<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 30, 1994
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SHAWMUT NATIONAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 6712 06-1212629
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
777 MAIN STREET ONE FEDERAL STREET
HARTFORD, CONNECTICUT 06115 BOSTON, MASSACHUSETTS 02211
TEL. (203) 986-2000 TEL. (617) 292-2000
</TABLE>
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
RAYMOND A. GUENTER, ESQ.
777 MAIN STREET
HARTFORD, CONNECTICUT 06115
TEL. (203) 986-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Copy to:
WILLIAM S. RUBENSTEIN, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 735-3000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
------------------------
If any of the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES BEING REGISTERED(1) REGISTERED PER SHARE(2) PRICE(2) FEE(2)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share........ 11,000,000 $14.89 $163,753,345 $56,467
- --------------------------------------------------------------------------------------------------------------
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</TABLE>
(1) Also includes associated Rights to purchase shares of the Registrant's
Series A Junior Participating Preferred Stock, which Rights (a) are not
currently separable from the shares of Common Stock and (b) are not
currently exercisable. See "DESCRIPTION OF SHAWMUT CAPITAL STOCK" and
"COMPARISON OF SHAREHOLDER RIGHTS."
(2) The registration fee has been computed pursuant to Rule 457(f)(1) under the
Securities Act of 1933, as amended, based on the average of the high and low
prices for shares of Common Stock of Peoples Bancorp of Worcester, Inc.
("Peoples") reported on the National Association of Securities Dealers
Automated Quotation/National Market System on March 28, 1994 ($47.44) and
the maximum number of such shares (3,451,799) that may be exchanged for the
securities being registered. The proposed maximum offering price per share
has been determined by dividing the portion of the proposed maximum
aggregate offering price by the number of shares being registered. Pursuant
to Rule 457(b), the registration fee has been reduced by the $32,466.91 paid
on October 29, 1993 upon the filing under the Securities Exchange Act of
1934, as amended, of Peoples' proxy materials included herein relating to
the Merger. Accordingly, the registration fee payable upon the filing of
this Registration Statement is $24,000.09.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
SHAWMUT NATIONAL CORPORATION
CROSS-REFERENCE SHEET BETWEEN ITEMS IN FORM S-4 AND PROSPECTUS
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM NO. FORM S-4 CAPTION HEADING IN PROSPECTUS
- -------- ----------------------------------------- -------------------------------------------------
<S> <C> <C>
A. INFORMATION ABOUT THE TRANSACTION
Item 1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus... Cover Page of Registration Statement; Cross
Reference Sheet; Outside Front Cover Page of
Prospectus
Item 2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Inside Front Cover Page of Prospectus; Table of
Contents; Available Information; Incorporation of
Certain Documents by Reference
Item 3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............ Summary; The Special Meeting; The Merger
Item 4. Terms of the Transaction................. Summary; The Merger; Certain Related
Transactions; Description of Shawmut Capital
Stock; Comparison of Shareholder Rights
Item 5. Pro Forma Financial Information.......... Summary; Unaudited Pro Forma Condensed Financial
Information
Item 6. Material Contacts with the Company Being
Acquired................................. Summary; The Merger; Certain Related Transactions
Item 7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters....................... *
Item 8. Interests of Named Experts and Counsel... *
Item 9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. *
B. INFORMATION ABOUT THE REGISTRANT
Item 10. Information with Respect to S-3
Registrants.............................. Available Information; Incorporation of Certain
Documents by Reference; Summary; The Merger;
Unaudited Pro Forma Condensed Financial
Information
Item 11. Incorporation of Certain Information by
Reference................................ Incorporation of Certain Documents by Reference
Item 12. Information with Respect to S-2 or S-3
Registrants.............................. *
Item 13. Incorporation of Certain Information by
Reference................................ *
Item 14. Information with Respect to Registrants
Other than S-2 or S-3 Registrants........ *
C. INFORMATION ABOUT THE COMPANY BEING
ACQUIRED
Item 15. Information with Respect to S-3
Companies................................ Available Information; Incorporation of Certain
Documents by Reference; Summary; Information
About Peoples Bancorp of Worcester, Inc.
Item 16. Information with Respect to S-2 or S-3
Companies................................ *
Item 17. Information with Respect to Companies
Other than S-2 or S-3 Companies.......... *
D. VOTING AND MANAGEMENT INFORMATION
Item 18. Information if Proxies, Consents or
Authorizations Are to be Solicited....... Summary; The Special Meeting; The Merger
Item 19. Information if Proxies, Consents or
Authorizations Are Not to be Solicited in
an Exchange Offer........................ *
</TABLE>
- ---------------
* Omitted because inapplicable or answer is in the negative.
<PAGE> 3
PEOPLES BANCORP OF WORCESTER, INC.
120 FRONT STREET
WORCESTER, MA 01608
March 30, 1994
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders (the
"Special Meeting") of Peoples Bancorp of Worcester, Inc. ("Peoples"), to be held
at Mechanics Hall, 321 Main Street, Worcester, MA at 10:00 a.m. on May 4, 1994.
The purpose of the Special Meeting is to vote on the merger (the "Merger") of
your company with a wholly-owned subsidiary of Shawmut National Corporation
("Shawmut"), which was announced on August 26, 1993. Upon consummation of the
Merger, you will be entitled to receive in a tax-free exchange, $52 in value
(based on the Average Closing Price as defined in the Merger Agreement and
subject to adjustment under certain circumstances which are described in the
accompanying Proxy Statement/Prospectus) of the common stock of Shawmut for each
share of Peoples common stock.
Your Board of Directors, after evaluating the proposal, believes that the
Merger is in the best interest of Peoples and its stockholders. The Board has
unanimously approved the Merger and recommends that you vote FOR its approval.
Approval of the Merger requires the affirmative vote of the holders of at least
a majority of the outstanding shares of Peoples common stock entitled to vote at
the Special Meeting.
The enclosed Proxy Statement/Prospectus contains a description of the terms
of the Merger as well as information regarding the background of the
transaction, which should help you to understand more fully why the Board
believes the Merger is in the best interest of Peoples stockholders. Your Board
recognizes that the Proxy Statement/Prospectus is a long document, but
encourages you to study it carefully. Should you have any questions concerning
the Special Meeting, you may call Peoples at (508) 791-3861. Additionally,
Georgeson & Company, Inc., which has been retained by Peoples to assist in the
solicitation of proxies, is available to answer questions at (800) 223-2064.
YOUR VOTE IS IMPORTANT. Accompanying this letter is a Notice of Special
Meeting of Stockholders, a Proxy Statement/Prospectus and a proxy card with a
return envelope. To ensure that your shares are represented at the Special
Meeting, please sign, date and mail your proxy card as soon as possible in the
postage prepaid envelope provided. If you attend the Special Meeting, you may
vote in person even though you have previously returned the proxy card. PLEASE
DO NOT SEND IN CERTIFICATES OF PEOPLES COMMON STOCK AT THIS TIME.
On behalf of your Board of Directors, thank you for your continued support.
Sincerely,
[Facsimile signature]
WOODBURY C. TITCOMB
President and Chief Executive Officer
/sf/enclosures
<PAGE> 4
PEOPLES BANCORP OF WORCESTER, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 4, 1994
To the Stockholders of
Peoples Bancorp of Worcester, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Peoples
Bancorp of Worcester, Inc. ("Peoples") will be held at Mechanics Hall, 321 Main
Street, Worcester, Massachusetts on May 4, 1994, at 10:00 a.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, as amended, dated as of August 26, 1993 (the
"Merger Agreement"), by and among Shawmut National Corporation ("Shawmut"),
Shawmut Service Corporation ("SSC") and Peoples and the transactions
contemplated thereby, including the merger (the "Merger") of Peoples with
and into SSC, pursuant to which, among other things, Peoples stockholders
will receive $52.00 in value (based on the Average Closing Price (as
defined in the Merger Agreement) and subject to adjustment) of Shawmut
common stock for each share of Peoples common stock exchanged in the
Merger, and will become Shawmut shareholders.
2. To transact such other business as may properly come before the
Special Meeting or any adjournments or postponements thereof (subject to
the restrictions, if any, specified in the accompanying Proxy
Statement/Prospectus).
The Peoples Board of Directors has fixed the close of business on March 21,
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 stockholders of record at the close of business on such date are
entitled to notice of and to vote at the Special Meeting. A list of Peoples
stockholders entitled to vote at the Special Meeting will be available for
examination for any purpose germane to the Special Meeting, during ordinary
business hours, at the principal executive offices of Peoples located at 120
Front Street, Worcester, Massachusetts 01608, for 10 days prior to the Special
Meeting.
The common stock, par value $0.10 per share, of Peoples is the only
security of Peoples whose holders are entitled to vote upon the proposals to be
presented at the Special Meeting.
Your vote is important regardless of the number of shares you own. Each
stockholder, even though he or she now plans 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,
RICHARD B. HUTCHINS,
Secretary
March 30, 1994
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL
TO APPROVE AND ADOPT THE MERGER AGREEMENT AND EACH OF THE
TRANSACTIONS CONTEMPLATED THEREBY
PLEASE DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY
IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE
<PAGE> 5
PEOPLES BANCORP OF WORCESTER, INC.
PROXY STATEMENT
---------------------
SHAWMUT NATIONAL CORPORATION
PROSPECTUS
---------------------
11,000,000 SHARES OF COMMON STOCK
This Proxy Statement/Prospectus (the "Proxy Statement/Prospectus") is being
furnished to stockholders of Peoples Bancorp of Worcester, Inc. ("Peoples") in
connection with the solicitation of proxies by the Board of Directors of Peoples
for use at the special meeting of stockholders of Peoples (including any
adjournments or postponements thereof) to be held on May 4, 1994 (the "Special
Meeting"). This Proxy Statement/Prospectus relates to the proposed merger of
Shawmut Service Corporation ("SSC"), a wholly owned subsidiary of Shawmut
National Corporation ("Shawmut"), with Peoples (the "Merger") pursuant to the
Agreement and Plan of Merger dated as of August 26, 1993, as amended (the
"Merger Agreement"), by and among Shawmut, SSC and Peoples and certain
transactions contemplated thereby.
The Merger Agreement, as amended, is attached as Annex A hereto and is
incorporated herein by reference.
This Proxy Statement/Prospectus also constitutes a prospectus of Shawmut
with respect to up to 11,000,000 shares of common stock, par value $.01 per
share, of Shawmut ("Shawmut Common Stock") issuable to holders of common stock,
par value $0.10 per share, of Peoples ("Peoples Common Stock") in the Merger.
Upon consummation of the Merger, each outstanding share of Peoples Common Stock,
with certain exceptions, will be converted into and exchangeable for that number
of shares of Shawmut Common Stock as shall be equal to the Exchange Ratio (as
hereinafter defined).
This Proxy Statement/Prospectus and the accompanying form of proxy is first
being mailed to stockholders of Peoples on or about March 31, 1994.
Because of the uncertainty of the timing of the receipt of the required
regulatory approvals, if granted, the Merger may not be consummated for several
months after the approval of the Merger by the stockholders of Peoples. Pursuant
to the Merger Agreement, the Board of Directors of Peoples is soliciting
stockholder approval at this time to be in a position to consummate the Merger
as soon as practicable after the receipt of the required regulatory approvals.
Shawmut Common Stock is listed and traded on the New York Stock Exchange
("NYSE"). The closing price of Shawmut Common Stock on the NYSE on March 29,
1994 was $20.38.
THE ABOVE MATTERS ARE DISCUSSED IN DETAIL IN THIS PROXY
STATEMENT/PROSPECTUS. THE PROPOSED MERGER IS A COMPLEX TRANSACTION. STOCKHOLDERS
ARE STRONGLY URGED TO READ AND CONSIDER CAREFULLY THIS PROXY
STATEMENT/PROSPECTUS IN ITS ENTIRETY.
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
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
THE SHARES OF SHAWMUT 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.
The date of this Proxy Statement/Prospectus is March 30, 1994
<PAGE> 6
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS OR
INCORPORATED BY REFERENCE HEREIN IN CONNECTION WITH THE SOLICITATION 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 SHAWMUT OR PEOPLES. 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 SHAWMUT OR PEOPLES SINCE THE
DATE OF THIS PROXY STATEMENT/PROSPECTUS OR THAT THE INFORMATION HEREIN OR THE
DOCUMENTS OR REPORTS INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO SUCH DATE. ALL INFORMATION CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS RELATING TO SHAWMUT AND ITS SUBSIDIARIES HAS BEEN SUPPLIED
BY SHAWMUT AND ALL INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS
RELATING TO PEOPLES AND ITS SUBSIDIARIES HAS BEEN SUPPLIED BY PEOPLES.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION........................... 3
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE..................................... 3
SUMMARY......................................... 5
RECENT DEVELOPMENTS............................. 16
THE SPECIAL MEETING............................. 16
General....................................... 16
Record Date; Voting; Solicitation and
Revocation
of Proxies.................................. 16
THE MERGER...................................... 18
General....................................... 18
Exchange Ratio................................ 18
Background of the Merger...................... 19
Recommendation of the Board of Directors of
Peoples; Reasons for the Merger............. 22
Shawmut's Reasons for the Merger.............. 24
Opinion of Peoples' Financial Advisor......... 24
Interests of Certain Persons in the Merger.... 28
Employee Matters.............................. 31
Effective Time................................ 31
Conversion of Shares; Procedures for Exchange
of Certificates; Fractional Shares.......... 32
Conditions to the Merger...................... 33
Regulatory Approvals Required for the
Merger...................................... 35
Conduct of Business Pending the Merger........ 37
Waiver and Amendment; Termination............. 38
No Solicitation of Transactions............... 39
Resales of Shawmut Common Stock Received
in the Merger............................... 39
Stock Exchange Listing........................ 40
Anticipated Accounting Treatment.............. 40
Federal Income Tax Consequences............... 41
No Appraisal Rights........................... 42
CERTAIN RELATED TRANSACTIONS.................... 42
Stock Option Agreement........................ 42
Voting Agreement.............................. 45
Subsidiary Bank Merger Agreement.............. 46
Amendment to Rights Agreement................. 46
INFORMATION ABOUT PEOPLES BANCORP OF WORCESTER,
INC........................................... 46
DESCRIPTION OF SHAWMUT CAPITAL
STOCK......................................... 46
General....................................... 46
Common Stock.................................. 47
Rights Plan................................... 48
Shawmut Preferred Stock....................... 50
COMPARISON OF SHAREHOLDER RIGHTS................ 50
Action by Written Consent..................... 51
Special Meetings of Shareholders.............. 51
Shareholder Nominations and Proposals
for Business................................ 51
Certain Business Combinations................. 52
Rights Plans.................................. 53
Payment of Dividends.......................... 55
Removal of Directors.......................... 56
Amendment of By-laws.......................... 56
Amendment of Certificate...................... 56
Meeting of Creditors and/or Shareholders...... 57
Standards for Evaluating Takeover Proposals... 57
Restriction on Repurchases of Shares.......... 57
UNAUDITED PRO FORMA CONDENSED FINANCIAL
INFORMATION................................... 59
MARKET PRICES................................... 67
LEGAL OPINIONS.................................. 67
PROPOSALS OF STOCKHOLDERS....................... 67
EXPERTS......................................... 68
ANNEX A AGREEMENT AND PLAN OF MERGER............ A-1
ANNEX B FORM OF VOTING AGREEMENT................ B-1
ANNEX C STOCK OPTION AGREEMENT.................. C-1
ANNEX D OPINION OF McDANIELS & CO. ............. D-1
</TABLE>
2
<PAGE> 7
AVAILABLE INFORMATION
Shawmut and Peoples are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by Shawmut and Peoples 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 7 World Trade Center,
New York, New York 10048 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
Shawmut can be inspected at the offices of the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005 and material filed by Peoples can be
inspected at the offices of the National Association of Securities Dealers,
Inc., 33 White Hall, New York, New York 10004.
Shawmut has filed with the Commission a Registration Statement 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 Shawmut 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 Statement 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 by reference
in this Proxy Statement/Prospectus 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 Statement 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 Shawmut (File No.
1-10102) and Peoples (File No. 0-16681) pursuant to the Exchange Act are
incorporated by reference in this Proxy Statement/ Prospectus:
1. Shawmut's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 (the "1993 Shawmut Form 10-K").
2. Shawmut's Annual Report on Form 11-K for the fiscal year ended
December 31, 1992.
3. Shawmut's Current Reports on Form 8-K, dated February 28, 1994;
March 3, 1994; March 9, 1994 and March 28, 1994.
4. The description of Shawmut Common Stock and Shawmut Series A
Junior Participating Preferred Stock and Preferred Stock Purchase Rights
set forth in Shawmut's Registration Statements on Form S-3 dated February
13, 1992 and on Form 8-A dated March 7, 1989.
5. The portions of Shawmut's Proxy Statement for the Annual Meeting
of Shareholders to be held on April 26, 1994 that have been incorporated by
reference in the 1993 Shawmut Form 10-K.
6. Peoples' Annual Report on Form 10-K for the fiscal year ended
December 31, 1992 (the "1992 Peoples Form 10-K").
7. Peoples' Quarterly Reports on Form 10-Q for the quarterly periods
ended March 31, June 30 and September 30, as amended, 1993.
8. Peoples' Current Report on Form 8-K, dated September 7, 1993.
9. The description of Peoples Common Stock and Series A Junior
Participating Preferred Stock and Purchase Rights set forth in the Peoples'
Registration Statements filed under Section 12 of the Exchange Act,
including any amendment or report filed for the purpose of updating such
description.
3
<PAGE> 8
10. The portions of Peoples' Proxy Statement for the Annual Meeting of
Stockholders held April 29, 1993 that have been incorporated by reference
in the 1992 Peoples Form 10-K.
All documents and reports filed by Shawmut or Peoples 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 or report 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 the extent that a statement
contained herein, or in any other subsequently filed document or report 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.
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
BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, ON
WRITTEN OR ORAL REQUEST IN THE CASE OF DOCUMENTS RELATING TO SHAWMUT, TO SHAWMUT
NATIONAL CORPORATION, 777 MAIN STREET, MSN309, HARTFORD, CONNECTICUT 06115,
ATTENTION: SHAREHOLDER RELATIONS, TELEPHONE NUMBER (203) 986-2028, AND IN THE
CASE OF DOCUMENTS RELATING TO PEOPLES, TO PEOPLES BANCORP OF WORCESTER, INC.,
120 FRONT STREET, WORCESTER, MASSACHUSETTS 01608, ATTENTION: DIRECTOR, CORPORATE
AFFAIRS, TELEPHONE NUMBER (508) 791-3861. IN ORDER TO ENSURE TIMELY DELIVERY OF
THE DOCUMENTS, REQUESTS SHOULD BE RECEIVED BY THURSDAY, APRIL 21, 1994.
4
<PAGE> 9
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.
PARTIES TO THE MERGER
Shawmut. Shawmut is a multibank holding company, registered under the Bank
Holding Company Act of 1956, as amended. 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 Shawmut. Shawmut maintains
dual headquarters in the States of Connecticut and Massachusetts. The principal
executive offices of Shawmut 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) 986-2000 and (617)
292-2000, respectively.
The principal business of Shawmut 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 270 branches located throughout Connecticut, Massachusetts and
Rhode Island. Shawmut's principal banking subsidiaries are Shawmut Bank
Connecticut, National Association, Hartford, Connecticut ("SBC") and Shawmut
Bank, National Association, Boston, Massachusetts ("SBM").
Shawmut provides other financial services through its other subsidiaries,
including Shawmut Mortgage Company. With its principal office in West Hartford,
Connecticut, Shawmut Mortgage Company originates substantially all of the
residential mortgages among Shawmut 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 December 31, 1993, Shawmut had assets of $27.2 billion, deposits of
$15.3 billion, loans of $15.4 billion and shareholders' equity of $1.8 billion.
For more information about Shawmut, reference is made to the 1993 Shawmut
Form 10-K which is incorporated herein by reference. See "AVAILABLE INFORMATION"
and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
Peoples. Peoples is a registered bank holding company, organized in 1987
under Delaware law, which, through its principal subsidiary, Peoples Savings
Bank ("Peoples Bank"), is engaged in community banking activities, which include
gathering deposits and investing in various loans and securities, while
providing a wide range of financial products and services to a broad customer
base throughout central Massachusetts. Peoples Bank maintains 23 branches in
Massachusetts. At December 31, 1993, Peoples had assets of $891 million,
deposits of $777 million, loans of $461 million and shareholders' equity of $106
million. As of that date, Peoples' subsidiaries employed in the aggregate
approximately 262 full-time equivalent employees in their operations.
The principal executive offices of Peoples are located at 120 Front Street,
Worcester, Massachusetts 01608 and its telephone number is (508) 791-3861. For
more information about Peoples, reference is made to the 1992 Peoples Form 10-K
and to Peoples' Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1993, as amended, both of which are incorporated herein by
reference. See "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE."
5
<PAGE> 10
THE SPECIAL MEETING
The Special Meeting will be held at Mechanics Hall, 321 Main Street,
Worcester, Massachusetts on Wednesday, May 4, 1994 beginning at 10:00 a.m. local
time. The purpose of the Special Meeting is to consider and vote upon a proposal
to approve and adopt the Merger Agreement and each of the transactions
contemplated thereby, including the Merger, pursuant to which, among other
things, Peoples stockholders will receive $52.00 in value (based on the Average
Closing Price (as defined in the Merger Agreement) and subject to adjustment) of
Shawmut Common Stock for each share of Peoples Common Stock exchanged in the
Merger, and will become Shawmut shareholders, and to act upon such other matters
as may properly be brought before the Special Meeting. See "THE SPECIAL
MEETING -- General."
Only holders of record of Peoples Common Stock at the close of business on
March 21, 1994 (the "Record Date") will be entitled to notice of and to vote at
the Special Meeting. As of the Record Date, there were 3,353,347 shares of
Peoples Common Stock outstanding and entitled to vote. See "THE SPECIAL
MEETING -- Record Date; Voting; Solicitation and Revocation of Proxies."
REQUIRED STOCKHOLDER APPROVAL; VOTING AGREEMENT
The approval and adoption of the Merger Agreement by Peoples stockholders
will require the affirmative vote of the holders of a majority of the
outstanding shares of Peoples Common Stock entitled to vote thereon. As of March
21 1994, directors and executive officers of Peoples and their affiliates may be
deemed to be beneficial owners of 411,582 shares or approximately 12.05% of the
shares of Peoples Common Stock outstanding as of the Record Date. Each of the
directors and executive officers has entered into a voting agreement with
Shawmut pursuant to which each has agreed to vote or direct the vote of all
shares of Peoples Common Stock over which he or she has sole voting control
(representing in the aggregate approximately 8.19% of the outstanding Peoples
Common Stock on the Record Date) FOR approval and adoption of the Merger
Agreement and each of the transactions contemplated thereby. Execution of the
voting agreement was a condition to Shawmut entering into the Merger Agreement
and no compensation was paid to any director or executive officer in
consideration for entering into such agreement. See "THE SPECIAL MEETING --
Record Date; Voting; Solicitation and Revocation of Proxies" and "CERTAIN
RELATED TRANSACTIONS -- Voting Agreement."
EFFECT OF THE MERGER AND THE SUBSIDIARY BANK MERGER
Pursuant to the Merger Agreement, at the Effective Time (as defined below),
Peoples will be merged with and into Shawmut Service Corporation ("SSC") and SSC
will continue as a wholly owned subsidiary of Shawmut. Peoples stockholders will
become shareholders of Shawmut. See "THE MERGER -- General."
Immediately prior to consummation of the Merger, Peoples Bank will merge
with and into SBM (the "Subsidiary Bank Merger"). SBM will continue as a
national banking association. See "CERTAIN RELATED TRANSACTIONS -- Subsidiary
Bank Merger Agreement."
EFFECTIVE TIME
The Merger will become effective upon the filing of a certificate of merger
with the Secretary of State of the State of Delaware in accordance with
applicable law or on such later date as the certificate may specify (the
"Effective Time"). The certificate will be filed on the first day which is (i)
the last business day of a month and (ii) at least two business days after
satisfaction or waiver of the latest to occur of certain conditions to the
Merger specified in the Merger Agreement, unless another date is agreed to by
Shawmut and Peoples. See "THE MERGER -- Effective Time."
EXCHANGE RATIO
The terms of the Merger Agreement summarized below and described in greater
detail elsewhere in this Proxy Statement/Prospectus were determined as a result
of arms' length negotiations between representatives of Shawmut and Peoples and
are intended to provide $52 in value (based on the Average Closing Price)
6
<PAGE> 11
of Shawmut Common Stock for each share of Peoples Common Stock, subject to
potential adjustment as noted below. At the Effective Time, each issued and
outstanding share of Peoples Common Stock, other than shares held, directly or
indirectly, by Peoples or Shawmut (other than shares held in a fiduciary
capacity ("Trust Account Shares") or in respect of a debt previously contracted
("DPC Shares")) will be converted into and exchangeable for that number of
shares of Shawmut Common Stock equal to the quotient obtained by dividing (i)
$52 by (ii) the Average Closing Price, rounded to the nearest thousandth of a
share (the "Exchange Ratio"), provided that if the Average Closing Price (x) is
equal to or less than $20.506, the Exchange Ratio will be 2.536 (the "Maximum
Exchange Ratio"), unless waived by Shawmut and (y) is equal to or greater than
$27.744, then the Exchange Ratio will be 1.874 (the "Minimum Exchange Ratio"),
unless waived by Peoples. As used in the Merger Agreement, "Average Closing
Price" means the average of the daily closing sales prices of a share of Shawmut
Common Stock on the New York Stock Exchange ("NYSE")(as reported by The Wall
Street Journal or, if not reported thereby, by another authoritative source) for
the 20 NYSE trading days ending on the fifth business day prior to the date on
which the last of the regulatory approvals required to consummate the Merger is
obtained and any applicable waiting periods have expired. For a tabular
presentation of possible Exchange Ratios at various hypothetical Average Closing
Prices, see "THE MERGER -- Exchange Ratio."
The Merger Agreement provides that (i) Peoples will not be obligated to
consummate the Merger if the Average Closing Price is less than $20.506, unless
Shawmut waives the applicability of the Maximum Exchange Ratio and (ii) Shawmut
will not be obligated to consummate the Merger if the Average Closing Price is
greater than $27.744, unless Peoples waives the applicability of the Minimum
Exchange Ratio. See "THE MERGER -- Exchange Ratio" and " -- Conditions to the
Merger." If Shawmut waives the Maximum Exchange Ratio or Peoples waives the
Minimum Exchange Ratio, the Exchange Ratio will be equal to the quotient
obtained by dividing (i) $52 by (ii) the Average Closing Price. Assuming the
Merger is approved by Peoples stockholders, the Peoples Board of Directors (the
"Peoples Board") may elect to consummate the Merger without resoliciting Peoples
stockholders if the Average Closing Price is less than $20.506 and Shawmut does
not waive the applicability of the Maximum Exchange Ratio, even though, as a
result of the application of the Maximum Exchange Ratio, the calculated value of
the shares of Shawmut Common Stock (based on the Average Closing Price) to be
exchanged for each share of Peoples Common Stock would be less than $52. In such
a situation, in considering whether to consummate the Merger without the
resolicitation of Peoples stockholders, the Peoples Board will take into
account, consistent with its fiduciary duties, all relevant facts and
circumstances that exist at such time including, without limitation, the advice
of its financial advisor and legal counsel. Stockholder approval of the Merger
Agreement and each of the transactions contemplated thereby confers upon the
Peoples Board the power, consistent with its fiduciary duties, to elect to
consummate the Merger notwithstanding that the Average Closing Price is less
than $20.506 and Shawmut has not waived the Maximum Exchange Ratio. See "THE
MERGER -- Exchange Ratio" and "-- Conditions to the Merger."
RECOMMENDATION OF THE BOARD OF DIRECTORS OF PEOPLES; REASONS FOR THE MERGER
The Peoples Board believes that the terms of the Merger Agreement and each
of the transactions contemplated thereby are in the best interests of Peoples
and are fair to, and in the best interests of, its stockholders and unanimously
recommends that stockholders of Peoples vote for the approval and adoption of
the Merger Agreement and each of the transactions contemplated thereby.
Since the end of 1992, Peoples has explored various major strategic
alternatives available to it with the overall objective of maximizing
stockholder value. The alternatives Peoples explored included remaining
independent, acquiring other entities and being acquired. After evaluating the
available alternatives, in August of 1993 Peoples determined that being acquired
in a strategic merger potentially represented the greatest value and most likely
opportunity for enhancement of stockholder value.
In the course of reaching its decision to enter into the Merger Agreement
with Shawmut, the Peoples Board consulted with its legal and financial advisors,
as well as the management of Peoples, and considered a number of factors,
including, without limitation, the following: Peoples' business, results of
operations, prospects and financial condition; the prospects for remaining
independent and growing by accretive
7
<PAGE> 12
acquisitions; the operation of the Minimum Exchange Ratio and the Maximum
Exchange Ratio; the opinion of McDaniels & Co. ("McDaniels") that the Exchange
Ratio was fair, from a financial point of view, to Peoples' stockholders; the
conditions to the Merger and the risks to Peoples if the Merger were not
consummated; certain information concerning Shawmut's financial condition,
results of operations and prospects; the terms of the Stock Option Agreement and
the Voting Agreement; and the possible impact of the Merger on Peoples'
business, prospects, employees, customers and community. The Peoples Board
concluded that the consideration to be received by Peoples stockholders upon the
consummation of the Merger (by operation of the Exchange Ratio) as outlined in
the Shawmut proposal was consistent with the valuation of Peoples prepared by
McDaniels & Co., provided greater value to stockholders than any other strategic
opportunity available to Peoples, and outweighed any associated risks. See "THE
MERGER -- Background of the Merger" and "-- Recommendation of the Board of
Directors of Peoples; Reasons For the Merger."
OPINION OF PEOPLES' FINANCIAL ADVISOR
McDaniels has delivered its written opinion to the Peoples Board that as of
August 26, 1993, and as of the date of this Proxy Statement/Prospectus, the
Exchange Ratio was fair, from a financial point of view to Peoples stockholders.
The full text of the opinion of McDaniels, dated the date of this Proxy
Statement/ Prospectus (the "McDaniels Opinion"), which sets forth the procedures
followed, assumptions made and the matters considered in connection with such
opinion, is attached as Annex D to this Proxy Statement/ Prospectus. Peoples
stockholders are urged to read the McDaniels Opinion in its entirety. The
McDaniels Opinion is directed only to the Exchange Ratio and does not constitute
a recommendation to any Peoples stockholder as to how such stockholder should
vote at the Special Meeting. See "THE MERGER -- Opinion of Peoples' Financial
Advisor."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain executive officers of Peoples who are parties to existing
employment agreements, Woodbury C. Titcomb, George C. Rand, Jr., Sam H.
Hokkanen, James K. Hunt and Brian W. Thompson, and special termination
agreements, Messrs. Titcomb, Rand and Hokkanen, will be entitled to certain
rights and benefits under those agreements if the Merger is consummated. The
rights and benefits under those agreements range from lump-sum payments upon the
occurrence of certain post-closing events specified under the special
termination agreements and/or the assurance of continued post-closing
compensation and benefits under the employment agreements. If such events occur,
Mr. Titcomb will be entitled to receive a lump-sum payment equal to
approximately three times his base amount under the special termination
agreement. For these purposes, Mr. Titcomb's 1994 base amount would be $961,800.
This payment is in addition to, and not an alternative to, any of his benefits
under his employment agreement. In addition, Peoples has approved the amendment
of certain existing employment agreements of Messrs. Rand, Hokkanen, Hunt and
Thompson which, after the Effective Time, will be assumed by Shawmut and will
establish new levels for those executive officers' base compensation. Peoples
has also approved the execution of employment agreements with officers
previously not parties to such arrangements with Peoples, which agreements will
be assumed by Shawmut and continue after the Effective Time. Such agreements
generally provide assurance of continued post-closing compensation and
employment benefits for 22 officers for specified maximum periods ranging from
12 to 24 months from the Effective Time. For a detailed description of the
foregoing, see "THE MERGER -- Interests of Certain Persons in the Merger."
In addition, at the Effective Time, certain options to acquire shares of
Peoples Common Stock granted to Mr. Thompson and Ms. Leslie E. Greis will become
immediately exercisable pursuant to the accelerated vesting provision of the
Peoples Stock Option Plan. If Mr. Thompson and Ms. Greis were to exercise all of
their options immediately upon such acceleration, the value (based upon the
difference between the exercise price and $52.00) to Mr. Thompson and Ms. Greis
would be $186,000 and $38,250, respectively.
Pursuant to the Merger Agreement, Shawmut has, subject to certain
limitations, agreed to indemnify, defend and hold harmless each present and past
director, officer and employee of Peoples against certain claims and the
expenses and liabilities resulting therefrom. Shawmut has also agreed to use
best efforts to
8
<PAGE> 13
maintain for four years (or provide an appropriate substitute) the directors'
and officers' liability insurance maintained by Peoples prior to the Effective
Time. For a detailed description of the foregoing, see "THE MERGER -- Interests
of Certain Persons in the Merger."
EMPLOYEE MATTERS
The Merger Agreement obligates Shawmut to assume Peoples' salary
continuation policy and maintain, subject to certain limitations, all employee
benefit plans of Peoples and its subsidiaries in effect at the Effective Time.
Generally, Peoples' salary continuation policy entitles eligible employees who
are terminated to receive two weeks of base salary for each prior year of
service with Peoples up to a maximum of 52 weeks of base salary. Any employee
receiving salary continuation payments is entitled to a minimum of 30 days'
salary continuation payments following termination of employment and a minimum
of 30 days' notice, or certain additional compensation in lieu thereof, prior to
termination. Shawmut has also agreed to credit any employee of Peoples or its
subsidiaries under any Shawmut employee benefit plan with all years of service
with Peoples or its subsidiaries for all purposes, other than benefit accrual,
to the extent such service was recognized by Peoples under its employee benefits
plans. For a detailed description of the foregoing, see "THE MERGER -- Employee
Matters."
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 Shawmut's
independent accountants that the Merger qualifies for pooling of interests
accounting treatment, receipt of opinions of counsel regarding certain federal
income tax consequences of the Merger and satisfaction of other customary
closing conditions. In addition, if the Average Closing Price of the shares of
Shawmut Common Stock is greater than $27.744, Shawmut will not be obligated to
consummate the Merger unless Peoples waives the applicability of the Minimum
Exchange Ratio and if the Average Closing Price is less than $20.506, Peoples
will not be obligated to consummate the Merger unless Shawmut waives the
applicability of the Maximum Exchange Ratio. See "THE MERGER -- Conditions to
the Merger" and "-- Exchange Ratio."
The regulatory approvals and consents necessary to consummate the
Subsidiary Bank Merger include the approval of the Office of the Comptroller of
the Currency. The Merger may be subject to the prior approval of the Federal
Reserve Board. However, Shawmut may choose to provide the Federal Reserve Board
with prior written notice of the Merger in lieu of filing an application. Under
those circumstances, the Merger does not require the approval of the Federal
Reserve Board unless the Federal Reserve Board informs Shawmut that an
application for approval is required. 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 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. See
"THE MERGER -- Regulatory Approvals Required for the Merger."
On November 15, 1993, the Federal Reserve Board, in a tie vote, declined to
approve Shawmut's application to acquire New Dartmouth Bank ("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 (the "DOJ") and the Federal Trade
Commission (the "FTC"). The investigation was undertaken pursuant to a referral
from the Federal Reserve Board. Those Governors indicated that while Shawmut 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. On December 13, 1993, without admitting any wrongdoing,
Shawmut Mortgage Company entered into a consent decree with the DOJ and FTC
regarding such investigation. On March 1, 1994, Shawmut filed with the Federal
Reserve Board a petition seeking reconsideration of the Board's November 15,
1993 decision not to approve Shawmut's application to acquire all of the
outstanding voting shares of New Dartmouth. On March 7, 1994, the Federal
Reserve Board announced that it will defer action on such
9
<PAGE> 14
petition. The Federal Reserve Board said that it expects to consider such
petition no later than May 2, 1994. See "THE MERGER -- Regulatory Approvals
Required for the Merger."
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time by the mutual consent of Shawmut and Peoples and by either of them
individually under certain specified circumstances, including if the Merger has
not been consummated by August 31, 1994. See "THE MERGER -- Waiver and
Amendment; Termination."
NO SOLICITATION
Peoples has agreed in the Merger Agreement that neither it nor any of its
subsidiaries will solicit, initiate 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), participate in any negotiations or
discussions concerning any acquisition or purchase of all or a substantial
portion of its assets, 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
Peoples 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 by its counsel); Peoples also agreed in the Merger
Agreement that it would immediately cease and cause to be terminated any
existing activities, discussions or negotiations previously conducted with any
parties other than Shawmut with respect to the foregoing; it will notify Shawmut
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 Shawmut in writing of the relevant details with respect to the foregoing;
and it will instruct its officers, directors, agents, advisors and affiliates to
comply with the same restrictions. See "THE MERGER -- No Solicitation of
Transactions."
STOCK EXCHANGE LISTING
The Shawmut Common Stock is listed on the NYSE. Shawmut has agreed to cause
the shares of Shawmut Common Stock to be issued in the Merger to be approved for
listing on the NYSE. The obligation of each of Shawmut and Peoples 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. The issuance of shares of Peoples Common Stock
pursuant to the Stock Option Agreement, however, may prevent the Merger from
qualifying as a pooling of interests for accounting and financial reporting
purposes. It is a condition to each party's obligation to consummate the Merger
that such party receives a letter from Shawmut's independent accountants to the
effect that the Merger qualifies for pooling of interests accounting treatment
unless such firm advises the parties that it is unable to issue a letter to such
effect solely by reason of Shawmut having exercised its right to purchase
Peoples Common Stock pursuant to the Stock Option Agreement. See "THE
MERGER -- Conditions to the Merger" and "-- Anticipated Accounting Treatment."
FEDERAL INCOME TAX CONSEQUENCES
It is intended that the Merger will be treated as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"). Consummation of the Merger is conditioned upon receipt by Shawmut
of an opinion of Skadden, Arps, Slate, Meagher & Flom (the "Skadden Opinion")
and receipt by Peoples of an opinion of Bingham, Dana & Gould (the "Bingham
Opinion"), each dated as of the Effective Time. The Skadden Opinion and the
Bingham Opinion will be substantially to the effect that, on the basis of facts
(which are consistent with the facts existing at the Effective Time),
representations and
10
<PAGE> 15
assumptions set forth or referred to in such opinions, (i) the Merger will be
treated for Federal income tax purposes as a reorganization or part of one or
more reorganizations within the meaning of Section 368(a) of the Code; (ii) no
gain or loss will be recognized by the stockholders of Peoples who exchange
their Peoples Common Stock solely for Shawmut Common Stock pursuant to the
Merger (except with respect to cash received in lieu of a fractional share
interest in Shawmut Common Stock); and (iii) the tax basis of the Shawmut Common
Stock received by Peoples stockholders who exchange all of their Peoples Common
Stock solely for Shawmut Common Stock in the Merger will be the same as the tax
basis of the Peoples Common Stock surrendered in exchange therefor (reduced by
any amount allocable to a fractional share interest for which cash is received).
In addition, the Skadden Opinion will be to the effect that, on the basis
of facts (which are consistent with the facts existing at the Effective Time),
representations and assumptions set forth or referred to therein, (i) the
Subsidiary Bank Merger will be treated for Federal income tax purposes as part
of one or more reorganizations within the meaning of Section 368(a) of the Code;
and (ii) no gain or loss will be recognized by (x) Shawmut, SSC or Peoples as a
result of the Merger or (y) SBM or Peoples Bank (except with respect to any gain
or income that may at any time or times be realized or recognized with respect
to Peoples Bank's tax reserves for possible loan losses) as a result of the
Subsidiary Bank Merger. See "THE MERGER -- Federal Income Tax Consequences."
NO APPRAISAL RIGHTS
No stockholders of Peoples are entitled to appraisal rights in connection
with, or as a result of, the Merger. For a summary of the provisions of the
Delaware General Corporation Law regarding appraisal rights, see "THE
MERGER -- No Appraisal Rights."
STOCK OPTION AGREEMENT
Execution of the Stock Option Agreement was a condition to Shawmut's merger
proposal. Pursuant to the Stock Option Agreement, Peoples granted Shawmut an
option to purchase 660,000 shares of Peoples Common Stock, representing
approximately 19.9% of the issued and outstanding shares of such common stock
before taking into account the shares issuable upon exercise of such option, at
an exercise price of $35, subject to the terms and conditions set forth therein.
The option may only be exercised upon the occurrence of certain events (none of
which has occurred). The Stock Option Agreement is attached as Annex C to this
Proxy Statement/Prospectus. See "CERTAIN RELATED TRANSACTIONS -- 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 or a significant interest in Peoples from
considering or proposing such an acquisition, even if such persons were prepared
to pay a higher price per share for Peoples Common Stock than the price per
share implicit in the Exchange Ratio.
AMENDMENT TO RIGHTS AGREEMENT
In connection with the execution of the Merger Agreement, Peoples amended
the Peoples Rights Agreement (as defined below). The amendment amended the
definition of "Acquiring Person" in the Peoples Rights Agreement to provide that
neither Shawmut nor any of its subsidiaries will be deemed to be an Acquiring
Person by virtue of the fact that Shawmut is the beneficial owner of Peoples
Common Stock (i) of which Shawmut or such subsidiary was the beneficial owner as
of August 26, 1993, together with up to 1% more of the Peoples Common Stock
acquired after such date by Shawmut's Affiliates and Associates (as such terms
are defined in the Peoples Rights Agreement); (ii) acquired or acquirable
pursuant to the Stock Option Agreement; (iii) held directly or indirectly by
Shawmut as Trust Account Shares; and (iv) held as DPC Shares. As a result of the
amendment, no Distribution Date (as defined below) will be deemed to have
occurred, and the Peoples Rights (as defined below) will not become exercisable
as a result of execution of the
11
<PAGE> 16
Merger Agreement and the Stock Option Agreement or consummation of any of the
transactions contemplated thereby. See "CERTAIN RELATED
TRANSACTIONS -- Amendment to Rights Agreement."
COMPARISON OF SHAREHOLDERS' RIGHTS
At the Effective Time, Peoples stockholders automatically will become
shareholders of Shawmut and their rights as shareholders of Shawmut will be
governed by the Delaware General Corporation Law and by Shawmut's Certificate of
Incorporation and By-laws. The rights of shareholders of Shawmut differ from
rights of the stockholders of Peoples with respect to certain important matters,
including, among others, with respect to the calling of special meetings,
nominations and removal of directors by shareholders, certain business
combinations, rights plans, meetings of creditors and/or stockholders, standards
for evaluating takeover proposals, amendments to the Certificate of
Incorporation and By-laws, and the payment of dividends. For a summary of these
differences, see "COMPARISON OF SHAREHOLDER RIGHTS."
MARKET PRICES
Shawmut Common Stock is traded principally on the New York Stock Exchange.
Peoples Common Stock is traded in the over-the-counter market and is reported
through the National Association of Securities Dealers Automated Quotation
System/National Market System (the "NASDAQ/NMS").
The following table sets forth, for the periods indicated, the high and low
sales prices per share for the Shawmut Common Stock as reported on the NYSE and
the high and low sales prices per share of the Peoples Common Stock as reported
by the NASDAQ/NMS. The information with respect to NASDAQ/NMS quotations was
obtained from the National Association of Securities Dealers, Inc. and reflects
interdealer prices, without retail markup, markdown or commissions and may not
represent actual transactions.
<TABLE>
<CAPTION>
SHAWMUT PEOPLES
----------------- -----------------
YEAR HIGH LOW HIGH LOW
----------------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
1992:.......................................... $19.50 $ 8.88 $30.25 $21.75
1993:.......................................... 26.38 17.88 48.50 26.00
1994: First Quarter (through March 29, 1994)... 24.00 19.75 49.50 46.75
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
MARKET VALUE PER SHARE(1): SHAWMUT PEOPLES EQUIVALENT(2)
---------------------------------------------------- ------- ------- -------------
<S> <C> <C> <C>
August 25, 1993..................................... $24.00 $ 38.50 $ 52.00
March 29, 1994...................................... 20.38 47.25 52.00
</TABLE>
- ---------------
(1) The market values for Shawmut Common Stock and Peoples Common Stock
represent the last reported sale prices per share on August 25, 1993, the
last business day preceding public announcement of the Merger and March 29,
1994, the last practicable date prior to the mailing of this Proxy
Statement/Prospectus. See "MARKET PRICES."
(2) The pro forma equivalents were computed by multiplying the Exchange Ratio
(which is intended to provide $52 in value (based on the Average Closing
Price and subject to adjustment) of Shawmut Common Stock for each share of
Peoples Common Stock exchanged in the Merger) by the market values of
Shawmut Common Stock on August 25, 1993 and March 29, 1994, assuming in each
case that the Average Closing Price is equal to the market value of the
Shawmut Common Stock as of such date.
12
<PAGE> 17
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
The following table sets forth certain selected historical consolidated
financial data of Shawmut. The table is based on and should be read in
conjunction with Shawmut's historical financial statements and notes thereto
incorporated by reference in this Proxy Statement/Prospectus. See "INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
SELECTED FINANCIAL DATA
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Interest and dividend income......................... $1,562.2 $1,545.7 $1,813.9 $2,275.2 $2,625.4
Interest expense..................................... 637.6 720.4 1,076.6 1,515.7 1,736.9
-------- -------- -------- -------- --------
Net interest income.................................. 924.6 825.3 737.3 759.5 888.5
Provision for loan losses............................ 29.2 189.5 466.4 434.3 625.8
-------- -------- -------- -------- --------
Net interest income after provision for loan
losses............................................. 895.4 635.8 270.9 325.2 262.7
Noninterest income................................... 363.5 392.2 451.5 439.6 355.1
Securities gains, net................................ 5.7 85.9 78.2 26.2 39.9
Noninterest expenses................................. 1,027.7 1,036.4 969.7 918.3 877.4
-------- -------- -------- -------- --------
Income (loss) before income taxes, extraordinary
credit and cumulative effect of accounting
changes............................................ 236.9 77.5 (169.1) (127.3) (219.7)
Income taxes (benefit)............................... (7.6) 20.7 1.5 5.7 (90.8)
-------- -------- -------- -------- --------
Income (loss) before extraordinary credit and
cumulative effect of accounting changes............ 244.5 56.8 (170.6) (133.0) (128.9)
Extraordinary credit................................. 18.4
Cumulative effect of changes in methods of
accounting......................................... 46.2
-------- -------- -------- -------- --------
Net income (loss).................................... $ 290.7 $ 75.2 $ (170.6) $ (133.0) $ (128.9)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Net income (loss) applicable to common stock......... $ 275.2 $ 70.4 $ (172.9) $ (135.3) $ (131.3)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
COMMON SHARE DATA:
Income (loss) before extraordinary credit and
cumulative effect of accounting changes............ $ 2.44 $ .60 $ (2.35) $ (1.84) $ (1.77)
Net income (loss).................................... 2.93 .81 (2.35) (1.84) (1.77)
Dividends declared................................... .50 .75 1.40
PERIOD END BALANCES:
Total assets......................................... $ 27,245 $ 25,288 $ 22,816 $ 23,703 $ 27,855
Notes and debentures................................. 759 810 665 679 699
Total shareholders' equity........................... 1,803 1,482 1,040 1,192 1,398
AVERAGE BALANCES:
Total assets......................................... $ 25,411 $ 22,450 $ 22,391 $ 25,461 $ 27,275
Notes and debentures................................. 839 668 669 687 714
Total shareholders' equity........................... 1,596 1,256 1,092 1,394 1,739
</TABLE>
13
<PAGE> 18
PEOPLES BANCORP OF WORCESTER, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
The following table sets forth certain selected historical consolidated
financial data of Peoples. The table is based on and should be read in
conjunction with Peoples' historical financial statements and notes thereto
incorporated by reference in this Proxy Statement/Prospectus. See "INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED FINANCIAL DATA
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Interest and dividend income................................ $ 59.6 $ 69.3 $ 80.8 $ 82.1 $ 79.3
Interest expense............................................ 22.4 32.7 47.5 51.4 50.7
------ ------ ------ ------ ------
Net interest income......................................... 37.2 36.6 33.3 30.7 28.6
Provision for loan losses................................... 1.0 2.1 1.9 2.5 .5
------ ------ ------ ------ ------
Net interest income after provision for
loan losses............................................... 36.2 34.5 31.4 28.2 28.1
Noninterest income.......................................... 3.9 3.7 3.7 3.3 2.2
Securities gains and losses................................. 3.1 4.8 1.8 .1 2.1
Noninterest expenses........................................ 24.5 26.5 26.2 24.9 23.0
------ ------ ------ ------ ------
Income before income taxes, extraordinary
credit and cumulative effect of accounting change......... 18.7 16.5 10.7 6.7 9.4
Income taxes................................................ 7.9 7.0 4.8 3.6 3.9
------ ------ ------ ------ ------
Income before extraordinary credit and cumulative effect of
accounting change......................................... 10.8 9.5 5.9 3.1 5.5
Extraordinary credit........................................ 1.3
Cumulative effect of change in method of accounting for
income taxes.............................................. 1.5
------ ------ ------ ------ ------
Net income.................................................. $ 10.8 $ 11.0 $ 7.2 $ 3.1 $ 5.5
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Net income applicable to common stock....................... $ 10.8 $ 11.0 $ 7.2 $ 3.1 $ 5.5
------ ------ ------ ------ ------
------ ------ ------ ------ ------
COMMON SHARE DATA:
Income before extraordinary credit and cumulative effect of
accounting change......................................... $ 3.18 $ 3.11 $ 2.17 $ 1.19 $ 1.90
Net income.................................................. 3.18 3.62 2.64 1.19 1.90
Dividends declared.......................................... 1.33 1.29 1.25 1.21 1.06
PERIOD END BALANCES:
Total assets................................................ $891.1 $932.2 $933.0 $891.4 $808.0
Total shareholders' equity.................................. 106.3 96.3 75.8 71.1 71.3
AVERAGE BALANCES:
Total assets................................................ $914.3 $931.6 $920.3 $857.9 $794.4
Total shareholders' equity.................................. 100.5 86.0 73.4 73.1 75.3
</TABLE>
14
<PAGE> 19
COMPARISON OF CERTAIN PER SHARE DATA
The following table shows unaudited comparative historical per share data
for Shawmut and Peoples, unaudited pro forma per share and per share equivalent
data for Shawmut and Peoples combined (including the results of operations of
Cohasset Savings Bank ("Cohasset") and West Newton Savings Bank ("West Newton")
for the year ended December 31, 1993) and Shawmut, Peoples, New Dartmouth Bank
("New Dartmouth") and Gateway Financial Corporation ("Gateway") combined.(1) Pro
forma per share and per share equivalent data for the year ended December 31,
1993 includes the results of operations of Cohasset and West Newton. The range
of values presented reflects the minimum and maximum number of shares of Shawmut
Common Stock that may be issued pursuant to the Merger and the acquisitions of
New Dartmouth and Gateway, calculated as of December 31, 1993. The information
presented should be read in conjunction with the consolidated historical
financial statements and notes thereto of Shawmut, Peoples, New Dartmouth,
Gateway, Cohasset and West Newton, which are incorporated by reference in this
Proxy Statement/Prospectus, and the unaudited pro forma condensed 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 operations which 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 is presented. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE" and "UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE OF SHAWMUT COMMON STOCK:
Income (loss) before extraordinary credit and cumulative effect of
accounting changes:
Historical........................................................ $ 2.44 $ .60 $(2.35) $(1.84) $(1.77)
Pro forma:
Shawmut and Peoples............................................. 2.42 to .67 to (2.12)to (1.69)to (1.58)to
2.37 .65 (2.07) (1.65) (1.54)
Shawmut, Peoples, New Dartmouth and Gateway..................... 2.42 to .60 to (2.07)to (1.92)to (1.48)to
2.34 .58 (2.02) (1.88) (1.45)
Cash dividends declared:
Historical........................................................ 0.50 0.75 1.40
BOOK VALUE (as of end of period):
Historical........................................................ 17.02
Pro forma:
Shawmut and Peoples............................................. 16.97 to
16.61
Shawmut, Peoples, New Dartmouth and Gateway..................... 16.56 to
15.97
PER SHARE OF PEOPLES COMMON STOCK:
Income (loss) before extraordinary credit and cumulative effect of
accounting change:
Historical........................................................ 3.18 3.11 2.17 1.19 1.90
Pro forma equivalent:
Shawmut and Peoples............................................. 4.54 to 1.26 to (3.97)to (3.17)to (2.96)to
6.01 1.65 (5.25) (4.18) (3.91)
Shawmut, Peoples, New Dartmouth and Gateway..................... 4.54 to 1.12 to (3.88)to (3.60)to (2.77)to
5.93 1.47 (5.12) 4.77 (3.68)
Cash dividends declared:
Historical........................................................ 1.33 1.29 1.25 1.21 1.06
Pro forma equivalent.............................................. .94 to 1.41 to 2.62 to
1.27 1.90 3.55
Book value (as of end of period):
Historical........................................................ 31.84
Pro forma equivalent:
Shawmut and Peoples............................................. 31.80 to
42.12
Shawmut, Peoples, New Dartmouth and Gateway..................... 31.03 to
40.50
</TABLE>
- ---------------
(1) On March 24, 1993, Shawmut announced the signing of a definitive agreement
to acquire New Dartmouth in a transaction to be accounted for as a pooling
of interests. New Dartmouth commenced operations on October 10, 1991 and has
not declared or paid dividends since its inception. On November 5, 1993,
Shawmut entered into an agreement to acquire Gateway in a transaction to be
accounted for as a pooling of interests. On March 2, 1994, Shawmut announced
the signing of a definitive agreement to acquire Cohasset Savings Bank. On
March 8, 1994, Shawmut announced the signing of a definitive agreement to
acquire West Newton Savings Bank.
15
<PAGE> 20
RECENT DEVELOPMENTS
On January 20, 1994, Peoples reported net income for the fourth quarter of
1993 of $2.2 million, or $.65 per common share, compared with net income of
$2.14 million, or $.64 per share, in the fourth quarter of 1992. Net income for
the year 1993 was $10.79 million, or $3.18 per share, a 14 percent improvement
over the $9.5 million, or $3.11 per share, earned in 1992, excluding the
cumulative effect of a change in accounting principles. During 1992, Peoples
recorded a nonrecurring benefit of $1.54 million, or $.51 per share, from the
adoption of Statement of Financial Accounting Standards No. 109, resulting in
net income of $11.03 million, or $3.62 per share, for that year. Operating
income for the year 1993 included pre-tax gains on the sales of loans and
investments of $3.68 million, or $.63 per share after taxes, compared with $5.06
million, or $.96 per share after taxes in the year 1992. At December 31, 1993,
loans totaled $455.16 million, compared with $468.97 million at the end of 1992.
Nonperforming loans at year end were $5.13 million, or 1.11 percent of Peoples'
total loan portfolio. Net charge-offs against the reserve for possible loan
losses totaled $539,000 in 1993, and $1 million was added to the reserve. At
December 31, 1993, the reserve for possible loan losses was $5.57 million, or
1.21 percent of total loans and 7.48 percent of commercial loans.
THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to stockholders of
Peoples Bancorp of Worcester, Inc. ("Peoples") in connection with the
solicitation of proxies by the Board of Directors of Peoples (the "Peoples
Board") for use at the special meeting of stockholders of Peoples (the "Special
Meeting") to be held at 10:00 a.m., on Wednesday, May 4, 1994, at Mechanics
Hall, 321 Main Street, Worcester, Massachusetts, and at any adjournments or
postponements thereof. At the Special Meeting, or at any adjournments or
postponements thereof, the stockholders of Peoples will be asked to approve and
adopt the Agreement and Plan of Merger, dated as of August 26, 1993, as amended
(the "Merger Agreement"), by and among Shawmut National Corporation ("Shawmut"),
Shawmut Service Corporation, a wholly owned subsidiary of Shawmut ("SSC"), and
Peoples, and each of the transactions contemplated thereby which are more fully
described herein. A copy of the Merger Agreement is attached as Annex A hereto.
The Merger Agreement provides, among other things, that Peoples will merge (the
"Merger") with and into SSC and, except as described below, each share of common
stock, par value $0.10 per share, of Peoples ("Peoples Common Stock") will be
converted into and exchangeable for that number of shares of common stock, par
value $.01 per share, of Shawmut ("Shawmut Common Stock") as shall be equal to
the Exchange Ratio (as hereinafter defined).
This Proxy Statement/Prospectus constitutes a prospectus of Shawmut with
respect to the shares of Shawmut Common Stock to be issued in connection with
the Merger. The information in this Proxy Statement/Prospectus concerning
Shawmut and Peoples has been furnished by each of such entities, respectively.
The principal executive offices of Shawmut are located at 777 Main Street,
Hartford, Connecticut 06115 and One Federal Street, Boston, Massachusetts 02211,
and its telephone numbers in Connecticut and Massachusetts are (203) 986-2000
and (617) 292-2000, respectively. The principal executive offices of Peoples are
located at 120 Front Street, Worcester, Massachusetts 01608, and its telephone
number is (508) 791-3861.
This Proxy Statement/Prospectus is first being mailed to stockholders of
Peoples on or about March 31, 1994.
RECORD DATE; VOTING; SOLICITATION AND REVOCATION OF PROXIES
The Peoples Board has fixed March 21, 1994 as the record date (the "Record
Date") for the determination of those Peoples stockholders entitled to notice of
and to vote at the Special Meeting. Only holders of record of Peoples Common
Stock at the close of business on the Record Date will be entitled to
16
<PAGE> 21
notice of and to vote at the Special Meeting or at any adjournments or
postponements thereof. As of the Record Date, there were 3,353,347 shares of
Peoples Common Stock outstanding, entitled to vote and held by approximately
1,014 holders of record. Each holder of record of shares of Peoples Common Stock
on the Record Date is entitled to cast one vote per share on the proposal to
approve and adopt the Merger Agreement and each of the transactions contemplated
thereby, including the Merger, pursuant to which, among other things, Peoples
stockholders will receive $52.00 in value (based on the Average Closing Price
(as defined in the Merger Agreement) and subject to adjustments) of Shawmut
Common Stock for each share of Peoples Common Stock exchanged in the Merger, and
any other matter properly submitted for the vote of the Peoples stockholders at
the Special Meeting, or at any adjournments or postponements thereof. The
presence, either in person or by properly executed proxy, of the holders of a
majority in interest of the outstanding shares of Peoples Common Stock entitled
to vote at the Special Meeting is necessary to constitute a quorum at the
Special Meeting. Shares of Peoples Common Stock which are present in person or
by proxy but abstain from voting at the Special Meeting will be included for
purposes of determining a quorum at such meeting.
The approval and adoption of the Merger Agreement by Peoples stockholders
will require the affirmative vote of the holders of a majority of the
outstanding shares of Peoples Common Stock entitled to vote thereon. Under
applicable Delaware law, in determining whether the proposal has received the
requisite number of affirmative votes, abstentions and broker non-votes will be
counted and 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 Merger.
As of March 21, 1994, directors and executive officers of Peoples and their
affiliates may be deemed to be beneficial owners of approximately 411,582
shares, or approximately 12.05% of the shares of Peoples Common Stock
outstanding as of the Record Date. Each of the directors and executive officers
has agreed to vote or direct the vote of all shares of Peoples Common Stock over
which he or she has sole voting control (representing in the aggregate
approximately 8.19% of the outstanding Peoples Common Stock on the Record Date)
FOR approval and adoption of the Merger Agreement and each of the transactions
contemplated thereby. See "CERTAIN RELATED TRANSACTIONS -- Voting Agreement."
All shares of Peoples 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, and any
adjournments or postponements thereof, 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.
If any other matters are properly presented at the Special Meeting for
consideration, the persons named in the form of proxy enclosed herewith and
acting thereunder will have discretion to vote on such matters in accordance
with their best judgment; provided however, that such discretionary authority
(i) will only be exercised to the extent possible under applicable federal and
state securities and corporation laws and (ii) does not include the right to
vote any proxies which were voted against approval and adoption of the Merger
Agreement and each of the transactions contemplated thereby, in favor of any
proposal to adjourn the Special Meeting to continue to solicit votes to approve
the proposal to approve the Merger Agreement. Peoples does not have any
knowledge of any matters to be presented at the Special Meeting other than the
matter set forth above under "-- General."
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 Secretary of Peoples, 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 Secretary of Peoples before the taking of the vote at the
Special Meeting, or (iii) attending the Special Meeting and voting in person
(although attendance at the meeting will not in and of itself constitute a
revocation of a proxy). Any written notice of revocation or subsequent proxy
should be sent so as to be delivered to Peoples Bancorp of Worcester, Inc., 120
Front Street, Worcester, Massachusetts 01608, Attention Richard B. Hutchins or
hand delivered to the Secretary of Peoples at or before the taking of the vote
at the Special Meeting.
17
<PAGE> 22
Peoples will bear all expenses of this solicitation, except that the cost
of preparing and mailing this Proxy Statement/Prospectus will be borne equally
by Peoples and Shawmut. In addition to solicitation by use of the mails, proxies
may be solicited by directors, officers and employees of Peoples 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. Peoples
has retained Georgeson & Company, Inc., a proxy soliciting firm, to assist in
such solicitation. The fee to be paid to such firm is not expected to exceed
$6,000, plus reasonable out-of-pocket costs and expenses. In addition, Peoples
will make arrangements with brokerage firms and other custodians, nominees and
fiduciaries to send proxy materials to their principals and will reimburse such
parties for their expenses in doing so.
PEOPLES STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR
PROXY CARDS.
THE MERGER
The following information concerning the Merger, insofar as it relates to
matters contained in the Merger Agreement, describes the material aspects of the
Merger, but does not purport to be a complete description and is qualified in
its entirety by reference to the Merger Agreement which is incorporated herein
by reference and attached hereto as Annex A. Peoples stockholders are urged to
read carefully the Merger Agreement.
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 approval of the Merger Agreement by
the stockholders of Peoples, Peoples will be merged with and into SSC. As a
result of the Merger, the separate corporate existence of Peoples will cease,
the stockholders of Peoples will become shareholders of Shawmut, and SSC will
continue as a wholly owned subsidiary of Shawmut.
Immediately prior to consummation of the Merger, Peoples Savings Bank, a
wholly owned subsidiary of Peoples ("Peoples Bank"), will merge (the "Subsidiary
Bank Merger") with and into Shawmut Bank, National Association, Boston,
Massachusetts ("SBM"), an indirect wholly owned subsidiary of Shawmut. See
"CERTAIN RELATED TRANSACTIONS -- Subsidiary Bank Merger Agreement."
EXCHANGE RATIO
The terms of the Merger Agreement were determined as a result of arms'
length negotiations between representatives of Shawmut and Peoples and are
intended to provide $52 in value (based on the Average Closing Price (as defined
below)) of Shawmut Common Stock for each issued and outstanding share of Peoples
Common Stock, subject to potential adjustments as noted below. At the Effective
Time (as defined below), each issued and outstanding share of Peoples Common
Stock, other than shares held, directly or indirectly, by Peoples or Shawmut
(other than shares held by Shawmut or Peoples in a fiduciary capacity ("Trust
Account Shares") or in respect of a debt previously contracted ("DPC Shares"))
will be converted into and exchangeable for that number of shares of Shawmut
Common Stock equal to the quotient obtained by dividing (i) $52 by (ii) the
Average Closing Price rounded to the nearest thousandth of a share (the
"Exchange Ratio"), provided that if the Average Closing Price (x) is equal to or
less than $20.506, the Exchange Ratio will be 2.536 (the "Maximum Exchange
Ratio"), unless Shawmut waives the applicability of the Maximum Exchange Ratio
and (y) is equal to or greater than $27.744, the Exchange Ratio will be 1.874
(the "Minimum Exchange Ratio"), unless Peoples waives the applicability of the
Minimum Exchange Ratio. As used in the Merger Agreement, "Average Closing Price"
means the average of the daily closing sales price of a share of Shawmut Common
Stock as reported on the New York Stock Exchange ("NYSE") (as reported by The
Wall Street Journal or, if not reported thereby, by another authoritative
source) for the 20 NYSE trading days ending on the fifth business day prior to
the date on which the last of the regulatory approvals required to consummate
the Merger is obtained and any applicable waiting period has expired. No
18
<PAGE> 23
fractional shares of Shawmut Common Stock will be issued in the Merger. See
"-- Conversion of Shares; Procedures for Exchange of Certificates; Fractional
Shares" below.
The following table sets forth examples of possible Exchange Ratios at
various hypothetical Average Closing Prices, assuming that neither Shawmut nor
Peoples, as the case may be, waives the Maximum and Minimum Exchange Ratio
provisions:
<TABLE>
<CAPTION>
AVERAGE CLOSING VALUE (BASED ON AVERAGE CLOSING
PRICE OF SHAWMUT PRICE) PER SHARE OF
COMMON STOCK EXCHANGE RATIO PEOPLES COMMON STOCK
- ----------------- -------------- -------------------------------
<S> <C> <C>
$29.00 1.874 $ 54.35
27.00 1.926 52.00
21.00 2.476 52.00
19.00 2.536 48.18
</TABLE>
The Merger Agreement provides that (i) Peoples will not be obligated to
consummate the Merger if the Average Closing Price is less than $20.506, unless
Shawmut waives the applicability of the Maximum Exchange Ratio and (ii) Shawmut
will not be obligated to consummate the Merger if the Average Closing Price is
greater than $27.744, unless Peoples waives the applicability of the Minimum
Exchange Ratio. If Shawmut waives the Maximum Exchange Ratio or Peoples waives
the Minimum Exchange Ratio, as the case may be, the Exchange Ratio will be equal
to the quotient obtained by dividing (i) $52 by (ii) the Average Closing Price.
See "-- Conditions to the Merger" below. Assuming the Merger is approved by
holders of Peoples Common Stock, the Peoples Board may elect to consummate the
Merger without resoliciting Peoples stockholders if the Average Closing Price is
less than $20.506 and Shawmut does not waive the applicability of the Maximum
Exchange Ratio, even though, as a result of the application of the Maximum
Exchange Ratio, the calculated value of the shares of Shawmut Common Stock
(based on the Average Closing Price) to be exchanged for each share of Peoples
Common Stock would be less than $52. In such a situation, in considering whether
to consummate the Merger without the resolicitation of Peoples stockholders, the
Peoples Board will take into account, consistent with its fiduciary duties, all
relevant facts and circumstances that exist at such time, including, without
limitation, the advice of its financial advisors and legal counsel. Stockholder
approval of the Merger Agreement and each of the transactions contemplated
thereby confers upon the Peoples Board the power, consistent with its fiduciary
duties, to elect to consummate the Merger notwithstanding that the Average
Closing Price is less than $20.506 and Shawmut has not waived the Maximum
Exchange Ratio. See "-- Conditions to the Merger" below.
In addition, at the Effective Time, each outstanding and unexercised option
to purchase shares of Peoples Common Stock (a "Peoples Option") will be assumed
by Shawmut. After the Effective Time, each Peoples Option will be deemed to
constitute an option to acquire, on the same terms and conditions as were
applicable under such Peoples Option immediately prior to the Effective Time,
the number of shares of Shawmut Common Stock equal to the product, rounded down
to the nearest share, of the number of shares of Peoples Common Stock subject to
the Peoples Option and the Exchange Ratio, at a price per share equal to (x) the
exercise price per share of Peoples Common Stock otherwise purchasable pursuant
to such Peoples Option divided by (y) the Exchange Ratio rounded up to the
nearest cent.
The Merger Agreement provides that, in the event that Shawmut changes the
number of shares of Shawmut Common Stock issued and outstanding between the date
of the Merger Agreement and the Effective Time as a result of a stock split or
combination, stock dividend or other similar distribution, the Exchange Ratio
will be adjusted proportionately.
BACKGROUND OF THE MERGER
Peoples has for some time through its subsidiary, Peoples Bank, pursued the
strategy of growth in earnings and assets as an independent savings bank
providing community banking services throughout Central Massachusetts. Peoples
continuously examines its strategic alternatives in terms of its corporate
objective of enhancing stockholder value.
19
<PAGE> 24
The Executive Committee of Peoples, at a meeting on November 18, 1992,
identified three major strategic alternatives available to Peoples. Those
alternatives were continued independence, acquisitions by Peoples, including a
merger of equals, and a sale or strategic merger of Peoples involving a larger
acquiring bank holding company. Peoples had focused repeatedly on the issues
presented by remaining independent and the difficulties that would be
encountered in attempting to continue to improve performance and enhance
stockholder value as an independent organization of its size in its markets.
Peoples was also acquainted with, and had recent experience in, attempting to
grow through acquisitions. Over the past few years, Peoples had participated in
two government assisted transactions, one involving the purchase of certain
assets and assumption of deposit liabilities of the failed First Service Bank
for Savings, Leominster, Massachusetts, and the second involving the purchase of
certain assets and assumption of deposit liabilities of the former Milford
Savings Bank. In addition, Peoples had numerous discussions with other
organizations and explored the possibility of different types of acquisitions,
with structures ranging from the acquisition of small organizations to the
consideration of a merger with an institution of comparable size, a merger of
equals. The third alternative, being acquired by another entity, either by a
cash sale or in a strategic merger, was less familiar to Peoples. While Peoples
believed that it had some sense of the value of Peoples in the context of an
acquisition of Peoples, at that time it had no direct information other than
that which an analysis of comparable institutions being acquired might suggest.
After identifying the strategic alternatives, the Executive Committee at the
November 18, 1992 meeting directed Mr. Woodbury C. Titcomb, Peoples' President
and Chief Executive Officer, to continue to evaluate the alternatives of
remaining independent and growth by acquisition. In addition, the Committee
authorized the gathering of information as to the values which might be created
for Peoples' stockholders by a possible acquisition of Peoples. The Executive
Committee reported its progress and plans to the full Peoples Board, and the
Peoples Board approved of the actions and plans of the Executive Committee.
During the ensuing months, Peoples continued to evaluate the issues
presented by remaining independent. Peoples also made efforts to develop
opportunities to acquire small institutions in transactions that would be
accretive to the earnings per share of Peoples Common Stock and also explored
the opportunities of engaging in a merger of equals transaction with
organizations of similar size. Despite considerable efforts in those directions,
attractive acquisitions or a merger of equals did not develop for a variety of
reasons, including a stated desire by the prospective target or merger partner
to remain independent at such time or a determination by Peoples, after further
investigation, that a prospective target was not an attractive acquisition
candidate. At the same time, Peoples, with the assistance of its financial
advisor, McDaniels & Co. ("McDaniels"), developed a preliminary list of logical
parties that might have an interest in Peoples in the event that Peoples were to
determine that it should be acquired through a sale or merger. That list,
originally prepared by McDaniels, was reviewed by the Executive Committee at its
November 18, 1992 meeting and then further refined by Mr. Titcomb. McDaniels
then contacted the ten candidates which for various reasons were believed to be
the most logical candidates. In all instances, the potential candidate contacted
was informed that Peoples was simply considering its future options and that it
had not made any determination to sell or otherwise be acquired, but it wished
to explore whether there might be an interest in acquiring Peoples if Peoples
were to determine that it would enter into such a transaction. This effort
resulted in meetings between Mr. Titcomb and five of the ten candidates and
thereafter in the reduction of the list to the three potential acquirors who had
expressed the greatest interest. Mr. Titcomb met and had additional preliminary
conversations with each of these three potentially interested parties, including
Shawmut. Peoples entered into a confidentiality agreement with each of these
potentially interested parties and exchanged certain preliminary financial
information. During the course of these exploratory discussions, Peoples
reemphasized its position that no decision had been made to sell or merge
Peoples. Rather than asking each potentially interested party to submit a bid
for Peoples, Peoples simply asked for an indication of what it would be willing
to pay in the event that Peoples were to determine that it would be sold for
cash or merged with a strategic partner. In all instances, these communications
were, from Peoples' perspective, designed to elicit the potential value that a
sale or merger of Peoples might offer so that it could be reported to the
Executive Committee of Peoples.
In early August 1993, one of the three potentially interested parties
approached Peoples and suggested the possibility of capitalizing Peoples to the
extent necessary to effect an acquisition of a similar but larger institution in
the Worcester market. Mr. Titcomb explored this possibility, which evolved into
a proposal that
20
<PAGE> 25
essentially represented the sale of Peoples to that potentially interested party
simultaneously with that entity's attempt to acquire the other institution in
the Worcester market. At the same time, Peoples asked the other two potentially
interested parties (including Shawmut) to renew, and if willing, raise, their
indications of value relating to Peoples. In response to this request, Shawmut
increased its earlier indication of value relating to Peoples, while the other
potentially interested party indicated that it would be unwilling to increase
the amount of the consideration that it might be willing to pay to acquire
Peoples.
The results of Peoples' efforts relating to the exploration of strategic
alternatives since November 1992, including the details of those recent
conversations with the potentially interested parties, were reported at an
August 10, 1993 meeting of the Executive Committee of Peoples. At that meeting,
the Executive Committee emphasized that no determination had been made to sell
or merge Peoples, but it authorized continued exploratory discussions with
potential acquirors.
At a meeting of the Executive Committee held on August 18, 1993, Mr.
Titcomb reported that after further conversations with the three potential
acquirors, it appeared that Shawmut's proposal potentially represented the
greatest value and the most likely opportunity for enhancement of stockholder
value. Although the Executive Committee did not determine at this meeting that
Peoples should be sold to, or otherwise enter into any other form of transaction
with, Shawmut or any other potential acquiror, the Executive Committee
authorized management to pursue discussions and negotiations with Shawmut, with
a view to developing a full proposal for consideration by the Executive
Committee in the first instance, it being understood that the Executive
Committee's recommendation could then accompany such proposal before the Peoples
Board. Initially, the parties focused on price, and by August 19, 1993, Shawmut
had agreed to improve slightly its prior indication of value to the level of
$52. The price Shawmut was willing to pay to acquire Peoples exceeded any other
price that any other prospective acquiror had previously indicated it might be
willing to pay to acquire Peoples. In addition, the mechanics of the Exchange
Ratio, including the parties' rights to terminate the Merger Agreement under
certain circumstances, were agreed upon. Shawmut and Peoples then addressed
certain non-financial issues, which ultimately resulted in the understanding
reflected in the provisions of the Merger Agreement which afford certain
protections to the employees, including officers, of Peoples. At the same time
the parties, both directly and through their legal advisors, addressed various
other terms of the documentation proposed by Shawmut in connection with the
transaction.
On August 23, 1993, while the parties continued their negotiations, Peoples
publicly announced that it was engaged in preliminary negotiations with a
potential acquiror. Following this announcement, Peoples was contacted by
telephone by one other potential acquiror, whom McDaniels & Co. had previously
contacted, but which had not been among the three potential acquirors with whom
Peoples had entered into confidentiality agreements and held multiple
exploratory discussions prior to Peoples entering into the negotiations then in
progress with Shawmut. During the course of this telephone call, the potential
acquiror stated that it may have been willing to acquire Peoples for
consideration which would entitle Peoples stockholders to receive approximately
$42.00 per share of Peoples Common Stock. Although the consideration to be paid
in this potential offer was below McDaniels & Co.'s valuation of Peoples, and
was below that contained in the Shawmut offer, in an effort to encourage all
bona fide offers, Peoples invited this potential acquiror to present a formal
proposal, but such proposal was never made.
The parties' negotiations resulted in the preparation of proposed final
drafts of the Merger Agreement and related documents for presentation to
Peoples' Executive Committee on August 26, 1993. After considering the
recommendation of management and the advice of Peoples' financial and legal
advisors, the Executive Committee determined that the best interests of Peoples'
stockholders would be served by a strategic merger of Peoples with a larger bank
holding company and that such strategic merger should be with Shawmut in
accordance with the terms of the Merger Agreement and related documents.
Immediately following this meeting of the Executive Committee, a meeting of the
Peoples Board was convened. At this meeting, the Peoples Board approved the
proposed acquisition of Peoples by Shawmut under the terms of the Merger
Agreement and related documents.
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<PAGE> 26
RECOMMENDATION OF THE BOARD OF DIRECTORS OF PEOPLES; REASONS FOR THE MERGER
The Peoples Board believes that the overall terms of the Merger Agreement
and the transactions contemplated thereby are in the best interests of Peoples'
stockholders, employees, customers and other constituencies. The Peoples Board
unanimously recommends that the Peoples stockholders vote to approve the Merger
Agreement and related transactions.
In reaching its determination, the Peoples Board consulted with management,
its financial advisor, McDaniels, and Peoples' legal advisors, and considered a
number of factors, including without limitation the following:
1. Peoples' Business, Results of Operations, Prospects and Financial
Condition. As part of its consideration of the Exchange Ratio, the Peoples
Board considered the historical and equivalent values affecting book value and
cash dividends and the per share dilution to Peoples' stockholders in historical
and pro forma per share earnings. Further, the Peoples Board was aware of
Peoples' financial condition, earnings and prospects. In light of the overall
consideration to be paid to the Peoples stockholders and the operation of the
Exchange Ratio (including the Minimum Exchange Ratio and the Maximum Exchange
Ratio), the Peoples Board determined that the Merger was in the best interests
of the Peoples stockholders.
2. Consideration of Other Strategic Alternatives. The Peoples Board also
considered the prospects for other alternatives available to Peoples. The
difficulties of achieving continued improvement in stockholder value as an
independent entity were considered. The Peoples Board was aware of the economic
conditions in and prospects for the markets in which Peoples operates and the
competitive pressures in the financial services industry in general and in the
banking industry in particular for a community banking organization. The Peoples
Board also considered the risk that the current favorable interest rate
environment might not continue and the fact that the Massachusetts banking
market is becoming increasingly concentrated. Based on these factors, the
Peoples Board assessed the value to stockholders of Peoples of carrying out
management's plan to continue to operate as an independent company. The
prospects for the alternatives of growing by accretive acquisitions and the
possibility of a merger of equals were discussed by the Peoples Board, but as
prior repeated efforts to attempt to develop such opportunities had not come to
fruition, the Peoples Board concluded that the benefits of those opportunities
did not appear to be reasonably obtainable by Peoples. Given the risks and
factors noted above, the Peoples Board decided that Shawmut's proposal
represented the best available means to obtain value for Peoples stockholders.
3. Exchange Ratio. The Peoples Board considered the Exchange Ratio and the
fact that it would produce $52 in value of Shawmut Common Stock (assuming the
Average Closing Price is between $20.506 and $27.744). The Board considered the
operation of the Minimum Exchange Ratio and Maximum Exchange Ratio and the
respective options that Peoples and Shawmut would have to decline to consummate
the Merger or waive application of the Minimum Exchange Ratio or Maximum
Exchange Ratio. The Peoples Board believes that the operation of the Exchange
Ratio provides an opportunity for Peoples stockholders to receive shares of
Shawmut Common Stock with a calculated value (based on the Average Closing
Price) which represents a substantial premium over the prices at which Peoples
Common Stock has traded in the past. See "MARKET PRICES."
4. Presentations and Fairness Opinion of McDaniels. The Peoples Board took
into account the presentations made by McDaniels on August 26, 1993 and
previously and its written opinion delivered to the Board on August 26, 1993 and
subsequently confirmed and updated, that the Exchange Ratio was fair, from a
financial point of view, to the Peoples stockholders. See "-- Opinion of
Peoples' Financial Advisor" below.
5. The Terms of the Merger and the Risks to Peoples if the Merger Were Not
Consummated. The Peoples Board was aware of the principal terms of the Merger
Agreement, including the conditions to the Merger and how those conditions might
affect the business of Peoples if the Merger were not consummated. Peoples had
negotiated the terms under which it would be required to operate its business
pending the Merger. As a result of these negotiations, the Peoples Board
believes it will not be materially harmed by a delay or failure of the Merger.
The Peoples Board also considered the tax and accounting consequences of the
Merger, provisions in the Merger Agreement relating to officers, directors and
employees of Peoples and various
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<PAGE> 27
regulatory approvals that would likely be necessary to consummate the Merger and
the likelihood that such approvals would be obtained and the risks to Peoples if
such approvals were not obtained, including a decline in the market value of
Peoples Common Stock. The Peoples Board concluded that these risks were not
great in comparison to the potential value represented by the Shawmut proposal.
6. Certain Information Concerning Shawmut's Financial Condition, Results of
Operations and Prospects. The Peoples Board considered, based, in part, on due
diligence conducted by management and McDaniels, Shawmut's financial condition,
historical earnings, prospects and the trading market in Shawmut Common Stock.
The Board also noted if the market value of Shawmut Common Stock declined,
resulting in an Average Closing Price of less than $20.506, Peoples would have
the right under the Merger Agreement not to proceed with the Merger unless
Shawmut waived the applicability of the Maximum Exchange Ratio. Consequently,
based on the results of its due diligence examination and the protective floor
price which could be paid to Peoples stockholders, the Peoples Board concluded
that Shawmut's proposal was attractive.
7. Terms of the Stock Option Agreement. The Peoples Board was aware that
the existence of the Stock Option Agreement would make it significantly more
difficult for a third party to acquire Peoples. The Peoples 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 "CERTAIN
RELATED TRANSACTIONS -- Stock Option Agreement." The Peoples Board also
considered that Peoples attempted to avoid signing such an agreement, but that
Shawmut insisted that such an agreement was a condition to its willingness to
sign the Merger Agreement and that such stock option agreements are typical in
transactions such as the Merger. The Peoples Board concluded that based on the
attractiveness of the Shawmut proposal and McDaniels' analysis of the offer, the
risk that Shawmut may have withdrawn its offer if Peoples declined to execute
the Stock Option Agreement justified entering into such agreement.
8. Voting Agreement. The Peoples Board was also aware that the agreement
of certain Peoples' directors and officers to vote in favor of the Merger was
being required by Shawmut in connection with entering into the Merger Agreement.
See "CERTAIN RELATED TRANSACTIONS -- Voting Agreement."
9. Impact of the Merger on Peoples' Business, Prospects, Employees,
Customers and Communities. The Peoples Board considered generally the impact of
the Merger on Peoples' business, prospects, employees, customers and
communities. The Peoples Board was aware of arrangements relating to certain
protections for various officers and employees and provisions of the Merger
Agreement that obligated Shawmut to provide Peoples' employees with benefits
generally comparable to those provided to Shawmut employees. Shawmut's
commitment to community banking was also discussed as was the general effect of
the Merger on Peoples, its business, employees and communities. The Peoples
Board determined that its consideration of the foregoing factors was consistent
with approval of the Merger Agreement.
10. Procedural Aspects of the Merger. The Peoples Board was aware of the
background to the proposed Merger as described above, including its evaluation
of the potential value to be possibly realized from the sale of Peoples and
other alternatives. The Peoples Board was also aware of the fact that the Merger
would be subject to approval by the holders of a majority of the Peoples Common
Stock.
In view of the wide variety of factors considered in connection with its
evaluation of the Merger, the Peoples Board did not quantify or otherwise assign
relative weights to the individual factors considered in reaching its
determination, except that the Peoples Board placed special emphasis on the
Exchange Ratio and the matters set forth in Items 4, 5 and 6 set forth above. In
addition, the Peoples Board of Directors viewed the matters set forth in Items
1, 2, 3 (except for the Maximum Exchange Ratio), 4, 6 and 10 as positive factors
supporting its recommendations and the matters set forth in Items 5, 7 and 8 as
negative factors. The Peoples Board of Directors viewed the loss of Peoples'
status as an independent banking organization as a negative factor, but viewed
all other matters set forth in Item 9 as positive factors.
The Directors of Peoples voted unanimously to approve the Merger. Mr.
Bigelow, who was absent from the meeting, subsequently indicated his concurrence
in the actions taken at the meeting.
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<PAGE> 28
SHAWMUT'S REASONS FOR THE MERGER
In reaching its determination to enter into the Merger Agreement, the Board
of Directors of Shawmut (the "Shawmut Board") considered a number of factors,
including the following: (i) the Shawmut Board's familiarity with and review of
Shawmut's business, operations, financial condition, earnings and prospects;
(ii) the Shawmut Board's review, based in part on a presentation by Shawmut
management regarding its due diligence on Peoples, of the business, operations,
earnings and financial condition of Peoples on an 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 Shawmut, including, without limitation, opportunities for
growth in deposits, assets and earnings, and opportunities available to Shawmut
in the market areas where Peoples conducts business; (iv) the current and
prospective economic environment facing financial institutions, including
Shawmut; (v) the terms of the Merger Agreement, the Stock Option Agreement and
the other documents executed in connection with the Merger; and (vi) the
anticipated cost savings and efficiencies available from the Merger. The Shawmut
Board did not assign any specific or relative weight to the factors in its
consideration.
OPINION OF PEOPLES' FINANCIAL ADVISOR
General. Pursuant to an engagement letter dated as of August 19, 1993 (the
"McDaniels Engagement Letter"), the Board of Directors of Peoples retained
McDaniels to render financial advisory and investment banking services to
Peoples in connection with a possible sale of Peoples.
McDaniels is an investment banking firm, and as part of its investment
banking business, is engaged in the evaluation of businesses and their
securities in connection with mergers, acquisitions, private placements and
evaluations for various other purposes. The Peoples Board selected McDaniels on
the basis of its ability to evaluate the fairness of the Exchange Ratio, from a
financial point of view, to holders of Peoples Common Stock, as set forth in the
Merger Agreement, its qualifications, its previous experience and its prior
services to Peoples.
McDaniels has delivered its written opinions to the Board of Directors of
Peoples that, as of August 26, 1993 (the "August 26 Opinion"), and as of the
date of this Proxy Statement/Prospectus, the Exchange Ratio was fair, from a
financial point of view, to the holders of Peoples Common Stock.
The full text of the opinion of McDaniels dated the date hereof, which sets
forth the procedures followed, assumptions made, matters considered and limits
on the review undertaken in connection with such opinion, is attached as Annex D
to this Proxy Statement/Prospectus. The summary description of the opinion set
forth herein is qualified in its entirety by reference to the full text of Annex
D. The August 26 Opinion is substantially identical to the opinion attached as
Annex D.
The McDaniels opinion is directed only to the Exchange Ratio and does not
constitute a recommendation to any holder of Peoples Common Stock as to how such
stockholder should vote at the Special Meeting.
In connection with its opinion dated the date hereof, McDaniels reviewed,
among other things, (a) the Merger Agreement, (b) the Registration Statement,
including this Proxy Statement/Prospectus, (c) the Annual Reports to
Stockholders and the Annual Reports on Form 10-K of Shawmut and Peoples for the
five years ended December 31, 1993 and 1992, respectively, (d) certain interim
reports to stockholders and Quarterly Reports on Form 10-Q of Shawmut and
Peoples, (e) certain Current Reports on Form 8-K of Shawmut and Peoples, (f)
certain press releases of Shawmut and Peoples, (g) certain other financial
information concerning the businesses and operations of Shawmut and Peoples,
including certain internal financial analyses and forecasts that were prepared
by members of their respective senior management, (h) certain financial and
securities data (including historical share prices and trading volumes) and
other information that was publicly available concerning Shawmut, Peoples and
various other companies whose securities are traded in the public markets, and
(i) certain publicly available data concerning the financial terms of selected
recent business combinations in the commercial banking and thrift industries
that McDaniels deemed relevant for purposes of its opinion. McDaniels also held
discussions with members of the senior management of both Shawmut and Peoples
regarding the past and current business operations, financial
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<PAGE> 29
condition and performance, regulatory agreements and relationships, and future
prospects of their respective companies.
In conducting its review and arriving at its opinion, McDaniels assumed and
relied upon, without independent verification, the accuracy, completeness and
fairness of all of the financial and other information that was publicly
available or that was provided to it by Shawmut and Peoples or their respective
representatives. McDaniels also assumed that the aggregate reserves for possible
loan losses for Shawmut and Peoples are adequate to cover such losses. Moreover,
McDaniels did not make or obtain any independent evaluations or appraisals of
any assets or liabilities of Shawmut or Peoples or any of their respective
subsidiaries, nor did it verify any of Shawmut's or Peoples' books and records
or review any individual loan credit files. Further, McDaniels assumed for
purposes of its opinions that the Merger will be recorded as a pooling of
interests under generally accepted accounting principles.
The following is a summary of the report presented by McDaniels to the
Peoples Board of Directors on August 26, 1992 (the "McDaniels Report") in
connection with its August 26, 1992 opinion.
Pro Forma Analysis of Shawmut Offer. McDaniels analyzed certain pro forma
effects resulting from the Merger, based on Average Closing Prices of Shawmut
Common Stock ranging from $19.00 per share to $29.00 per share. This analysis,
based upon the assumption described above, and based upon projections of the
management of Peoples and, with respect to Shawmut, projections of the
Institutional Broker's Estimate System ("IBES"), projected a dilution ranging
from 1.48% to 4.47% in Shawmut's 1994 earnings per share ("EPS"). This analysis
did not take into account the effect of any cost savings for Shawmut following
the Merger.
Discounted Cash Flow Analysis. Using a discounted cash flow analysis,
McDaniels estimated the 1997 value of Peoples Common Stock under various
assumptions and discounted them to present value as of the end of the current
fiscal year using three different discount rates (10%, 14% and 18%) selected to
reflect different assumptions regarding the required rate of return of holders
or prospective buyers of Peoples Common Stock and terminal multiples of 10.5,
11.5 and 12.5. Those assumptions included Peoples management's projections of
EPS and dividends for each of the years 1993 through 1997, including projections
of an EPS of $3.82 and a dividend per share of $1.58 in 1997 for Peoples. On the
basis of such assumptions, McDaniels estimated that the net present value of one
share of Peoples Common Stock on a stand-alone basis would range from $21.98 to
$35.07. The analysis is based upon the aforementioned assumptions as to future
earnings and dividends, among other things; actual earnings and dividends will
be dependent upon many factors which are beyond the control of Peoples or
Shawmut. As indicated below, this analysis is not necessarily indicative of
actual values or actual future results and does not purport to reflect the price
or prices at which any securities may trade at the present time or at any time
in the future.
Peer Group Analysis. McDaniels compared selected historical and IBES
estimated future earnings, annualized returns, balance sheet, dividend and stock
market data and financial ratios for Peoples and Shawmut to the corresponding
data and ratios for a selected group of six banks deemed comparable to Peoples
(Bank Worcester, Boston Bancorp, Boston Five, NBB Bancorp, Neworld Bancorp and
Sterling Bancshares, collectively, the "Peoples Peer Group") and a selected
group of six banks deemed comparable to Shawmut (BayBanks, Inc., Bank of Boston
Corporation, First Fidelity, Fleet Financial Group, Inc., KeyCorp and Midlantic
Corp., collectively, the "Shawmut Peer Group").
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<PAGE> 30
This peer group analysis produced the following data with respect to
Peoples and the Peoples Peer Group:
<TABLE>
<CAPTION>
PEOPLES PEER GROUP
----------------------------------------
PEOPLES MEDIAN HIGH LOW
------- ------ ------ ------
<S> <C> <C> <C> <C>
Market Value per Share to Book Value per Share........ 106.6% 118.6% 136.5% 109.4%
Market Capitalization to Total Assets................. 11.7% 9.4% 11.9% 7.3%
Dividend Yield (annualized)........................... 4.1% 2.1% 3.2% 0.0%
Share Price to Latest 12-month Earnings per Share..... 9.86x 10.88x 32.81x 5.52x
Share Price to 1993 Estimated Earnings per Share...... 10.08x 10.46x 17.33x 5.95x
Share Price to 1994 Estimated Earnings per Share...... 9.77x 9.60x 15.70x 6.73x
Return on Average Assets (year-to-date, annualized)... 1.23% 0.75% 1.65% -0.37%
Return on Average Common Equity (year-to-date,
annualized)......................................... 11.45% 10.60% 25.97% -8.27%
Non-performing Assets to Total Assets................. 0.53% 1.80% 3.63% 0.61%
Loan Loss Reserve to Non-performing Assets............ 117.28% 61.06% 172.79% 31.80%
Total Equity to Total Assets.......................... 10.95% 7.18% 9.87% 4.50%
</TABLE>
Further, this peer group analysis produced the following data with respect
to Shawmut and the Shawmut Peer Group:
<TABLE>
<CAPTION>
SHAWMUT PEER GROUP
----------------------------------------
SHAWMUT MEDIAN HIGH LOW
------- ------ ------ ------
<S> <C> <C> <C> <C>
Market Value per Share to Book Value per Share........ 159.3% 141.6% 184.7% 110.1%
Market Capitalization to Total Assets................. 8.7% 9.5% 12.0% 6.4%
Dividend Yield (annualized)........................... 1.7% 2.6% 3.3% 0.0%
Share Price to Latest 12-month Earnings per Share..... 21.13x 11.43x 13.58x 8.75x
Share Price to 1993 Estimated Earnings per Share...... 12.91x 10.63x 16.25x 9.61x
Share Price to 1994 Estimated Earnings per Share...... 9.74x 8.86x 12.10x 8.03x
Return on Average Assets (year-to-date, annualized)... 0.78% 0.97% 1.27% 0.55%
Return on Average Common Equity
(year-to-date, annualized).......................... 13.52% 15.17% 18.94% 8.05%
Non-performing Assets to Total Assets................. 2.26% 1.98% 6.18% 1.14%
Loan Loss Reserve to Non-performing Assets............ 117.28% 91.17% 138.78% 59.60%
Total Equity to Total Assets.......................... 6.13% 7.34% 7.75% 6.86%
</TABLE>
Stock Trading History. McDaniels examined the history of the trading
prices and volume for the Shawmut Common Stock and the Peoples Common Stock,
both separately and in relation to each other.
Analysis of Selected Merger Transactions. McDaniels reviewed certain
financial data relating to the following six types of bank merger transactions
consummated or definitively agreed upon and not subsequently terminated since
the beginning of 1992; first, a group consisting of the forty-seven banking or
holding company mergers and potential mergers where the acquired banking company
had assets of at least $500 million (the "$500 Million Bank Merger Group"),
second, a group consisting of the thirty-nine thrift company mergers and
potential mergers where the acquired thrift company had assets of at least $500
million (the "$500 Million Thrift Merger Group"), third, a group consisting of
the thirty-eight banking or holding company mergers and potential mergers where
the announced transaction value totaled $90 million or more ("$90 Million Value
Bank Merger Group"), fourth, a group consisting of the twenty-one thrift company
mergers or potential mergers where the announced transaction value totaled $90
million or more (the "$90 Million Value Thrift Merger Group"), fifth, a group
consisting of the fifteen banking and thrift company mergers and potential
mergers where the acquired banking or thrift company was located in New England,
New Jersey or New York and where the announced transaction value totalled $50
million or more (the "$50 Million Regional Merger Group"), and sixth, a group
consisting of the fifteen banking and thrift company mergers and potential
mergers where the acquired banking or thrift company had a ratio of
non-performing assets to
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<PAGE> 31
total assets of less than one percent as of its most recent quarter ended prior
to announcement and where the announced transaction value totaled $90 million or
more (the "$90 Million NPA Merger Group").
In the $500 Million Bank Merger Group, the calculations yielded a range of
(i) price offered as a percentage of book value of 23.34% to 311.74% with a
median of 187.83%, compared with 171.84% associated with the Shawmut proposal,
(ii) price offered as a percentage of tangible book value of 23.79% to 322.18%
with a median of 199.69%, compared with 176.45% associated with the Shawmut
proposal, (iii) price offered as a multiple of latest four quarters' earnings of
2.85x to 702.25x with a median of 15.75x, compared with 15.90x associated with
the Shawmut proposal, and (iv) price offered as a percentage of the market price
of the seller's stock one month prior to the announcement of the transaction of
64% to 174.6% with a median of 139.1%, compared with 174.8% associated with the
Shawmut proposal.
In the $500 Million Thrift Merger Group, the calculations yielded a range
of (i) price offered as a percentage of book value of 56.86% to 205.40% with a
median of 130.61%, compared with 171.84% associated with the Shawmut proposal,
(ii) price offered as a percentage of tangible book value of 63.13% to 247.49%
with a median of 139.3%, compared with 176.45% associated with the Shawmut
proposal, (iii) price offered as a multiple of latest four quarters' earnings of
3.91x to 84.43x with a median of 14.55x, compared with 15.90x associated with
the Shawmut proposal, and (iv) price offered as a percentage of the market price
of the seller's stock one month prior to the announcement of the transaction of
108.1% to 235.3% with a median of 157.1%, compared with 174.8% associated with
the Shawmut proposal.
In the $90 Million Value Bank Merger Group, the calculations yielded a
range of (i) price offered as a percentage of book value of 109.78% to 311.74%
with a median of 197.72%, compared with 171.84% associated with the Shawmut
proposal, (ii) price offered as a percentage of tangible book value of 116.30%
to 322.18% with a median of 208.99%, compared with 176.45% associated with the
Shawmut proposal, (iii) price offered as a multiple of latest four quarters'
earnings of 6.99x to 702.25x with a median of 15.93x, compared with 15.90x
associated with the Shawmut proposal, and (iv) price offered as a percentage of
the market price of the seller's stock one month prior to the announcement of
the transaction of 94.5% to 174.6% with a median of 139.5%, compared with 174.8%
associated with the Shawmut proposal.
In the $90 Million Value Thrift Merger Group, the calculations yielded a
range of (i) price offered as a percentage of book value of 68.71% to 205.40%
with a median of 137.3%, compared with 171.84% associated with the Shawmut
proposal, (ii) price offered as a percentage of tangible book value of 100.78%
to 212.50% with a median of 142.86%, compared with 176.45% associated with the
Shawmut proposal, (iii) price offered as a multiple of latest four quarters'
earnings of 3.91x to 37.05x with a median of 16.29x, compared with 15.90x
associated with the Shawmut proposal, and (iv) price offered as a percentage of
the market price of the seller's stock one month prior to the announcement of
the transaction of 108.1% to 216.2% with a median of 148.0%, compared with
174.8% associated with the Shawmut proposal.
In the $50 Million Regional Merger Group, the calculations yielded a range
of (i) price offered as a percentage of book value of 88.40% to 259.72% with a
median of 125.00%, compared with 171.84% associated with the Shawmut proposal,
(ii) price offered as a percentage of tangible book value of 88.40% to 259.72%
with a median of 126.95%, compared with 176.45% associated with the Shawmut
proposal, (iii) price offered as a multiple of latest four quarters' earnings of
2.85x to 32.76x with a median of 14.93x, compared with 15.90x associated with
the Shawmut proposal, and (iv) price offered as a percentage of the market price
of the seller's stock one month prior to the announcement of the transaction of
111.1% to 164.9% with a median of 140.2%, compared with 174.8% associated with
the Shawmut proposal.
In the $90 Million NPA Merger Group, the calculations yielded a range of
(i) price offered as a percentage of book value of 115.82% to 258.25% with a
median of 175.16%, compared with 171.84% associated with the Shawmut proposal,
(ii) price offered as a percentage of tangible book value of 116.30% to 268.50%
with a median of 198.38%, compared with 176.45% associated with the Shawmut
proposal, (iii) price offered as a multiple of latest four quarters' earnings of
9.00x to 22.88x with a median of 15.75x, compared with 15.90x associated with
the Shawmut proposal, and (iv) price offered as a percentage of the market price
of the seller's stock one month prior to the announcement of the transaction of
110.0% to 181.0% with a median of 140.3%, compared with 174.8% associated with
the Shawmut proposal.
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<PAGE> 32
No company or transaction used in the above analysis as a comparison is
identical to Peoples, Shawmut or the contemplated transaction. Accordingly, an
analysis of the results of the foregoing is not formulaic; rather, it involves
complex considerations and judgments concerning differences in financial, market
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.
In connection with its opinion dated the date of this Proxy
Statement/Prospectus, McDaniels confirmed the appropriateness of its reliance on
the analyses in the McDaniels 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 of the McDaniels Report set forth above does not purport to be
a complete description of the presentation by McDaniels to the Peoples Board or
the analyses performed by McDaniels. The preparation of a fairness opinion is
not necessarily susceptible to a partial analyses or summary description.
McDaniels believes that its analyses, and the summary set forth above, must be
considered as a whole and that selecting portions of its analyses, without
considering all analyses, or selecting part or all of the above summary, without
considering all factors and analyses, could create an incomplete view of the
processes underlying the analyses set forth in the McDaniels Report. McDaniels
made no attempt to assign specific weights to particular analyses. In addition,
McDaniels may have deemed various assumptions more or less probable than other
assumptions, so that the ranges of valuations resulting from any particular
analysis described above should not be taken to be McDaniels' view of the actual
value of Peoples, Shawmut or the combined entity.
In performing its analyses, McDaniels made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Shawmut and Peoples. The
analyses performed by McDaniels are not necessarily indicative of actual values
or actual future results, which may be significantly more or less favorable than
suggested by such analyses. Such analyses were prepared solely as part of
McDaniels' analysis of the fairness of the Exchange Ratio, from a financial
point of view, to Peoples stockholders and were provided to the Peoples Board in
connection with the delivery of McDaniels' opinion. 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 any time. In addition,
the McDaniels' Report and McDaniels' opinion was only one of the factors taken
into account by the Peoples Board in making its determination to approve the
Merger.
Pursuant to the terms of the McDaniels Engagement Letter, Peoples paid
McDaniels a fee of $250,000 at the time of McDaniels' delivery of its opinion on
August 26, 1993 and Peoples is further obligated to pay McDaniels a cash fee
equal to 1.00% of the market value as of the last trading day prior to the
Effective Time of the consideration paid by Shawmut and received by Peoples
stockholders at the Effective Time, less $250,000. Peoples has also agreed to
reimburse McDaniels for its reasonable out-of-pocket expenses and to indemnify
McDaniels against certain liabilities.
In addition to McDaniels' financial services referred to above, McDaniels
has been engaged by Peoples as financial advisor for investment banking services
from time to time since May 28, 1992. During such time, McDaniels has performed
services with respect to identifying, reviewing and analyzing certain potential
acquisition candidates for Peoples. In addition, in July 1992 an affiliate of
McDaniels co-managed an offshore placement of Peoples Common Stock.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Peoples and Mr. Titcomb are parties to an Amended and Restated Employment
Agreement and an Amended and Restated Special Termination Agreement. Mr.
Titcomb's Amended and Restated Employment Agreement provides that Mr. Titcomb
shall receive compensation and benefits, as Peoples' President and Chief
Executive Officer, through June 30, 1995. In addition, his Amended and Restated
Employment Agreement also provides certain post-employment retirement and other
benefits to Mr. Titcomb. Mr. Titcomb enjoys certain protections under his
Amended and Restated Special Termination Agreement with respect to any "Change
in Control" of Peoples which, as defined in the Amended and Restated Special
Termination Agreement, includes the consummation of the Merger. Upon such a
Change in Control and the occurrence of
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a Terminating Event (as such term is defined below) within 3 years of the
Effective Time, Mr. Titcomb would be entitled to a lump-sum severance payment
equal to approximately three times his "base amount" (as such term is defined in
Section 280G(b)(3) of the Code). If such a Terminating Event were to occur in
1994, Mr. Titcomb's base amount for purposes of the Change in Control provisions
of his Amended and Restated Special Termination Agreement would be approximately
$961,800. Inasmuch as it is not anticipated that Mr. Titcomb will retain his
present responsibilities following the Effective Time, it is likely that a
Terminating Event would occur and that Mr. Titcomb will elect to receive his
lump-sum payment at the Effective Time or shortly thereafter. The lump-sum
severance payment payable pursuant to Mr. Titcomb's Amended and Restated Special
Termination Agreement is in addition to, and is not an alternative to, any
benefits he may be entitled to pursuant to his Amended and Restated Employment
Agreement. For purposes of Mr. Titcomb's Amended and Restated Special
Termination Agreement, a "Terminating Event" would occur if: (i) Mr. Titcomb is
terminated other than for certain reasons specified therein, or (ii) Mr. Titcomb
resigns after (x) a significant change in the nature or scope of his
responsibilities prior to the Effective Time or a reasonable determination by
him that he will be unable to exercise those responsibilities, or (y) a decrease
in his total annual compensation.
It is currently anticipated that Shawmut and Mr. Titcomb may agree to enter
into a new employment agreement which would, after the Effective Time, replace
Mr. Titcomb's Amended and Restated Employment Agreement and Amended and Restated
Special Termination Agreement; however, whether a new agreement will in fact be
entered into and what the terms of such new employment agreement would be has
not been determined as of the date of this Proxy Statement/Prospectus.
Peoples is also party to Employment Agreements, as amended and restated
where applicable, with Messrs. Sam H. Hokkanen, James K. Hunt, George C. Rand
Jr., and Brian W. Thompson, all of whom are executive officers of Peoples. The
general terms of those agreements are set forth below.
The employment agreements with Messrs. Rand, Hokkanen and Hunt, entered
into in 1988, are for three year terms, provided that the terms shall be
extended automatically from day to day, such that the remaining terms shall
always be three years, and Mr. Thompson's agreement, entered into in 1991, is
for a one year term and provides that the term shall be extended automatically
from day to day, such that the remaining term shall always be one year, unless,
in the case of each such agreement, either party gives notice to the other not
to extend the term of the agreement. Messrs. Hokkanen and Rand also are parties
to respective Amended and Restated Special Termination Agreements with Peoples.
Shawmut has agreed in the Merger Agreement that the Change in Control provisions
of each of the Amended and Restated Special Termination Agreements of Messrs.
Hokkanen and Rand would be triggered by the Merger, generally entitling each of
Messrs. Hokkanen and Rand to lump sum payments under the Amended and Restated
Special Termination Agreements in the event that, within two years of the
Effective Time, (a) such officer is terminated other than for certain reasons
specified therein, or (b) resigns following (i) a significant change in the
nature or scope of his responsibilities prior to the Effective Time or a
reasonable determination by him that he is unable to exercise those
responsibilities, or (ii) a decrease in his total annual compensation. If a
Change in Control and such other events were to occur in 1994, Mr. Hokkanen's
lump sum payment would be approximately $559,250 and Mr. Rand's lump sum payment
would be approximately $633,750. Messrs. Hokkanen and Rand have the option of
receiving the compensation and benefits under their Amended and Restated
Employment Agreements in lieu of their lump sum severance payments under their
respective Amended and Restated Special Termination Agreements. The Merger
Agreement provides that each of the Amended and Restated Employment Agreements
of Messrs. Hokkanen, Hunt, Rand and Thompson will be honored by Shawmut in
accordance with their terms.
In addition, Peoples has approved the amendment, prior to the Effective
Time, of each of the Employment Agreements with Messrs. Hokkanen, Hunt, Rand and
Thompson to provide that the base compensation payable to each such executive
officer pursuant to the terms of his Employment Agreement is equal to the amount
of income reported in his 1992 W-2 wage reporting statement (consisting
principally of salary and any cash bonuses paid in 1992). Such amounts are
$195,041, $198,219, $242,517 and $211,195, respectively. Further, each of the
Employment Agreements with Messrs. Hunt and Thompson are to be amended to
provide that if, following the Effective Time, such executive officer is
substantially relocated or is
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subject to a significant change in his responsibilities, authorities, powers,
functions or duties from those exercised prior to the Effective Time, he will be
able to terminate his employment and retain his rights to receive his salary and
employee benefits for the remainder of the term of his Employment Agreement.
Peoples has also approved the execution prior to the Effective Time of
Change in Control Employment Agreements with William A. Gregg, Jr., Leslie E.
Greis, Franklin Lang, Jr. and Michael S. Shaw, all of whom are executive
officers of Peoples and with 18 other officers other than those described above.
The effect of these agreements is to make it more likely that the officers party
thereto will remain employed for a certain period of time (the "Protected
Period") following the Merger. The Protected Period afforded each of these
officers varies between one and two years. The Change in Control Employment
Agreements provide that if an officer is terminated without cause during the
Protected Period, he or she will continue to receive compensation and benefits
for the remainder of the Protected Period. In addition, those officers afforded
a two-year Protected Period in their Change in Control Employment Agreements
will also have protections against involuntary relocations and against
reductions in annual compensation.
In addition, as part of the discussions and negotiations preceding
execution of the Merger Agreement, Peoples sought to establish that its
intention to follow its existing policies and practices regarding the
compensation of officers and employees not parties to existing employment
agreements would not be constrained by the usual agreement undertakings, which
are often required in the context of this type of transaction. In this regard,
Peoples described its intention to proceed in October and November of 1993 with
its normal review and compensation procedure for its officers and employees.
Peoples also described its intention to pay bonuses to Mr. Hunt, Ms. Greis and
Mr. Gregg, executive officers of Peoples, and Mr. Brian R. Carter, an officer of
Peoples, in an aggregate amount of $458,000 as compensation for and in reward of
past services in connection with the assumption of additional responsibilities
and duties beyond the scope of the respective offices they occupied at the time
of these services. Peoples further explained that such bonuses were designed to
economically reward those employees for exemplary services to Peoples over
several years. Peoples evaluated individual officer performance based upon a
combination of superior and record corporate results, the administration of
assigned business segments and the individual's progress in attaining assigned
goals. Shawmut indicated that it did not object to Peoples' implementation of
these intentions.
In addition, at the Effective Time, options to acquire an aggregate of
7,000 shares of Peoples Common Stock which are currently not exercisable and
which were granted by Peoples in 1990 and 1991 to Mr. Thompson (option to
purchase 6,000 shares at an average exercise price of $21.00 per share) and Ms.
Greis (option to purchase 1,000 shares at an average exercise price of $13.75
per share), both of whom are executive officers of Peoples, will become
immediately exercisable pursuant to the accelerated vesting provision of the
Peoples Stock Option Plan. Based upon the difference between the exercise price
for shares issuable under the options and $52.00, Mr. Thompson would be entitled
to a value in the amount of $186,000 and Ms. Greis would be entitled to a value
in the amount of $38,250.
Pursuant to the Merger Agreement Shawmut has agreed, subject to certain
limitations, to indemnify, defend and hold harmless each person who is now, has
been or becomes prior to the Effective Time a director, officer or employee of
Peoples or any of its subsidiaries (the "Indemnified Parties") against all
losses, claims, damages, costs, expenses, liabilities or judgments, fines and
amounts that are paid in settlement with the approval of Shawmut, in connection
with any threatened or actual claim, action, suit, proceeding or investigation
based in whole or in part on or arising in whole or in part out of or pertaining
to the fact that such person is or was a director, officer or employee of
Peoples or any of its subsidiaries or the Merger Agreement and any of the
transactions contemplated thereby, whether in any case asserted or arising prior
to, or at or after such Effective Time, in each case to the fullest extent
Peoples would have been permitted under the law of the State of Delaware to
indemnify such person. Shawmut 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.
Pursuant to the Merger Agreement, Shawmut has agreed, subject to certain
limitations, to use best efforts to maintain in effect for a period of four
years after the Effective Time the policies of directors' and officers'
liability insurance maintained by Peoples in effect as of the date of the Merger
Agreement with
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respect to acts or omissions occurring before the Effective Time (provided that
Shawmut may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions which are not less advantageous than
such policy).
In addition, the Merger Agreement provides that in the event that Shawmut,
SSC or any of their successors and assigns (i) consolidates with or merges into
any other person and is not the surviving entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its assets to
any person, proper provisions will be made so that such successors and assigns
assume the indemnification obligations set forth above.
EMPLOYEE MATTERS
Shawmut has agreed in the Merger Agreement that, from and after the
Effective Time, Shawmut shall continue all employee benefit plans of Peoples and
its subsidiaries as were in effect at the Effective Time, including pension
plans, thrift plans, stock option plans, management incentive plans, group life
plans, accidental death and dismemberment plans, travel accident plans, medical
and hospitalization plans and long-term disability plans; provided, however,
that Shawmut may amend, supplement or replace any such plan or program if, in
the good faith judgment of Shawmut's Board of Directors, any such amendment,
supplement or replacement will provide the employees (the "Peoples Employees")
or retired employees covered thereby with benefits that are in the aggregate at
least as valuable to them as a group as the benefits to be received by them
under the prior plans and programs in effect immediately prior to such
amendment, supplement or replacement. Moreover, Shawmut has agreed that, with
respect to benefits payable to employees who have retired from Peoples and its
subsidiaries (whether before or after the Effective Time), it will not reduce
such benefits and shall take such action as it deems appropriate from time to
time with respect to possible increases in the level of such benefits, taking
into consideration among other factors any similar increases which Shawmut shall
have effected with respect to its retired employees. In addition, whenever
Shawmut amends in any manner favorable to its employees any of its employee
benefit plans or programs corresponding to plans and programs of Peoples and its
subsidiaries, Shawmut has agreed that it shall consider effecting similar
favorable amendments to the corresponding plans or programs previously
maintained by Peoples and its subsidiaries.
Shawmut has also agreed in the Merger Agreement that, with respect to the
continuation of Peoples' benefits plans, Peoples Employees will be credited
under employee plans maintained by Shawmut with all years of service with
Peoples or any of its subsidiaries for all purposes to the extent such service
was recognized by Peoples or any such subsidiary under any of such employee
benefit plans. To the extent that Peoples employees become participants in any
employee plans maintained by Shawmut or any of its subsidiaries, Peoples
employees will be credited under the Shawmut plans for prior years of service
with Peoples or any of its subsidiaries for all purposes, other than benefit
accrual, to the extent such service is recognized by Peoples or any of its
subsidiaries.
In addition, Shawmut has agreed to assume Peoples' Salary Continuation
Policy at the Effective Time. The Salary Continuation Policy, which was adopted
by Peoples on August 26, 1993, essentially provides salary continuation to any
employee not party to an employment agreement who is terminated within twelve
months of the Effective Time. Generally, the Salary Continuation Policy entitles
eligible employees who are terminated to receive two weeks of base salary for
each year of service to Peoples and any successor. Each employee receiving
salary continuation payments is entitled to a minimum of thirty days' salary
continuation and a minimum of thirty days' notice (or certain additional
compensation in lieu thereof) prior to termination regardless of length of
service to Peoples.
EFFECTIVE TIME
The Merger will become effective upon the filing of a certificate of merger
with the Secretary of State of the State of Delaware in accordance with
applicable law or such later time as is specified in such certificate (the
"Effective Time"). The filing with respect to the Merger will occur on the first
day which is (i) the last business day of a month and (ii) at least two business
days after satisfaction or waiver of the latest to occur of
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certain conditions to the Merger specified in the Merger Agreement, unless
another date is agreed to in writing by Shawmut and Peoples. See "-- Conditions
to the Merger" below. It is expected that a period of time will elapse between
the Special Meeting and the Effective Time while the parties seek to obtain the
regulatory approvals required in order to consummate the Merger. There can be no
assurance that such approvals will be obtained or that the Merger will be
completed at any time. Shawmut and Peoples have targeted the second quarter of
1994 for completion of the Merger. See "-- Regulatory Approvals Required for the
Merger" below. The Merger Agreement may be terminated by either party if, among
other reasons, the Merger has not been consummated on or before August 31, 1994.
See "-- Waiver and Amendment; Termination" below.
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES
As promptly as practicable after the Effective Time, and in no event later
than three business days thereafter, Chemical Bank, acting in the capacity of
exchange agent (the "Exchange Agent"), will mail to each former holder of record
of Peoples Common Stock a form of letter of transmittal, together with
instructions for the (i) exchange of such holder's certificates representing
shares of Peoples Common Stock for certificates representing shares of Shawmut
Common Stock and (ii) receipt by such holder of cash in lieu of fractional
shares into which such holder's shares of Peoples Common Stock have been
converted.
HOLDERS OF PEOPLES COMMON STOCK 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
representing shares of Peoples Common Stock, together with a properly completed
letter of transmittal, there will be issued and mailed to the holder of Peoples
Common Stock surrendering such items a certificate or certificates representing
the number of shares of Shawmut 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. The
Peoples certificate or certificates so surrendered will be forthwith cancelled.
No dividend or other distribution declared after the Effective Time with
respect to Shawmut Common Stock will be paid to the holder of any unsurrendered
Peoples 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 Peoples
certificate will be entitled, until the surrender of such certificate, to vote
the shares of Shawmut Common Stock into which his shares of Peoples Common Stock
have been converted.
After the Effective Time, there will be no transfers on the stock transfer
books of Peoples of shares of Peoples Common Stock issued and outstanding
immediately prior to the Effective Time. If certificates representing shares of
Peoples Common Stock are presented for transfer after the Effective Time, they
will be cancelled and exchanged for certificates representing shares of Shawmut
Common Stock.
Neither Shawmut nor Peoples nor any other person will be liable to any
former holder of Peoples Common Stock for any amount properly delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
If a certificate for Peoples 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 Shawmut Common Stock will be issued in the Merger.
Instead, the Merger Agreement provides that each holder of shares of Peoples
Common Stock exchanged pursuant to the Merger, who would otherwise have been
entitled to receive a fraction of a share of Shawmut Common Stock will receive,
in lieu thereof, cash in an amount equal to such fractional part of a share of
Shawmut Common Stock multiplied by the average of the closing sale prices of
Shawmut Common Stock on the NYSE (as reported by The Wall Street Journal) for
the five trading days immediately preceding the Effective Time. 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 Shawmut capital stock (including Shawmut 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 Shawmut and Peoples to effect the Merger are
subject to the satisfaction of the following conditions at or prior to the
Effective Time: (i) approval of the Merger Agreement by the affirmative vote of
the holders of at least a majority of the outstanding shares of Peoples Common
Stock entitled to vote thereon (see "CERTAIN RELATED TRANSACTIONS -- Voting
Agreement"); (ii) the shares of Shawmut Common Stock issuable to holders of
Peoples Common Stock pursuant to the Merger shall have been authorized for
listing on the NYSE, subject to official notice of issuance; (iii) approval of
the Merger Agreement and the transactions contemplated thereby, including the
Subsidiary Bank Merger, by the appropriate governmental authorities, including
the Office of the Comptroller of the Currency (the "OCC") (all such governmental
authorities being referred to as the "Governmental Entities") and the expiration
of any statutory waiting periods in respect thereof (see "-- Regulatory
Approvals Required for the Merger" below); (iv) receipt of all necessary state
securities laws and "blue sky" permits and other authorizations required in
connection with the issuance of Shawmut Common Stock in the Merger; (v) the
Registration Statement of which this Proxy Statement/Prospectus forms a part
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 Commission; (vi) no order, injunction or decree issued by any
court or agency of competent jurisdiction or other legal restraint or
prohibition (an "Injunction") which prohibits the consummation of the Merger,
the Subsidiary Bank Merger or any of the other transactions contemplated by the
Merger Agreement or the Subsidiary Bank Merger Agreement shall be in effect; and
(vii) 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 or the
Subsidiary Bank Merger.
The obligations of Shawmut and SSC to effect the Merger are further subject
to the satisfaction, or waiver by Shawmut, of the following conditions: (i)(x)
the representations and warranties of Peoples contained in the Merger Agreement
(including without limitation the representation (the "Peoples Material Adverse
Change Representation") that since December 31, 1992 there has not been any
change in the business, assets, financial condition or results of operations of
Peoples or any of its subsidiaries which has had, individually or in the
aggregate, a Material Adverse Effect (as defined below) on Peoples) shall be
true and correct in all material respects as of the date of the Merger Agreement
and (except to the extent that such representations and warranties relate to an
earlier date) as of the Effective Time as though made at and as of the Effective
Time and (y) the representations and warranties of Peoples contained in the
Merger Agreement (including without limitation the Peoples Material Adverse
Change Representation) shall be true and correct in all material respects as of
the date of the Merger Agreement and (except to the extent that such
representations and warranties relate to an earlier date) as of the Effective
Time as though made at and as of the Effective Time, provided, however, that for
purposes of determining the satisfaction of the condition described in this
clause (i)(y), no effect shall be given to any exception in such representations
and warranties relating to materiality or a Material Adverse Effect, and
provided further, however, that the representations and warranties of Peoples
will be deemed true and correct in all material respects unless the failure or
failures of such representations and warranties 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 Peoples and its subsidiaries
taken as a whole as represented in the Merger Agreement, other than an adverse
change resulting from or attributable to general economic conditions; (ii)
Peoples shall have duly performed, in all material respects, all obligations
required to be performed by it under the Merger Agreement at or prior to the
Effective Time; (iii) the consent, approval or waiver of each person (other than
the Governmental Entities) whose consent or approval shall be required in order
to permit the succession by the surviving corporation in the Merger or the
surviving bank in the Subsidiary Bank Merger pursuant to the Merger or the
Subsidiary Bank Merger, as the case may be, to any obligation, right or interest
of Peoples or any subsidiary of Peoples under any agreement shall have been
obtained, except where the failure to obtain such consent, approval or waiver
would not materially adversely affect the economic or business benefits of the
transactions contemplated by the Merger
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Agreement to Shawmut as to render inadvisable the consummation of the Merger;
(iv) no proceeding initiated by a Governmental Entity seeking an Injunction
shall be pending; (v) Shawmut shall have received an opinion of its counsel,
dated as of the Effective Time, substantially 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, the Merger
and the Subsidiary Bank Merger will be treated for Federal income tax purposes
as part of one or more reorganizations within the meaning of Section 368 of the
Code and such opinion shall address several related Federal income tax aspects
commonly dealt with in such an opinion (see "-- Federal Income Tax Consequences"
below); (vi) Shawmut shall have received a customary legal opinion from counsel
to Peoples; (vii) Shawmut shall have received a letter addressed to both Shawmut
and Peoples, dated as of the Effective Time, from Shawmut's independent public
accountants to the effect that the Merger will qualify for pooling of interests
accounting treatment unless such firm advises Shawmut and Peoples that it is
unable to issue a letter to such effect solely by reason of Shawmut having
exercised its right to purchase Peoples Common Stock pursuant to the Stock
Option Agreement; (viii) Shawmut shall have received from Peoples' independent
public accountants certain customary letters with respect to certain financial
information of Peoples; (ix) the Average Closing Price of the Shawmut Common
Stock shall not be more than $27.744 per share; provided, however, that this
condition shall not apply if Peoples waives the applicability of the Minimum
Exchange Ratio; and (x) a Distribution Date, as such term is defined in the
Peoples Rights Agreement (as defined below), shall not have occurred, and the
Peoples Rights (as defined below) shall not have become nonredeemable and the
Peoples Rights shall not become exercisable for capital stock of Shawmut upon
consummation of the Merger.
The Merger Agreement defines a "Material Adverse Effect," when applied to a
party to the Merger Agreement, as a material adverse effect on the business,
properties, assets, liabilities, results of operations or financial condition of
such party and its subsidiaries taken as a whole, other than any such effect
attributable to or resulting from general economic conditions.
The obligations of Peoples to effect the Merger are further subject to the
satisfaction, or waiver by Peoples, of the following conditions: (i)(x) the
representations and warranties of Shawmut contained in the Merger Agreement
(including without limitation the representation (the "Shawmut Material Adverse
Change Representation") that since December 31, 1992 there has not been any
change in the business, assets, financial condition or results of operations of
Shawmut or any of its subsidiaries which has had, individually or in the
aggregate, a Material Adverse Effect on Shawmut) shall be true and correct in
all material respects as of the date of the Merger Agreement and (except to the
extent they relate to an earlier date) as of the Effective Time as though made
at and as of the Effective Time and (y) the representations and warranties of
Shawmut set forth in the Merger Agreement (including without limitation the
Shawmut Material Adverse Change Representation) shall be true and correct in all
material respects as of the date of the Merger Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as of
the Effective Time as though made at and as of the Effective Time; provided,
however, that for purposes of determining the satisfaction of the condition
described in this clause (i)(y), no effect shall be given to any exception in
such representations and warranties relating to materiality or a Material
Adverse Effect, and provided further, however, that such representations and
warranties will be deemed true and correct in all material respects unless the
failure or failures of such representations and warranties 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 Shawmut and
its subsidiaries taken as a whole, other than an adverse change resulting from
or attributable to general economic conditions; (ii) Shawmut and SSC shall have
each duly performed in all material respects all obligations to be performed by
it under the Merger Agreement at or prior to the Effective Time; (iii) the
consent or approval of each person (other than the Governmental Entities) whose
consent or approval shall be required in connection with the transactions
contemplated hereby under any agreement to which Shawmut or any of its
subsidiaries is a party or is otherwise bound, except those for which the
failure to obtain such consents and approvals would not, individually or in the
aggregate, have a material adverse effect on the business, operations or
financial condition of Shawmut and its subsidiaries taken as a whole (after
giving effect to the transactions contemplated by the Merger Agreement), shall
have been obtained; (iv) no proceeding initiated by any Governmental Entity
seeking an Injunction shall be pending; (v) Peoples shall have received from its
counsel an opinion dated as of the Effective Time, rendered on the basis of
facts,
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representations and assumptions set forth in such opinion or in writing
elsewhere and referred to therein substantially to the effect that for Federal
income tax purposes the Merger constitutes a reorganization within the meaning
of Section 368(a) of the Code and such opinion shall address several related
Federal income tax aspects commonly dealt with in such an opinion (see "--
Federal Income Tax Consequences" below); (vi) Peoples shall have received a
customary legal opinion from counsel to Shawmut; (vii) Peoples shall have
received a letter addressed to both Peoples and Shawmut, dated as of the
Effective Time, from Shawmut's independent public accountants to the effect that
the Merger will qualify for pooling of interests accounting treatment, unless
such firm advises Shawmut and Peoples that it is unable to issue a letter to
such effect solely by reason of Shawmut having exercised its right to purchase
Peoples Common Stock pursuant to the Stock Option Agreement; (viii) Peoples
shall have received an opinion, dated as of the date of this Proxy
Statement/Prospectus, from McDaniels to the effect that as of the date hereof
the consideration to be received by the stockholders of Peoples pursuant to the
Merger is fair to such stockholders from a financial point of view (see Annex D
hereto); and (ix) the Average Closing Price of the Shawmut Common Stock shall
not be less than $20.506 per share; provided, however, that this condition will
not apply if Shawmut waives the applicability of the Maximum Exchange Ratio.
No assurance can be provided as to when, or whether, the regulatory
consents and approvals necessary to consummate the Merger will be obtained 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 August 31,
1994, the Merger Agreement may be terminated, and the Merger abandoned, by a
vote of a majority of the Board of Directors of either Shawmut or Peoples,
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.
REGULATORY APPROVALS REQUIRED FOR THE MERGER
The Subsidiary Bank Merger is subject to the prior approval of the OCC
under the Bank Merger Act, as amended (the "BMA"), and other provisions of
federal law, and applications for such approvals have been filed with the OCC.
In reviewing the BMA application, the OCC must 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.
In addition, the BMA prohibits the OCC from approving the Subsidiary Bank Merger
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 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 the OCC finds
that the anticompetitive effects of the Subsidiary Bank Merger are clearly
outweighed by the public interest and the probable effect of the transaction in
meeting the convenience and needs of the communities to be served. In addition,
under the BMA, the Subsidiary Bank Merger may not be consummated until the
thirtieth day following the date of OCC approval of the Merger, during which
time the United States Department of Justice (the "DOJ") may challenge the
Subsidiary Bank Merger 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.
The Merger may be subject to the prior approval of the Board of Governors
of the Federal Reserve System (the "Federal Reserve Board"), under the Bank
Holding Company Act of 1956, as amended (the "BHC Act"). In reviewing
applications under the BHC Act, the Federal Reserve Board, or the appropriate
regional Federal Reserve Bank, acting pursuant to delegated authority, which, in
the case of the Merger, would be the Federal Reserve Bank of Boston (the
"Reserve Bank"), must consider the same factors that the OCC considers in
connection with the BMA application, namely, the financial and managerial
resources and future prospects of the institutions and the convenience and needs
of the communities to be served. In addition, the Federal Reserve Board may not
approve a transaction that will result in the anticompetitive effects described
in the preceding paragraph, and any transaction approved by the Federal Reserve
Board may not be consummated prior to 30 days from the date of the Federal
Reserve Board's approval of the application, during which time the DOJ may
challenge the transaction on antitrust grounds.
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Pursuant to regulations of the Federal Reserve Board, Shawmut may choose to
provide the Federal Reserve Board with prior written notice of the Merger, in
lieu of filing an application under the BHC Act, since among other things, the
Subsidiary Bank Merger requires the prior approval of a federal supervisory
agency under the BMA. Under these circumstances, the Merger does not require the
prior approval of the Federal Reserve Board (or the Reserve Bank, acting on
delegated authority), unless the Reserve Bank informs Shawmut (within 30 days of
the notice filing) that an application for approval under the BHC Act is
required. The filing of such notice does not provide any assurance that the
Reserve Bank would not require Shawmut to file an application seeking the
Federal Reserve Board's prior approval of the Merger.
On November 15, 1993, the Federal Reserve Board issued an order not
approving Shawmut'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. Those Governors who voted not to
approve the application cited a then-pending investigation of possible
discriminatory lending at Shawmut Mortgage Company by the DOJ and the Federal
Trade Commission (the "FTC"). The investigation was undertaken pursuant to a
referral from the Federal Reserve Board. Those Governors stated that in order
for Shawmut to obtain their votes for approval of the Merger, Shawmut 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 Shawmut Mortgage Company under the Home
Mortgage Disclosure Act (the "HMDA") and the structure of its mortgage lending
operation. The three Governors who voted to approve Shawmut's acquisition of New
Dartmouth said that the record showed that Shawmut 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, Shawmut Mortgage
Company 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 Shawmut's more recent flexible
underwriting criteria. According to a press release issued by the DOJ, the DOJ
agreed to settle the case because Shawmut had initiated efforts to ensure that
minority and white applicants are treated equally. The DOJ noted that those
efforts, which included changes to Shawmut's underwriting process, were
initiated prior to the joint investigation into Shawmut Mortgage Company's
lending practices by the DOJ and the FTC. In recognition of the self-corrective
steps undertaken by Shawmut 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 Shawmut
Mortgage Company, Shawmut, or any of Shawmut's other subsidiaries.
On March 1, 1994, Shawmut filed with the Federal Reserve Board a petition
seeking reconsideration of the Board's November 15, 1993 decision not to approve
Shawmut's application to acquire all of the outstanding voting shares of New
Dartmouth. On March 7, 1994, the Federal Reserve Board announced that it will
defer action on such petition. The Federal Reserve Board said that it expects to
consider such petition no later than May 2, 1994.
In light of the initiatives undertaken by Shawmut, Shawmut believes that it
will be able to demonstrate to the Federal Reserve Board Shawmut'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,
Shawmut believes that Federal Reserve Board approval of its acquisition of New
Dartmouth, as well as the approval of the other bank regulatory authorities that
may be required for consummation of such transaction, will be obtained in due
course and in any event prior to the termination date set forth in the New
Dartmouth merger agreement.
Similarly, although there can be no assurances that all required regulatory
approvals will be received for the Merger, Shawmut believes that all required
regulatory approvals will be obtained, including the approval of the Federal
Reserve Board in the event that it determines to exert jurisdiction over the
Merger.
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Shawmut is not aware of any other regulatory approvals that would be
required for consummation of the Merger or the Subsidiary Bank Merger, except as
described above. Should any other approval(s) be required, it is presently
contemplated that such approval(s) would be sought. There can be no assurance
that any other approval(s), if required, will be obtained.
The Merger will not be consummated unless all of the requisite regulatory
approvals for the transactions contemplated by the Merger Agreement, including
the Subsidiary Bank Merger, are obtained. See "-- Conditions to the Merger"
above.
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Merger Agreement, Peoples has agreed that until the
Effective Time, except as provided in the Merger Agreement, the Subsidiary Bank
Merger Agreement, the Stock Option Agreement or with the prior consent of
Shawmut, Peoples and its subsidiaries will carry on their respective businesses
in the ordinary course consistent with past practice and consistent with prudent
banking practices. Peoples has agreed to use its best efforts to (x) preserve
its business organization and that of its significant subsidiaries intact, (y)
keep available to itself and Shawmut the present services of its and its
significant subsidiaries' employees and (z) preserve for itself and Shawmut the
goodwill of its and its significant subsidiaries' customers and others with whom
business relationships exist.
The Merger Agreement also contains certain restrictions on the conduct of
Peoples' business pending consummation of the Merger. In particular, the Merger
Agreement provides that, except as provided in the Merger Agreement or with the
prior written consent of Shawmut, Peoples may not, among other things, (i)
solely in the case of Peoples, declare or pay any dividend on, or make any other
distributions in respect of, any of its capital stock, except (a) for the
declaration and payment of regular quarterly cash dividends in an amount not to
exceed the amount of the most recent quarterly cash dividend paid by Peoples
prior to the date of the Merger Agreement; provided, however, that Peoples may
increase its regular quarterly cash dividend by $.01 per share of Peoples Common
Stock beginning in the first quarter of 1994, and (b) that (x) the parties will
consult with respect to the amount of the last Peoples quarterly dividend
payable prior to the Effective Time with the object of assuring that the
stockholders of Peoples do not receive a shortfall or a premium based on the
record and payment dates of their last dividend prior to the Merger and the
record and payment dates of the first dividend of Shawmut following the Merger
and (y) Peoples may pay a special dividend to holders of record of Peoples
Common Stock immediately prior to the Effective Time consistent with the object
described in clause (x) above; (ii)(a) subject to certain exceptions, split,
combine or reclassify any shares of its capital stock or (b) repurchase, redeem
or otherwise acquire (except for the acquisition of Trust Account Shares and DPC
Shares) any shares of the capital stock of Peoples or any of its subsidiaries or
convertible securities therefor, (iii) subject to certain exceptions, issue,
deliver or sell, or authorize or propose the issuance, delivery or sale of, any
shares of its capital stock or securities convertible therefor, (iv) amend its
Certificate of Incorporation or By-laws, (v) make any capital expenditures other
than in the ordinary course of business or as necessary to maintain existing
assets in good repair, (vi) enter into any new line of business, (vii) subject
to certain exceptions, acquire or agree to acquire any business or entity or
otherwise acquire any assets, (viii) take any action 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 in any material
respect, or in any of the conditions to the Merger not being satisfied, or in a
violation of any provision of the Merger Agreement or the Subsidiary Bank Merger
Agreement, except as may be required by applicable law, (ix) change its methods
of accounting in effect at June 30, 1993, subject to certain exceptions, (x) (a)
adopt, amend, renew or terminate (except as may be required by law) any employee
benefit plan or agreement, arrangement, plan or policy between Peoples or any of
its subsidiaries and any of its current or former directors, officers and
employees, (b) except for normal increases in the ordinary course of business
consistent with past practice or except as required by applicable law, increase
the compensation or fringe benefits of any director, officer or employee, (xi)
take or cause to be taken any action 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 Code; provided, however, that nothing
contained in the Merger Agreement will limit the ability of Shawmut to exercise
its rights under the Stock Option Agreement, (xii) dispose of its material
assets,
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properties or other rights or agreements, (xiii) incur any indebtedness for
borrowed money, assume, guarantee, endorse or otherwise become responsible for
the obligations of any other entity, (xiv) file any application to relocate or
terminate the operations of any of its or its subsidiaries' banking offices,
(xv) breach any regulatory agreement or material contract or license to which
Peoples or any of its subsidiaries is a party or by which any of them or their
respective properties is bound, (xvi) subject to certain exceptions, invest or
commit to invest in real estate or any real estate development project, (xvii)
create, renew, amend or terminate or give notice to do the same to any material
contract, agreement or lease for goods, services or office space to which
Peoples or any of its subsidiaries is a party or by which Peoples or any of its
subsidiaries or their respective property is bound, or (xviii) agree to do any
of the foregoing.
Pursuant to the Merger Agreement, Shawmut has also agreed that until the
Effective Time, except as provided in the Merger Agreement or with the prior
consent of Peoples, Shawmut and its subsidiaries will carry on their respective
businesses in the ordinary course consistent with prudent banking practices and
shall use all reasonable efforts to preserve intact their present business
organizations and relationships. The Merger Agreement also provides, among other
things, that Shawmut will not (i) declare, pay or make any extraordinary or
special dividends or distributions, (ii) take any action 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 in any material
respect, or in any of the conditions to the Merger not being satisfied, or in a
violation of any provision of the Merger Agreement or the Subsidiary Bank Merger
Agreement, except as may be required by applicable law, (iii) change its methods
of accounting in effect at June 30, 1993, subject to certain exceptions, (iv)
take or cause to be taken any action 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 Code; provided, however, that nothing
contained in the Merger Agreement will limit the ability of Shawmut to exercise
its rights under the Stock Option Agreement, or (v) agree to do any of the
foregoing.
WAIVER AND AMENDMENT; TERMINATION
Prior to the Effective Time, any provision of the Merger Agreement may be
waived by the party benefitted 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 Shawmut and Peoples, provided that after the vote
of the stockholders of Peoples no provision of the Merger Agreement may be
amended, without further approval by Peoples' stockholders, if such amendment
reduces the amount or changes the form of the consideration to be received by
Peoples stockholders. Accordingly, stockholder approval of the Merger Agreement
and each of the transactions contemplated thereby confers upon the Peoples Board
the power to amend or modify provisions of the Merger Agreement within the
parameters discussed above, and may adversely affect the ability of any Peoples
stockholder to succeed in an action against Peoples challenging such amendment
or modification if the Peoples Board has acted within the parameters discussed
above and in accordance with its fiduciary duties.
The Merger Agreement may be terminated at any time prior to the Effective
Time, either before or after its approval by the Peoples stockholders, as
follows: (i) by the mutual consent of Shawmut and Peoples if the Boards of
Directors of each so determines; (ii) by either Shawmut or Peoples upon written
notice to the other (a) 90 days after the date on which any request or
application for a necessary regulatory approval is denied or withdrawn at the
request of the Governmental Entity which must grant such approval, unless within
such 90-day period a petition for rehearing or an amended application has been
filed with the applicable Governmental Entity (or unless the failure to obtain
the necessary regulatory approval is due to the failure of the party seeking to
terminate the Merger Agreement to perform or observe its covenants and
agreements set forth in the Merger Agreement) or (b) if any Governmental Entity
of competent jurisdiction issues a final nonappealable order enjoining or
otherwise prohibiting the consummation of any of the transactions contemplated
by the Merger Agreement; (iii) by either Shawmut or Peoples if its Board of
Directors so determines, in the event that the Merger has not been consummated
by August 31, 1994, unless the failure to consummate the Merger is due to a
breach of the Merger Agreement by the party seeking to terminate the Merger
Agreement, (iv) by either Shawmut or Peoples, if the Peoples stockholders fail
to approve the Merger Agreement (provided that if Peoples is the terminating
party, it is not in breach of its obligations in the
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Merger Agreement with respect to the Special Meeting); and (v) by either Shawmut
or Peoples in the event of (a) a material breach by the other of any of its
representations or warranties contained in the Merger Agreement, which is not
cured within 45 days after written notice of such breach is given to the
breaching party or (b) a material breach of any of the covenants or agreements
contained in the Merger Agreement by the other which is not cured within 45 days
after written notice of such breach is given to the breaching party.
In the event of the termination of the Merger Agreement by either Shawmut
or Peoples, neither Shawmut nor Peoples will have any further obligations under
the Merger Agreement except as set forth below. If the Merger Agreement is
terminated pursuant to the provisions described in clauses (i), (iv) or (v) of
the immediately preceding paragraph, such termination will be without cost,
expense or liability to either party unless, in the case of termination under
clause (v) above, the breach of representation or warranty, or the breach of a
covenant is caused by the willful conduct or gross negligence of a party, in
which event such party will be liable to the other for all its out-of-pocket
costs and expenses (including, without limitation, reasonable legal, accounting
and investment banking fees and expenses, collectively the "Expenses") incurred
in connection with the Merger Agreement. If the Merger Agreement is terminated
pursuant to the provisions described in clauses (ii) or (iii) of the immediately
preceding paragraph, or the Merger otherwise fails to be consummated, in any
such case because of the failure to receive any required regulatory approval,
Shawmut will reimburse Peoples for all of its Expenses up to a maximum of
$1,250,000. 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.
NO SOLICITATION OF TRANSACTIONS
Peoples has agreed in the Merger Agreement that neither it nor any of its
subsidiaries will authorize or permit any of its officers, directors, employees
or agents to directly or indirectly solicit, initiate or encourage any inquiries
relating to, or the making of any proposal which constitutes, a "takeover
proposal" (as defined below), or, except to the extent legally required for the
discharge of the fiduciary duties of the Peoples Board as advised in writing by
such board's counsel, recommend or endorse any takeover proposal, or participate
in any discussions or negotiations, or provide third parties with any non-public
information, relating to any such inquiry or proposal or otherwise facilitate
any effort or attempt to make or implement a takeover proposal; provided,
however, that Peoples may communicate information about any such takeover
proposal to its stockholders if, in the judgement of the Peoples Board with the
advice of outside counsel, such communication is required under applicable law;
Peoples will immediately cease and cause to be terminated any existing
activities, discussions or negotiations previously conducted with any parties
other than Shawmut with respect to any of the foregoing; it will notify Shawmut
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 or continued with, it, and will promptly inform Shawmut
in writing of the relevant details with respect to the foregoing. As used in the
Merger Agreement, "takeover proposal" means any tender or exchange offer,
proposal for a merger, consolidation or other business combination involving
Peoples or any subsidiary of Peoples or any proposal or offer to acquire in any
manner a substantial equity interest in, or a substantial portion of the assets
of, Peoples or any subsidiary of Peoples other than the transactions
contemplated or permitted by the Merger Agreement, the Subsidiary Bank Merger
Agreement and the Stock Option Agreement.
RESALES OF SHAWMUT COMMON STOCK RECEIVED IN THE MERGER
The shares of Shawmut 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 stockholder who may be deemed to
be an "affiliate" of Shawmut or Peoples for purposes of Rule 145 under the
Securities Act. Persons who may be deemed to be affiliates generally include
individuals or entities that control, are controlled by or are under common
control with Peoples or Shawmut at the time of the Special Meeting or Shawmut at
or after the Effective Time, and may include certain officers and directors of
Peoples or Shawmut as well as principal stockholders of Peoples or Shawmut.
Rules 144 and 145 promulgated by the Commission under the
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Securities Act restrict the sale of Shawmut Common Stock received in the Merger
by affiliates and certain of their family members and related interests.
Generally speaking, during the two years following the Effective Time,
affiliates of Peoples, provided they are not affiliates of Shawmut, may publicly
resell the Shawmut Common Stock received by them in the Merger with certain
limitations as to the amount of Shawmut Common Stock sold in any rolling
three-month period and as to the manner of sale. After the two-year period, such
affiliates of Peoples who are not affiliates of Shawmut may resell their shares
without such restrictions. Persons who become affiliates of Shawmut prior to the
Effective Time may publicly resell the Shawmut Common Stock received by them in
the Merger subject to similar limitations and subject to certain filing
requirements specified in Rule 144. The ability of affiliates to resell shares
of Shawmut Common Stock received in the Merger under Rule 144 or 145 as
summarized herein generally will be subject to Shawmut's having satisfied the
Exchange Act reporting requirements for specified periods prior to the time of
sale. Affiliates also would be permitted to resell Shawmut Common Stock received
in the Merger pursuant to an effective "resale" registration statement under of
Securities Act (other than the Registration Statement of which this Proxy
Statement/Prospectus forms a part) or any available exemption from the
Securities Act registration requirements.
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.
Each of Shawmut and Peoples has agreed in the Merger Agreement to use its
best efforts to cause each person who is an affiliate (for purposes of Rule 145
of the Securities Act and for purposes of qualifying the Merger for pooling of
interests accounting treatment) of such party to deliver to the other party a
written agreement intended to ensure compliance with the Securities Act and
preserve the ability to treat the Merger as a pooling of interests.
Shawmut has agreed in the Merger Agreement to use its best efforts to
publish 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, combined sales and net income figures as contemplated by and in
accordance with the terms of SEC Accounting Series Release No. 135.
STOCK EXCHANGE LISTING
The Shawmut Common Stock is listed on the NYSE. Shawmut has agreed to cause
the shares of Shawmut Common Stock to be issued in the Merger to be approved for
listing on the NYSE, subject to official notice of issuance, prior to the
Effective Time. The obligations of the parties to consummate the Merger are
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
amount of assets and liabilities of Shawmut and Peoples will be combined at the
Effective Time and carried forward at their previously recorded amounts and the
shareholders' equity accounts of Shawmut and Peoples will be combined on
Shawmut's consolidated balance sheet. Income and other financial statements of
Shawmut issued after the Effective Time will be restated retroactively to
reflect the consolidated operations of Shawmut and Peoples as if the Merger had
taken place prior to the periods covered by such financial statements.
The Merger Agreement provides that a condition to each party's obligation
to consummate the Merger is the receipt of a letter from Shawmut's independent
accountants to the effect that the Merger qualifies for pooling of interests
accounting treatment. See "-- Conditions to the Merger" above.
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The issuance of shares of Peoples Common Stock pursuant to the Stock Option
Agreement may prevent the Merger from qualifying as a pooling of interests for
accounting and financial reporting purposes. See "CERTAIN RELATED
TRANSACTIONS -- Stock Option Agreement."
For information concerning certain restrictions to be imposed on the
transferability of Shawmut Common Stock to be received by affiliates in order,
among other things, to ensure the availability of pooling of interests
accounting treatment, see "-- Resales of Shawmut Common Stock Received in the
Merger" above.
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 INFORMATION."
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal Federal income tax consequences
of the Merger and the Subsidiary Bank Merger to the stockholders of Peoples. The
discussion set forth below is based on currently existing provisions of the
Code, Treasury Regulations thereunder, 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. The Federal income tax
discussion set forth below may not be applicable to certain classes of
taxpayers, including insurance companies, securities dealers, financial
institutions, foreign persons and persons who acquired shares of Peoples Common
Stock pursuant to the exercise of employee stock options or rights or otherwise
as compensation. Peoples stockholders are urged to consult their tax advisors as
to their respective personal tax situations including the applicability and
effect of state, local and other tax laws.
Consummation of the Merger is conditioned upon receipt by Shawmut of an
opinion of Skadden, Arps, Slate, Meagher & Flom (the "Skadden Opinion") and
receipt by Peoples of an opinion of Bingham, Dana & Gould (the "Bingham
Opinion"), each dated as of the Effective Time. The Skadden Opinion and the
Bingham Opinion will be substantially to the effect that, on the basis of facts
(which are consistent with the facts existing at the Effective Time),
representations and assumptions set forth or referred to in such opinions, (i)
the Merger will be treated for Federal income tax purposes as a reorganization
or part of one or more reorganizations within the meaning of Section 368(a) of
the Code; (ii) no gain or loss will be recognized by the stockholders of Peoples
who exchange their Peoples Common Stock solely for Shawmut Common Stock pursuant
to the Merger (except with respect to cash received in lieu of a fractional
share interest in Shawmut Common Stock); and (iii) the tax basis of the Shawmut
Common Stock received by Peoples stockholders who exchange all of their Peoples
Common Stock solely for Shawmut Common Stock in the Merger will be the same as
the tax basis of the Peoples Common Stock surrendered in exchange therefor
(reduced by any amount allocable to a fractional share interest for which cash
is received).
In addition, the Skadden Opinion will be to the effect that, on the basis
of facts (which are consistent with the facts existing at the Effective Time),
representations and assumptions set forth or referred to therein, (i) the
Subsidiary Bank Merger will be treated for Federal income tax purposes as part
of one or more reorganizations within the meaning of Section 368(a) of the Code;
and (ii) no gain or loss will be recognized by (x) Shawmut, SSC or Peoples as a
result of the Merger or (y) SBM or Peoples Bank (except with respect to any gain
or income that may at any time or times be realized or recognized with respect
to Peoples Bank's tax reserves for possible loan losses) as a result of the
Subsidiary Bank Merger.
Any cash received by the holders of Peoples Common Stock in lieu of a
fractional share of Shawmut Common Stock will be treated as having been received
in redemption of the fractional share interest so cashed out, and will result in
taxable gain or loss. The receipt of such cash generally should result in gain
or loss in an amount equal to the difference between the amount of cash received
and the basis of the shares or the fractional share interest surrendered in
exchange therefor. Such gain or loss will be capital gain or loss if the shares
or the fractional share interest was held as a capital asset at the Effective
Time, and such capital gain or loss will be long-term capital gain or loss if
the holding period for such shares or fractional share interest was greater than
one year.
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Shawmut may revise the structure of the Merger and/or the Subsidiary Bank
Merger and related transactions provided that such revised structure shall (i)
fully qualify as, or fully be treated as part of, one or more tax-free
reorganizations within the meaning of Section 368(a) of the Code, and not
subject any of the stockholders of Peoples to adverse tax consequences or change
the amount of consideration to be received by such stockholders, (ii) be
properly treated for financial reporting purposes as a pooling of interests,
(iii) be capable of consummation in as timely a manner as the structure
contemplated herein and (iv) not otherwise be prejudicial to the interests of
stockholders or employees of Peoples.
NO APPRAISAL RIGHTS
Pursuant to Section 262(b) of the Delaware General Corporation law (the
"DGCL"), the stockholders of a constituent corporation in a merger generally are
not entitled to appraisal rights if the shares of stock they own are, as of the
record date fixed to determine stockholders entitled to notice of and to vote at
the meeting to act upon the agreement providing for such merger, either listed
on a national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association of
Securities Dealers, Inc. (a "NASDAQ/NMS Security"), or held of record by more
than 2,000 stockholders. However, stockholders that would otherwise not have
appraisal rights pursuant to the provisions described in the previous sentence
are entitled to appraisal rights if such stockholders are required by the terms
of the merger to accept for their stock anything except (i) shares of the
corporation surviving the merger, (ii) shares of stock which are either listed
on a national securities exchange or designated as a NASDAQ/NMS Security or held
of record by more than 2,000 stockholders, (iii) cash in lieu of fractional
shares of stock described in (i) and (ii) above or (iv) any combination thereof.
Peoples stockholders are not entitled to appraisal rights generally because the
Peoples Common Stock is designated as a NASDAQ/NMS Security, and such
stockholders are not entitled to appraisal rights in connection with the Merger
because the shares of Shawmut Common Stock to be issued in the Merger will be
listed on the New York Stock Exchange at the Effective Time, subject to official
notice of issuance. In addition, there are more than 2,000 holders of record of
Shawmut Common Stock.
CERTAIN RELATED TRANSACTIONS
STOCK OPTION AGREEMENT
The following is a brief summary of certain provisions of the Stock Option
Agreement, dated as of August 26, 1993 (the "Stock Option Agreement"), by and
between Peoples and Shawmut, which is attached hereto as Annex C. 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 Shawmut's merger
proposal. Pursuant to the Stock Option Agreement, Peoples granted to Shawmut an
option to purchase up to 660,000 shares of Peoples Common Stock (representing
approximately 19.9% of the issued and outstanding shares of such Peoples Common
Stock before taking into account the shares issuable upon exercise of such
option) at an exercise price of $35 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 Agreement. The option is exercisable only upon the occurrence of one
of the following events (each a "Purchase Event"):
(a) Peoples fails to publicly oppose a Tender Offer or an Exchange
Offer (as defined below) to, or authorizes, recommends, publicly proposes
or enters into an agreement with any person (other than Shawmut or any of
its subsidiaries) to (i) effect a merger, consolidation or similar
transaction involving Peoples 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 all or substantially all of the assets of Peoples, or any of its
material subsidiaries, or (iii) issue, sell or otherwise dispose of
(including by merger, consolidation, share exchange or similar transaction)
securities
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representing 15% or more of the voting power of Peoples or any of its
material subsidiaries (any of the foregoing an "Acquisition Transaction");
(b) any person (other than Shawmut or its subsidiaries) shall have
acquired beneficial ownership (as defined in Rule 13d-3 promulgated under
the Exchange Act, "Beneficial Ownership") of, or the right to acquire
Beneficial Ownership of, or any group (as defined in the Exchange Act,
"Group") shall have been formed which beneficially owns or has the right to
acquire Beneficial Ownership of, 15% or more of the then outstanding shares
of Peoples Common Stock;
(c) any person (other than Shawmut or any subsidiary of Shawmut) shall
have commenced (as such term is defined in Rule 14d-2 under the Exchange
Act) or shall have filed a registration statement under the Securities Act
with respect to a Tender Offer or Exchange Offer to purchase any shares of
Peoples Common Stock such that, upon consummation of such offer, such
person would own or control 15% or more of the then outstanding shares of
Peoples Common Stock (such an offer being referred to herein as a "Tender
Offer" or an "Exchange Offer," respectively); or
(d) the stockholders of Peoples 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 termination of the Merger Agreement, in
each case after it shall have been publicly announced that any person
(other than Shawmut or any subsidiary of Shawmut) 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 BHC Act or the Change in Bank Control Act of
1978, for approval to engage in an Acquisition Transaction.
The option expires upon the earliest to occur of (i) the Effective Time,
(ii) 12 months after the first occurrence of a Purchase Event, (iii) termination
of the Merger Agreement in accordance with the terms thereof prior to the
occurrence of a Purchase Event (other than a termination resulting from a
material breach of certain of Peoples' covenants under the Merger Agreement
relating to the solicitation of transactions and the Special Meeting), or (iv)
12 months after the termination of the Merger Agreement by Shawmut if such
termination results from a breach by Peoples of certain of its covenants
contained in the Merger Agreement relating to the solicitation of transactions
and the Special Meeting (provided, however, that if within 12 months after such
termination of the Merger Agreement a Purchase Event occurs, then the option
will terminate 12 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, without limitation,
any approvals required under the BHC Act.
The number and type of securities subject to the option and the purchase
price of shares will be adjusted for (i) any change in the Peoples Common Stock
by reason of a stock dividend, stock split, split-up, recapitalization,
combination, exchange of shares or similar transaction or (ii) the effect of any
of the Peoples Rights becoming exercisable, such that Shawmut 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 Peoples Common Stock subject to
the option will also be adjusted in the event Peoples issues additional shares
of Peoples Common Stock such that the number of shares of Peoples Common Stock
subject to the option, together with shares previously purchased pursuant
thereto, represents 19.9% of the Peoples Common Stock then issued and
outstanding, without giving effect to shares subject to or issued pursuant to
the option.
In the event Peoples enters into any agreement (i) to merge into or
consolidate with any person other than Shawmut or one of its subsidiaries such
that Peoples is not the surviving corporation, (ii) to permit any person, other
than Shawmut or one of its subsidiaries, to merge into Peoples and Peoples is
the surviving corporation, but, in connection with such merger, the outstanding
shares of Peoples Common Stock are changed into or exchanged for stock or other
securities of Peoples or any other person or cash or any other property or the
outstanding shares of Peoples 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 Shawmut or one of its
subsidiaries, then, and in each such case, the agreement governing the
transaction must provide that, upon
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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 Peoples (if Peoples is the surviving
entity), in all cases at the option of Shawmut.
Shawmut has the right to require Peoples to repurchase (i) the option and
(ii) any shares acquired pursuant to exercise of the option of which Shawmut has
Beneficial Ownership, upon the occurrence of any of the following circumstances
(each a "Repurchase Event").
(a) any person or Group (other than Shawmut or any of its
subsidiaries) shall have acquired Beneficial Ownership of 50% or more of
the then outstanding shares of Peoples 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 Shawmut for any shares of Peoples Common Stock
acquired pursuant to the option with respect to which Shawmut then has
Beneficial Ownership; (ii) the excess, if any, of (x) the Applicable Price (as
defined below) for each share of Peoples Common Stock over (y) the exercise
price of the option, multiplied by the number of shares of Peoples 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
Shawmut for each share of Peoples Common Stock with respect to which the option
has been exercised and with respect to which Shawmut then has Beneficial
Ownership, multiplied by the number of such shares. Shawmut'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 Peoples 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 Peoples Common Stock received
by the holders of such common stock in connection with any merger or other
business combination referred to in subsection (b) of the second preceding
paragraph and (iii) the highest closing sales price per share of Peoples Common
Stock quoted on the National Association of Securities Dealers Automated
Quotation/National Market System (the "NASDAQ/NMS") (or, if the Peoples 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 prior to
Shawmut's exercise of its right to require Peoples 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 Peoples' 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 Peoples as determined by a nationally recognized
investment banking firm selected by Shawmut, divided by the number of shares of
Peoples Common Stock outstanding at the time of such sale; provided, further,
that for purposes of the calculation described in clause (iii) of the
immediately preceding paragraph, in no event shall the Applicable Price exceed
the average (the "Charter Average Value") for the twenty trading business days
prior to the date of the payment of the repurchase price of (whichever is
applicable) (i) the average of the closing bid and asked price quotations for
shares of Peoples Common Stock provided by the National Association of Security
Dealers as published in The Wall Street Journal for each trading business day
and in the absence of such published price quotations for any date, the bid and
asked price quotations appearing on the National Association of Securities
Dealers Automated Quotation ("NASDAQ") System as of 4 o'clock p.m. Eastern
Standard Time, (ii) the average of the closing prices of shares of Peoples
Common Stock on the NASDAQ/NMS as published in The Wall Street Journal for each
trading business day and in the absence of such published closing price for any
date, the closing price appearing on the NASDAQ System for that date, or (iii)
if shares of Peoples Common Stock are listed on a national securities exchange,
the closing price of such stock, as reported by such exchange, for each trading
business day, consistent with the provisions of Article XIV of the Certificate
of Incorporation of Peoples.
Shawmut may not require Peoples to repurchase from Shawmut any shares of
Peoples Common Stock purchased by Shawmut pursuant to the Stock Option Agreement
if the purchase price paid by Shawmut for such shares exceeds the Charter
Average Value at the time such repurchase would otherwise occur.
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The Stock Option Agreement provides that if at any time after the first
occurrence of a Purchase Event and prior to the later of (a) the expiration of
24 months immediately following the first purchase of shares of Peoples Common
Stock pursuant to the option, or (b) the termination of the option pursuant to
its terms, Shawmut proposes to sell, assign, transfer or otherwise dispose of
any shares of Peoples Common Stock acquired by Shawmut pursuant to the option,
Peoples shall have a right of first refusal with respect to such shares.
Peoples has granted Shawmut certain registration rights with respect to
shares of Peoples Common Stock acquired by Shawmut upon exercise of the option.
These rights include that Peoples will file up to two registration statements
under the Securities Act if requested by Shawmut within three years of the date
the option first becomes exercisable (the "Registration Period") provided such
registration is necessary in order to permit the sale or other disposition of
the shares acquired by Shawmut. Any such registration statement, and any sale
covered thereby, will be at Peoples's expense other than underwriting discounts
or commissions, brokers' fees and the fees and disbursements of Shawmut's
counsel related thereto. In addition, in the event that during the Registration
Period Peoples effects a registration under the Securities Act of Peoples Common
Stock (other than on Form S-4 or Form S-8 or any form with respect to a dividend
reinvestment or similar plan), Peoples will allow Shawmut to participate in such
registration, subject to certain limitations. In connection with any
registration described above, Peoples and Shawmut will provide to each other and
any underwriter of the offering customary representations, warranties,
covenants, indemnifications and contributions.
Certain rights and obligations of Shawmut and Peoples under the Stock
Option Agreement are subject to receipt of required regulatory approvals. The
approval of the Federal Reserve Board is required for the acquisition by Shawmut
of more than 5% of the outstanding shares of Peoples Common Stock.
Effect of 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 Peoples from considering or proposing such an
acquisition, even if such persons were prepared to pay a higher price per share
for Peoples Common Stock than the price per share implicit in the Exchange
Ratio. The acquisition of Peoples or an interest in Peoples, 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 Peoples 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 Peoples than it might
otherwise have proposed to pay. Based on the advice of Peoples' independent
accountants, the management of Peoples believes that the exercise of the Stock
Option Agreement is likely to prohibit any acquiror of Peoples from accounting
for any acquisition of Peoples 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 Peoples by other banking organizations. The Peoples Board took
this factor into account before approving the Stock Option Agreement. See "THE
MERGER -- Recommendation of the Board of Directors of Peoples; Reasons for the
Merger."
VOTING AGREEMENT
In connection with the execution of the Merger Agreement, directors and
executive officers of Peoples entitled to exercise sole voting power with
respect to an aggregate of 273,577 shares of Peoples Common Stock or
approximately 8.19% of the outstanding Peoples Common Stock entered into an
agreement (the "Voting Agreement") with Shawmut pursuant to which such persons
agreed, among other things, to vote all such shares of Peoples Common Stock
which they are entitled to vote (a) in favor of approval of the Merger Agreement
and the Merger and (b) against approval of any other agreement which provides
for a merger, consolidation, sale of assets or other business combination of
Peoples or any of its subsidiaries with any person or entity other than Shawmut
and its subsidiaries. Execution of the Voting Agreement was a condition to
Shawmut entering into the Merger Agreement and no compensation was paid to any
director or executive
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officer in consideration for entering into such agreement. A form of Voting
Agreement is attached hereto as Annex B.
SUBSIDIARY BANK MERGER AGREEMENT
In connection with the Merger, SBM and Peoples Bank have entered into the
Subsidiary Bank Merger Agreement (the "Subsidiary Bank Merger Agreement")
pursuant to which Peoples Bank will be merged with and into SBM. SBM will
continue as a national banking association. The Subsidiary Bank Merger Agreement
may be terminated by mutual consent of the parties at any time and will be
terminated automatically in the event the Merger Agreement is terminated.
AMENDMENT TO RIGHTS AGREEMENT
In connection with the execution of the Merger Agreement, Peoples amended
the Peoples Rights Agreement. The amendment amended the definition of "Acquiring
Person" in the Peoples Rights Agreement to provide that neither Shawmut nor any
of its subsidiaries will be deemed to be an Acquiring Person by virtue of the
fact that Shawmut is the beneficial owner of Peoples Common Stock (i) of which
Shawmut or such subsidiary was the beneficial owner as of August 26, 1993,
together with up to 1% more of the Peoples Common Stock acquired after such date
by Shawmut's Affiliates and Associates (as such terms are defined in the Peoples
Rights Agreement); (ii) acquired or acquirable pursuant to the Stock Option
Agreement; (iii) held directly or indirectly by Shawmut as Trust Account Shares;
and (iv) held as DPC Shares. As a result of the amendment, no Distribution Date
(as defined below) will be deemed to have occurred and the Peoples Rights (as
defined below) will not become exercisable as a result of execution of the
Merger Agreement and the Stock Option Agreement or consummation of any of the
transactions contemplated thereby.
THE FOREGOING SUMMARY OF THE STOCK OPTION AGREEMENT, SUBSIDIARY BANK MERGER
AGREEMENT, VOTING AGREEMENT AND AMENDMENT TO THE PEOPLES RIGHTS AGREEMENT IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH AGREEMENTS AND AMENDMENT. A FORM
OF VOTING AGREEMENT AND THE STOCK OPTION AGREEMENT ARE ATTACHED HERETO AS
ANNEXES B AND C, RESPECTIVELY. THE AMENDMENT TO THE PEOPLES RIGHTS AGREEMENT IS
AN EXHIBIT TO THE MERGER AGREEMENT WHICH IS ATTACHED HERETO AS ANNEX A. SEE
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
INFORMATION ABOUT PEOPLES BANCORP OF WORCESTER, INC.
Peoples is a registered bank holding company, organized in 1987 under
Delaware law, which, through its principal subsidiary, Peoples Bank, is engaged
in community banking activities, which include gathering deposits and investing
in various loans and securities, while providing a wide range of financial
products and services to a broad customer base throughout central Massachusetts.
Peoples Bank maintains 23 branches in Massachusetts. As of December 31, 1993,
Peoples had total assets of $891 million and total deposits of $777 million. As
of that date, Peoples' subsidiaries employed in the aggregate approximately 262
full-time equivalent employees in their operations.
For more information about Peoples, reference is made to the 1992 Peoples
Form 10-K and to Peoples' Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1993, as amended, both of which are incorporated herein by
reference. See "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE."
DESCRIPTION OF SHAWMUT CAPITAL STOCK
GENERAL
The authorized capital stock of Shawmut consists of 150,000,000 shares of
Shawmut Common Stock and 10,000,000 shares of Preferred Stock, without par value
(the "Shawmut Preferred Stock"), issuable in one or more series with such terms
and at such times and for such consideration as the Shawmut Board of Directors
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determines. As of December 31, 1993, there were issued 95,546,359 shares of
Shawmut Common Stock (including 106,487 shares of treasury stock), 575,000
shares of Shawmut Preferred Stock designated as 9.30% Cumulative Preferred Stock
(the "9.30% Cumulative Preferred") and 700,000 shares of Shawmut Preferred Stock
designated as Preferred Stock with Cumulative and Adjustable Dividends (the
"Adjustable Preferred").
As of December 31, 1993, approximately 6,215,651 shares of Shawmut Common
Stock had been reserved for issuance upon the exercise of outstanding stock
options under various employee incentive and purchase plans, 13,500,966 shares
of Shawmut Common Stock were reserved for issuance pursuant to Shawmut's
dividend reinvestment and stock purchase plans, and 16,984,753 shares of Shawmut
Common Stock were reserved for issuance upon consummation of the acquisitions of
New Dartmouth Bank ("New Dartmouth") and Gateway Financial Corporation
("Gateway"). In addition, 1,500,000 shares of a series of Shawmut 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, Shawmut entered
into a Warrant Agreement between Shawmut 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 Shawmut 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 Shawmut but does not purport to be complete and is
subject in all respects to the applicable provisions of the DGCL and is
qualified in its entirety by reference to the Restated Certificate of
Incorporation of Shawmut (the "Shawmut Certificate"), 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 "Shawmut Rights Agreement"),
dated as of February 28, 1989, described below. A copy of the Shawmut
Certificate, each of the Certificates of Designation and the Shawmut Rights
Agreement is incorporated in this Proxy Statement/Prospectus by reference.
COMMON STOCK
The holders of Shawmut Common Stock are entitled to dividends when and as
declared by the Shawmut Board of Directors out of funds legally available
therefor. Each series of Shawmut Preferred Stock has preference over the Shawmut
Common Stock with respect to the payment of dividends. Shawmut is also subject
to certain regulatory restrictions on the payment of dividends. See "MARKET
PRICES" and "COMPARISON OF SHAREHOLDER RIGHTS."
The holders of Shawmut Common Stock are entitled to one vote for each share
held on all matters as to which shareholders are entitled to vote. The Shawmut
Common Stock is the only security of Shawmut entitled to vote for directors,
unless and until Shawmut is in default on the equivalent of six quarterly
dividends payable on any series of Shawmut Preferred Stock. See "-- Shawmut
Preferred Stock" below.
Except as otherwise provided in the resolution providing for the issue of
any series of Shawmut Preferred Stock, in the event of any liquidation,
dissolution or winding up of Shawmut, whether voluntary or involuntary, after
payment shall have been made to the holders of all series of Shawmut Preferred
Stock of the full preferential amounts to which such holders are entitled, the
holders of shares of Shawmut Common Stock shall be entitled, to the exclusion of
the holders of Shawmut Preferred Stock, to share, ratably according to the
number of shares of Shawmut Common Stock held by them, in all remaining assets
of Shawmut available for distribution to its shareholders.
Certain business combinations involving Shawmut and any beneficial owner of
10 percent or more of the outstanding voting stock of Shawmut, any affiliate of
Shawmut 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 Shawmut.
Holders of Shawmut Common Stock are not entitled to cumulative voting
rights, or any preemptive, preferential or subscriptive rights with respect to
any securities of Shawmut, except as described below under
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"Rights Plan." Outstanding shares of Shawmut Common Stock are fully paid and
nonassessable. Chemical Bank, successor by merger to Manufacturers Hanover Trust
Company, is the transfer agent, registrar and dividend disbursement agent for
Shawmut Common Stock.
RIGHTS PLAN
On February 28, 1989, the Shawmut Board of Directors declared a dividend
distribution of one right (a "Shawmut Right") for each outstanding share of
Shawmut 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), Shawmut Rights shall be deemed to be delivered with each
share of Shawmut Common Stock issued by Shawmut, including in connection with
the issuance of the shares of Shawmut Common Stock to be issued in the Merger.
Each Shawmut Right entitles the registered holder to purchase from Shawmut 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 Shawmut Rights are summarized below and are set
forth in the Shawmut Rights Agreement between Shawmut and Manufacturers Hanover
Trust Company, as Rights Agent.
At the present time, the Shawmut Rights are attached to all Shawmut Common
Stock certificates representing outstanding shares, and no separate Shawmut
Rights Certificates will be distributed. The Shawmut Rights will separate from
the Shawmut 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 (an "Acquiring Person") has acquired, or
obtained the right to acquire, beneficial ownership of 20 percent or more of the
outstanding shares of Shawmut Common Stock (the "Stock Acquisition Date"), (ii)
10 business days (or such later date as may be determined by the Shawmut Board)
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 Shawmut Common Stock and (iii) 10 business days following the
determination by the Shawmut Board, upon a determination of at least a majority
of the unaffiliated "Continuing Directors" who are not officers of Shawmut,
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 Shawmut Common Stock outstanding (a) such beneficial ownership by such person
is intended to cause Shawmut to repurchase the Shawmut Common Stock beneficially
owned by such person or to cause pressure on Shawmut 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 Shawmut 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 Shawmut's
ability to maintain its competitive position or impairment of Shawmut's business
reputation or ability to deal with governmental agencies) on the business or
prospects of Shawmut (any such person being referred to herein and in the
Shawmut Rights Agreement as an "Adverse Person").
The Shawmut Rights are not exercisable until the Distribution Date and will
expire at the close of business on March 13, 1999 unless earlier redeemed by
Shawmut 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 Shawmut Common Stock (except pursuant
to an offer for all outstanding shares of Shawmut Common Stock which a majority
of the unaffiliated Continuing Directors who are not officers of Shawmut
determines to be fair to and otherwise in the best interests of Shawmut and its
shareholders), or (ii) the Shawmut Board determines, upon the determination by
at least a majority of the unaffiliated Continuing Directors who are not
officers of Shawmut, that a person is an Adverse Person, each holder of a
Shawmut Right will thereafter have the right to receive upon exercise Shawmut
Common Stock (or, in certain circumstances, cash, property or other securities
of Shawmut) having a value (based on the lowest closing price of the Shawmut
Common Stock during the twelve-month period preceding such event) equal to two
times the exercise price of the Shawmut Right. Notwithstanding any of the
foregoing, following the occurrence of any of the events set forth in this
paragraph, all Shawmut Rights that are, or (under certain
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circumstances specified in the Shawmut Rights Agreement) were, beneficially
owned by any Acquiring Person or Adverse Person will be null and void. However,
Shawmut Rights are not exercisable following the occurrence of either of the
events set forth above until such time as the Shawmut Rights are no longer
redeemable by Shawmut 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) Shawmut is acquired in a
merger or other business combination transaction in which Shawmut is not the
surviving company or in which it is the surviving company but the Shawmut 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 Shawmut's
assets, cash flow or earning power is sold or transferred, each holder of a
Shawmut Right (except Shawmut 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 Shawmut 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, Shawmut may redeem the Shawmut Rights in whole, but not in
part, at a price of $.01 per Shawmut Right (payable in cash, Shawmut Common
Stock or other consideration deemed appropriate by the Shawmut Board). Under
certain circumstances set forth in the Shawmut Rights Agreement, the decision to
redeem the Shawmut Rights will require the concurrence of a majority of the
Continuing Directors. Shawmut may not redeem the Shawmut Rights if the Shawmut
Board has previously declared a person to be an Adverse Person. Immediately upon
the action of the Shawmut Board ordering redemption of the Shawmut Rights, the
Shawmut Rights will terminate and the only right of the holders of Shawmut
Rights will be to receive the $.01 redemption price.
The term "Continuing Directors" means any member of the Board of Directors
of Shawmut who was a member of the Board prior to the date of the Shawmut 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.
Until a Shawmut Right is exercised, the holder thereof, as such, will have
no rights as a shareholder of Shawmut including, without limitation, the right
to vote or to receive dividends.
Other than those provisions relating to the principal economic terms of the
Shawmut Rights, any of the provisions of the Shawmut Rights Agreement may be
amended by the Shawmut Board prior to the Distribution Date. After the
Distribution Date, the provisions of the Shawmut 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 Shawmut Rights, or to shorten or
lengthen any time period under the Shawmut Rights Agreement; provided, however,
that no amendment to adjust the time period governing redemption shall be made
at such time as the Shawmut Rights are not redeemable.
The Shawmut Rights have certain anti-takeover effects. The Shawmut Rights
will cause substantial dilution to a person or group that attempts to acquire
Shawmut in a manner defined as a Triggering Event unless the offer is
conditioned on a substantial number of Shawmut Rights being acquired. The
Shawmut Rights, however, should not affect any prospective offeror willing to
make an offer for all outstanding shares of Shawmut Common Stock and other
voting securities at a fair price and otherwise in the best interests of Shawmut
and its shareholders as determined by the Shawmut Board or affect any
prospective offeror willing to negotiate with the Shawmut Board. The Shawmut
Rights should not interfere with any merger or other business combination
approved by the Shawmut Board since the Shawmut Board 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 Shawmut Rights at the $.01
redemption price.
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SHAWMUT PREFERRED STOCK
The Shawmut Board is authorized in the Shawmut Certificate 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 Shawmut Preferred Stock. The following is a brief description of the
Adjustable Preferred and the 9.30% Cumulative Preferred, the only series of
Shawmut Preferred Stock outstanding. The Adjustable Preferred and the 9.30%
Cumulative Preferred have preference over the Shawmut Common Stock with respect
to the payment of dividends and the distribution of assets in the event of
liquidation, winding up or dissolution of Shawmut.
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 Shawmut Preferred Stock, including the Adjustable Preferred and the 9.30%
Cumulative Preferred are in default, the number of directors of Shawmut will be
increased by two and the holders of all outstanding series of Shawmut 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 Shawmut Certificate 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 Shawmut 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 Shawmut 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 Shawmut, 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 Shawmut 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"). Each Depositary Share represents a one-tenth
interest in a share of 9.30% Cumulative Preferred and is 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 Shawmut, 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 SHAREHOLDER RIGHTS
Upon the consummation of the transactions contemplated in the Merger
Agreement, the stockholders of Peoples will become shareholders of Shawmut.
Since both Shawmut and Peoples are Delaware corporations, Peoples stockholders
who receive Shawmut Common Stock will continue to be subject to the privileges
and restrictions provided in the DGCL. In addition, the rights presently enjoyed
by Peoples' stockholders under the relevant provisions of the Certificate of
Incorporation of Peoples (the "Peoples Certificate") and the By-laws of Peoples
differ in some respects from the rights they would have as shareholders of
Shawmut under the relevant provisions of the Shawmut Certificate and By-laws.
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
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discussed and is qualified in its entirety by reference to the Shawmut
Certificate, the Shawmut By-laws, the Peoples Certificate, the Peoples By-laws,
the DGCL, the Shawmut Rights Agreement and the Peoples Rights Agreement.
ACTION BY WRITTEN CONSENT
Shawmut. 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 Shawmut Certificate does not provide otherwise.
Peoples. The Peoples Certificate provides that stockholders may not act by
written consent. Accordingly, all action by Peoples stockholders must be taken
at a duly called annual or special meeting, while Shawmut shareholders may act
by written consent pursuant to the provisions of DGCL.
SPECIAL MEETINGS OF SHAREHOLDERS
Shawmut. Pursuant to Shawmut's By-laws, special meetings of shareholders
may be called by the Board of Directors, 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 Shawmut Common Stock.
Peoples. Pursuant to the Peoples Certificate, special meetings of
stockholders may be called by the Board of Directors pursuant to a resolution
approved by the affirmative vote of a majority of directors then in office, the
Chairman of the Board or the President; provided, however, that if at the time
such meeting is called there is an Interested Stockholder (defined generally as
any person who beneficially owns 10% or more of the voting stock of Peoples or
is an Affiliate of Peoples and, at any time within the two years immediately
prior to the date in question, owned 10% or more of the voting stock of
Peoples), the affirmative vote of a majority of the Continuing Directors
(defined generally as any member of the Board of Directors who is not an
Interested Stockholder or an Affiliate or Associate of an Interested Stockholder
or any member of the Board of Directors who is a successor to a Continuing
Director) then in office will be required. Peoples stockholders, in such
capacity as stockholders, may not call special meetings, while Shawmut
shareholders may call special meetings under the terms and conditions of the
Shawmut By-laws.
SHAREHOLDER NOMINATIONS AND PROPOSALS FOR BUSINESS
Shawmut. The Shawmut By-laws establish procedures that must be followed
for shareholders to nominate individuals to the Board of Directors of Shawmut or
to propose business at the annual meeting of shareholders. In order to nominate
individuals to the Board of Directors of Shawmut, a shareholder must provide
timely notice of such nomination in writing to the Secretary of Shawmut 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
Shawmut Common Stock beneficially owned by the shareholder giving such notice.
In order to properly propose that certain business come before the annual
meeting of shareholders, a shareholder must provide timely notice in writing to
the Secretary of Shawmut which notice must include a brief description of the
business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting. In addition, the notice must
contain the name, record address, class and number of shares of Shawmut capital
stock beneficially owned by the shareholder giving such notice and any material
interest of the shareholder in such business.
To be timely, notice must be delivered to Shawmut not less than 50 nor more
than 75 days prior to the meeting at which directors are to be elected or the
proposed business is to be conducted, or, if Shawmut 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.
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Peoples. The Peoples By-laws establish similar procedures that must be
followed for shareholders to nominate individuals to the Board of Directors of
Peoples or to propose business at the annual meeting of stockholders. The
informational requirements of the Peoples By-laws for nominations to the Board
of Directors and business proposals are essentially the same as those of
Shawmut; however, with respect to nominations for the Board of Directors, a
Peoples stockholder need not provide a written statement from the nominee. In
addition, under the Peoples By-laws, in order to be timely, notice must be
delivered to Peoples not less than 60 nor more than 150 days prior to the
meeting at which directors are to be elected or the proposed business is to be
conducted, or, if Peoples gives less than 70 days' notice of the meeting, then
notice by the stockholder must be received by the close of business on the 10th
day following the earlier of the date notice of the meeting was mailed or public
disclosure of the meeting was made.
CERTAIN BUSINESS COMBINATIONS
Shawmut. The Shawmut Certificate provides that any "Business Combination"
involving Shawmut and a person who beneficially owns 10% or more of Shawmut's
capital stock (a "Shawmut Related Person") must be approved by the holders of at
least 80% of the outstanding shares of Shawmut voting stock (the "Shawmut Voting
Requirement") voting together as a single class. The Shawmut Voting Requirement
does not apply if (i) the Business Combination is approved by a majority of the
Shawmut Continuing Directors (defined generally to include any person who is
unaffiliated with, and not a representative of, the Shawmut Related Person and
who either was a director immediately prior to the time the Shawmut Related
Person in the Business Combination became such a person or was recommended or
elected to succeed a Shawmut Continuing Director by a majority of the Shawmut
Continuing Directors) or (ii) certain "fair price" (defined generally to mean
that the consideration to be received by shareholders in such Business
Combination shall be at least equal to the higher of, and in the same form as,
the highest per share price paid by the Shawmut Related Person for such person's
acquisition of Shawmut capital stock within the two year period immediately
prior to the first public announcement of the proposal of the Business
Combination or in the transaction in which such person became a Shawmut Related
Person) and other criteria are met. As defined in the Shawmut Certificate, a
Business Combination includes, among other things, (i) any merger or
consolidation of Shawmut with any Shawmut Related Person or affiliate or
associate thereof, (ii) the sale by Shawmut of assets having a fair market value
equal to 10% or more of the total shareholders' equity of Shawmut ("Substantial
Assets") to a Shawmut Related Person or an affiliate or associate thereof, (iii)
the acquisition by Shawmut of Substantial Assets from a Shawmut Related Person
or an affiliate or associate thereof, (iv) the adoption of a plan or proposal
for the liquidation or dissolution of Shawmut proposed by or on behalf of a
Shawmut 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 Shawmut that is beneficially owned by a Shawmut Related Person or
any affiliate or associate thereof and (vi) any agreement or arrangement
providing for any of the foregoing. This provision of the Shawmut Certificate
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 Shawmut Board and all of such directors are Shawmut
Continuing Directors.
Peoples. The Peoples Certificate provides that any "Business Combination"
involving Peoples and a person who beneficially owns 10% or more of Peoples
voting stock (a "Peoples Related Person") must be approved by the holders of at
least two-thirds of the outstanding shares of Peoples voting stock (the "Peoples
Voting Requirement") voting together as a single class. The Peoples Voting
Requirement does not apply if (i) the Business Combination is approved by an
affirmative vote of two-thirds of the Peoples Continuing Directors (defined
generally to include any person who is unaffiliated with, and not a
representative of, the Peoples Related Person and who either was a director
immediately prior to the time the Peoples Related Person in the Business
Combination became such a person or was recommended or elected to succeed a
Peoples Continuing Director by a majority of the Peoples Continuing Directors)
or (ii) certain "fair price" (defined generally to mean, among other things,
that the consideration to be received by stockholders in such Peoples Business
Combination shall be in the same form and kind as the consideration paid by the
Peoples Related Person for Peoples capital stock owned by such person and shall
be at least equal to the highest of the following: the highest per share price
paid by such Peoples Related Person in acquiring any of its holdings of
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Peoples Common Stock within the two year period immediately prior to the first
public announcement of the proposal of the Business Combination (the
"Announcement Date") or in the transaction in which such person became a Peoples
Related Person; the highest Fair Market Value (as defined therein) per share of
Peoples Common Stock on any date during the one-year period prior to and
including the Announcement Date and the price per share equal to (1) the Fair
Market Value per share of common stock on the Announcement Date or on the date
on which the Peoples Related Person became a Peoples Related Person, multiplied
by (2) a fraction (x) the numerator of which is the highest per share price paid
by the Peoples Related Person for any share of common stock acquired by it
within the two-year period immediately prior to and including the Announcement
Date and (y) the denominator of which is the Fair Market Value per share of
common stock on the first day in such two-year period on which the Peoples
Related Person acquired any shares of common stock) and other criteria are met.
As defined in the Peoples Certificate, a Business Combination includes, among
other things, (i) any merger or consolidation of Peoples with any Peoples
Related Person or affiliate thereof, (ii) the sale by Peoples of assets having a
fair market value of $1,000,000 or more ("Substantial Assets") to or with a
Peoples Related Person or an affiliate thereof, (iii) the issuance or transfer
by Peoples of any securities of Peoples to a Peoples Related Person or any
affiliate thereof in exchange for cash, securities or other property (or a
combination thereof) having a fair market value of $1,000,000 or more, (iv) the
adoption of a plan or proposal for the liquidation or dissolution of Peoples
proposed by or on behalf of a Peoples Related Person or an affiliate thereof and
(v) any transaction that has the effect of increasing the proportionate share of
any class of equity security of Peoples that is beneficially owned by a Peoples
Related Person or any affiliate thereof.
RIGHTS PLANS
Shawmut. On February 28, 1989, the Shawmut Board declared a dividend
distribution of one Shawmut Right for each outstanding share of Shawmut Common
Stock to shareholders of record at the close of business on March 13, 1989. For
a description of the Shawmut Rights and the related Shawmut Rights Agreement,
see "DESCRIPTION OF SHAWMUT CAPITAL STOCK -- Rights Plan."
Peoples. On March 28, 1989, the Peoples Board declared a dividend
distribution of one preferred share purchase right (a "Peoples Right") for each
outstanding share of Peoples Common Stock which was payable on April 11, 1989 to
shareholders of record on that date. Subsequent to that date and prior to the
occurrence of a Peoples Distribution Date (as defined below), Peoples Rights
will be deemed to be delivered with each share of Peoples Common Stock issued by
Peoples. Each Peoples Right entitles the registered holder to purchase from
Peoples a unit consisting of one one-hundredth of a share (a "Peoples Unit") of
Series A Junior Participating Preferred Stock, par value $0.10 per share, at a
purchase price of $90 per Unit, subject to adjustment. The description and terms
of the Peoples Rights are summarized below and are set forth in the Rights
Agreement between Peoples and The First National Bank of Boston, as Rights Agent
(the "Peoples Rights Agreement").
At the present time, the Peoples Rights are attached to all Peoples Common
Stock certificates representing outstanding shares, and no separate Peoples
Rights Certificates will be distributed. The Rights will separate from the
Peoples Common Stock and a Peoples Distribution Date will occur upon the earlier
of (i) 10 business days following a public announcement that a person or group
of affiliated or associated persons (a "Peoples Acquiring Person") has acquired
beneficial ownership of 20 percent or more of the outstanding shares of Peoples
Common Stock (the "Peoples Stock Acquisition Date") and (ii) 10 business days
(or such later date as may be determined by the Peoples Board) following the
commencement of, or an announcement of an intention to make, 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 Peoples Common Stock.
The Peoples Rights are not exercisable until the Peoples Distribution Date
and will expire at the close of business on April 11, 1999 (the "Final
Expiration Date") unless the Final Expiration Date is extended or unless the
Peoples Rights are earlier redeemed by Peoples as described below.
In the event that (i) a person becomes a Peoples Acquiring Person (except
pursuant to a tender or exchange offer for all outstanding shares of Peoples
Common Stock at a price and on terms which a majority
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of the unaffiliated Peoples Continuing Directors who are not officers of Peoples
determines to be adequate to and otherwise in the best interests of Peoples and
its shareholders) or (ii) during such time as there is a Peoples Acquiring
Person, there shall be a reclassification of securities or a recapitalization or
reorganization of Peoples or other transaction or series of transactions
involving Peoples which has the effect of increasing by more than 1% the
proportionate share of the outstanding shares of any class of equity securities
of Peoples or any of its subsidiaries beneficially owned by the Peoples
Acquiring Person, proper provision shall be made so that each holder of a
Peoples Right other than Peoples Rights beneficially owned by any Peoples
Acquiring Person, will thereafter have the right to receive upon exercise that
number of shares of Peoples Common Stock having a market value of two times the
exercise price of the Peoples Right (such right being called a "Peoples Flip-In
Right"). Upon occurrence of any of the events giving rise to the exercisability
of the Peoples Flip-In Right, any Peoples Rights that are or (under certain
circumstances specified in the Peoples Rights Agreement) were, beneficially
owned by any Peoples Acquiring Person shall immediately become null and void.
In the event that, at any time following the Peoples Stock Acquisition Date
(i) Peoples is acquired in a merger or other business combination transaction in
which Peoples Common Stock is changed or exchanged or (ii) more than 50 percent
of Peoples' consolidated assets or earning power is sold, each holder of a
Peoples Right (except Peoples Rights which are beneficially held by a Peoples
Acquiring Person) will thereafter have the right to receive, upon exercise,
common stock of the acquiring company (or, in the event there is more than one
acquiring company, the acquiring company receiving the greatest portion of the
assets or earning power transferred) having a value equal to two times the
exercise price of the Peoples Right (such right being called a "Peoples
Flip-Over Right"). Upon occurrence of any of the events giving rise to the
exercisability of the Peoples Flip-Over Right, any Peoples Rights that are or
(under certain circumstances specified in the Peoples Rights Agreement) were,
beneficially owned by any Peoples Acquiring Person shall immediately become null
and void. The events set forth in this paragraph and in the preceding paragraph
are referred to as the "Peoples Triggering Events."
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 20% or more of the outstanding
shares of Peoples Common Stock and prior to the acquisition by such person or
group of 50% or more of the outstanding shares of Peoples Common Stock, the
Peoples Continuing Directors may exchange the Peoples Rights (other than Peoples
Rights owned by such person or group which have become void), in whole or in
part, at an exchange ratio of one share of Peoples Common Stock or Peoples Unit
(or one one-hundredth of a share of a class or series of People's preferred
stock having equivalent rights preferences and privileges) per Peoples Right
(subject to adjustment).
At any time prior to the earlier of (i) a person becoming a Peoples
Acquiring Person or (ii) the expiration of the Peoples Rights, the Peoples Board
may redeem the Peoples Rights in whole, but not in part, at a price of $.01 per
Right (the "Peoples Redemption Price"). Thereafter, the Peoples Rights may only
be redeemed by the Peoples Continuing Directors in whole, but not in part, at
the Peoples Redemption Price, if such redemption is incidental to a merger or
other business combination transaction or series of transactions involving
Peoples but not involving a Peoples Acquiring Person and satisfying certain
other conditions. The redemption of the rights may be made effective at such
time on such basis and with such conditions as the Peoples Board or the Peoples
Continuing Directors, as the case may be, in their sole discretion may
establish. Immediately upon any redemption of the Peoples Rights, the right to
exercise the Peoples Rights will terminate and the only right of the holders of
Peoples Rights will be to receive the Peoples Redemption Price.
The terms of the Peoples Rights may be amended by the Peoples Board without
the consent of the holders of the Peoples Rights, except that from and after
such time as any person becomes a Peoples Acquiring Person no such amendment may
adversely affect the interests of the holders of the Peoples Rights.
Until a Peoples Right is exercised, the holder thereof, as such, will have
no rights as a stockholder of Peoples, including, without limitation, the right
to vote or to receive dividends.
The term "Peoples Continuing Directors" means any member of the Peoples
Board who was a member of the Board on the date of the Peoples Rights Agreement,
and any person who is subsequently elected to the Peoples Board if such person
is recommended or approved by at least one Peoples Continuing Director and a
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majority of the Peoples Continuing Directors in office at the time of such
nomination, but will not include a Peoples Acquiring Person or an affiliate or
associate of any such Person or any representative of any of the foregoing.
The Peoples Rights have certain anti-takeover effects. The Peoples Rights
will cause substantial dilution to a person or group that attempts to acquire
Peoples on terms not approved by the Peoples Board, except pursuant to an offer
conditioned on a substantial number of Peoples Rights being acquired. The
Peoples Rights should not interfere with any merger or other business
combination approved by the Peoples Board since the Peoples Rights may be
redeemed by Peoples at $.01 per Peoples Right prior to the time that a person or
group has acquired beneficial ownership of 20% or more of the outstanding
Peoples Common Stock.
In connection with the execution of the Merger Agreement, Peoples amended
the Peoples Rights Agreement. See "CERTAIN RELATED TRANSACTIONS -- Amendment to
Rights Agreement" above. The Peoples Rights Agreement and the amendment thereto
specifying the terms of the Peoples Rights are incorporated herein by reference.
See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." The foregoing description
of the Peoples Rights does not purport to be complete and is qualified in its
entirety by reference to the Peoples Rights Agreement and the amendment thereto.
Material Differences. The material differences between the Shawmut Rights
Agreement and the Peoples Rights Agreement relate to the Distribution Dates and
the Triggering Events of each respective agreement. In addition to providing for
the same Distribution Dates as in the Peoples Rights Agreement, the Shawmut
Rights Agreement also provides that a Distribution Date will occur if at least a
majority of the unaffiliated Continuing Directors who are not officers of
Shawmut determine that a person is an Adverse Person. Such a determination by
the Shawmut Board also will constitute a Triggering Event under the Shawmut
Rights Agreement. The Peoples Rights may be exchanged for Peoples Common Stock
under certain circumstances following the acquisition of beneficial ownership of
20% or more of the outstanding Peoples Common Stock by any person or group as
long as such person or group has not acquired beneficial ownership of 50% or
more of the outstanding shares of such stock.
In addition, under the Peoples Rights Agreement but not the Shawmut Rights
Agreement, a Peoples Triggering Event will occur if, during the time there is a
Peoples Acquiring Person, there is a reclassification of securities or a
recapitalization or reorganization of Peoples or other transaction or series of
transactions involving Peoples which has the effect of increasing by more than
1% the proportionate share of the outstanding shares of any class of equity
securities of Peoples or any of its subsidiaries beneficially owned by the
Peoples Acquiring Person. For a description of the Shawmut Rights Agreement, See
"DESCRIPTION OF SHAWMUT CAPITAL STOCK -- Rights Plan."
PAYMENT OF DIVIDENDS
Shawmut. It is the policy of the Federal Reserve Board that bank holding
companies should pay cash dividends on common stock only out of the past year's
net income, and only if prospective earnings retention is consistent with the
organization's expected future needs. The policy further provides that bank
holding companies should not maintain a level of cash dividends that undermines
the bank holding company's ability to serve as a source of strength to its
subsidiary banks. Principal sources of revenues for Shawmut 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 Shawmut 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 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 January
1, 1994, SBM could pay dividends of $210.7 million without prior approval. At
January 1, 1994, SBC could pay dividends of
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$113.8 million without prior approval. SBM and SBC had undivided profits of
$469.6 million and $262.9 million, respectively, at December 31, 1993.
Peoples. As permitted by the DGCL, Peoples can pay dividends out of its
capital surplus or its net profits for the fiscal year in which the dividend is
declared and/or the preceding fiscal year, if, as and when declared by the Board
of Directors, consistent with the Federal Reserve Board policy.
In addition, Peoples is a legal entity separate and distinct from Peoples
Bank and its other subsidiaries. The revenues of Peoples result primarily from
dividends paid to it by Peoples Bank. Under applicable Massachusetts law and
FDIC regulations governing the payment of dividends by stock savings banks, such
as Peoples Bank, the board of directors is generally empowered to pay dividends
out of the bank's net profits, to the extent that the board of directors
considers such payment advisable, and the bank remains adequately capitalized.
Massachusetts law also imposes various specific restrictions upon a bank's
payment of dividends, including the requirement that on the date a dividend is
declared the bank's capital and surplus must equal at least 10% of its deposit
liabilities or a sufficient amount must be transferred from net profits to
surplus so that the surplus account shall equal one hundred percent of the
capital stock account prior to the payment of such dividend.
Neither Peoples nor Peoples Bank is subject to any regulatory agreement,
order or directive that would restrict its ability to pay dividends to the
fullest extent otherwise permitted by applicable law and regulation.
REMOVAL OF DIRECTORS
Shawmut. Neither the Shawmut Certificate nor By-laws contains any
provisions regarding removal of directors. Under the DGCL, any director may be
removed, with or without cause, by the holders of a majority of shares then
entitled to vote at an election of directors.
Peoples. The Peoples Certificate provides that any director may be removed
from office, with or without cause, by the affirmative vote of at least
two-thirds of the stockholders entitled to vote thereon or by affirmative vote
of at least two-thirds of the directors then in office, unless at the time of
such removal there is an Interested Stockholder, in which case the affirmative
vote of at least two-thirds of the Continuing Directors then in office will be
required for removal by vote of the Board of Directors.
AMENDMENT OF BY-LAWS
Shawmut. The DGCL provides that after a corporation has received any
payment for any of its stock, the power to adopt, amend or repeal its by-laws
shall be in the stockholders entitled to vote; provided, however, any
corporation may, in its certificate, confer the power to adopt, amend or repeal
by-laws upon the directors. Shawmut's By-laws confer such power upon the Shawmut
Board. The DGCL provides further that the conferring of such power on the
directors shall not divest or limit the powers of the shareholders described
above.
Peoples. The Peoples Certificate confers upon the Peoples Board the power
to adopt, alter, amend and repeal Peoples By-laws. In addition, the Peoples
Certificate provides that any action by its stockholders to adopt, amend or
repeal its by-laws shall require (i) approval by the affirmative vote of a
majority of the directors of Peoples then in office or, if there is an
Interested Stockholder at the time of such action, by the affirmative vote of at
least a majority of the Continuing Directors then in office, (ii) unless waived
by the affirmative vote of the Peoples Board, the timely submission by the
stockholders of written proposals for adopting, altering, amending, changing or
repealing the By-laws and (iii) the affirmative vote by the holders of at least
two-thirds of the total shares of Peoples Common Stock entitled to vote thereon.
AMENDMENT OF CERTIFICATE
Shawmut. The DGCL provides that certain enumerated amendments to a
corporation's certificate of incorporation shall require an affirmative vote of
the majority of stock entitled to vote thereon. The Shawmut Certificate reserves
the right to amend, alter, change or repeal any provision in its certificate and
provides that all rights conferred upon shareholders therein are granted subject
to such reservation.
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Peoples. The Peoples Certificate provides that any amendment to the
Peoples Certificate by the shareholders shall be approved by the Peoples Board
pursuant to a resolution adopted by the affirmative vote of at least two-thirds
of the directors then in office, or by an affirmative vote of two-thirds of the
Continuing Directors then in office, if at any time within the sixty day period
immediately preceding the meeting at which the shareholder vote is to be taken
there is an Interested Stockholder, and thereafter approved by the affirmative
vote by the stockholders of at least two-thirds of the total shares entitled to
vote thereon.
MEETING OF CREDITORS AND/OR SHAREHOLDERS
Shawmut. The Shawmut Certificate provides that, in the event of a proposed
compromise or arrangement between Shawmut and its creditors or shareholders or
any class thereof, upon application to any court of equitable jurisdiction
within the State of Delaware by either Shawmut, any creditor or shareholder
thereof or any trustee or receiver of the corporation appointed pursuant to the
DGCL, such court may order a meeting of the creditors or shareholders or any
class thereof, as the case may be. If the proposed compromise or arrangement
receives the affirmative vote of three-fourths in value of the creditors or the
shareholders or any class thereof, as the case may be, then, if sanctioned by
the court to which the application has been made, such compromise or arrangement
shall be binding on all the creditors or shareholders, or any class thereof, as
the case may be, and the corporation.
Peoples. Neither the Peoples Certificate nor By-laws contains any similar
provision.
STANDARDS FOR EVALUATING TAKEOVER PROPOSALS
Shawmut. Neither the Shawmut Certificate nor By-laws contains any
provisions regarding standards for evaluating takeover proposals.
Peoples. The Peoples Certificate provides that when evaluating any offer
or any proposal of any person to (i) make a tender or exchange offer for any
equity security of Peoples, (ii) merge or consolidate Peoples with another
entity or (iii) purchase or otherwise acquire all or substantially all of the
properties and assets of Peoples, the Peoples Board shall, in connection with
the exercise of its judgment in determining what is in the best interests of
Peoples and its stockholders, give due consideration to all relevant factors,
including without limitation, the social and economic effects of accepting such
offer or proposal on (a) the employees of Peoples and its subsidiaries, (b) the
depositors, borrowers and other customers of any subsidiary, (c) the communities
in which Peoples and its subsidiaries operate and are located and (d) the
ability of Peoples and its subsidiaries to fulfill their objectives under
applicable statutes and regulations.
RESTRICTION ON REPURCHASES OF SHARES
Shawmut. Neither the Shawmut Certificate nor By-laws contains any
provisions restricting repurchases by Shawmut of any of its capital stock.
Peoples. The Peoples Certificate provides that no purchase by Peoples from
any Controlling Person (defined as any person which directly or indirectly is
the beneficial owner of 5% or more of the voting stock of Peoples) of shares of
any stock of Peoples owned by such Controlling Person shall be made at a price
exceeding the average for the twenty trading business days prior to the date of
such purchase of the average of the closing prices of such stock on the
NASDAQ/NMS as published in The Wall Street Journal for each trading business day
and in the absence of such published closing price for any date, the closing
price appearing on the NASDAQ System for that date unless such purchase is
approved by the affirmative vote of not less than a majority of the voting stock
held by Disinterested Shareholders (defined as those holders of the voting stock
who are not Controlling Persons).
This provision of the Peoples Certificate will not apply to (i) any offer
made by Peoples to purchase shares of a class of stock issued by Peoples which
is made on the same terms and conditions to the holders of all shares of such
class of stock of Peoples, (ii) any purchase by Peoples of shares owned by a
Controlling Person occurring after the end of two years following the date of
the last acquisition by such Controlling Person of stock of Peoples, (iii) any
transaction which may be deemed to be a purchase by Peoples of shares
57
<PAGE> 62
of its stock which is made in accordance with the terms of any stock option or
other employee benefit plan now or hereafter maintained by Peoples or (iv) any
purchase by Peoples of shares of its stock at prevailing market prices pursuant
to a stock repurchase program.
58
<PAGE> 63
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
PEOPLES BANCORP OF WORCESTER, INC. AND SUBSIDIARIES
NEW DARTMOUTH BANK
GATEWAY FINANCIAL CORPORATION AND SUBSIDIARIES
COHASSET SAVINGS BANK
WEST NEWTON SAVINGS BANK AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINING BALANCE SHEET
DECEMBER 31, 1993
The following Unaudited Pro Forma Condensed Combining Balance Sheet
presents the combined financial position of Shawmut National Corporation
("Shawmut") and Peoples Bancorp of Worcester, Inc. ("Peoples") as of December
31, 1993, assuming the Merger had occurred as of December 31, 1993. The
Unaudited Pro Forma Condensed Combining Balance Sheet also gives effect to the
pending acquisitions of New Dartmouth Bank ("New Dartmouth") and Gateway
Financial Corporation ("Gateway") and the pending acquisitions of Cohasset
Savings Bank ("Cohasset") and West Newton Savings Bank ("West Newton").(Pro
Forma Pending Acquisitions). Such pro forma information is based on historical
balance sheet data of Shawmut, Peoples, New Dartmouth, Gateway, Cohasset and
West Newton as of that date, giving effect to the proposed mergers of Shawmut
and Peoples, New Dartmouth and Gateway under the pooling of interests method of
accounting and the proposed acquisitions of Cohasset and West Newton accounted
for under the purchase 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 Shawmut, Peoples, New Dartmouth, Gateway, Cohasset and West Newton 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 of Shawmut and Peoples, New Dartmouth and
Gateway and the proposed acquisitions of Cohasset and West Newton had been
consummated on December 31, 1993 or at the beginning of the periods indicated or
which may be obtained in the future.
59
<PAGE> 64
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
PEOPLES BANCORP OF WORCESTER, INC. AND SUBSIDIARIES
NEW DARTMOUTH BANK
GATEWAY FINANCIAL CORPORATION AND SUBSIDIARIES
COHASSET SAVINGS BANK
WEST NEWTON SAVINGS BANK AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINING BALANCE SHEET
DECEMBER 31, 1993
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA PRO FORMA PENDING PRO FORMA
(IN THOUSANDS) SHAWMUT PEOPLES ADJUSTMENTS COMBINED ACQUISITIONS COMBINED
----------- -------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks................ $ 1,435,286 $ 19,406 $ (10,714) $ 1,443,978 $ 23,077 $ 1,467,055
Interest-bearing deposits in other
banks, federal funds sold and
securities purchased under agreements
to resell............................ 8,573 16,168 24,741 69,207 93,948
Trading account securities............. 19,625 19,625 657 20,282
Residential mortgages held for
sale/putback......................... 415,812 415,812 56,638 472,450
Securities
Available for sale at fair value..... 2,596,382 298,289 2,894,671 299,332 3,194,003
Held to maturity..................... 6,394,201 79,001 6,473,202 791,827 7,265,029
Loans, less reserve for loan losses.... 14,751,450 455,158 15,206,608 1,912,262 17,118,870
Premises and equipment................. 307,033 10,033 317,066 17,693 334,759
Foreclosed properties.................. 47,986 2,118 50,104 17,854 67,958
Customers' acceptance liability........ 13,747 13,747 13,747
Other assets........................... 1,254,647 10,966 1,265,613 90,791 1,356,404
----------- -------- ----------- ----------- ------------ -----------
Total assets................... $27,244,742 $891,139 $ (10,714) $28,125,167 $3,279,338 $31,404,505
----------- -------- ----------- ----------- ------------ -----------
----------- -------- ----------- ----------- ------------ -----------
LIABILITIES
Deposits
Demand............................... $ 4,587,156 $ 33,979 $ (10,714) $ 4,610,421 $ 182,057 $ 4,792,478
Savings, money market and
NOW accounts....................... 7,304,708 482,276 7,786,984 1,303,118 9,090,102
Domestic and foreign time............ 3,405,371 261,128 3,666,499 1,479,415 5,145,914
----------- -------- ----------- ----------- ------------ -----------
Total deposits................. 15,297,235 777,383 (10,714) 16,063,904 2,964,590 19,028,494
----------- -------- ----------- ----------- ------------ -----------
Other borrowings....................... 9,187,606 850 9,188,456 101,874 9,290,330
Acceptances outstanding................ 13,747 13,747 13,747
Accrued taxes and other liabilities.... 183,923 6,610 5,000 195,533 37,875 233,408
Notes and debentures................... 758,941 758,941 758,941
----------- -------- ----------- ----------- ------------ -----------
Total liabilities.............. 25,441,452 784,843 (5,714) 26,220,581 3,104,339 29,324,920
----------- -------- ----------- ----------- ------------ -----------
SHAREHOLDERS' EQUITY
Preferred stock
Shawmut.............................. 178,750 178,750 178,750
Common stock
Shawmut.............................. 955 63 to 1,018 to 131 to 1,149 to
85 1,040 151 1,191
Peoples.............................. 334 (334) 0 0
Surplus................................ 1,074,793 39,924 271 to 1,114,988 to 122,216 to 1,237,204 to
249 1,114,966 122,196 1,237,162
Retained earnings...................... 541,455 63,256 (5,000) 599,711 51,325 651,036
Net unrealized gain on securities...... 9,680 2,782 12,462 1,327 13,789
Treasury stock, common stock at cost... (2,343) (2,343) (2,343)
----------- -------- ----------- ----------- ------------ -----------
Total shareholders' equity..... 1,803,290 106,296 (5,000) 1,904,586 174,999 2,079,585
----------- -------- ----------- ----------- ------------ -----------
Total liabilities and
shareholders' equity......... $27,244,742 $891,139 $ (10,714) $28,125,167 $3,279,338 $31,404,505
----------- -------- ----------- ----------- ------------ -----------
----------- -------- ----------- ----------- ------------ -----------
</TABLE>
See accompanying notes to unaudited pro forma condensed financial information.
60
<PAGE> 65
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
PEOPLES BANCORP OF WORCESTER, INC. AND SUBSIDIARIES
NEW DARTMOUTH BANK
GATEWAY FINANCIAL CORPORATION AND SUBSIDIARIES
COHASSET SAVINGS BANK
WEST NEWTON SAVINGS BANK AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINING BALANCE SHEET
PRO FORMA PENDING ACQUISITIONS
DECEMBER 31, 1993
<TABLE>
<CAPTION>
NEW PRO FORMA PRO FORMA PRO FORMA
(IN THOUSANDS) DARTMOUTH ADJUSTMENTS GATEWAY ADJUSTMENTS COHASSET ADJUSTMENTS
---------- ----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks.................... $ 51,142 $ (17,786) $ 44,570 $ $ 1,251 $ (16,900)
Interest-bearing deposits in other banks,
federal funds sold and securities
purchased under agreements to resell...... 20,011 40,000 3,121
Trading account securities................. 657
Residential mortgages held for
sale/putback.............................. 25,837 30,801
Securities
Available for sale, at fair value......... 163,209 111,386 24,737
Held to maturity.......................... 573,635 125,839
Loans, less reserve for loan losses........ 846,202 875,722 44,039
Premises and equipment..................... 5,682 10,212 897
Foreclosed properties...................... 2,349 12,745 2,142
Other assets............................... 35,105 24,564 1,614 3,381
---------- ----------- ---------- ----------- ----------- -----------
Total assets........................ $1,723,172 $ (17,786) $1,275,839 $ $78,458 $ (13,519)
---------- ----------- ---------- ----------- ----------- -----------
---------- ----------- ---------- ----------- ----------- -----------
LIABILITIES
Deposits
Demand.................................... $ 79,688 $ 64,927 $ 1,627
Savings, money market and NOW accounts.... 628,778 559,923 29,850
Domestic and foreign time................. 791,025 547,339 32,295
---------- ---------- -----------
Total deposits............................ 1,499,491 1,172,189 63,772
---------- ---------- -----------
Other borrowings........................... 95,345 5,445 78
Accrued taxes and other liabilities........ 29,762 3,994 1,089
---------- ---------- -----------
Total liabilities................... 1,624,598 1,181,628 64,939
---------- ---------- -----------
SHAREHOLDERS' EQUITY
Preferred stock
New Dartmouth............................. 15,215 $ (15,215)
Common stock
Shawmut................................... 57 to $ 74
77
New Dartmouth............................. 4 (4)
Gateway................................... 138 (138)
Cohasset.................................. 100 $ (100)
West Newton...............................
Surplus.................................... 40,350 (53) to 84,831 (2,912) 7,895 (7,895)
(73)
Retained earnings.......................... 42,970 (2,571) 10,926 5,286 (5,286)
Net unrealized gain on
securities................................ 35 1,292 238 (238)
Treasury stock, common stock at cost....... (2,976) 2,976
---------- ----------- ---------- ----------- ----------- -----------
Total shareholders' equity.......... 98,574 (17,786) 94,211 0 13,519 (13,519)
---------- ----------- ---------- ----------- ----------- -----------
Total liabilities and
shareholders' equity............... $1,723,172 $ (17,786) $1,275,839 $ 0 $78,458 $ (13,519)
---------- ----------- ---------- ----------- ----------- -----------
---------- ----------- ---------- ----------- ----------- -----------
<CAPTION>
PRO FORMA
WEST PRO FORMA PENDING
(IN THOUSANDS) NEWTON ADJUSTMENTS ACQUISITIONS
----------- ----------- ------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks.................... $ 6,200 $ (45,400) $ 23,077
Interest-bearing deposits in other banks,
federal funds sold and securities
purchased under agreements to resell...... 6,075 69,207
Trading account securities................. 657
Residential mortgages held for
sale/putback.............................. 56,638
Securities
Available for sale, at fair value......... 299,332
Held to maturity.......................... 92,353 791,827
Loans, less reserve for loan losses........ 146,299 1,912,262
Premises and equipment..................... 902 17,693
Foreclosed properties...................... 618 17,854
Other assets............................... 4,891 21,236 90,791
----------- ----------- ------------
Total assets........................ $ 257,338 $ (24,164) $3,279,338
----------- ----------- ------------
----------- ----------- ------------
LIABILITIES
Deposits
Demand.................................... $ 35,815 $ 182,057
Savings, money market and NOW accounts.... 84,567 1,303,118
Domestic and foreign time................. 108,756 1,479,415
----------- ------------
Total deposits............................ 229,138 2,964,590
----------- ------------
Other borrowings........................... 1,006 101,874
Accrued taxes and other liabilities........ 3,030 37,875
----------- ------------
Total liabilities................... 233,174 3,104,339
----------- ------------
SHAREHOLDERS' EQUITY
Preferred stock
New Dartmouth............................. 0
Common stock
Shawmut................................... 131 to
151
New Dartmouth............................. 0
Gateway................................... 0
Cohasset.................................. 0
West Newton............................... 172 $ (172) 0
Surplus.................................... 11,734 (11,734) 122,216 to
122,196
Retained earnings.......................... 12,258 (12,258) 51,325
Net unrealized gain on
securities................................ 1,327
Treasury stock, common stock at cost....... 0
----------- ----------- ------------
Total shareholders' equity.......... 24,164 (24,164) 174,999
----------- ----------- ------------
Total liabilities and
shareholders' equity............... $ 257,338 $ (24,164) $3,279,338
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
See accompanying notes to unaudited pro forma condensed financial information.
61
<PAGE> 66
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
PEOPLES BANCORP OF WORCESTER, INC. AND SUBSIDIARIES
NEW DARTMOUTH BANK
GATEWAY FINANCIAL CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
DECEMBER 31, 1993
The following Unaudited Pro Forma Condensed Combined Statement of Income
gives effect to Shawmut's proposed acquisition of Peoples by combining the
results of operations of Shawmut for the three years ended December 31, 1993
(pro forma including Cohasset and West Newton for 1993, as if the proposed
acquisitions of Cohasset and West Newton had occurred on January 1, 1993) with
the results of operations of Peoples for the three years ended December 31, 1993
on a pooling of interests basis, assuming the Merger had occurred as of January
1, 1991. Also presented is the Unaudited Pro Forma Condensed Combined Statement
of Income of Shawmut (pro forma including Cohasset and West Newton for 1993, as
if the proposed acquisitions of Cohasset and West Newton had occurred on January
1, 1993), Peoples, New Dartmouth and Gateway for the same periods (with the
exception of New Dartmouth which is presented for the years ended December 31,
1993 and 1992 and the period from October 10, 1991 (the date operations
commenced) through December 31, 1991). Income before extraordinary credit and
cumulative effect of accounting changes 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 Shawmut, Peoples, New Dartmouth, Gateway, Cohasset and West Newton 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 of Shawmut and Peoples, New Dartmouth and
Gateway and the proposed acquisitions of Cohasset and West Newton had been
consummated on December 31, 1993 or at the beginning of the periods indicated or
which may be obtained in the future.
62
<PAGE> 67
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
PEOPLES BANCORP OF WORCESTER, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1993 1992 1991
------------ ----------- -----------
<S> <C> <C> <C>
INTEREST AND DIVIDEND INCOME
Loans....................................................................... $ 1,098,416 $ 1,097,880 $ 1,351,488
Securities
At lower of aggregate cost or market value................................ 233,468 232,406 40,675
Held to maturity.......................................................... 269,659 237,959 442,295
Residential mortgages held for sale......................................... 29,636 27,312 19,243
Interest-bearing deposits in other banks, federal funds sold
and securities purchased under agreements to resell....................... 10,508 17,946 38,800
Trading account securities.................................................. 1,562 1,564 2,176
------------ ----------- -----------
Total............................................................... 1,643,249 1,615,067 1,894,677
------------ ----------- -----------
INTEREST EXPENSE
Interest on deposits
Savings, money market and NOW accounts.................................... 161,729 233,589 377,611
Domestic and foreign time deposits........................................ 178,324 272,235 479,961
------------ ----------- -----------
Total............................................................... 340,053 505,824 857,572
Other borrowings............................................................ 257,441 187,996 206,052
Notes and debentures........................................................ 72,040 59,321 60,436
------------ ----------- -----------
Total............................................................... 669,534 753,141 1,124,060
------------ ----------- -----------
NET INTEREST INCOME......................................................... 973,715 861,926 770,617
Provision for loan losses................................................... 30,510 191,615 468,360
------------ ----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES........................................................... 943,205 670,311 302,257
------------ ----------- -----------
NONINTEREST INCOME
Customer service fees....................................................... 174,228 174,646 177,598
Trust and agency fees....................................................... 116,845 115,103 112,030
Securities gains, net....................................................... 8,999 90,689 79,911
Other....................................................................... 77,322 106,199 165,600
------------ ----------- -----------
Total............................................................... 377,394 486,637 535,139
------------ ----------- -----------
NONINTEREST EXPENSES
Compensation and benefits................................................... 470,019 442,314 438,965
Occupancy and equipment..................................................... 152,043 161,804 161,556
Foreclosed properties provision and expense................................. 96,766 167,863 110,750
Other....................................................................... 341,462 290,907 284,586
------------ ----------- -----------
Total............................................................... 1,060,290 1,062,888 995,857
------------ ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES, EXTRAORDINARY CREDIT AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGES.............................................. 260,309 94,060 (158,461)
Income taxes................................................................ 2,174 27,739 6,243
------------ ----------- -----------
INCOME (LOSS) BEFORE EXTRAORDINARY CREDIT AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGES........................................................ $ 258,135 $ 66,321 $ (164,704)
------------ ----------- -----------
------------ ----------- -----------
INCOME (LOSS) BEFORE EXTRAORDINARY CREDIT AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGES APPLICABLE TO
COMMON SHARES............................................................. $ 242,666 $ 61,538 $ (166,966)
------------ ----------- -----------
------------ ----------- -----------
INCOME (LOSS) BEFORE EXTRAORDINARY CREDIT AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGES PER COMMON SHARE....................................... $ 2.42 to $ 0.67 to $ (2.12) to
$ 2.37 $ 0.65 $ (2.07)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING.................................. 100,242,954 to 92,275,051 to 78,849,758 to
102,485,559 94,292,150 80,664,033
</TABLE>
See accompanying notes to unaudited pro forma condensed financial information.
63
<PAGE> 68
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
PEOPLES BANCORP OF WORCESTER, INC. AND SUBSIDIARIES
NEW DARTMOUTH BANK
GATEWAY FINANCIAL CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1993 1992 1991
----------- ----------- ----------
<S> <C> <C> <C>
INTEREST AND DIVIDEND INCOME
Loans....................................................................... $ 1,258,000 $ 1,301,564 $1,468,113
Securities
At lower of aggregate cost or market value................................ 243,123 233,766 42,178
Held to maturity.......................................................... 302,243 270,654 454,705
Residential mortgages held for sale......................................... 29,636 27,312 19,243
Interest-bearing deposits in other banks, federal funds sold and
securities purchased under agreements to resell......................... 13,823 21,666 41,655
Trading account securities................................................ 1,562 1,564 2,176
----------- ----------- ----------
Total............................................................... 1,848,387 1,856,526 2,028,070
----------- ----------- ----------
INTEREST EXPENSE
Interest on deposits
Savings, money market and NOW accounts.................................... 192,658 272,351 399,903
Domestic and foreign time deposits........................................ 237,679 349,771 533,146
----------- ----------- ----------
Total............................................................... 430,337 622,122 933,049
Other borrowings............................................................ 262,594 192,554 218,355
Notes and debentures........................................................ 72,040 59,321 60,436
----------- ----------- ----------
Total............................................................... 764,971 873,997 1,211,840
----------- ----------- ----------
NET INTEREST INCOME......................................................... 1,083,416 982,529 816,230
Provision for loan losses................................................... 56,268 242,128 486,441
----------- ----------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES........................................................... 1,027,148 740,401 329,789
----------- ----------- ----------
NONINTEREST INCOME
Customer service fees....................................................... 182,557 183,261 180,500
Trust and agency fees....................................................... 116,845 115,103 112,030
Securities gains, net....................................................... 12,647 94,103 80,063
Other....................................................................... 102,894 128,794 171,260
----------- ----------- ----------
Total............................................................... 414,943 521,261 543,853
----------- ----------- ----------
NONINTEREST EXPENSES
Compensation and benefits................................................... 504,512 474,725 455,250
Occupancy and equipment..................................................... 169,045 179,507 169,251
Foreclosed properties provision and expense................................. 105,556 178,248 120,327
Other....................................................................... 368,893 321,730 297,074
----------- ----------- ----------
Total............................................................... 1,148,006 1,154,210 1,041,902
----------- ----------- ----------
INCOME (LOSS) BEFORE INCOME TAXES, EXTRAORDINARY CREDIT AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGES.............................................. 294,085 107,452 (168,260)
Income taxes................................................................ 8,441 40,898 4,076
----------- ----------- ----------
INCOME (LOSS) BEFORE EXTRAORDINARY CREDIT AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGES........................................................ $ 285,644 $ 66,554 $ (172,336)
----------- ----------- ----------
----------- ----------- ----------
INCOME (LOSS) BEFORE EXTRAORDINARY CREDIT AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGES APPLICABLE TO
COMMON SHARES............................................................. $ 270,175 $ 61,771 $ (174,598)
----------- ----------- ----------
----------- ----------- ----------
INCOME (LOSS) BEFORE EXTRAORDINARY CREDIT AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGES PER COMMON SHARE....................................... $ 2.42 to $ 0.60 to $ (2.07) to
$ 2.34 $ 0.58 $ (2.02)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING.................................. 111,441,799 to 102,126,150 to 84,301,315 to
115,693,415 106,152,261 86,573,198
</TABLE>
See accompanying notes to unaudited pro forma condensed financial information.
64
<PAGE> 69
NOTES TO UNAUDITED PRO FORMA
CONDENSED FINANCIAL INFORMATION
NOTE 1:
Certain reclassifications have been made to the accounts of Peoples, New
Dartmouth, Gateway, Cohasset and West Newton in the accompanying Unaudited Pro
Forma Condensed Combining Balance Sheet and Unaudited Pro Forma Condensed
Combined Statements of Income to conform to Shawmut 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: the cumulative effect of an accounting change due to the adoption of
Statement of Financial Accounting Standards (FAS) No. 109 of $52,800,000 for
Shawmut for the year ended December 31, 1993 and $1,544,000 for Peoples for the
year ended December 31, 1992; the cumulative effect of an accounting change due
to the adoption of FAS No. 112 of $6,600,000 for Shawmut for the year ended
December 31, 1993; extraordinary credits from the utilization of federal tax
loss carry forwards of $18,378,000 for Shawmut for the year ended December 31,
1992; extraordinary charges relating to debt prepayment penalties of $371,000
and $2,250,000 for Gateway for the year ended December 31, 1992 and 1991,
respectively; and the extraordinary credit for a stock distribution of
$1,287,000 for Peoples for the year ended December 31, 1991. Intercompany cash
and due bank balances of $10,714,000 have been eliminated between Shawmut and
Peoples.
NOTE 2:
PEOPLES
The pro forma shareholders' equity accounts of Shawmut and Peoples have
been adjusted in the accompanying Unaudited Pro Forma Condensed Combining
Balance Sheet to reflect the issuance of shares of Shawmut Common Stock in
exchange for all of the outstanding shares of Peoples Common Stock. The number
of shares of Shawmut Common Stock to be issued pursuant to the acquisition of
Peoples (in the range between 6,256,720 and 8,466,938 shares) is based upon the
number of shares of Peoples Common Stock outstanding as of December 31, 1993 and
the exchange ratios specified in the Peoples merger agreement. The difference
between the par value of the Shawmut Common Stock to be issued over the par
value of the Peoples Common Stock outstanding ($271,000 to $249,000 at December
31, 1993) has been credited to surplus.
PRO FORMA PENDING ACQUISITIONS
The pro forma shareholders' equity accounts of Shawmut, as adjusted for
Peoples, have been further adjusted to reflect the issuance of shares of Shawmut
Common Stock in exchange for all of the outstanding shares of New Dartmouth
Common Stock and Gateway Common Stock (Pro Forma Pending Acquisitions). The
number of shares of Shawmut 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 December 31, 1993 and assumes an exchange ratio of 13.438 to
18.174 shares of Shawmut Common Stock for each share of New Dartmouth Common
Stock, assuming consideration of $310.95 per share. The New Dartmouth merger
agreement provides for additional per share consideration based on 177 percent
of New Dartmouth's earnings from October 1, 1993 to the closing date of the
merger, subject to certain potential adjustments. Any additional shares of
Shawmut Common Stock to be issued pursuant to the New Dartmouth transaction will
have a de minimis effect on the unaudited pro forma financial information for
all periods presented. The excess of the par value of the Shawmut Common Stock
to be issued over the par value of the New Dartmouth Common Stock outstanding
($53,000 to $73,000 at December 31, 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 New Dartmouth merger
at the December 31, 1993 redemption price of $104.58 per share ($17,786,000).
The excess ($2,571,000) of redemption price over the stated value of New
Dartmouth Preferred Stock ($15,215,000) has been charged to retained earnings.
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<PAGE> 70
The number of shares of Shawmut Common Stock to be issued pursuant to the
acquisition of Gateway (7,414,475 shares) is based upon the number of shares of
Gateway Common Stock outstanding as of December 31, 1993 and the exchange ratio
specified in the Gateway merger agreement. The difference between the par value
of the Shawmut Common Stock to be issued over the par value of the Gateway
Common Stock outstanding ($64,000 at December 31, 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.
The shareholders' equity accounts of Cohasset and West Newton have been
eliminated and reflect the acquisition of Cohasset and West Newton by Shawmut
for an aggregate purchase price of $16,900,000 and $45,400,000, respectively.
The excess of the purchase price over the recorded shareholders' equity accounts
at December 31, 1993 has been reflected as goodwill (other assets) in the
accompanying Unaudited Pro Forma Condensed Combining Balance Sheet. No goodwill
amortization has been reflected in the accompanying Unaudited Pro Forma
Condensed Combined Statement of Income as the annual amount of amortization is
de minimis.
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.
PEOPLES
Shares of Peoples Common Stock have been adjusted to the equivalent shares
of Shawmut Common Stock for each period assuming an exchange ratio of 1.874 to
2.536 shares of Shawmut Common Stock for each share of Peoples Common Stock.
PRO FORMA PENDING ACQUISITIONS
Shares of New Dartmouth Common Stock have been adjusted to the equivalent
shares of Shawmut Common Stock for each period assuming an exchange ratio of
13.438 to 18.174 shares of Shawmut Common Stock for each share of New Dartmouth
Common Stock, assuming consideration of $310.95 per share (See Note 2 for
further discussion). Shares of Gateway Common Stock have been adjusted to the
equivalent shares of Shawmut Common Stock for each period assuming an exchange
ratio of 0.559 shares of Shawmut 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 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 Shawmut, 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.
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<PAGE> 71
MARKET PRICES
The Shawmut Common Stock is listed and traded on the NYSE under the symbol
"SNC" and the Peoples Common Stock is traded through the NASDAQ/NMS under the
symbol "PEBW."
The following table sets forth, for the periods indicated, the high and low
sales prices per share for the Shawmut Common Stock as reported on the NYSE and
the high and low sales prices per share of the Peoples Common Stock as reported
by the NASDAQ/NMS. The information with respect to NASDAQ/NMS quotations was
obtained from the National Association of Securities Dealers, Inc. and reflects
interdealer prices, without retail markup, markdown or commissions and may not
represent actual transactions.
<TABLE>
<CAPTION>
SHAWMUT PEOPLES
COMMON STOCK COMMON STOCK
----------------- -----------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
1992............................................ $19.50 $ 8.88 $30.25 $21.75
1993............................................ 26.38 17.88 48.50 26.00
1994 First Quarter (through March 29, 1994)..... 24.00 19.75 49.50 46.75
</TABLE>
On August 25, 1993, the last business day preceding public announcement of
the execution of the Merger Agreement, the last reported sale price per share of
Shawmut Common Stock was $24.00 and the last reported sale price for the Peoples
Common Stock as reported on the NASDAQ/NMS was $38.50. On March 29, 1994, the
last practicable date prior to the mailing of this Proxy Statement/Prospectus,
the closing sales price per share of Shawmut Common Stock was $20.38 and the
closing bid price for the Peoples Common Stock as reported on the NASDAQ/NMS was
$47.25.
Stockholders are advised to obtain current market quotations for Shawmut
Common Stock. No assurance can be given as to the market price of Shawmut Common
Stock at or after the effective time of the Merger. It is expected that the
market price of Shawmut 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 Peoples
stockholders in the Merger is fixed so long as the Average Closing Price of the
Shawmut Common Stock during the pricing period is at least $20.506 per share and
is no greater than $27.744 per share, and because the market price of the
Shawmut Common Stock is subject to fluctuation, the number of shares of Shawmut
Common Stock that holders of Peoples Common Stock would receive in the Merger
may increase or decrease prior to the Merger.
On March 28, 1994, there were approximately 29,971 record holders of
Shawmut Common Stock.
LEGAL OPINIONS
The legality of the shares of Shawmut 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.
PROPOSALS OF STOCKHOLDERS
Peoples will hold an Annual Meeting in 1994 only if the Merger is not
consummated on or before August 31, 1994 (or such later date as shall be agreed
to by Peoples and Shawmut).
In the event that Peoples holds its 1994 Annual Meeting, Peoples will, in a
timely manner, inform its stockholders of the date upon which such meeting will
be held and the date by which proposals from stockholders are required to be
received. Stockholders submitting a proposal must meet the requirements
specified in Rule 14a-8 under the Exchange Act.
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<PAGE> 72
EXPERTS
The consolidated financial statements of Shawmut incorporated in this Proxy
Statement/Prospectus by reference to Shawmut's Annual Report on Form 10-K for
the year ended December 31, 1993, have been so incorporated in reliance on 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 Peoples incorporated herein by
reference to the Peoples Annual Report on Form 10-K for the fiscal year ended
December 31, 1992 have been audited by Ernst & Young, independent accountants,
and have been so included in reliance upon the report of Ernst & Young set forth
herein, given on the authority of such firm as experts in auditing and
accounting. The consolidated financial statements of Peoples for the years ended
December 31, 1991, 1992 and 1993, incorporated herein by reference to the
Shawmut Current Report on Form 8-K, dated March 28, 1994, have been audited by
Ernst & Young, independent accountants, and have been so incorporated in
reliance on the report of Ernst & Young, independent accountants, set forth
herein, given on the authority of said firm as experts in auditing and
accounting.
The consolidated financial statements of New Dartmouth incorporated herein
by reference to the Shawmut Current Report on Form 8-K, dated March 28, 1994,
have been audited by Price Waterhouse, independent accountants, and have been so
incorporated in reliance on the report of Price Waterhouse, independent
accountants, set forth herein, given on the authority of said firm as experts in
auditing and accounting.
The consolidated financial statements of Gateway at December 31, 1993, and
for the year then ended, have been audited by Coopers & Lybrand, independent
auditors, and for each of the two years in the period ended December 31, 1992,
by Ernst & Young, independent auditors, as set forth in their respective reports
thereon, incorporated herein by reference to the Shawmut Current Report on Form
8-K, dated March 28, 1994, have been so included in reliance upon such reports
given on the authority of said firms as experts in auditing and accounting.
The consolidated financial statements of Cohasset incorporated herein by
reference to the Shawmut Current Report on Form 8-K, dated March 28, 1994, have
been audited by Wolf & Company, P.C., independent accountants, and have been so
incorporated in reliance on the report of Wolf & Company, P.C., independent
accountants, set forth herein, given on the authority of said firm as experts in
auditing and accounting.
The consolidated financial statements of West Newton incorporated herein by
reference to the Shawmut Current Report on Form 8-K, dated March 28, 1994, have
been audited by Wolf & Company, P.C., independent accountants, and have been so
incorporated in reliance on the report of Wolf & Company, P.C., independent
accountants, set forth herein, given on the authority of said firm as experts in
auditing and accounting.
Representatives of Ernst & Young are expected to be present at the Special
Meeting. These representatives will have an opportunity to make statements if
they desire and will be available to respond to appropriate questions.
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<PAGE> 73
ANNEX A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 26, 1993, by and among
Shawmut National Corporation, a Delaware corporation ("Parent"), Shawmut Service
Corporation, a Delaware corporation and a wholly owned subsidiary of Parent
("Merger Sub"), and Peoples Bancorp of Worcester, Inc., a Delaware corporation
("Target"). (Target and Merger Sub are herein sometimes collectively referred to
herein as the "Constituent Corporations".)
WHEREAS, the Boards of Directors of Parent and Target have determined that
it is in the best interests of their respective companies and their shareholders
to consummate the business combination transaction provided for herein in which
Target will, subject to the terms and conditions set forth herein, merge (the
"Merger") with and into Merger Sub; and
WHEREAS, as soon as practicable after the execution and delivery of this
Agreement, Shawmut Bank, N.A., a national banking association and an indirect
wholly owned subsidiary of Parent ("Massachusetts Bank", and sometimes referred
to herein as the "Surviving Bank"), and Peoples Savings Bank, a Massachusetts
savings bank and a wholly owned subsidiary of Target ("Target Bank"), will enter
into a Subsidiary Agreement and Plan of Merger (the "Bank Merger Agreement")
providing for the merger (the "Subsidiary Merger"), of Target Bank with and into
Massachusetts Bank, and it is intended that the Subsidiary Merger be consummated
immediately following the consummation of the Merger; and
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.01. The Merger. Subject to the terms and conditions of this Agreement,
in accordance with the Delaware General Corporation Law (the "DGCL"), at the
Effective Time (as defined in Section 1.02 hereof), Target shall merge with and
into Merger Sub. Merger Sub shall be the surviving corporation (hereinafter
sometimes called the "Surviving Corporation") in the Merger, and shall continue
its corporate existence under the laws of the State of Delaware as a wholly
owned subsidiary of Parent. The name of the Surviving Corporation shall continue
to be Shawmut Service Corporation. Upon consummation of the Merger, the separate
corporate existence of Target shall terminate.
1.02. Effective Time. The Merger shall become effective as set forth in
the certificate of merger (the "Certificate of Merger") which shall be filed
with the Secretary of State of the State of Delaware (the "Secretary") on the
Closing Date (as defined in Section 9.01 hereof). The term "Effective Time"
shall be the date and time when the Merger becomes effective, as set forth in
the Certificate of Merger.
1.03. Effects of the Merger. At and after the Effective Time, the Merger
shall have the effects set forth in Sections 259 and 261 of the DGCL.
1.04. Conversion of Target Common Stock.
(a) At the Effective Time, subject to Section 2.02(e) hereof, each share of
the common stock, par value $0.10 per share, of Target (the "Target Common
Stock") issued and outstanding immediately prior to the Effective Time (other
than shares of Target Common Stock held (x) in Target's treasury or (y) directly
or indirectly by Parent or Target or any of their respective Subsidiaries (as
defined below) (except for Trust Account Shares and DPC shares, as such terms
are defined in Section 1.04(b) hereof)) shall, by virtue of this Agreement and
without any action on the part of the holder thereof, be converted into and
exchangeable for
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the number of shares (the "Exchange Ratio") of the common stock, par value $.01
per share, of Parent ("Parent Common Stock") (together with the number of Parent
Rights (as defined in Section 4.02 hereof) associated therewith), rounded to the
nearest thousandth of a share, determined by dividing $52 by the Average Closing
Price (as defined below); provided, that (I) if the Average Closing Price is
equal to or greater than $27.744, the Exchange Ratio shall be 1.874 (the
"Minimum Exchange Ratio"); provided, however, that Target may waive this Section
1.04(a)(I), and (II) if the Average Closing Price is equal to or less than
$20.506, the Exchange Ratio shall be 2.536 (the "Maximum Exchange Ratio");
provided, however, that Parent may waive this Section 1.04(a)(II). For purposes
of this Article II, "Average Closing Price" means the average closing sale price
per share of Parent Common Stock on the New York Stock Exchange ("NYSE") (as
reported by The Wall Street Journal or, if not reported thereby, another
authoritative source), for the 20 NYSE trading days ending on the fifth business
day prior to the date on which the last of the Requisite Regulatory Approvals
(as defined below) is obtained. All of the shares of Target Common Stock
converted into Parent Common Stock pursuant to this Article I shall no longer be
outstanding and shall automatically be cancelled and shall cease to exist, and
each certificate (each a "Certificate") previously representing any such shares
of Target Common Stock shall thereafter represent the right to receive (i) the
number of whole shares of Parent Common Stock and (ii) cash in lieu of
fractional shares into which the shares of Target Common Stock represented by
such Certificate have been converted pursuant to this Section 1.04(a) and
Section 2.02(e) hereof. Certificates previously representing shares of Target
Common Stock shall be exchanged for certificates representing whole shares of
Parent Common Stock and cash in lieu of fractional shares issued in
consideration therefor upon the surrender of such Certificates in accordance
with Section 2.02 hereof, without any interest thereon. If prior to the
Effective Time Parent should split or combine its common stock, or pay a
dividend or other distribution in such common stock, then the Exchange Ratio,
Minimum Exchange Ratio and Maximum Exchange Ratio shall be appropriately
adjusted to reflect such split, combination, dividend or distribution.
(b) At the Effective Time, all shares of Target Common Stock that are owned
by Target as treasury stock and all shares of Target Common Stock that are owned
directly or indirectly by Parent or Target or any of their respective
Subsidiaries (other than shares of Target Common Stock held directly or
indirectly in trust accounts, managed accounts and the like or otherwise held in
a fiduciary capacity that are beneficially owned by third parties (any such
shares, and shares of Parent Common Stock which are similarly held, whether held
directly or indirectly by Parent or Target, as the case may be, being referred
to herein as "Trust Account Shares") and other than any shares of Target Common
Stock held by Parent or Target or any of their respective Subsidiaries in
respect of a debt previously contracted (any such shares of Target Common Stock,
and shares of Parent Common Stock which are similarly held, whether held
directly or indirectly by Parent or Target, being referred to herein as "DPC
Shares")) shall be cancelled and shall cease to exist and no stock of Parent or
other consideration shall be delivered in exchange therefor. All shares of
Parent Common Stock that are owned by Target or any of its Subsidiaries (other
than Trust Account Shares and DPC Shares) shall become treasury stock of Parent.
1.05. Conversion of Merger Sub Common Stock. Each of the 1,000 shares of
the common stock, par value $1.00 per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding after the Merger as shares of the Surviving Corporation, which shall
thereafter constitute all of the issued and outstanding shares of the Surviving
Corporation.
1.06. Options and Rights. At the Effective Time, each option granted by
Target to purchase shares of Target Common Stock which is outstanding and
unexercised immediately prior thereto shall be converted automatically into an
option to purchase shares of Parent Common Stock in an amount and at an exercise
price determined as provided below (and otherwise subject to the terms
(including those providing for accelerated vesting) of the Target Stock Option
Plan (the "Target Stock Plan")):
(1) The number of shares of Parent Common Stock to be subject to the
new option shall be equal to the product of the number of shares of Target
Common Stock subject to the original option and the Exchange Ratio,
provided that any fractional shares of Parent Common Stock resulting from
such multiplication shall be rounded down to the nearest share; and
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(2) The exercise price per share of Parent Common Stock under the new
option shall be equal to the exercise price per share of Target Common
Stock under the original option divided by the Exchange Ratio, provided
that such exercise price shall be rounded up to the nearest cent.
The adjustment provided herein with respect to any options which are "incentive
stock options" (as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code")) shall be and is intended to be effected in a manner
which is consistent with Section 424(a) of the Code. The duration and other
terms of the new option shall be the same as the original option, except that
all references to Target shall be deemed to be references to Parent.
1.07. Certificate of Incorporation. At the Effective Time, the Certificate
of Incorporation of Merger Sub, as in effect at the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation.
1.08. By-Laws. At the Effective Time, the By-Laws of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the By-Laws of the
Surviving Corporation until thereafter amended in accordance with applicable
law.
1.09. Directors and Officers. The directors and officers of Merger Sub
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and By-Laws of the Surviving Corporation until
their respective successors are duly elected or appointed and qualified.
1.10. Tax Consequences. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Code, and that this
Agreement shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code.
ARTICLE II
EXCHANGE OF SHARES
2.01. Parent to Make Shares Available. At or prior to the Effective Time,
Parent shall deposit, or shall cause to be deposited, with a bank or trust
company selected by Parent (which may be a Subsidiary of Parent) (the "Exchange
Agent"), for the benefit of the holders of Certificates, for exchange in
accordance with this Article II, certificates representing the shares of Parent
Common Stock and the cash in lieu of fractional shares (such cash and
certificates for shares of Parent Common Stock, together with any dividends or
distributions with respect thereto, being hereinafter referred to as the
"Exchange Fund") to be issued pursuant to Section 1.04 and paid pursuant to
Section 2.02(a) in exchange for outstanding shares of Target Common Stock.
2.02. Exchange of Shares. (a) As soon as practicable after the Effective
Time, and in no event later than three business days thereafter, the Exchange
Agent shall mail to each holder of record of a Certificate or Certificates a
form letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon delivery of
the Certificates to the Exchange Agent) and instructions for use in effecting
the surrender of the Certificates in exchange for certificates representing the
shares of Parent Common Stock and the cash in lieu of fractional shares into
which the shares of Target Common Stock represented by such Certificate or
Certificates shall have been converted pursuant to this Agreement. Target shall
have the right to review both the letter of transmittal and the instructions.
Upon surrender of a Certificate for exchange and 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 Parent Common Stock to
which such holder of Target Common Stock shall have become entitled pursuant to
the provisions of Article I hereof and (y) a check representing the amount of
cash in lieu of fractional shares, if any, which such holder has the right to
receive in respect of the Certificate surrendered pursuant to the provisions of
this Article II, and the Certificate so surrendered shall forthwith be
cancelled. No interest will be paid or accrued on the cash in lieu of fractional
shares and unpaid dividends and distributions, if any, payable to holders of
Certificates.
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(b) No dividends or other distributions declared after the Effective Time
with respect to Parent Common Stock and payable to the holders of record thereof
shall be paid to the holder of any unsurrendered Certificate 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 Parent Common Stock represented by such
Certificate. No holder of an unsurrendered Certificate shall be entitled, until
the surrender of such Certificate, to vote the shares of Parent Common Stock
into which his Target Common Stock shall have been converted.
(c) If any certificate representing shares of Parent Common Stock is to be
issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, 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 Parent 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 satisfaction of the Exchange
Agent that such tax has been paid or is not payable.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of Target of the shares of Target Common Stock which were issued
and outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates representing such shares are presented for transfer to the
Exchange Agent, they shall be cancelled and exchanged for certificates
representing shares of Parent Common Stock as provided in this Article II.
(e) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of Parent Common Stock
shall be issued upon the surrender for exchange of Certificates, no dividend or
distribution with respect to Parent Common Stock shall be payable on or with
respect to any fractional share, and such fractional share interests shall not
entitle the owner thereof to vote or to any other rights of a shareholder of
Target. In lieu of the issuance of any such fractional share, Parent shall pay
to each former stockholder of Target who otherwise would be entitled to receive
a fractional share of Parent Common Stock an amount in cash determined by
multiplying (i) the average of the closing sale prices of Parent Common Stock on
the New York Stock Exchange as reported by The Wall Street Journal for the five
trading days immediately preceding the date of the Effective Time by (ii) the
fraction of a share of Parent Common Stock to which such holder would otherwise
be entitled to receive pursuant to Section 1.04 hereof.
(f) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of Target for twelve months after the Effective Time shall be paid
to Parent. Any stockholders of Target who have not theretofore complied with
this Article II shall thereafter look only to Parent for payment of their shares
of Parent Common Stock, cash in lieu of fractional shares and unpaid dividends
and distributions on the Parent Common Stock deliverable in respect of each
share of Target Common Stock such stockholder holds as determined pursuant to
this Agreement, in each case, without any interest thereon. Notwithstanding the
foregoing, none of Parent, Target, the Exchange Agent or any other person shall
be liable to any former holder of shares of Target Common Stock for any amount
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(g) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by Parent, the
posting by such person of a bond in such amount as Parent may direct as
indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the shares of Parent Common Stock and cash in lieu of
fractional shares deliverable in respect thereof pursuant to this Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TARGET
Target hereby represents and warrants to Parent and Merger Sub as follows:
3.01. Corporate Organization. (a) Target is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Target has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted,
and is duly licensed or qualified to do business 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, except where the failure to be so licensed or qualified
would not have a Material Adverse Effect (as defined below) on Target. As used
in this Agreement, the term "Material Adverse Effect" means, with respect to
Parent, Target or the Surviving Corporation, as the case may be, a material
adverse effect on the business, properties, assets, liabilities, results of
operations or financial condition of such party and its Subsidiaries taken as a
whole, other than any such effect attributable to or resulting from general
economic conditions. As used in this Agreement, the word "Subsidiary" when used
with respect to any party means any corporation, partnership or other
organization, whether incorporated or unincorporated, which is consolidated with
such party for financial reporting purposes. Target is duly registered as a bank
holding company under the Bank Holding Company Act of 1956, as amended (the "BHC
Act"). The Certificate of Incorporation and By-laws of Target, copies of which
have previously been delivered to Parent, are true, complete and correct copies
of such documents as in effect as of the date of this Agreement.
(b) Target Bank is a savings bank duly organized, validly existing and in
good standing under the laws of the Commonwealth of Massachusetts. The deposit
accounts of Target Bank are insured by the Federal Deposit Insurance Corporation
(the "FDIC") through the Bank Insurance Fund (the "BIF") and by the Depositors
Insurance Fund to the fullest extent permitted by law, and all premiums and
assessments required in connection therewith have been paid by Target Bank. Each
of Target's other Subsidiaries that is a "Significant Subsidiary" (each a
"Significant Subsidiary" and together the "Significant Subsidiaries") as such
term is defined in Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC") is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization. Each of Target's Significant Subsidiaries has the corporate power
and authority to own or lease all of its properties and assets and to carry on
its business as it is now being conducted and is duly licensed or qualified to
do business in each jurisdiction in which the nature of the business conducted
by it or the character or the location of the properties and assets owned or
leased by it makes such licensing or qualification necessary, except where the
failure to be so licensed or qualified would not have a Material Adverse Effect
on Target. The articles of incorporation, By-laws and similar governing
documents of each Significant Subsidiary of Target, copies of which have
previously been delivered to Parent, are true, complete and correct copies of
such documents as in effect as of the date of this Agreement.
(c) The minute books of Target and each of its Significant Subsidiaries
contain true, complete and accurate records in all material respects of all
meetings and other corporate actions held or taken since December 31, 1990 of
their respective stockholders and Boards of Directors (including committees of
their respective Boards of Directors).
3.02. Capitalization. (a) The authorized capital stock of Target consists
of 10,000,000 shares of Target Common Stock and 1,000,000 shares of preferred
stock, par value $.10 per share (the "Target Preferred Stock"). As of the date
of this Agreement, there are (x) 3,309,990 shares of Target Common Stock issued
and outstanding and no shares of Target Common Stock held in Target's treasury,
(y) no shares of Target Common Stock reserved for issuance upon exercise of
outstanding stock options or otherwise except for (i) 23,387 shares of Target
Common Stock reserved for issuance pursuant to the Target Stock Plan and (ii)
660,000 shares of Target Common Stock reserved for issuance upon exercise of the
option issued to Parent pursuant to the Stock Option Agreement, dated August 26,
1993, between Parent and Target (the "Option Agreement") and (z) no shares of
Target Preferred Stock issued or outstanding, held in Target's treasury or
reserved for issuance upon exercise of outstanding stock options or otherwise,
except for 90,000 shares of Target Series A Junior Participating Preferred Stock
reserved for issuance upon exercise of the rights
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(the "Target Rights") distributed to holders of Target Common Stock pursuant to
the Rights Agreement, dated as of March 28, 1989, between Target and The First
National Bank of Boston, as Rights Agent (the "Target Rights Agreement"). All of
the issued and outstanding shares of Target Common Stock have been duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. Except as referred to above or reflected in Section 3.02(a) of the
Disclosure Schedule which is being delivered to Parent concurrently herewith
(the "Target Disclosure Schedule"), and except for the Option Agreement and the
Target Rights Agreement, Target does not have and is not bound by any
outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character calling for the purchase or issuance of any shares of Target
Common Stock or Target Preferred Stock or any other equity security of Target or
any securities representing the right to purchase or otherwise receive any
shares of Target Common Stock or any other equity security of Target. The names
of the optionees, the date of each option to purchase Target Common Stock
granted, the number of shares subject to each such option, the expiration date
of each such option, and the price at which each such option may be exercised
under the Target Stock Plan are set forth in Section 3.02(a) of the Target
Disclosure Schedule.
(b) Section 3.02(b) of the Target Disclosure Schedule sets forth a true and
correct list of all of the Target Subsidiaries as of the date of this Agreement.
Except as set forth on Section 3.02(b) of the Target Disclosure Schedule, Target
owns, directly or indirectly, all of the issued and outstanding shares of
capital stock of each of the Target 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, with no personal liability attaching to the ownership
thereof. No Target 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. Assuming compliance by Parent with Section 1.06 hereof, at the
Effective Time, there will not be any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character by which Target or
any of its Subsidiaries will be bound calling for the purchase or issuance of
any shares of the capital stock of Target or any of its Subsidiaries.
3.03. Authority; No Violation. (a) Target 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 Target. The Board of Directors of
Target has directed that this Agreement and the transactions contemplated hereby
be submitted to Target's stockholders for approval at a meeting of such
stockholders and, except for the adoption of this Agreement by the requisite
vote of Target's stockholders, no other corporate proceedings on the part of
Target are necessary to approve this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Target and (assuming due authorization, execution and
delivery by Parent and Merger Sub) constitutes a valid and binding obligation of
Target, enforceable against Target in accordance with its terms, except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
(b) Target Bank has full corporate power and authority to execute and
deliver the Bank Merger Agreement and to consummate the transactions
contemplated thereby. The execution and delivery of the Bank Merger Agreement
and the consummation of the transactions contemplated thereby will be duly and
validly approved by the Board of Directors of the Target Bank. Upon the due and
valid approval of the Bank Merger Agreement by Target as the sole stockholder of
Target Bank and by the Board of Directors of Target Bank, no other corporate
proceedings on the part of Target Bank will be necessary to consummate the
transactions contemplated thereby. The Bank Merger Agreement, upon execution and
delivery by Target Bank, will be duly and validly executed and delivered by
Target Bank and will (assuming due authorization, execution and delivery by
Massachusetts Bank) constitute a valid and binding obligation of Target Bank,
enforceable against Target Bank in accordance with its terms, except as
enforcement may be limited by
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general principles of equity whether applied in a court of law or a court of
equity and by bankruptcy, insolvency and similar laws affecting creditors'
rights and remedies generally.
(c) Except as set forth in Section 3.03(c) of the Target Disclosure
Schedule, neither the execution and delivery of this Agreement by Target or the
Bank Merger Agreement by Target Bank, nor the consummation by Target or Target
Bank, as the case may be, of the transactions contemplated hereby or thereby,
nor compliance by Target or Target Bank with any of the terms or provisions
hereof or thereof, will (i) violate any provision of the Certificate of
Incorporation or By-Laws of Target or the certificate of incorporation, by-laws
or similar governing documents of any of its Significant Subsidiaries or (ii)
assuming that the consents and approvals referred to in Section 3.04 hereof are
duly obtained, (x) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to Target or any of its
Significant Subsidiaries, or any of their respective properties or assets, or
(y) violate, conflict with, result in a breach of any provision 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 Target or any of its Significant 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 Target or
any of its Significant 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, would not have or be reasonably likely
to have a Material Adverse Effect on Target.
3.04. Consents and Approvals. Except for (a) the filing of applications
and notices, as applicable, with the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") under the BHC Act, the Bank Merger Act and
the Federal Reserve Act (the "FRA") and approval of such applications and
notices, (b) the filing of applications with the Office of the Comptroller of
the Currency (the "OCC") under the Bank Merger Act and approval of such
applications, (c) the filing of an application with the Board of Bank
Incorporation of the Commonwealth of Massachusetts (the "Massachusetts Board")
(the "State Banking Approval"), (d) the filing with the SEC of a proxy statement
in definitive form relating to the meeting of Target's stockholders to be held
in connection with this Agreement and the transactions contemplated hereby (the
"Proxy Statement"), (e) the approval of this Agreement by the requisite vote of
the stockholders of Target, (f) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware (the "Secretary") pursuant to the
DGCL, (g) the filings required by the Bank Merger Agreement, and (h) such
filings, authorizations or approvals as may be set forth in Section 3.04 of the
Target Disclosure Schedule, 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 third party are necessary in connection with (1) the execution and delivery
by Target of this Agreement, (2) the consummation by Target of the Merger and
the other transactions contemplated hereby, (3) the execution and delivery by
Target Bank of the Bank Merger Agreement, and (4) the consummation by Target
Bank of the Subsidiary Merger and the transactions contemplated thereby.
3.05. Loan Portfolio; Reports. (a) Except as set forth in Section 3.05(a)
of the Disclosure Schedule which Target shall deliver to Parent no later than 15
days after the date of this Agreement (the "Second Target Schedule"), neither
Target nor any of its Subsidiaries is a party to any written or oral (i) loan
agreement, note or borrowing arrangement (including, without limitation, leases,
credit enhancements, commitments, guarantees and interest-bearing assets)
(collectively, "Loans"), other than Loans the unpaid principal balance of which
does not exceed $100,000, under the terms of which the obligor is, as of the
date of this Agreement, over 90 days delinquent in payment of principal or
interest or in default of any other provision, or (ii) Loan with any director,
executive officer or ten percent stockholder of Target or any of its
Subsidiaries, or to the knowledge of Target, any person, corporation or
enterprise controlling, controlled by or under common control with any of the
foregoing. Section 3.05(a) of the Second Target Schedule sets forth (i) all of
the Loans in original principal amount in excess of $100,000 of Target or any of
its Subsidiaries that as of the date of this Agreement are classified by any
bank examiner (whether regulatory or internal) as "Other Loans
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Specially Mentioned", "Special Mention", "Substandard", "Doubtful", "Loss",
"Classified", "Criticized", "Credit Risk Assets", "Concerned Loans", "Watch
List" or words of similar import, together with the principal amount of and
accrued and unpaid interest on each such Loan and the identity of the borrower
thereunder, and (ii) by category of Loan (i.e., commercial, consumer, etc.), all
of the other Loans of Target and its Subsidiaries that as of the date of this
Agreement are classified as such, together with the aggregate principal amount
of and accrued and unpaid interest on such Loans by category. Target shall
promptly inform Parent in writing of any Loan that becomes classified in the
manner described in the previous sentence, or any Loan the classification of
which is changed, at any time after the date of this Agreement.
(b) Target and each of its Significant Subsidiaries have timely filed all
material reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file since
December 31, 1990 with (i) the Federal Reserve Board, (ii) the FDIC, (iii) the
Massachusetts Commissioner of Banks and any other state banking commissions or
any other state regulatory authority (each a "State Regulator") and (iv) any
other self-regulatory organization ("SRO") (collectively "Regulatory Agencies"),
and all other material reports and statements required to be filed by them since
December 31, 1990, including, without limitation, any report or statement
required to be filed pursuant to the laws, rules or regulations of the United
States, the Federal Reserve Board, the FDIC, any State Regulator or any SRO, and
have paid all fees and assessments due and payable in connection therewith.
Except for normal examinations conducted by a Regulatory Agency in the regular
course of the business of Target and its Subsidiaries, no Regulatory Agency has
initiated any proceeding or, to the best knowledge of Target, investigation into
the business or operations of Target or any of its Subsidiaries since December
31, 1990. There is no unresolved violation, criticism, or exception by any
Regulatory Agency with respect to any report or statement relating to any
examinations of Target or any of its Subsidiaries.
3.06. Financial Statements. Target has previously delivered to Parent
copies of (a) the consolidated balance sheets of Target and its Subsidiaries as
of December 31 for the fiscal years 1991 and 1992, and the related consolidated
statements of income, changes in stockholders' equity and cash flows for the
fiscal years 1990 through 1992, inclusive, as reported in Target's Annual Report
on Form 10-K for the fiscal year ended December 31, 1992 filed with the SEC
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in
each case accompanied by the audit report of Ernst & Young, independent public
accountants with respect to Target, and (b) the unaudited consolidated balance
sheets of Target and its Subsidiaries as of June 30, 1993 and June 30, 1992 and
the related unaudited consolidated statements of income, cash flows and changes
in stockholders' equity for the six month periods then ended as reported in
Target's Quarterly Report on Form 10-Q for the period ended June 30, 1993 filed
with the SEC under the Exchange Act. The December 31, 1992 consolidated balance
sheet of Target (including the related notes, where applicable) fairly presents
the consolidated financial position of Target and its Subsidiaries as of the
date thereof, and the other financial statements referred to in this Section
3.06 (including the related notes, where applicable) fairly present, and the
financial statements referred to in Section 6.09 hereof will fairly present
(subject, in the case of the unaudited statements, to recurring audit
adjustments normal in nature and amount), the results of the consolidated
operations and consolidated financial position of Target 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, and the financial statements referred to in Section 6.09 hereof will
comply, in all material respects with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto; and
each of such statements (including the related notes, where applicable) has
been, and the financial statements referred to in Section 6.09 hereof will be,
prepared in accordance with generally accepted accounting principles ("GAAP")
consistently applied during the periods involved, except as indicated in the
notes thereto or, in the case of unaudited statements, as permitted by Form
10-Q. The books and records of Target and its Significant Subsidiaries have
been, and are being, maintained in all material respects in accordance with GAAP
and any other applicable legal and accounting requirements and reflect only
actual transactions.
3.07. Broker's Fees. Neither Target nor any Target Subsidiary nor any of
their respective officers or directors has employed any broker or finder or
incurred any liability for any broker's fees, commissions or finder's fees in
connection with any of the transactions contemplated by this Agreement, the Bank
Merger
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Agreement or the Option Agreement, except that Target has engaged, and will pay
a fee or commission to McDaniels & Co. in accordance with the terms of a letter
agreement between McDaniels & Co. and Target, a true, complete and correct copy
of which has been previously delivered by Target to Parent.
3.08. Absence of Certain Changes or Events. (a) Except as may be set forth
in Section 3.08(a) of the Target Disclosure Schedule or as disclosed in Target's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 or in any
Current Reports of Target on Form 8-K filed prior to August 20, 1993, true,
complete and correct copies of which have previously been delivered to Parent,
since December 31, 1992, (i) neither Target nor any of its Subsidiaries has
incurred any material liability, except in the ordinary course of their business
consistent with their past practices, and (ii) there has not been any change in
the business, assets, financial condition or results of operations of Target or
any of its Subsidiaries which has had, individually or in the aggregate, a
Material Adverse Effect on Target.
(b) Except as set forth in Section 3.08(b) of the Target Disclosure
Schedule, since June 30, 1993, Target and its Subsidiaries have carried on their
respective businesses in the ordinary and usual course consistent with their
past practices.
(c) Except as set forth in Section 3.08(c) of the Target Disclosure
Schedule and as previously disclosed in writing to Parent, since June 30, 1993,
neither Target nor any of its Subsidiaries has (i) increased the wages,
salaries, compensation, pension, or other fringe benefits or perquisites payable
to any executive officer, employee, or director from the amount thereof in
effect as of June 30, 1993 (which amounts have been previously disclosed to
Parent), granted any severance or termination pay, entered into any contract to
make or grant any severance or termination pay, or paid any bonus other than
year-end bonuses for fiscal 1992 as listed in Section 3.08 of the Target
Disclosure Schedule or (ii) suffered any strike, work stoppage, slow-down, or
other labor disturbance.
3.09. Legal Proceedings. (a) Except as set forth in Section 3.09 of the
Target Disclosure Schedule, neither Target nor any of its Subsidiaries is a
party to any, and there are no pending or, to the best of Target's knowledge,
threatened, legal, administrative, arbitral or other proceedings, claims,
actions or governmental or regulatory investigations of any nature against
Target or any of its Subsidiaries or challenging the validity or propriety of
the transactions contemplated by this Agreement, the Bank Merger Agreement or
the Option Agreement as to which there is a reasonable probability of an adverse
determination and which, if adversely determined, would, individually or in the
aggregate, have a Material Adverse Effect on Target.
(b) Section 3.09 of the Second Target Schedule lists all pending and, to
the best knowledge of Target, threatened, legal, administrative, arbitral or
other proceedings, claims, actions or governmental or regulatory investigations
of any nature against Target or any of its Subsidiaries or challenging the
validity or propriety of the transactions contemplated by this Agreement, the
Bank Merger Agreement or the Option Agreement, which are not set forth on
Section 3.09 of the Target Disclosure Schedule.
(c) There is no injunction, order, judgment, decree, or regulatory
restriction imposed upon Target, any of its Subsidiaries or the assets of Target
or any of its Subsidiaries which has had, or might reasonably be expected to
have, a Material Adverse Effect on Target.
3.10. Taxes and Tax Returns. (a) Except as may be reflected in Section
3.10 of the Target Disclosure Schedule, (x) each of Target and its Subsidiaries
has duly filed all Federal, state and, to the best of Target's knowledge, local
information returns and tax returns required to be filed by it on or prior to
the date hereof (all such returns being accurate and complete in all material
respects) and has duly paid or made provisions for the payment of all material
Taxes (as defined below) and other governmental charges which have been incurred
or are due or claimed to be due from it by Federal, state, county or local
taxing authorities on or prior to the date hereof (including, without
limitation, if and to the extent applicable, those due in respect of its
properties, income, business, capital stock, deposits, franchises, licenses,
sales and payrolls, and the Massachusetts net worth tax) other than Taxes or
other charges (1) which are not yet delinquent or are being contested in good
faith (and which are set forth in Section 3.10 of the Target Disclosure
Schedule) and (2) have not been finally determined and (y) the amounts set up as
reserves for Taxes on the consolidated balance sheet of Target included in its
Form 10-Q for the period ended June 30, 1993 are sufficient in the aggregate for
the
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payment of all unpaid Federal, state, county and local Taxes (including any
interest or penalties thereon), whether or not disputed, accrued or applicable,
for the period ended June 30, 1993 or for any year or period prior thereto, and
for which Target or any of its Subsidiaries 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. The Federal income tax
returns of Target and its Subsidiaries have been examined by the Internal
Revenue Service (the "IRS") and any liability with respect thereto has been
satisfied for all years to and including 1991, and no deficiencies were asserted
as a result of such examination or all such deficiencies were satisfied. The
state and local income or corporation excise tax returns of Target and its
Subsidiaries have been examined by the relevant state and local tax authorities
and any liability with respect to such state returns has been satisfied for all
tax periods ending on or prior to December 31, 1991 and no deficiencies were
asserted as a result of such examinations or all such deficiencies were
satisfied. Except as may be reflected in Section 3.10 of the Target Disclosure
Schedule, to the best of Target's knowledge, there are no material disputes
pending, or claims asserted for, Taxes or assessments upon Target or any of its
Subsidiaries, nor has Target or any of its Subsidiaries been requested to give
any currently effective waivers extending the statutory period of limitation
applicable to any Federal, state, county or local income tax return for any
period. In addition, (i) proper and accurate amounts have been withheld by
Target and its Subsidiaries from their employees for all prior periods in
compliance in all material respects with the tax withholding provisions of
applicable Federal, state and local laws, (ii) Federal, state, county and local
returns which are accurate and complete in all material respects have been filed
by Target and its Subsidiaries for all periods for which returns were due with
respect to income tax withholding, Social Security and unemployment taxes, (iii)
the amounts shown on such Federal, state, local or county returns to be due and
payable have been paid in full or adequate provision therefor has been included
by Target in its consolidated financial statements as of June 30, 1993 and (iv)
there are no Tax liens upon any property or assets of the Target or its
Subsidiaries except liens for current taxes not yet due. Neither Target nor its
Subsidiaries is, or has ever been a party to any agreement to share Federal,
state or local income tax liability with any corporation not listed on the
Target Disclosure Schedule. To the knowledge of Target, no property of Target or
any of its Subsidiaries is property that Target or any of its Subsidiaries is or
will be required to treat as being owned by another person pursuant to the
provisions of Section 168(f)(8) of the Code (as in effect prior to its amendment
by the Tax Reform Act of 1986) or is "tax-exempt use property" within the
meaning of Section 168(h) of the Code. Neither Target nor any of its
Subsidiaries has been required to include in income any adjustment pursuant to
Section 481 of the Code by reason of a voluntary change in accounting method
initiated by Target or any of its Subsidiaries, and the Internal Revenue Service
has not initiated or proposed any such adjustment or change in accounting
method. Neither Target nor any of its Subsidiaries has entered into a
transaction which is being accounted for as an installment obligation under
Section 453 of the Code.
(b) As used in this Agreement, the term "Tax" or "Taxes" means all federal,
state, county, local, and foreign income, excise, gross receipts, ad valorem,
profits, gains, property, sales, transfer, use, payroll, employment, severance,
withholding, duties, intangibles, franchise, and other taxes, charges, levies or
like assessments, including the Massachusetts net worth tax, together with all
penalties and additions to tax and interest thereon.
3.11. Employees. (a) Section 3.11 of the Target Disclosure Schedule sets
forth a true and complete list of each employee benefit plan, arrangement or
agreement that is maintained as of the date of this Agreement (the "Plans") by
Target, any of its Significant Subsidiaries or by any trade or business, whether
or not incorporated (an "ERISA Affiliate"), all of which together with Target
would be deemed a "single employer" within the meaning of Section 4001 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
(b) Target has heretofore delivered to Parent true and complete copies of
each of the Plans and all related documents, including but not limited to (i)
the actuarial report for such Plan (if applicable) for each of the last two
years, and (ii) the most recent determination letter from the Internal Revenue
Service (if applicable) for such Plan.
(c) Except as set forth in Section 3.11 of the Disclosure Schedule, (i)
each of the Plans has been operated and administered in all material respects
with applicable laws, including but not limited to ERISA
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and the Code, (ii) each of the Plans intended to be "qualified" within the
meaning of Section 401(a) of the Code is so qualified, (iii) with respect to
each Plan which is subject to Title IV of ERISA, the present value of accrued
benefits under such Plan, based upon the actuarial assumptions used for funding
purposes in the most recent actuarial report prepared by such Plan's actuary
with respect to such Plan, did not, as of its latest valuation date, exceed the
then current value of the assets of such Plan allocable to such accrued
benefits, (iv) no Plan provides benefits, including without limitation death or
medical benefits (whether or not insured), with respect to current or former
employees of Target, its Significant Subsidiaries or any ERISA Affiliate beyond
their retirement or other termination of service, other than (w) coverage
mandated by applicable law, (x) death benefits or retirement benefits under any
"employee pension plan," as that term is defined in Section 3(2) of ERISA, (y)
deferred compensation benefits accrued as liabilities on the books of Target,
its Significant Subsidiaries or the ERISA Affiliates or (z) benefits the full
cost of which is borne by the current or former employee (or his beneficiary),
(v) no liability under Title IV of ERISA has been incurred by Target, its
Significant Subsidiaries or any ERISA Affiliate that has not been satisfied in
full, and no condition exists that presents a material risk to Target, its
Significant Subsidiaries or an ERISA Affiliate of incurring a material liability
thereunder, (vi) no Plan is a "multi-employer pension plan," as such term is
defined in Section 3(37) of ERISA, (vii) all contributions or other amounts
payable by Target or its Significant Subsidiaries as of the Effective Time with
respect to each Plan in respect of current or prior plan years have been paid or
accrued in accordance with generally accepted accounting practices and Section
412 of the Code, (viii) neither Target, its Significant Subsidiaries nor any
ERISA Affiliate has engaged in a transaction in connection with which Target,
its Significant Subsidiaries or any ERISA Affiliate could be subject to either a
civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax
imposed pursuant to Section 4975 or 4976 of the Code, and (ix) to the best
knowledge of Target there are no pending, threatened or anticipated claims
(other than routine claims for benefits) by, on behalf of or against any of the
Plans or any trusts related thereto.
3.12. SEC Reports. Target has previously made available to Parent an
accurate and complete copy of each (a) final registration statement, prospectus,
report, schedule and definitive proxy statement filed since January 1, 1989 by
Target with the SEC pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act (the "Target Reports") and (b)
communication mailed by Target to its stockholders since January 1, 1989, and no
such registration statement, prospectus, report, schedule, proxy statement or
communication contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances in which they were
made, not misleading, except that information as of a later date shall be deemed
to modify information as of an earlier date. Target has timely filed all Target
Reports and other documents required to be filed by it under the Securities Act
and the Exchange Act, and, as of their respective dates, all Target Reports
complied in all material respects with the published rules and regulations of
the SEC with respect thereto.
3.13. Target Information. The information relating to Target and its
Subsidiaries to be contained in the Proxy Statement and the registration
statement on Form S-4 (the "S-4") of which the Proxy Statement will be included
as a prospectus, or in any other document filed with any other regulatory agency
in connection herewith, will not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein, in
light of the circumstances in which they are made, not misleading. The Proxy
Statement (except for such portions thereof that relate only to Parent or any of
its Subsidiaries) will comply in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder.
3.14. Compliance with Applicable Law. Target and each of its Subsidiaries
hold, and have at all times held, all material licenses, franchises, permits and
authorizations necessary for the lawful conduct of their respective businesses
under and pursuant to all, and have complied with and are not in default in any
respect under any, applicable law, statute, order, rule, regulation, policy
and/or guideline of any Governmental Entity relating to Target or any of its
Subsidiaries, except where the failure to hold such license, franchise, permit
or authorization or such noncompliance or default would not, individually or in
the aggregate, have a Material Adverse Effect on Target, and neither Target nor
any of its Subsidiaries knows of, or has received notice of, any material
violations of any of the above.
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3.15. Certain Contracts. (a) Except as set forth in Section 3.15(a) of the
Target Disclosure Schedule, neither Target nor any of its Subsidiaries is a
party to or bound by any contract, arrangement, commitment or understanding
(whether written or oral) (i) with respect to the employment of any directors,
officers, employees or consultants, (ii) which, upon the consummation of the
transactions contemplated by this Agreement or the Bank Merger Agreement will
(either alone or upon the occurrence of any additional acts or events) result in
any payment (whether of severance pay or otherwise) becoming due from Parent,
Target, the Surviving Corporation, the Surviving Bank or any of their respective
Subsidiaries to any officer or employee thereof, (iii) which is a material
contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC) to be
performed after the date of this Agreement that has not been filed or
incorporated by reference in the Target Reports, (iv) which is a consulting
agreement (including data processing, software programming and licensing
contracts) not terminable on 60 days or less notice involving the payment of
more than $100,000 per annum, in the case of any such agreement with an
individual, or $500,000 per annum, in the case of any other such agreement, (v)
which materially restricts the conduct of any line of business by Target or any
of its Significant Subsidiaries, (vi) with or to a labor union or guild
(including any collective bargaining agreement) or (vii) (including any stock
option plan, stock appreciation rights plan, restricted stock plan or stock
purchase plan) any of the benefits of which will be increased, or the vesting of
the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the Bank Merger Agreement, or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement or the Bank Merger Agreement.
Target has previously delivered to Parent true and correct copies of all
employment, consulting and deferred compensation agreements which are in writing
and to which Target or any of its Subsidiaries is a party. Each contract,
arrangement, commitment or understanding of the type described in this Section
3.15(a), whether or not set forth in Section 3.15(a) of the Target Disclosure
Schedule, is referred to herein as a "Target Contract".
(b) Except as set forth in Section 3.15(b) of the Target Disclosure
Schedule, (i) each Target Contract is valid and binding and in full force and
effect, (ii) Target and each of its Subsidiaries has in all material respects
performed all obligations required to be performed by it to date under each
Target Contract, except where such noncompliance, individually or in the
aggregate, would not have a Material Adverse Effect on Target, and (iii) no
event or condition exists which constitutes or, after notice or lapse of time or
both, would constitute, a material default on the part of Target or any of its
Subsidiaries under any such Target Contract, except where such default,
individually or in the aggregate, would not have a Material Adverse Effect on
Target.
3.16. Agreements with Regulatory Agencies. Except as set forth in Section
3.16 of the Target Disclosure Schedule, neither Target nor any of its
Subsidiaries is subject to any cease-and-desist or other order issued by, or is
a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient of
any extraordinary supervisory letter from, or has adopted any board resolutions
at the request of (each, whether or not set forth on Section 3.16 of the Target
Disclosure Schedule, a "Regulatory Agreement"), any Regulatory Agency or other
Governmental Entity that restricts the conduct of its business or that in any
manner relates to its capital adequacy, its credit policies, its management or
its business, nor has Target or any of its Subsidiaries been advised by any
Regulatory Agency or other Governmental Entity that it is considering issuing or
requesting any Regulatory Agreement.
3.17. Investment Securities. Section 3.17 of the Target Disclosure
Schedule sets forth the book and market value as of June 30, 1993 of the
investment securities, mortgage backed securities and securities held for sale
of Target and its Subsidiaries. Section 3.17 of the Second Target Schedule sets
forth an investment securities report which includes, security descriptions,
CUSIP numbers, pool face values, book values, coupon rates, current market
values, paydown factors, paydown speeds, book yields, durations, weighted
average life and weighted average coupons.
3.18. Intellectual Property. Except where there would be no Material
Adverse Effect on Target, Target 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
used in its businesses; and neither Target nor any of its Subsidiaries has
received any notice of conflict with respect
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thereto that asserts the right of others. Target and each of its Subsidiaries
have in all material respects performed all the obligations required to be
performed by them and are not in default in any material respect under any
contract, agreement, arrangement or commitment relating to any of the foregoing,
except where such non-performance or default would not, individually or in the
aggregate, have a Material Adverse Effect on Target.
3.19. Undisclosed Liabilities. Except (a) as set forth in Section 3.19 of
the Target Disclosure Schedule, (b) for those liabilities that are fully
reflected or reserved against on the consolidated balance sheet of Target
included in its Form 10-Q for the period ended June 30, 1993 and (c) for
liabilities incurred in the ordinary course of business consistent with past
practice since June 30, 1993, neither Target nor any of its Subsidiaries has
incurred any liability of any nature whatsoever (whether absolute, accrued,
contingent or otherwise and whether due or to become due) that, either alone or
when combined with all similar liabilities, is, or could reasonably be expected
to have, a material adverse effect on the business, properties, assets,
liabilities, results of operations or financial condition of Target and its
Subsidiaries taken as whole.
3.20. State Takeover Laws. The provisions of Section 203 of the DGCL,
Section 1 of Article 6 of Target's Certificate of Incorporation and Chapter 110E
of the Massachusetts Business Corporation Law (the Control Share Acquisition
statute applicable to foreign corporations) will not, assuming the accuracy of
the representations contained in Section 4.13 hereof, apply to the Agreement,
the Bank Merger Agreement or the Option Agreement or any of the transactions
contemplated hereby or thereby.
3.21. Administration of Fiduciary Accounts. Target and each of its
Significant Subsidiaries has properly administered in all material respects all
accounts for which it acts as a fiduciary, including but not limited to accounts
for which it serves as a trustee, agent, custodian, personal representative,
guardian, conservator or investment advisor, in accordance with the terms of the
governing documents and applicable state and federal law and regulation and
common law. Neither Target nor any of its Significant Subsidiaries nor any of
their respective directors, officers or employees has committed any breach of
trust with respect to any such fiduciary account which has had or could
reasonably be expected to have a Material Adverse Effect on Target, and the
accountings for each such fiduciary account are true and correct in all material
respects and accurately reflect the assets of such fiduciary account.
3.22. Environmental Matters. Except as set forth in Section 3.22 of the
Target Disclosure Schedule:
(a) Each of Target, its Subsidiaries, the Participation Facilities and
the Loan Properties (each as hereinafter defined) are, and have been, in
compliance with all applicable laws, rules, regulations, standards and
requirements of the United States Environmental Protection Agency (the
"EPA") and of state and local agencies with jurisdiction over pollution or
protection of the environment, except for violations which, either
individually or in the aggregate, have not had and cannot reasonably be
expected to have a Material Adverse Effect on Target;
(b) There is no suit, claim, action or proceeding pending or
threatened, before any Governmental Entity or other forum in which Target,
any of its Subsidiaries, any Participation Facility or any Loan Property,
has been or, with respect to threatened proceedings, may be, named as a
defendant (x) for alleged noncompliance (including by any predecessor),
with any environmental law, rule or regulation or (y) relating to the
release into the environment of any Hazardous Material (as hereinafter
defined) or oil whether or not occurring at or on a site owned, leased or
operated by Target or any of its Subsidiaries, any Participation Facility
or any Loan Property, except where such noncompliance or release has not
had, and cannot be reasonably expected to have, either individually or in
the aggregate, a Material Adverse Effect on Target;
(c) During the period of (x) Target's or any of its Subsidiaries'
ownership or operation of any of their respective current properties, (y)
Target's or any of its Subsidiaries' participation in the management of any
Participation Facility, or (z) Target's or any of its Subsidiaries' holding
of a security interest in a Loan Property, there has been no release of
Hazardous Material or oil in, on, under or affecting any such property,
except where such release has not had and cannot reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect on
Target. Prior to the period of (x) Target's
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or any of its Subsidiaries' ownership or operation of any of their
respective current properties, (y) Target's or any of its Subsidiaries'
participation in the management of any Participation Facility, or (z)
Target's or any of its Subsidiaries' holding of a security interest in a
Loan Property, there was no release of Hazardous Material or oil in, on,
under or affecting any such property, Participation Facility or Loan
Property, except where such release has not had and cannot be reasonably
expected to have, either individually or in the aggregate, a Material
Adverse Effect on Target; and
(d) The following definitions apply for purposes of this Section 3.22:
(x) "Loan Property" means any property in which Target or any of its
Subsidiaries holds a security interest for an amount greater than $100,000,
and, where required by the context, said term means the owner or operator
of such property; (y) "Participation Facility" means any facility in which
Target or any of its Subsidiaries participates in the management and, where
required by the context, said term means the owner or operator of such
property; and (z) "Hazardous Material" means any pollutant, contaminant, or
hazardous substance under the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. sec. 9601 et seq., or any
similar state law.
3.23. Derivative Transactions. Except as set forth in Section 3.23 of the
Second Target Schedule, since December 31, 1992, neither Target nor any of its
Subsidiaries has engaged in transactions in or involving forwards, futures,
options on futures, swaps or other derivative instruments except (i) as agent on
the order and for the account of others, or (ii) as principal for purposes of
hedging interest rate risk on U.S. dollar-denominated securities and other
financial instruments. None of the counterparties to any contract or agreement
with respect to any such instrument is in default with respect to such contract
or agreement and no such contract or agreement, were it to be a Loan held by
Target or any of its Subsidiaries, would be classified as "Other Loans Specially
Mentioned", "Special Mention", "Substandard", "Doubtful", "Loss", "Classified",
"Criticized", "Credit Risk Assets", "Concerned Loans" or words of similar
import. The financial position of Target and its Subsidiaries on a consolidated
basis under or with respect to each such instrument has been reflected in the
books and records of Target and such Subsidiaries in accordance with GAAP
consistently applied, and no open exposure of Target or any of its Subsidiaries
with respect to any such instrument (or with respect to multiple instruments
with respect to any single counterparty) exceeds $500,000.
3.24. Disclosure. All material facts relating to the business, properties,
assets, liabilities, results of operations and financial condition of Target and
its Subsidiaries have been disclosed to Parent in or in connection with this
Agreement. No representation or warranty contained in this Agreement, and no
statement contained in any certificate, list or other writing furnished to
Parent pursuant to the provisions hereof, to the best knowledge of Target,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements herein or therein, in light of
the circumstances in which they are made, not misleading. No information
material to the Merger or the Subsidiary Merger and which is necessary to make
the representations and warranties herein contained not misleading, to the best
knowledge of Target, has been withheld from, or has not been delivered in
writing to, Parent.
3.25. Opinion. Target has received a written opinion, dated the date
hereof, from McDaniels & Co. to the effect that, subject to the terms,
conditions and qualifications set forth therein, as of the date thereof the
consideration to be received by the stockholders of Target pursuant to the
Merger is fair to such stockholders from a financial point of view. Such opinion
has not been amended or rescinded as of the date of this Agreement, and a true
and correct copy of such opinion has been delivered to Parent concurrently
herewith.
3.26. Assistance Agreements. Except as set forth in Section 3.26 of the
Target Disclosure Schedule, neither Target nor any of its Subsidiaries is a
party to any agreement or arrangement entered into in connection with the
consummation of a federally assisted acquisition of a depository institution
pursuant to which Target or any of its Subsidiaries is entitled to receive
financial assistance or indemnification from any governmental agency.
3.27. Rights Agreement. The amendment to the Target Rights Agreement
attached hereto as Exhibit 3.27 has been duly authorized and adopted by Target
and will be duly executed and effective promptly, and in no event more than two
business days, after the date of this Agreement. Parent will not become an
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"Acquiring Person" and no "Shares Acquisition Date" or "Distribution Date" (as
such terms are defined in the Target Rights Agreement) will occur as a result of
the approval, execution or delivery of this Agreement, the Bank Merger Agreement
or the Stock Option Agreement by Target or Target Bank, as the case may be, or
the consummation of the transactions contemplated hereby or thereby, including,
without limitation, the acquisition of shares of Target Common Stock by Parent
pursuant to the Option Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT
Parent hereby represents and warrants to Target as follows:
4.01. Corporate Organization. (a) Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Parent has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted,
and is duly licensed or qualified to do business 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, except where the failure to be so licensed or qualified
would not have a Material Adverse Effect on Parent. Parent is duly registered as
a bank holding company under the BHC Act. The Certificate of Incorporation and
By-laws of Parent, copies of which have previously been made available to
Target, are true, complete and correct copies of such documents as in effect as
of the date of this Agreement.
(b) Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.
(c) Each Significant Subsidiary of Parent is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. Each Significant Subsidiary of Parent has the corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as it is now being conducted, and is duly licensed or qualified to do
business 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, except where the failure to
be so licensed or qualified would not have a Material Adverse Effect on Parent.
The articles of organization and by-laws of Massachusetts Bank and Shawmut Bank
Connecticut, N.A., a national banking association and an indirect wholly owned
subsidiary of Parent, copies of which have previously been made available to
Target, are true, complete and correct copies of such documents as in effect as
of the date of this Agreement.
4.02. Capitalization. (a) The authorized capital stock of Parent consists
of 150,000,000 shares of Parent Common Stock and 10,000,000 shares of preferred
stock, without par value ("Parent Preferred Stock"). At the close of business on
June 30, 1993 there were 93,635,868 shares of Parent Common Stock, 700,000
shares of Parent Preferred Stock (of stated value of $50.00 per share), and
5,750,000 shares of Parent Depositary Shares (each representing a one-tenth
interest in a share of 9.30% cumulative preferred stock ($250 stated value))
issued and outstanding, and 673,865 shares of Parent Common Stock held in
Parent's treasury. On June 30, 1993, no shares of Parent Common Stock or Parent
Preferred Stock were reserved for issuance, except that 5,840,064 shares of
Parent Common Stock were reserved for issuance pursuant to the Parent's dividend
reinvestment and stock purchase plans, 7,725,000 shares of Parent Common Stock
were reserved for issuance upon the exercise of stock options pursuant to the
Parent Stock Option and Restricted Stock Award Plan and the Parent 1989
Nonemployee Directors' Restricted Stock Plan (collectively, the "Parent Stock
Plans"), 7,314,617 shares of Parent Common Stock were reserved for issuance upon
consummation of the merger of New Dartmouth Bank ("New Dartmouth") with a
Subsidiary of Parent, pursuant to the Agreement and Plan of Merger, dated as of
March 23, 1993, as amended, between Parent and New Dartmouth, and 1,500,000
shares of Parent Series A Junior Participating Preferred Stock were reserved for
issuance upon exercise of the rights (the "Parent Rights") distributed to
holders of Parent Common Stock pursuant to the Shareholder Rights Agreement,
dated as of February 28, 1989, between Parent and Manufacturers Hanover Trust
Company, as Rights Agent (the "Parent Shareholder Rights Agreement"). All
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of the issued and outstanding shares of Parent Common Stock and Parent Preferred
Stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. As of the date of this Agreement, except as
referred to above or reflected in Section 4.02 of the Disclosure Schedule which
is being delivered by Parent to Target herewith (the "Parent Disclosure
Schedule") and the Parent Shareholder Rights Agreement, Parent does not have and
is not bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or issuance
of any shares of Parent Common Stock or Parent Preferred Stock or any other
equity securities of Parent or any securities representing the right to purchase
or otherwise receive any shares of Parent Common Stock or Parent Preferred
Stock. The authorized capital stock of Merger Sub consists of 2,000 shares of
common stock, par value $1.00 per share ("Merger Sub Common Stock"), 1,000 of
which are issued and outstanding and owned by Parent free and clear of all
liens, charges, encumbrances and security interests whatsoever, and all of such
shares are duly authorized and validly issued and fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to ownership
thereof. The shares of Parent Common Stock to be issued pursuant to the Merger
will be duly authorized and validly issued and, at the Effective Time, all such
shares will be fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof.
(b) Section 4.02(b) of the Parent Disclosure Schedule sets forth a true and
correct list of all of the Parent Subsidiaries as of the date of this Agreement.
Except as set forth in Section 4.02(b) of the Parent Disclosure Schedule, Parent
owns, directly or indirectly, all of the issued and outstanding shares of
capital stock of each of the Parent 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, with no personal liability attaching to the ownership
thereof. No Parent Subsidiary has or is bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character with any
party that is not a direct or indirect Subsidiary of Parent 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.
4.03. Authority; No Violation. (a) Parent 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 Parent, and no other corporate
proceedings on the part of Parent are necessary to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Parent and (assuming due authorization, execution and delivery by
Target) constitutes a valid and binding obligation of Parent, enforceable
against Parent in accordance with its terms, except as enforcement may be
limited by general principles of equity whether applied in a court of law or a
court of equity and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally.
(b) Merger Sub 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 will be duly and validly approved by the Board
of Directors of Merger Sub. Upon the due and valid approval of this Agreement by
Parent as the sole stockholder of Merger Sub, and by the Board of Directors of
Merger Sub, no other corporate proceedings on the part of Merger Sub will be
necessary to consummate the transactions contemplated hereby. This Agreement,
upon execution and delivery by Merger Sub, will be duly and validly executed and
delivered by Merger Sub and will (assuming due authorization, execution and
delivery by Target) constitute a valid and binding obligation of Merger Sub,
enforceable against Merger Sub in accordance with its terms, except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
(c) Massachusetts Bank has full corporate power and authority to execute
and deliver the Bank Merger Agreement and to consummate the transactions
contemplated thereby. The execution and delivery of the Bank Merger Agreement
and the consummation of the transactions contemplated thereby will be duly and
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validly approved by the Board of Directors of the Massachusetts Bank. Upon the
due and valid approval of the Bank Merger Agreement by Shawmut Corporation and
Hartford National Corporation as the sole stockholders of Massachusetts Bank,
and by the Board of Directors of Massachusetts Bank, no other corporate
proceedings on the part of Massachusetts Bank will be necessary to consummate
the transactions contemplated thereby. The Bank Merger Agreement, upon execution
and delivery by Massachusetts Bank, will be duly and validly executed and
delivered by Massachusetts Bank and will (assuming due authorization, execution
and delivery by Target Bank) constitute a valid and binding obligation of
Massachusetts Bank, enforceable against Massachusetts Bank in accordance with
its terms, except as enforcement may be limited by general principles of equity
whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally.
(d) Except as set forth in Section 4.03(d) of the Parent Disclosure
Schedule, neither the execution and delivery of this Agreement by Parent or
Merger Sub or the Bank Merger Agreement by Massachusetts Bank, nor the
consummation by Parent, Merger Sub or Massachusetts Bank, as the case may be, of
the transactions contemplated hereby or thereby, nor compliance by Parent,
Merger Sub or Massachusetts Bank with any of the terms or provisions hereof or
thereof, will (i) violate any provision of the Certificate of Incorporation or
By-Laws of Parent, the Certificate of Incorporation or By-Laws of Merger Sub or
the articles of incorporation or by-laws or similar governing documents of
Massachusetts Bank, as the case may be, or (ii) assuming that the consents and
approvals referred to in Section 4.04 are duly obtained, (x) violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to Parent or any of its Significant Subsidiaries or any of
their respective properties or assets, or (y) violate, conflict with, result in
a breach of any provision 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 Parent 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 Parent 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 Parent.
4.04. Consents and Approvals. (a) Except for (i) the filing of
applications and notices, as applicable, with the Federal Reserve Board under
the BHC Act, the Bank Merger Act and the FRA and approval of such applications
and notices, (ii) the filing of applications with the OCC under the Bank Merger
Act and approval of such applications, (iii) the State Banking Approvals, (iv)
the filing with the SEC of the Proxy Statement and the S-4, (v) the approval of
this Agreement by Parent as the sole stockholder of Merger Sub, (vi) the filing
of the Articles of Merger with the Secretary, (vii) such filings and approvals
as are required to be made or obtained under the securities or "Blue Sky" laws
of various states in connection with the issuance of the shares of Parent Common
Stock pursuant to this Agreement, (viii) filings required by the Bank Merger
Agreement, (ix) the approval of the Bank Merger Agreement by the stockholders of
Massachusetts Bank, and (x) such filings, authorizations or approvals as may be
set forth in Section 4.04 of the Parent Disclosure Schedule, no consents or
approvals of or filings or registrations with any Governmental Entity or with
any third party are necessary in connection with (1) the execution and delivery
by Parent and Merger Sub of this Agreement, (2) the consummation by Parent and
Merger Sub of the Merger and the other transactions contemplated hereby (3) the
execution and delivery by Massachusetts Bank of the Bank Merger Agreement, and
(4) the consummation of Massachusetts Bank of the transactions contemplated by
the Bank Merger Agreement. The affirmative vote of the holders of the
outstanding shares of Parent Common Stock is not required to approve this
Agreement or the transactions contemplated hereby, except as may be required
under the rules of the NYSE in the event the Maximum Exchange Ratio is waived.
(b) Parent hereby represents to Target that it has no reason to believe
that it will be unable to obtain each and every required consent and approval
referred to in this Section 4.04 so that the transactions contemplated by this
Agreement and the Bank Merger Agreement may be consummated on or prior to August
31, 1994.
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4.05. Financial Statements. Parent has previously delivered to Target
copies of (a) the consolidated balance sheets of Parent and its Subsidiaries as
of December 31 for the fiscal years 1991 and 1992 and the related consolidated
statements of income, changes in shareholders' equity and cash flows for the
fiscal years 1990 through 1992, inclusive, as reported in Parent's Annual Report
on Form 10-K for the fiscal year ended December 31, 1992 filed with the SEC
under the Exchange Act, in each case accompanied by the audit report of Price
Waterhouse, independent public accountants with respect to Parent, and (b) the
unaudited consolidated balance sheet of Parent and its Subsidiaries as of June
30, 1993 and June 30, 1992 and the related unaudited consolidated statements of
income, changes in shareholders' equity and cash flows for the six-month periods
then ended as reported in Parent's Quarterly Report on Form 10-Q for the period
ended June 30, 1993 filed with the SEC under the Exchange Act. The December 31,
1992 consolidated balance sheet of Parent (including the related notes, where
applicable) fairly presents the consolidated financial position of Parent and
its Subsidiaries as of the date thereof, and the other financial statements
referred to in this Section 4.05 (including the related notes, where applicable)
fairly present and the financial statements referred to in Section 6.09 hereof
will fairly present (subject, in the case of the unaudited statements, to
recurring audit adjustments normal in nature and amount), the results of the
consolidated operations and changes in shareholders' equity and consolidated
financial position of Parent 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, and the financial
statements referred to in Section 6.09 hereof will comply, in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto; and each of such statements
(including the related notes, where applicable) has been, and the financial
statements referred to in Section 6.09 hereof will be, prepared in accordance
with GAAP consistently applied during the periods involved, except as indicated
in the notes thereto or, in the case of unaudited statements, as permitted by
Form 10-Q. The books and records of Parent and its Significant Subsidiaries have
been, and are being, maintained in all material respects in accordance with GAAP
and any other applicable legal and accounting requirements and reflect only
actual transactions.
4.06. Broker's Fees. Neither Parent, Merger Sub nor any Parent Subsidiary,
nor any of their respective officers or directors, has employed any broker or
finder or incurred any liability for any broker's fees, commissions or finder's
fees in connection with any of the transactions contemplated by this Agreement,
the Bank Merger Agreement or the Option Agreement.
4.07. Absence of Certain Changes or Events. Except as may be set forth in
Section 4.07 of the Parent Disclosure Schedule, or as disclosed in Parent's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 or in any
Current Reports of Parent on Form 8-K filed prior to August 20, 1993, true,
complete and correct copies of which have previously been delivered to Target,
since December 31, 1992, (i) neither Parent nor any of its Subsidiaries has
incurred any material liability, except in the ordinary course of their business
consistent with their past practices, and (ii) there has not been any change in
the business, assets, financial condition or results of operations of Parent or
any of its Subsidiaries which has had, individually or in the aggregate, a
Material Adverse Effect on Parent.
4.08. Legal Proceedings. Except as set forth in Section 4.08 of the Parent
Disclosure Schedule or in Parent's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993, neither Parent nor any of its Subsidiaries is a party to
any and there are no pending or, to the best of Parent's knowledge, threatened,
material legal, administrative, arbitral or other proceedings, claims, actions
or governmental or regulatory investigations of any nature against Parent or any
of its Subsidiaries or challenging the validity or propriety of the transactions
contemplated by this Agreement, the Bank Merger Agreement or the Option
Agreement as to which there is a reasonable probability of an adverse
determination and which, if adversely determined, would have a Material Adverse
Effect on Parent. There is no injunction, order, judgment, decree or regulatory
restriction imposed upon Parent, any of its Subsidiaries or the assets of Parent
or any of its Subsidiaries which has had a Material Adverse Effect on Parent.
4.09. Compliance with Applicable Law. Parent and each of its Subsidiaries
holds, and has at all times held, all material licenses, franchises, permits and
authorizations necessary for the lawful conduct of their respective businesses
under and pursuant to all, and have complied with and are not in default in any
respect under any, applicable law, statute, order, rule, regulation, policy
and/or guideline of any Governmental Entity
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relating to Parent or any of its Subsidiaries, except where the failure to hold
such license, franchise, permit or authorization or such non-compliance or
default would not, individually or in the aggregate, have a Material Adverse
Effect on Parent, and neither Parent nor any of its Subsidiaries knows of, or
has received notice of violation of, any material violations of any of the
above.
4.10. SEC Reports. Parent has previously made available to Target an
accurate and complete copy of each (a) final registration statement, prospectus,
report, schedule and definitive proxy statement filed since January 1, 1989 by
Parent with the SEC pursuant to the Securities Act or the Exchange Act (the
"Parent Reports") and (b) communication mailed by Parent to its shareholders
since January 1, 1989, and no such registration statement, prospectus, report,
schedule, proxy statement or communication contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading, except that information
as of a later date shall be deemed to modify information as of an earlier date.
Parent has timely filed all Parent Reports and other documents required to be
filed by it under the Securities Act and the Exchange Act, and, as of their
respective dates, all Parent Reports complied in all material respects with the
published rules and regulations of the SEC with respect thereto.
4.11. Parent Information. The information relating to Parent and its
Subsidiaries to be contained in the Proxy Statement and the S-4, or in any other
document filed with any other regulatory agency in connection herewith, will not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances in which
they are made, not misleading. The S-4 (except for such portions thereof that
relate only to Target or any of its Subsidiaries) will comply in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder.
4.12. Disclosure. All material facts relating to the business, operations,
properties, assets, liabilities, results of operations and financial condition
of Parent and its Subsidiaries have been disclosed to Target in or in connection
with this Agreement. No representation or warranty contained in this Agreement,
and no statement contained in any certificate, list or other writing furnished
to Target pursuant to the provisions hereof, to the best knowledge of Parent,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements herein or therein, in light of
the circumstances in which they are made, not misleading. No information
material to the Merger or the Subsidiary Merger and which is necessary to make
the representations and warranties herein contained not misleading, to the best
knowledge of Parent, has been withheld from, or has not been delivered in
writing to, Target.
4.13. Ownership of Target Common Stock; Affiliates and Associates.
(a) Neither Parent nor any of its affiliates or associates (as such terms
are defined under the Exchange Act), (i) beneficially own, directly or
indirectly, or (ii) is a party to any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of, in each case, any
shares of capital stock of Target (other than Trust Account Shares and DPC
Shares); and
(b) Neither Parent nor any of its Subsidiaries is an "affiliate" (as such
term is defined in DGCL Section 203(c)(1)) or an "associate" (as such term is
defined in DGCL Section 203(c)(2)) of Target.
4.14. Taxes and Tax Returns. Except as may be reflected in Section 4.14 of
the Parent Disclosure Schedule, (i) each of Parent and its Subsidiaries has duly
filed all Federal, state and, to the best of Parent's knowledge, local
information returns and tax returns required to be filed by it on or prior to
the date hereof (all such returns being accurate and complete in all material
respects) and has duly paid or made provisions for the payment of all material
Taxes and other governmental charges which have been incurred or are due or
claimed to be due from it by Federal, state, county or local taxing authorities
on or prior to the date hereof (including, without limitation, if and to the
extent applicable, those due in respect of its properties, income, business,
capital stock, deposits, franchises, licenses, sales and payrolls, and the
Massachusetts net worth tax) other than Taxes or other charges (a) which (x) are
not yet delinquent or (y) are being contested in good faith and set forth in
Section 4.14 of the Parent Disclosure Schedule and (b) have not been finally
determined and (ii) the amounts set up as reserves for Taxes on the consolidated
balance sheet of Parent included in its Form 10-Q for the period ended June 30,
1993 are sufficient in the aggregate for the payment of all unpaid
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Federal, state, county and local Taxes (including any interest or penalties
thereon), whether or not disputed, accrued or applicable, for the period ended
June 30, 1993 or for any year or period prior thereto, and for which Parent or
any of its Subsidiaries 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. The Federal income tax returns of Parent and its
Subsidiaries have been examined by the IRS and any liability with respect
thereto has been satisfied for all years to and including 1985, and no
deficiencies were asserted as a result of such examination or all such
deficiencies were satisfied. The state and local income or corporation excise
tax returns of Parent and its Subsidiaries have been examined by the relevant
state and local tax authorities and any liability with respect to such state
returns has been satisfied for all tax periods ending on or prior to December
31, 1987 and no deficiencies were asserted as a result of such examinations or
all such deficiencies were satisfied. Except as may be set forth in Section 4.14
of the Parent Disclosure Schedule, to the best of Parent's knowledge, there are
no material disputes pending, or claims asserted for, Taxes or assessments upon
Parent or any of its Subsidiaries, nor has Parent or any of its Subsidiaries
been requested to give any currently effective waivers extending the statutory
period of limitation applicable to any Federal, state, county or local income
tax return for any period. In addition, Federal, state, county and local returns
which are accurate and complete in all material respects have been filed by
Parent and its Subsidiaries for all periods for which returns were due with
respect to income tax withholding, Social Security and unemployment taxes and
the amounts shown on such Federal, state, local or county returns to be due and
payable have been paid in full or adequate provision therefor has been included
by Parent in its consolidated financial statements as of June 30, 1993.
4.15. Employees. (a) Section 4.15 of the Parent Disclosure Schedule sets
forth a true and complete list of each employee benefit plan, arrangement or
agreement that is maintained as of the date of this Agreement (the "Parent
Plans"), except as noted in Section 4.15 of the Parent Disclosure Schedule, by
Parent, any of its Subsidiaries or by any trade or business, whether or not
incorporated (a "Parent ERISA Affiliate"), all of which together with Parent
would be deemed a "single employer" within the meaning of Section 4001 of ERISA.
(b) Parent has heretofore delivered to Target true and complete copies of
each of the Parent Plans and all related documents, including but not limited to
(i) the actuarial report for such Parent Plan (if applicable) for each of the
last two years, and (ii) the most recent determination letter from the Internal
Revenue Service (if applicable) for such Parent Plan.
(c) Except as set forth in Section 4.15 of the Parent Disclosure Schedule,
(i) each of the Parent Plans has been operated and administered in all material
respects with applicable laws, including but not limited to ERISA and the Code,
(ii) each of the Parent Plans intended to be "qualified" within the meaning of
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 Parent is not aware of any circumstances
likely to result in the revocation or denial of any such favorable determination
letter, (iii) with respect to each Parent Plan which is subject to Title IV of
ERISA, the present value of accrued benefits under such Parent Plan, based upon
the actuarial assumptions used for funding purposes in the most recent actuarial
report prepared by such Parent Plan's actuary with respect to such Parent Plan,
did not, as of its latest valuation date, exceed the then current value of the
assets of such Parent Plan allocable to such accrued benefits, (iv) no Parent
Plan provides benefits, including without limitation death or medical benefits
(whether or not insured), with respect to current or former employees of Parent,
its Subsidiaries or any Parent ERISA Affiliate beyond their retirement or other
termination of service, other than (w) coverage mandated by applicable law, (x)
death benefits or retirement benefits under any "employee pension plan," as that
term is defined in Section 3(2) of ERISA, (y) deferred compensation benefits
accrued as liabilities on the books of Parent, its Subsidiaries or the Parent
ERISA Affiliates or (z) benefits the full cost of which is borne by the current
or former employee (or his beneficiary), (v) no liability under Title IV of
ERISA has been incurred by Parent, its Subsidiaries or any Parent ERISA
Affiliate that has not been satisfied in full, and no condition exists that
presents a material risk to Parent, its Subsidiaries or any Parent ERISA
Affiliate of incurring a material liability thereunder, (vi) no Parent Plan is a
"multi-employer pension plan," as such term is defined in Section 3(37) of
ERISA, (vii) all contributions or other amounts payable by Parent or its
Subsidiaries as of the Effective Time with respect to each Parent Plan in
respect of current or prior plan years have been paid or
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accrued in accordance with generally accepted accounting practices and Section
412 of the Code, (viii) neither Parent, its Subsidiaries nor any Parent ERISA
Affiliate has engaged in a transaction in connection with which Parent, its
Subsidiaries or any Parent ERISA Affiliate could be subject to either a material
civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material
tax imposed pursuant to Section 4975 or 4976 of the Code, (ix) consummation of
the transactions contemplated hereby will not cause any amounts payable under
any of the Parent Plans to fail to be deductible for federal income tax purposes
under Section 280G of the Code, and (x) to the best knowledge of Parent there
are no pending, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the Parent Plans or any trusts
related thereto.
4.16. Agreements with Regulatory Agencies. Except as set forth in Section
4.16 of the Parent Disclosure Schedule or as disclosed in Parent's Annual Report
on Form 10-K for the year ended December 31, 1992, neither Parent nor any of its
Subsidiaries is subject to any cease-and-desist or other order issued by, or is
a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient of
any extraordinary supervisory letter from, or has adopted any board resolutions
at the request of (each, whether or not set forth on Section 4.16 of the Parent
Disclosure Schedule, a "Parent Regulatory Agreement"), any Regulatory Agency or
other Governmental Entity that restricts the conduct of its business or that in
any manner relates to its capital adequacy, its credit policies, its management
or its business, nor has Parent or any of its Subsidiaries been advised by any
Regulatory Agency or other Governmental Entity that it is considering issuing or
requesting any Regulatory Agreement.
4.17. Undisclosed Liabilities. Except (a) as set forth in Section 4.17 of
the Parent Disclosure Schedule, (b) for those liabilities that are fully
reflected or reserved against on the consolidated balance sheet of Parent
included in its Form 10-Q for the period ended June 30, 1993 and (c) for
liabilities incurred in the ordinary course of business consistent with past
practice, since June 30, 1993, neither Parent nor any of its Subsidiaries has
incurred any liability of any nature whatsoever (whether absolute, accrued,
contingent or otherwise and whether due or to become due) that, either alone or
when combined with all similar liabilities, is, or could reasonably be expected
to be, material to the business, properties, assets, liabilities, results of
operations or financial condition of Parent and its Subsidiaries taken as a
whole.
4.18. Administration of Fiduciary Accounts. Parent and each of its
Significant Subsidiaries has properly administered in all material respects all
accounts for which it acts as a fiduciary, including but not limited to accounts
for which it serves as a trustee, agent, custodian, personal representative,
guardian, conservator or investment advisor, in accordance with the terms of the
governing documents and applicable state and federal law and regulation and
common law. Neither Parent nor any of its Significant Subsidiaries nor any of
their respective directors, officers or employees has committed any breach of
trust with respect to any such fiduciary account which has had or could
reasonably be expected to have a Material Adverse Effect on Parent, and the
accountings for each such fiduciary account are true and correct in all material
respects and accurately reflect the assets of such fiduciary account.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.01. Covenants of Target. During the period from the date of this
Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement, the Bank Merger Agreement or the
Option Agreement or with the prior written consent of Parent, Target and its
Subsidiaries shall carry on their respective businesses in the ordinary course
consistent with past practice and consistent with prudent banking practice.
Target will use its best efforts to (x) preserve its business organization and
that of its Significant Subsidiaries intact, (y) keep available to itself and
Parent the present services of the employees of Target and its Significant
Subsidiaries and (z) preserve for itself and Parent the goodwill of the
customers of Target and its Significant Subsidiaries and others with whom
business relationships exist. Without limiting the generality of the foregoing,
and except as set forth on Section 5.01 of the Target
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Disclosure Schedule or as otherwise contemplated by this Agreement or consented
to in writing by Parent, Target shall not, and shall not permit any of its
Subsidiaries to:
(a) solely in the case of Target, declare or pay any dividends on, or
make other distributions in respect of, any of its capital stock, except
(i) for the declaration and payment of regular quarterly cash dividends in
an amount not to exceed the amount of the most recent quarterly cash
dividend paid by Target prior to the date of this Agreement; provided,
however, that Target's regular quarterly cash dividend may be increased by
$.01 per share of Target Common Stock beginning in the first quarter of
1994, and (ii) that the parties agree (x) to consult with respect to the
amount of the last Target quarterly dividend payable prior to the Effective
Time with the object of assuring that the stockholders of Target do not
receive a shortfall or a premium based on the record and payment dates of
their last dividend prior to the Merger and the record and payment dates of
the first dividend of Parent following the Merger and (y) that Target may
pay a special dividend to holders of record of Target Common Stock
immediately prior to the Effective Time consistent with the object
described in clause (x) above;
(b) (i) split, combine or reclassify any shares of its capital stock
or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock
except upon the exercise or fulfillment of rights or options issued or
existing pursuant to employee benefit plans, programs or arrangements, all
to the extent outstanding and in existence on the date of this Agreement,
and except pursuant to the Option Agreement, or (ii) repurchase, redeem or
otherwise acquire (except for the acquisition of Trust Account Shares and
DPC Shares, as such terms are defined in Section 1.04(b) hereof) any shares
of the capital stock of Target or any Target Subsidiary, or any securities
convertible into or exercisable for any shares of the capital stock of
Target or any Target Subsidiary;
(c) issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or any securities
convertible into or exercisable for, or any rights, warrants or options to
acquire, any such shares, or enter into any agreement with respect to any
of the foregoing, other than (i) the issuance of Target Common Stock
pursuant to stock options or similar rights to acquire Target Common Stock
granted pursuant to the Target Stock Plans and outstanding prior to the
date of this Agreement, in each case in accordance with their present terms
and (ii) pursuant to the Option Agreement;
(d) amend its Certificate of Incorporation, By-laws or other similar
governing documents;
(e) authorize or permit any of its officers, directors, employees or
agents to directly or indirectly solicit, initiate or encourage any
inquiries relating to, or the making of any proposal which constitutes, a
"takeover proposal" (as defined below), or, except to the extent legally
required for the discharge of the fiduciary duties of the Board of
Directors of Target as advised in writing by such board's counsel,
recommend or endorse any takeover proposal, or participate in any
discussions or negotiations, or provide third parties with any nonpublic
information, relating to any such inquiry or proposal or otherwise
facilitate any effort or attempt to make or implement a takeover proposal;
provided, however, that Target may communicate information about any such
takeover proposal to its stockholders if, in the judgment of Target's Board
of Directors with the advice of outside counsel, such communication is
required under applicable law. Target will immediately cease and cause to
be terminated any existing activities, discussions or negotiations
previously conducted with any parties other than Parent with respect to any
of the foregoing. Target will take all actions necessary or advisable to
inform the appropriate individuals or entities referred to in the first
sentence hereof of the obligations undertaken in this Section 5.01(e).
Target will notify Parent immediately if any such inquiries or takeover
proposals are received by, any such information is requested from, or any
such negotiations or discussions are sought to be initiated or continued
with, Target, and Target will promptly inform Parent in writing of all of
the relevant details with respect to the foregoing. As used in this
Agreement, "takeover proposal" shall mean any tender or exchange offer,
proposal for a merger, consolidation or other business combination
involving Target or any Subsidiary of Target or any proposal or offer to
acquire in any manner a substantial equity interest in,
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or a substantial portion of the assets of, Target or any Subsidiary of
Target other than the transactions contemplated or permitted by this
Agreement, the Bank Merger Agreement and the Option Agreement;
(f) make any capital expenditures other than in the ordinary course of
business or as necessary to maintain existing assets in good repair;
(g) enter into any new line of business;
(h) acquire or agree to acquire, by merging or consolidating with, or
by purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof
or otherwise acquire any assets, 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, which would be material, individually or in the
aggregate, to Target;
(i) 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 in any material respect, 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 or the Bank Merger
Agreement, except, in every case, as may be required by applicable law;
(j) change its methods of accounting in effect at June 30, 1993,
except as required by changes in GAAP or regulatory accounting principles
as concurred to by Target's independent auditors;
(k) (i) except as required by applicable law or to maintain
qualification pursuant to the Code, adopt, amend, renew or terminate any
Plan or any agreement, arrangement, plan or policy between Target or any
Target Subsidiary and one or more of its current or former directors,
officers or employees or (ii) except for normal increases in the ordinary
course of business consistent with past practice or except as required by
applicable law, increase in any manner the compensation or fringe benefits
of any director, officer or employee or pay any benefit not required by any
plan or agreement as in effect as of the date hereof (including, without
limitation, the granting of stock options, stock appreciation rights,
restricted stock, restricted stock units or performance units or shares);
(l) take or cause to be taken any action which would disqualify the
Merger as a "pooling of interests" for accounting purposes or a tax free
reorganization under Section 368 of the Code, provided, however, that
nothing contained herein shall limit the ability of Parent to exercise its
rights under the Option Agreement;
(m) other than activities in the ordinary course of business
consistent with prior practice, sell, lease, encumber, assign or otherwise
dispose of, or agree to sell, lease, encumber, assign or otherwise dispose
of, any of its material assets, properties or other rights or agreements;
(n) other than in the ordinary course of business consistent with past
practice, 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;
(o) file any application to relocate or terminate the operations of
any banking office of it or any of its Subsidiaries;
(p) commit any act or omission which constitutes a material breach or
default by Target or any of its Subsidiaries under any Regulatory Agreement
or under any material contract or material license to which Target or any
of its Subsidiaries is a party or by which any of them or their respective
properties is bound;
(q) make any equity investment or commitment to make such an
investment in real estate or in any real estate development project, other
than in connection with foreclosures, settlements in lieu of foreclosure or
troubled loan or debt restructurings in the ordinary course of business
consistent with prudent banking practices;
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(r) 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 Target or any of its
Subsidiaries is a party or by which Target or any of its Subsidiaries or
their respective properties is bound; or
(s) agree to do any of the foregoing.
5.02. Covenants of Parent. 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 with the prior written consent of
Target, Parent and its Subsidiaries shall carry on their respective businesses
in the ordinary course consistent with prudent banking practice and use all
reasonable efforts to preserve intact their present business organizations and
relationships. Without limiting the generality of the foregoing and except as
set forth on Section 5.02 of the Parent Disclosure Schedule or as otherwise
contemplated by this Agreement or consented to in writing by Target, Parent
shall not, and shall not permit any of its Subsidiaries to:
(a) solely in the case of Parent, declare or pay any extraordinary or
special dividends on or make any other extraordinary or special
distributions in respect of any of its capital stock;
(b) 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 in any material respect, 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 or the Bank Merger
Agreement, except, in every case, as may be required by applicable law;
(c) change its methods of accounting in effect at June 30, 1993,
except in accordance with changes in GAAP or regulatory accounting
principles as concurred to by Parent's independent auditors;
(d) take or cause to be taken any action which would disqualify the
Merger as a "pooling of interests" for accounting purposes or a tax free
reorganization under Section 368 of the Code, provided, however, that
nothing contained herein shall limit the ability of Parent to exercise its
rights under the Option Agreement; or
(e) agree to do any of the foregoing.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01. Regulatory Matters. (a) Target shall promptly prepare and file with
the SEC the Proxy Statement and Parent shall promptly prepare and file with the
SEC the S-4, in which the Proxy Statement will be included as a prospectus. Each
of Parent and Target shall use all reasonable efforts to have the S-4 declared
effective under the Securities Act as promptly as practicable after such filing,
and Target shall thereafter mail the Proxy Statement to its stockholders. Parent
shall also use all reasonable efforts to obtain all necessary state securities
law or "Blue Sky" permits and approvals required to carry out the transactions
contemplated by this Agreement and the Bank Merger Agreement, and Target shall
furnish all information concerning Target and the holders of Target Common Stock
as may be reasonably requested in connection with any such action.
(b) The parties hereto shall cooperate with each other and use their best
efforts to promptly prepare and file all necessary documentation, to effect all
applications, notices, petitions and filings, and to obtain as promptly as
practicable all permits, consents, approvals and authorizations of all third
parties and Governmental Entities which are necessary or advisable to consummate
the transactions contemplated by this Agreement (including without limitation
the Merger and the Subsidiary Merger) (it being understood that any amendments
to the S-4 or a resolicitation of proxies as consequence of an acquisition
agreement by Parent or any of its Subsidiaries shall not violate this covenant).
Target and Parent shall have the right to review in advance, and to the extent
practicable each will consult the other on, in each case subject to applicable
laws relating to the exchange of information, all the information relating to
Target or Parent, as the case may be, and any of their respective Subsidiaries,
which appear in any filing made with, or written materials submitted to, any
third party or any Governmental Entity in connection with the transactions
contemplated by this
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Agreement. In exercising the foregoing right, each of the parties hereto shall
act reasonably and as promptly as practicable. The parties hereto agree that
they will consult with each other with respect to the obtaining of all permits,
consents, approvals and authorizations of all third parties and Governmental
Entities necessary or advisable to consummate the transactions contemplated by
this Agreement and each party will keep the other apprised of the status of
matters relating to completion of the transactions contemplated herein.
(c) Parent and Target shall, upon request, furnish each other with all
information concerning themselves, their Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or advisable
in connection with the Proxy Statement, the S-4 or any other statement, filing,
notice or application made by or on behalf of Parent, Target or any of their
respective Subsidiaries to any Governmental Entity in connection with the Merger
and the other transactions contemplated by this Agreement.
(d) Parent and Target shall promptly furnish each other with copies of
written communications received by Parent or Target, as the case may be, or any
of their respective Subsidiaries, Affiliates or Associates (as such terms are
defined in Rule 12b-2 under the Exchange Act as in effect on the date of this
Agreement) from, or delivered by any of the foregoing to, any Governmental
Entity in respect of the transactions contemplated hereby.
6.02. Access to Information. (a) Upon reasonable notice and subject to
applicable laws relating to the exchange of information, Target shall, and shall
cause each of its Subsidiaries to, afford to the officers, employees,
accountants, counsel and other representatives of Parent, access, during normal
business hours during the period prior to the Effective Time, to all its
properties, books, contracts, commitments and records and, during such period,
Target shall, and shall cause its Subsidiaries to, make available to Parent (i)
a copy of each report, schedule, registration statement and other document filed
or received by it during such period pursuant to the requirements of Federal
securities laws or Federal or state banking laws (other than reports or
documents which Target is not permitted to disclose under applicable law) and
(ii) all other information concerning its business, properties and personnel as
Parent may reasonably request. Neither Target nor any of its Subsidiaries shall
be required to provide access to or to disclose information where such access or
disclosure would violate or prejudice the rights of Target's customers,
jeopardize the attorney-client privilege of the institution in possession or
control of such information or contravene any law, rule, regulation, order,
judgment, decree, fiduciary duty or binding agreement entered into prior to the
date of this Agreement. The parties hereto will make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of the
preceding sentence apply. Parent will hold all such information in confidence to
the extent required by, and in accordance with, the provisions of the
confidentiality agreement, dated July 7, 1993, between Parent and Target (the
"Confidentiality Agreement").
(b) Upon reasonable notice and subject to applicable laws relating to the
exchange of information, Parent shall, and shall cause its Subsidiaries to,
afford to the officers, employees, accountants, counsel and other
representatives of Target, access, during normal business hours during the
period prior to the Effective Time, to such information regarding Parent and its
Subsidiaries as shall be reasonably necessary for Target to fulfill its
obligations pursuant to this Agreement to prepare the Proxy Statement or which
may be reasonably necessary for Target to confirm that the representations and
warranties of Parent contained herein are true and correct and that the
covenants of Parent contained herein have been performed in all material
respects. Neither Parent nor any of its Subsidiaries shall be required to
provide access to or to disclose information where such access or disclosure
would violate or prejudice the rights of Parent's customers, jeopardize the
attorney-client privilege of the institution in possession or control of such
information or contravene any law, rule, regulation, order, judgment, decree,
fiduciary duty or binding agreement entered into prior to the date of this
Agreement. The parties hereto will make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply. During the period from the date of this Agreement to the
Effective Time, Parent will cause one or more of its designated representatives
to confer on a regular and frequent basis (not less than monthly) with
representatives of Target and to report the general status of the ongoing
operations of Parent and its Subsidiaries.
(c) All information furnished by Parent to Target or its representatives
pursuant hereto shall be treated as the sole property of Parent and, if the
Merger shall not occur, Target and its representatives shall return to
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Parent all of such written information and all documents, notes, summaries or
other materials containing, reflecting or referring to, or derived from, such
information. Target 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
continue for five years from the date the proposed Merger is abandoned and shall
not apply to (i) any information which (x) was already in Target's possession
prior to the disclosure thereof by Parent; (y) was then generally known to the
public; or (z) was disclosed to Target 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 Target is nonetheless, in the opinion of its counsel, compelled
to disclose information concerning Parent to any tribunal or governmental body
or agency or else stand liable for contempt or suffer other censure or penalty,
Target may disclose such information to such tribunal or governmental body or
agency without liability hereunder.
(d) No investigation by either of the parties or their respective
representatives shall affect the representations and warranties of the other set
forth herein.
6.03. Stockholder Meeting. Target shall take all steps necessary to duly
call, give notice of, convene and hold a meeting of its stockholders to be held
as soon as is reasonably practicable after the date on which the S-4 becomes
effective for the purpose of voting upon the approval of this Agreement. Target
will, through its Board of Directors, except to the extent legally required for
the discharge of the fiduciary duties of such board as advised in writing by its
counsel, recommend to its stockholders approval of this Agreement and the
transactions contemplated hereby and such other matters as may be submitted to
its stockholders in connection with this Agreement. Target and Parent shall
coordinate and cooperate with respect to the foregoing matters.
6.04. Legal Conditions to Merger. Each of Parent and Target shall, and
shall cause its Subsidiaries to, use their best efforts (a) to take, or cause to
be taken, all actions necessary, proper or advisable to comply promptly with all
legal requirements which may be imposed on such party or its Subsidiaries with
respect to the Merger or the Subsidiary Merger and, subject to the conditions
set forth in Article VII hereof, to consummate the transactions contemplated by
this Agreement and (b) to obtain (and to cooperate with the other party to
obtain) any consent, authorization, order or approval of, or any exemption by,
any Governmental Entity and any other third party which is required to be
obtained by Target or Parent or any of their respective Subsidiaries in
connection with the Merger and the Subsidiary Merger and the other transactions
contemplated by this Agreement.
6.05. Affiliates; Publication of Combined Financial Results. (a) Each of
Parent and Target shall use its best efforts to cause each director, executive
officer and other person who is an "affiliate" (for purposes of Rule 145 under
the Securities Act and for purposes of qualifying the Merger for
"pooling-of-interests" accounting treatment) of such party to deliver to the
other party hereto, as soon as practicable after the date of this Agreement, and
prior to the date of the stockholders meeting called by Target to approve this
Agreement, a written agreement, in the form of Exhibit 6.05(a) hereto, providing
that such person will not sell, pledge, transfer or otherwise dispose of any
shares of Parent Common Stock or Target Common Stock held by such "affiliate"
and, in the case of the "affiliates" of Target, the shares of Parent Common
Stock to be received by such "affiliate" in the Merger: (1) in the case of
shares of Parent Common Stock to be received by "affiliates" of Target in the
Merger, except in compliance with the applicable provisions of the Securities
Act and the rules and regulations thereunder; and (2) during the period
commencing 30 days prior to the Merger and ending at the time of the publication
of financial results covering at least 30 days of combined operations of Parent
and Target.
(b) Parent shall use its best efforts to publish no later than thirty (30)
days after the end of the first month after the Effective Time in which there
are at least thirty (30) days of post-Merger combined operations (which month
may be the month in which the Effective Time occurs), combined sales and net
income figures as contemplated by and in accordance with the terms of SEC
Accounting Series Release No. 135.
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6.06. Stock Exchange Listing. Parent shall cause the shares of Parent
Common Stock to be issued in the Merger to be approved for listing on the New
York Stock Exchange, Inc. (the "NYSE"), subject to official notice of issuance,
prior to the Effective Time.
6.07. Employee Benefit Plans. (a) From and after the Effective Time, and
subject to applicable law, the Surviving Corporation shall continue all employee
benefit plans of Target and its Subsidiaries as in effect at the Effective Time,
including pension plans, thrift plans, stock option plans, management incentive
plans, group life plans, accidental death and dismemberment plans, travel
accident plans, medical and hospitalization plans and long-term disability
plans, provided, however, that the Surviving Corporation may amend, supplement
or replace any such plan or program if, in the good faith judgment of the Board
of Directors of the Surviving Corporation, any such amendment, supplement or
replacement will provide the employees ("Target Employees") or retired employees
covered thereby with benefits that are in the aggregate at least as valuable to
them as a group as the benefits to be received by them under the plans and
programs in effect immediately prior to any such amendment, supplement or
replacement. With respect to benefits payable to employees who shall have
retired from the Target and its Subsidiaries, whether before or after the
Effective Time, the Surviving Corporation shall in no event take any action to
reduce such benefits and shall take such action as it deems appropriate from
time to time with respect to possible increases in the level of such benefits,
taking into consideration among other factors any similar increases which the
Parent shall have effected with respect to its retired employees. Whenever the
Parent amends in any manner favorable to its employees any of its employee
benefit plans or programs corresponding to plans and programs of Target and its
Subsidiaries, the Surviving Corporation shall consider effecting similar
favorable amendments to the corresponding plans or programs previously
maintained by Target and its Subsidiaries.
(b) With respect to the continuation of Target's benefit plans pursuant to
Section 6.07(a) hereof, Target Employees shall be credited under such plans
maintained by the Surviving Corporation or Parent with all years of service with
Target or any Subsidiary of Target for all purposes to the extent such service
was recognized by Target or any Subsidiary of Target under any of such plans; to
the extent that Target Employees become participants in any employee benefit
plans maintained by Parent or any of its Subsidiaries (other than the plans of
Target referred to in the first sentence of Section 6.07(a) ("Parent Plans")),
Target Employees shall be credited under the Parent Plans for prior years of
service with Target or any Subsidiary of Target for all purposes, other than
benefit accrual, to the extent such service was recognized by Target or any
Subsidiary of Target under any of the plans referred to in the first sentence of
Section 6.07(a).
(c) Notwithstanding anything contained herein to the contrary, for purposes
of eligibility for participation in any retiree medical program maintained by
Parent or its Subsidiaries, each Target Employee shall be considered a new
employee.
6.07A. Assumption of Existing Agreements Relating to
Employment. (a) Following the Effective Time, Parent shall honor and shall
cause Target or any successor thereto to honor in accordance with their terms
all employment, severance and other compensation agreements and arrangements
existing prior to the execution of this Agreement, which are between Target or
Target Bank and any director, officer or employee thereof and which have been
disclosed in the Target Disclosure Schedule, and to assume all duties,
liabilities and obligations under such agreements. Parent agrees for itself and
its Subsidiaries that the consummation of the transactions contemplated hereby
is a "Change in Control" as defined in the Special Termination Agreements
entered into between Target Bank and the officers listed on Section 6.07A(a) of
the Target Disclosure Schedule.
(b) Following the Effective Time, Parent shall cause Target or any
successor thereto to assume Target's and Target Bank's Salary Continuation
Policy, as set forth in Section 6.07A(b) of the Target Disclosure Schedule, for
all individuals employed by Target immediately prior to the Effective Time that
are not otherwise parties to employment, special termination, change in control
and/or other agreements affording similar protection with Target and/or Target
Bank, and further agrees to (i) treat any termination of any Target Employee by
Parent or any of its Subsidiaries other than for cause or by reason of death,
disability or retirement within twelve (12) months of the Effective Time as "an
involuntary termination as a result of the elimination of the employee's
position" (said employee terminated in accordance with this part (i) shall be
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referred to herein as a "Terminated Employee"), (ii) provide and pay the salary
continuation payment provided in the Salary Continuation Policy to the
Terminated Employees, (iii) provide said salary continuation benefits for up to
a maximum of 52 weeks, as provided in said Salary Continuation Policy, (iv)
provide said salary continuation benefits based upon the total years of service
of Terminated Employee to Target, Target Bank (or any entity for which Target or
Target Bank credited the employee's years of service with such entity), Parent
and any Subsidiaries of Parent such that years of service to Target and/or
Target Bank prior to the Effective Time and years of service to Parent and/or
any Subsidiaries of Parent after the Effective Time shall be credited to the
Terminated Employee for purposes of the Salary Continuation Policy, and (v)
provide the Terminated Employee employee benefits to the same extent provided as
of the date of this Agreement to terminated employees of Parent and its
Subsidiaries.
6.08. Indemnification; Directors' and Officers' Insurance. (a) In the
event of any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative, including, without
limitation, any such claim, action, suit, proceeding or investigation in which
any person who is now, or has been at any time prior to the date of this
Agreement, or who becomes prior to the Effective Time, a director or officer or
employee of Target or any of its Subsidiaries (the "Indemnified Parties") is, or
is threatened to be, made a party based in whole or in part on, or arising in
whole or in part out of, or pertaining to (i) the fact that he is or was a
director, officer or employee of Target, any of the Target Subsidiaries or any
of their respective predecessors or (ii) this Agreement or any of the
transactions contemplated hereby, whether in any case asserted or arising before
or after the Effective Time, the parties hereto agree to cooperate and use their
best efforts to defend against and respond thereto. It is understood and agreed
that after the Effective Time, Parent shall indemnify and hold harmless, as and
to the extent permitted by Delaware law, each such Indemnified Party against any
losses, claims, damages, liabilities, costs, expenses (including reasonable
attorney's fees and expenses in advance of the final disposition of any claim,
suit, proceeding or investigation to each Indemnified Party to the fullest
extent permitted by law upon receipt of any undertaking required by applicable
law), judgments, fines and amounts paid in settlement in connection with any
such threatened or actual claim, action, suit, proceeding or investigation, and
in the event of any such threatened or actual claim, action, suit, proceeding or
investigation (whether asserted or arising before or after the Effective Time),
the Indemnified Parties may retain counsel reasonably satisfactory to them after
consultation with Parent; provided, however, that (1) Parent shall have the
right to assume the defense thereof and upon such assumption Parent shall not be
liable to any Indemnified Party for any legal expenses of other counsel or any
other expenses subsequently incurred by any Indemnified Party in connection with
the defense thereof, except that if Parent elects not to assume such defense or
counsel for the Indemnified Parties reasonably advises that there are issues
which raise conflicts of interest between Parent and the Indemnified Parties,
the Indemnified Parties may retain counsel reasonably satisfactory to them after
consultation with Parent, and Parent shall pay the reasonable fees and expenses
of such counsel for the Indemnified Parties, (2) Parent shall be obligated
pursuant to this paragraph to pay for only one firm of counsel for all
Indemnified Parties, (3) Parent shall not be liable for any settlement effected
without its prior written consent (which consent shall not be unreasonably
withheld) and (4) Parent 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. Any Indemnified Party wishing to claim
Indemnification under this Section 6.08, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify Parent thereof, provided
that the failure to so notify shall not affect the obligations of Parent under
this Section 6.08 except to the extent such failure to notify materially
prejudices Parent. Parent's obligations under this Section 6.08 continue in full
force and effect for a period of six (6) years from the Effective Time;
provided, however, that all rights to indemnification in respect of any claim (a
"Claim") asserted or made within such period shall continue until the final
disposition of such Claim.
(b) Parent shall use best efforts to cause the persons serving as officers
and directors of Target immediately prior to the Effective Time to be covered
for a period of four years from the Effective Time by the directors' and
officers' liability insurance policy maintained by Target (provided that Parent
may substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are not less advantageous than such
policy) with respect to acts or omissions occurring prior to the Effective Time
which
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were committed by such officers and directors in their capacity as such;
provided, however, that in no event shall Parent be required to expend more than
200% of the current amount expended by Target (the "Insurance Amount") to
maintain or procure insurance coverage pursuant hereto and further provided that
if Parent is unable to maintain or obtain the insurance called for by this
Section 6.08(b), Parent shall use its best efforts to obtain as much comparable
insurance as available for the Insurance Amount.
(c) In the event Parent or the Surviving Corporation 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 Parent or the Surviving Corporation, as the case may be, assume the
obligations set forth in this section.
(d) The provisions of this Section 6.08 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs and
representatives.
6.09. Subsequent Interim and Annual Financial Statements. As soon as
reasonably available, but in no event later than March 31, 1994, Parent will
deliver to Target and Target will deliver to Parent their respective Annual
Reports on Form 10-K for the fiscal year ended December 31, 1993, as filed with
the SEC under the Exchange Act. As soon as reasonably available, but in no event
more than 45 days after the end of each fiscal quarter ending after the date of
this Agreement, Parent will deliver to Target and Target will deliver to Parent
their respective Quarterly Reports on Form 10-Q, as filed with the SEC under the
Exchange Act.
6.10. Additional Agreements. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement, or the Bank Merger Agreement, or to vest the Surviving Corporation or
the Surviving Bank with full title to all properties, assets, rights, approvals,
immunities and franchises of any of the parties to the Merger or the Subsidiary
Merger, the proper officers and directors of each party to this Agreement and
their respective Subsidiaries shall take all such necessary action as may be
reasonably requested by, and at the sole expense of, Parent.
6.11. Advice of Changes. Parent and Target shall promptly advise the other
party of any change or event having a Material Adverse Effect on it or which it
believes would or would be reasonably likely to cause or constitute a material
breach of any of its representations, warranties or covenants contained herein.
From time to time prior to the Effective Time, each party will promptly
supplement or amend the Disclosure Schedules delivered in connection with the
execution of this Agreement to reflect any matter which, if existing, occurring
or known at the date of this Agreement, would have been required to be set forth
or described in such Disclosure Schedules or which is necessary to correct any
information in such Disclosure Schedules which has been rendered inaccurate
thereby. No supplement or amendment to such Disclosure Schedules shall have any
effect for the purpose of determining satisfaction of the conditions set forth
in Sections 7.02(a) or 7.03(a) hereof, as the case may be, or the compliance by
Target or Parent, as the case may be, with the respective covenants set forth in
Sections 5.01 and 5.02 hereof.
6.12. Current Information. (a) During the period from the date of this
Agreement to the Effective Time, Target will cause one or more of its designated
representatives to confer on a regular and frequent basis (not less than
monthly) with representatives of Parent and to report (i) the general status of
the ongoing operations of Target and its Subsidiaries and (ii) the status of,
and the action proposed to be taken with respect to, those Loans held by Target
or any Target Subsidiary which, individually or in combination with one or more
other Loans to the same borrower thereunder, have an original principal amount
of $100,000 or more and are non-performing assets. Target will promptly notify
Parent of any material change in the normal course of business or in the
operation of the properties of Target 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 Target or any of its Subsidiaries, and will
keep Parent fully informed of such events.
(b) Parent will promptly notify Target of any material change in the normal
course of business or in the operation of the properties of Parent or any of its
Subsidiaries and of any governmental complaints,
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investigations or hearings (or communications indicating that the same may be
contemplated), or the institution or the threat of significant litigation
involving Parent or any of its Subsidiaries, and will keep Target fully informed
of such events.
6.13. Execution and Authorization of Bank Merger Agreement. As soon as
reasonably practicable after the date of this Agreement, (a) Parent shall (i)
cause the Board of Directors of Massachusetts Bank to approve the Bank Merger
Agreement, (ii) cause Massachusetts Bank to execute and deliver the Bank Merger
Agreement, and (iii) cause the holding companies of Massachusetts Bank to
approve the Bank Merger Agreement as the stockholders of Massachusetts Bank, and
(b) Target shall (i) cause the Board of Directors of Target Bank to approve the
Bank Merger Agreement, (ii) cause Target Bank to execute and deliver the Bank
Merger Agreement, and (iii) approve the Bank Merger Agreement as the sole
stockholder of Target Bank. The Bank Merger Agreement shall contain terms that
are normal and customary in light of the transactions contemplated hereby and
such additional terms as are necessary to carry out the purposes of this
Agreement.
6.14. Merger Sub. As soon as practicable after the date of this Agreement,
Parent shall (a) cause Merger Sub to execute a copy of this Agreement and
deliver such executed copy to each of Parent and Target and (b) cause Merger Sub
to take all necessary action to complete the transactions contemplated hereby
subject to the terms and conditions hereof.
6.15. Second Target Schedules. No later than 15 days after the date of
this Agreement, Target shall deliver to Parent the Second Target Schedules.
ARTICLE VII
CONDITIONS PRECEDENT
7.01. Conditions to Each Party's Obligation To Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement shall have been approved and
adopted by the affirmative vote of the holders of at least a majority of
the outstanding shares of Target Common Stock entitled to vote thereon.
(b) NYSE Listing. The shares of Parent Common Stock which shall be
issued to the stockholders of Target upon consummation of the Merger shall
have been authorized for listing on the NYSE, subject to official notice of
issuance.
(c) Other Approvals. All regulatory approvals required to consummate
the transactions contemplated hereby (including the Merger and the
Subsidiary Merger) shall have been obtained and shall remain in full force
and effect and all statutory waiting periods in respect thereof shall have
expired (all such approvals and the expiration of all such waiting periods
being referred to herein as the "Requisite Regulatory Approvals").
(d) S-4. The S-4 shall have become effective under the Securities Act
and no stop order suspending the effectiveness of the S-4 shall have been
issued and no proceedings for that purpose shall have been initiated or
threatened by the SEC.
(e) No Injunctions or Restraints; Illegality. No order, injunction or
decree issued by any court or agency of competent jurisdiction or other
legal restraint or prohibition (an "Injunction") preventing the
consummation of the Merger, the Subsidiary Merger or any of the other
transactions contemplated by this Agreement or the Bank Merger Agreement
shall be in effect. No statute, rule, regulation, order, injunction or
decree shall have been enacted, entered, promulgated or enforced by any
Governmental Entity which prohibits, restricts or makes illegal
consummation of the Merger or the Subsidiary Merger.
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7.02. Conditions to Obligations of Parent and Merger Sub. The obligation
of Parent and Merger Sub to effect the Merger is also subject to the
satisfaction or waiver by Parent at or prior to the Effective Time of the
following conditions:
(a) Representations and Warranties. (I) The representations and
warranties of Target set forth in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and (except to
the extent such representations and warranties speak as of an earlier date)
as of the Closing Date as though made on and as of the Closing Date; and
(II) the representations and warranties of Target set forth in this
Agreement shall be true and correct in all material respects as of the date
of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date; provided, however, that for purposes of
determining the satisfaction of the condition contained in this clause
(II), no effect shall be given to any exception in such representations and
warranties relating to materiality or a Material Adverse Effect, and
provided further, however, that, for purposes of this clause (II), such
representations and warranties shall be deemed to be true and correct in
all material respects unless the failure or failures of such
representations and warranties to be so true and correct, in the aggregate,
represent a material adverse change from the business, assets, financial
condition or results of operations of Target and its Subsidiaries taken as
a whole as represented herein, other than an adverse change resulting from
or attributable to general economic conditions. Parent shall have received
a certificate signed on behalf of Target by the Chief Executive Officer and
the Chief Financial Officer of Target to the foregoing effect.
(b) Performance of Obligations of Target. Target shall have performed
in all material respects all obligations required to be performed by it
under this Agreement at or prior to the Closing Date, and Parent shall have
received a certificate signed on behalf of Target by the Chief Executive
Officer and the Chief Financial Officer of Target to such effect.
(c) Intentionally Omitted.
(d) Consents Under Agreements. The consent, approval or waiver of
each person (other than the Governmental Entities referred to in Section
7.01(c)) whose consent or approval shall be required in order to permit the
succession by the Surviving Corporation or the Surviving Bank pursuant to
the Merger or the Subsidiary Merger, as the case may be, to any obligation,
right or interest of Target or any Subsidiary of Target under any loan or
credit agreement, note, mortgage, indenture, lease, license or other
agreement or instrument shall have been obtained, except where the failure
to obtain such consent, approval or waiver would not materially adversely
affect the economic or business benefits of the transactions contemplated
by this Agreement to Parent as to render inadvisable the consummation of
the Merger.
(e) No Pending Governmental Actions. No proceeding initiated by any
Governmental Entity seeking an Injunction shall be pending.
(f) Federal Tax Opinion. Parent shall have received an opinion of
Skadden, Arps, Slate, Meagher & Flom, counsel to Parent, in form and
substance reasonably satisfactory to Parent, dated as of the Effective
Time, substantially 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, the
Merger and the Subsidiary Merger will be treated for Federal income tax
purposes as part of one or more reorganizations within the meaning of
Section 368 of the Code and that accordingly:
(i) No gain or loss will be recognized by (x) Parent, Merger Sub or
Target as a result of the Merger or (y) Massachusetts Bank or Target
Bank (except with respect to any gain or income that may at any time or
times be realized or recognized with respect to Target Bank's tax
reserves for possible loan losses) as a result of the Subsidiary Merger;
(ii) No gain or loss will be recognized by the stockholders of
Target who exchange their Target Common Stock solely for Parent Common
Stock pursuant to the Merger (except with respect to cash received in
lieu of a fractional share interest in Parent Common Stock); and
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(iii) The tax basis of the Parent Common Stock received by
stockholders who exchange all of their Target Common Stock solely for
Parent Common Stock in the Merger will be the same as the tax basis of
the Target Common Stock surrendered in exchange therefor (reduced by any
amount allocable to a fractional share interest for which cash is
received).
In rendering such opinion, Skadden, Arps, Slate, Meagher & Flom may require
and rely upon representations contained in certificates of officers of
Parent, Merger Sub, Target and others.
(g) Legal Opinion. Parent shall have received the opinion of Bingham,
Dana & Gould, counsel to Target, dated the Closing Date, substantially in
the form attached hereto as Exhibit 7.02(g). As to any matter in such
opinion which involves matters of fact or matters relating to laws other
than Federal securities or Delaware corporate law, such counsel may rely
upon the certificates of officers and directors of Target and of public
officials and opinions of local counsel, reasonably acceptable to Parent,
provided a copy of such reliance opinion shall be attached as an exhibit to
the opinion of such counsel.
(h) Pooling of Interests. Parent shall have received a letter from
Price Waterhouse addressed to Target and Parent, to the effect that the
Merger will qualify for "pooling of interests" accounting treatment, unless
such firm advises Parent and Target that it is unable to issue a letter to
such effect solely by reason of Parent having exercised its right to
purchase Target Common Stock pursuant to the Option Agreement.
(i) Accountant's Letter. Target shall have caused to be delivered to
Parent letters from Ernst & Young, independent public accountants with
respect to Target, dated the date on which the Registration Statement or
last amendment thereto shall become effective, and dated the date of the
Closing, and addressed to Parent and Target, with respect to Target's
consolidated financial position and results of operation, which letters
shall be based upon agreed upon procedures to be specified by Parent, which
procedures shall be consistent with applicable professional standards for
letters delivered by independent accountants in connection with comparable
transactions.
(j) Average Closing Price. The Average Closing Price shall not be
more than $27.744; provided, however, that this Section 7.02(j) shall not
apply if Target has waived the provisions of Section 1.04(a)(I) hereof.
(k) Target Rights Agreement. A Distribution Date, as such term is
defined in the Target Rights Agreement, shall not have occurred, and the
Target Rights shall not have become nonredeemable and the Target Rights
shall not become exercisable for capital stock of Parent upon consummation
of the Merger.
7.03. Conditions to Obligations of Target. The obligation of Target to
effect the Merger is also subject to the satisfaction or waiver by Target at or
prior to the Effective Time of the following conditions:
(a) Representations and Warranties. (I) The representations and
warranties of Parent set forth in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and (except to
the extent such representations and warranties speak as of an earlier date)
as of the Closing Date as though made on and as of the Closing Date; and
(II) the representations and warranties of Parent set forth in this
Agreement shall be true and correct in all material respects as of the date
of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date; provided, however, that for purposes of
determining the satisfaction of the condition contained in this clause
(II), no effect shall be given to any exception in such representations and
warranties relating to materiality or a Material Adverse Effect, and
provided further, however, that, for purposes of this clause (II), such
representations and warranties shall be deemed to be true and correct in
all material respects unless the failure or failures of such
representations and warranties to be so true and correct, in the aggregate,
represent a material adverse change from the business, assets, financial
condition or results of operations of Parent and its Subsidiaries taken as
a whole as represented herein, other than an adverse change resulting from
or attributable to general economic conditions. Target shall have received
a certificate signed on behalf of Parent by the Chief Executive Officer and
the Chief Financial Officer of Parent to the foregoing effect.
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(b) Performance of Obligations of Parent. Parent and Merger Sub shall
have each performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and
Target shall have received a certificate signed on behalf of Parent by the
Chief Executive Officer and the Chief Financial Officer of Parent to such
effect.
(c) Consents Under Agreements. The consent or approval of each person
(other than the Governmental Entities referred to in Section 7.01(c)) whose
consent or approval shall be required in connection with the transactions
contemplated hereby under any loan or credit agreement, note, mortgage,
indenture, lease, license or other agreement or instrument to which Parent
or any of its Subsidiaries is a party or is otherwise bound, except those
for which failure to obtain such consents and approvals would not,
individually or in the aggregate, have a material adverse effect on the
business, operations or financial condition of Parent and its Subsidiaries
taken as a whole (after giving effect to the transactions contemplated
hereby), shall have been obtained.
(d) No Pending Governmental Actions. No proceeding initiated by any
Governmental Entity seeking an Injunction shall be pending.
(e) Federal Tax Opinion. Target shall have received from its counsel,
Bingham, Dana & Gould, opinions dated as of the Effective Time, in form and
substance reasonably satisfactory to Target, rendered on the basis of
facts, representations, and assumptions set forth in such opinions or in
writing elsewhere and referred to therein, substantially to the effect that
for federal income tax purposes (i) the Merger constitutes a reorganization
within the meaning of Section 368(a) of the Code, and (ii) accordingly no
gain or loss will be recognized by stockholders of Target with respect to
Parent Common Stock received solely in exchange for Target Common Stock
pursuant to this Agreement and Plan of Merger (noting, however, that
nontaxability does not extend to cash received in lieu of a fractional
share interest in Parent Common Stock or to cash received by dissenters, if
any). In rendering any such opinion, such counsel may require and, to the
extent they deem necessary or appropriate may rely upon, opinions of other
counsel and upon representations made in certificates of officers of
Target, Parent, Merger Sub, affiliates of the foregoing, and others.
(f) Legal Opinion. Target shall have received the opinion of Skadden,
Arps, Slate, Meagher & Flom, counsel to Parent, dated the Closing Date,
substantially in the form attached hereto as Exhibit 7.03(f). As to any
matter in such opinion which involves matters of fact or matters relating
to laws other than Federal securities law or Delaware corporate law, such
counsel may rely upon the certificates of officers and directors of Parent
and of public officials and opinions of local counsel, reasonably
acceptable to Target, provided a copy of such reliance opinions shall be
attached as an exhibit to the opinion of such counsel.
(g) Pooling of Interests. Target shall have received a letter from
Price Waterhouse addressed to Target and Parent, to the effect that the
Merger will qualify for "pooling of interests" accounting treatment, unless
such firm advises Parent and Target that it is unable to issue a letter to
such effect solely by reason of Parent having exercised its right to
purchase Target Common Stock pursuant to the Option Agreement.
(h) Opinion of Financial Advisor. Target shall have received an
opinion, dated as of the date of the Proxy Statement, from McDaniels & Co.
to the effect that as of the date thereof the consideration to be received
by the stockholders of Target pursuant to the Merger is fair to such
stockholders from a financial point of view.
(i) Average Closing Price. The Average Closing Price shall not be
less than $20.506; provided, however, that this Section 7.03(i) shall not
apply if Parent has waived the provisions of Section 1.04(a)(II) hereof.
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ARTICLE VIII
TERMINATION AND AMENDMENT
8.01. Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of the matters presented in
connection with the Merger by the stockholders of Target:
(a) by mutual consent of Parent and Target in a written instrument, if
the Board of Directors of each so determines by a vote of a majority of the
members of its entire Board;
(b) by either Parent or Target upon written notice to the other party
(i) 90 days after the date on which any request or application for a
Requisite Regulatory Approval shall have been denied or withdrawn at the
request or recommendation of the Governmental Entity which must grant such
Requisite Regulatory Approval, unless within the 90-day period following
such denial or withdrawal a petition for rehearing or an amended
application has been filed with the applicable Governmental Entity,
provided, however, that no party shall have the right to terminate this
Agreement pursuant to this Section 8.01(b)(i) if such denial or request or
recommendation for withdrawal shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe the covenants and
agreements of such party set forth herein or (ii) if any Governmental
Entity of competent jurisdiction shall have issued a final nonappealable
order enjoining or otherwise prohibiting the consummation of any of the
transactions contemplated by this Agreement;
(c) by either Parent or Target if the Merger shall not have been
consummated on or before August 31, 1994, unless the failure of the Closing
to occur by such date shall be due to the failure of the party seeking to
terminate this Agreement to perform or observe the covenants and agreements
of such party set forth herein;
(d) by either Parent or Target (provided that if the terminating party
is Target, Target shall not be in material breach of any of its obligations
under Section 6.03) if any approval of the stockholders of Target required
for the consummation of the Merger shall not have been obtained by reason
of the failure to obtain the required vote at a duly held meeting of
stockholders or at any adjournment or postponement thereof;
(e) by either Parent or Target (provided that the terminating party is
not then in material breach of any representation, warranty, covenant or
other agreement contained herein) if there shall have been a material
breach of any of the representations or warranties set forth in this
Agreement on the part of the other party, which breach is not cured within
forty-five days following written notice to the party committing such
breach, or which breach, by its nature, cannot be cured prior to the
Closing; or
(f) by either Parent or Target (provided that the terminating party is
not then in material breach of any representation, warranty, covenant or
other agreement contained herein) if there shall have been a material
breach of any of the covenants or agreements set forth in this Agreement on
the part of the other party, which breach shall not have been cured within
forty-five days following receipt by the breaching party of written notice
of such breach from the other party hereto.
8.02. Effect of Termination; Expenses. (a) In the event of termination of
this Agreement by either Parent or Target as provided in Section 8.01, this
Agreement shall forthwith become void and have no effect except (i) the last
sentence of Section 6.02(a), and Sections 6.02(c), 8.02 and 9.03, shall survive
any termination of this Agreement, and (ii) notwithstanding anything to the
contrary contained in this Agreement, no party shall be relieved or released
from any liabilities or damages arising out of its willful breach of any
provision of this Agreement.
(b) If this Agreement is terminated, expenses of the parties hereto
shall be determined as follows:
(i) Any termination of this Agreement pursuant to Section 8.01(a) or
Section 8.01(d) hereof shall be without cost, expense or liability on the
part of any party to the other. Any termination of this Agreement pursuant
to Section 8.01(e) or Section 8.01(f) hereof shall also be without cost,
liability or
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expense on the part of any party to the others, unless the breach of a
representation or warranty or the breach of a covenant 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").
(ii) If this Agreement is terminated pursuant to Section 8.01(b) or
Section 8.01(c) or the transactions contemplated hereby otherwise fail to
be consummated, in any such case because of the failure to receive any
required regulatory approval, Parent shall reimburse Target for all
Expenses; provided, however, that such Expenses shall only be reimbursed to
a maximum of $1,250,000.
(iii) 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.
8.03. Amendment. Subject to compliance with applicable law, this Agreement
may be amended by the parties hereto, by action taken or authorized by their
respective Boards of Directors, at any time before or after approval of the
matters presented in connection with the Merger by the stockholders of Target;
provided, however, that after any approval of the transactions contemplated by
this Agreement by Target's stockholders, there may not be, without further
approval of such stockholders, any amendment of this Agreement which reduces the
amount or changes the form of the consideration to be delivered to the Target
stockholders hereunder other than as contemplated by this Agreement. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
8.04. Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein; provided, however,
that after any approval of the transactions contemplated by this Agreement by
Target's stockholders, there may not be, without further approval of such
stockholders, any extension or waiver of this Agreement or any portion thereof
which reduces the amount or changes the form of the consideration to be
delivered to the Target stockholders hereunder other than as contemplated by
this Agreement. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party, but such extension or waiver or failure to
insist on strict compliance with an obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure.
ARTICLE IX
GENERAL PROVISIONS
9.01. Closing. Subject to the terms and conditions of this Agreement and
the Merger Agreement, the closing of the Merger (the "Closing") will take place
at 10:00 a.m. on a date to be specified by the parties, which shall be the first
day which is (a) the last business day of a month and (b) at least two business
days after the satisfaction or waiver (subject to applicable law) of the latest
to occur of the conditions set forth in Article VI hereof (the "Closing Date"),
at the offices of Bingham, Dana & Gould, unless another time, date or place is
agreed to in writing by the parties hereto.
9.02. Alternative Structure. Notwithstanding anything to the contrary
contained in this Agreement, prior to the Effective Time, Parent shall be
entitled to revise the structure of the Merger and/or the Subsidiary Merger and
related transactions provided that each of the transactions comprising such
revised structure shall (i) fully qualify as, or fully be treated as part of,
one or more tax-free reorganizations within the meaning of Section 368(a) of the
Code, and not subject any of the stockholders of Target to adverse tax
consequences or
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change the amount of consideration to be received by such stockholders, (ii) be
properly treated for financial reporting purposes as a pooling of interests,
(iii) be capable of consummation in as timely a manner as the structure
contemplated herein and (iv) not otherwise be prejudicial to the interests of
stockholders or employees of Target. This Agreement and any related documents
shall be appropriately amended in order to reflect any such revised structure.
9.03. Nonsurvival of Representations, Warranties and Agreements. None of
the representations, warranties, covenants and agreements in this Agreement or
in any instrument delivered pursuant to this Agreement (other than pursuant to
the Option Agreement, which shall terminate in accordance with its terms) shall
survive the Effective Time, except for those covenants and agreements contained
herein and therein which by their terms apply in whole or in part after the
Effective Time.
9.04. Expenses. Except as provided by Section 8.02(b) hereof, whether or
not the Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expense, provided, however, that the costs and expenses
of printing and mailing the Proxy Statement, and all filing and other fees paid
to the SEC or any other Governmental Entity in connection with the Merger, the
Subsidiary Merger and the other transactions contemplated hereby, shall be borne
equally by Parent and Target, provided, however, that nothing contained herein
shall limit either party's rights under Section 8.02 hereof, including, but not
limited to, the right to recover any liabilities or damages arising out of the
other party's willful breach of any provision of this Agreement.
9.05. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt requested)
or delivered by an express courier (with confirmation) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Parent, to:
Shawmut National Corporation
777 Main Street
Hartford, CT 06115
Fax: (203) 728-4205
Attn: Chief Executive Officer
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Fax: (212) 735-2000
Attn: William S. Rubenstein, Esq.
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and
(b) if to Target, to:
Peoples Bancorp of Worcester, Inc.
120 Front Street
Worcester, MA 01608
Fax: (508) 798-3743
Attn: Chief Executive Officer
with a copy to:
Bingham, Dana & Gould
150 Federal Street
Boston, MA 02110
Fax: (617) 951-8736
Attn: Neal J. Curtin, Esq.
9.06. Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The phrases "the date of this Agreement", "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to August 26, 1993.
9.07. Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
9.08. Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, other than the
Confidentiality Agreement, the Bank Merger Agreement and the Option Agreement.
9.09. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the Commonwealth of Massachusetts, without regard to
any applicable conflicts of law.
9.10. Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that the provisions contained in the last
sentence of Section 6.02(a) and in Section 6.02(c) of this Agreement were not
performed in accordance with its specific terms or was otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of the last sentence of Section 6.02(a) and
Section 6.02(c) of this Agreement and to enforce specifically the terms and
provisions thereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
9.11. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
9.12. Publicity. Except as otherwise required by law or the rules of the
NYSE or the National Association of Securities Dealers, so long as this
Agreement is in effect, neither Parent nor Target shall, or shall permit any of
its Subsidiaries to, issue or cause the publication of any press release or
other public announcement with respect to, or otherwise make any public
statement concerning, the transactions
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contemplated by this Agreement without the consent of the other party, which
consent shall not be unreasonably withheld.
9.13. Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns. Except as otherwise expressly provided herein, this
Agreement (including the documents and instruments referred to herein) is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
IN WITNESS WHEREOF, Parent, Merger Sub and Target have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written.
SHAWMUT NATIONAL CORPORATION
By /s/ JOEL B. ALVORD
Name: Joel B. Alvord
Title: Chairman of the Board and
Chief Executive Officer
Attest:
/s/ WILLIAM J. DAILEY III
Name: William J. Dailey III
SHAWMUT SERVICE CORPORATION
By /s/ BENNETT F. VIVERITO
Name: Bennett F. Viverito
Title: President
Attest:
/s/ HARRIET MUNRETT WOLFE
Name: Harriet Munrett Wolfe
Title: Assistant Secretary
PEOPLES BANCORP OF
WORCESTER, INC.
By /s/ WOODBURY C. TITCOMB
Name: Woodbury C. Titcomb
Title: President
Attest:
/s/ WILLIAM J. DAILEY III
Name: William J. Dailey III
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<PAGE> 111
November 10, 1993
Peoples Bancorp of Worcester, Inc.
120 Front Street
Worcester, Massachusetts 06108
Attention: Chief Executive Officer
Re: AMENDMENT NO. 1 TO MERGER AGREEMENT
Gentlemen:
Reference is made to the Agreement and Plan of Merger, dated as of August
26, 1993 (the "Merger Agreement"), by and among Shawmut National Corporation, a
Delaware corporation, Shawmut Service Corporation, a Delaware corporation and a
wholly owned subsidiary of Parent, and Peoples Bancorp of Worcester, Inc. a
Delaware corporation. Capitalized terms which are not otherwise defined herein
shall have the meaning set forth in the Merger Agreement.
The second Recital to the Merger Agreement is hereby amended in its
entirety to read as follows:
WHEREAS, as soon as practicable after the execution and delivery of
this Agreement, Shawmut Bank, National Association, a national banking
association and an indirect wholly owned subsidiary of Parent
("Massachusetts Bank" and sometimes referred to herein as the "Surviving
Bank"), and Peoples Savings Bank, a Massachusetts savings bank and a wholly
owned subsidiary of Target ("Target Bank"), will enter into a Subsidiary
Agreement and Plan of Merger (the "Bank Merger Agreement") providing for
the merger (the "Subsidiary Merger") of Target Bank with and into
Massachusetts Bank, and it is intended that the Subsidiary Merger be
consummated immediately prior to the consummation of the Merger; and
This letter of agreement may be executed by the parties hereto on separate
counterparts, and when so executed, each such counterpart shall be deemed to be
an original, said counterparts together to constitute one and the same
instrument.
If the foregoing correctly states our understanding and agreement, kindly
acknowledge and return this letter of agreement to the attention of the
undersigned.
Sincerely,
SHAWMUT NATIONAL CORPORATION
BY: /s/ RAYMOND A. GUENTER
Name: Raymond A. Guenter
Title: Executive Vice President
SHAWMUT SERVICE CORPORATION
BY: /s/ RAYMOND A. GUENTER
Name: Raymond A. Guenter
Title: Vice President
Agreed and Acknowledged:
PEOPLES BANCORP OF WORCESTER, INC.
BY: /s/ WOODBURY C. TITCOMB
Name: Woodbury C. Titcomb
Title: President
<PAGE> 112
ANNEX B
August 25, 1993
Shawmut National Corporation
777 Main Street
Hartford, CT 06115
Gentlemen:
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
$0.10 per share (the "Shares"), of Peoples Bancorp of Worcester, Inc. (the
"Company") indicated opposite such Stockholder's name below.
Simultaneously with the execution of this letter agreement, Shawmut
National Corporation ("Parent") and the Company are entering into an Agreement
and Plan of Merger (the "Merger Agreement") providing, among other things, for
the merger of a subsidiary of Parent with the Company (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 Company
or any of its subsidiaries with any person or entity other than Parent and
its subsidiaries, all of the Shares that such Stockholder shall be entitled
to so vote, whether such Shares are held by such Stockholder on the date of
this letter agreement or are subsequently acquired whether pursuant to the
exercise of stock options or otherwise.
2. Each Stockholder will not sell, assign, transfer or otherwise
dispose of (including, without limitation, by the creation of a Lien (as
defined in paragraph 4 below)) or permit to be sold, assigned, transferred
or otherwise disposed of any Shares owned by such Stockholder, whether such
Shares are held by such Stockholder on the date of this letter agreement or
are subsequently acquired, whether pursuant to the exercise of stock
options or otherwise, except (a) for transfers by will or by operation of
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 approval of Parent's
acquisition of the Shares pursuant to the Merger.
4. Each of the Stockholders severally represents that such Stockholder
has the complete and unrestricted power and the unqualified right to enter
into and perform the terms of this letter agreement. Each of the
Stockholders further severally represents that this letter agreement
constitutes 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 Stockholder owns the number of
Shares indicated opposite such Stockholder's name below, free and clear 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 termination of the Merger
Agreement in accordance with Article VIII thereof.
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<PAGE> 113
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 State 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.
Please confirm our agreement with you by signing a copy of this letter.
Very truly yours,
<TABLE>
<CAPTION>
DIRECTOR OR NUMBER OF
EXECUTIVE OFFICER SHARES SIGNATURES
- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C>
Henry S. Poler -----------------------------
Diane Benison -----------------------------
Palmer W. Bigelow, Jr. -----------------------------
Henry J. Ciborowski -----------------------------
Richard V. Kesseli -----------------------------
Arthur F. Koskinas -----------------------------
Julie Martin Sanders -----------------------------
Robert B. Ayres -----------------------------
Richard B. Hutchins -----------------------------
Anne M. Morgan -----------------------------
James J. Moynihan -----------------------------
Oscar R. Rudnick -----------------------------
</TABLE>
B-2
<PAGE> 114
<TABLE>
<CAPTION>
DIRECTOR OR NUMBER OF
EXECUTIVE OFFICER SHARES SIGNATURES
- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C>
Cushing C. Bozenhard ------------------------------
Ralph D. Crowley ------------------------------
Henry B. Dewey ------------------------------
Woodbury C. Titcomb ------------------------------
Corinne C. Turner ------------------------------
David K. Woodbury ------------------------------
George C. Rand, Jr. ------------------------------
Brian W. Thompson ------------------------------
James K. Hunt ------------------------------
Sam H. Hokkanen ------------------------------
</TABLE>
AGREED TO AND ACCEPTED
THIS 25th DAY OF August, 1993
SHAWMUT NATIONAL CORPORATION
By
Name:
Title:
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<PAGE> 115
ANNEX C
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 August 26, 1993 (the "Agreement"), by
and between Peoples Bancorp of Worcester, Inc., a Delaware corporation
("Issuer"), and Shawmut National Corporation, a Delaware corporation
("Grantee").
WHEREAS, Grantee, Shawmut Services Corporation, a wholly owned subsidiary
of Grantee ("Merger Sub"), 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 Issuer with and into Merger Sub, with Merger Sub
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 660,000 shares (subject to adjustment as set forth herein) shares (the
"Option Shares") of common stock, par value $0.10 per share ("Issuer Common
Stock"), of Issuer at a purchase price (subject to adjustment as set forth
herein) of $35.00 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) termination of the Merger Agreement in
accordance with the terms thereof prior to the occurrence of a Purchase Event
(other than a termination of the Merger Agreement by Grantee pursuant to Section
8.01(f) thereof which termination is due to a breach of Section 5.01(e) or
Section 6.03 thereof) or (iv) 12 months after the termination of the Merger
Agreement by Grantee pursuant to Section 8.01(f) thereof which termination is
due to a breach of Section 5.01(e) or Section 6.03 thereof (provided, however,
that if within 12 months after a termination of the Merger Agreement under the
circumstances described in this clause (iv) 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"). 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) Issuer shall have authorized, recommended, publicly proposed 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 Offer or an Exchange Offer (as defined
below). 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 internal mergers, reorganizations, consolidations
or
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dissolutions involving only existing Subsidiaries), (B) the disposition, by
sale, lease, exchange or otherwise, of all or substantially all of the
assets of Issuer or any of its Subsidiaries representing 10% or more of the
consolidated assets of Issuer and its Subsidiaries taken as a whole (a
"Material Subsidiary") or (C) the issuance, sale or other disposition of
(including by way of merger, consolidation, share exchange or any similar
transaction) securities representing 15% or more of the voting power of
Issuer or any material Subsidiary;
(ii) any person (other than Grantee or any Subsidiary of Grantee)
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, 15% or more of the then outstanding
shares of Issuer Common Stock;
(iii) any person (other than Grantee or any Subsidiary of Grantee)
shall have commenced (as such term is defined in Rule 14d-2 under the
Exchange Act) or shall have filed a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to,
a tender offer or exchange offer to purchase any shares of Issuer Common
Stock such that, upon consummation of such offer, such person would own or
control 15% or more of the then outstanding shares of Issuer Common Stock
(such an offer being referred to herein as a "Tender Offer" or an "Exchange
Offer," respectively); or
(iv) 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.
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 14(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, other than any such lien or encumbrance created by Grantee
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") prior or
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subsequent 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 AUGUST 26, 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. Except as disclosed pursuant to the Merger
Agreement, 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 Certificate of Incorporation or By-Laws of Issuer or the
certificates of incorporation, by-laws or similar governing documents of
any of its Significant 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) 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,
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
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additional shares of Issuer Common Stock (together with any Rights which
may have 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, except any such lien or encumbrance created
by Grantee, including any preemptive rights of any stockholder of Issuer.
(d) Board Action. By action of at least two-thirds of the Continuing
Directors (as such term is defined in Article VI of Issuer's Certificate of
Incorporation) of Issuer prior to the execution of this Agreement,
resolutions were duly adopted (x) 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. Accordingly, the provisions of Section 203 of the DGCL
and Article VI of Issuer's Certificate of Incorporation as they relate to
Issuer do not and will not apply to this Agreement or any of the other
transactions contemplated hereby.
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, 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 19.9% 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 Issuer or 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
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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 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 substantially all of
the Issuer's assets.
(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) 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. 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 (or a majority of interest of the Grantees if there shall be more
than one Grantee (a "Grantee Majority")).
(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 19.9% 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 19.9% of the aggregate of the shares of Substitute Common Stock
but for this clause (f), the Substitute
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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 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, 10 and 11 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 and (II) all 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;
(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
(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, 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 the certificates evidencing the shares of Issuer Common Stock
purchased thereunder with respect to which Grantee then has beneficial
ownership, 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 the Federal
Reserve Board or other 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 the Federal Reserve Board or any other
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
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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 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) 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; provided, further,
that for purposes of Section 8(a)(iii) hereof in no event shall the Applicable
Price exceed the average (the "Charter Average Value") for the twenty trading
business days prior to the date of the payment of the Section 8 Repurchase
Consideration of (whichever is applicable) (i) the average of the closing bid
and asked price quotations for shares of Issuer Common Stock provided by the
National Association of Security Dealers as published in The Wall Street Journal
for each trading business day and in the absence of such published price
quotations for any date, the bid and asked price quotations appearing on the
National Association of Securities Dealers Automated Quotation ("NASDAQ") System
as of 4 o'clock p.m. Eastern Standard Time, (ii) the average of the closing
prices of shares of Issuer Common Stock on the NASDAQ National Market as
published in The Wall Street Journal for each trading business day and in the
absence of such published closing price for any date, the closing price
appearing on the NASDAQ System for that date, or (iii) if shares of Issuer
Common Stock are listed on a national securities exchange, the closing price of
such stock, as reported by such exchange, for each trading business day,
consistent with the provisions of Article XIV of Issuer's Certificate of
Incorporation. 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 (or a Grantee
Majority) 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 or
any "group" (as such term is defined under the Exchange Act) (other than Grantee
or any Subsidiary of Grantee) shall have acquired 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.
(e) Notwithstanding anything in this Agreement to the contrary, Grantee
shall have no right to cause Issuer to repurchase from Grantee any shares of
Issuer Common Stock purchased by Grantee pursuant hereto if the Purchase Price
paid by Grantee for such shares exceeds the Charter Average Value at the time
such repurchase would otherwise occur.
9. First Refusal. At any time after the first occurrence of a Purchase
Event and prior to the later of (a) the expiration of 24 months immediately
following the first purchase of shares of Issuer Common Stock pursuant to the
Option, or (b) the termination of the Option pursuant to Section 3(a) hereof, if
Grantee shall
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desire to sell, assign, transfer or otherwise dispose of all or any of the
shares of Issuer Common Stock acquired by it pursuant to the Option, it shall
give Issuer written notice of the proposed transaction (an "Offeror's Notice"),
identifying the proposed transferee, accompanied by a copy of a binding offer to
purchase such shares or other securities signed by such transferee and setting
forth the terms of the proposed transaction. An Offeror's Notice shall be deemed
an offer by Grantee to Issuer, which may be accepted within 10 business days of
the receipt of such Offeror's Notice, on the same terms and conditions and at
the same price at which Grantee is proposing to transfer such shares or other
securities to such transferee. The purchase of such shares by Issuer shall be
settled within 2 business days of the date of the acceptance of the offer and
the purchase price shall be paid to Grantee in immediately available funds;
provided that, if prior notification to or approval of the Federal Reserve Board
or any other regulatory authority is required in connection with such purchase,
Issuer shall promptly file the required notice or application for approval and
shall expeditiously process the same (and Grantee shall cooperate with Issuer in
the filing of any such notice or application and the obtaining of any such
approval) and the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which, as the case may be, (a) any
required notification period has expired or been terminated or (b) such approval
has been obtained and, in either event, any requisite waiting period shall have
passed. In the event of the failure or refusal of Issuer to purchase all the
shares or other securities covered by an Offeror's Notice or if the Federal
Reserve Board or any other regulatory authority disapproves Issuer's proposed
purchase of such shares or other securities, Grantee may, within 150 days from
the date of the Offeror's Notice (subject to any necessary extension for
regulatory notification, approval, or waiting periods), sell all, but not less
than all, of such shares or other securities to the proposed transferee at no
less than the price specified and on terms no more favorable to the proposed
transferee than those set forth in the Offeror's Notice. The requirements of
this Section 9 shall not apply to (i) any disposition of Issuer Common Stock or
other securities by a person to whom Grantee has assigned its rights under the
Option with the consent of Issuer, (ii) any sale by means of a public offering
registered under the Securities Act in which steps are taken to reasonably
assure that no purchaser will acquire securities representing more than 2% of
the outstanding voting power of Issuer or (iii) any transfer to a direct or
indirect wholly owned subsidiary of Grantee which agrees in writing to be bound
by the terms hereof.
10. Registration Rights. Issuer shall, if requested by Grantee (or if
applicable, a Grantee Majority) 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 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 90 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 10, 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 10
Issuer effects a registration under the Securities Act 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 10;
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
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with any registration pursuant to this Section 10, 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 10 by reason of the
fact that there shall be more than one Grantee.
11. 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.
12. 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.
13. 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 DPC 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 13.
14. Miscellaneous. (a) Expenses. Except as otherwise provided in Section
10 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, the Bank Merger Agreement and the
other agreements, documents and instruments referred to herein and therein (a)
constitutes 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, the Merger Agreement or
the Bank Merger Agreement, this Agreement shall be deemed to amend the
confidentiality agreement, dated July 7, 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
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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 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 Commonwealth 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:
Peoples Bancorp of Worcester, Inc.
120 Front Street
Worcester, MA 01608
Attention: Chief Executive Officer
Telecopier no.: (508) 798-3743
with a copy to:
Bingham, Dana & Gould
150 Federal Street
Boston, MA 02110
Attention: Neal J. Curtin, Esq.
Telecopier no.: (617) 951-8736
If to Grantee to:
Shawmut National Corporation
777 Main Street
Hartford, CT 06115
Attention: Chief Executive Officer
Telecopier no.: (203) 728-4205
with copies 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.
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(h) Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder or under 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 after the occurrence of a
Purchase Event Grantee may assign its rights under this Agreement to third
parties, provided that no assignment to any one person or group of related
persons shall involve a portion of the Option representing more than 2% of the
outstanding Issuer Common Stock. 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.
PEOPLES BANCORP OF WORCESTER, INC.
By /s/ WOODBURY C. TITCOMB
Name: Woodbury C. Titcomb
Title: President and Chief
Executive Officer
SHAWMUT NATIONAL CORPORATION
By /s/ JOEL B. ALVORD
Name: Joel B. Alvord
Title: Chairman of the Board and
Chief Executive Officer
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ANNEX D
MCDANIELS & CO.
24 SCHOOL STREET
BOSTON, MASSACHUSETTS 02108
TELEPHONE (617) 227-5757
FAX (617) 227-8887
March 30, 1994
Board of Directors
Peoples Bancorp of Worcester, Inc.
120 Front Street
Worcester, Massachusetts 01608
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of the common stock, par value
$0.10 per share (the "Company Common Shares"), of Peoples Bancorp of Worcester,
Inc. (the "Company") of the Exchange Ratio (as defined below) in the
contemplated merger (the "Merger") of the Company with and into Shawmut Service
Corporation ("SSC"), a wholly-owned subsidiary of Shawmut National Corporation
("Shawmut"), pursuant to the terms of the Agreement and Plan of Merger dated as
of August 26, 1993, as amended, among Shawmut, SSC and the Company (the
"Agreement").
Pursuant to the Agreement, and except as otherwise provided therein, each
Company Common Share will be converted into and exchangeable for that number of
shares (the "Exchange Ratio") of the common stock, par value $0.01 per share, of
Shawmut (the "Shawmut Common Shares"), rounded to the nearest thousandth of a
Shawmut Common Share, that is equal to the result of $52.00 divided by the
Average Closing Price (as defined in the Agreement) for Shawmut Common Shares,
provided, however, that (i) if the Average Closing Price is greater than or
equal to $27.744, the Exchange Ratio shall be 1.874 (the "Minimum Exchange
Ratio"), unless the Company waives the applicability of the Minimum Exchange
Ratio and (ii) if the Average Closing Price is less than or equal to $20.506,
the Exchange Ratio shall be 2.536 (the "Maximum Exchange Ratio"), unless Shawmut
waives the applicability of the Maximum Exchange Ratio. Further, the Agreement
provides: (a) that it is a condition precedent (which the Company may waive) to
the Company's obligation to effect the Merger that the Average Closing Price
shall not be less than $20.506, unless Shawmut has waived the applicability of
the Maximum Exchange Ratio; and (b) that it is a condition precedent (which
Shawmut may waive) to Shawmut's obligation to effect the Merger that the Average
Closing Price shall not be more than $27.744, unless the Company has waived the
applicability of the Minimum Exchange Ratio. Were the Company to waive the
applicability of the Minimum Exchange Ratio, or Shawmut the applicability of the
Maximum Exchange Ratio, then the Exchange Ratio would equal the result of $52.00
divided by the Average Closing Price.
McDaniels & Co., as a part of its investment banking business, is engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, private placements and valuations for 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 have received compensation from the
Company in connection with our engagement as financial advisor and are entitled
to receive additional compensation upon consummation of the Merger.
In arriving at our opinion, we have reviewed, among other things: (i) the
Agreement; (ii) Shawmut's Registration Statement on Form S-4 (which includes the
Proxy Statement-Prospectus for the special meeting of the shareholders of the
Company to be held pursuant to the Agreement) dated as of the date hereof; (iii)
the Annual Reports to Shareholders and the Annual Reports on Form 10-K of
Shawmut and the Company for the five years ended December 31, 1993 and 1992,
respectively; (iv) certain Quarterly Reports to Shareholders and Quarterly
Reports on Form 10-Q of Shawmut and the Company; (v) certain Current
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<PAGE> 127
Reports on Form 8-K of Shawmut and the Company; (vi) certain press releases of
Shawmut and the Company; (vii) certain other financial information concerning
the businesses and operations of Shawmut and the Company, including certain
internal financial analyses and forecasts that were prepared by members of the
respective senior managements; (viii) certain financial and securities data
(including historical share prices and trading volumes) and other information
that was publicly available concerning Shawmut, the Company and various other
companies whose securities are traded in public markets; and (ix) certain
publicly-available data concerning the financial terms of selected recent
business combinations in the commercial banking and thrift industries that we
deemed relevant. We have also held discussions with members of the senior
managements of Shawmut and the Company regarding the past and current business
operations, financial conditions and performance, regulatory agreements and
relationships, and future prospects (as contained in their respective internal
analyses and forecasts and otherwise) of their respective companies.
In conducting our review and arriving at our opinion, we have assumed and
relied upon, without independent verification, the accuracy, completeness and
fairness of all of the financial and other information that was publicly
available or that was provided to us by Shawmut and the Company or their
respective representatives. In that regard, we have assumed: (i) that the
internal financial and operating forecasts and projections (and the assumptions
and bases related thereto) of Shawmut and the Company which we reviewed and
discussed with members of their respective senior managements were reasonably
prepared and reflect the best currently available estimates and judgments of
such managements; and (ii) that such forecasts and projections will be realized
in the amounts and time periods currently estimated by such managements. We have
also assumed, without independent verification, that the aggregate reserves for
possible loan losses for Shawmut and the Company are adequate to cover such
losses. We did not make or obtain any independent evaluations or appraisals of
any assets or liabilities of Shawmut or the Company or any of their respective
subsidiaries nor did we verify any of Shawmut's or the Company's books and
records or review any individual loan credit files. We have relied as to all
legal matters (other than in regard to our opinion or role as the Company's
financial advisor) on advice of counsel to the Company. Further, we have assumed
that the Merger will be accounted for as a pooling-of-interests transaction
under United States generally accepted accounting principles. Finally, we have
considered such financial, economic and other factors and conducted such
financial and other studies and analyses as we deemed appropriate under the
circumstances.
Based upon and subject to the foregoing and such other factors as we deem
relevant, we are of the opinion that, as of the date hereof, the Exchange Ratio
pursuant to the Agreement is fair to the holders of the Company Common Shares
from a financial point of view.
Yours sincerely,
McDaniels & Co.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify directors and officers as well as other employees and
individuals against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement in connection with specified actions, suits or
proceedings, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation--a "derivative action"), if
they acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe their conduct
was unlawful. A similar standard is applicable in the case of derivative
actions, except that indemnification only extends to expenses (including
attorneys' fees) incurred in connection with the defense or settlement of such
action, and the statute requires court approval before there can be any
indemnification where the person seeking indemnification has been found liable
to the corporation. The statute provides that it is not exclusive of other
indemnification that may be granted by a corporation's charter, by-laws,
disinterested director vote, stockholder vote, agreement or otherwise. Sections
14-24 of Shawmut's By-laws provide for the indemnification of its directors and
officers as authorized by Section 145 of the Delaware General Corporation Law.
Article Fifth of Shawmut's Restated Certificate of Incorporation provides
that no director of Shawmut shall be personally liable to Shawmut or its
stockholders for monetary damages for any breach of his fiduciary duty as a
director except for liability (1) for any breach of the director's duty of
loyalty to Shawmut or its stockholders, (2) for acts or omissions that are not
in good faith or involve intentional misconduct or a knowing violation of the
law, (3) under Section 174 of the Delaware General Corporation Law or (4) for
any transaction from which the director derived an improper personal benefit.
The directors and officers of Shawmut and its subsidiaries are insured
(subject to certain exceptions and deductions) against liabilities which they
may incur in their capacity as such, including liabilities under the Securities
Act of 1933, under liability insurance policies carried by Shawmut. In addition,
Shawmut has entered into indemnification agreements with the directors of
Shawmut which provide that Shawmut will honor its obligations pursuant to its
By-laws within 30 days of written demand and will, under certain circumstances,
provide security for its obligations to indemnify. Section 8(k) of the Federal
Deposit Insurance Act prohibits or limits certain types of indemnification
payments to directors and officers as well as other employees and individuals
who are "institution-affiliated parties".
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<PAGE> 129
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<S> <C> <C>
2(a) -- Agreement and Plan of Merger, dated as of August 26, 1993, as amended, by and
among Shawmut National Corporation, Shawmut Service Corporation and Peoples
Bancorp of Worcester, Inc., is included as Annex A to the Proxy
Statement/Prospectus which is part of this Registration Statement.
3(a) -- Restated Certificate of Incorporation, previously filed and incorporated by
reference to Shawmut National Corporation's Registration Statement on Form S-4
(file no. 33-17765) filed October 7, 1987.
3(b) -- By-laws, as amended, previously filed and incorporated by reference to Shawmut
National Corporation's Registration Statement on Form S-4 (file no. 33-17765)
filed October 7, 1987.
3(c) -- By-laws, as amended, previously filed and incorporated by reference to Shawmut
National Corporation's Quarterly Report on Form 10-Q filed November 12, 1993.
4(a) -- Shareholder Rights Plan, previously filed and incorporated by reference to
Shawmut National Corporation's Registration Statement on Form 8-A (file no.
1-10102) filed March 7, 1989.
4(b) -- Designation of Adjustable Rate Preferred Stock, previously filed and
incorporated by reference to Shawmut National Corporation's Registration
Statement on Form S-4 (file no. 33-17765) filed October 7, 1987.
4(c) -- Designation of 9.30% Cumulative Preferred Stock, previously filed and
incorporated by reference to Shawmut National Corporation's Current Report on
Form 8-K dated October 27, 1992.
4(d) -- Certificate of Correction of Certificate of Designation of 9.30% Cumulative
Preferred Stock, previously filed and incorporated by reference to Exhibit No.
4 to Shawmut National Corporation's Quarterly Report on Form 10-Q for the
period ended September 30, 1992.
4(e) -- Amended Certificate of Designation of the 9.30% Cumulative Preferred Stock,
previously filed and incorporated by reference to Shawmut National
Corporation's Annual Report on Form 10-K for the year ended December 31, 1992.
5 -- Opinion of Skadden, Arps, Slate, Meagher & Flom.
8 -- Opinion of Skadden, Arps, Slate, Meagher & Flom.
10(a) -- Voting Agreement, dated as of August 26, 1993, by and among Shawmut National
Corporation and certain stockholders of Peoples Bancorp of Worcester, Inc., is
included as Annex B to the Proxy Statement/Prospectus which is part of this
Registration Statement.
10(b) -- Stock Option Agreement, dated as of August 26, 1993, by and between Peoples
Bancorp of Worcester, Inc. and Shawmut National Corporation, is included as
Annex C to the Proxy Statement/Prospectus which is part of this Registration
Statement.
23(a) -- Consent of Price Waterhouse, Hartford, Connecticut.
23(b) -- Consent of Price Waterhouse, Boston, Massachusetts.
23(c) -- Consent of Ernst & Young, Worcester, Massachusetts.
23(d) -- Consent of Ernst & Young, Hartford, Connecticut.
23(e) -- Consent of Wolf & Company, P.C., Boston, Massachusetts
23(f) -- Consent of Wolf & Company, P.C., Boston, Massachusetts
23(g) -- Consent of McDaniels & Co.
23(h) -- Consent of Skadden, Arps, Slate, Meagher & Flom (included in Exhibit 5).
23(i) -- Consent of Skadden, Arps, Slate, Meagher & Flom (included in Exhibit 8).
23(j) -- Consent of Coopers & Lybrand, Hartford, Connecticut.
24 -- Powers of Attorney (see the signature page to this Form S-4 Registration
Statement).
99 -- Opinion of McDaniels & Co. is included as Annex D to the Proxy
Statement/Prospectus which is part of this Registration Statement.
</TABLE>
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<PAGE> 130
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) which is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such offering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(d) The undersigned Registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (c) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to any existing provision or arrangement or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
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indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(f) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statements through
the date of responding to the request.
(g) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Hartford, State of Connecticut, on March 30, 1994.
SHAWMUT NATIONAL CORPORATION
By: /s/ JOEL B. ALVORD
------------------------------------
Joel B. Alvord
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1993, this
Registration Statement has been signed below by the following persons in the
capacities indicated on March 30, 1994.
We, the undersigned officers and directors of Shawmut National Corporation,
hereby severally and individually constitute and appoint Joel B. Alvord, Gunnar
S. Overstrom, Jr., Raymond A. Guenter and each of them, the true and lawful
attorneys and agents (with full power of substitution and resubstitution in each
case) of each of us to execute in the name, place and stead of each of us
(individually and in any capacity stated below) any and all amendments to this
Registration Statement on Form S-4 and all instruments necessary or advisable in
connection therewith and to file the same with the Securities and Exchange
Commission, each of said attorneys and agents to have power to act with or
without the other and to have full power and authority to do and perform in the
name and on behalf of each of the undersigned every act whatsoever necessary or
advisable to be done in the premises as fully and to all intents and purposes as
any of the undersigned might or could do in person, and we hereby ratify and
confirm our signatures as they may be signed by our said attorneys and agents
and each of them to any and all such amendments and instruments.
<TABLE>
<CAPTION>
SIGNATURES TITLE
- ------------------------------------------ -----------------------------------------------
<S> <C>
/s/ JOEL B. ALVORD Chairman, Chief Executive Officer, and Director
- ------------------------------------------ (Principal Executive Officer)
Joel B. Alvord
/s/ GUNNAR S. OVERSTROM, JR. President, Chief Operating Officer and Director
- ------------------------------------------
Gunnar S. Overstrom, Jr.
/s/ BHARAT BHATT Chief Financial Officer (Principal Financial
- ------------------------------------------ Officer and Principal Accounting Officer)
Bharat Bhatt
/s/ STILLMAN B. BROWN Director
- ------------------------------------------
Stillman B. Brown
/s/ JOHN T. COLLINS Director
- ------------------------------------------
John T. Collins
</TABLE>
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<TABLE>
<CAPTION>
SIGNATURES TITLE
- ------------------------------------------ -----------------------------------------------
<S> <C>
/s/ FERDINAND COLLOREDO-MANSFELD Director
- ------------------------------------------
Ferdinand Colloredo-Mansfeld
Director
- ------------------------------------------
Bernard M. Fox
Director
- ------------------------------------------
Herbert W. Jarvis
/s/ ROBERT J. MATURA Director
- ------------------------------------------
Robert J. Matura
Director
- ------------------------------------------
Maurice Segall
Director
- ------------------------------------------
Lois D. Rice
/s/ PAUL R. TREGURTHA Director
- ------------------------------------------
Paul R. Tregurtha
/s/ WILSON WILDE Director
- ------------------------------------------
Wilson Wilde
</TABLE>
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<PAGE> 134
<TABLE>
<CAPTION>
EXHIBIT
INDEX PAGE
- -------- -----------
<S> <C> <C>
2(a) --Agreement and Plan of Merger, dated as of August 26, 1993, as
amended, by and between Shawmut National Corporation and Peoples
Bancorp of Worcester, Inc., is included as Annex A to the Proxy
Statement/Prospectus which is part of this Registration Statement.
3(a) --Restated Certificate of Incorporation, previously filed and
incorporated by reference to Shawmut National Corporation's
Registration Statement on Form S-4 (file no. 33-17765) filed October
7, 1987.
3(b) --By-laws, as amended, previously filed and incorporated by reference
to Shawmut National Corporation's Registration Statement on Form S-4
(file no. 33-17765) filed October 7, 1987.
3(c) --By-laws, as amended, previously filed and incorporated by reference
to Shawmut National Corporation's Quarterly Report on Form 10-Q filed
November 12, 1993.
4(a) --Shareholder Rights Plan, previously filed and incorporated by
reference to Shawmut National Corporation's Registration Statement on
Form 8-A (file no. 1-10102) filed March 7, 1989.
4(b) --Designation of Adjustable Rate Preferred Stock, previously filed and
incorporated by reference to Shawmut National Corporation's
Registration Statement on Form S-4 (file no. 33-17765) filed October
7, 1987.
4(c) --Designation of 9.30% Cumulative Preferred Stock, previously filed and
incorporated by reference to Shawmut National Corporation's Current
Report on Form 8-K dated October 27, 1992.
4(d) --Certificate of Correction of Certificate of Designation of 9.30%
Cumulative Preferred Stock, previously filed and incorporated by
reference to Exhibit No. 4 to Shawmut National Corporation's
Quarterly Report on Form 10-Q for the period ended September 30,
1992.
4(e) --Amended Certificate of Designation of the 9.30% Cumulative Preferred
Stock, previously filed and incorporated by reference to Shawmut
National Corporation's Annual Report on Form 10-K for the year ended
December 31, 1992.
5 --Opinion of Skadden, Arps, Slate, Meagher & Flom.
8 --Opinion of Skadden, Arps, Slate, Meagher & Flom.
10(a) --Stock Option Agreement, dated as of August 26, 1993, by and between
Peoples Bancorp of Worcester, Inc. and Shawmut National Corporation,
is included as Annex C to the Proxy Statement/Prospectus which is
part of this Registration Statement.
10(b) --Voting Agreement, dated as of August 26, 1993, by and among Shawmut
National Corporation and certain stockholders of Peoples Bancorp of
Worcester, Inc., is included as Annex B to the Proxy
Statement/Prospectus which is part of this Registration Statement.
23(a) --Consent of Price Waterhouse, Hartford, Connecticut.
23(b) --Consent of Price Waterhouse, Boston, Massachusetts.
23(c) --Consent of Ernst & Young, Worcester, Massachusetts.
23(d) --Consent of Ernst & Young, Hartford, Connecticut.
23(e) --Consent of McDaniels & Co.
23(f) --Consent of Wolf & Company, P.C., Boston, Massachusetts.
23(g) --Consent of Wolf & Company, P.C., Boston, Massachusetts.
23(h) --Consent of Skadden, Arps, Slate, Meagher & Flom (included in Exhibit
5).
23(i) --Consent of Skadden, Arps, Slate, Meagher & Flom (included in Exhibit
8).
23(j) --Consent of Coopers & Lybrand, Hartford, Connecticut.
24 --Powers of Attorney (see the signature page to this Form S-4
Registration Statement).
99 --Opinion of McDaniels & Co. is included as Annex D to the Proxy
Statement/Prospectus which is part of this Registration Statement.
</TABLE>
<PAGE> 1
EXHIBIT 5
March 30, 1994
Board of Directors
Shawmut National Corporation
777 Main Street
Hartford, Connecticut 06115
Re: Shawmut National Corporation
Registration Statement on Form S-4
Gentlemen:
We have acted as special counsel to Shawmut National Corporation, a
Delaware corporation (the "Company"), in connection with the issuance and sale
by the Company of an aggregate of up to 11,000,000 shares (the "Shares") of
common stock, par value $0.01 per share (the "Common Stock"), together with an
equal number of rights to purchase units of Series A Junior Participating
Preferred Stock associated therewith (the "Rights"), of the Company pursuant to
an Agreement and Plan of Merger, dated as of August 26, 1993, as amended (the
"Merger Agreement"), by and among the Company, Shawmut Service Corporation, a
Delaware corporation and a wholly owned subsidiary of the Company, and Peoples
Bancorp of Worcester, Inc., a Delaware corporation.
This opinion is delivered in accordance with the requirements of Item
601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended.
In connection with this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
(i) the Registration Statement of the Company on Form S-4 filed with the
Securities and Exchange Commission (the "Commission") on the date hereof (the
"Registration Statement"); (ii) the form of certificates to be used to represent
the Shares (and the Rights); (iii) the Certificate of Incorporation and By-Laws
of the Company, as amended to date; (iv) resolutions adopted by the Board of
Directors of the Company relating to the Merger Agreement (including the
amendment thereto) and the issuance of the Shares and the Rights pursuant
thereto; (v) the Rights Agreement, dated as of February 28, 1989 (the "Rights
Agreement"), between the Company and Manufacturers Hanover Trust Company, as
Rights Agent; and (vi) such other documents as we have deemed necessary or
appropriate as a basis for the opinion set forth below.
In our examination, we have assumed the genuineness of all signatures, the
legal capacity of all natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed or photostatic copies, and the
authenticity of the originals of such copies. As to any other facts material to
this opinion which we did not independently establish or verify, we have relied
upon statements or representations of officers and other representatives of the
Company and others.
In rendering this opinion, we have assumed that, if the Company issues in
excess of 8,753,763 shares of Common Stock (and associated Rights) pursuant to
the Merger Agreement, the Board of Directors of the Company, including any
appropriate committee appointed thereby, and appropriate officers of the Company
have taken all necessary corporate action to approve the issuance of such
additional shares of Common Stock and Rights and related matters.
Members of this firm are admitted to the bar in the State of Delaware, and
we express no opinion as to the laws of any other jurisdiction.
<PAGE> 2
Board of Directors
March , 1994
Page 2
Based upon the foregoing and assuming the due execution and delivery of
certificates representing the Shares in the form examined by us, we are of the
opinion that (i) the Shares to be issued by the Company pursuant to the Merger
Agreement, when issued in accordance with the terms of the Merger Agreement,
will be duly authorized, validly issued, fully paid and nonassessable and (ii)
the Rights, when issued as described in the Registration Statement and in
accordance with the Rights Agreement, will be duly authorized and validly
issued.
We hereby consent to the filing of this opinion with the Commission as
Exhibit 5 to the Registration Statement. We also consent to the reference to our
firm under the caption "Legal Opinions" in the Registration Statement. In giving
such consent we do not thereby admit that we are in the category of persons
whose consent is required under Section 7 of the Act.
Very truly yours,
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM
<PAGE> 1
EXHIBIT 8
March 30, 1994
Shawmut National Corporation
777 Main Street
Hartford, CT 06115
Ladies and Gentlemen:
We have acted as your counsel in connection with the Registration Statement
on Form S-4 filed on the date hereof with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the "Securities
Act"). The Registration Statement relates to the proposed merger of Peoples
Bancorp of Worcester Inc. with and into Shawmut Service Corporation and the
proposed merger of Peoples Savings Bank into Shawmut Bank N.A. This opinion is
delivered in accordance with the requirements of Item 601(b)(8) of Regulation
S-K under the Securities Act.
In connection with this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
the Registration Statement, the Proxy Statement/Prospectus included therein and
such other documents as we have deemed necessary or appropriate.
We hereby confirm that the discussion in the Proxy Statement/Prospectus
under the caption "Federal Income Tax Consequences" is a fair and accurate
summary of the matters addressed therein, under current law and the assumptions
stated or referred to therein. There can be no assurance that a contrary
position may not be taken by the Internal Revenue Service.
We hereby consent to the filing of this opinion as Exhibit 8 to the
Registration Statement and to the use of our name under the caption "Federal
Income Tax Consequences" in the Proxy Statement/Prospectus. In giving such
consent, we do not thereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act.
Very truly yours,
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM
<PAGE> 1
EXHIBIT 23(A)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of Shawmut National
Corporation of our report dated January 19, 1994 appearing on page F-3 of
Shawmut National Corporation's Annual Report on Form 10-K for the year ended
December 31, 1993. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
/s/ PRICE WATERHOUSE
PRICE WATERHOUSE
Hartford, Connecticut
March 28, 1994
<PAGE> 1
EXHIBIT 23(B)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-4 of Shawmut National
Corporation of our report dated August 10, 1993 relating to the consolidated
financial statements of New Dartmouth Bank, which appears in the Current Report
on Form 8-K of Shawmut National Corporation dated March 28, 1994. We also
consent to the reference to us as under the heading "Experts" in such
Prospectus.
[SIG]
PRICE WATERHOUSE
Boston, Massachusetts
March 24, 1994
<PAGE> 1
EXHIBIT 23(C)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated January 21, 1993, which is incorporated by reference
in the Peoples Bancorp of Worcester, Inc. Annual Report (Form 10-K) for the
fiscal year ended December 31, 1992, and our report dated January 20, 1994,
which is included in the Current Report on Form 8-K of Shawmut National
Corporation dated March 28, 1994, both of which are incorporated by reference in
the Proxy Statement of Peoples Bancorp of Worcester, Inc. which is made a part
of the Registration Statement (Form S-4) and related Prospectus of Shawmut
National Corporation for the registration of its common stock.
/s/ ERNST & YOUNG
ERNST & YOUNG
Worcester, Massachusetts
March 28, 1994
<PAGE> 1
EXHIBIT 23(D)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of Shawmut National
Corporation pertaining to the merger with Peoples Bancorp of Worcester, Inc. and
to the incorporation by reference therein of our report dated February 11, 1993,
except for Note B, as to which the date is March 22, 1994, with respect to the
consolidated financial statements of Gateway Financial Corporation, included in
the Current Report on Form 8-K of Shawmut National Corporation dated March 28,
1994.
/s/ ERNST & YOUNG
ERNST & YOUNG
Hartford, Connecticut
March 28, 1994
<PAGE> 1
EXHIBIT 23(E)
CONSENT
We hereby consent to the use of our opinion as an annex to the Proxy
Statement of Peoples Bancorp of Worcester, Inc. (the "Company") that is being
furnished to the shareholders of the Company in connection with a special
meeting of such shareholders, called for the purpose of voting upon the proposed
merger transaction (the "Transaction") whereby the Company would become a
wholly-owned subsidiary of Shawmut National Corporation ("Shawmut"), and to the
use of our name and the references to us in such Proxy Statement. We also
acknowledge that such Proxy Statement will be incorporated into a Registration
Statement on Form S-4 of Shawmut relating to the registration of the shares of
Shawmut common stock expected to be issued in connection with the Transaction.
McDANIELS & CO.
By: /s/ JOHN MORRELL
John Morrell
Director
Boston, Massachusetts
March 29, 1994
<PAGE> 1
EXHIBIT 23(F)
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in the Registration
Statement (Form S-4) and related Prospectus of Shawmut National Corporation
pertaining to the merger with Peoples Bancorp of Worcester, Inc. of our
independent auditors' report dated January 21, 1994, except for Note 17, as to
which the date is March 2, 1994, with respect to the consolidated financial
statements of Cohasset Savings Bank, included in the Current Report on Form 8-K
of Shawmut National Corporation dated March 28, 1994 and to the use of our name
and the statements with respect to us, as appearing under the heading "Experts"
in the Prospectus.
/s/ WOLF & COMPANY, P.C.
WOLF & COMPANY, P.C.
Boston, Massachusetts
March 28, 1994
<PAGE> 1
EXHIBIT 23(G)
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in the Registration
Statement (Form S-4) and related Prospectus of Shawmut National Corporation
pertaining to the merger with Peoples Bancorp of Worcester, Inc. of our
independent auditors' report dated January 24, 1994, except for Note 16, as to
which the date is March 7, 1994, with respect to the consolidated financial
statements of West Newton Savings Bank, included in the Current Report on Form
8-K of Shawmut National Corporation dated March 28, 1994 and to the use of our
name and the statements with respect to us, as appearing under the heading
"Experts" in the Prospectus.
/s/ WOLF & COMPANY, P.C.
WOLF & COMPANY, P.C.
Boston, Massachusetts
March 28, 1994
<PAGE> 1
EXHIBIT 23(J)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-4) and related Prospectus of Shawmut National Corporation pertaining to
the merger with People's Bancorp of Worcester, Inc. of our report dated January
27, 1994 on our audit of the consolidated financial statements of Gateway
Financial Corporation as of and for the year ended December 31, 1993 which
report is included in the Current Report on Form 8-K of Shawmut National
Corporation dated March 28, 1994. We also consent to the reference to our Firm
under the caption "Experts".
/s/ COOPERS & LYBRAND
COOPERS & LYBRAND
Hartford, Connecticut
March 28, 1994
