
shall jointly select for determination of the disputed amounts in
accordance with GAAP and this Agreement. The determination of such firm
shall be final and binding upon the parties and the amount so determined
shall be used to complete the final Reference Period Income Statement
(the "Reference Period Income Statement") and the final Adjustment
Schedule. Such firm shall render its determination as soon as
practicable, but in no event later than ten (10) business days, after
referral of the Disagreement. The fees and expenses of such firm shall
be paid one-half by Buyer and one-half by Seller.
15. The following text is hereby added to the end of Section 6.7 of the
Merger Agreement:
Prior to the Effective Time, except to the extent prohibited by
applicable law, Buyer shall furnish promptly to Seller or its
representatives a copy of each report, schedule, piece of
correspondence, and other document that Buyer or its representatives
delivers to or files with, or Buyer or any of its representatives
receives from, any Governmental Entity in connection with the
transactions contemplated by this Agreement, including without
limitation, any document or portion thereof designated as confidential
by Buyer.
16. Section 6.10 of the Merger Agreement is hereby amended by deleting the
last sentence thereof in its entirety and adding the following text:
For a period of at least one (1) year after the Merger Effective
Date, Buyer shall provide severance benefits to Current Employees no
less favorable than those benefits set forth in the Seller's Severance
Benefits Policy, giving effect to years of service with Seller and its
subsidiaries (and service with the failed depository institutions listed
in Section 7.2(H) hereof to the extent Seller gave effect, as of the
date of this Agreement, to such service as Previously Disclosed pursuant
to Section 3.11 hereof). The retention bonus payments contemplated by
Section 5.4 of this Agreement shall be in addition to, and not in lieu
of, any severance payments to which Current Employees shall otherwise be
entitled after the Merger Effective Date, provided, however, that such
-------- -------
severance payments may be offset to the extent of any forfeiture of such
retention bonus payments under the terms thereof, except to the extent
prohibited by applicable law.
17. The following text is hereby added to the end of Section 6.11 of the
Merger Agreement:
The interpretations of certain provisions of the Seller Option Plan
and related instruments set forth in Schedule 6.11-A hereto shall be
---------------
binding upon Seller as if fully set forth in this Section, to the extent
not inconsistent with any of the conditions set forth in Article VII
hereof.
5
<PAGE>
18. The following Section 6.19 is hereby added immediately following Section
6.18 of the Merger Agreement:
6.19 Certain Payments. Concurrently with, or within five business
days after, the execution and delivery of this Amendment, Buyer shall
establish an escrow account in accordance with the terms of the escrow
agreement attached hereto as Exhibit A (the "Escrow Agreement"), and
deposit into such account by wire transfer of immediately available
funds the amount of $5,000,000. On the first business day of each month
beginning on January 1, 1994, through and including May 1, 1994, so long
as (i) there has not been a Material Breach (as defined in Section
1.4(a)(i) of the Escrow Agreement) and (ii) this Agreement has not been
abandoned pursuant to the terms of Article VIII hereof, Buyer shall
deposit into such escrow account by wire transfer of immediately
available funds an additional $1,000,000.
19. Section 7.2(C) of the Merger Agreement is hereby deleted and the
following shall be substituted therefor:
(C) [Reserved].
20. Section 7.3(C) of the Merger Agreement is hereby amended in its entirety
to read as follows:
(C) Average Closing Price. The Average Closing Price shall not be
less than $17.11; provided, however, that this Section 7.3(C) shall not
-------- -------
apply if Buyer has waived the provisions of Section 2.2(B) hereof.
21. The following text is hereby added to the end of Section 8.2 of the
Merger Agreement:
, provided, however, that Seller may abandon this Agreement if Buyer
-------- -------
commits a breach of Section 6.19 hereof, which breach is not cured
within three (3) business days after Seller or the escrow agent gives
written notice to Buyer of such breach.
22. Section 8.3 of the Merger Agreement is hereby amended in its entirety to
read as follows:
8.3 Abandonment Date. Subject to Section 5.30 hereof, by Buyer
or Seller, if its Board of Directors so determines, if (i) on or before
May 30, 1994 Buyer has not received the approvals of the Federal Reserve
Board, the FDIC and the Bank Commissioner to consummate the Merger
(excluding, in each case, any required waiting or notice periods) or
(ii) the Closing does not occur on or before June 30, 1994 (the
"Abandonment Date"); provided, however, that the right to abandon under
-------- -------
this Section 8.3 shall not be available to any party whose failure to
perform an obligation hereunder has been the cause of, or has resulted
in, the failure (x) to receive the approvals of the Federal Reserve
Board, the FDIC and the Bank Commissioner (excluding in each case, any
required waiting or notice periods) on or before May 30, 1994 or (y) of
the Closing to occur on or before the Abandonment Date.
23. Section 8.6 of the Merger Agreement is hereby amended in its entirety to
read as follows:
8.6 Effect of Abandonment; Expenses. If this Agreement is
abandoned by either Seller or Buyer, as provided above, neither Buyer
nor Seller shall have any further obligations under Articles V or VI
hereof except as set forth in Section 6.6 hereof. If this Agreement is
abandoned, expenses of the parties hereto shall be determined as
follows:
(A) Any abandonment of this Agreement pursuant to Section
8.1, Section 8.3, Section 8.4 or Section 8.5 hereof shall be without
costs, expense or liability on the part of any party to the other,
except as provided in the Escrow Agreement. Any abandonment of this
Agreement pursuant to Section 8.2 hereof by Buyer shall also be without
cost, liability or expense on the part of Seller unless the breach of a
representation or warranty, the breach of a covenant or the failure to
satisfy a condition precedent to the Closing is caused by the willful
misconduct or gross negligence of Seller in which event Seller shall be
liable to Buyer for all out-of-pocket costs and expenses, including,
without limitation, reasonable legal, accounting, consulting and
investment banking fees and expenses, incurred by Buyer in connection
with the entering into of this Agreement and the carrying out of any and
all acts contemplated hereunder (all such out-of-pocket costs and
expenses, whether incurred by Buyer or Seller, being referred to herein
as "Expenses").
6
<PAGE>
(B) The payment of Expenses is not an exclusive remedy,
but is in addition to any other rights or remedies available at law or
in equity, and notwithstanding anything to the contrary contained
herein, no party shall be relieved or released from any liabilities or
damages arising out of its willful breach of any provisions of this
Agreement.
(C) Except as expressly provided in this Section 8.6 and
in the Escrow Agreement, each of Buyer and Seller will bear all expenses
incurred by it in connection with this Agreement and the transactions
contemplated hereby.
24. Section 9.7(D) of the Merger Agreement is hereby amended in its entirety
to read as follows:
(D) the term "Previously Disclosed" by a party shall mean
--------------------
information set forth in a written disclosure letter that is delivered
by that party to the other party contemporaneously with the execution of
this Agreement or any amendment of this Agreement and specifically
designated as information "Previously Disclosed" pursuant to this
Agreement; and
25. Each of the parties hereto represents to the other that (i) it has full
corporate power and authority to execute and deliver this Amendment and to
consummate the transactions contemplated hereby, (ii) the execution and delivery
of this Amendment by such party have been duly and validly approved by the Board
of Directors of such party and no other corporate proceedings on the part of
such party are necessary in connection with such Amendment and (iii) this
Amendment has been duly and validly executed and delivered by such party and
constitutes a valid and binding obligation of such party, enforceable against
such party in accordance with its terms.
26. Except as expressly amended by this Amendment and Amendment No. 1, the
Merger Agreement is hereby ratified and confirmed in all respects.
27. This Amendment may be executed in counterparts, all of which shall be
considered one and the same instrument, each being deemed to constitute an
original, and shall be effective when one or more counterparts have been signed
by each party hereto and delivered to the other party hereto, which delivery may
be made by facsimile transmission.
28. This Amendment shall be governed by, and interpreted in accordance with,
the laws of the Commonwealth of Massachusetts, without regard to any applicable
conflicts of law.
29. In the event of any inconsistency between the terms of this Amendment
and the Merger Agreement, this Amendment shall govern.
30. Seller hereby agrees and acknowledges that the Option Agreement remains
in full force and effect and that any references to the Merger Agreement in the
Option Agreement shall be deemed to refer to the Merger Agreement as amended
hereby.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed, under seal, in counterparts by their duly authorized officers, all as
of the day and year first above written.
CORPORATE SHAWMUT NATIONAL CORPORATION
SEAL
ATTEST: By: /s/ Raymond A. Guenter
------------------------
Name: Raymond A. Guenter
/s/ Linda Kelly Title: Executive Vice
----------------- President
Linda Kelly
Assistant Secretary
CORPORATE NEW DARTMOUTH BANK
SEAL
ATTEST: By: /s/ Robert P. Keller
-----------------------
Name: Robert P. Keller
/s/ Dennis P. Beaulieu Title: President & Chief
------------------------ Executive Officer
Dennis P. Beaulieu
Secretary and
Assistant Clerk
8
<PAGE>
ANNEX B
- --------------------------------------------------------------------------------
CONTRACT FOR UNION
by and between
SHAWMUT BANK NEW HAMPSHIRE
and
NEW DARTMOUTH BANK
- --------------------------------------------------------------------------------
<PAGE>
CONTRACT FOR UNION
------------------
Contract for Union, dated as of ________________, 1993 by and between Shawmut
Bank New Hampshire, a New Hampshire banking corporation ("SBNH") and a
wholly-owned subsidiary of Shawmut National Corporation, a Delaware corporation
("SNC"), and New Dartmouth Bank, a New Hampshire guaranty savings bank ("NDB").
RECITALS
WHEREAS, NDB and SNC are parties to an Agreement and Plan of Merger dated as
of March 23, 1993 (the "Merger Agreement"), which provides that NDB and SBNH
shall enter into this Contract for Union so that the merger of SBNH with NDB
(the "Merger") may take place as contemplated in the Merger Agreement; and
WHEREAS, the respective Boards of Directors of NDB and SBNH have adopted
resolutions approving this Contract for Union and have directed that it be duly
submitted to the stockholders of each of NDB and SBNH in accordance with the
applicable laws of the State of New Hampshire; and
WHEREAS, the stockholders of each of NDB and SBNH have duly approved the
Merger Agreement and this Contract for Union; and
WHEREAS, NDB and SBNH desire that SBNH be merged with NDB, on the terms and
conditions hereinafter set forth and in accordance with the applicable laws of
the State of New Hampshire.
NOW, THEREFORE, in consideration of the premises and of the mutual agreements
contained in the Merger Agreement and in this Contract for Union, NDB and SBNH
agree to merge on the terms and conditions as follows:
ARTICLE 1.
THE MERGER
1.1. The Merger.
-----------
(a) At the Effective Time (as defined below), if NDB and SNC are
proceeding with the Merger pursuant to Section 1.3(A)(i) of the Merger
Agreement, then NDB shall be merged with and into SBNH (the "Forward Merger
Structure"). SBNH shall continue its corporate existence as the surviving bank
and the identity, properties and assets of SBNH shall continue unaffected and
unimpaired by the merger. The identity and separate existence of NDB shall
cease, and all of the rights, privileges, powers, franchises, properties and
assets of NDB shall be vested in SBNH.
(b) At the Effective Time, if NDB and SNC are proceeding with the
Merger pursuant to Section 1.3(A)(ii) of the Merger Agreement, then SBNH shall
be merged with and into NDB (the "Reverse Merger Structure"). NDB shall
continue its corporate existence as the surviving bank and the identity,
properties and assets of NDB shall continue unaffected and unimpaired by the
Merger. The identity and separate existence of SBNH shall cease, and all of the
rights, privileges, powers, franchises, properties and assets of SBNH shall be
vested in NDB.
(c) As used in this Contract for Union, (i) the "Merged Bank" shall
refer to NDB in the case of the Forward Merger Structure and to SBNH in the case
of the Reverse Merger Structure and (ii) the "Surviving Bank" shall refer to
SBNH in the case of the Forward Merger Structure and to NDB in the case of the
Reverse Merger Structure.
1.2. Effective Time. When authorization of the Merger by the New Hampshire
---------------
Bank Commissioner is received pursuant to RSA 388:8 and 9, this Contract for
Union shall constitute a contract for union entered into pursuant to that
authorization, and shall be submitted to the Bank Commissioner for his approval
pursuant to RSA 388:10. Following receipt of such approval or the Superior Court
decree pursuant to RSA 388:5 and the receipt of other required approvals, and
following the Closing provided for by Section 1.1 of the Merger Agreement, this
Contract for Union, together with the Bank Commissioner's certificate of
authority pursuant to RSA 388:9 and
1
<PAGE>
approval pursuant to RSA 388:10 and any necessary approvals pursuant to RSA
388:14, or the Superior Court decree pursuant to RSA 388:5, shall be filed with
the New Hampshire Secretary of State. Subject to the terms and upon
satisfaction of all requirements of law and the conditions specified in this
Contract for Union, the Merger shall become effective at the opening of business
on the date on which such filing with the Secretary of State takes place (the
"Effective Time"), which will constitute an effective date of union as that term
is used in RSA 388:10.
ARTICLE 2.
ARTICLES OF AGREEMENT: BYLAWS
2.1. Charter. The Articles of Agreement (the "Charter") of SBNH, as in
--------
effect immediately prior to the Effective Time, shall be the Charter of the
Surviving Bank from and after the Effective Time, except as the Charter may
thereafter be altered, amended or repealed.
2.2. Bylaws. The Bylaws of SBNH, as in effect immediately prior to the
-------
Effective Time, shall be the Bylaws of the Surviving Bank from and after the
Effective Time, except as the Bylaws may thereafter be altered, amended or
repealed.
ARTICLE 3.
BOARD OF DIRECTORS AND OFFICERS
3.1. Directors. From and after the Effective Time of the Merger, the
----------
directors of the Surviving Bank, who shall hold office until their successors
are elected and qualified according to the Bylaws of the Surviving Bank, shall
be the same as the directors of SBNH immediately prior to the Effective Time of
the Merger, and the approval of the Contract for Union by the stockholders of
the Surviving Bank shall constitute the due election of each director.
3.2. Officers. From and after the Effective Time of the Merger, the
---------
officers of the Surviving Bank, who shall hold office until their successors are
elected and qualified according to the Bylaws of the Surviving Bank, shall be
the same as the officers of SBNH immediately prior to the Effective Time of the
Merger, and the approval of the Contract for Union by the directors of the
Surviving Bank shall constitute the due election of each officer.
ARTICLE 4.
CONVERSION AND EXCHANGE OF SHARES:
DISSENTERS' RIGHTS
4.1. Conversion and Exchange of Shares. The manner of converting and
----------------------------------
exchanging the shares of SBNH and shares, share options, and share warrants of
NDB shall be as set forth in Article II of the Merger Agreement.
4.2. Dissenters' Rights. Shares of NDB or SBNH Stock, which are issued and
-------------------
outstanding immediately prior to the Effective Time and which are owned by
stockholders who assert and perfect dissenters' rights pursuant to and in
accordance with New Hampshire RSA 388:13 and RSA 293-A: 13.01 - 13.31
("Dissenting Shares"), shall not be converted or exchangeable as provided in
Section 4.1 of this Contract for Union unless and until such holders shall have
failed to perfect or shall have effectively withdrawn or lost their right to
payment for such shares under such applicable laws. If any such holder shall
have failed to perfect or shall have effectively withdrawn or lost such right,
the shares of NDB or SBNH Stock held by such stockholder shall thereupon be
deemed to have been converted and exchangeable, at the Effective Time, as
provided for in Section 4.1 hereof.
2
<PAGE>
ARTICLE 5.
RIGHTS AND OBLIGATIONS; FURTHER ASSURANCES
At the Effective Time of the Merger, the separate existence of the Merged
Bank shall cease and the Surviving Bank shall possess all rights, franchises,
and interests of the Merged Bank in and to every type of property (real,
personal and mixed) and chose in action by virtue of such Merger without any
deed or other transfer, and the Surviving Bank, without any order or other
action on the part of any court or otherwise, shall hold and enjoy all rights of
property, franchises and interests, of a public as well as of a private nature,
including appointments, designations and nominations and all other rights and
interests as trustee, executor, administrator, registrar of stocks and bonds,
guardian of estates, assignee, receiver and committee of estates of
incompetents, and in every other fiduciary capacity, in the same manner and to
the same extent as such rights, franchises and interests were held or enjoyed by
the Merged Bank at the time the Merger became effective. The Surviving Bank
shall be liable for all liabilities of the Merged Bank and all deposits, debts,
liabilities, obligations and contracts of the Merged Bank matured or unmatured,
whether accrued, absolute, contingent or otherwise, and whether or not reflected
or reserved against on balance sheets, books of account, or records of the
Merged Bank shall be those of the Surviving Bank and shall not be released or
impaired by the Merger, and all rights of creditors and other obligees and all
liens on property of the Merged Bank shall be preserved unimpaired.
At the Effective Time, this Contract for Union shall be deemed to constitute,
insofar as any transfer document is necessary, an irrevocable transfer and
assignment by the Merged Bank to the Surviving Bank of all the Merged Bank's
interests in and to every type of property, including those described in the
foregoing paragraph. From time to time as and when requested by the Surviving
Bank and to the extent permitted by New Hampshire law, the officers and
directors of the Merged Bank last in office shall execute and deliver such deeds
and other instruments and shall take or cause to be taken such further or other
actions as shall be necessary in order to vest or perfect in or to confirm of
record or otherwise to the Surviving Bank title to, and possession of, all the
property, interests, assets, rights, privileges, immunities, powers, franchises
and authority of the Merged Bank, and otherwise to carry out the purposes of
this Contract for Union; provided, that the Surviving Bank shall, to the extent
provided in the Bylaws of the Surviving Bank and by New Hampshire law, indemnify
any such officer or director who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding by
reason of the fact that he executed or delivered such instrument or took such
action at the request of the Surviving Bank; further provided, without limiting
the foregoing, that the Merged Bank hereby irrevocably appoints the duly elected
officers of the Surviving Bank as the Merged Bank's attorneys-in-fact, each with
full power and authority in the place and stead of the Merged Bank and in the
name of the Merged Bank to execute and deliver such deeds and other instruments.
ARTICLE 6.
AMENDMENT
The parties hereto, by mutual action of their respective Boards of Directors,
may amend, modify or supplement this Contract for Union, whether before or after
approval thereof by the stockholders of the parties, the New Hampshire Bank
Commissioner or Superior Court; provided, however, that after any approval of
the Merger by the stockholders, there may not be, without further approval of
NDB stockholders, any amendment of this Contract for Union which reduces the
amount or changes the form of consideration to be delivered to NDB
stockholders. This Contract for Union may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
ARTICLE 7.
MISCELLANEOUS
7.1. Any party, by written instrument signed by any duly authorized officer,
may extend the time for the performance of any of the obligations or other acts
of any other party hereto, and may waive compliance with any of the covenants or
performance of any of the obligations of the other party contained in this
Contract for Union.
7.2. This Contract for Union shall be governed by and construed in
accordance with the laws of New Hampshire applicable to agreements made and
entirely to be performed within such State.
3
<PAGE>
7.3. The headings of the several Articles herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Contract for Union.
7.4. This Contract for Union may be executed in several counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, SBNH and NDB have caused this Contract for Union to be
executed by their duly authorized officers as of the day and year first above
written.
SHAWMUT BANK NEW HAMPSHIRE
Attest:
____________________ By: _________________________
Title:
[SEAL]
NEW DARTMOUTH BANK
Attest:
____________________ By: _________________________
Title:
[SEAL]
4
<PAGE>
ANNEX C
CONFIDENTIAL
- ------------
February 4, 1994
Board of Directors
New Dartmouth Bank
1155 Elm Street
Manchester, New Hampshire 03101
Gentlemen and Madame:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Common Stock, par value $0.01 per share (the "Shares"), of
New Dartmouth Bank (the "Company") of the Consideration (as defined below) to be
received for each Share in the proposed merger (the "Merger") of the Company
with a wholly owned subsidiary ("Merger Sub") of Shawmut National Corporation
("Shawmut") pursuant to the Agreement and Plan of Merger dated as of March 23,
1993 between Shawmut and the Company, as amended as of July 21, 1993 and
December 20, 1993 (the "Agreement"). Pursuant to the Agreement, each Share will
be converted into a number of shares of Shawmut common stock, par value $0.01
per share (the "Shawmut Common Stock"), determined by dividing the sum of
$310.95 plus 177.0% of New Dartmouth's Adjusted Earnings (as defined in the
Agreement) per fully diluted share from October 1, 1993 to the Closing Date (as
defined in the Agreement) by the Average Closing Price (as defined in the
Agreement) of Shawmut Common Stock subject, unless waived, to a maximum and
minimum number of shares of Shawmut Common Stock per share and other
price-related provisions, as set forth in the Agreement (the "Consideration").
Goldman, Sachs & Co., as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. We are familiar with
the Company, having acted as its financial advisor in connection with, and
having participated in certain of the negotiations leading to, the Agreement. We
also have provided certain investment banking services to Shawmut from time to
time, including acting as a co-manager of Shawmut's subordinated note offerings
in December 1992 and in April 1993, and acting as Shawmut's financial advisor in
connection with the pending acquisition of Gateway Financial Corporation and we
may provide investment banking services to Shawmut in the future.
In connection with this opinion, we have reviewed, among other things, the
Agreement and the Stock Option Agreement; Shawmut's Registration Statement on
Form S-4, including the Proxy Statement/Prospectus relating to the Merger; the
Audited Annual Reports for the period from October 10, 1991 to June 30, 1992 and
the year ended June 30, 1993, respectively, to Stockholders of the Company and
Annual Reports to Stockholders and Annual Reports on Form 10-K of Shawmut for
the five years ended December 31, 1992; certain unaudited interim reports to
the respective stockholders of the Company and Shawmut and certain Quarterly
Reports on Form 10-Q of Shawmut; the several Purchase and Assumption Agreements
each dated October 10, 1991 between the Federal Deposit Insurance
<PAGE>
New Dartmouth Bank
Page Two
Corporation (the "FDIC") as receiver of the Failed Banks named therein, New
Dartmouth Bank, and the FDIC in its corporate capacity; certain other
communications from the Company and Shawmut to their respective stockholders;
and certain internal financial analyses and forecasts for the Company and
Shawmut prepared by their respective managements. We also have held discussions
with members of the senior managements of the Company and Shawmut and with
independent consultants and legal advisers to the Company and Shawmut regarding
the past and current business operations, regulatory relationships, financial
condition and future prospects of their respective companies. We also have
reviewed with members of the senior management of the Company the results of the
Company's due diligence examination of Shawmut. We also have held discussions
with the independent auditors of each of the Company and of Shawmut regarding
the financial and accounting affairs of the respective companies. In addition,
we have reviewed the reported price and trading activity for the Shawmut Common
Stock, compared certain financial information for the Company and certain
financial and stock market information for Shawmut, with similar information for
certain other companies the securities of which are publicly traded, reviewed
the financial terms of certain recent business combinations. In the commercial
banking and thrift industries specifically, and in other industries generally,
and performed such other studies and analyses as we considered appropriate.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. In that regard, we have assumed, with your consent,
that the financial and operating forecasts provided to us (including, without
limitation, projected cost savings and operating synergies resulting from the
Merger and projections regarding under-performing and non-performing assets and
net charge-offs) have been reasonably prepared on a basis reflecting the best
currently available judgments and estimates of the Company and Shawmut. We are
not experts in the evaluation of loan portfolios for purposes of assessing the
adequacy of the allowances for loan losses with respect thereto and have
assumed, with your consent, that such allowances for each of the Company and
Shawmut are in the aggregate adequate to cover all such losses. In addition, we
have not reviewed individual credit files nor have we made an independent
evaluation or appraisal of the assets and liabilities of the Company or Shawmut
or any of their subsidiaries and we have not been furnished with any such
evaluation or appraisal. After consulting with you and your counsel, we have
assumed, with your consent, that issues previously raised in connection with
Shawmut's failure to obtain the approval of the Board of Governors of the
Federal Reserve System for the Merger will be satisfactorily addressed and that
Shawmut will receive on a timely basis all regulatory approvals necessary for
consummation of the Merger. Finally, we have assumed, with your consent, that
the Merger of the Company with Shawmut will be recorded as a pooling of
interests under generally accepted accounting principles.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the
Consideration to be received by the holders of Shares pursuant to the Agreement
is fair to such holders.
Very truly yours,
Goldman, Sachs & Co.
<PAGE>
- --------------------------------------------------------------------------------
VOTING AGREEMENT
as of March 23, 1993
as amended as of
December 20, 1993
- --------------------------------------------------------------------------------
<PAGE>
March 23, 1993
Shawmut National Corporation
777 Main Street
Hartford, CT 06115
Gentleman:
Each of the undersigned (a "Stockholder") beneficially owns and has sole
voting power with respect to the number of shares of the common stock, par value
$0.01 per (the "Shares"), of New Dartmouth Bank (the "Bank") indicated opposite
such Stockholder's name below.
Simulataneously with the execution of this letter agreement, Shawmut
National Corporation ("Parent") and the Bank are entering into an Agreement and
Plan of Merger (the "Merger Agreement") providing, among other things, for the
merger of an indirect wholly owned subsidiary of Parent with and into the Bank
(the "Merger"). We understand that Parent has undertaken and will continue to
undertake substantial expenses in connection with the negotiation and execution
of the Merger Agreement and the subsequent actions necessary to consummate the
Merger and the other transactions contemplated by the Merger Agreement.
In consideration of, and as a condition to, Parent's entering into the
Merger Agreement, and in consideration of the expenses incurred and to be
incurred by Parent in connection therewith, each Stockholder and Parent agree as
follows:
1. Each Stockholder shall vote or cause to be voted for the approval of
the Merger Agreement and the Merger, and shall vote or cause to be voted against
the approval of any other agreement providing for a merger, consolidation,sale
of assets or other business combination of the Bank or any of its subsidiaries
with any person or entity other than Parent and its subsidiaries, the Shares
that such Stockholder shall be entitled to so vote.
2. Each Stockholder will not sell, assign, transfer or otherwise dispose
of (including, without limitation, by the creation of a Lean (as defined in
paragraph 4 below)) or permit to be sold, assigned, transferred or otherwise
disposed of any Shares owned by such Stockholders except (a) for transfers by
will or by law (in which case this letter agreement shall bind the transferee),
(b) for transfers to any other Stockholders, and (c) as Parent may otherwise
agree.
3. The agreements contained herein are intended to relate to restrictions
on transferability and to continue only for such time as may reasonably be
necessary to obtain regulatory approvalof Parent's acquistion of the Shares
pursuant to the Merger.
4. Parent and each of the Stockholders severally represent that they have
the complete and unrestricted power and the unqualified right to enter into and
perform the terms of this letter agreement. Parent and each of the
Stockholders further severally represent that this letter agreement consitutes a
valid and binding agreement with respect to such party, enforceable against such
party in accordance with its terms. Each of the Stockholders severally
represents that such Stockholders owns the number of Shares indicated opposite
such Stockholder's name below, free and dear of any liens, claims, charges or
other encumbrances and restrictions of any kind whatsoever ("Liens"), and has
sole and unrestricted voting power with respect to such Shares.
5. Notwithstanding anything herein to the contrary, the agreements
contained herein shall remain in full force and effect until the earlier of (i)
the consummation of the Merger and (ii) the abandonment of the Merger Agreement
in accordance with Article VIII thereof.
6. Each of the Stockholders has signed this letter agreement intending to
be bound severally thereby and not to be bound as joint obligors.
7. This letter agreement is to be governed by the laws of the
Commonwealth of Massachusetts, without giving effect to the principles of
conflicts of laws thereof. If any provision hereof is deemed unenforceable, the
enforceability of the other provisions hereof shall not be affected.
<PAGE>
Please confirm our agreement with you by signing a copy of this letter.
Very truly yours,
Number
Director or of
Executive Officer Shares Signature
- ----------------- ------ ----------------------------
William F. Craig 16,334 /s/ Willian F. Craig
----------------------------
Robert P. Keller 1,036 /s/ Robert P. Keller
----------------------------
Ernest J. Boch 50,00 /s/ Ernest J. Boch
----------------------------
John J. Byrne 74,00 /s/ John J. Byrne
----------------------------
Richard A. Charpentier 12 /s/ Richard A. Charpentier
----------------------------
John Constable, directly 12 /s/ John Constable
----------------------------
Constable Partners, L.P. 4,000 /s/ John Constable
----------------------------
Its General Partner
Edward A. Fox 15,000 /s/ Edward A. Fox
----------------------------
Lola N. Grace 12 /s/ Lola N. Grace
----------------------------
Charles Hoyt, directly 2,500 /s/ Charles Hoyt
----------------------------
Hoyt & Worthen Tanning
Corp. Profit Sharing Plan 2,840 /s/ Charles Hoyt
----------------------------
Charles E. Hugel 17,500 /s/ Charles E. Hugel
----------------------------
K. Thomas Kemp 1,500 /s/ K. Thomas Kemp
----------------------------
Jefferson W. Kirby 5,181 /s/ Jefferson W. Kirby
----------------------------
AGREED TO AND ACCEPTED
THIS ____ DAY OF ____________, 1993
PARENT
By ____________________
Name:
Title:
<PAGE>
December 20, 1993
Shawmut National Corporation
777 Main Street
Hartford, CT 06115
Gentlemen:
Reference is made to the letter agreement, dated as of March 23, 1993 (the
"Voting Agreement"), between each of the undersigned and Shawmut National
Corporation ("Parent"). Capitalized terms which are not otherwise defined herein
shall have the meaning set forth in the Voting Agreement.
In consideration of, and as a condition to, Parent's entering into Amendment
No. 2 to the Merger Agreement, and in consideration of the expenses incurred and
to be incurred by Parent in connection therewith, each Stockholder and Parent
agree as follows:
1. Each Stockholder's obligations pursuant to Paragraph 1 of the Voting
Agreement shall include voting for approval of the Merger Agreement (including
any amendments thereto) and the Merger at any and all meetings of the
stockholders of the Bank held for such purpose.
2. The phrase "such time as may reasonably be necessary to obtain
regulatory approval" in Paragraph 3 of the Voting Agreement shall be deemed to
mean the earlier of (x) the date on which the last required regulatory approval
is received and (y) May 30, 1994.
3. Except as set forth herein, the Voting Agreement is hereby ratified and
confirmed in all respects.
<PAGE>
Please confirm our agreement with you by signing a copy of this letter.
Very truly yours,
Number
Director or of
Executive Officer Shares Signature
- ----------------- ------ ----------------------------
William F. Craig 16,334 /s/ Willian F. Craig
----------------------------
Robert P. Keller 1,036 /s/ Robert P. Keller
----------------------------
Ernest J. Boch 50,00 /s/ Ernest J. Boch
----------------------------
John J. Byrne 74,00 /s/ John J. Byrne
----------------------------
Richard A. Charpentier 12 /s/ Richard A. Charpentier
----------------------------
John Constable, directly 12 /s/ John Constable
----------------------------
Constable Partners, L.P. 4,000 /s/ John Constable
----------------------------
Its General Partner
Edward A. Fox 15,000 /s/ Edward A. Fox
----------------------------
Lola N. Grace 12 /s/ Lola N. Grace
----------------------------
Charles Hoyt, directly 2,500 /s/ Charles Hoyt
----------------------------
Hoyt & Worthen Tanning
Corp. Profit Sharing Plan 2,840 /s/ Charles Hoyt
----------------------------
Charles E. Hugel 17,500 /s/ Charles E. Hugel
----------------------------
K. Thomas Kemp 1,500 /s/ K. Thomas Kemp
----------------------------
Jefferson W. Kirby 5,181 /s/ Jefferson W. Kirby
----------------------------
AGREED TO AND ACCEPTED
THIS ____ DAY OF ____________, 1993
PARENT
By ____________________
Name:
Title:
<PAGE>
ANNEX E
- --------------------------------------------------------------------------------
STOCK OPTION AGREEMENT
dated March 23, 1933
by and between
NEW DARTMOUTH BANK
and
SHAWMUT NATIONAL CORPORATION
- --------------------------------------------------------------------------------
<PAGE>
THE TRANSFER OF THIS AGREEMENT IS
SUBJECT TO CERTAIN PROVISIONS CONTAINED
HEREIN AND TO RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of March 23, 1993 (the "Agreement"), by and
between New Dartmouth Bank, a New Hampshire chartered guaranty savings bank
("Issuer") and Shawmut National Corporation, a Delaware corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of Merger
(the "Merger Agreement"), of even date herewith, providing for, among other
things, the merger of a wholly owned subsidiary of Grantee ("Acquiror Sub") with
and into Issuer, with Issuer surviving such Merger; and
WHEREAS, as a condition and inducement to Grantee's execution of the Merger
Agreement, Grantee has requested that Issuer agree, and Issuer has agreed, to
grant Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, and intending to be legally bound hereby, Issuer and
Grantee agree as follows:
1. Defined Terms. Capitalized terms which are used but not defined herein
shall have the meanings ascribed to such terms in the Merger Agreement.
2. Grant of Option. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
up to 74,275 shares (subject to adjustment as set forth herein) (the "Option
Shares") of common stock, par value $0.01 per share ("Issuer Common Stock"), of
Issuer at a purchase price (subject to adjustment as set forth herein) of
$310.00 per Option Share (the "Purchase Price").
3. Exercise of Option. (a) Grantee may exercise the Option, in whole or in
part, at any time and from time to time, following the occurrence of a Purchase
Event (as defined below); provided that the Option, to the extent not previously
--------
exercised, shall terminate and be of no further force and effect upon the
earliest to occur of (i) the Effective Time, (ii) 12 months after the first
occurrence of a Purchase Event, (iii) abandonment of the Merger Agreement in
accordance with the terms thereof prior to the occurrence of a Purchase Event
(other than an abandonment of the Merger Agreement by Grantee by virtue of a
breach of such Merger Agreement by Issuer) or (iv) 12 months after the
abandonment of the Merger Agreement by Grantee by virtue of a breach of such
Merger Agreement by Issuer (provided, however, that if within 12 months after a
-------- -------
termination of the Merger Agreement by Grantee by virtue of a breach of such
Merger Agreement by Issuer a Purchase Event shall occur, then notwithstanding
anything to the contrary contained herein, this Option shall terminate 12 months
after the first occurrence of such Purchase Event); and provided further, that
-------- -------
any purchase of shares upon exercise of the Option shall be subject to
compliance with applicable law, including, without limitation, the Bank Holding
Company Act of 1956, as amended (the "BHC Act") and New Hampshire Revised
Statutes Annotated RSA 384:44 et seq. The rights set forth in Section 8 shall
-- ---
terminate at the time set forth in such Section 8.
(b) As used herein, a "Purchase Event" means any of the following events:
(i) a material breach by Issuer of any of the covenants and
agreements of Issuer set forth in the Merger Agreement which remains
uncured or unremedied for more than 20 business days after notice thereof
from Grantee;
(ii) Issuer shall have authorized, recommended or publicly proposed,
or publicly announced an intention to authorize, recommend or propose, or
entered into an agreement with any person (other than Grantee or any
Subsidiary of Grantee) to effect, an Acquisition Transaction or shall have
failed to publicly oppose a tender or exchange offer to purchase any shares
of Issuer Common Stock. As used herein, the term Acquisition Transaction
shall mean (A) a merger, consolidation or similar transaction involving
Issuer or any of its Subsidiaries (other than with Grantee or any
Subsidiary of Grantee and other
1
<PAGE>
than internal mergers, reorganizations, consolidations or dissolutions
involving only existing Subsidiaries), (B) the disposition, by sale, lease,
exchange or otherwise, of assets of Issuer or any of its Subsidiaries
representing 10% or more of the consolidated assets of Issuer and its
Subsidiaries other than in the ordinary course of business, or (C) the
issuance, sale or other disposition of (including by way of merger,
consolidation, share exchange or any similar transaction) securities
representing 10% or more of the voting power of Issuer or any of its
Subsidiaries except pursuant to any presently outstanding options, warrants
or other convertible securities;
(iii) any person shall have acquired Beneficial Ownership (as such term
is defined in Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended (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, 10% or more
of the then outstanding shares of Issuer Common Stock (other than by the
automatic conversion of Issuer's Class A Non-Cumulative Convertible
Perpetual Preferred Stock pursuant to the terms thereof ("Seller Preferred
Stock"));
(iv) any person as of the date hereof who owns or controls 10% or more
of the outstanding shares of Issuer Common Stock shall have acquired since
the date hereof Beneficial Ownership of, or the right to acquire Beneficial
Ownership, of an additional 2% or more of the then outstanding shares of
Issuer Common Stock;
(v) the holders of Issuer Common Stock shall not have approved the
Merger Agreement at the meeting of such stockholders held for the purpose
of voting on such agreements, or such meeting shall not have been held or
shall have been cancelled prior to termination of the Merger Agreement, in
each case after it shall have been publicly announced that any person
(other than Grantee or any Subsidiary of Grantee) shall have (A) made, or
disclosed an intention to make, a proposal 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; or
(vi) Issuer's Board of Directors shall not have recommended to the
stockholders of Issuer that such stockholders vote in favor of the approval
of the Merger Agreement, or shall have withdrawn or modified such
recommendation in a manner adverse to Grantee.
As used in this Agreement, "person" shall have the meaning specified in Sections
3(a)(9) and 13(d)(3) of the Exchange Act.
(c) In the event Grantee 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 Option Shares it intends to
purchase pursuant to such exercise and (ii) a place and date not earlier than
three business days nor later than 15 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"). If prior
notification to or approval of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") or any other regulatory authority is
required in connection with such purchase, Issuer shall cooperate with Grantee
in the filing of the required notice or application for approval and the
obtaining of any such approval.
4. Payment and Delivery of Certificates. (a) On each Closing Date, Grantee
shall (i) pay to Issuer, in immediately available funds by wire transfer to a
bank account designated by Issuer, an amount equal to the Purchase Price
multiplied by the number of Option Shares to be purchased on such Closing Date
and (ii) present and surrender this Agreement to the Issuer at the address of
the Issuer specified in Section 13(f) hereof.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a)
hereof, Issuer shall deliver to Grantee (A) a certificate or certificates
representing the Option Shares to be purchased at such Closing, which Option
Shares shall be free and clear of all liens, claims, charges and encumbrances of
any kind whatsoever, and (B) if the Option is exercised in part only, an
executed new agreement with the same terms as this Agreement evidencing the
right to purchase the balance of the shares of Issuer Common Stock purchasable
hereunder. If Issuer shall have issued rights or any similar securities
("Rights") pursuant to any shareholder rights, poison pill or similar plan (a
"Shareholder Rights Plan") subsequent
2
<PAGE>
to the date of this Agreement and such Rights remain outstanding at the time of
the issuance of any Option Shares pursuant to an exercise of all or part of the
Option hereunder, then each Option Share issued pursuant to such exercise shall
also represent the number of Rights issued per share of Issuer Common Stock with
terms substantially the same as and at least as favorable to Grantee as are
provided under the Shareholder Rights Plan as then in effect.
(c) Certificates for the Option Shares delivered at each Closing shall be
endorsed with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF March
23,1993. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if Grantee shall have delivered
to Issuer a copy of a letter from the staff of Securities and Exchange
Commission (the "SEC"), or an opinion of counsel in form and substance
reasonably satisfactory to Issuer and its counsel, to the effect that such
legend is not required for purposes of the Securities Act.
5. Representations and Warranties of Issuer. Issuer hereby represents and
warrants to Grantee as follows:
(a) Due Authorization. Issuer has full corporate power and authority to
enter into 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 authorized by all necessary
corporate action on the part of Issuer. This Agreement has been duly and
validly executed and delivered by Issuer.
(b) No Violation. Neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, nor compliance by
Issuer with any of the terms or provisions hereof, will (i) violate any
provision of the Restated Articles of Organization or By-Laws of Issuer or the
articles of incorporation, by-laws or similar governing documents of any of its
Subsidiaries or (ii) (x) assuming that all of the consents and approvals
required under applicable law for the purchase of shares upon the exercise of
the Option are duly obtained, violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to Issuer or
any of its Subsidiaries, or any of their respective properties or assets, or (y)
assuming the approval of the Federal Deposit Insurance Corporation (the "FDIC")
under Section 10 of that certain Stock Purchase Agreement, dated October 10,
1991, between Issuer and the FDIC (the "Preferred Stock Purchase Agreement"),
which approval Issuer shall use its best efforts to secure as soon as
practicable after the date hereof, or the inapplicability of such Section 10 as
a result of the redemption of all, or substantially all of the Seller Preferred
Stock, violate, conflict with, 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, result in the
termination of or a right of termination or cancellation under, accelerate the
performance required by, or result in the creation of any lien, pledge, security
interest, charge or other encumbrance upon any of the respective properties or
assets of Issuer or any of its Subsidiaries under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which Issuer or any of its
Subsidiaries is a party, or by which they or any of their respective properties
or assets may be bound or affected, except, in the case of clause (y) above, for
such violations, conflicts, breaches or defaults which either individually or in
the aggregate will not have a material adverse effect on the business,
properties, assets, liabilities, prospects, results of operations or financial
condition of Issuer and its Subsidiaries taken as a whole.
(c) Authorized Stock. Issuer has taken all necessary corporate and other
action to authorize and reserve and to permit it to issue, and, at all times
from the date of this Agreement until the obligation to deliver Issuer Common
Stock upon the exercise of the Option terminates, will have reserved for
issuance, upon exercise of the Option, shares of Issuer Common Stock necessary
for Grantee to exercise the Option, and Issuer will take all necessary corporate
action to authorize and reserve for issuance all additional shares of Issuer
Common Stock (together with any Rights which may have
3
<PAGE>
been issued with respect thereto) or other securities which may be issued
pursuant to Section 7 upon exercise of the Option. The shares of Issuer Common
Stock to be issued upon due exercise of the Option, including all additional
shares of Issuer Common Stock (together with any Rights which may have been
issued with respect thereto) or other securities which may be issuable pursuant
to Section 7, upon issuance pursuant hereto, shall be duly and validly issued,
fully paid and nonassessable, and shall be delivered free and clear of all
liens, claims, charges and encumbrances of any kind or nature whatsoever,
including any preemptive rights of any stockholder of Issuer.
(d) Board Action. By action of the Board of Directors of Issuer on a
date prior to the date of this Agreement and the execution hereof, resolutions
were duly adopted approving the execution, delivery and performance of this
Agreement, any purchase or other transaction respecting Issuer Common Stock
provided for herein, and the other transactions contemplated hereby. The
transactions contemplated by this Agreement are not subject to any applicable
state takeover laws in effect as of the date hereof excluding New Hampshire
Revised Statutes Annotated RSA 384:44 et seq.
-- ---
6. Representations and Warranties of Grantee. Grantee hereby represents and
warrants to Issuer that:
(a) Due Authorization. Grantee has 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) Purchase Not for Distribution. This Option is not being acquired
with a view to the public distribution thereof and neither this Option nor any
Option Shares will be transferred or otherwise disposed of except in a
transaction registered or exempt from registration under the Securities Act.
7. Adjustment upon Changes in Capitalization, etc.
(a) In the event (i) of any change in Issuer Common Stock by reason of a
stock dividend, including without limitation any distribution to holders of
Issuer Common Stock of any securities of Issuer or Rights or Options to acquire
any such securities, stock split, split-up, recapitalization, combination,
exchange of shares or similar transaction or (ii) that any Rights issued by
Issuer shall become exercisable, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and, in the case of any of the transactions described in clause
(i) above, proper provision shall be made in the agreements governing such
transaction so that Grantee shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that Grantee would
have received in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such event, or the record date therefor, as applicable. If
any additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence of
this Section 7(a)), the number of shares of Issuer Common Stock subject to the
Option shall be adjusted so that, after such issuance, it, together with any
shares of Issuer Common Stock previously issued pursuant hereto, equals 14.9% of
the number of shares of Issuer Common Stock then issued and outstanding, without
giving effect to any shares subject or previously issued pursuant to the Option.
(b) In the event that 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 Issuer 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
outstanding shares of Issuer Common Stock immediately prior to such merger shall
after such merger represent less than 50% of the outstanding shares and 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 provisions 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 Grantee, of either (I) the Acquiring Corporation
(as defined below), (II) any person that controls the Acquiring Corporation, or
(III) in the case of a merger described in clause (ii), the Issuer (such person
being referred to as the "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the
4
<PAGE>
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
Grantee. The Substitute Option Issuer 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 the Substitute Common Stock (as hereinafter defined) as is equal to the
Assigned Value (as hereinafter defined) multiplied by the number of shares of
Issuer Common Stock for which the Option was theretofore exercisable, divided by
the Average Price (as hereinafter defined). The exercise price of the
Substitute Option per share of the Substitute Common Stock (the "Substitute
Purchase Price") shall then be equal to the Purchase Price multiplied by a
fraction in which the numerator is the number of shares of the Issuer Common
Stock for which the Option was theretofore exercisable and the denominator is
the number of shares of the Substitute Common Stock for which the Substitute
Option is exercisable.
(e) The following terms have the meanings indicated:
(I) "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 any substantial part of the Issuer's assets
(or the assets of its Subsidiaries).
(II) "Substitute Common Stock" shall mean the common stock issued by
the Substitute Option Issuer upon exercise of the Substitute Option.
(III) "Assigned Value" shall mean the highest of (i) the price per
share of Issuer Common Stock at which a tender offer or exchange offer therefor
has been made by any person (other than Grantee), (ii) the price per share of
Issuer Common Stock to be paid by any person (other than the Grantee) pursuant
to an agreement with Issuer, and (iii) if applicable, the highest closing sales
price per share of Issuer Common Stock quoted on the National Association of
Securities Dealers Automated Quotations Systems National Market System
("NASDAQ/NMS") (or if Issuer Common Stock is not quoted on the NASDAQ/NMS, the
highest bid price per share as quoted on the principal trading market or
securities exchange on which such shares are traded as reported by a recognized
source) within the six-month period immediately preceding the agreement;
provided, however, that in the event of a sale of less than all of Issuer's
- -------- -------
assets, the Assigned Value shall be 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
Grantee, divided by the number of shares of Issuer Common Stock outstanding at
the time of such sale. In the event that an exchange offer is made for the
Issuer Common Stock or an agreement is entered into for a merger or
consolidation involving consideration other than cash, the value of the
securities or other property issuable or deliverable in exchange for the Issuer
Common Stock shall be determined by a nationally recognized investment banking
firm mutually selected by Grantee and Issuer (or if applicable, Acquiring
Corporation), provided that if a mutual selection cannot be made as to such
investment banking firm, it shall be selected by Grantee.
(IV) "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 the 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 Issuer, the person merging into Issuer or by any
company which controls or is controlled by such merging person, as Grantee may
elect.
(f) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 14.9% of the aggregate of the
shares of the Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 14.9% of the aggregate of the shares of Substitute Common Stock
but for this clause (f), the Substitute Option Issuer shall make a cash payment
to Grantee equal to the excess of (i) the value of the Substitute Option without
giving effect to the limitation in this clause (f) over (ii) the value of the
Substitute Option after giving effect to the limitation in this clause (f).
This difference in value shall be determined by a nationally recognized
investment banking firm selected by Grantee (or a Grantee Majority).
(g) Issuer shall not enter into any transaction described in subsection
(b) of this Section 7 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations
5
<PAGE>
of Issuer hereunder and take all other actions that may be necessary so that the
provisions of this Section 7 are given full force and effect (including, without
limitation, any action that may be necessary so that the shares of Substitute
Common Stock are in no way distinguishable from or have lesser economic value
than other shares of common stock issued by the Substitute Option Issuer).
(h) The provisions of Sections 8, 9 and 10 shall apply, with appropriate
adjustments, to any securities for which the Option becomes exercisable pursuant
to this Section 7 and as applicable, references in such sections to "Issuer",
"Option", "Purchase Price" and "Issuer Common Stock" shall be deemed to be
references to "Substitute Option Issuer", "Substitute Option", "Substitute
Purchase Price" and "Substitute Common Stock", respectively.
8. Repurchase at the Option of Grantee. (a) Subject to the last sentence
of Section 3(a) hereof, at the request of Grantee at any time commencing upon
the first occurrence of a Repurchase Event (as defined in Section 8(d) below)
and ending 12 months immediately thereafter, Issuer shall repurchase from
Grantee (I) the Option, in whole or in part, and/or (II) any or all of the
shares of Issuer Common Stock purchased by Grantee pursuant hereto with respect
to which Grantee then has beneficial ownership. The date on which Grantee
exercises its rights under this Section 8 is referred to as the "Request Date".
Such repurchase shall be at an aggregate price (the "Section 8 Repurchase
Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Grantee for any shares of
Issuer Common Stock acquired pursuant to the Option with respect to which
Grantee then has beneficial ownership (and which are included in Grantee's
request under this Section 8(a));
(ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of Issuer Common Stock over (y) the Purchase Price
(subject to adjustment pursuant to Section 7), multiplied by the number of
shares of Issuer Common Stock with respect to which the Option has not
been exercised (and which are included in Grantee's request under this
Section 8(a)); and
(iii) the excess, if any, of the Applicable Price over the Purchase
Price (subject to adjustment pursuant to Section 7) paid (or, in the case
of Option Shares with respect to which the Option has been exercised but
the Closing Date has not occurred, payable) by Grantee for each share of
Issuer Common Stock with respect to which the Option has been exercised
and with respect to which Grantee then has beneficial ownership (and which
are included in Grantee's request under this Section 8(a)), multiplied by
the number of such shares.
(b) If Grantee exercises its rights under this Section 8, Issuer shall,
within 10 business days after the Request Date, pay the Section 8 Repurchase
Consideration to Grantee in immediately available funds by wire transfer to a
bank account designated by Grantee, and Grantee shall surrender to Issuer the
Option and/or the certificates evidencing the shares of Issuer Common Stock
purchased thereunder with respect to which Grantee then has beneficial ownership
(and which are included in Grantee's request under this Section 8(a)), and
Grantee shall warrant that it has sole record and beneficial ownership of such
shares and that the same are then free and clear of all liens, claims, charges
and encumbrances of any kind whatsoever. Notwithstanding the foregoing, to the
extent that prior notification to or approval of any regulatory authority is
required in connection with the payment of all or any portion of the Section 8
Repurchase Consideration, Grantee shall have the ongoing option to revoke its
request for repurchase pursuant to Section 8 or to require that Issuer (a)
deliver from time to time that portion of the Section 8 Repurchase Consideration
that it is not then so prohibited from paying and (b) promptly file the required
notice or application for approval and expeditiously process the same. If any
regulatory authority disapproves of any part of Issuer's proposed repurchase
pursuant to this Section 8, Issuer shall promptly give notice of such fact to
Grantee and redeliver to Grantee the Option Shares it is then prohibited from
repurchasing, and Grantee shall have the right (x) to exercise the Option as to
the number of Option Shares for which the Option was exercisable at the Request
Date less the number of shares covered by the Option in respect of which payment
has been made pursuant to Section 8(a)(ii) hereof or (y) to revoke its request
for repurchase with respect to any Option Shares in respect of which such
payment has been made and exercise the Option as to the number of Option Shares
for which the Option was exercisable at the Request Date. Notwithstanding
anything herein to the contrary, (i) Issuer shall not be obligated to repurchase
the Option or any shares of Issuer Common Stock pursuant to this Section 8 on
more than one occasion, except that Issuer's obligation to repurchase on one
occasion any Option or shares of Issuer Common Stock shall be reinstated in the
event that Grantee has revoked its request for repurchase in accordance with the
provisions of this Section 8, (ii) all of Grantee's rights under this Section 8
shall terminate on the date of termination of this Option
6
<PAGE>
pursuant to Section 3(a) hereof, unless this Option shall have been exercised in
whole or part prior to the date of termination and (iii) if this Option shall
have been exercised in whole or in part prior to the date of termination
described in clause (ii) above, then Grantee's rights under this Section 8 shall
terminate 12 months after such date of termination.
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Issuer Common Stock paid for any
such share by the person or groups described in Section 8(d)(i) hereof, (ii) the
price per share of Issuer Common Stock received by holders of Issuer Common
Stock in connection with any merger or other business combination transaction
described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) hereof or (iii) if
applicable, the highest closing sales price per share of Issuer Common Stock
quoted on the NASDAQ/NMS (or if Issuer Common Stock is not quoted on the
NASDAQ/NMS, the highest bid price per share as quoted on the principal trading
market or securities exchange on which such shares are traded as reported by a
recognized source) during the 60 business days preceding the Request Date;
provided, however, that in the event of a sale of less than all of Issuer's
- -------- -------
assets, the Applicable Price shall be 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
Grantee, divided by the number of shares of the Issuer Common Stock outstanding
at the time of such sale. If the consideration to be offered, paid or received
pursuant to either of the foregoing clauses (i) or (ii) shall be other than in
cash, the value of such consideration shall be determined in good faith by an
independent nationally recognized investment banking firm selected by Grantee
and reasonably acceptable to Issuer, which determination shall be conclusive for
all purposes of this Agreement.
(d) As used herein, a "Repurchase Event" shall occur if (i) any person
(other than Grantee or any Subsidiary of Grantee) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act) 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
beneficially owns or has the right to acquire beneficial ownership of, 50% or
more of the then outstanding shares of Issuer Common Stock or (ii) any of the
transactions described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) hereof shall be
consummated.
9. Registration Rights. Issuer shall, if requested by Grantee at any time
and from time to time within three years of the date on which the Option first
becomes exercisable, as expeditiously as possible prepare and file up to two
registration statements under the Securities Act or other applicable law or
regulation if such registration is necessary in order to permit the sale or
other disposition of any or all shares of Issuer Common Stock or other
securities that have been acquired by or are issuable to Grantee upon exercise
of the Option in accordance with the intended method of sale or other
disposition stated by Grantee, including a "shelf" registration statement under
Rule 415 under the Securities Act or any successor provision, and Issuer shall
use its best efforts to qualify such shares or other securities under any
applicable state securities laws. Issuer shall use all reasonable efforts to
cause each such registration statement to become effective, to obtain all
consents or waivers of other parties which are required therefor and to keep
such registration statement effective for such period not in excess of 180 days
from the day such registration statement first becomes effective as may be
reasonably necessary to effect such sale or other disposition. Any registration
statement prepared and filed under this Section 9, and any sale covered thereby,
shall be at Issuer's expense except for underwriting discounts or commissions,
brokers' fees and the fees and disbursements of Grantee's counsel related
thereto. Grantee shall provide all information reasonably requested by Issuer
for inclusion in any registration statement to be filed hereunder. If during
the time periods referred to in the first sentence of this Section 9 Issuer
effects a registration under the Securities Act or other applicable law or
regulation of Issuer Common Stock for its own account or for any other
stockholders of Issuer (other than on Form S-4 or Form S-8, or any successor
forms or any form with respect to a dividend reinvestment or similar plan), it
shall allow Grantee the right to participate in such registration, and such
participation shall not affect the obligation of Issuer to effect two
registration statements for Grantee under this Section 9; provided that, if the
-------- ----
managing underwriters of such offering advise Issuer in writing that in their
opinion the number of shares of Issuer Common Stock requested by Grantee to be
included in such registration, together with the shares of Issuer Common Stock
proposed to be included in such registration, exceeds the number which can be
sold in such offering, Issuer shall include the shares requested to be included
therein by Grantee pro rata with the shares intended to be included therein by
Issuer. In connection with any registration pursuant to this Section 9, Issuer
and Grantee shall provide each other and any underwriter of the offering with
customary representations, warranties, covenants, indemnification and
contribution in connection with such registration. Notwithstanding anything to
the contrary contained herein, in no event shall Issuer be obligated to effect
more than two registrations pursuant to the first sentence of this Section 9 by
reason of the fact that there shall be more than one Grantee as a result of any
assignment of this Agreement or division of this
7
<PAGE>
Agreement pursuant to Section 11 hereof. It is understood and agreed for
purposes of this Section 9 that nothing contained in this Section 9 shall impair
or limit the registration rights of the FDIC under Section 10(c) of the
Preferred Stock Purchase Agreement.
10. Listing. If Issuer Common Stock or any other securities to be acquired
upon exercise of the Option are then authorized for quotation on the NASDAQ/NMS
or any securities exchange, Issuer, upon the request of Grantee, will promptly
file an application to authorize for quotation the shares of Issuer Common Stock
or other securities to be acquired upon exercise of the Option on the NASDAQ/NMS
or such other securities exchange and will use its best efforts to obtain
approval of such listing as soon as practicable.
11. Division of Option. This Agreement and the Option granted hereby are
exchangeable, without expense, at the option of Grantee, 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 in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other 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.
12. Rights Agreement. Issuer shall not approve or adopt, or propose the
approval and adoption of, any Shareholder Rights Plan unless such Shareholder
Rights Plan contains terms which provide, to the reasonable satisfaction of
Grantee, that (a) the Rights issued pursuant thereto will not become exercisable
by virtue of the fact that (i) Grantee is the Beneficial Owner of shares of
Issuer Common Stock (x) acquired or acquirable pursuant to the grant or exercise
of this Option and (y) held by Grantee or any of its Subsidiaries as Trust
Account Shares or DTC Shares or (ii) while Grantee is the Beneficial Owner of
the shares of Issuer Common Stock described in clause (a)(i), an Acquisition
Transaction involving Issuer or any of its Subsidiaries, on the one hand, and
Grantee or any of its Subsidiaries, on the other hand, is proposed, agreed to or
consummated and (b) no restrictions or limitations with respect to the exercise
of any Rights acquired or acquirable by Grantee will result or be imposed by
virtue of the fact that Grantee is the Beneficial Owner of the shares of Issuer
Common Stock described in clause (a)(i) of this Section 12.
13. Miscellaneous. (a) Expenses. Except as otherwise provided in Section
9 hereof, 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.
(b) Waiver and Amendment. Any provision of this Agreement may be waived
at any time by the party that is entitled to the benefits of such provision.
This Agreement may not be modified, amended, altered or supplemented except upon
the execution and delivery of a written agreement executed by the parties
hereto.
(c) Entire Agreement; No Third-Party Beneficiary; Severability. This
Agreement, together with the Merger Agreement and the other documents and
instruments referred to herein and therein and the confidentiality agreement,
dated January 9, 1993, between Grantee and Issuer (a) constitute the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter hereof and (b)
is not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder. Notwithstanding anything to the contrary
contained in this Agreement or the Merger Agreement, this Agreement shall be
deemed to amend the confidentiality agreement, dated January 9, 1993, between
Issuer and Grantee, so as to permit Grantee to enter into this Agreement and
exercise all of its rights hereunder, including its right to acquire Issuer
Common Stock upon exercise of the Option. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or a
federal or state regulatory agency to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of 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 Option does not permit Grantee to acquire, or does not require Issuer
to repurchase, the full number of shares of Issuer Common Stock as provided in
Sections 3 and 8 hereof (as adjusted
8
<PAGE>
pursuant to Section 7 hereof), it is the express intention of Issuer to allow
Grantee to acquire or to require Issuer to repurchase such lesser number of
shares as may be permissible without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Massachusetts without regard to any
applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained herein are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
If to Issuer to:
New Dartmouth Bank
1155 Elm Street
Manchester, New Hampshire 03101
Attention: Chief Executive Officer
Telecopier no.: (603) 666-4584
with copies to:
Nutler, McClennen & Fish
One International Place
Boston, Massachusetts 02110
Attention: John P. Driscoll, Jr., Esq.
Michael K. Krebs, Esq.
Telecopier no.: (617) 973-9748
If to Grantee to:
Shawmut National Corporation
777 Main Street
Hartford, Connecticut 06115
Attention: Raymond A. Guenter, Esq.
Telecopier no.: (203) 728-4205
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, N.Y. 10022
Attention: William S. Rubenstein, Esq.
Telecopier no.: (212) 735-2000
(g) Counterparts. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(h) Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder or under
9
<PAGE>
the Option shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other party,
except that Grantee may assign this Agreement to a wholly owned subsidiary of
Grantee and Grantee may assign its rights hereunder in whole or in part to any
person after the occurrence of a Purchase Event. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns. As used
in this Agreement, Grantee shall include any person to whom this Agreement or
the Option shall be assigned by a previous Grantee in accordance with the terms
hereof.
(i) Further Assurances. In the event of any exercise of the Option by
Grantee, Issuer and Grantee shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree that this Agreement
may be enforced by either party through specific performance, injunctive relief
and other equitable relief. Both parties further agree to waive any requirement
for the securing or posting of any bond in connection with the obtaining of any
such equitable relief and that this provision is without prejudice to any other
rights that the parties hereto may have for any failure to perform this
Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
ISSUER
by /s/ Robert P. Keller
----------------------
Name: Robert P. Keller
Title: President and Chief Executive Officer
GRANTEE
by /s/ Joel B. Alvord
--------------------
Name: Joel B. Alvord
Title: Chairman of the Board
and Chief Executive Officer
10
<PAGE>
ANNEX F
- --------------------------------------------------------------------------------
NEW DARTMOUTH BANK
Consolidated Financial Statements
As of June 30, 1993
and for the Period
July 1, 1992 to June 30, 1993
- --------------------------------------------------------------------------------
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Price Waterhouse
160 Federal Street
Boston, MA 20110
To the Board of Directors and Stockholders of New Dartmouth Bank
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in stockholders' equity and
of cash flows, appearing on pages 24 through 45 of this report, present fairly,
in all material respects, the financial position of New Dartmouth Bank and its
subsidiaries at June 30, 1993 and 1992, and the results of their operations and
their cash flows for the year ended June 30, 1993 and the period October 10,
1991 (date of commencement of operations) to June 30, 1992, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the management of New Dartmouth Bank; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse
August 10, 1993
F-1
<PAGE>
New Dartmouth Bank
<TABLE>
<CAPTION>
Index Page
<S> <C>
Report of Independent Accountants 23
Consolidated Balance Sheets 24
Consolidated Statement of Operations 25
Consolidated Statement of Change
in Stockholders' Equity 26
Consolidated Statement of Cash Flow 27
Notes to Consolidated Financial Statements 28
</TABLE>
F-2
<PAGE>
New Dartmouth Bank
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
June 30, June 30,
(In thousands, except per share data) 1993 1992
- -----------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 44,923 $ 34,164
Interest bearing deposits in
other banks 499 8,880
Federal funds sold 0 7,200
Securities purchased under
agreements to resll 0 34,000
Securities held for sale 363,261 0
Securities held to maturity
(market value $333,766 and
$449,331 respectively) 331,087 445,728
Due from Federal Deposit
Insurance Corporation 6,893 33,334
Mortgage loans held for sale 15,163 4,466
Loans:
Subject to FDIC Small Loan
protection 523,348 696,223
Subject to FDIC "put" protection 285,206 389,568
Other loans 146,169 70,261
---------- ----------
Gross loans 954,723 1,156,052
Less: Discount on loans acquired
from the FDIC 42,086 42,669
---------- ----------
Gross loans net of discount on
loans acquired from the FDIC 912,637 1,113,383
Less: Allowance for possible loan
losses 12,398 13,151
---------- ----------
Net loans 900,239 1,100,232
Premises and equipment, net 5,833 4,113
Other real estate owned 1,729 1,068
Other assets 30,869 30,123
---------- ----------
Total assets $1,700,496 $1,703,308
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand deposits $ 70,780 $ 61,819
N.O.W. accounts 146,443 142,613
Money market accounts 107,315 138,486
Savings 363,179 301,974
Time deposits 803,019 920,035
---------- ----------
Total deposits 1,490,736 1,564,927
Short-term borrowed funds:
Securities sold under agreements
to repurchase 31,808 10,940
Other short-term borrowed funds 0 234
---------- ----------
Total short-term borrowed funds 31,808 11,174
Federal Home Loan Bank advances 50,000 0
---------- ----------
Total borrowed funds 81,808 11,174
Other liabilities 33,443 40,312
---------- ----------
Total liabilities 1,605,987 1,616,413
---------- ----------
Commitments and contingent
liabilities
Stockholders' Equity:
Preferred stock--$.01 par value,
233,000 and 370,000 shares
authorized 210,073 and 347,073
shares issued and outstanding 18,794 31,050
Common stock--$.01 par value,
960,000 shares authorized 424,200
shares issued and outstanding 4 4
Common surplus 40,350 40,350
Retained earnings 33,788 15,491
Unrealized gain on securities
held for sale 1,573 0
---------- ----------
Total stockholders' equity 94,509 86,895
---------- ----------
Total liabilities and
stockholders' equity $1,700,496 $1,703,308
========== ==========
</TABLE>
See accompanying notes
F-3
<PAGE>
New Dartmouth Bank
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
For the Period
--------------------------------------
July 1, 1992 October 10, 1991
to to
(In thousands, except per share data) June 30, 1993 June 30, 1992
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest and loan fee income:
Interest and fees on loans $ 95,309 $ 89,418
Interest on securities held for sale 3,304 0
Interest on securities held to maturity 24,381 10,556
Interest on interest bearing deposits in other
banks and federal funds sold 1,241 2,678
Interest on securities purchased under agreement to resell 581 442
Dividends on Federal Home Loan Bank stock 1,098 863
-------- --------
Total interest and loan fee income 125,914 103,957
-------- --------
Interest expense:
Interest on deposits 55,588 54,278
Interest on securities sold under agreements to repurchase and
other short-term borrowings 1,048 307
Interest on Federal Home Loan Bank advances 2,178 0
-------- --------
Total interest expense 58,814 54,585
-------- --------
Net interest income 67,100 49,372
Provision for possible loan losses 16,101 3,216
-------- --------
Net interest income after provision for possible loan losses 50,999 46,156
-------- --------
Noninterest income:
Fees for services to customers 7,392 5,614
FDIC Small Loan protection payments 10,903 2,216
FDIC loan administration 0 2,976
Gain on sales of securities, net 1,373 9
Other income 3,672 2,194
-------- --------
Total noninterest income 23,340 13,009
-------- --------
Noninterest expense:
Salaries and employee benefits 17,985 11,594
Occupancy and equipment expense 6,966 5,948
Data processing expense 3,408 2,071
FDIC insurance assessment 3,491 2,602
Printing and mailing 1,879 1,326
Other expenses 10,083 9,208
-------- --------
Total noninterest expense 43,812 32,749
-------- --------
Income before income taxes 30,527 26,416
Income tax expense 11,145 10,925
-------- --------
Net income $ 19,382 $ 15,491
======== ========
Earnings per share:
Primary $ 43.63 $ 36.10
Fully diluted 23.85 17.77
Weighted average common shares outstanding:
Primary 444,282 429,093
Fully diluted 812,496 871,655
</TABLE>
See accompanying notes
F-4
<PAGE>
New Dartmouth Bank
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Preferred Stock Common Stock Net Unrealized Total
--------------- ------------
(In thousands, except Number of Number of Paid in Retained Gain on Securities Stockholders'
share data) Shares Amount Shares Amount Capital Earnings Held for Sale Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at October 10, 1991 347,073 $ 31,050 424,200 $ 4 $ 40,350 $ 0 $ 0 $ 71,404
Net Income 15,491 15,491
------- -------- ------- ------ -------- -------- ------------------ -----------
Balance at June 30, 1992 347,073 31,050 424,200 4 40,350 15,491 0 86,895
Net Income 19,382 19,382
Preferred Stock redemption (137,000) (12,256) (1,085) (13,341)
Net unrealized gain on
securities held for
sale, net of income taxes
of $1,017 1,573 1,573
------- -------- ------- ------ -------- -------- ------------------ -----------
Balance at June 30, 1993 210,073 $ 18,794 424,200 $ 4 $ 40,350 $ 33,788 $ 1,573 $ 94,509
======= ======== ======= ====== ======== ======== ================== ===========
</TABLE>
See accompanying notes
F-5
<PAGE>
New Dartmouth Bank
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
For the Period
-------------------------------
July 1, 1992 October 10, 1991
to to
(In thousands, except per share data) June 30, 1993 June 30, 1992
- --------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 19,382 $ 15,491
Adjustments to reconcile net income to net
cash provided by (used in)operating
activities:
Provision for possible loan losses 16,101 3,216
Amortization of premiums on securities 3,207 745
(Gain) on sale of securities, net (1,373) (9)
(Increase) decrease in mortgage loans
held for sale (10,697) 3,725
Loss on sale and disposal of premises and
equipment 172 0
Depreciation and amortization of premises
and equipment 907 537
Deferred tax expense (benefit) (844) 1,492
Decrease in accrued interest payable (201) (3,271)
Decrease in accrued interest receivable 2,154 294
Decrease (increase) in due from FDIC 26,441 (30,927)
Other, net (9,741) (6,531)
------------ ------------
Net cash provided by (used in)
operating activities 45,508 (15,238)
------------ ------------
Cash flows from investing activities:
Proceeds from maturities of securities 683,072 277,245
Proceeds from sales of securities 689,930 11,453
Purchases of securities (1,620,866) (518,535)
Decrease (increase) in securities
purchased under agreements to resell 34,000 (34,000)
Decrease in loans, net 127,185 157,817
Proceeds from loans "put" to FDIC 56,707 123,200
Purchases of premises and equipment (3,275) (4,108)
Proceeds from sales of premises and
equipment 476 0
Premium received from FDIC for
acquisition 0 4,500
Net cash received from banking
institution acquired 0 53,939
Net increase in other real estate owned (661) 0
------------ ------------
Net cash provided by (used in)
investing activities (33,432) 71,511
------------ ------------
Cash flows from financing activities:
Net increase in demand deposits, N.O.W.,
money market, and savings accounts 42,825 65,340
Net decrease in time deposits (117,016) (672,463)
Increase in short-term borrowed funds 20,634 4,145
Increase in Federal Home Loan Bank
advances 50,000 0
Preferred stock redemptions (13,341) 0
------------ ------------
Net cash used in financing activities (16,898) (602,978)
------------ ------------
Decrease in cash and cash equivalents (4,822) (546,705)
Cash and cash equivalents at
beginning of period 50,244 596,949
------------ ------------
Cash and cash equivalents at end of period $ 45,422 $ 50,244
============ ============
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest expense $ 59,015 $ 57,856
Income taxes 9,736 7,618
On June 26, 1992, New Dartmouth acquired
certain assets and assumed certain
liabilities of the failed Somersworth
Bank from the FDIC as follows:
Assets acquired net of cash and cash
equivalents received $ 48,700
Cash and cash equivalents received (net
of premium received) 54,000
Premium paid by the FDIC in New Dartmouth 4,500
Liabilities assumed 102,700
</TABLE>
See accompanying notes
F-6
<PAGE>
New Dartmouth Bank
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. FORMATION OF NEW DARTMOUTH
New Dartmouth Bank ("New Dartmouth") is a New Hampshire chartered guaranty
savings bank that was formed to acquired certain assets and assume certain
liabilities, as of the close of business on October 10, 1991 (the "Acquisition
Date"), from the Federal Deposit Insurance Corporation (the "FDIC"), as
Receiver of the failed Dartmouth Bank, New Hampshire Savings Bank and Numerica
Savings Bank, FSB (collectively, the "Failed Banks"). New Dartmouth was
initially capitalized through the sale of $40.4 million of common stock to
accredited investors and $31.0 million of non-voting, convertible, redeemable
perpetual preferred stock ("Preferred Stock") to the FDIC.
Simultaneous with New Dartmouth's capitalization and the FDIC's appointment
as Receiver, New Dartmouth entered into three Purchase and Assumption Agreements
(collectively, the "1991 P&A Agreements") with the FDIC as Receiver of the
Failed Banks. Under the terms of the Agreements, New Dartmouth acquired from
the FDIC $1.7 billion in certain assets and assumed $2.1 billion in deposits of
the Failed Banks (collectively, the "1991 P&A Transaction"). The FDIC paid New
Dartmouth $55.3 million to complete the transaction in addition to a payment of
$400.8 million to New Dartmouth for the assumption of net liabilities. Included
in the assets acquired were $1.4 billion of loans.
Pursuant to the Agreements, New Dartmouth acquired Consulting Systems and
Management Corporation ("CSM"), National Mortgage Company, Inc. ("NMC") and
United Savers Acceptance Corporation ("USAC"), all non-bank subsidiaries of the
Failed Banks. CSM, a data processing subsidiary, ceased active operations in
March 1992. USAC and NMC are currently engaged in servicing portfolios of
automobile and residential real estate loans, respectively, that were sold into
the secondary market.
In connection with the 1991 P&A TRansaction, the FDIC provided the
following assistance:
(a) the FDIC transferred an allowance for possible loan losses of 1.25%
of the book value of all acquired loans to New Dartmouth;
(b) the FDIC agreed to repurchase at book value, including up to 90
days accrued interest, subject to certain limitations, all loans, other
than Small Loans, which become adversely credit classified within three
years after the Acquisition Date ("Puts");
(c) the FDIC agreed to share losses on certain small residential
mortgage and consumer loans for the three-year period following the
Acquisition Date by assuming 90% of amounts charged-off each quarter in
excess of 0.0875% and 0.25% of the respective loan balances outstanding
at the beginning of each quarter, and to reimburse New Dartmouth for up
to 90 days accrued interest on such loans;
(d) the FDIC agreed to reacquire, during the 180-day period following
the Acquisition Date, certain assets with material defects in title
which may impair collectibility; and
(e) the FDIC agreed to indemnify New Dartmouth with respect to certain
other matters.
Putable loans are loans on the books of the Failed Banks as of the
Acquisition Date which are other than Small Loans (defined below). Loans "put"
to the FDIC during the period October 10, 1992 through October 9, 1993 are
subject to a discount of 2% and loans "put" to the FDIC during the period
October 10, 1993 through October 10, 1994 are subject to a discount of 4%.
Small Loans are defined as consumer loans (including advances on home equity
lines of credit) and residential mortgage loans (i.e., loans secured by
mortgages on one to four family residential properties or by stock of
cooperative housing associations) having a book balance as of the Acquisition
Date of not more than $100,000 and $191,250, respectively. Amounts due from the
FDIC under the Small Loan loss protection and "put" provisions are classified as
Due from FDIC.
Under the 1991 P&A Agreements, on the Acquisition Date all classified loans,
charged-off loans and other real estate owned of the Failed Banks were
transferred to an FDIC-owned special asset pool ("the
F-7
<PAGE>
New Dartmouth Bank
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Pool"). The Pool was serviced by New Dartmouth until March 9, 1992, as required
under the terms of the 1991 P&A Agreements. Total fees received by New Dartmouth
under this arrangement were $3.0 million and are included in interest income.
2. MERGER WITH SHAWMUT NATIONAL CORPORATION
On March 23, 1993, New Dartmouth entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Shawmut National Corporation ("SNC")
pursuant to which SNC will acquire New Dartmouth through the merger (the
"Merger") of New Dartmouth with a wholly owned subsidiary of SNC. Upon
consummation of the Merger, New Dartmouth stockholders will become stockholders
of SNC and will receive a number of shares of SNC Common Stock in exchange for
each share of New Dartmouth Common Stock as shall be equal to the exchange
ratio.
Upon consummation of the Merger, each issued and outstanding share of New
Dartmouth Common Stock will be converted into the right to receive a number of
shares of SNC Common Stock equal to the quotient obtained by dividing (i) $310
by (ii) the Average Closing Price (the average of the daily closing price of
SNC Common Stock for the fifteen consecutive trading days prior to the Merger),
provided that if the Average Closing Price is (x) less than $19.975, then the
Average Closing Price will be deemed to be $19.975 and the Exchange Ratio will
be 15.519, unless waived by SNC and (y) greater than $27.025, then the Average
Closing Price will be deemed to be $27.025 and the Exchange Ratio will be
11.471, unless waived by New Dartmouth.
As a condition to SNC's merger proposal, New Dartmouth and SNC entered into
a Stock Option Agreement pursuant to which New Dartmouth granted SNC an option
to purchase up to 74,275 shares of New Dartmouth Common Stock, or 14.9% of the
issued and outstanding shares of such common stock at March 31, 1993, at an
exercise price of $310 per share. The Stock Option Agreement is intended to
increase the likelihood that the Merger will be consummated in accordance with
the terms of the Merger Agreement. Consequently, the Stock Option Agreement may
discourage persons who might now or prior to the Merger be interested in
acquiring New Dartmouth from considering such an acquisition, even if such
persons were prepared to pay a higher price per share for New Dartmouth Common
Stock than the price per share implicit in the Exchange Ratio. The option is
exercisable only upon the occurrence of the following events: (a) a material
breach by New Dartmouth of any of its covenants and agreements contained in the
Merger Agreement; (b) New Dartmouth fails to publicly oppose a tender offer or
an exchange offer to purchase shares of New Dartmouth Common Stock; (c) any
person shall have acquired beneficial ownership or any group shall have been
formed which beneficially owns, or has the right to acquire beneficial
ownership, of 10% of the outstanding shares of New Dartmouth Common Stock; (d)
any person who, as of March 23, 1993, owns or controls 10% or more of the
outstanding shares of New Dartmouth Commomm Stock shall have acquired an
additional 2% or more of New Dartmouth Common Stock; (e) New Dartmouth
Stockholders shall not have approved the Merger Agreement at the Special
Meeting, or the Special Meeting shall have been cancelled prior to the
abandonment of the Merger Agreement, in each case after it shall have been
publicly announced that another person shall have (i) made, or disclosed an
intention to make, a proposal to acquire New Dartmouth or (ii) filed an
application under the Bank Holding Company Act or the Change in Bank Control Act
of 1978, for approval to acquire New Dartmouth; or (f) New Dartmouth's Board of
Directors shall not have recommended to New Dartmouth Stockholders that such
stockholders vote in favor of the Merger.
The Merger is expected to qualify as tax-free reorganization within the
meaning of Section 368(a) of the Internal Revenue Service Code.
Holders of New Dartmouth Common Stock and Preferred Stock will be asked to
vote on the Merger at a Special Meeting of Stockholders to be held on August 26,
1993, New Hampshire law requires the affirmative approval of the holders of
66 2/3% of all of the outstanding shares of New Dartmouth Common Stock and
Preferred Stock, voting together as a single class, in order to obtain the
permission of the Bank Commissioner of the State of New Hampshire to consummate
the Merger. In addition, New Dartmouth's Articles of Agreement separately
require that the Merger be approved by the holders of a majority of the
F-8
<PAGE>
New Dartmouth Bank
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
outstanding shares of New Dartmouth Common Stock.
The Merger is subject to prior approval by (i) the Federal Reserve Board
under Section 3 of the Bank Holding Company Act of 1956, (ii) the FDIC under the
Bank Merger Act, (iii) the Board of Trust Company Incorporation of the State of
New Hampshire, (iv) the Board of Bank Incorporation of the Commonwealth of
Massachusetts, and (v) the Bank Commissioner of the State of New Hampshire. The
Merger will not be consummated unless all of the requisite regulatory approvals
for such transactions are obtained without the imposition of any condition or
requirement that, in the reasonable opinion of SNC, would so materially
adversely affect the economic or business benefits to SNC of the Merger as to
render consummation of the Merger inadvisable. Applications have been submitted
to each of the respective regulatory agencies.
New Dartmouth and SNC expect the Merger will occur prior to December 31,
1993.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
New Dartmouth's consolidated financial statements have been prepared in
accordance with generally accepted accounting principles and prevailing
practices within the banking industry.
Certain amounts in the 1992 financial statements have been reclassified to
conform with the 1993 presentation.
Basis of Financial Statement Presentation
- -----------------------------------------
The consolidated financial statements include the accounts of New Dartmouth
and its wholly-owned subsidiaries. Significant intercompany balances and
transactions have been eliminated. The financial statements reflect all
adjustments which are, in the opinion of management, necessary to state fairly
the results of operations for the periods presented. The acquisition of The
Somersworth Bank on June 26, 1992 (the "Somersworth Transaction") has been
accounted for as a purchase and the accompanying consolidated financial
statements include the results of operations from the date of acquisition.
Cash and Cash Equivalents
- -------------------------
For purposes of reporting cash flows, cash and cash equivalents include cash
and due from banks, interest bearing deposits in other banks and federal funds
sold.
Securities
- ----------
During 1993, as a result of changing industry practice and management's
evaluation of the investment securities portfolio, New Dartmouth segregated its
investment portfolio into securities held to maturity and those held for sale.
Securities held for sale are to be held for an indefinite period of time and can
be used for asset/liability management and may be sold in response to changes
in interest rates, prepayment risk or other factors.
In May 1993, the Financial Accounting Standards Board issued Statement No.
115, "Accounting for Certain Investments in Debt and Equity Securities" ("FAS
115"). FAS 115 requires that debt and equity securities be classified as
trading, available for sale or held to maturity. Securities classified as
trading are reported at fair value with unrealized gains and losses included in
income. Securities classified as held for sale are reported at fair value with
unrealized gains and losses included as a separate component of stockholders'
equity. Securities classified as held to maturity are reported at amortized
cost. In order to classify securities as held to maturity, management must have
the positive intent and ability to hold securities to maturity.
F-9
<PAGE>
New Dartmouth Bank
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
New Dartmouth adopted FAS 115 effective June 30, 1993 and on June 30, 1993
recorded a total unrealized gain of $2.6 million ($1.6 million, net of tax) as a
separate component of stockholders' equity.
Gains or losses on sales of securities are computed on a specific
identification method.
Loans
- -----
Loans are stated at principal outstanding net of unearned income with the
exception of mortgages held for sale which are carried at the lower of aggregate
cost or market. Interest income on loans is recognized on an accrual basis based
on the principal amount outstanding. Unearned income on loans made or purchased
at a discount and loan related fees are recognized in interest income over the
lives of the loans using a method that results in a level yield.
When a loan, other than a credit card or student loan, reaches 90 days past
due for principal or interest, it is placed on non-accrual status and interest
accrued is reversed and charged against current year interest income.
Collections on non-accrual loans which are not subject to the FDIC protection
are applied as either a reduction of principal or interest income depending upon
management's assessment of the ultimate collectibility of principal. Loans are
removed from non-accrual status when they become current as to principal and
interest and when, in the opinion of management, the loans are estimated to be
fully collectible on a timely basis as to principal and interest.
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment
of a Loan" ("FAS 114"). Among other things, FAS 114 requires that impairments of
loans due to uncollectibility of principal and interest be measured based upon
the present value of probable and estimable future cash flows. Previously,
measurement of such impairments was on an undiscounted basis. FAS 114 is
effective for fiscal years beginning after December 15, 1994. Generally, the
impact of FAS 114 will be to increase loan losses and, because of the effects
of discounting, provide future interest income on impaired loans. Had FAS 114
been adopted at June 30, 1993, management believes that it would not have had a
material effect on New Dartmouth's financial position and results of operations.
On October 10, 1991, New Dartmouth allocated approximately $39.0 million of
the federal financial assistance it received from the FDIC as part of the 1991
P&A Transaction as a discount against the acquired loan portfolio representing
New Dartmouth's estimate of potential future losses in excess of the protection
provided by the FDIC. On June 26, 1992, New Dartmouth allocated approximately
$3.6 million of the federal financial assistance it received from the FDIC as
part of the Somersworth Transaction as a discount against the acquired loan
portfolio representing New Dartmouth's estimate of potential future losses.
These discounts were not accreted into interest income in Fiscal 1993 or 1992.
Allowance for Possible Loan Losses
- ----------------------------------
An allowance for possible loan losses is established for the absorption of
potential losses on loans through charges to current expense. Loan losses are
charged against this allowance for possible loans losses and subsequent
recoveries are added to it. Small Loan protection payments received from the
FDIC are recorded as noninterest income and offset by a corresponding provision
for possible loan losses.
The amount and adequacy of this allowance is determined by management and is
based on several factors, including, but not limited to, a review and evaluation
of specific loans, the overall quality, growth and composition of the loan
portfolio, an evaluation of present and anticipated economic conditions and
other pertinent factors. While management considers the allowance for possible
loan losses to be adequate to provide for losses inherent in the portfolios, it
should be noted that it is based on estimated and ultimate losses may vary from
the estimates if future conditions differ substantially from the assumptions
used in making the evaluation. It is possible that future events may result in
additional charge-offs and changes in the level of the allowance for possible
loan losses and the level of non-performing loans. Further, various regulatory
agencies, as an integral part of their examination process, periodically review
New Dartmouth's
F-10
<PAGE>
New Dartmouth Bank
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
allowance for possible loan losses. Such agencies may require New Dartmouth to
recognize additional provisions to the allowance for possible loan losses based
on judgments different from those of management.
Premises and Equipment
- ----------------------
Premises and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are charged to expense using the
straight-line method over the estimated useful life of each asset. Expenditures
for maintenance and repairs are charged to expense as incurred. The cost of
major additions and improvements are capitalized. Amortization of leasehold
improvements on leased facilities is charged to expense using the straight-line
method over the shorter of the useful life of the asset or the term of the
lease. Upon retirement or disposition, the cost and accumulated depreciation are
eliminated from the respective accounts and any resulting gain or loss is
credited to or charged against income.
Other Real Estate Owned
- -----------------------
Other real estate owned is comprised of the foreclosed properties for which
New Dartmouth has received title. The properties are recorded at the lower of
the remaining principal balance of the foreclosed loan or estimated fair market
value. Estimated fair market value is determined on the basis of an appraisal at
the time of foreclosure. The difference between the principal balance and the
estimated fair value of the loan at the time of foreclosure is charged against
the allowance for possible loan losses. Any subsequent write-down, related to
loans that originally qualified for Small Loan loss protection, resulting from
an excess of the carrying value over the fair market value is subject to
reimbursement by the FDIC under the Small Loan Loss Protection provisions of the
1991 P&A Agreement. Any subsequent write-down, related to loans originated or
acquired after October 10, 1991, resulting from an excess of the carrying value
over the fair market value is charged to expense.
Income Taxes
- ------------
Income taxes are provided at the statutory federal and state income tax
rates on income and unrealized gains or losses on securities held for sale as
reported in the accompanying financial statements. Deferred taxes are provided
as a result of the recognition of certain income and expense items in different
time periods for financial and income tax purposes.
New Dartmouth adopted Statement of Financial Accounting Standards No. 109,
"Accounting For Income Taxes" ("FAS 109"), effective October 10, 1991. FAS 109
is an asset and liability approach that requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of temporary
differences between the carrying amounts and tax basis of assets and
liabilities. In estimating future tax consequences, FAS 109 generally considers
all expected future events other than enactments of changes in the tax law or
rates.
Earnings Per Share
- ------------------
Primary earnings per share is determined on the basis of the weighted
average number of shares of common stock outstanding after giving effect to
dilutive stock options and warrants.
Fully diluted earnings per share reflects both the effect of dilutive stock
options and warrants and the dilutive effect of conversion of each share of
preferred stock into 1.25 shares of common stock (the maximum conversion ratio
applicable for the preferred stock).
Fair Value of Financial Instruments
- -----------------------------------
New Dartmouth implemented Statement of Financial Accounting Standards No.
107, "Disclosures About Fair Value of Financial Instruments", ("FAS 107") for
the year ended June 30, 1993, which requires
F-11
<PAGE>
New Dartmouth Bank
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
New Dartmouth to disclose the fair value of its financial instruments. A
financial instrument is defined as cash, evidence of an ownership interest in an
entity or a contract that conveys or imposes the contractual right or obligation
to either receive or deliver cash or another financial instrument. Examples of
financial instruments included in New Dartmouth's balance sheet are cash,
federal funds sold, debt and equity securities, loans, demand, savings and other
interest-bearing deposits, securities sold under agreements to repurchase and
Federal Home Loan Bank advances. Examples of financial instruments which are
not included in New Dartmouth's balance sheet are commitments to extend credit,
standby letters of credit and loans sold with recourse. Fair value is defined
as the amount at which a financial instrument could be exchanged in a current
transaction between willing parties, other than in forced sale or liquidation
and is best evidenced by a quoted market price if one exists.
FAS 107 requires the fair value of deposit liabilities with no stated
maturity, such as demand deposits, N.O.W. and money market accounts, to equal
the carrying value of these financial instruments and, therefore, does not allow
for the recognition of the inherent value of these core deposit relationships.
New Dartmouth has estimated fair value based on quoted market prices where
available. In cases where quoted market prices were not available, fair values
were based on the quoted market price of a financial instrument with similar
characteristics, the present value of expected future cash flows or other
valuation techniques. Each of these alternative valuation techniques utilizes
assumptions which are highly subjective and judgmental in nature. Subjective
factors include, among other things, estimates of cash flows, the timing of
cash flows, risk and credit quality characteristics and interest rates.
Accordingly, the results may not be precise and modifying the assumptions may
significantly affect the values derived. In addition, fair values established
utilizing alternative valuation techniques may or may not be substantiated by
comparison with independent markets. Further, fair value may or may not be
realized if a significant portion of the financial instruments were sold in a
bulk transaction. Therefore, any aggregate unrealized gains or losses should
not be interpreted as a forecast of future earnings or cash flows.
Furthermore, the fair value disclosed should not be interpreted as the
aggregate current value of New Dartmouth.
The methodology and assumptions utilized to estimate the fair value of New
Dartmouth's financial instruments, not previously discussed in the policy
statements above, are described below.
Financial instruments with fair value approximate to carrying value -- The
carrying value of cash and due from banks, interest-bearing deposits in other
banks, federal funds sold and securities sold under agreement to repurchase,
demand deposits, savings, N.O.W. and money market deposits, and accrued
interest income and expense approximate fair value due to the short-term nature
of these financial instruments.
Securities -- The fair value of securities held for sale and securities
held to maturity was derived based on quoted market prices.
Loans -- The fair value of loans was estimated for groups of similar loans
based on the type of loan, interest rate characteristics, credit risk and
maturity. The carrying value of loans maturing or repricing within 90 days was
estimated to approximate fair value due to the short-term characteristics of
these loans. The fair value of performing loans was estimated by discounting
expected future cash flows utilizing appropriate discount rates. Prepayments
were not anticipated for either fixed-rate or variable-rate loans. The fair
value of non-accruing loans was estimated by discounting expected future cash
flows utilizing appropriate discount rates, commensurate with a portfolio of
non-accruing loans. As appropriate, the fair values reflect the FDIC loss
protection. The fair value of loans was approximately $928.4 million at June
30, 1993 compared to a carrying value of $900.2 million.
Deposits -- The fair value of deposits with fixed maturities was estimated
by discounting expected future cash flows utilizing interest rates currently
being offered on deposits with similar characteristics and maturities. The fair
value of these deposits was approximately $811.2 million at June 30, 1993
compared to a carrying value of $803.0 million.
F-12
<PAGE>
New Dartmouth Bank
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Federal Home Loan Bank Advances - The fair value of Federal Home Loan Bank
advances was estimated by discounting expected future cash flows utilizing
interest rates currently being offered on advances with similar characteristics
and maturities. The fair value of these advances was approximately $50.7 million
at June 30, 1993 compared to a carrying value of $50.0 million.
Off-balance sheet financial instruments - The fair value of commitments to
extend credit and standby letters of credit was determined based on the dis-
counted value of fees currently charged for similar agreements and was not
significant. The fair value of New Dartmouth's recourse obligations was not
significant due to FDIC credit protection.
4. SOMERSWORTH ACQUISITION
On June 26, 1992, New Dartmouth and the FDIC, as Receiver for The Somers-
worth Bank, Somersworth, New Hampshire ("Somersworth"), entered into a Purchase
and Assumption Agreement (the "Somersworth Agreement"), whereby New Dartmouth
assumed Somersworth's deposits totaling approximately $101.6 million and
purchased certain assets totaling approximately $54.0 million. New Dartmouth
accounted for the Somersworth transaction under the purchase method of
accounting. New Dartmouth's June 30, 1992 financial statements include
Somersworth's results of operations since the date of acquisition.
Under the terms of the Somersworth Agreement, the FDIC retained
Somersworth's initial pool of classified assets and paid New Dartmouth $4.5
million to complete the transaction in addition to a payment of $48.7 million
to New Dartmouth for the assumption of net liabilities. The FDIC is not
providing New Dartmouth with loan loss protection with respect to the acquired
loans. New Dartmouth allocated approximately $3.6 million of the federal
financial assistance received from the FDIC as a discount against the acquired
loan portfolio.
In fiscal 1993, New Dartmouth returned to the FDIC approximately $6.6
million, of the loans acquired as part of the Somersworth Transaction
($6.0 million net of discount). These loans should have been retained by
the FDIC under the terms of the Somersworth Agreement.
5. CASH AND DUE FROM BANKS
New Dartmouth is required by the Federal Reserve Bank of Boston to
maintain average balances in the form of cash or noninterest bearing deposits.
Reserve balances of $16.7 million at June 30, 1993 were maintained in
accordance with these requirements compared to reserve balances of $11.0
million at June 30, 1992.
F-13
<PAGE>
New Dartmouth Bank
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. SECURITIES
A summary of the amortized cost and market value of the securities held for
sale portfolio at June 30, 1993 is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Gross Gross
June 30, 1993 Amortized Unrealized Unrealized Market
(In thousands) Cost Gains Losses Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government and federal
agency obligations $ 213,196 $ 10 $ 2 $ 213,204
Collateralized mortgage
obligations 55,210 290 152 55,348
Mortgage-backed securities 92,265 2,453 9 94,709
--------- --------- --------- ---------
Total securities held
for sale $ 360,671 $ 2,753 $ 163 $ 363,261
========= ========= ========= =========
</TABLE>
Securities held for sale with a market value of $34.4 million were pledged
to secure funds on deposit and Federal Home Loan Bank advances.
A summary of the amortized cost and market value of securities held to
maturity at June 30, 1993 is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Gross Gross
June 30, 1993 Amortized Unrealized Unrealized Market
(In thousands) Cost Gains Losses Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government and federal
agency obligations $ 76,587 $ 1,334 $ 0 $ 77,921
Obligations of state and
political subdivisions 8,168 0 0 8,168
Collateralized mortgage
obligations 201,381 1,309 308 202,382
Mortgage-backed securities 30,019 335 8 30,346
Other 55 17 0 72
--------- --------- --------- ---------
Total debt securities 316,210 2,995 316 318,889
Federal Home Loan Bank stock 14,877 0 0 14,877
--------- --------- --------- ---------
Total securities held
to maturity $ 331,087 $ 2,995 $ 316 $ 333,766
========= ========= ========= =========
</TABLE>
Securities held to maturity with an amortized cost of $102.4 million were
pledged to secure funds on deposit, short-term borrowings, and Federal Home Loan
Bank advances.
Proceeds from sales of securities were $689.9 million for the year ended
June 30, 1993. Gross gains of $2.4 million and gross losses of $1.0 million
were realized on those sales.
F-14
<PAGE>
New Dartmouth Bank
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
A summary of the amortized cost and market value of securities at June 30,
1992 is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Gross Gross
June 30, 1994 Amortized Unrealized Unrealized Market
(In thousands) Cost Gains Losses Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government and federal
agency obligations $ 211,441 $ 1,930 $ 38 $ 213,333
Obligations of state and
political subdivisions 2,938 0 0 2,938
Collateralized mortgage
obligations 95,951 628 210 96,369
Mortgage-backed securities 108,090 1,301 23 109,368
Other 12,431 40 25 12,446
--------- --------- -------- ---------
Total debt securities 430,851 3,899 296 434,454
Federal Home Loan Bank stock 14,877 0 0 14,877
--------- --------- -------- ---------
Total securities held
to maturity $ 445,728 $ 3,899 $ 296 $ 449,331
========= ========= ======== =========
</TABLE>
Investment securities with an amortized cost of $39.2 million were pledged to
secure funds on deposit and short-term borrowings at June 30, 1992. Proceeds
from the sales of investments were $5.4 million during the period October 10,
1991 to June 30, 1992. Gross gains of $15,000 and gross losses of $7,000 were
realized on those sales. Proceeds from sales of mortgage-backed securities were
$6.0 million during the period and gross gains of $1,000 were realized on those
sales.
The amortized cost and market value of debt securities at June 30, 1993, by
contractual maturity, are summarized below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without prepayment penalties.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Securities held for sale Securities held to maturity
--------------------------------------- ----------------------------------------
June 30, 1993 Amortized Market Amortized Market
(In thousands) Cost Value Yield Cost Value Yield
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Due in one year or less $ 163,165 $ 163,175 3.22% $ 40,033 $ 40,547 6.38%
Due after one year through five years 50,031 50,029 4.69 41,749 42,490 5.50
Due after five years through
ten years 0 0 0.00 1,636 1,732 8.70
Due after ten years 0 0 0.00 1,392 1,392 7.36
--------- ---------- ----- ---------- --------- -----
Total 213,196 213,204 3.56 84,810 86,161 6.01
Collateralized mortgage obligations 55,210 55,348 5.39 201,381 202,382 5.39
Mortgage-backed securities 92,265 94,709 5.44 30,019 30,346 5.34
--------- ---------- ----- ---------- --------- -----
Total $ 360,671 $ 363,261 4.33% $ 316,210 $ 318,889 5.55%
========= ========== ===== ========== ========= =====
</TABLE>
F-15
<PAGE>
New Dartmouth Bank
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. LOANS AND LOAN COMMITMENTS
The following tables summarize New Dartmouth's outstanding loan portfolio:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
June 30, 1993 Loans subject to FDIC protection
--------------------------------
(In thousands) Small Loan "Put" Other loans Total loans
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Residential real estate $ 466,251 $ 33,339 $ 49,277 $ 548,867
Consumer 57,097 231 76,213 133,541
Commercial real estate 0 220,340 9,045 229,385
Commercial 0 26,220 11,360 37,580
Construction 0 5,076 274 5,350
--------- --------- --------- ---------
Gross loans 523,348 285,206 146,169 954,723
Discount on loans 42,086 0 0 42,086
--------- --------- --------- ---------
Gross loans, net of
discount on loans
acquired from the
FDIC $ 481,262 $ 285,206 $ 146,169 $ 912,637
========= ========= ========= =========
- --------------------------------------------------------------------------------
June 30, 1992 Loans subject to FDIC protection
--------------------------------
(In thousands) Small Loan "Put" Other loans Total loans
- --------------------------------------------------------------------------------
Residential real estate $ 566,674 $ 44,352 $ 47,357 $ 658,383
Consumer 129,549 307 14,114 143,970
Commercial real estate 0 300,449 6,955 307,404
Commercial 0 34,029 1,835 35,864
Construction 0 10,431 0 10,431
--------- --------- --------- ----------
Gross loans 696,223 389,568 70,261 1,156,052
Discount on loans 42,669 0 0 42,669
--------- --------- --------- ----------
Gross loans, net of
discount on loans
acquired from the
FDIC $ 653,554 $ 389,568 $ 70,261 $1,113,383
========= ========= ========= ==========
</TABLE>
The foregoing tables do not include any allocation of the $39.0 million
discount on loans acquired from the FDIC pursuant to the 1991 P&A Agreements
or the $3.6 million discount on loans acquired from the FDIC pursuant to the
Somersworth Agreement. There was no accretion of these discounts from October
10, 1991 to June 30, 1993. The discount was adjusted, however, in connection
with the return to the FDIC of certain loans acquired in the Somersworth
Transaction. See Note 4 above.
At June 30, 1993, New Dartmouth had $32.8 million of non-accrual loans
and $0.9 million in loans 90 days past due and still accruing compared to
$84.1 million and $1.2 million, respectively, at June 30, 1992. Interest
income for the year ended June 30, 1993 relating to non-accrual loans would
have been $2.5 million had these loans performed according to their original
terms. Interest income actually recorded for the year ended June 30, 1993 was
approximately $0.8 million. The FDIC will reimburse New Dartmouth up to 90
days of interest that would have been earned had these loans performed in
accordance with their original terms. Amounts due from the FDIC at June 30,
1993, resulting from the Small Loan and "put" protection processes, were
$6.5 million and $0.00, respectively, compared to $2.0 million and $28.5
million, respectively at June 30, 1992.
F-16
<PAGE>
New Dartmouth Bank
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following table summarizes the loans "put" to the FDIC under the terms
of the 1991 P&A Agreements for the periods indicated below:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
For the Period
----------------------------------------
July 1, 1992 October 10, 1991
to to
(In thousands) June 30, 1993 June 30, 1992
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Loans "put" to the FDIC $ 57,808 $ 124,778
1.25% initial allowance and 2% discount for loans "put"
to the FDIC during the period 1,101 1,578
----------- -------------
FDIC reimbursement $ 56,707 $ 123,200
=========== =============
</TABLE>
The following table summarizes New Dartmouth's net charge-offs and the
payments received from the FDIC under the Small Loan protection provisions of
the 1991 P&A Agreements for the periods indicated:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
For the Period
----------------------------------------
July 1, 1992 October 10, 1991
to to
(In thousands) June 30, 1993 June 30, 1992
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Small loan net charge-offs $ 16,090 $ 6,560
FDIC Small Loan protection payments 10,903 2,216
</TABLE>
New Dartmouth considers its primary market area for lending and deposit
activities to be the State of New Hampshire. Although New Dartmouth has a
diversified loan portfolio, a substantial portion of its debtors' ability to
honor their contracts is reliant upon the economic stability of the area.
In the normal course of business, New Dartmouth enters into commitments to
lend to customers. These commitments are not recorded on the consolidated
balance sheet. These off-balance sheet items include commitments to extend
credit and standby letters of credit. Commitments to extend credit are
contracts made by New Dartmouth to lend to a customer under specified
conditions. Failure to satisfy these conditions by the customer would terminate
New Dartmouth's obligation to lend. Generally, these commitments have fixed
expiration dates and require the payment of fees. Due to the fixed expiration
dates or other termination agreements, these commitments may not be drawn upon.
Therefore, total commitments outstanding do not necessarily represent future
cash outlays. The amount of collateral necessary is determined on an individual
basis.
Standby letters of credit are conditional commitments issued by New
Dartmouth as a financial or performance guarantee of a customer to a third
party. The credit risk involved in issuing letters of credit is essentially the
same as that involved in commitments to extend credit.
F-17
<PAGE>
New Dartmouth Bank
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following table summarizes New Dartmouth's loan commitments to extend
credit at June 30, 1993:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
June 30,
(In thousands) 1993
- --------------------------------------------------------------------------------
<S> <C>
Residential real estate $ 24,802
Commercial real estate 1,380
Construction 923
Commercial 7,353
Consumer 17,060
----------
Total $ 51,518
==========
Standby Letters of Credit $ 288
==========
</TABLE>
At June 30, 1993, New Dartmouth had commitments to sell residential real
estate loans totaling approximately $12.2 million. New Dartmouth and its
subsidiary, NMC, also have recourse obligations as a result of certain loan
sales by the Failed Banks or NMC prior to the Acquisition Date. These recourse
obligations are subject to the same Small Loan protection provisions as loans
held in the portfolio. At June 30, 1993, loans sold with recourse amounted to
$144.1 million. At June 30, 1993, New Dartmouth and NMC were servicing a
portfolio of $345.3 million of residential real estate loans compared to $301.5
million at June 30, 1992.
8. ALLOWANCE FOR POSSIBLE LOAN LOSSES
The following table summarizes the changes in the allowance for possible
loan losses for the periods indicated:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
For the Period
----------------------------------
July 1, 1992 October 10, 1991
to to
(In thousands) June 30, 1993 June 30, 1992
- --------------------------------------------------------------------------------
<S> <C> <C>
Balance at beginning of period $ 13,151 $ 17,507
Provision charged to operations 16,101 3,216
Allowance for possible loan losses
of acquired loans 0 566
------------ ------------
29,252 21,289
Loans charged-off subject to Small
Loan protection (17,588) (6,866)
Other loans charged-off (189) 0
Recovery of loans subject to Small
Loan protection 1,498 306
Recovery of other loans 8 0
FDIC settlement adjustments 518 0
1.25% initial allowance and 2%
discount for loans "put" to the
FDIC after October 10, 1992 (1,101) (1,578)
------------ ------------
Balance at end of period $ 12,398 $ 13,151
============ ============
</TABLE>
F-18
<PAGE>
New Dartmouth Bank
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
9. PREMISES AND EQUIPMENT
Premises and equipment consist of the following:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
June 30, June 30,
(In thousands) 1993 1992
- -----------------------------------------------------------------------------------
<S> <C> <C>
Furniture and equipment $ 3,710 $ 4,643
Buildings and improvements 1,938 7
Land 1,442 0
----------- -----------
7,090 4,650
Less: accumulnted depreciation and amortization 1,257 537
----------- -----------
Premises and equipment, net $ 5,833 $ 4,113
=========== ===========
</TABLE>
Total depreciation expense for the year ended June 30, 1993 amounted to
$907,000 compared to $537,000 for the period October 10, 1991 to June 30, 1992.
The terms on operating leases range from one to ten years. Total rent expense
was approximately $3.7 million for the period July 1, 1992 to June 30, 1993
compared to $3.3 million for the period October 10, 1991 to June 30, 1992. The
future minimum lease payments under non-cancelable operating lease agreements
with initial or remaining terms in excess of one year as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
June 30,
(In thousands) 1993
- --------------------------------------------------------------------------------
<S> <C>
1994 $ 2,190
1995 2,143
1996 2,101
1997 2,042
1998 939
Thereafter 2,271
------------
Total minimum obligations $ 11,686
============
</TABLE>
10. DEPOSITS
Time deposits of $100,000 or more totaled $44.2 million at June 30, 1993
compared to $49.5 million at June 30, 1992. Interest expense incurred on these
deposits was $2.0 million for the year ended June 30, 1993 compared to $1.1
million for the period October 10, 1991 to June 30, 1992.
11. SHORT-TERM BORROWED FUNDS
A summary of short-term borrowed funds at June 30, 1993 follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
1993
----------------------------------------
Weighted Maximum
June 30, 1993 Average Average Month-end
-------------------
(In thousands) Balance Rate Balance Rate Balance
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Securities sold under agreements
to repurchase $ 31,808 3.39% $ 30,469 3.44% $ 44,061
=========== ===== =========== ===== ===========
</TABLE>
F-19
<PAGE>
New Dartmouth Bank
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
A summary of short-term borrowed funds at June 30, 1992 follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
1992
-----------------------------------
June 30, 1992 Weighted Maximum
--------------------- Average Average Mouth-end
(In thousands) Balance Rate Balance Rate Balance
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Securities sold under agreements
to repurchase $ 10,940 4.22% $ 8,597 4.95% $ 12,865
Treasury Tax & Loan note 234 4.28 6 3.62 234
------- ----- ------- ----- -------
Total $ 11,174 4.22% $ 8,603 4.95% $ 13,099
======= ===== ======= ===== =======
</TABLE>
At June 30, 1993, $40.3 million of U.S. Treasury securities were pledged as
collateral for securities sold under agreements to repurchase. At June 30, 1992,
approximately $15.5 million of U.S. Treasury securities were pledged as
collateral for securities sold under agreements to repurchase, and approximately
$500,000 in other securities were pledged as collateral for the Treasury Tax and
Loan note.
12. FEDERAL HOME LOAN BANK ADVANCES
As of June 30, 1993, New Dartmouth has the ability to borrow up to
approximately $510.1 million, or 30% of its total assets, from the Federal Home
Loan Bank of Boston ("FHLBB") with no restriction on the terms of maturity. At
June 30, 1993, New Dartmouth had outstanding borrowings of $50.0 million with a
weighted average interest rate of 5.38%. FHLBB advances are scheduled to mature
as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(in thousands) Balance Rate
- --------------------------------------------------------------------------------
<S> <C> <C>
August, 19, 1994 $25,000 4.12%
September 30, 2002 25,000 6.67%
</TABLE>
At June 30, 1993, mortgage-backed securities and collateralized mortgage
obligations with a market value of $85.9 million were pledged as collateral for
outstanding FHLBB advances and New Dartmouth's overnight credit line. New
Dartmouth has the ability to repay its FHLBB advances prior to maturity. At June
30, 1993, the prepayment penalty on advances of $50.0 million amounted to
approximately $700,000.
F-20
<PAGE>
New Dartmouth Bank
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
13. INCOME TAXES
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
For the Period
---------------------------------------
(In thousands) June 30, 1993 June 30, 1992
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current tax expense:
Federal $ 10,736 $ 8,560
State 1,253 873
------------- -------------
11,989 9,433
------------- -------------
Deferred tax expense:
Federal (672) 1,486
State (172) 6
------------- -------------
(844) 1,492
------------- -------------
Tax expense on income 11,145 10,925
Deferred tax expense on unrealized gain included
in stockholders' equity 1,017 0
------------- -------------
Total tax expense $ 12,162 $ 10,925
============= =============
</TABLE>
Deferred tax liabilities (assets) are comprised of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
For the Period
---------------------------------------
July 1, 1992 October 10, 1991
to to
(In thousands) June 30, 1993 June 30, 1992
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Excess of book over tax basis of assets required $ 10,246 $ 15,908
Provision for possible loan losses 9,771 1,717
Unrealized gains included in stockholders' equity 1,017 0
Other 164 0
------------- -------------
Gross deferred tax liabilities 21,198 17,625
Federal financial assistance (7,390) (12,196)
Loan discount accretion (4,836) (3,343)
Other (1,319) (676)
------------- -------------
Gross deferred tax assets (13,545) (16,215)
------------- -------------
Deferred tax asset valuation allowance 1,465 1,465
------------- -------------
Net deferred tax liabilities $ 9,118 $ 2,875
============= =============
</TABLE>
F-21
<PAGE>
New Dartmouth Bank
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The provision for income taxes differs from the amount of income tax
determined by applying the applicable U.S. statutory federal income tax rate of
34% to pretax income from continuing operations as a result of the following
differences:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
For the Period
October 10, 1991
For the Year Ended to
June 30, 1993 June 30, 1992
------------------ ------------------
(In thousands) Amount Percent Amount Percent
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax expense at statutory rate $ 10,379 34.0% $ 8,981 34.0%
Increase (decrease) in rates
resulting from:
State taxes, net of federal
income tax benefit 713 2.3 576 2.2
Valuation allowance 0 0.0 1,465 5.5
Other -- net 53 0.2 (97) (0.3)
-------- ----- --------- -----
Tax expense on income $ 11,145 36.5% $ 10,925 41.4%
======== ===== ========= =====
</TABLE>
On August 10, 1993, the Omnibus Budget Reconciliation Act of 1993 (the
"Act") was enacted. Among other things, the Act increases the corporate tax
rate from 34 percent to 35 percent for corporations with taxable income in
excess of $10 million. Management believes that the Act will not have a
material effect on New Dartmouth.
14. COMMITMENTS AND CONTINGENCIES
New Dartmouth and its subsidiaries are involved in a number of legal
proceedings arising out of, and incidental to, their respective businesses.
Management of New Dartmouth, based on its review with legal counsel of the
merits of each of these proceedings, does not anticipate that any losses that
may be incurred as a result of these legal proceedings would materially affect
New Dartmouth's consolidated financial position.
On October 31, 1991, New Dartmouth entered into a five year non-cancelable
facilities management contract with a third-party vendor for its data and item
processing services. Under the contract, the vendor provides the hardware,
software and staff required to perform these services. New Dartmouth provides
the vendor with suitable facilities. The minimum annual commitment under this
contract is approximately $3.0 million. Items processed in excess of monthly
base volumes are charged on a per item basis. Expenses under this contract for
the twelve months ended June 30, 1993 amounted to $3.4 million.
15. STOCKHOLDER'S EQUITY
New Dartmouth was initially capitalized through the issuance of $31.0
million of Preferred Stock to the FDIC and the sale of $40.4 million of common
stock to private investors.
On October 10, 1991, New Dartmouth issued 347,073 shares of non-voting,
convertible, redeemable, preferred stock ("Preferred Stock") to the FDIC at a
price of $89.46 per share. The shares of Preferred Stock are redeemable at New
Dartmouth's option at a price that increases by approximately 7.2% per year for
the first four years, by 22.1% in year five and by 12.6% per year thereafter.
The redemption price increases quarterly. At June 30, 1993, the redemption
price was $101.01 per share. The Preferred Stock is convertible into Common
Stock beginning October 10, 1994 if held by, or immediately on transfer to,
anyone other than the FDIC. The conversion ratio will be 1.00 share of Common
Stock for 1.00 share of Preferred Stock in year four and will increase to 1.10
shares of Common Stock for 1.00 of Preferred Stock in year five and 1.25 shares
of Common Stock for 1.00 share of Preferred Stock thereafter.
F-22
<PAGE>
New Dartmouth Bank
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
So long as the FDIC owns Preferred Stock that, assuming the full conversion
thereof into Common Stock, constitutes at least 10% of the then outstanding
common stock, New Dartmouth may not declare or pay dividends on any shares of
its capital stock without the FDIC's prior consent. A holder of the Preferred
Stock is entitled to receive dividends per share equal to dividends per share
paid on common stock. There were no dividends declared or paid from October 10,
1991 to June 30, 1993.
On January 25, 1993, New Dartmouth redeemed 112,000 shares of Preferred
Stock having an aggregate value of $10.9 million at a redemption price of $96.95
per share. On April 8, 1993, New Dartmouth redeemed an additional 25,000
shares, for $2.5 million at a redemption price of $99.28 per share. In May
1993, the New Hampshire Bank Commissioner approved a petition of the Board of
Directors to redeem the remaining shares of Preferred Stock.
On August 9, 1993, New Dartmouth notified the FDIC of its intention to
redeem an additional 40,000 shares of its preferred stock outstanding for
$4.1 million in August 1993.
As a condition to SNC's merger proposal, New Dartmouth and SNC entered into a
Stock Option Agreement dated March 23, 1993 pursuant to which New Dartmouth
granted Shawmut National Corporation an option to purchase up to 74,275 shares
of New Dartmouth Common Stock, at an exercise price of $310 per share. See Note
2 above.
16. WARRANTS AND STOCK OPTION PLAN
New Dartmouth has adopted a management warrant plan and a stock option
plan authorizing the granting of warrants and options to issue 47,133
shares of common stock to senior executives.
Warrants for 11,783 shares were granted on October 10, 1991 at an initial
price of $100.00 per share which escalates by 1.75% per quarter. These
warrants vested in three installments over an eighteen month period and can be
exercised during the lifetime of the employee. At June 30, 1993, the warrants
for 11,783 shares were fully exercisable and the warrants had an exercise price
of $112.91 per share.
Warrants for 17,675 shares were granted on October 10, 1991 for which the
exercise price is $109.06 per share. These warrants vest in three installments
over a three year period and can be exercised during the lifetime of the
employee. At June 30, 1993, warrants for 5,892 shares were fully exercisable.
Options for 9,250 shares and 1,500 shares were granted on September 10, 1992
and December 17, 1993, respectively, at exercise prices of $129.82 and $149.83
per share, respectively. These options vest in equal installments on June 30,
1995, and June 30, 1997. Options are exercisable for a period of ten years from
the date of the grant.
There were 6,925 shares available for future grants under the stock option
plan. The exercise price of the warrants and options approximated fair market
value at the date of the grant. There were no warrants or options exercised for
the year ended June 30, 1993 or for the period October 10, 1991 to June 30,
1992.
17. EMPLOYEE BENEFIT PLANS
Defined Contribution Employee Savings and Retirement Plan. New Dartmouth
maintains a defined contribution, tax qualified, employee savings and
retirement plan (the "401(k) Plan") in which all employees of New Dartmouth
working more than 1,000 hours per year are eligible to participate after
completing 1,000 hours of service to New Dartmouth and attaining the age of 21.
Participants are entitled to contribute between 1% and 15% of their salaries per
year up to the federally prescribed maximum, which for 1992 is $8,728. Each
year, New Dartmouth contributes to each participant's account an amount equal
to 25% of the participant's contribution up to the first 4% of the
participant's base salary. Each participant is immediately vested with respect
to both the participant's respective contribution and New Dartmouth's
contribution. New Dartmouth's contribution to the 401(k) plan for the period
July,1 1992 to June 30, 1993 amounted to $67,303 compared to $32,600 for the
period October 10, 1991 to June 30, 1992.
F-23
<PAGE>
New Dartmouth Bank
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Supplemental retirement arrangements. Effective October 10, 1991, New
Dartmouth entered into a three-year Consulting Agreement with its Chairman.
Pursuant to the terms of the Agreement, New Dartmouth is obligated to provide
maximum annual retirement benefits up to 12% of the Chairman's base
compensation. The supplemental retirement benefit accrues and vests annually at
the rate of 4% per year over the three-year term of the Agreement. The
supplemental retirement benefit will be payable monthly for ten years commencing
on the earliest of (i) the termination of the Agreement, (ii) the Chairman's
attainment of age 65, and (iii) the Chairman's death. Any retirement benefits
remaining unpaid at the Chairman's death will be paid to his designated
beneficiary.
Pursuant to the terms of an Employment Agreement with its President and Chief
Executive Officer, New Dartmouth is obligated to provide maximum annual
retirement benefits through a non-qualified, unfunded arrangement of up to 45%
of his Average Base Salary. The supplemental retirement benefit accrues and
vests annually at the rate of 4% per year. The supplemental retirement benefit
will be paid monthly for 10 years commencing upon (i) the later of his
retirement date or age 65 or (ii) his death, if earlier. Any retirement benefits
remaining unpaid at his death will be paid to his designated beneficiary.
The expense incurred under the Supplemental Arrangements was $96,000 for the
period July 1, 1992 to June 30, 1993 compared to $71,000 for the period
October 10, 1991 to June 30, 1992.
Senior Management Incentive Program. New Dartmouth has a Senior Management
Incentive Program for the benefit of eligible participants who hold positions
of Vice President or above. Amounts eligible for distribution under the Senior
Management Incentive Program are determined by the Board of Directors, at its
sole discretion, based upon (i) a formula containing certain financial targets
for New Dartmouth and (ii) the exercise of discretionary authority by New
Dartmouth's President and Chief Executive Officer, based upon a participant's
attainment of individual performance goals and objectives. New Dartmouth's
discretionary contribution to 23 eligible participants under the Senior
Management Incentive Program for the year ended June 30, 1993 amounted to
$175,000 compared to $99,300 for the period October 10, 1991 to June 30, 1992.
Profit Sharing Plan. New Dartmouth instituted a Profit Sharing Plan in
January 1992 for the benefit of all employees in lieu of a pension plan. To be
eligible to participate in the plan, an individual must be a full-time employee
with a minimum of one year of service. New Dartmouth's annual contribution to
the Profit Sharing Plan is determined by the Board of Directors, at its sole
discretion, based on New Dartmouth's earnings performance for the year. The
annual discretionary contribution is made to eligible participants based on a
percentage of each participant's salary. New Dartmouth's contribution to the
Profit Sharing Plan is deposited into a separate trust on behalf of the
participants. The Profit Sharing Plan is intended to satisfy the requirements
of a qualified retirement plan. New Dartmouth's discretionary contribution for
the year ended June 30, 1993 amounted to $450,000, or 4% of eligible
participants' base salaries compared to $216,700 for the period October 10, 1991
to June 30, 1992.
18. RELATED PARTIES
It is New Dartmouth's practice that loans, other than credit card loans and
overdraft protection, will not be granted to executive officers and directors.
At June 30, 1993, loans and loan commitments to executive officers and directors
aggregated $143,802 compared to $158,593 at June 30, 1992.
On October 10, 1991, New Dartmouth entered into a Consulting Agreement with
the Chairman of its Board of Directors. Pursuant to the terms of the agreement,
he will serve as a non-executive Chairman of the Board of Directors. In such
capacity, he performs such services for New Dartmouth as the Board of Directors,
designates. The agreement expires on October 9, 1994 and provides for payments
totaling $250,000 per year.
F-24
<PAGE>
19. SUBSEQUENT EVENTS
On November 15, 1993, the Federal Reserve Board, by 3 to 3 vote, failed to
approve SNC's application to acquire New Dartmouth. Because SNC was unable to
obtain by November 15, 1993 all regulatory approvals necessary to consummate the
proposed Merger, New Dartmouth was entitled to abandon the transaction under the
terms of the Merger Agreement.
On December 20, 1993, SNC and New Dartmouth agreed to amend the Merger
Agreement to extend the deadline for completing the Merger to June 30, 1994.
Pursuant to the terms of the Merger Agreement, as amended, each share of New
Dartmouth Common Stock will be exchanged for shares of SNC Common Stock having a
value equal to $310.95 plus 177% of New Dartmouth's net earnings per fully
diluted share from October 1, 1993 through the closing date, subject to certain
adjustments. For purposes of calculating the number of shares of SNC Common
Stock to be exchanged for each share of New Dartmouth Common Stock, if the
market price of SNC Common Stock prior to closing exceeds $23.14, the Exchange
Ratio will be calculated as if the market price were $23.14. If the market price
of SNC Common Stock is less than $17.11, then the Exchange Ratio will be
calculated as if the market price were $17.11, unless SNC waives this provision.
F-25
<PAGE>
ANNEX G
NEW DARTMOUTH BANK
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED
SEPTEMBER 30, 1993
(UNAUDITED)
<PAGE>
NEW DARTMOUTH BANK
INDEX
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS Page
<S> <C>
Consolidated Balance Sheet 1
Consolidated Statement of Operations 2
Consolidated Statement of Cash Flows 3
Consolidated Statement of changes in stockholders' equity 4
Notes to Consolidated Financial Statements 5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
New Dartmouth Bank
Consolidated Balance Sheets September 30, June 30,
(In thousands, except per share data) 1993 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Cash and due from banks $ 46,176 $ 44,923
Interest bearing deposits in other banks 3 499
Securities held for sale 320,401 363,261
Securities held to maturity (market value $428,923,
and $333,766 respectively) 425,844 331,087
Due from Federal Deposit Insurance Corporation 11,600 6,893
Mortgage loans held for resale 17,703 15,163
Loans:
Subject to FDIC Small Loan protection 484,336 523,348
Subject to FDIC "put" protection 255,495 285,206
Other loans 186,514 146,169
---------- ----------
Gross loans 926,345 954,723
Less: Discount on loans acquired from the FDIC 42,086 42,086
---------- ----------
Gross loans net of discount on loans acquired from
the FDIC 884,259 912,637
Less: Allowance for possible loan losses 11,766 12,398
---------- ----------
Net loans 872,493 900,239
Premises and equipment, net 5,746 5,833
Other real estate owned 2,428 1,729
Other assets 32,819 30,869
---------- ----------
Total assets $1,735,213 $1,700,496
========== ==========
Liabilities and Stockholders' Equity:
Deposits:
Demand deposits $ 78,760 $ 70,780
N.O.W. accounts 152,970 146,443
Money market accounts 103,799 107,315
Regular savings 365,725 363,179
Time deposits 802,681 803,019
---------- ----------
Total deposits 1,503,935 1,490,736
Securities sold under agreements to repurchase 40,296 31,808
Federal Home Loan Bank advances 52,500 50,000
---------- ----------
Total borrowed funds 92,796 81,808
Other liabilities 44,402 33,443
---------- ----------
Total liabilities 1,641,133 1,605,987
---------- ----------
Commitments and contingent liabilities
Stockholders' Equity:
Preferred stock - $.01 par value, 193,000 and
370,000 shares authorized, 170,073 and 210,073
shares issued and outstanding 15,215 18,794
Common stock - $.01 par value, 960,000 shares
authorized,
424,200 shares issued and outstanding 4 4
Common surplus 40,350 40,350
Retained earnings 37,992 33,788
Unrealized gain on securities held for sale 519 1,573
---------- ----------
Total stockholders' equity 94,080 94,509
---------- ----------
Total liabilities and stockholders' equity $1,735,213 $1,700,496
========== ==========
</TABLE>
See accompanying notes
1
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
New Dartmouth Bank Three Months Three Months
Consolidated Statement of Operations Ended Ended
(In thousands, except per share data) September 30, September 30,
1993 1992
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Interest and loan fee income:
Interest and fees on loans $ 20,509 $ 26,087
Interest on securities held for sale 2,792 0
Interest on securities held to maturity 4,627 6,021
Interest on interest bearing deposits in other
banks and federal funds sold 512 226
Interest on securities purchased under
agreement to resell 0 285
Dividends on Federal Home Loan Bank stock 304 295
-------- --------
Total interest and loan fee income 28,744 32,914
Interest expense:
Interest on deposits 12,747 15,458
Interest on securities sold under agreements to
repurchase and other short term borrowings 380 143
Interest on Federal Home Loan Bank advances 694 132
-------- --------
Total interest expense 13,821 15,733
Net interest income 14,923 17,181
Provision for possible loan losses 4,106 2,563
-------- --------
Net interest income after provision for
possible loan losses 10,817 14,618
Noninterest income:
Fees for services to customers 1,819 1,860
FDIC Small Loan protection payments 3,506 1,300
Other income 883 740
Gain on sale of securities held for sale 1,074 0
-------- --------
Total noninterest income 7,282 3,900
Noninterest expense:
Salaries and employee benefits 4,350 4,690
Occupancy and equipment expense 1,759 1,701
Data processing expenses 852 858
FDIC assessment 823 874
Mailing services 401 401
Other operating expenses 2,328 2,268
-------- --------
Total noninterest expense 10,513 10,792
-------- --------
Income before income taxes 7,586 7,726
Income taxes 2,864 2,774
-------- --------
Net income $ 4,722 $ 4,952
======== ========
Earnings per share:
Primary $10.57 $11.27
Fully diluted 6.84 5.66
Weighted average common shares outstanding:
Primary 446,579 439,480
Fully diluted 690,149 874,146
</TABLE>
See accompanying notes
2
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
New Dartmouth Bank Three Months Three Months
Consolidated Statements of Cash Flow Ended Ended
(In thousands) September 30, September 30,
1993 1992
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 722 $ 4,952
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Provision for possible loan losses 4,106 2,563
Amortization (accretion) on securities held for sale, net (486) 0
Amortization (accretion) on securities held to
maturity, net 604 (239)
(Gain) on sale of securities held for sale (1,074) 0
Increase in mortgage loans held for sale (2,540) (4,405)
Loss (gain) on sale and disposal of premises and equipment 0 (11)
Depreciation and amortization of premises and equipment 303 150
Decrease in accrued interest payable (61) (144)
(Increase) decrease in accrued interest receivable (198) 988
Decrease (increase) in due from FDIC (4,707) 32,835
Other, net 9,949 (8,868)
---------- ----------
Net cash (used) provided by operating activities 10,618 27,821
---------- ----------
Cash flows from investment activities:
Proceeds from maturities of securities held for sale 131,404 0
Proceeds from maturities of securities held to maturity 52,433 102,508
Proceeds from sales of securities held for sale 647,417 0
Purchases of securities held for sale (736,136) 0
Purchases of securities held to maturity (147,794) (199,652)
Decrease (increase) in securities purchased
under agreements to resell 0 24,000
Decrease in loans, net 3,661 44,378
Proceeds from loans "put" to the FDIC 19,979 12,630
Purchases of premises and equipment (230) (414)
Proceeds from sales of premises and equipment 14 136
Net increase in other real estate owned (699) (612)
---------- ----------
Net cash used in investing activities (29,951) (17,026)
---------- ----------
Cash flows from financing activities:
Net increase in demand deposits, N.O.W.,
money market and savings accounts 13,537 17,549
Net decrease in time deposits (338) (57,586)
Net increase in short-term borrowed funds 8,488 8,396
Net increase in Federal Home Loan Bank advances 2,500 50,000
Preferred stock redemption (4,097) 0
---------- ----------
Net cash provided by financing activities 20,090 18,359
---------- ----------
Increase in cash and cash equivalents 757 29,154
Cash and cash equivalents at beginning of period 45,422 50,244
---------- ----------
Cash and cash equivalents at end of period $ 46,179 $ 79,398
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest expense $ 13,882 $ 15,877
Income taxes 0 1,882
</TABLE>
See accompanying notes
3
<PAGE>
New Dartmouth Bank
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Preferred Stock Common Stock
--------------- ------------
Net Unrealized
(In thousands, Number of Preferred Number of Common Paid in Retained Gain on Stocholders'
Securities
except per share data) Shares Stock Shares Stock Capital Earnings Held for Sale Equity
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at July 1, 1992 347,073 $31,050 424,200 $ 4 $40,350 $15,491 $ 0 $86,895
Net Income 4,952 0 4,952
Preferred Stock Redemption 0
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1992 347,073 $31,050 424,200 $ 4 $40,350 $20,443 $ 0 $91,847
===================================================================================================================================
Balance at July 1, 1993 210,073 $18,794 424,200 $ 4 $40,350 $33,788 $ 1,573 $94,509
Net Income 4,722 4,722
Preferred Stock Redemption (40,000) (3,579) (518) (4,097)
Net unrealized loss on
securities held for sale (1,054) (1,054)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1993 170,073 $15,215 424,200 $ 4 $40,350 $37,992 $ 519 $94,080
===================================================================================================================================
</TABLE>
See accompanying notes
4
<PAGE>
New Dartmouth Bank
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MERGER
On November 15, 1993, the Federal Reserve Board, by 3 to 3 vote, failed
to approve Shawmut National Corporation's ("Shawmut") application to acquire New
Dartmouth Bank ("New Dartmouth"). Because Shawmut was unable to obtain by
November 15, 1993 all regulatory approvals necessary to consummate the proposed
Merger, New Dartmouth was entitled to abandon the transaction under the terms of
the Merger Agreement.
On December 20, 1993, Shawmut and New Dartmouth agreed to amend the
Merger Agreement to extend the deadline for completing the Merger to June 30,
1994. Pursuant to the terms of the Merger Agreement, as amended, each share of
New Dartmouth common stock will be exchanged for shares of Shawmut common stock
having a value equal to $310.95 plus 177% of New Dartmouth's net earnings per
share (assuming the exercise of all outstanding warrants and options) from
October 1, 1993 through the closing date, subject to certain adjustments. For
purposes of calculating the number of shares of Shawmut common stock to be
exchanged for each share of New Dartmouth common stock, if the market price of
Shawmut common stock prior to closing exceeds $23.14, the exchange ratio will be
calculated as if the market price were $23.14. If the market price of Shawmut
common stock is less than $17.11, then the exchange ratio will be calculated as
if the market price were $17.11, unless Shawmut waives this provision.
BASIS OF PRESENTATION
The unaudited consolidated financial statements of New Dartmouth Bank
presented herein should be read in conjunction with New Dartmouth's Consolidated
Financial Statements in the Annual Report for the period ended June 30, 1993.
The accompanying unaudited Consolidated Financial Statements have been prepared
in accordance with generally accepted accounting principles but do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements.
The consolidated financial statements include the accounts of New
Dartmouth and its wholly-owned subsidiaries, collectively referred to as "New
Dartmouth". All material intercompany balances and transactions have been
eliminated. The unaudited financial statements reflect all adjustments,
consisting of normal recurring adjustments, which are, in the opinion of
management, necessary to present fairly the financial position at September 30,
1993 and the results of operations for the three month periods ended September
30, 1993 and September 30, 1992. Interim results are not necessarily indicative
of results to be expected for the entire year.
EARNINGS PER SHARE
Primary earnings per share is determined on the basis of the weighted
average number of shares outstanding after giving effect to dilutive stock
options and warrants.
Fully diluted earnings per share reflects the dilutive effect of
conversion of each share of preferred stock into 1.25 shares of common stock.
CONTINGENCIES
New Dartmouth and its subsidiaries are involved in a number of legal
proceedings arising out of and incidental to, their respective businesses.
Management of New Dartmouth, based on its review with its legal counsel of the
merits of each of these proceedings, does not anticipate that any loses that may
be incurred as a result of these proceedings would materially affect New
Dartmouth's consolidated financial position.
STOCKHOLDERS' EQUITY
On August 27, 1993, New Dartmouth redeemed 40,000 shares of Preferred
Stock for $4.1 million, reflecting a redemption price of $102.42 per share.
Under the terms of the Merger Agreement, New Dartmouth will redeem the remaining
170,073 shares of Preferred Stock outstanding prior to consummation of the
Merger.
5
<PAGE>
ANNEX H
NEW HAMPSHIRE REVISED STATUTES ANNOTATED ("RSA")
Sections RSA 388:13
and
RSA 293-A:13.01
through
RSA 293-A:13.31
<PAGE>
DISSENTING STOCKHOLDERS
388:13 DISSENTING STOCKHOLDERS
I. Any stockholder of a bank shall have the right to dissent from, and to
obtain payment for his shares in the event of any merger, consolidation, or
other union of banks under the provisions of this chapter. Such right shall be
the same as the right provided for in RSA 293-A:13.01 through RSA 293-A:13.31
with respect to mergers and consolidations of business corporations and shall be
subject to the same limitations. Any stockholder of a bank electing to assert
the right provided for by this section shall do so in accordance with the
provisions of RSA 293-A:13.01 through RSA 293-A:13.31, which provisions shall be
binding upon the stockholder and upon the bank and shall in all respects govern
the perfection and enforcing of the right provided for by this section.
II. If a proposed merger, consolidation, or other union of banks under the
provisions of this chapter is submitted to a vote at a meeting of stockholders,
the notice of meeting shall notify all stockholders that they have or may have a
right to dissent and obtain payment for their shares by complying with the terms
of this section and of RSA 293-A:13.01 through RSA 293-A:13.31 and shall be
accompanied by a copy of this section and RSA 293-A:13.01 through RSA
293-A:13.31.
III. For purposes of this section, the term "stockholder" shall include
the holder of a special deposit in a guaranty savings bank.
DISSENTERS' RIGHTS
A. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
293-A:13.01 DEFINITIONS. In this subdivision:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under RSA 293-A: 13.02 and who exercises that right when and in
the manner required by RSA 293-A: 13.20 through 293-A: 13.28.
(3) "Fair value," with respect to a dissenter's shares, means the
value of the shares immediately before the effectuation of the corporate action
to which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action, unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the average rate currently paid
by the corporation on its principal bank loans or, if none, at a rate that is
fair and equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the record
shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
293-A:13.02 RIGHT TO DISSENT.
(a) A shareholder is entitled to dissent from, and obtain payment of the
fair value of his shares in the event of, any of the following corporate
actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
1
<PAGE>
(i) If shareholder approval is required for the merger by RSA
293-A:11.03 or the articles of incorporation and the shareholder is
entitled to vote on the merger; or
(ii) If the corporation is a subsidiary that is merged with its
parent under RSA 293-A:11.04.
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan.
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale
or exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale.
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissents shares because it:
(i) Alters or abolishes a preferential right of the shares.
(ii) Creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking fund for the
redemption or repurchase, of the shares.
(iii) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities.
(iv) Excludes or omits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights.
(v) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be
acquired for cash under RSA 293-A:6.04.
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the
board of directors provides that voting or nonvoting shareholders are
entitled to dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this subdivision shall not challenge the corporate action creating his
entitlement, unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
293-A:13.03 DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares held
on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial
shareholder asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder or over which he has power to direct the vote.
2
<PAGE>
B. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
293-A:13.20 NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under RSA
293-A: 13.02 is submitted to a vote at a shareholders' meeting, the meeting
notice shall state that shareholders are or may be entitled to assert
dissenters' rights under this subdivision and be accompanied by a copy of this
subdivision.
(b) If corporate action creating dissenters' rights under RSA 293-A:13.02
is taken without a vote of shareholders or by consent pursuant to RSA
293-A:7.04, the corporation shall notify in writing all shareholders entitled to
assert dissenters' rights that the action was taken and send them the
dissenters' notice described in RSA 293-A:13.22.
293-A:13.21 NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under RSA
293-A:13.02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Shall deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Shall not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a) is
not entitled to payment for his shares under this subdivision.
293-A:13.22 DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under RSA
293-A:13.02 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of RSA 293-A:13.21.
(b) The dissenters' notice shall be sent no later than 10 days after
corporate action was taken, and shall:
(1) State where the payment demand shall be sent and where and when
certificates for certificated shares shall be deposited.
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received.
(3) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not the acquired beneficial
ownership of the shares before that date.
(4) Set a date by which the corporation shall receive the payment
demand, which date shall not be fewer than 30 nor more than 60 days
after the date the notice is delivered.
(5) Be accompanied by a copy of this subdivision.
293-A:13.23 DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in RSA 293-A:13.22
shall demand payment, certify whether he acquired beneficial ownership of the
shares before the date required to be set forth, in the dissenters notice
pursuant to RSA 293-A:13.22 (b)(3), and deposit his certificates in accordance
with the terms of the notice.
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains
3
<PAGE>
all other rights of a shareholder until these rights are cancelled or modified
by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this subdivision.
293-A:13.24 SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under RSA 293-A:13.26.
(b) The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are
cancelled or modified by the taking of the proposed corporate action.
293-A:13.25 PAYMENT.
(a) Except as provided in RSA 293-A:13.27, as soon as the proposed corporate
action is taken, or upon receipt of a payment demand, the corporation shall pay
each dissenter who complied with RSA 293-A:13.23 the amount the corporation
estimates to be the fair value of his shares, plus accrued interest.
(b) The payment shall be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity
for that year, and the latest available interim financial statements, if
any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under RSA
293-A:13.28; and
(5) A copy of this subdivision.
293-A:13.26 FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it shall send a new
dissenters' notice under RSA 293-A:13.22 and repeat the payment demand
procedure.
293-A:13.27 AFTER-ACQUIRED SHARES.
(a) A corporation may elect to withhold payment required by RSA 293-A:13.25
from a dissenter, unless he was the beneficial owner of the shares before the
date set forth in the dissenters' notice as the date of the first announcement
to news media or to shareholders of the terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a), after taking the proposed corporate action, it shall estimate
the fair value of the shares, plus accrued interest, and shall pay this amount
to each dissenter who agrees to accept it in full satisfaction of his demand.
The corporation shall send with its offer a statement of its estimate of the
fair value of the shares, an explanation of how the interest was calculated, and
a statement of the dissenter's right to demand payment under RSA 293-A:13.28.
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293-A:13.28 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate of
the fair value of his shares and amount of interest due, and demand payment of
his estimate, less any payment under RSA 293-A:13.25, or reject the
corporation's offer under RSA 293-A:13.27 and demand payment of the fair value
of his shares and interest due, if:
(1) The dissenter believes that the amount paid under RSA 293-A:13.25
or offered under RSA 293 A:13.27 is less than the fair value of his
shares or that the interest due is incorrectly calculated;
(2) The corporation fails to make payment under RSA 293-A:13.25 within
60 days after the date set for demanding payment; or
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within 60 days after the
date set for demanding payment.
(b) A dissenter waives his right to demand payment under this section unless
he notifies the corporation of his demand in writing under subsection (a) within
30 days after the corporation made or offered payment for his shares.
C. JUDICIAL APPRAISAL OF SHARES
293-A:13.30 COURT ACTION.
(a) If a demand for payment under RSA 293-A:13.28 remains unsettled, the
corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding
within the 60-day period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the superior court of
the county where a corporation's principal office, or, if none in this state,
its registered office, is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the county in this state where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign corporation was
located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties shall be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced under
subsection (b) is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decisions on the
question of their value. The appraisers have the powers described in the order
appointing them, or in any amendment to it. The dissenters are entitled to the
same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment:
(1) For the amount, if any, by which the court finds the fair value of
his shares, plus interest, exceeds the amount paid by the corporation;
or,
(2) For the fair value, plus accrued interest, of his after-acquired
shares for which the corporation elected to withhold payment under RSA
293-A:13.27.
293-A:13.31 COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under RSA 293-A:13.30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court
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shall assess the costs against the corporation, except that the court may assess
costs against all or some of the dissenters, in amounts the court finds
equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under RSA 293-A: 13.28.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of RSA 293-A:13.20 through RSA 293-A: 13.28.
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this subdivision.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefitted.
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