<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
May 30, 1996
- --------------------------------------------------------------------------------
(Date of earliest event reported)
Peoples Heritage Financial Group, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maine 0-16947 01-0437984
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
P.O. Box 9540, One Portland Square, Portland, Maine 04112-9540
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(207) 761-8500
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Exhibit Index appears on page 5.
<PAGE> 2
ITEM 5. OTHER EVENTS
Following the close of business on May 30, 1996, Peoples Heritage
Financial Group, Inc. ("Peoples Heritage"), a Maine corporation, Peoples
Heritage Merger Corp. ("PHMC"), a Maine corporation and a wholly-owned
subsidiary of Peoples Heritage, and Family Bancorp ("Family"), a Massachusetts
corporation, entered into an Agreement and Plan of Merger (the "Agreement")
which sets forth the terms and conditions under which Family will merge with and
into PHMC (the "Merger").
The Agreement provides that upon consummation of the Merger, each
outstanding share of common stock of Family (other than (i) any dissenting
shares under Massachusetts law and (ii) any shares held by Peoples Heritage
other than in a fiduciary capacity or in satisfaction of a debt previously
contracted) shall, by virtue of the Merger and without any action on the part of
the holder thereof, be converted into the right to receive 1.26 shares of common
stock of Peoples Heritage.
The transaction will be accounted for under the purchase method of
accounting. Subject to market conditions, Peoples Heritage intends to repurchase
on the open market approximately half, or about 2.6 million shares, of the
shares to be issued in the acquisition.
Concurrently with the execution and delivery of the Agreement, (i)
Family entered into a Stock Option Agreement with Peoples Heritage (the "Family
Stock Option Agreement") whereby Family granted to Peoples Heritage an option to
purchase up to 832,000 shares of Family common stock, representing 19.9% of the
outstanding shares of Family common stock, at a price of $20.50 per share, which
is exercisable only upon the occurrence of certain events, and (ii) Peoples
Heritage entered into a Stock Option Agreement with Family (together with the
Family Stock Option Agreement, the "Stock Option Agreements") whereby Peoples
Heritage granted to Family an option to purchase up to 1,500,000 shares of
Peoples Heritage common stock, representing 6.0% of the outstanding shares of
Peoples Heritage common stock, at a price of $19.75 per share, which also is
exercisable only upon the occurrence of certain events. Each of the Stock Option
Agreements provide the grantee (i) with the right, in certain circumstances, to
require the issuer to repurchase the option and any shares acquired by exercise
of the option and (ii) with the right to require the issuer to register the
common stock acquired by or issuable upon exercise of the option under the
Securities Act of 1933, as amended.
Concurrently with the execution and delivery of the Agreement, Peoples
Heritage entered into a Stockholder Agreement with certain stockholders of
Family, pursuant to which, among other things, such stockholders agreed to vote
their shares of Family common stock (which, exclusive of stock options,
currently amount to approximately 7.4% of the shares of such stock outstanding)
in favor of the Merger.
2
<PAGE> 3
Consummation of the Merger is subject to the approval of the
shareholders of Peoples Heritage and Family and the receipt of all required
regulatory approvals, as well as other customary conditions.
The Agreement, the Stock Option Agreements, the Stockholder Agreement
and the press release issued by Peoples Heritage and Family on May 31, 1996
regarding the Merger are attached as exhibits to this report and are
incorporated herein by reference. The foregoing summaries of the Agreement, the
Stock Option Agreements and the Stockholder Agreement do not purport to be
complete and are qualified in their entirety by reference to such agreements.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
The following exhibits are filed with this report:
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
2 Agreement and Plan of Merger, dated as of
May 30, 1996, among Peoples Heritage, PHMC
and Family
10(a) Stock Option Agreement, dated as of May
30, 1996, between Peoples Heritage (as
grantee) and Family (as issuer)
10(b) Stock Option Agreement, dated as of May
30, 1996, between Peoples Heritage (as
issuer) and Family (as grantee)
10(c) Stockholder Agreement, dated as of May 30,
1996, among Peoples Heritage and certain
stockholders of Family
20 Press Release issued on May 31, 1996 with
respect to the Agreement
</TABLE>
3
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PEOPLES HERITAGE FINANCIAL GROUP, INC.
Date: June 3, 1996 By:/s/ Peter J. Verrill
--------------------------------------------------
Peter J. Verrill
Executive Vice President, Chief Operating Officer,
Chief Financial Officer and Treasurer
4
<PAGE> 5
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
2 Agreement and Plan of Merger, dated as of
May 30, 1996, among Peoples Heritage, PHMC
and Family
10(a) Stock Option Agreement, dated as of May
30, 1996, between Peoples Heritage (as
grantee) and Family (as issuer)
10(b) Stock Option Agreement, dated as of May
30, 1996, between Peoples Heritage (as
issuer) and Family (as grantee)
10(c) Stockholder Agreement, dated as of May 30,
1996, among Peoples Heritage and certain
stockholders of Family
20 Press Release issued on May 31, 1996 with
respect to the Agreement
</TABLE>
5
<PAGE> 1
Exhibit 2
Agreement and Plan of Merger,
dated as of May 30, 1996,
among Peoples Heritage,
PHMC and Family
<PAGE> 2
AGREEMENT AND PLAN OF MERGER
AMONG
PEOPLES HERITAGE FINANCIAL GROUP, INC.,
PEOPLES HERITAGE MERGER CORP.
AND
FAMILY BANCORP
DATED AS OF MAY 30, 1996
<PAGE> 3
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I DEFINITIONS............................................ 2
ARTICLE II THE MERGER............................................. 7
2.1 The Merger............................................. 7
2.2 Effective Time; Closing................................ 8
2.3 Treatment of Capital Stock............................. 8
2.4 Shareholder Rights; Stock Transfers.................... 9
2.5 Dissenting Shares...................................... 9
2.6 Fractional Shares...................................... 9
2.7 Exchange Procedures.................................... 10
2.8 Anti-Dilution Provisions............................... 11
2.9 Options................................................ 11
2.10 Additional Actions..................................... 12
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF THE COMPANY........................................ 13
3.1 Capital Structure...................................... 13
3.2 Organization, Standing and Authority of the Company.... 13
3.3 Ownership of the Company Subsidiaries.................. 14
3.4 Organization, Standing and Authority of
the Company Subsidiaries............................. 14
3.5 Authorized and Effective Agreement..................... 14
3.6 Securities Documents and Regulatory Reports............ 16
3.7 Financial Statements................................... 16
3.8 Material Adverse Change................................ 17
3.9 Environmental Matters.................................. 17
3.10 Tax Matters............................................ 18
3.11 Legal Proceedings...................................... 19
3.12 Compliance with Laws................................... 19
3.13 Certain Information.................................... 20
3.14 Employee Benefit Plans................................. 20
3.15 Certain Contracts...................................... 21
3.16 Brokers and Finders.................................... 22
3.17 Insurance.............................................. 22
3.18 Properties............................................. 23
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C> <C>
3.19 Labor................................................... 23
3.20 Required Vote; Inapplicability of Antitakover Statutes.. 23
3.21 Ownership of Acquiror Common Stock...................... 24
3.22 Disclosures............................................. 24
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF THE ACQUIROR....................................... 25
4.1 Capital Structure....................................... 25
4.2 Organization, Standing and Authority of the Acquiror.... 25
4.3 Ownership of the Acquiror Subsidiaries.................. 25
4.4 Organization, Standing and Authority of the
Acquiror Subsidiaries................................. 26
4.5 Authorized and Effective Agreement...................... 26
4.6 Securities Documents and Regulatory Reports............. 28
4.7 Financial Statements.................................... 28
4.8 Material Adverse Change................................. 29
4.9 Environmental Matters................................... 29
4.10 Tax Matters............................................. 29
4.11 Legal Proceedings....................................... 30
4.12 Compliance with Laws.................................... 30
4.13 Certain Information..................................... 31
4.14 Employee Benefit Plans.................................. 31
4.15 Certain Contracts....................................... 33
4.16 Brokers and Finders..................................... 33
4.17 Insurance............................................... 33
4.18 Properties.............................................. 33
4.19 Labor................................................... 34
4.20 Required Vote; Acquiror Rights Agreement................ 34
4.21 Ownership of Company Common Stock....................... 34
4.22 Disclosures............................................. 34
ARTICLE V COVENANTS............................................... 35
5.1 Reasonable Best Efforts................................. 35
5.2 Shareholder Meetings.................................... 35
5.3 Regulatory Matters...................................... 35
5.4 Investigation and Confidentiality....................... 36
5.5 Press Releases.......................................... 37
5.6 Business of the Parties................................. 37
5.7 Certain Actions......................................... 41
5.8 Current Information..................................... 42
5.9 Indemnification; Insurance.............................. 42
5.10 Directors............................................... 43
</TABLE>
ii
<PAGE> 5
<TABLE>
<S> <C> <C>
5.11 Benefit Plans and Arrangements............................ 44
5.12 Branch Sale............................................... 45
5.13 Certain Policies; Integration............................. 45
5.14 Disclosure Supplements.................................... 46
5.15 Failure to Fulfill Conditions............................. 46
ARTICLE VI CONDITIONS PRECEDENT...................................... 46
6.1 Conditions Precedent - The Acquiror, the Acquiror Sub
and the Company.......................................... 46
6.2 Conditions Precedent - The Company........................ 47
6.3 Conditions Precedent - The Acquiror and the Acquiror Sub.. 48
ARTICLE VII TERMINATION, WAIVER AND AMENDMENT......................... 49
7.1 Termination............................................... 49
7.2 Effect of Termination..................................... 50
7.3 Survival of Representations, Warranties
and Covenants........................................... 51
7.4 Waiver.................................................... 51
7.5 Amendment or Supplement................................... 51
ARTICLE VIII MISCELLANEOUS..................................................... 52
8.1 Expenses.................................................. 52
8.2 Entire Agreement.......................................... 52
8.3 No Assignment............................................. 52
8.4 Notices................................................... 52
8.5 Alternative Structure..................................... 53
8.6 Interpretation............................................ 54
8.7 Counterparts.............................................. 54
8.8 Governing Law............................................. 54
</TABLE>
Exhibit A Form of Company Stock Option Agreement
Exhibit B Form of Company Stockholder Agreement
Exhibit C Form of Acquiror Stock Option Agreement
Exhibit D Matters to be covered by Opinion of Counsel to the Acquiror
Exhibit E Matters to be covered by Opinion of Counsel to the Company
iii
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (the "Agreement"), dated as of May 30,
1996, by and among Peoples Heritage Financial Group, Inc. (the "Acquiror"), a
Maine corporation, Peoples Heritage Merger Corp. (the "Acquiror Sub"), a Maine
corporation and a wholly-owned subsidiary of the Acquiror, and Family Bancorp
(the "Company"), a Massachusetts corporation.
W I T N E S S E T H:
WHEREAS, the Boards of Directors of the Acquiror and the Company have
determined that it is in the best interests of their respective companies and
their shareholders to consummate the business combination transactions provided
for herein, including the merger of the Company with and into the Acquiror Sub,
subject to the terms and conditions set forth herein; and
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby; and
WHEREAS, as a condition and inducement to the Acquiror's willingness to
enter into this Agreement, (i) the Company is concurrently entering into a Stock
Option Agreement with the Acquiror (the "Company Stock Option Agreement"), in
substantially the form attached hereto as Exhibit A, pursuant to which the
Company is granting to the Acquiror the option to purchase shares of Company
Common Stock (as defined herein) under certain circumstances and (ii) certain
stockholders of the Company are concurrently entering into a Stockholder
Agreement with the Acquiror (the "Company Stockholder Agreement"), in
substantially the form attached hereto as Exhibit B, pursuant to which, among
other things, such stockholders agree to vote their shares of Company Common
Stock in favor of this Agreement and the transactions contemplated hereby; and
WHEREAS, as a condition and inducement to the Company's willingness to
enter into this Agreement, the Acquiror is concurrently entering into a Stock
Option Agreement with the Company (the "Acquiror Stock Option Agreement"), in
substantially the form attached hereto as Exhibit C, pursuant to which the
Acquiror is granting to the Company the option to purchase shares of Acquiror
Common Stock (as defined herein) under certain circumstances;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto do hereby agree as
follows:
<PAGE> 7
ARTICLE I
DEFINITIONS
The following terms shall have the meanings ascribed to them for all
purposes of this Agreement.
"Acquiror Common Stock" shall mean the common stock, par value $.01 per
share, of the Acquiror and, unless the context otherwise requires, related
Acquiror Rights.
"Acquiror Employee Plans" shall have the meaning set forth in Section
4.14(a) hereof.
"Acquiror Employee Stock Benefit Plans" shall mean the following
employee benefit plans of the Acquiror: 1986 Stock Option and Stock Appreciation
Rights Plan, 1986 Employee Stock Purchase Plan, Thrift Incentive Plan, Profit
Sharing Employee Stock Ownership Plan, Restricted Stock Plan for Non-Employee
Directors, 1995 Stock Option Plan for Non-Employee Directors, 1996 Equity
Incentive Plan and Dividend Reinvestment Plan.
"Acquiror Financial Statements" shall mean (i) the consolidated
statements of financial condition (including related notes and schedules, if
any) of the Acquiror as of December 31, 1995, 1994 and 1993 and the consolidated
statements of operations, shareholders' equity and cash flows (including related
notes and schedules, if any) of the Acquiror for each of the three years ended
December 31, 1995, 1994 and 1993 as filed by the Acquiror in its Securities
Documents, and (ii) the consolidated statements of financial condition of the
Acquiror (including related notes and schedules, if any) and the consolidated
statements of operations, shareholders' equity and cash flows (including related
notes and schedules, if any) of the Acquiror included in the Securities
Documents filed by the Acquiror with respect to the quarterly and annual periods
ended subsequent to December 31, 1995.
"Acquiror Maine Bank" shall mean Peoples Heritage Savings Bank, a
Maine- chartered savings bank and a wholly-owned subsidiary of the Acquiror.
"Acquiror National Bank" shall mean The First National Bank of
Portsmouth, a national bank and a wholly-owned subsidiary of the Acquiror, which
is to be merged with and into the Acquiror New Hampshire Bank on or about July
1, 1996.
"Acquiror New Hampshire Bank" shall mean Bank of New Hampshire, a New
Hampshire-chartered commercial bank and a wholly-owned subsidiary of the
Acquiror.
"Acquiror Preferred Stock" shall mean the shares of preferred stock,
par value $.01 per share, of the Acquiror.
"Acquiror Rights" shall mean the rights attached to shares of Common
Stock pursuant to the Acquiror Rights Agreement.
2
<PAGE> 8
"Acquiror Rights Agreement" shall mean the Stockholder Rights
Agreement, dated as of September 12, 1989, between Acquiror and Mellon
Securities Trust Company, in its capacity as Rights Agent.
"Articles of Merger" shall have the meaning set forth in Section 2.2
hereof.
"Bank" shall mean Family Bank, FSB, a federally-chartered savings bank
and a wholly-owned subsidiary of the Company.
"Bank Commissioner" shall mean the Bank Commissioner of the State of
New Hampshire.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"BIF" means the Bank Insurance Fund administered by the FDIC or any
successor thereto.
"Branch Sale" shall mean the sale of the branch office maintained by
the Bank in Seabrook, New Hampshire, and such other branch offices maintained by
the Bank in New Hampshire as may be determined by the Company and the Acquiror,
to the Acquiror New Hampshire Bank.
"Branch Sale Agreement" shall mean the Branch Sale Agreement between
the Bank and the Acquiror New Hampshire Bank to be executed as soon as
practicable after the parties' execution of this Agreement and which provides
for the Branch Sale.
"Central Fund" shall mean the Mutual Savings Central Fund, Inc.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission.
"Company Common Stock" shall mean the common stock, par value $0.10 per
share, of the Company.
"Company Employee Plans" shall have the meaning set forth in Section
3.14(a) hereof.
"Company Financial Statements" shall mean (i) the consolidated
statements of financial condition (including related notes and schedules, if
any) of the Company as of December 31, 1995, 1994 and 1993 and the consolidated
statements of operations, shareholders' equity and cash flows (including related
notes and schedules, if any) of the Company for each of the three years ended
December 31, 1995, 1994 and 1993 as filed by the Company in its Securities
Documents, and (ii) the consolidated statements of financial
3
<PAGE> 9
condition of the Company (including related notes and schedules, if any) and the
consolidated statements of operations, shareholders' equity and cash flows
(including related notes and schedules, if any) of the Company included in the
Securities Documents filed by the Company with respect to the quarterly and
annual periods ended subsequent to December 31, 1995.
"Company Options" shall mean options to purchase shares of Company
Common Stock granted pursuant to the Company Stock Option Plans or as otherwise
Previously Disclosed.
"Company Option Plans" shall mean the following stock option plans of
the Company, as amended and as in effect as of the date hereof: 1995 Incentive
and Nonqualified Stock Option Plan, 1986 Incentive and Nonqualified Stock Option
Plan and 1986 Nonemployees Nonqualified Stock Option Plan.
"Company Preferred Stock" shall mean the shares of preferred stock, par
value $0.10 per share, of the Company.
"Dissenting Shares" shall have the meaning set forth in Section 2.5
hereof.
"DOJ" shall mean the United States Department of Justice.
"Effective Time" shall mean the date and time specified pursuant to
Section 2.2 hereof as the effective time of the Merger.
"Environmental Claim" means any written notice from any Governmental
Entity or third party alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on, or resulting from the
presence, or release into the environment, of any Materials of Environmental
Concern.
"Environmental Laws" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any governmental
entity relating to (1) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource), and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Materials of Environment Concern.
The term Environmental Law includes without limitation (1) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
Section9601, et seq; the Resource Conservation and Recovery Act, as amended, 42
U.S.C. Section6901, et seq; the Clean Air Act, as amended, 42 U.S.C.
Section7401, et seq; the Federal Water Pollution Control Act, as amended, 33
U.S.C. Section1251, et seq; the Toxic Substances Control Act, as amended, 15
U.S.C. Section9601, et seq; the Emergency Planning
4
<PAGE> 10
and Community Right to Know Act, 42 U.S.C. Section1101, et seq; the Safe
Drinking Water Act, 42 U.S.C. Section300f, et seq; and all comparable state and
local laws, and (2) any common law (including without limitation common law that
may impose strict liability) that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of or
exposure to any Materials of Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Ratio" shall have the meaning set forth in Section 2.3
hereof.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FHLB" shall mean Federal Home Loan Bank.
"Form S-4" shall mean the registration statement on Form S-4 (or on any
successor or other appropriate form) to be filed by the Acquiror in connection
with the issuance of shares of Acquiror Common Stock pursuant to the Merger,
including the Proxy Statement which forms a part thereof, as amended and
supplemented.
"FRB" means the Board of Governors of the Federal Reserve System or any
successor thereto.
"Governmental Entity" shall mean any federal or state court,
administrative agency or commission or other governmental authority or
instrumentality.
"HOLA" shall mean the Home Owners' Loan Act, as amended.
"Massachusetts Board" shall mean the Massachusetts Board of Bank
Incorporation.
"Material Adverse Effect" shall mean, with respect to the Acquiror or
the Company, respectively, any effect that (i) is material and adverse to the
financial condition, results of operations or business of the Acquiror and its
Subsidiaries taken as whole or the Company and its Subsidiaries taken as a
whole, respectively, or (ii) materially impairs the ability of either the
Company, on the one hand, or the Acquiror or the Acquiror Sub, on the other
hand, to consummate the transactions contemplated by this Agreement, provided,
however, that Material Adverse Effect shall not be deemed to include the impact
of (a) changes in laws and regulations or interpretations thereof that are
generally applicable to the banking or savings industries (including without
limitation prospective changes which result in
5
<PAGE> 11
assessments which are intended to recapitalize the SAIF), (b) changes in
generally accepted accounting principles that are generally applicable to the
banking or savings industries, (c) expenses incurred in connection with the
transactions contemplated hereby or (d) actions or omissions of a party (or any
of its Subsidiaries) taken with the prior informed written consent of the other
party or parties in contemplation of the transactions contemplated hereby,
including without limitation any actions taken by the Company pursuant to
Section 5.13 hereof.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any other
materials regulated under Environmental Laws.
"Merger" shall mean the merger of the Company with and into the
Acquiror Sub pursuant to the terms hereof.
"MBCA" shall mean the Maine Business Corporation Act, as amended.
"MBCL" shall mean the Massachusetts Business Corporation Law, as
amended.
"MHPF" shall mean the Massachusetts Housing Partnership Fund.
"MRSA" shall mean the Maine Revised Statutes Annotated, as amended.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OCC" shall mean the Office of the Comptroller of the Currency of the
U.S. Department of the Treasury or any successor thereto.
"OTS" shall mean the Office of Thrift Supervision of the U.S.
Department of the Treasury or any successor thereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Previously Disclosed" shall mean disclosed (i) in a letter dated the
date hereof delivered from the disclosing party to the other party specifically
referring to the appropriate section of this Agreement and describing in
reasonable detail the matters contained therein, or (ii) a letter dated after
the date hereof from the disclosing party specifically referring to this
Agreement and describing in reasonable detail the matters contained therein and
delivered by the other party pursuant to Section 5.14 hereof.
"Proxy Statement" shall mean the prospectus/joint proxy statement
contained in the Form S-4, as amended or supplemented, and to be delivered to
shareholders of the Acquiror
6
<PAGE> 12
and the Company in connection with the solicitation of their approval of this
Agreement and the transactions contemplated hereby.
"Rights" shall mean warrants, options, rights, convertible securities
and other arrangements or commitments which obligate an entity to issue or
dispose of any of its capital stock or other ownership interests.
"SAIF" means the Savings Association Insurance Fund administered by the
FDIC or any successor thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, offering circulars,
proxy statements, registration statements and all similar documents filed, or
required to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended, and the rules and
regulations of the Commission promulgated thereunder.
"Subsidiary" and "Significant Subsidiary" shall have the meanings set
forth in Rule 1- 02 of Regulation S-X of the Commission.
"Superintendent" shall mean the Superintendent of the Bureau of Banking
of the State of Maine.
Other terms used herein are defined in the preamble and elsewhere in
this Agreement.
ARTICLE II
THE MERGER
2.1 The Merger
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time (as defined in Section 2.2 hereof), the Company shall be merged
with and into the Acquiror Sub (the "Merger") in accordance with the provisions
of Section 906 of the MBCA and Section 79 of the MBCL. The Acquiror Sub shall be
the surviving corporation (hereinafter sometimes called the "Surviving
Corporation") of the Merger, and shall continue its corporate existence under
the laws of the State of Maine. The name of the Surviving Corporation shall
continue to be "Peoples Heritage Merger Corp." Upon consummation of the Merger,
the separate corporate existence of the Company shall terminate.
7
<PAGE> 13
(b) From and after the Effective Time, the Merger shall have the
effects set forth in Section 905 of the MBCA and Section 80 of the MBCL.
(c) The Articles of Incorporation and Bylaws of the Acquiror Sub, as in
effect immediately prior to the Effective Time, shall be the Articles of
Incorporation and Bylaws of the Surviving Corporation, respectively, until
altered, amended or repealed in accordance with their terms and applicable law.
(d) The authorized capital stock of the Surviving Corporation shall be
as stated in the Articles of Incorporation of the Acquiror Sub immediately prior
to the Effective Time.
(e) The directors and officers of the Acquiror 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 Articles of
Incorporation and Bylaws of the Surviving Corporation.
2.2 Effective Time; Closing
The Merger shall become effective upon the occurrence of the filing of
articles of merger (the "Articles of Merger") with the Secretary of State of the
State of Maine pursuant to Section 906(7) of the MBCA and the Secretary of State
of the Commonwealth of Massachusetts pursuant to Section 79(c) of the MBCL,
unless a later date and time is specified as the effective time in such Articles
of Merger (the "Effective Time"). A closing (the "Closing") shall take place
immediately prior to the Effective Time at 10:00 a.m., Eastern Time, on the
fifth business day following the satisfaction or waiver, to the extent permitted
hereunder, of the conditions to the consummation of the Merger specified in
Article VI of this Agreement (other than the delivery of certificates, opinions
and other instruments and documents to be delivered at the Closing), at the
principal executive offices of the Acquiror in Portland, Maine, or at such other
place, at such other time, or on such other date as the parties may mutually
agree upon, provided that, notwithstanding the foregoing, the parties hereby
agree to hold the Closing on the first day which is at least two business days
following the satisfaction or waiver, to the extent permitted hereunder, of the
conditions to consummation of the Merger specified in Article VI of this
Agreement (other than the delivery of certificates, opinions and other
instruments and documents to be delivered at the Closing) if necessary for the
Effective Time to occur on or before December 31, 1996. At the Closing, there
shall be delivered to the Acquiror and the Company the opinions, certificates
and other documents required to be delivered under Article VI hereof.
2.3 Treatment of Capital Stock
Subject to the provisions of this Agreement, at the Effective Time,
automatically by virtue of the Merger and without any action on the part of any
shareholder:
8
<PAGE> 14
(a) each share of Acquiror Common Stock issued and outstanding
immediately prior to the Effective Time shall be unchanged and shall remain
issued and outstanding;
(b) each share of Acquiror Sub common stock issued and outstanding
immediately prior to the Effective Time shall be unchanged and shall remain
issued and outstanding; and
(c) subject to Sections 2.5 and 2.6 hereof, each share of Company
Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares held by the Acquiror or any of its Subsidiaries other than in
a fiduciary capacity that are beneficially owned by third parties or as a result
of debts previously contracted, which shall be cancelled and retired) shall
become and be converted into the right to receive 1.26 shares of Acquiror Common
Stock (subject to possible adjustment as set forth in Sections 2.8 and 7.1(f)
hereof, the "Exchange Ratio").
Section 2.4 Shareholder Rights; Stock Transfers
Except as provided for in Section 2.5 hereof, at the Effective Time,
holders of Company Common Stock shall cease to be and shall have no rights as
shareholders of the Company, other than to receive the consideration provided
under this Article II. After the Effective Time, there shall be no transfers on
the stock transfers books of the Company or the Surviving Corporation of shares
of Company Common Stock.
Section 2.5 Dissenting Shares
Each outstanding share of Company Common Stock the holder of which has
perfected his right to dissent under the MBCL and has not effectively withdrawn
or lost such right as of the Effective Time (the "Dissenting Shares") shall not
be converted into or represent a right to receive shares of Acquiror Common
Stock hereunder, and the holder thereof shall be entitled only to such rights as
are granted by the MBCL. The Company shall give the Acquiror prompt notice upon
receipt by the Company of any such written demands for payment of the fair value
of such shares of Company Common Stock and of withdrawals of such demands and
any other instruments provided pursuant to the MBCL (any shareholder duly making
such demand being hereinafter called a "Dissenting Shareholder"). If any
Dissenting Shareholder shall effectively withdraw or lose (through failure to
perfect or otherwise) his right to such payment at any time, such holder's
shares of Company Common Stock shall be converted into the right to receive
Acquiror Common Stock in accordance with the applicable provisions of this
Agreement. Any payments made in respect of Dissenting Shares shall be made by
the Surviving Corporation.
Section 2.6 Fractional Shares
Notwithstanding any other provision hereof, no fractional shares of
Acquiror Common Stock shall be issued to holders of Company Common Stock. In
lieu thereof, each holder of shares of Company Common Stock entitled to a
fraction of a share of Acquiror
9
<PAGE> 15
Common Stock shall, at the time of surrender of the certificate or certificates
representing such holder's shares, receive an amount of cash (without interest)
equal to the product arrived at by multiplying such fraction of a share of
Acquiror Common Stock by the closing price of the Acquiror Common Stock on the
Nasdaq Stock Market's National Market on the business day preceding the
Effective Time, as reported in The Wall Street Journal, or if not reported
therein, in another authoritative source, rounded to the nearest whole cent. No
such holder shall be entitled to dividends, voting rights or any other rights in
respect of any fractional share interest.
2.7 Exchange Procedures
(a) At or after the Effective Time, each holder of a certificate or
certificates theretofore evidencing issued and outstanding shares of Company
Common Stock, upon surrender of the same to an agent, duly appointed by the
Acquiror ("Exchange Agent"), shall be entitled to receive in exchange therefor a
certificate or certificates representing the number of full shares of Acquiror
Common Stock into which the shares of Company Common Stock theretofore
represented by the certificate or certificates so surrendered shall have been
converted as provided in Section 2.3(c) hereof. As promptly as practicable after
the Effective Time (and in no event later than the fifth business day following
the Effective Time), the Exchange Agent shall mail to each holder of record of
an outstanding certificate which immediately prior to the Effective Time
evidenced shares of Company Common Stock, and which is to be exchanged for
Acquiror Common Stock as provided in Section 2.3 hereof, a form of letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to such certificate shall pass, only upon delivery of such
certificate to the Exchange Agent) advising such holder of the terms of the
exchange effected by the Merger and of the procedure for surrendering to the
Exchange Agent such certificate in exchange for a certificate or certificates
evidencing Acquiror Common Stock or cash in lieu of any fractional share.
(b) No holder of a certificate theretofore representing shares of
Company Common Stock shall be entitled to receive any dividends in respect of
the Acquiror Common Stock into which such shares shall have been converted by
virtue of the Merger until the certificate representing such shares is
surrendered in exchange for a certificate or certificates representing shares of
Acquiror Common Stock. In the event that dividends are declared and paid by the
Acquiror in respect of Acquiror Common Stock after the Effective Time but prior
to any holder's surrender of certificates representing shares of Company Common
Stock, dividends payable to such holder in respect of shares of Acquiror Common
Stock not then issued shall accrue (without interest). Any such dividends shall
be paid (without interest) upon surrender of the certificates representing such
shares of Company Common Stock. The Acquiror shall be entitled, after the
Effective Time, to treat certificates representing shares of Company Common
Stock as evidencing ownership of the number of full shares of Acquiror Common
Stock into which the shares of Company Common Stock represented by such
certificates shall have been converted pursuant to this
10
<PAGE> 16
Agreement, notwithstanding the failure on the part of the holder thereof to
surrender such certificates.
(c) The Acquiror shall not be obligated to deliver a certificate or
certificates representing shares of Acquiror Common Stock to which a holder of
Company Common Stock would otherwise be entitled as a result of the Merger until
such holder surrenders the certificate or certificates representing the shares
of Company Common Stock for exchange as provided in this Section 2.7, or, in
default thereof, an appropriate affidavit of loss and indemnity agreement and/or
a bond in an amount as may be reasonably required in each case by the Acquiror.
If any certificate evidencing shares of Acquiror Common Stock is to be issued in
a name other than that in which the certificate evidencing Company Common Stock
surrendered in exchange therefor is registered, it shall be a condition of the
issuance thereof that the certificate so surrendered shall be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange pay to the Exchange Agent any transfer or other tax required by reason
of the issuance of a certificate for shares of Acquiror Common Stock in any name
other than that of the registered holder of the certificate surrendered or
otherwise establish to the satisfaction of the Exchange Agent that such tax has
been paid or is not payable.
2.8 Anti-Dilution Provisions
If, between the date hereof and the Effective Time, the shares of
Acquiror Common Stock shall be changed into a different number or class of
shares by reason of any reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment, or a stock dividend thereon
shall be declared with a record date within said period, the Exchange Ratio
shall be adjusted accordingly.
2.9 Options
(a) At the Effective Time, each Company Option which is then
outstanding, whether or not exercisable, shall cease to represent a right to
acquire shares of Company Common Stock and shall be converted automatically into
an option to purchase shares of Acquiror Common Stock, and the Acquiror shall
assume each Company Option, in accordance with the terms of the applicable
Company Stock Option Plan and stock option or other agreement by which it is
evidenced, except that from and after the Effective Time, (i) the Acquiror and
the Human Resources Committee of its Board of Directors shall be substituted for
the Company and the committee of the Company's Board of Directors (including, if
applicable, the entire Board of Directors of the Company) administering such
Company Stock Option Plan, (ii) each Company Option assumed by the Acquiror may
be exercised solely for shares of Acquiror Common Stock, (iii) the number of
shares of Acquiror Common Stock subject to such Company Option shall be equal to
the number of shares of Company Common Stock subject to such Company Option
immediately prior to the Effective Time multiplied by the Exchange Ratio,
provided that any fractional shares of Acquiror Common Stock resulting from such
multiplication shall be rounded down to the
11
<PAGE> 17
nearest share, and (iv) the per share exercise price under each such Company
Option shall be adjusted by dividing the per share exercise price under each
such Company Option by the Exchange Ratio, provided that such exercise price
shall be rounded up to the nearest cent. Notwithstanding clauses (iii) and (iv)
of the preceding sentence, each Company Option which is an "incentive stock
option" shall be adjusted as required by Section 424 of the Code, and the
regulations promulgated thereunder, so as not to constitute a modification,
extension or renewal of the option within the meaning of Section 424(h) of the
Code. The Acquiror and the Company agree to take all necessary steps to effect
the foregoing provisions of this Section 2.9(a).
(b) As soon as practicable after the Effective Time, the Acquiror shall
deliver to each participant in each Company Stock Option Plan an appropriate
notice setting forth such participant's rights pursuant thereto and the grants
subject to such Company Stock Option Plan shall continue in effect on the same
terms and conditions, including without limitation the duration thereof, subject
to the adjustments required by Section 2.9(a) hereof after giving effect to the
Merger. Within 30 days after the Effective Time, the Acquiror shall file a
registration statement on Form S-3 or Form S-8, as the case may be (or any
successor or other appropriate forms), with respect to the shares of Acquiror
Common Stock subject to such options and shall use its reasonable efforts to
maintain the current status of the prospectus or prospectuses contained therein
for so long as such options remain outstanding.
2.10 Additional Actions
If, at any time after the Effective Time, the Surviving Corporation
shall consider that any further assignments or assurances in law or any other
acts are necessary or desirable to (i) vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title or interest in, to or
under any of the rights, properties or assets of the Company acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger, or (ii) otherwise carry out the purposes of this Agreement, the Company
and its proper officers and directors shall be deemed to have granted to the
Surviving Corporation an irrevocable power of attorney to execute and deliver
all such proper deeds, assignments and assurances in law and to do all acts
necessary or proper to vest, perfect or confirm title to and possession of such
rights, properties or assets in the Surviving Corporation and otherwise to carry
out the purposes of this Agreement; and the proper officers and directors of the
Surviving Corporation are fully authorized in the name of the Company or
otherwise to take any and all such action.
12
<PAGE> 18
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Acquiror as follows:
3.1 Capital Structure
The authorized capital stock of the Company consists of 20,000,000
shares of Company Common Stock and 10,000,000 shares of Company Preferred Stock.
As of the date hereof, 4,188,617 shares of Company Common Stock are issued and
outstanding, 1,427,188 shares of Company Common Stock are directly or indirectly
held by the Company as treasury stock and no shares of Company Preferred Stock
are issued and outstanding. All outstanding shares of Company Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable,
and none of the outstanding shares of Company Common Stock has been issued in
violation of the preemptive rights of any person, firm or entity. Except for the
Company Stock Option Agreement and for Company Options to acquire not more than
233,606 shares of Company Common Stock as of the date hereof, a schedule of
which has been Previously Disclosed, there are no Rights authorized, issued or
outstanding with respect to the capital stock of the Company.
3.2 Organization, Standing and Authority of the Company
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Massachusetts with full
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as now conducted and is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which its
ownership or leasing of property or the conduct of its business requires such
licensing or qualification, except where the failure to be so licensed,
qualified or in good standing would not have a Material Adverse Effect on the
Company. The Company is duly registered as a unitary savings and loan holding
company under the HOLA and the regulations of the OTS thereunder. The Company
has heretofore delivered to the Acquiror true and complete copies of the
Articles of Organization and Bylaws of the Company as in effect as of the date
hereof.
3.3 Ownership of the Company Subsidiaries
The Company has Previously Disclosed the name, jurisdiction of
incorporation and percentage ownership of each direct or indirect Company
Subsidiary and identified the Bank as its only Significant Subsidiary. Except
for (w) capital stock of the Company Subsidiaries, (x) securities and other
interests held in a fiduciary capacity and beneficially owned by third parties
or taken in consideration of debts previously contracted, (y) the Acquiror Stock
Option Agreement and (z) securities and other interests which are Previously
Disclosed, the Company does not own or have the right to acquire, directly or
indirectly, any outstanding capital stock or other voting securities or
ownership interests of any corporation, bank,
13
<PAGE> 19
savings association, partnership, joint venture or other organization, other
than investment securities representing not more than 1% of any entity. The
outstanding shares of capital stock or other ownership interests of each Company
Subsidiary have been duly authorized and validly issued, are fully paid and
nonassessable, and are directly owned by the Company free and clear of all
liens, claims, encumbrances, charges, pledges, restrictions or rights of third
parties of any kind whatsoever. No Rights are authorized, issued or outstanding
with respect to the capital stock or other ownership interests of the Company
Subsidiaries and there are no agreements, understandings or commitments relating
to the right of the Company to vote or to dispose of such capital stock or other
ownership interests.
3.4 Organization, Standing and Authority of the Company Subsidiaries
Each of the Company Subsidiaries is a corporation or partnership duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized. Each of the Company Subsidiaries (i) has
full power and authority to own or lease all of its properties and assets and to
carry on its business as now conducted, and (ii) is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which its
ownership or leasing of property or the conduct of its business requires such
qualification, except where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect on the Company. The deposit
accounts of the Bank are insured by the BIF or, in the case of certain deposits,
the SAIF to the maximum extent permitted by the FDIA, and the
Massachusetts-based deposits of the Bank are insured by the Depositors Insurance
Fund for amounts in excess of FDIC limits pursuant to an agreement which
terminates on July 31, 1996. The Bank has paid all deposit insurance premiums
and assessments required by the FDIA and Massachusetts law and the regulations
thereunder. The Company has heretofore delivered or made available to the
Acquiror true and complete copies of the Charter and Bylaws of the Bank as in
effect as of the date hereof.
3.5 Authorized and Effective Agreement
(a) The Company has all requisite corporate power and authority to
enter into this Agreement and (subject to receipt of all necessary governmental
approvals and the approval of the Company's shareholders of this Agreement) to
perform all of its obligations under this Agreement. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action in
respect thereof on the part of the Company, except for the approval of this
Agreement by the Company's shareholders. This Agreement has been duly and
validly executed and delivered by the Company and, assuming due authorization,
execution and delivery by the Acquiror and the Acquiror Sub, constitutes a
legal, valid and binding obligation of the Company which is enforceable against
the Company in accordance with its terms, subject, as to enforceability, to
bankruptcy, insolvency and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
14
<PAGE> 20
(b) Neither the execution and delivery of this Agreement, nor
consummation of the transactions contemplated hereby (including the Merger and
the Branch Sale), nor compliance by the Company with any of the provisions
hereof (i) does or will conflict with or result in a breach of any provisions of
the Articles of Organization or Bylaws of the Company or the equivalent
documents of any Company Subsidiary, (ii) violate, conflict with or result in a
breach of any term, condition or provision of, or constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, or give rise to any right of termination, cancellation or acceleration
with respect to, or result in the creation of any lien, charge or encumbrance
upon any property or asset of the Company or a Company Subsidiary pursuant to,
any material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which the Company or a Company
Subsidiary is a party, or by which any of their respective properties or assets
may be bound or affected, or (iii) subject to receipt of all required
governmental and shareholder approvals, violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company or a Company
Subsidiary.
(c) Except for (i) the filing of applications and notices with, and the
consents and approvals of, as applicable, the FRB, the OTS, the FDIC, the
Massachusetts Board, the MHPF, the Central Fund, the Bank Commissioner and the
Superintendent, (ii) the filing and effectiveness of the Form S-4 with the
Commission, (iii) compliance with applicable state securities or "blue sky" laws
and the NASD Bylaws in connection with the issuance of Acquiror Common Stock
pursuant to this Agreement, (iv) the approval of this Agreement by the requisite
vote of the shareholders of the Company and the Acquiror, (v) the filing of
Articles of Merger with the Secretary of State of the State of Maine and the
Secretary of State of the Commonwealth of Massachusetts pursuant to the MBCA and
the MBCL, respectively, in connection with the Merger, and (vi) review of the
Merger by the DOJ under federal antitrust laws, and except for such filings,
registrations, consents or approvals which are Previously Disclosed, no consents
or approvals of or filings or registrations with any Governmental Entity or with
any third party are necessary on the part of the Company or the Bank in
connection with (i) the execution and delivery by the Company of this Agreement
and the consummation by the Company of the transactions contemplated hereby and
(ii) the execution and delivery by the Bank of the Branch Sale Agreement and the
consummation by the Bank of the transactions contemplated thereby.
(d) As of the date hereof, neither the Company nor the Bank is aware of
any reasons relating to the Company or the Bank (including without limitation
Community Reinvestment Act compliance) why all consents and approvals shall not
be procured from all regulatory agencies having jurisdiction over the
transactions contemplated by this Agreement as shall be necessary for (i)
consummation of the transactions contemplated by this Agreement and the Branch
Sale Agreement and (ii) the continuation by the Acquiror after the Effective
Time of the business of each of the Acquiror and the Company as such business is
carried on immediately prior to the Effective Time, free of any conditions or
requirements which, in the reasonable opinion of the Company, could have a
Material
15
<PAGE> 21
Adverse Effect on the Acquiror or the Company or materially impair the value of
the Company and the Bank to the Acquiror.
3.6 Securities Documents and Regulatory Reports
(a) Since January 1, 1993, the Company has timely filed with the
Commission and the NASD all Securities Documents required by the Securities Laws
and such Securities Documents complied in all material respects with the
Securities Laws and did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(b) Since January 1, 1993, each of the Company and the Bank has duly
filed with the OTS, the FDIC and any other applicable federal or state banking
authority, as the case may be, in correct form the reports required to be filed
under applicable laws and regulations and such reports were in all material
respects complete and accurate and in compliance with the requirements of
applicable laws and regulations. In connection with the most recent examinations
of the Company and the Bank by the OTS and the FDIC, neither the Company nor the
Bank was required to correct or change any action, procedure or proceeding which
the Company or the Bank believes has not been corrected or changed as required
as of the date hereof and which could have a Material Adverse Effect on the
Company.
3.7 Financial Statements
(a) The Company has previously delivered or made available to the
Acquiror accurate and complete copies of the Company Financial Statements which,
in the case of the consolidated statements of financial condition of the Company
as of December 31, 1995, 1994 and 1993 and the consolidated statements of
operations, shareholders' equity and cash flows for each of the three years
ended December 31, 1995, 1994 and 1993, are accompanied by the audit reports of
Wolf & Company, P.C., independent public accountants with respect to the
Company. The Company Financial Statements referred to herein, as well as the
Company Financial Statements to be delivered pursuant to Section 5.8 hereof,
fairly present or will fairly present, as the case may be, the consolidated
financial condition of the Company as of the respective dates set forth therein,
and the consolidated results of operations, shareholders' equity and cash flows
of the Company for the respective periods or as of the respective dates set
forth therein.
(b) Each of the Company Financial Statements referred to in Section
3.7(a) has been or will be, as the case may be, prepared in accordance with
generally accepted accounting principles consistently applied during the periods
involved, except as stated therein. The audits of the Company and the Company
Subsidiaries have been conducted in all material respects in accordance with
generally accepted auditing standards. The books and records of the Company and
the Company Subsidiaries are being maintained in material
16
<PAGE> 22
compliance with applicable legal and accounting requirements, and such books and
records accurately reflect in all material respects all dealings and
transactions in respect of the business, assets, liabilities and affairs of the
Company and its Subsidiaries.
(c) Except and to the extent (i) reflected, disclosed or provided for
in the consolidated statement of financial condition of the Company as of March
31, 1996 (including related notes) and (ii) of liabilities incurred since March
31, 1996 in the ordinary course of business, neither the Company nor any Company
Subsidiary has any liabilities, whether absolute, accrued, contingent or
otherwise, material to the financial condition, results of operations or
business of the Company on a consolidated basis.
3.8 Material Adverse Change
Since March 31, 1996 (i) the Company and its Subsidiaries have
conducted their respective businesses in the ordinary and usual course
(excluding the incurrence of expenses in connection with this Agreement, and
excluding the transactions contemplated hereby) and (ii) no event has occurred
or circumstance arisen that, individually or in the aggregate, has had or is
reasonably likely to have a Material Adverse Effect on the Company.
3.9 Environmental Matters
(a) To the best of the Company's knowledge, the Company and its
Subsidiaries are in compliance with all Environmental Laws, except for any
violations of any Environmental Law which would not, singly or in the aggregate,
have a Material Adverse Effect on the Company. Neither the Company nor a Company
Subsidiary has received any communication alleging that the Company or a Company
Subsidiary is not in such compliance and, to the best knowledge of the Company,
there are no present circumstances that would prevent or interfere with the
continuation of such compliance.
(b) To the best of the Company's knowledge, none of the properties
owned, leased or operated by the Company or a Company Subsidiary has been or is
in violation of or liable under any Environmental Law, except any such
violations or liabilities which would not singly or in the aggregate have a
Material Adverse Effect on the Company.
(c) To the best of the Company's knowledge, there are no past or
present actions, activities, circumstances, conditions, events or incidents that
could reasonably form the basis of any Environmental Claim or other claim or
action or governmental investigation that could result in the imposition of any
liability arising under any Environmental Law against the Company or a Company
Subsidiary or against any person or entity whose liability for any Environmental
Claim the Company or a Company Subsidiary has or may have retained or assumed
either contractually or by operation of law, except such which would not have a
Material Adverse Effect on the Company.
17
<PAGE> 23
(d) Except as Previously Disclosed, the Company has not conducted any
environmental studies during the past five years with respect to any properties
owned by it or a Company Subsidiary as of the date hereof.
3.10 Tax Matters
(a) The Company and its Subsidiaries have timely filed all federal,
state and local (and, if applicable, foreign) income, franchise, bank, excise,
real property, personal property and other tax returns required by applicable
law to be filed by them (including, without limitation, estimated tax returns,
income tax returns, information returns and withholding and employment tax
returns) and have paid, or where payment is not required to have been made, have
set up an adequate reserve or accrual for the payment of, all material taxes
required to be paid in respect of the periods covered by such returns and, as of
the Effective Time, will have paid, or where payment is not required to have
been made, will have set up an adequate reserve or accrual for the payment of,
all material taxes for any subsequent periods ending on or prior to the
Effective Time. Neither the Company nor a Company Subsidiary will have any
material liability for any such taxes in excess of the amounts so paid or
reserves or accruals so established.
(b) All federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
filed by the Company and its Subsidiaries are complete and accurate in all
material respects. Neither the Company nor a Company Subsidiary is delinquent in
the payment of any tax, assessment or governmental charge or, except as
Previously Disclosed, has requested any extension of time within which to file
any tax returns in respect of any fiscal year or portion thereof which have not
since been filed. Except as Previously Disclosed, the federal, state and local
income tax returns of the Company and its Subsidiaries have been examined by the
applicable tax authorities (or are closed to examination due to the expiration
of the applicable statute of limitations) and no deficiencies for any tax,
assessment or governmental charge have been proposed, asserted or assessed
(tentatively or otherwise) against the Company or a Company Subsidiary as a
result of such examinations or otherwise which have not been settled and paid.
There are currently no agreements in effect with respect to the Company or a
Company Subsidiary to extend the period of limitations for the assessment or
collection of any tax. As of the date hereof, no audit, examination or
deficiency or refund litigation with respect to such return is pending or, to
the best of the Company's knowledge, threatened.
(c) Except as Previously Disclosed, neither the Company nor any Company
Subsidiary (i) is a party to any agreement providing for the allocation or
sharing of taxes, (ii) is required to include in income any adjustment pursuant
to Section 481(a) of the Code by reason of a voluntary change in accounting
method initiated by the Company or a Company Subsidiary (nor does the Company
have any knowledge that the Internal Revenue Service has proposed any such
adjustment or change of accounting method) or (iii) has filed
18
<PAGE> 24
a consent pursuant to Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply.
3.11 Legal Proceedings
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of the Company,
threatened against the Company or a Company Subsidiary or against any asset,
interest or right of the Company or a Company Subsidiary, or against any
officer, director or employee of any of them that in any such case, if decided
adversely, would have a Material Adverse Effect on the Company. Neither the
Company nor a Company Subsidiary is a party to any order, judgment or decree
which has or could reasonably be expected to have a Material Adverse Effect on
the Company.
3.12 Compliance with Laws
(a) Each of the Company and the Company Subsidiaries has all permits,
licenses, certificates of authority, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local and foreign
governmental or regulatory bodies that are required in order to permit it to
carry on its business as it is presently being conducted and the absence of
which could reasonably be expected to have a Material Adverse Effect on the
Company; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect; and to the best knowledge of the
Company, no suspension or cancellation of any of the same is threatened.
(b) Neither the Company nor a Company Subsidiary is in violation of its
respective Articles of Organization, Charter or Bylaws, or of any applicable
federal, state or local law or ordinance or any order, rule or regulation of any
federal, state, local or other governmental agency or body (including, without
limitation, all banking (including without limitation all regulatory capital
requirements), securities, municipal securities, safety, health, environmental,
zoning, anti-discrimination, antitrust, and wage and hour laws, ordinances,
orders, rules and regulations), or in default with respect to any order, writ,
injunction or decree of any court, or in default under any order, license,
regulation or demand of any governmental agency, any of which violations or
defaults could reasonably be expected to have a Material Adverse Effect on the
Company; and neither the Company nor a Company Subsidiary has received any
notice or communication from any federal, state or local governmental authority
asserting that the Company or a Company Subsidiary is in violation of any of the
foregoing which could reasonably be expected to have a Material Adverse Effect
on the Company. Neither the Company nor a Company Subsidiary is subject to any
regulatory or supervisory cease and desist order, agreement, written directive,
memorandum of understanding or written commitment (other than those of general
applicability to all savings associations or savings and loan holding companies
issued by governmental authorities), and neither of them has received any
written communication requesting that it enter into any of the foregoing.
19
<PAGE> 25
3.13 Certain Information
None of the information relating to the Company and its Subsidiaries
supplied or to be supplied for inclusion or incorporation by reference in (i)
the Form S-4 will, at the time the Form S-4 and any amendment thereto becomes
effective under the Securities Act, 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 under which they were made, not misleading, and
(ii) the Proxy Statement, as of the date(s) such Proxy Statement is mailed to
shareholders of the Company and the Acquiror and up to and including the date(s)
of the meetings of shareholders to which such Proxy Statement relates, will
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 under
which they were made, not misleading, provided that information as of a later
date shall be deemed to modify information as of an earlier date. The Proxy
Statement mailed by the Company to its shareholders in connection with the
meeting of shareholders at which this Agreement will be considered by such
shareholders will comply as to form in all material respects with the Exchange
Act and the rules and regulations promulgated thereunder.
3.14 Employee Benefit Plans
(a) The Company has Previously Disclosed all stock option, employee
stock purchase and stock bonus plans, qualified pension or profit-sharing plans,
any deferred compensation, consultant, bonus or group insurance contract or any
other incentive, health and welfare or employee benefit plan or agreement
maintained for the benefit of employees or former employees of the Company or
any Company Subsidiary (the "Company Employee Plans"), whether written or oral,
and the Company has previously furnished or made available to the Acquiror
accurate and complete copies of the same together with (i) the most recent
actuarial and financial reports prepared with respect to any qualified plans,
(ii) the most recent annual reports filed with any governmental agency, and
(iii) all rulings and determination letters and any open requests for rulings or
letters that pertain to any qualified plan.
(b) None of the Company, any Company Subsidiary, any pension plan
maintained by either of them and qualified under Section 401 of the Code or, to
the best of the Company's knowledge, any fiduciary of such plan has incurred any
material liability to the PBGC or the Internal Revenue Service with respect to
any employees of the Company or a Company Subsidiary. To the best of the
Company's knowledge, no reportable event under Section 4043(b) of ERISA has
occurred with respect to any such pension plan.
(c) Except as Previously Disclosed, neither the Company nor any Company
Subsidiary participates in or has incurred any liability under Section 4201 of
ERISA for a complete or partial withdrawal from a multi-employer plan (as such
term is defined in ERISA).
20
<PAGE> 26
(d) A favorable determination letter has been issued by the Internal
Revenue Service with respect to each Company Employee Plan which is an "employee
pension benefit plan" (as defined in Section 3(2) of ERISA) (a "Company Pension
Plan") which is intended to qualify under Section 401 of the Code to the effect
that such plan is qualified under Section 401 of the Code and the trust
associated with such employee pension plan is tax exempt under Section 501 of
the Code. No such letter has been revoked or, to the best of the Company's
knowledge, is threatened to be revoked and the Company does not know of any
ground on which such revocation may be based. Neither the Company nor any
Company Subsidiary has any liability under any such plan that is not reflected
on the consolidated statement of financial condition of the Company at March 31,
1996 included in the Company Financial Statements, other than liabilities
incurred in the ordinary course of business in connection therewith subsequent
to the date thereof.
(e) To the best of the Company's knowledge, no prohibited transaction
(which shall mean any transaction prohibited by Section 406 of ERISA and not
exempt under Section 408 of ERISA or Section 4975 of the Code) has occurred with
respect to any Company Employee Plan which would result in the imposition,
directly or indirectly, of a material excise tax under Section 4975 of the Code
or otherwise have a Material Adverse Effect on the Company.
(f) Full payment has been made (or proper accruals have been
established) of all contributions which are required for periods prior to the
date hereof, and full payment will be so made (or proper accruals will be so
established) of all contributions which are required for periods after the date
hereof and prior to the Effective Time, under the terms of each Company Employee
Plan or ERISA; no accumulated funding deficiency (as defined in Section 302 of
ERISA or Section 412 of the Code), whether or not waived, exists with respect to
any Company Pension Plan, and there is no "unfunded current liability" (as
defined in Section 412 of the Code) with respect to any Company Pension Plan.
(g) To the best of the Company's knowledge, the Company Employee Plans
have been operated in compliance in all material respects with the applicable
provisions of ERISA, the Code, all regulations, rulings and announcements
promulgated or issued thereunder and all other applicable governmental laws and
regulations.
(h) There are no pending or, to the best knowledge of the Company,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of the Company Employee Plans or any trust related thereto or any
fiduciary thereof.
3.15 Certain Contracts
(a) Except as Previously Disclosed, neither the Company nor a Company
Subsidiary is a party to, is bound or affected by, receives, or is obligated to
pay, benefits under (i) any agreement, arrangement or commitment, including
without limitation any agreement, indenture or other instrument, relating to the
borrowing of money by the
21
<PAGE> 27
Company or a Company Subsidiary (other than in the case of the Bank deposits,
FHLB advances, federal funds purchased and securities sold under agreements to
repurchase in the ordinary course of business) or the guarantee by the Company
or a Company Subsidiary of any obligation, other than by the Bank in the
ordinary course of its banking business, (ii) any agreement, arrangement or
commitment relating to the employment of a consultant or the employment,
election or retention in office of any present or former director, officer or
employee of the Company or a Company Subsidiary, (iii) any agreement,
arrangement or understanding pursuant to which any payment (whether of severance
pay or otherwise) became or may become due to any director, officer or employee
of the Company or a Company Subsidiary upon execution of this Agreement or upon
or following consummation of the transactions contemplated by this Agreement
(either alone or in connection with the occurrence of any additional acts or
events); (iv) any agreement, arrangement or understanding pursuant to which the
Company or a Company Subsidiary is obligated to indemnify any director, officer,
employee or agent of the Company or a Company Subsidiary; (v) any agreement,
arrangement or understanding to which the Company or a Company Subsidiary is a
party or by which any of the same is bound which limits the freedom of the
Company or a Company Subsidiary to compete in any line of business or with any
person, (vi) any assistance agreement, supervisory agreement, memorandum of
understanding, consent order, cease and desist order or condition of any
regulatory order or decree with or by the OTS, the FDIC or any other regulatory
agency, or (vii) any other agreement, arrangement or understanding which would
be required to be filed as an exhibit to the Company's Annual Report on Form
10-K under the Exchange Act and which has not been so filed.
(b) Neither the Company nor any Company Subsidiary is in default or in
non-compliance, which default or non-compliance could reasonably be expected to
have a Material Adverse Effect on the Company, under any contract, agreement,
commitment, arrangement, lease, insurance policy or other instrument to which it
is a party or by which its assets, business or operations may be bound or
affected, whether entered into in the ordinary course of business or otherwise
and whether written or oral, and there has not occurred any event that with the
lapse of time or the giving of notice, or both, would constitute such a default
or non-compliance.
3.16 Brokers and Finders
Except as Previously Disclosed, neither the Company nor any Company
Subsidiary nor any of their respective directors, officers or employees, has
employed any broker or finder or incurred any liability for any broker or finder
fees or commissions in connection with the transactions contemplated hereby.
3.17 Insurance
Each of the Company and its Subsidiaries is insured for reasonable
amounts with financially sound and reputable insurance companies against such
risks as companies
22
<PAGE> 28
engaged in a similar business would, in accordance with good business practice,
customarily be insured and has maintained all insurance required by applicable
laws and regulations. The Company has Previously Disclosed all policies of
insurance maintained by it or a Company Subsidiary as of the date hereof and any
claims thereunder in excess of $50,000 since January 1, 1994.
3.18 Properties
All real and personal property owned by the Company or its Subsidiaries
or presently used by any of them in its respective business is in an adequate
condition (ordinary wear and tear excepted) and is sufficient to carry on the
business of the Company and its Subsidiaries in the ordinary course of business
consistent with their past practices. The Company has good and marketable title
free and clear of all liens, encumbrances, charges, defaults or equities (other
than equities of redemption under applicable foreclosure laws) to all of the
material properties and assets, real and personal, reflected on the consolidated
statement of financial condition of the Company as of March 31, 1996 included in
the Company Financial Statements or acquired after such date, except (i) liens
for current taxes not yet due or payable (ii) pledges to secure deposits and
other liens incurred in the ordinary course of its banking business, (iii) such
imperfections of title, easements and encumbrances, if any, as are not material
in character, amount or extent and (iv) as reflected on the consolidated
statement of financial condition of the Company as of March 31, 1996 included in
the Company Financial Statements. All real and personal property which is
material to the Company's business on a consolidated basis and leased or
licensed by the Company or a Company Subsidiary is held pursuant to leases or
licenses which are valid and enforceable in accordance with their respective
terms and such leases will not terminate or lapse prior to the Effective Time.
3.19 Labor
No work stoppage involving the Company or a Company Subsidiary is
pending or, to the best knowledge of the Company, threatened. Neither the
Company nor a Company Subsidiary is involved in, or threatened with or affected
by, any labor dispute, arbitration, lawsuit or administrative proceeding
involving the employees of the Company or a Company Subsidiary which could have
a Material Adverse Effect on the Company. Employees of the Company and the
Company Subsidiaries are not represented by any labor union nor are any
collective bargaining agreements otherwise in effect with respect to such
employees, and to the best of the Company's knowledge, there have been no
efforts to unionize or organize any employees of the Company or any of the
Company Subsidiaries during the past five years.
3.20 Required Vote; Inapplicability of Antitakover Statutes
(a) Assuming the accuracy of the representation and warranty of the
Acquiror contained in Section 4.21 hereof, the affirmative vote of the holders
of two thirds of the
23
<PAGE> 29
issued and outstanding shares of Company Common Stock is necessary to approve
this Agreement and the transactions contemplated hereby on behalf of the
Company.
(b) A majority of the Continuing Directors (as defined in Section 3G of
the Articles of Organization of the Company) has approved the Merger and this
Agreement such that the provisions of Section 3 of the Articles of Organization
of the Company is inapplicable to this Agreement and the transactions
contemplated hereby.
(c) Assuming the accuracy of the representation and warranty of the
Acquiror contained in Section 4.21 hereof, no "fair price," "moratorium,"
control share acquisition" or other form of antitakeover statute or regulation,
including without limitation Chapters 110D and 110F of the MBCL, is applicable
to this Agreement and the transactions contemplated hereby.
3.21 Ownership of Acquiror Common Stock
As of the date hereof, neither the Company nor, to its best knowledge,
any of its affiliates or associates (as such terms are defined under the
Exchange Act), (i) beneficially own, directly or indirectly, or (ii) are parties
to any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of, in each case, shares of Acquiror Common Stock
which in the aggregate represent 5% or more of the outstanding shares of
Acquiror Common Stock (other than shares held in a fiduciary capacity and
beneficially owned by third parties, shares taken in consideration of debts
previously contracted or in the case of the Company shares which may be acquired
pursuant to the Acquiror Stock Option Agreement).
3.22 Disclosures
None of the representations and warranties of the Company or any of the
written information or documents furnished or to be furnished by the Company to
the Acquiror in connection with or pursuant to this Agreement or the
consummation of the transactions contemplated hereby, when considered as a
whole, contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact required to be stated or necessary
to make any such information or document, in light of the circumstances, not
misleading.
24
<PAGE> 30
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
The Acquiror represents and warrants to the Company as follows:
4.1 Capital Structure
The authorized capital stock of the Acquiror consists of 100,000,000
shares of Acquiror Common Stock and 5,000,000 shares of Acquiror Preferred
Stock. As of April 30, 1996, there were 25,173,106 shares of Acquiror Common
Stock issued and outstanding, 423,444 shares of Acquiror Common Stock were held
as treasury stock and not outstanding and there were no shares of Acquiror
Preferred Stock issued and outstanding. All outstanding shares of Acquiror
Common Stock have been duly authorized and validly issued and are fully paid and
nonassessable, and none of the outstanding shares of Acquiror Common Stock has
been issued in violation of the preemptive rights of any person, firm or entity.
As of the date hereof, there are no Rights authorized, issued or outstanding
with respect to the capital stock of the Acquiror, except for (i) shares of
Acquiror Common Stock issuable pursuant to the Acquiror Employee Stock Benefit
Plans, (ii) shares of Acquiror Common Stock issuable pursuant to the Acquiror
Rights Agreement and (iii) by virtue of this Agreement and the Acquiror Stock
Option Agreement.
4.2 Organization, Standing and Authority of the Acquiror
The Acquiror is a corporation duly organized, validly existing and in
good standing under the laws of the State of Maine with full corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted and is duly licensed or qualified to do business and
is in good standing in each jurisdiction in which its ownership or leasing of
property or the conduct of its business requires such licensing or
qualification, except where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect on the Acquiror. The Acquiror
is duly registered as a bank holding company under the BHCA and the regulations
of the FRB thereunder. The Acquiror has heretofore delivered to the Company true
and complete copies of the Articles of Incorporation and Bylaws of the Acquiror
as in effect as of the date hereof.
4.3 Ownership of the Acquiror Subsidiaries
The Acquiror has Previously Disclosed each direct or indirect Acquiror
Subsidiary and identified Acquiror Maine Bank, Acquiror National Bank and
Acquiror New Hampshire Bank as its only Significant Subsidiaries as of the date
hereof. The outstanding shares of capital stock of each of the Acquiror
Subsidiaries which is a Significant Subsidiary have been duly authorized and
validly issued, are fully paid and nonassessable (except as otherwise provided
with respect to the capital stock of the Acquiror Maine Bank and the Acquiror
National Bank by the MRSA and the National Bank Act, respectively) and are
directly or indirectly owned by the Acquiror free and clear of all liens,
claims, encumbrances, charges,
25
<PAGE> 31
pledges, restrictions or rights of third parties of any kind whatsoever. No
Rights are authorized, issued or outstanding with respect to the capital stock
or other ownership interests of any Acquiror Subsidiary which is a Significant
Subsidiary and there are no agreements, understandings or commitments relating
to the right of the Acquiror to vote or to dispose of said shares or other
ownership interests.
4.4 Organization, Standing and Authority of the Acquiror Subsidiaries
Each Acquiror Subsidiary which is a Significant Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the United States or the laws of the jurisdiction in which it is organized,
as applicable. Each of the Acquiror Subsidiaries which is a Significant
Subsidiary (i) has full power and authority to own or lease all of its
properties and assets and to carry on its business as now conducted, and (ii) is
duly licensed or qualified to do business and is in good standing in each
jurisdiction in which its ownership or leasing of property or the conduct of its
business requires such qualification and where the failure to be so licensed,
qualified or in good standing would have a Material Adverse Effect on the
Acquiror. The deposit accounts of each Acquiror Subsidiary which is an insured
depository institution under the FDIA are insured by either the BIF or, in the
case of certain deposits, the SAIF to the maximum extent permitted by the FDIA,
and each such entity has paid all premiums and assessments required by the FDIA
and the regulations thereunder.
4.5 Authorized and Effective Agreement
(a) Each of the Acquiror and the Acquiror Sub has all requisite
corporate power and authority to enter into this Agreement and (subject to
receipt of all necessary governmental approvals and the approval of the
Acquiror's shareholders of this Agreement) to perform all of its obligations
under this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
the Acquiror and the Acquiror Sub, except for the approval of this Agreement by
the Acquiror's shareholders. This Agreement has been duly and validly executed
and delivered by the Acquiror and the Acquiror Sub and, assuming due
authorization, execution and delivery by the Company, constitutes a legal, valid
and binding obligation of the Acquiror and the Acquiror Sub which is enforceable
against the Acquiror and the Acquiror Sub in accordance with its terms, subject,
as to enforceability, to bankruptcy, insolvency and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
(b) Neither the execution and delivery of this Agreement, nor
consummation of the transactions contemplated hereby (including the Merger and
the Branch Sale) nor compliance by the Acquiror and the Acquiror Sub with any of
the provisions hereof (i) does or will conflict with or result in a breach of
any provisions of the Articles of Incorporation or Bylaws of the Acquiror,
Acquiror Sub or any Acquiror Subsidiary which is a Significant Subsidiary, (ii)
violate, conflict with or result in a breach of any term, condition or provision
26
<PAGE> 32
of, or constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, or give rise to any right of
termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon any property or asset of the
Acquiror, Acquiror Sub or any Acquiror Subsidiary which is a Significant
Subsidiary pursuant to, any material note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which the
Acquiror, Acquiror Sub or any Acquiror Subsidiary which is a Significant
Subsidiary is a party, or by which any of their respective properties or assets
may be bound or affected, or (iii) subject to receipt of all required
governmental and shareholder approvals, violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Acquiror, Acquiror Sub or
any Acquiror Subsidiary which is a Significant Subsidiary.
(c) Except for (i) the filing of applications and notices with, and the
consents and approvals of, as applicable, the FRB, the OTS, the FDIC, the
Massachusetts Board, the MHPF, the Central Fund, the Bank Commissioner and the
Superintendent, (ii) the filing and effectiveness of the Form S-4 with the
Commission, (iii) compliance with applicable state securities or "blue sky" laws
and the NASD Bylaws in connection with the issuance of Acquiror Common Stock
pursuant to this Agreement, (iv) the approval of this Agreement by the requisite
vote of the shareholders of the Company and the Acquiror, (v) the filing of
Articles of Merger with the Secretary of State of the State of Maine and the
Secretary of State of the Commonwealth of Massachusetts pursuant to the MBCA and
the MBCL, respectively, in connection with the Merger and (vi) review of the
Merger by the DOJ under federal antitrust laws, and except for such filings,
registrations, consents or approvals as are Previously Disclosed, no consents or
approvals of or filings or registrations with any Governmental Entity or with
any third party are necessary on the part of the Acquiror, the Acquiror Sub or
Acquiror New Hampshire Bank in connection with (i) the execution and delivery by
the Acquiror and the Acquiror Sub of this Agreement and the consummation by the
Acquiror of the transactions contemplated hereby and (ii) the execution and
delivery by the Acquiror New Hampshire Bank of the Branch Sale Agreement and the
consummation by the Acquiror New Hampshire Bank of the transactions contemplated
thereby.
(d) As of the date hereof, the Acquiror is not aware of any reasons
relating to the Acquiror or any of its Subsidiaries (including without
limitation Community Reinvestment Act compliance) why all consents and approvals
shall not be procured from all regulatory agencies having jurisdiction over the
transactions contemplated by this Agreement as shall be necessary for (i)
consummation of the transactions contemplated by this Agreement and the Branch
Sale Agreement and (ii) the continuation by the Acquiror after the Effective
Time of the business of each of the Acquiror and the Company as such business is
carried on immediately prior to the Effective Time, free of any conditions or
requirements which, in the reasonable opinion of the Acquiror, could have a
Material Adverse Effect on the Acquiror or the Company or materially impair the
value of the Company and the Bank to the Acquiror.
27
<PAGE> 33
4.6 Securities Documents and Regulatory Reports
(a) Since January 1, 1993, the Acquiror has timely filed with the
Commission and the NASD all Securities Documents required by the Securities Laws
and such Securities Documents complied in all material respect with the
Securities Laws and did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(b) Since January 1, 1993, the Acquiror, the Acquiror Sub and each
Acquiror Subsidiary which is an insured depository institution under the FDIA
has duly filed with the FRB, the OCC, the FDIC, the Bank Commissioner and the
Superintendent, as the case may be, in correct form the reports required to be
filed under applicable laws and regulations and such reports were in all
material respects complete and accurate and in compliance with the requirements
of applicable laws and regulations. In connection with the most recent
examinations of the Acquiror or an Acquiror Subsidiary by the FRB, the OCC, the
FDIC, the Bank Commissioner or the Superintendent, neither the Acquiror nor any
Acquiror Subsidiary was required to correct or change any action, procedure or
proceeding which the Acquiror or the Acquiror Subsidiary believes has not been
corrected or changed as required as of the date hereof and which could have a
Material Adverse Effect on the Acquiror.
4.7 Financial Statements
(a) The Acquiror has previously delivered or made available to the
Company accurate and complete copies of the Acquiror Financial Statements which,
in the case of the consolidated statements of financial condition of the
Acquiror as of December 31, 1995, 1994 and 1993 and the consolidated statements
of operations, shareholders' equity and cash flows for each of the three years
ended December 31, 1995, 1994 and 1993, are accompanied by the audit reports of
KPMG Peat Marwick LLP, independent public accountants with respect to the
Acquiror. The Acquiror Financial Statements referred to herein, as well as the
Acquiror Financial Statements to be delivered pursuant to Section 5.8 hereof,
fairly present or will fairly present, as the case may be, the consolidated
financial condition of the Acquiror as of the respective dates set forth
therein, and the consolidated results of operations, shareholders' equity and
cash flows of the Acquiror for the respective periods or as of the respective
dates set forth therein.
(b) Each of the Acquiror Financial Statements referred to in Section
4.7(a) has been or will be, as the case may be, prepared in accordance with
generally accepted accounting principles consistently applied during the periods
involved, except as stated therein. The audits of the Acquiror and the Acquiror
Subsidiaries have been conducted in all material respects in accordance with
generally accepted auditing standards. The books and records of the Acquiror and
the Acquiror Subsidiaries are being maintained in material compliance with
applicable legal and accounting requirements, and all such books and
28
<PAGE> 34
records accurately reflect in all material respects all dealings and
transactions in respect of the business, assets, liabilities and affairs of the
Acquiror and the Acquiror Subsidiaries.
(c) Except and to the extent (i) reflected, disclosed or provided for
in the consolidated statement of financial condition of the Acquiror as of March
31, 1996 (including related notes) and (ii) of liabilities incurred since March
31, 1996 in the ordinary course of business, neither the Acquiror nor any
Acquiror Subsidiary has any liabilities, whether absolute, accrued, contingent
or otherwise, material to the financial condition, results of operations or
business of the Acquiror on a consolidated basis.
4.8 Material Adverse Change
Since March 31, 1996, no event has occurred or circumstance arisen
that, individually or in the aggregate, has had or is reasonably likely to have
a Material Adverse Effect on the Acquiror.
4.9 Environmental Matters
(a) To the best of the Acquiror's knowledge, the Acquiror and the
Acquiror Subsidiaries are in compliance with all Environmental Laws, except for
any violations of any Environmental Law which would not, singly or in the
aggregate, have a Material Adverse Effect on the Acquiror. Neither the Acquiror
nor any Acquiror Subsidiary has received any communication alleging that the
Acquiror or any Acquiror Subsidiary is not in such compliance and, to the best
knowledge of the Acquiror, there are no present circumstances that would prevent
or interfere with the continuation of such compliance.
(b) To the best of the Acquiror's knowledge, none of the properties
owned, leased or operated by the Acquiror or the Acquiror Subsidiaries has been
or is in violation of or liable under any Environmental Law, except any such
violations or liabilities which would not singly or in the aggregate have a
Material Adverse Effect on the Acquiror.
(c) To the best of the Acquiror's knowledge, there are no past or
present actions, activities, circumstances, conditions, events or incidents that
could reasonably form the basis of any Environmental Claim or other claim or
action or governmental investigation that could result in the imposition of any
liability arising under any Environmental Law against the Acquiror or any
Acquiror Subsidiary or against any person or entity whose liability for any
Environmental Claim the Acquiror or any Acquiror Subsidiary has or may have
retained or assumed either contractually or by operation of law, except such
which would not have a Material Adverse Effect on the Acquiror.
4.10 Tax Matters
The Acquiror and the Acquiror Subsidiaries, and each of their
predecessors, have timely filed all federal, state and local (and, if
applicable, foreign) income, franchise, bank,
29
<PAGE> 35
excise, real property, personal property and other tax returns required by
applicable law to be filed by them (including, without limitation, estimated tax
returns, income tax returns, information returns and withholding and employment
tax returns) and have paid, or where payment is not required to have been made,
have set up an adequate reserve or accrual for the payment of, all material
taxes required to be paid in respect of the periods covered by such returns and,
as of the Effective Time, will have paid, or where payment is not required to
have been made, will have set up an adequate reserve or accrual for the payment
of, all material taxes for any subsequent periods ending on or prior to the
Effective Time. Neither the Acquiror nor any of the Acquiror Subsidiaries will
have any material liability for any such taxes in excess of the amounts so paid
or reserves or accruals so established. Except as Previously Disclosed, as of
the date hereof, no audit, examination or deficiency or refund litigation with
respect to any federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
filed by the Acquiror and the Acquiror Subsidiaries is pending or, to the best
of the Acquiror's knowledge, threatened.
4.11 Legal Proceedings
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of the Acquiror
threatened against the Acquiror or any Acquiror Subsidiary or against any asset,
interest or right of the Acquiror or any Acquiror Subsidiary, or against any
officer, director or employee of any of them that in any such case, if decided
adversely, would have a Material Adverse Effect on the Acquiror. Neither the
Acquiror nor any of the Acquiror Subsidiaries is a party to any order, judgment
or decree which has or could reasonably be expected to have a Material Adverse
Effect on the Acquiror.
4.12 Compliance with Laws
(a) Each of the Acquiror and each of the Acquiror Subsidiaries has all
permits, licenses, certificates of authority, orders and approvals of, and has
made all filings, applications and registrations with, federal, state, local and
foreign governmental or regulatory bodies that are required in order to permit
it to carry on its business as it is presently being conducted and the absence
of which could reasonably be expected to have a Material Adverse Effect on the
Acquiror; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect; and to the best knowledge of the
Acquiror, no suspension or cancellation of any of the same is threatened.
(b) Neither the Acquiror nor any of the Acquiror Subsidiaries is in
violation of its respective Articles of Incorporation, Charter or other
chartering instrument or Bylaws, or of any applicable federal, state or local
law or ordinance or any order, rule or regulation of any federal, state, local
or other governmental agency or body (including, without limitation, all banking
(including without limitation all regulatory capital requirements), securities,
municipal securities, safety, health, environmental, zoning,
anti-discrimination,
30
<PAGE> 36
antitrust, and wage and hour laws, ordinances, orders, rules and regulations),
or in default with respect to any order, writ, injunction or decree of any
court, or in default under any order, license, regulation or demand of any
governmental agency, any of which violations or defaults could reasonably be
expected to have a Material Adverse Effect on the Acquiror; and neither the
Acquiror nor any Acquiror Subsidiary has received any notice or communication
from any federal, state or local governmental authority asserting that the
Acquiror or any Acquiror Subsidiary is in violation of any of the foregoing
which could reasonably be expected to have a Material Adverse Effect on the
Acquiror. Neither the Acquiror nor any Acquiror Subsidiary is subject to any
regulatory or supervisory cease and desist order, agreement, written directive,
memorandum of understanding or written commitment (other than those of general
applicability to all banks, savings associations or holding companies thereof,
as applicable, issued by governmental authorities), and none of them has
received any written communication requesting that it enter into any of the
foregoing.
4.13 Certain Information
None of the information relating to the Acquiror and the Acquiror
Subsidiaries to be included or incorporated by reference in (i) the Form S-4
will, at the time the Form S-4 and any amendment thereto becomes effective under
the Securities Act, 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 under which they were made, not misleading, and (ii) the Proxy
Statement, as of the date(s) such Proxy Statement is mailed to shareholders of
the Acquiror and the Company and up to and including the date(s) of the meetings
of shareholders to which such Proxy Statement relates, will 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 under which they were
made, not misleading, provided that information as of a later date shall be
deemed to modify information as of an earlier date. The Proxy Statement mailed
by the Acquiror to shareholders of the Company and the Acquiror in connection
with the meetings of shareholders at which this Agreement will be considered by
such shareholders will comply as to form in all material respects with the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder.
4.14 Employee Benefit Plans
(a) The Acquiror has Previously Disclosed all stock option, employee
stock purchase and stock bonus plans, qualified pension or profit-sharing plans,
any deferred compensation, consultant, bonus or group insurance contract or any
other incentive, health and welfare or employee benefit plan or agreement
maintained for the benefit of employees or former employees of the Acquiror or
any Acquiror Subsidiary (the "Acquiror Employee Plans"), whether written or
oral.
31
<PAGE> 37
(b) None of the Acquiror, any Acquiror Subsidiary, any pension plan
maintained by any of them and qualified under Section 401 of the Code or, to the
best of the Acquiror's knowledge, any fiduciary of such plan has incurred any
material liability to the PBGC or the Internal Revenue Service with respect to
any employees of the Acquiror or any Acquiror Subsidiary. To the best of the
Acquiror's knowledge, no reportable event under Section 4043(b) of ERISA has
occurred with respect to any such pension plan.
(c) Neither the Acquiror nor any Acquiror Subsidiary participates in or
has incurred any liability under Section 4201 of ERISA for a complete or partial
withdrawal from a multi-employer plan (as such term is defined in ERISA).
(d) A favorable determination letter has been issued by the Internal
Revenue Service with respect to each Acquiror Employee Plan which is an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA) (an
"Acquiror Pension Plan") which is intended to qualify under Section 401 of the
Code to the effect that such plan is qualified under Section 401 of the Code and
the trust associated with such employee pension plan is tax exempt under Section
501 of the Code. No such letter has been revoked or, to the best of the
Acquiror's knowledge, is threatened to be revoked and the Acquiror does not know
of any ground on which such revocation may be based. Neither the Acquiror nor
any Acquiror Subsidiary has any liability under any such plan that is not
reflected on the consolidated statement of financial condition of the Acquiror
at March 31, 1996 included in the Acquiror Financial Statements, other than
liabilities incurred in the ordinary course of business in connection therewith
subsequent to the date thereof.
(e) To the best of the Acquiror's knowledge, no prohibited transaction
(which shall mean any transaction prohibited by Section 406 of ERISA and not
exempt under Section 408 of ERISA or Section 4975 of the Code) has occurred with
respect to any Acquiror Employee Plan which would result in the imposition,
directly or indirectly, of a material excise tax under Section 4975 of the Code
or otherwise have a Material Adverse Effect on the Acquiror.
(f) Full payment has been made (or proper accruals have been
established) of all contributions which are required for periods prior to the
date hereof, and full payment will be so made (or proper accruals will be so
established) of all contributions which are required for periods after the date
hereof and prior to the Effective Time, under the terms of each Acquiror
Employee Plan or ERISA; no accumulated funding deficiency (as defined in Section
302 of ERISA or Section 412 of the Code), whether or not waived, exists with
respect to any Acquiror Pension Plan, and there is no "unfunded current
liability" (as defined in Section 412 of the Code) with respect to any Acquiror
Pension Plan.
(g) To the best of the Acquiror's knowledge, the Acquiror Employee
Plans have been operated in compliance in all material respects with the
applicable provisions of ERISA, the Code, all regulations, rulings and
announcements promulgated or issued thereunder and all other applicable
governmental laws and regulations.
32
<PAGE> 38
(h) There are no pending or, to the best knowledge of the Acquiror,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of the Acquiror Employee Plans or any trust related thereto or any
fiduciary thereof.
4.15 Certain Contracts
Neither the Acquiror nor any Acquiror Subsidiary is in default or in
non-compliance, which default or non-compliance could reasonably be expected to
have a Material Adverse Effect on the Acquiror, under any contract, agreement,
commitment, arrangement, lease, insurance policy or other instrument to which it
is a party or by which its assets, business or operations may be bound or
affected, whether entered into in the ordinary course of business or otherwise
and whether written or oral, and there has not occurred any event that with the
lapse of time or the giving of notice, or both, would constitute such a default
or non-compliance.
4.16 Brokers and Finders
Except as Previously Disclosed, neither the Acquiror nor any Acquiror
Subsidiary, nor any of their respective directors, officers or employees, has
employed any broker or finder or incurred any liability for any broker or finder
fees or commissions in connection with the transactions contemplated hereby.
4.17 Insurance
The Acquiror and each Acquiror Subsidiary is insured for reasonable
amounts with financially sound and reputable insurance companies against such
risks as companies engaged in a similar business would, in accordance with good
business practice, customarily be insured and has maintained all insurance
required by applicable laws and regulations.
4.18 Properties
All real and personal property owned by the Acquiror or each Acquiror
Subsidiary which is a Significant Subsidiary or presently used by any of them in
its respective business is in an adequate condition (ordinary wear and tear
excepted) and is sufficient to carry on its business in the ordinary course of
business consistent with their past practices. The Acquiror has good and
marketable title free and clear of all liens, encumbrances, charges, defaults or
equities (other than equities of redemption under applicable foreclosure laws)
to all of the material properties and assets, real and personal, reflected on
the consolidated statement of financial condition of the Acquiror as of March
31, 1996 included in the Acquiror Financial Statements or acquired after such
date, except (i) liens for current taxes not yet due or payable (ii) pledges to
secure deposits and other liens incurred in the ordinary course of its banking
business, (iii) such imperfections of title, easements and encumbrances, if any,
as are not material in character, amount or extent and (iv) as reflected on the
consolidated statement of financial condition of the Acquiror as of March
33
<PAGE> 39
31, 1996 included in the Acquiror Financial Statements. All real and personal
property which is material to the Acquiror's business on a consolidated basis
and leased or licensed by the Acquiror or an Acquiror Subsidiary is held
pursuant to leases or licenses which are valid and enforceable in accordance
with their respective terms and such leases will not terminate or lapse prior to
the Effective Time.
4.19 Labor
No work stoppage involving the Acquiror or an Acquiror Subsidiary which
is a Significant Subsidiary is pending or, to the best knowledge of the
Acquiror, threatened. Neither the Acquiror nor any Acquiror Subsidiary is
involved in, or threatened with or affected by, any labor dispute, arbitration,
lawsuit or administrative proceeding involving its employees which could have a
Material Adverse Effect on the Acquiror. Employees of the Acquiror and any
Acquiror Subsidiary are not represented by any labor union nor are any
collective bargaining agreements otherwise in effect with respect to such
employees, and to the best of the Acquiror's knowledge, there have been no
efforts to unionize or organize any employees of the Acquiror or any Acquiror
Subsidiary during the past five years.
4.20 Required Vote; Acquiror Rights Agreement
(a) A majority of the total votes cast on the proposal by the holders
of the issued and outstanding shares of Acquiror Common Stock is necessary to
approve this Agreement and the transactions contemplated hereby on behalf of the
Acquiror.
(b) There is no Acquiring Person, and none of a Stock Acquisition Date,
a Distribution Date or a Triggering Event has occurred, in each case as such
terms are defined in the Acquiror Rights Agreement.
4.21 Ownership of Company Common Stock.
As of the date hereof, neither the Acquiror nor, to its best knowledge,
any of its affiliates or associates (as such terms are defined under the
Exchange Act), (i) beneficially own, directly or indirectly, or (ii) are parties
to any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of, in each case, shares of Company Common Stock
which in the aggregate represent 5% or more of the outstanding shares of Company
Common Stock (other than shares held in a fiduciary capacity and beneficially
owned by third parties, shares taken in consideration of debts previously
contracted or in the case of the Acquiror shares which may be acquired pursuant
to the Company Stock Option Agreement).
4.22 Disclosures
None of the representations and warranties of the Acquiror or any of
the written information or documents furnished or to be furnished by the
Acquiror to the Company in
34
<PAGE> 40
connection with or pursuant to this Agreement or the consummation of the
transactions contemplated hereby, when considered as a whole, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact required to be stated or necessary to make any such
information or document, in light of the circumstances, not misleading.
ARTICLE V
COVENANTS
5.1 Reasonable Best Efforts
Subject to the terms and conditions of this Agreement, each of the
Company, the Acquiror and the Acquiror Sub shall use its reasonable best efforts
in good faith to take, or cause to be taken, all actions, and to do, or cause to
be done, all things necessary or advisable under applicable laws and regulations
so as to permit consummation of the Merger (including, without limitation,
satisfaction of the conditions to consummation of the Merger specified in
Article VI of this Agreement) and the Branch Sale on or before December 31, 1996
or, in the event that requisite regulatory and other approvals have not yet been
obtained, as promptly as practicable thereafter, and to otherwise enable
consummation of the transactions contemplated hereby, and shall cooperate fully
with the other party or parties hereto to that end.
5.2 Shareholder Meetings
Each of the Acquiror and the Company shall take all action necessary to
properly call and convene a meeting of its shareholders as soon as practicable
after the date hereof to consider and vote upon this Agreement and the
transactions contemplated hereby. The Board of Directors of the Acquiror and the
Board of Directors of the Company will recommend that the shareholders of the
Acquiror and the Company, respectively, approve this Agreement and the
transactions contemplated hereby, provided that the Board of Directors of the
Acquiror and the Board of Directors of the Company may fail to make such
recommendation, or withdraw, modify or change any such recommendation, if such
Board of Directors, after having consulted with and considered the advice of
outside counsel, has determined that the making of such recommendation, or the
failure to withdraw, modify or change such recommendation, would constitute a
breach of the fiduciary duties of such directors under applicable law.
5.3 Regulatory Matters
(a) The parties hereto shall promptly cooperate with each other in the
preparation and filing of the Form S-4, including the Proxy Statement. Each of
the Acquiror and the Company shall use its reasonable best efforts to have the
Form S-4 declared effective under the Securities Act as promptly as practicable
after such filing, and the Acquiror and the Company each shall thereafter
promptly mail the Proxy Statement to its respective
35
<PAGE> 41
shareholders. The Acquiror also shall use its reasonable best efforts to obtain
all necessary state securities law or "blue sky" permits and approvals required
to carry out the issuance of Acquiror Common Stock pursuant to the Merger and
all other transactions contemplated by this Agreement, and the Company shall
furnish all information concerning the Company and the holders of the Company
Common Stock as may be reasonably requested in connection with any such action.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all Governmental Entities and third parties which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including without limitation the Merger and the Branch Sale). The
Acquiror and the Company shall have the right to review in advance, and to the
extent practicable each will consult with the other on, in each case subject to
applicable laws relating to the exchange of information, all the information
which appears in any filing made with or written materials submitted to any
third party or any Governmental Entity in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
parties hereto shall act reasonably and as promptly as practicable. The parties
hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all third
parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
apprised of the status of matters relating to completion of the transactions
contemplated herein.
(c) The Acquiror and the Company shall, upon request, furnish each
other with all information concerning themselves, their respective Subsidiaries,
directors, officers and shareholders and such other matters as may be reasonably
necessary or advisable in connection with the Proxy Statement, the Form S-4 or
any other statement, filing, notice or application made by or on behalf of the
Acquiror, the Company or any of their respective Subsidiaries to any
Governmental Entity in connection with the Merger, the Branch Sale and the other
transactions contemplated hereby.
(d) The Acquiror and the Company shall promptly furnish each other with
copies of written communications received by the Acquiror or the Company, as the
case may be, or any of their respective Subsidiaries from, or delivered by any
of the foregoing to, any Governmental Entity in respect of the transactions
contemplated hereby.
5.4 Investigation and Confidentiality
(a) Each party shall permit the other party and its representatives
reasonable access to its properties and personnel, and shall disclose and make
available to such other party all books, papers and records relating to the
assets, stock ownership, properties, operations, obligations and liabilities of
it and its Subsidiaries, including, but not limited to,
36
<PAGE> 42
all books of account (including the general ledger), tax records, minute books
of meetings of boards of directors (and any committees thereof) and
shareholders, organizational documents, bylaws, material contracts and
agreements, filings with any regulatory authority, accountants' work papers,
litigation files, loan files, plans affecting employees, and any other business
activities or prospects in which the other party may have a reasonable interest,
provided that such access shall be reasonably related to the transactions
contemplated hereby and, in the reasonable opinion of the respective parties
providing such access, not unduly interfere with normal operations. Each party
and its Subsidiaries shall make their respective directors, officers, employees
and agents and authorized representatives (including counsel and independent
public accountants) available to confer with the other party and its
representatives, provided that such access shall be reasonably related to the
transactions contemplated hereby and shall not unduly interfere with normal
operations.
(b) All information furnished previously in connection with the
transactions contemplated by this Agreement or pursuant hereto shall be treated
as the sole property of the party furnishing the information until consummation
of the transactions contemplated hereby and, if such transactions shall not
occur, the party receiving the information shall either destroy or return to the
party which furnished such information all documents or other materials
containing, reflecting or referring to such information, shall use its best
efforts to keep confidential all such information, and shall not directly or
indirectly use such information for any competitive or other commercial
purposes. The obligation to keep such information confidential shall continue
for five years from the date the proposed transactions are abandoned but shall
not apply to (i) any information which (x) the party receiving the information
can establish by convincing evidence was already in its possession prior to the
disclosure thereof by the party furnishing the information; (y) was then
generally known to the public; or (z) became known to the public through no
fault of the party receiving the information; or (ii) disclosures pursuant to a
legal requirement or in accordance with an order of a court of competent
jurisdiction, provided that the party which is the subject of any such legal
requirement or order shall use its best efforts to give the other party at least
ten business days prior notice thereof.
5.5 Press Releases
The Acquiror and the Company shall agree with each other as to the form
and substance of any press release related to this Agreement or the transactions
contemplated hereby, and consult with each other as to the form and substance of
other public disclosures which may relate to the transactions contemplated by
this Agreement, provided, however, that nothing contained herein shall prohibit
either party, following notification to the other party, from making any
disclosure which is required by law or regulation.
5.6 Business of the Parties
(a) 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
37
<PAGE> 43
the prior written consent of the Acquiror, the Company and its Subsidiaries
shall carry on their respective businesses in the ordinary course consistent
with past practice. During such period, the Company also will use all reasonable
efforts to (x) preserve its business organization and that of the Bank intact,
(y) keep available to itself and the Acquiror the present services of the
employees of the Company and the Bank and (z) preserve for itself and the
Acquiror the goodwill of the customers of the Company and the Bank and others
with whom business relationships exist. Without limiting the generality of the
foregoing, except with the prior written consent of the Acquiror or as expressly
contemplated hereby, between the date hereof and the Effective Time, the Company
shall not, and shall cause each Company Subsidiary not to:
(i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of the Company Common Stock, except for regular
quarterly cash dividends at a rate per share of Company Common Stock
not in excess of $.12 per share, which shall have the same record and
payment dates as the record and payment dates relating to dividends on
the Acquiror Common Stock (as Previously Disclosed by the Acquiror), it
being the intention of the parties that the shareholders of the Company
receive dividends for any particular calendar quarter on either the
Company Common Stock or the Acquiror Common Stock acquired in exchange
therefor pursuant to the terms of this Agreement but not both,
provided, however, that if the Effective Time does not occur prior to
the record date for the first regular quarterly dividend in 1997, the
regular per share quarterly dividend on the Company Common Stock for
such quarter (and any subsequent quarterly dividends prior to the
Effective Time) may be increased to up to $.14 per share, and further
provided that nothing contained herein shall be deemed to affect the
ability of a Company Subsidiary to pay dividends on its capital stock
to the Company;
(ii) issue any shares of its capital stock, other than in the
case of the Company pursuant to the Company Stock Option Agreement and
upon exercise of the Company Options referred to in Section 3.1 hereof,
or issue, grant, modify or authorize any Rights, other than the Company
Stock Option Agreement; purchase any shares of Company Common Stock; or
effect any recapitalization, reclassification, stock dividend, stock
split or like change in capitalization;
(iii) amend its Articles of Organization, Charter, Bylaws or
similar organizational documents; impose, or suffer the imposition, on
any share of stock or other ownership interest held by the Company in a
Company Subsidiary of any lien, charge or encumbrance or permit any
such lien, charge or encumbrance to exist; or waive or release any
material right or cancel or compromise any material debt or claim;
(iv) increase the rate of compensation of any of its directors,
officers or employees, or pay or agree to pay any bonus or severance
to, or provide any other
38
<PAGE> 44
new employee benefit or incentive to, any of its directors, officers or
employees, except (i) as may be required pursuant to binding
commitments existing on the date hereof and (ii) such as may be granted
in the ordinary course of business consistent with past practice,
including without limitation pursuant to the Company's Performance
Compensation Program, as Previously Disclosed by the Company pursuant
to Section 3.14(a) hereof;
(v) except as Previously Disclosed, enter into or, except as
may be required by law, modify any pension, retirement, stock option,
stock purchase, stock appreciation right, savings, profit sharing,
deferred compensation, supplemental retirement, consulting, bonus,
group insurance or other employee benefit, incentive or welfare
contract, plan or arrangement, or any trust agreement related thereto,
in respect of any of its directors, officers or employees; make any
contributions to the Company's defined benefit Pension Plan or 401(k)
Plan not in the ordinary course of business consistent with past
practice; or make any contributions to the Company's Employee Stock
Ownership Plan, other than necessary to enable such plan to make
required payments on its indebtedness as of the date hereof;
(vi) enter into (w) any agreement, arrangement or commitment
not made in the ordinary course of business, (x) any agreement,
indenture or other instrument relating to the borrowing of money by the
Company or a Company Subsidiary or guarantee by the Company or any
Company Subsidiary of any such obligation, except in the case of the
Bank for deposits, FHLB advances, federal funds purchased and
securities sold under agreements to repurchase in the ordinary course
of business consistent with past practice, (y) any agreement,
arrangement or commitment relating to the employment of an employee, or
amend any such existing agreement, arrangement or commitment, provided
that the Company and the Bank may employ an employee in the ordinary
course of business if the employment of such employee is terminable by
the Company or the Bank at will without liability, other than as
required by law; or (z) any contract, agreement or understanding with a
labor union;
(vii) change its method of accounting in effect for the year
ended December 31, 1995, except as required by changes in laws or
regulations or generally accepted accounting principles, or change any
of its methods of reporting income and deductions for federal income
tax purposes from those employed in the preparation of its federal
income tax return for the fiscal year ended October 31, 1995, except as
required by changes in laws or regulations;
(viii) make any capital expenditures in excess of $50,000
individually or $250,000 in the aggregate, other than pursuant to
binding commitments existing on the date hereof and other than
expenditures necessary to maintain existing assets in good repair;
39
<PAGE> 45
(ix) file any applications or make any contract with respect to
branching or site location or relocation;
(x) acquire in any manner whatsoever (other than to realize
upon collateral for a defaulted loan) any business or entity;
(xi) enter into any futures contract, option contract, interest
rate caps, interest rate floors, interest rate exchange agreement or
other agreement for purposes of hedging the exposure of its
interest-earning assets and interest-bearing liabilities to changes in
market rates of interest (other than forward commitments to sell loans
in the ordinary course of business);
(xii) enter or agree to enter into any agreement or arrangement
granting any preferential right to purchase any of its assets or rights
or requiring the consent of any party to the transfer and assignment of
any such assets or rights;
(xiii) take any action that would prevent or impede the Merger
from qualifying as a reorganization within the meaning of Section 368
of the Code, provided, however, that nothing contained herein shall
limit the ability of the Company to exercise its rights under the
Acquiror Stock Option Agreement;
(xiv) take any action that would result in any of the
representations and warranties of the Company contained in this
Agreement not to be true and correct in any material respect at the
Effective Time; or
(xv) agree to do any of the foregoing.
In addition to the foregoing, the Company agrees to terminate the
existing contract with Wausau providing for a check item processing system using
imaging technology in accordance with its terms and shall not, and shall cause
each Company Subsidiary not to, take any action to acquire or otherwise install
or implement any new check item processing system without the prior written
consent of the Acquiror.
(b) During the period from the date of this Agreement and continuing
until the Effective Time, the Acquiror shall continue to conduct its business
and the business of the Acquiror Subsidiaries which are Significant Subsidiaries
in a manner designed in its reasonable judgment to enhance the long-term value
of the Acquiror Common Stock and the business prospects of the Acquiror. Without
limiting the generality of the foregoing, except with the prior written consent
of the Company or as expressly contemplated hereby, between the date hereof and
the Effective Time, the Acquiror shall not, and shall cause each Acquiror
Subsidiary which is a Significant Subsidiary not to:
40
<PAGE> 46
(i) amend its Articles of Incorporation or Bylaws in a manner
which would adversely affect in any manner the terms of the Acquiror
Common Stock or the ability of the Acquiror to consummate the
transactions contemplated hereby;
(ii) make any acquisition or take any other action that
individually or in the aggregate could materially adversely affect the
ability of the Acquiror to consummate the transactions contemplated
hereby in a reasonably timely manner;
(iii) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of the Acquiror Common Stock, except for regular
quarterly cash dividends in an amount determined by the Board of
Directors in the ordinary course of business and consistent with past
practice, provided, however, that nothing contained herein shall be
deemed to affect the ability of (x) an Acquiror Subsidiary to pay
dividends on its capital stock to the Acquiror or (y) the Acquiror to
repurchase shares of Acquiror Common Stock (whether pursuant to an open
market purchase program, privately- negotiated transactions and/or a
self-tender offer) to fund some or all of the shares of Acquiror Common
Stock to be issued pursuant to this Agreement;
(iv) take any action that would prevent or impede the Merger
from qualifying as a reorganization within the meaning of Section 368
of the Code; provided, however, that nothing contained herein shall
limit the ability of the Acquiror to exercise its rights under the
Company Stock Option Agreement;
(v) take any action that would result in any of the
representations and warranties of the Acquiror contained in this
Agreement not to be true and correct in any material respect at the
Effective Time; or
(vi) agree to do any of the foregoing.
5.7 Certain Actions
The Company shall not, and shall cause each Company Subsidiary not to,
solicit or encourage inquiries or proposals with respect to, furnish any
information relating to, or participate in any negotiations or discussions
concerning, any acquisition, lease or purchase of all or a substantial portion
of the assets of, or any equity interest in, the Company or a Company Subsidiary
(other than with the Acquiror or an affiliate thereof), provided, however, that
the Board of Directors of the Company may furnish such information or
participate in such negotiations or discussions if such Board of Directors,
after having consulted with and considered the advice of outside counsel, has
determined that the failure to do the same would cause the members of such Board
of Directors to breach their fiduciary duties under applicable law. The Company
will promptly inform the Acquiror orally and in writing of any such request for
information or of any such negotiations or
41
<PAGE> 47
discussions, as well as instruct its and its Subsidiaries' directors, officers,
representatives and agents to refrain from taking any action prohibited by this
Section 5.7.
5.8 Current Information
During the period from the date of this Agreement to the Effective
Time, each party shall, upon the request of the other party, cause one or more
of its designated representatives to confer on a monthly or more frequent basis
with representatives of the other party regarding its financial condition,
operations and business and matters relating to the completion of the
transactions contemplated hereby. As soon as reasonably available, but in no
event more than 45 days after the end of each calendar quarter ending after the
date of this Agreement (other than the last quarter of each fiscal year ending
December 31), the Company and the Acquiror will deliver to the other party its
quarterly report on Form 10-Q under the Exchange Act, and, as soon as reasonably
available, but in no event more than 90 days after the end of each fiscal year,
the Company and the Acquiror will deliver to the other party its Annual Report
on Form 10-K. Within 25 days after the end of each month, the Company and the
Acquiror will deliver to the other party a consolidated balance sheet and a
consolidated statement of operations, without related notes, for such month
prepared in accordance with generally accepted accounting principles.
5.9 Indemnification; Insurance
(a) From and after the Effective Time through the sixth anniversary of
the Effective Time, the Acquiror (the "Indemnifying Party") shall indemnify and
hold harmless each present and former director, officer and employee of the
Company or a Company Subsidiary, in each case determined as of the Effective
Time (the "Indemnified Parties"), against any costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages or
liabilities (collectively, "Costs") incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of matters existing or occurring at
or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent to which such Indemnified
Parties were entitled under the Articles of Organization and Bylaws of the
Company or in similar organizational documents of a Company Subsidiary, in each
case as in effect on the date hereof, provided, however, that all rights to
indemnification in respect of any claim asserted or made within such period
shall continue until the final disposition of such claim. Without limiting the
foregoing obligation, the Acquiror also agrees that all limitations of liability
existing in favor of the Indemnified Parties in the Articles of Organization and
Bylaws of the Company or in similar organizational documents of a Company
Subsidiary, in each case as in effect on the date hereof, arising out of matters
existing or occurring at or prior to the Effective Time shall survive the Merger
and shall continue in full force and effect for a period of six years from the
Effective Time, provided, however, that all such rights in respect of any claim
asserted or made within such period shall continue until the final disposition
of such claim.
42
<PAGE> 48
(b) Any Indemnified Party wishing to claim indemnification under
Section 5.9(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Indemnifying Party, but the failure to
so notify shall not relieve the Indemnifying Party of any liability it may have
to such Indemnified Party if such failure does not materially prejudice the
Indemnifying Party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) the
Indemnifying Party shall have the right to assume the defense thereof and the
Indemnifying Party shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if the
Indemnifying Party elects not to assume such defense or counsel for the
Indemnified Parties advises that there are issues which raise conflicts of
interest between the Indemnifying Party and the Indemnified Parties, the
Indemnified Parties may retain counsel which is reasonably satisfactory to the
Indemnifying Party, and the Indemnifying Party shall pay, promptly as statements
therefor are received, the reasonable fees and expenses of such counsel for the
Indemnified Parties (which may not exceed one firm in any jurisdiction unless
the use of one counsel for such Indemnified Parties would present such counsel
with a conflict of interest), (ii) the Indemnified Parties will cooperate in the
defense of any such matter, (iii) the Indemnifying Party shall not be liable for
any settlement effected without its prior written consent and (iv) the
Indemnifying Party shall have no obligation hereunder in the event a federal
banking agency or a court of competent jurisdiction shall ultimately determine,
and such determination shall have become final and nonappealable, that
indemnification of an Indemnified Party in the manner contemplated hereby is
prohibited by applicable law.
(c) The Acquiror shall cause the Surviving Corporation to maintain the
Company's existing directors' and officers' liability insurance policy as of the
date hereof (or a policy providing coverage on substantially the same terms and
conditions) for acts or omissions occurring prior to the Effective Time by
persons who are currently covered by such insurance policy maintained by the
Company for a period of three years following the Effective Time.
(d) In the event that the Acquiror or any of its respective 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 all or substantially all of its properties and assets
to any person, then, and in each such case the successors and assigns of such
entity shall assume the obligations set forth in this Section 5.9, which
obligations are expressly intended to be for the irrevocable benefit of, and
shall be enforceable by, each director and officer covered hereby.
5.10 Directors
(a) The Acquiror agrees to take all action necessary to appoint or
elect, effective as of the Effective Time, one non-employee director of the
Company as of the date hereof who is designated by the Company and who both
meets the director qualification
43
<PAGE> 49
requirements set forth in the Acquiror's Bylaws and is otherwise acceptable to
the Acquiror as a director of the Acquiror. Such person shall serve until the
first annual meeting of shareholders of the Acquiror following the Effective
Time and until his successor is elected and qualified. Subject to compliance
with the director qualification requirements set forth in the Acquiror's Bylaws,
the Acquiror shall include such person on the list of nominees for director
presented by the Board of Directors of the Acquiror and for which said Board
shall solicit proxies at the first annual meeting of shareholders of the
Acquiror following the Effective Time, which person shall be nominated for a
three-year term.
(b) Following consummation of the Merger, the Board of Directors of the
Bank shall be comprised of the directors of the Bank immediately prior to the
Effective Time and such additional director or directors as may be designated by
the Acquiror. Directors of the Bank shall serve in their capacities as such in
accordance with the Charter and Bylaws of the Bank, as the same may be amended
from time to time.
5.11 Benefit Plans and Arrangements
(a) As soon as administratively practicable after the Effective Time,
the Acquiror shall take all reasonable action so that employees of the Company
and its Subsidiaries shall be entitled to participate in the Acquiror Employee
Plans of general applicability, and until such time the Company Employee Plans
shall remain in effect, provided that no employee of the Company or a Company
Subsidiary who becomes an employee of the Acquiror and subject to the Acquiror's
medical insurance plans shall be excluded from coverage thereunder on the basis
of a preexisting condition that was not also excluded under the Company's
medical insurance plans, except to the extent such preexisting condition was
excluded from coverage under the Company's medical insurance plans, in which
case this Section 5.11(a) shall not require coverage for such preexisting
condition. For purposes of determining eligibility to participate in and the
vesting of benefits under the Acquiror Employee Plans, the Acquiror shall
recognize years of service with the Company and a Company Subsidiary prior to
the Effective Time.
(b) All employees of the Company or a Company Subsidiary as of the
Effective Time shall become employees of the Acquiror or an Acquiror Subsidiary
as of the Effective Time, provided that the Acquiror or an Acquiror Subsidiary
shall have no obligation to continue the employment of any such person and
nothing contained in this Agreement shall give any employee of the Company or
any Company Subsidiary a right to continuing employment with the Acquiror or an
Acquiror Subsidiary after the Effective Time. To the extent that the employment
of any employee of the Company or any Company Subsidiary (other than any
employee who is party to an employment agreement) is involuntarily terminated
following the Effective Time, such employee will be entitled to receive
severance payments in accordance with, and to the extent provided in, the
Acquiror's severance plan regarding the Merger, a copy of which the Company
acknowledges has been provided to it by the Acquiror. For purposes of
determining benefits under such severance plan, the
44
<PAGE> 50
Acquiror shall recognize years of service with the Company and a Company
Subsidiary prior to the Effective Time.
(c) Following the Merger, the Acquiror shall, or shall cause the
Surviving Corporation and/or the Bank to, honor in accordance with their terms
the employment agreements, split-dollar insurance agreements, deferred fee and
compensation agreements and Supplemental Executive Retirement Plan which have
been Previously Disclosed by the Company to the Acquiror.
5.12 Branch Sale
The Acquiror and the Company shall take, and shall respectively cause
the Acquiror New Hampshire Bank and the Bank to take, all necessary and
appropriate actions, including causing the execution of the Branch Sale
Agreement, to effect the Branch Sale immediately after the Effective Time, or at
such other time thereafter as may be determined by the Acquiror in its sole
discretion, in accordance with the requirements of all applicable laws and
regulations and the terms of the Branch Sale Agreement. Notwithstanding the
foregoing, the closing of the Branch Sale shall not be a precondition to the
closing of the Merger, and the closing of the Merger shall not be delayed in
order to facilitate a simultaneous closing of the Merger and the Branch Sale.
5.13 Certain Policies; Integration
(a) If requested by the Acquiror, on the business day immediately prior
to the Effective Time, the Company shall, consistent with generally accepted
accounting principles, establish or adjust accruals and reserves as may be
necessary to conform the Company's accounting and credit loss reserve practices
and methods to those of the Acquiror (as such practices and methods are to be
applied to the Company or its Subsidiaries from and after the Effective Time)
and reflect the Acquiror's plans with respect to the conduct of the Company's
business following the Merger and to provide for the costs and expenses relating
to the consummation by the Company of the transactions contemplated by this
Agreement; provided, however, that the Company shall not be required to take
such action (i) if such action is prohibited by applicable law or (ii) unless
the Acquiror informs the Company that it has no reason to believe that all
conditions to the Acquiror's obligations to consummate the transactions
contemplated by this Agreement set forth in Article VI hereof will not be
satisfied or waived. The establishment or adjustment of such accruals and
reserves shall not constitute a breach of any representation or warranty of the
Company contained in this Agreement.
(b) During the period from the date of this Agreement to the Effective
Time, the Company shall, and shall cause its directors, officers and employees
to, cooperate with and assist the Company in the formulation of a plan of
integration for the Acquiror and the Company and their respective banking
subsidiaries.
45
<PAGE> 51
5.14 Disclosure Supplements
From time to time prior to the Effective Time, each party shall
promptly supplement or amend any materials Previously Disclosed and delivered to
the other party pursuant hereto with respect to any matter hereafter arising
which, if existing, occurring or known at the date of this Agreement, would have
been required to be set forth or described in materials Previously Disclosed to
the other party or which is necessary to correct any information in such
materials which has been rendered materially inaccurate thereby; no such
supplement or amendment to such materials shall be deemed to have modified the
representations, warranties and covenants of the parties for the purpose of
determining whether the conditions set forth in Article VI hereof have been
satisfied.
5.15 Failure to Fulfill Conditions
In the event that either of the parties hereto determines that a
condition to its respective obligations to consummate the transactions
contemplated may not be fulfilled on or prior to the termination of this
Agreement, it will promptly notify the other party or parties. Each party will
promptly inform the other party or parties of any facts applicable to it that
would be likely to prevent or materially delay approval of the Merger or the
Branch Sale by any Governmental Entity or third party or which would otherwise
prevent or materially delay completion of the Merger or the Branch Sale.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent - The Acquiror, the Acquiror Sub and the Company
The respective obligations of the Acquiror, the Acquiror Sub and the
Company to effect the Merger shall be subject to satisfaction of the following
conditions at or prior to the Effective Time.
(a) All corporate action necessary to authorize the execution and
delivery of this Agreement and consummation of the Merger shall have been duly
and validly taken by the Acquiror and the Company, including approval by the
requisite vote of the respective shareholders of the Acquiror and the Company of
this Agreement.
(b) All approvals and consents from any Governmental Entity the
approval or consent of which is required for the consummation of the Merger
shall have been received and all statutory waiting periods in respect thereof
shall have expired; and the Acquiror and the Company shall have procured all
other approvals, consents and waivers of each person (other than the
Governmental Entities referred to above) whose approval, consent or waiver is
necessary to the consummation of the Merger and the failure of which to obtain
would have the effects set forth in the following proviso clause; provided,
however, that no approval or consent referred to in this Section 6.1(b) shall be
deemed to have been received
46
<PAGE> 52
if it shall include any condition or requirement that, individually or in the
aggregate, would so materially reduce the economic or business benefits of the
transactions contemplated by this Agreement to the Acquiror that had such
condition or requirement been known the Acquiror, in its reasonable judgment,
would not have entered into this Agreement.
(c) None of the Acquiror, the Company or their respective Subsidiaries
shall be subject to any statute, rule, regulation, injunction or other order or
decree which shall have been enacted, entered, promulgated or enforced by any
governmental or judicial authority which prohibits, restricts or makes illegal
consummation of the Merger.
(d) The Form S-4 shall have become effective under the Securities Act,
and the Acquiror shall have received all state securities laws or "blue sky"
permits and other authorizations or there shall be exemptions from registration
requirements necessary to issue the Acquiror Common Stock in connection with the
Merger, and neither the Form S-4 nor any such permit, authorization or exemption
shall be subject to a stop order or threatened stop order by the Commission or
any state securities authority.
(e) The shares of Acquiror Common Stock to be issued in connection with
the Merger shall have been approved for listing on the Nasdaq Stock Market's
National Market.
(f) The Acquiror shall have received the written opinion of Elias,
Matz, Tiernan & Herrick L.L.P. to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the Code, and the Company
shall have received the written opinion of Foley, Hoag & Eliot LLP to such
effect and to the effect that (i) except for cash received in lieu of fractional
share interests, holders of Company Common Stock who receive Acquiror Common
Stock in the Merger will not recognize income, gain or loss for federal income
tax purposes, (ii) the basis of such Acquiror Common Stock will equal the basis
of the Company Common Stock for which it is exchanged, and (iii) the holding
period of such Acquiror Common Stock will include the holding period of the
Company Common Stock for which it is exchanged, assuming that such stock is a
capital asset in the hands of the holder thereof at the Effective Time. Each
such opinion shall be based on such written representations from the Acquiror,
the Company and others as such counsel shall reasonably request as to factual
matters.
6.2 Conditions Precedent - The Company
The obligations of the Company to effect the Merger shall be subject to
satisfaction of the following conditions at or prior to the Effective Time
unless waived by the Company pursuant to Section 7.4 hereof.
(a) The representations and warranties of the Acquiror as set forth in
Article IV hereof shall be true and correct as of the date of this Agreement and
as of the Effective Time as though made on and as of the Effective Time (or on
the date when made in the case of any representation and warranty which
specifically relates to an earlier date),
47
<PAGE> 53
provided, however, that notwithstanding anything herein to the contrary, this
Section 6.2(a) shall be deemed to have been satisfied even if such
representations or warranties are not true and correct unless the failure of any
of the representations or warranties to be so true and correct would have,
individually or in the aggregate, a Material Adverse Effect on the Acquiror.
(b) The Acquiror shall have performed in all material respects all
obligations and complied with all covenants required to be performed and
complied with by it pursuant to this Agreement on or prior to the Effective
Time.
(c) The Acquiror shall have delivered to the Company a certificate,
dated the date of the Closing and signed by its Chairman and President and by
its Chief Financial Officer, to the effect that the conditions set forth in
Sections 6.2(a) and 6.2(b) have been satisfied.
(d) The Company shall have received the written opinion of Elias, Matz,
Tiernan & Herrick L.L.P., dated the date of the Closing, that addresses the
matters set forth in Exhibit D hereto.
(e) The Acquiror and the Acquiror Sub shall have furnished the Company
with such certificates of its respective officers or others and such other
documents to evidence fulfillment of the conditions set forth in Sections 6.1
and 6.2 as such conditions relate to the Acquiror and the Acquiror Sub as the
Company may reasonably request.
6.3 Conditions Precedent - The Acquiror and the Acquiror Sub
The obligations of the Acquiror and the Acquiror Sub to effect the
Merger shall be subject to satisfaction of the following conditions at or prior
to the Effective Time unless waived by the Acquiror or the Acquiror Sub pursuant
to Section 7.4 hereof.
(a) The representations and warranties of the Company set forth in
Article III hereof shall be true and correct as of the date of this Agreement
and as of the Effective Time as though made on and as of the Effective Time (or
on the date when made in the case of any representation and warranty which
specifically relates to an earlier date), provided, however, that
notwithstanding anything herein to the contrary, this Section 6.3(a) shall be
deemed to have been satisfied even if such representations or warranties are not
true and correct unless the failure of any of the representations or warranties
to be so true and correct would have, individually or in the aggregate, a
Material Adverse Effect on the Company.
(b) The Company shall have performed in all material respects all
obligations and covenants required to be performed by it pursuant to this
Agreement on or prior to the Effective Time.
48
<PAGE> 54
(c) The Company shall have delivered to the Acquiror a certificate,
dated the date of the Closing and signed by its President and by its Chief
Financial Officer, to the effect that the conditions set forth in Sections
6.3(a) and 6.3(b) have been satisfied.
(d) The Acquiror shall have received the written opinion of Foley, Hoag
& Eliot LLP, dated the date of the Closing, that addresses the matters set forth
in Exhibit E hereto.
(e) Dissenting Shares shall constitute not more than 10.0% of the
outstanding shares of Company Common Stock immediately prior to the Effective
Time.
(f) The Acquiror shall have received a letter to it from the
independent certified public accountants for the Company, dated (i) the date on
which the Form S-4 shall become effective and (ii) the date of the Closing, in
form and substance customary for "comfort" letters delivered by independent
accountants in accordance with Statement of Financial Accounting Standards No.
72 or any successor thereto.
(g) The Company shall have furnished the Acquiror with such
certificates of its officers or others and such other documents to evidence
fulfillment of the conditions set forth in Sections 6.1 and 6.3 as such
conditions relate to the Company as the Acquiror may reasonably request.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 Termination
This Agreement may be terminated:
(a) at any time on or prior to the Effective Time, by the mutual
consent in writing of the parties hereto;
(b) at any time on or prior to the Effective Time, by the Acquiror or
the Acquiror Sub in writing if the Company has, or by the Company in writing if
the Acquiror or the Acquiror Sub has, in any material respect, breached (i) any
material covenant or undertaking contained herein or (ii) any representation or
warranty contained herein, in any case if such breach would have a Material
Adverse Effect on the party and has not been cured by the earlier of 30 days
after the date on which written notice of such breach is given to the party
committing such breach or the Effective Time;
(c) at any time, by any party hereto in writing, if any of the
applications for prior approval referred to in Section 5.3 hereof are denied or
are approved in a manner which does not satisfy the requirements of Section
6.1(b) hereof, and the time period for appeals and requests for reconsideration
has run;
49
<PAGE> 55
(d) at any time, by any party hereto in writing, if the shareholders of
the Acquiror or the Company do not approve this Agreement after a vote taken
thereon at a meeting duly called for such purpose (or at any adjournment
thereof), unless the failure of such occurrence shall be due to the failure of
the party seeking to terminate to perform or observe in any material respect its
agreements set forth herein to be performed or observed by such party at or
before the Effective Time;
(e) by either the Company or the Acquiror in writing if the Effective
Time has not occurred by the close of business on the first anniversary of the
date hereof, provided that this right to terminate shall not be available to any
party whose failure to perform an obligation in breach of such party's
obligations under this Agreement has been the cause of, or resulted in, the
failure of the Merger and the other transactions contemplated hereby to be
consummated by such date (the Acquiror and the Acquiror Sub being treated as a
single entity for purposes of this Section 7.1(e)); and
(f) by the Company at any time during the five-day period following the
Pricing Period (as defined below) if the Average Closing Price (as defined
below) shall be less than $15.00, subject, however, to the following three
sentences. If the Company elects to exercise its termination right pursuant to
this Section 7.1(f), it shall give written notice to the Acquiror (provided that
such notice of election to terminate may be withdrawn at any time within the
aforementioned five-day period). During the five-day period commencing with its
receipt of such notice, the Acquiror shall have the option to increase the
consideration to be received by the holders of the Company Common Stock
hereunder by adjusting the Exchange Ratio to equal a number (calculated to the
nearest one-thousandth) obtained by dividing (a) $18.90 by (b) the Average
Closing Price. If the Acquiror so elects within such five-day period, it shall
give prompt written notice to the Company of such election and the revised
Exchange Ratio, whereupon no termination shall have occurred pursuant to this
Section 7.1(f) and this Agreement shall remain in effect in accordance with its
terms (except as the Exchange Ratio shall have been so modified). For purposes
of this Section 7.1(f), (i) the term "Average Closing Price" means the average
of the daily closing prices of a share of Acquiror Common Stock, as reported by
the Nasdaq Stock Market's National Market (as reported in the Wall Street
Journal or, if not reported thereby, another authoritative source) during the
Pricing Period, (ii) "Pricing Period" means the period of ten consecutive
trading days following the Determination Date and (iii) the term "Determination
Date" means the earlier of (x) the date on which the last regulatory approval
required to consummate the Merger is obtained, and (y) December 1, 1996.
7.2 Effect of Termination
In the event that this Agreement is terminated pursuant to Section 7.1
hereof, this Agreement shall become void and have no effect, except that (i) the
provisions relating to confidentiality and expenses set forth in Section 5.4 and
Section 8.1, respectively, and this Section 7.2 shall survive any such
termination and (ii) a termination pursuant to Section
50
<PAGE> 56
7.1(b), (d) or (e) shall not relieve the breaching party from liability for
willful breach of any covenant, undertaking, representation or warranty giving
rise to such termination.
7.3 Survival of Representations, Warranties and Covenants
All representations, warranties and covenants in this Agreement or in
any instrument delivered pursuant hereto or thereto shall expire on, and be
terminated and extinguished at, the Effective Time other than covenants that by
their terms are to be performed after the Effective Time (including without
limitation the covenants set forth in Sections 5.9, 5.10 and 5.11 hereof),
provided that the covenant of the Acquiror contained in Section 5.6(b)(iv)
hereof shall survive and be applicable following the Effective Time, and further
provided that no such representations, warranties or covenants shall be deemed
to be terminated or extinguished so as to deprive the Acquiror, the Acquiror Sub
or the Company (or any director, officer or controlling person thereof) of any
defense at law or in equity which otherwise would be available against the
claims of any person, including, without limitation, any shareholder or former
shareholder of either the Acquiror or the Company.
7.4 Waiver
Each party hereto by written instrument signed by an executive officer
of such party, may at any time (whether before or after approval of this
Agreement by the shareholders of the Acquiror and the Company) extend the time
for the performance of any of the obligations or other acts of the other party
hereto and may waive (i) any inaccuracies of the other party in the
representations or warranties contained in this Agreement or any document
delivered pursuant hereto, (ii) compliance with any of the covenants,
undertakings or agreements of the other party, (iii) to the extent permitted by
law, satisfaction of any of the conditions precedent to its obligations
contained herein or (iv) the performance by the other party of any of its
obligations set forth herein, provided that any such waiver granted, or any
amendment or supplement pursuant to Section 7.5 hereof executed after
shareholders of the Acquiror or the Company have approved this Agreement shall
not modify either the amount or form of the consideration to be provided hereby
to the holders of Company Common Stock upon consummation of the Merger or
otherwise materially adversely affect such shareholders without the approval of
the shareholders who would be so affected.
7.5 Amendment or Supplement
This Agreement may be amended or supplemented at any time by mutual
agreement of the Acquiror, the Acquiror Sub and the Company, subject to the
proviso to Section 7.4 hereof. Any such amendment or supplement must be in
writing and authorized by or under the direction of their respective Boards of
Directors.
51
<PAGE> 57
ARTICLE VIII
MISCELLANEOUS
8.1 Expenses
Each party hereto shall bear and pay all costs and expenses incurred by
it in connection with the transactions contemplated by this Agreement, including
fees and expenses of its own financial consultants, accountants and counsel,
provided that (i) expenses of printing the Form S-4 and the registration fee to
be paid to the Commission in connection therewith shall be shared equally
between the Company and the Acquiror and (ii) notwithstanding anything to the
contrary contained in this Agreement, neither the Acquiror nor the Company shall
be released from any liabilities or damages arising out of its willful breach of
any provision of this Agreement.
8.2 Entire Agreement
This Agreement contains the entire agreement among the parties with
respect to the transactions contemplated hereby and supersedes all prior
arrangements or understandings with respect thereto, written or oral, other than
documents referred to herein and therein. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and thereto and their respective successors. Nothing in this Agreement,
expressed or implied, is intended to confer upon any party, other than the
parties hereto, and their respective successors, any rights, remedies,
obligations or liabilities other than as set forth in Sections 5.9, 5.10 and
5.11(b) and (c) hereof.
8.3 No Assignment
None of the parties hereto may assign any of its rights or obligations
under this Agreement to any other person.
8.4 Notices
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally, telecopied
(with confirmation) or sent by overnight mail service or by registered or
certified mail (return receipt requested), postage prepaid, addressed as
follows:
52
<PAGE> 58
If to the Acquiror or the Acquiror Sub:
Peoples Heritage Financial Group, Inc.
One Portland Square
Portland, Maine 04112-9540
Attn: William J. Ryan
Chairman, President and Chief Executive Officer
Fax: 207-761-8587
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, DC 20005
Attn: Gerard L. Hawkins, Esq.
Fax: 202-347-2172
If to the Company:
Family Bancorp
153 Merrimack Street
Haverhill, Massachusetts 01830
Attn: David D. Hindle
President and Chief Executive Officer
Fax: 508-374-5319
With a required copy to:
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Peter W. Coogan, Esq.
Fax: 617-832-7000
8.5 Alternative Structure
Notwithstanding any provision of this Agreement to the contrary, the
Acquiror may, with the written consent of the Company, which shall not be
unreasonably withheld, elect, subject to the filing of all necessary
applications and the receipt of all required regulatory approvals, to modify the
structure of the acquisition of the Company set forth herein, provided that (i)
the federal income tax consequences of any transactions created by such
modification shall not be other than those set forth in Section 6.1(f) hereof,
(ii) consideration to be paid to the holders of the Company Common Stock is not
thereby changed in kind or reduced in amount as a result of such modification
and (iii) such
53
<PAGE> 59
modification will not materially delay or jeopardize receipt of any required
regulatory approvals or any other condition to the obligations of the Acquiror
and the Acquiror Sub set forth in Sections 6.1 and 6.3 hereof.
8.6 Interpretation
The captions contained in this Agreement are for reference purposes
only and are not part of this Agreement.
8.7 Counterparts
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
8.8 Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the State of Maine applicable to agreements made and entirely to be
performed within such jurisdiction.
54
<PAGE> 60
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers and their corporate
seal to be hereunto affixed and attested by their officers thereunto duly
authorized, all as of the day and year first above written.
PEOPLES HERITAGE
FINANCIAL GROUP, INC.
Attest:
/s/ Peter J. Verrill By: /s/ William J. Ryan
- ------------------------------------ ------------------------------------
Name: Peter J. Verrill Name: William J. Ryan
Title: Executive Vice President, Title: Chairman, President
Chief Operating Officer and Chief Executive Officer
and Chief Financial Officer
PEOPLES HERITAGE MERGER CORP.
Attest:
/s/ Peter J. Verrill By: /s/ William J. Ryan
- ------------------------------------ ------------------------------------
Name: Peter J. Verrill Name: William J. Ryan
Title: Executive Vice President, Title: Chairman, President
Chief Operating Officer and Chief Executive Officer
and Chief Financial Officer
FAMILY BANCORP
By: /s/ David D. Hindle
------------------------------------
Name: David D. Hindle
Title: President and Chief
Executive Officer
By: /s/ George E. Fahey
------------------------------------
Name: George E. Fahey
Title: Executive Vice President,
Treasurer and Chief
Financial Officer
55
<PAGE> 61
EXHIBIT A
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of May 30, 1996 (the "Agreement"), by
and between Family Bancorp, a Massachusetts corporation ("Issuer"), and Peoples
Heritage Financial Group, Inc., a Maine corporation ("Grantee").
WITNESSETH:
WHEREAS, Issuer, Grantee and Peoples Heritage Merger Corp. ("PHMC"), a
wholly-owned subsidiary of Grantee, have entered into an Agreement and Plan of
Merger, dated as of May 30, 1996 (the "Plan"), providing for, among other
things, the merger of Issuer with and into PHMC (the "Merger"), with PHMC as the
surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Plan and Grantee's agreement referred to in the next WHEREAS clause, Grantee has
required that Issuer agree, and Issuer has agreed, to grant to Grantee the
Option (as hereinafter defined); and
WHEREAS, as a condition and inducement to Issuer's execution of the
Plan and this Agreement, Grantee has agreed to grant an option to Issuer on
terms and conditions which are substantially identical to those of the Option
and this Agreement with respect to approximately 6% of the common stock of
Grantee;
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, 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 Plan.
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 832,000 shares (as adjusted as set forth herein) (the "Option
Shares," which shall include the Option Shares before and after any transfer of
such Option Shares) of Common Stock, par value $0.10 per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (the "Purchase Price")
of $20.50, provided, however, that in no event shall the number of Option Shares
for which the Option is exercisable exceed 19.9% of the issued and outstanding
shares of Issuer Common Stock without giving effect to any shares subject to or
issued pursuant to the Option.
3. Exercise of Option.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of the agreements or covenants
contained in this Agreement
<PAGE> 62
or the Plan, and (ii) no preliminary or permanent injunction or other order
against the delivery of shares covered by the Option issued by any court of
competent jurisdiction in the United States shall be in effect, Holder 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 hereinafter defined); provided
that the Option shall terminate and be of no further force and effect upon the
earliest to occur of (A) the Effective Time of the Merger, (B) termination of
the Plan in accordance with the terms thereof prior to the occurrence of a
Purchase Event or a Preliminary Purchase Event, other than a termination of the
Plan by Grantee pursuant to Section 7.1(b)(i) (a "Default Termination"), (C) 12
months after the termination of the Plan by Grantee pursuant to a Default
Termination, and (D) 12 months after termination of the Plan (other than
pursuant to a Default Termination) following the occurrence of a Purchase Event
or a Preliminary Purchase Event; and provided, further, that any purchase of
shares upon exercise of the Option shall be subject to compliance with
applicable laws, including without limitation the Bank Holding Company Act of
1956, as amended (the "BHC Act"), and the Home Owners' Loan Act, as amended
("HOLA"). The term "Holder" shall mean the holder or holders of the Option from
time to time, and which is initially Grantee. The rights set forth in Section 8
hereof shall terminate when the right to exercise the Option terminates (other
than as a result of a complete exercise of the Option) as set forth above.
(b) As used herein, a "Purchase Event" means any of the following
events:
(i) Without Grantee's prior written consent, Issuer shall have
authorized, recommended or publicly-proposed, or publicly announced an
intention to authorize, recommend or propose, or entered into an
agreement with any person (other than Grantee or any subsidiary of
Grantee) to effect (A) a merger, consolidation or similar transaction
involving Issuer or any of its subsidiaries, (B) the disposition, by
sale, lease, exchange or otherwise, of assets of Issuer or any of its
subsidiaries representing in either case 15% or more of the
consolidated assets of Issuer and its subsidiaries, 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 of its
subsidiaries (any of the foregoing an "Acquisition Transaction"); or
(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 Exchange Act) of or the right to
acquire beneficial ownership of, or any "group" (as such term is
defined in Section 13(d)(3) of the Exchange Act) shall have been formed
which beneficially owns or has the right to acquire beneficial
ownership of, 25% or more of the then outstanding shares of Issuer
Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
2
<PAGE> 63
(i) 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 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 10% or more of the then
outstanding shares of Issuer Common Stock (such an offer being referred
to herein as a "Tender Offer" and an "Exchange Offer," respectively);
or
(ii) (A) the holders of Issuer Common Stock shall not have
approved the Plan at the meeting of such stockholders held for the
purpose of voting on the Plan, (B) such meeting shall not have been
held or shall have been canceled prior to termination of the Plan or
(C) Issuer's Board of Directors shall have withdrawn or modified in a
manner adverse to Grantee the recommendation of Issuer's Board of
Directors with respect to the Plan, in each case after it shall have
been publicly announced that any person (other than Grantee or any
subsidiary of Grantee) shall have (x) made, or disclosed an intention
to make, a proposal to engage in an Acquisition Transaction, (y)
commenced a Tender Offer or filed a registration statement under the
Securities Act with respect to an Exchange Offer, or (z) filed an
application (or given notice), whether in draft or final form, under
the BHC Act, the HOLA, the Bank Merger Act, as amended, or the Change
in Bank Control Act of 1978, as amended, for approval to engage in an
Acquisition Transaction; or
(iii) Issuer shall have breached any representation, warranty,
covenant or obligation contained in the Plan and such breach would
entitle Grantee to terminate the Plan under Section 7.1(b) thereof
(without regard to the cure period provided for therein unless such
cure is promptly effected without jeopardizing consummation of the
Merger pursuant to the terms of the Plan) after (x) a bona fide
proposal is made by any person (other than Grantee or any subsidiary of
Grantee) to Issuer or its stockholders to engage in an Acquisition
Transaction, (y) any person (other than Grantee or any subsidiary of
Grantee) states its intention to Issuer or its stockholders to make a
proposal to engage in an Acquisition Transaction if the Plan terminates
or (z) any person (other than Grantee or any subsidiary of Grantee)
shall have filed an application or notice with any Governmental Entity
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.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Preliminary Purchase Event or Purchase Event, it being understood that
the giving of such notice by Issuer shall not be a condition to the right of
Holder to exercise the Option.
(e) In the event Holder 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
3
<PAGE> 64
(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"), the Office of Thrift Supervision ("OTS") or any other Governmental
Entity is required in connection with such purchase, Issuer shall cooperate with
Grantee in the filing of the required notice of application for approval and the
obtaining of such approval and the Closing shall occur immediately following
such regulatory approvals (and any mandatory waiting periods).
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Holder 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 Issuer at the address of Issuer specified in Section 12(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), (i)
Issuer shall deliver to Holder (A) a certificate or certificates representing
the Option Shares to be purchased at such Closing, which Option Shares shall be
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever and subject to no preemptive rights, 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, and (ii) Holder shall deliver to Issuer a
letter agreeing that Holder shall not offer to sell or otherwise dispose of such
Option Shares in violation of applicable federal and state law or of the
provisions of this Agreement.
(c) In addition to any other legend that is required by applicable law,
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 MAY 30, 1996. A COPY OF SUCH AGREEMENT WILL BE PROVIDED
TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY 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 Holder shall have
delivered to Issuer a copy of a letter from the staff of the Commission, or an
opinion of counsel in form and substance
4
<PAGE> 65
reasonably satisfactory to Issuer and its counsel, to the effect that such
legend is not required for purposes of the Securities Act.
(d) Upon the giving by Holder to Issuer of the written notice of
exercise of the Option provided for under Section 3(e), the tender of the
applicable purchase price in immediately available funds and the tender of this
Agreement to Issuer, Holder shall be deemed to be the holder of record of the
shares of Issuer Common Stock issuable upon such exercise, notwithstanding that
the stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Issuer Common Stock shall not then be actually
delivered to Holder.
(e) Issuer agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Issuer Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Issuer Common
Stock, (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer, (iii) promptly to take all action as may from time to time be required
(including (A) complying with all premerger notification, reporting and waiting
period requirements and (B) in the event prior approval of or notice to any
Governmental Entity is necessary before the Option may be exercised, cooperating
fully with Holder in preparing such applications or notices and providing such
information to such Governmental Entity as it may require) in order to permit
Holder to exercise the Option and Issuer duly and effectively to issue shares of
Issuer Common Stock pursuant hereto, and (iv) promptly to take all action
provided herein to protect the rights of Holder against dilution.
5. Representations and Warranties of Issuer. Issuer hereby represents
and warrants to Grantee (and Holder, if different than Grantee) as follows:
(a) Due Authorization. Issuer has all requisite corporate power and
authority to enter into this Agreement, and subject to any approvals 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 Issuer, and this Agreement has been duly executed and delivered by Issuer.
(b) No Violations. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by Issuer
with any of the provisions hereof will not (i) conflict with or result in a
breach of any provision of its Articles of Agreement or Bylaws or a default (or
give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any note, bond, debenture, mortgage,
indenture, license, material agreement or other material
5
<PAGE> 66
instrument or obligation to which Issuer is a party, or by which it or any of
its properties or assets may be bound, or (ii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Issuer or any of
its properties or assets.
(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 hereof 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 that number of shares of Issuer Common Stock equal to the
maximum number of shares of Issuer Common Stock at any time and from time to
time purchasable upon exercise of the Option, and all such shares, upon issuance
pursuant to the Option, will be duly and validly issued, fully paid and
nonassessable, and will be delivered free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever and not subject to any
preemptive rights.
6. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that Grantee has all requisite corporate power
and authority to enter into this Agreement and, subject to any approvals or
consents referred to herein, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee, and this Agreement has been duly
executed and delivered by Grantee.
7. Adjustment upon Changes in Issuer Capitalization, etc.
(a) In the event 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, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transactions so that Holder shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that Holder 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 to or issued pursuant to the Option.
(b) In the event that Issuer shall enter in 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
6
<PAGE> 67
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 Holder, of any of (x) the
Acquiring Corporation (as hereinafter defined), (y) any person that controls the
Acquiring Corporation or (z) in the case of a merger described in clause (ii),
Issuer (such person being referred to as "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 Holder. Substitute Option Issuer also shall enter
into an agreement with Holder in substantially the same form as this Agreement,
which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock (as 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 Substitute
Option per share of Substitute Common Stock (the "Substitute Option Price")
shall then be equal to the Purchase Price multiplied by a fraction in which the
numerator is the number of shares of 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:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if
other than Issuer), (ii) Issuer in a merger in which Issuer is the
continuing or surviving person, or (iii) the transferee of all or
substantially all of Issuer's assets (or a substantial part of the
assets of its subsidiaries taken as a whole).
(2) "Substitute Common Stock" shall mean the shares of capital
stock (or similar equity interest) with the greatest voting power in
respect of the election of directors (or persons similarly responsible
for the direction of the business and affairs) of the Substitute Option
Issuer.
(3) "Assigned Value" shall mean the highest of (w) the price per
share of Issuer Common Stock at which a Tender Offer or an Exchange
Offer therefor has
7
<PAGE> 68
been made, (x) the price per share of Issuer Common Stock to be paid by
any third party pursuant to an agreement with Issuer, (y) the highest
closing price for shares of Issuer Common Stock within the six-month
period immediately preceding the consolidation, merger or sale in
question and (z) in the event of a sale of all or substantially all of
Issuer's assets or deposits, an amount equal to (i) the sum of the
price paid in such sale for such assets (and/or deposits) and the
current market value of the remaining assets of Issuer, as determined
by a nationally-recognized investment banking firm selected by Holder,
divided by (ii) the number of shares of Issuer Common Stock outstanding
at such time. In the event that a Tender Offer or an Exchange Offer is
made for 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 Issuer Common Stock shall be determined by a
nationally-recognized investment banking firm selected by Holder.
(4) "Average Price" shall mean the average closing price of a share
of Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than
the closing price of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that if Issuer
is the issuer of the Substitute Option, the Average Price shall be
computed with respect to a share of common stock issued by Issuer, the
person merging into Issuer or by any company which controls such
person, as Holder 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 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 the limitation in the first sentence of this Section 7(f), Substitute
Option Issuer shall make a cash payment to Holder equal to the excess of (i) the
value of the Substitute Option without giving effect to the limitation in the
first sentence of this Section 7(f) over (ii) the value of the Substitute Option
after giving effect to the limitation in the first sentence of this Section
7(f). This difference in value shall be determined by a nationally-recognized
investment banking firm selected by Holder.
(g) Issuer shall not enter into any transaction described in Section
7(b) 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 holders of the other shares of common stock issued
by Substitute Option Issuer are not entitled to exercise any rights by reason of
the issuance or exercise of the Substitute Option and the shares of Substitute
Common Stock are otherwise in no way distinguishable from or have lesser
economic value (other than any diminution in value resulting from the fact that
the shares of Substitute
8
<PAGE> 69
Common Stock are restricted securities, as defined in Rule 144 under the
Securities Act or any successor provision) than other shares of common stock
issued by Substitute Option Issuer).
8. Repurchase at the Option of Holder.
(a) Subject to the last sentence of Section 3(a), at the request of
Holder at any time commencing upon the first occurrence of a Repurchase Event
(as defined in Section 8(d)) and ending 12 months immediately thereafter, Issuer
shall repurchase from Holder (i) the Option and (ii) all shares of Issuer Common
Stock purchased by Holder pursuant hereto with respect to which Holder then has
beneficial ownership. The date on which Holder 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 Holder for any shares of
Issuer Common Stock acquired pursuant to the Option with respect to
which Holder 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 Holder for
each share of Issuer Common Stock with respect to which the Option has
been exercised and with respect to which Holder then has beneficial
ownership, multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer shall,
within 10 business days after the Request Date, pay the Section 8 Repurchase
Consideration to Holder in immediately available funds, and contemporaneously
with such payment Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock purchased thereunder
with respect to which Holder then has beneficial ownership, and 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, the OTS or any other
Governmental Entity is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Holder shall have the ongoing
option to revoke its request for repurchase pursuant to Section 8, in whole or
in part, or to require that Issuer deliver from time to time that portion of the
Section 8 Repurchase Consideration that it is not then so prohibited
9
<PAGE> 70
from paying and promptly file the required notice or application for approval
and expeditiously process the same (and each party shall cooperate with the
other in the filing of any such notice or application and the obtaining of any
such approval). If the Federal Reserve Board, the OTS or any other Governmental
Entity disapproves of any part of Issuer's proposed repurchase pursuant to this
Section 8, Issuer shall promptly give notice of such fact to Holder. If the
Federal Reserve Board, the OTS or any other Governmental Entity prohibits the
repurchase in part but not in whole, then Holder shall have the right (i) to
revoke the repurchase request or (ii) to the extent permitted by the Federal
Reserve Board, the OTS or other Governmental Entity, determine whether the
repurchase should apply to the Option and/or Option Shares and to what extent to
each, and Holder shall thereupon have the right to exercise the Option as to the
number of Option Shares for which the Option was exercisable at the Request Date
less the sum of the number of shares covered by the Option in respect of which
payment has been made pursuant to Section 8(a)(ii) and the number of shares
covered by the portion of the Option (if any) that has been repurchased. Holder
shall notify Issuer of its determination under the preceding sentence within
five business days of receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Grantee's
rights under this Section 8 shall terminate on the date of termination of the
Option pursuant to Section 3(a).
(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), (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), or (iii) the highest closing sales
price per share of Issuer Common Stock quoted on the Nasdaq Stock Market's
National Market ("NASDAQ/NMS") (or if Issuer Common Stock is not quoted on
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 chosen by Holder) 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 Holder, divided by the number of shares of Issuer Common Stock outstanding at
the time of such sale. If the consideration to be offered, paid or received
pursuant to either of the foregoing clauses (i) or (ii) shall be other than in
cash, the value of such consideration shall be determined in good faith by an
independent nationally-recognized investment banking firm selected by Holder and
reasonably acceptable to Issuer, which determination shall be conclusive for all
purposes of this Agreement.
(d) As used herein, a "Repurchase Event" shall occur if (i) any person
(other than Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act), or the right to acquire
10
<PAGE> 71
beneficial ownership of, or any "group" (as such term is defined in Section
13(d)(3) of the Exchange Act) shall have been formed which beneficially owns or
has the right to acquire beneficial ownership of, 50% or more of the then
outstanding shares of Issuer Common Stock, or (ii) any of the transactions
described in Section 7(b)(i), Section 7(b)(ii) or Section 7(b)(iii) shall be
consummated.
9. Registration Rights.
(a) Demand Registration Rights. Issuer shall, subject to the conditions
of Section 9(c), if requested by any Holder, as expeditiously as possible
prepare and file a registration statement 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 Holder upon exercise of the Option in accordance
with the intended method of sale or other disposition stated by Holder in such
request, including without limitation 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 for sale under
any applicable state securities laws.
(b) Additional Registration Rights. If Issuer at any time after the
exercise of the Option proposes to register any shares of Issuer Common Stock
under the Securities Act in connection with an underwritten public offering of
such Issuer Common Stock, Issuer will promptly give written notice to Holder of
its intention to do so and, upon the written request of Holder given within 30
days after receipt of any such notice (which request shall specify the number of
shares of Issuer Common Stock intended to be included in such underwritten
public offering by Holder), Issuer will cause all such shares for which a Holder
shall have requested participation in such registration to be so registered and
included in such underwritten public offering; provided, however, that Issuer
may elect to not cause any such shares to be so registered (i) if the
underwriters in good faith object for valid business reasons, or (ii) in the
case of a registration solely to implement an employee benefit plan or a
registration filed on Form S-4 under the Securities Act or any successor form;
provided, further, however, that such election pursuant to clause (i) may only
be made one time. If some but not all the shares of Issuer Common Stock with
respect to which Issuer shall have received requests for registration pursuant
to this Section 9(b) shall be excluded from such registration, Issuer shall make
appropriate allocation of shares to be registered among Holders permitted to
register their shares of Issuer Common Stock in connection with such
registration pro rata in the proportion that the number of shares requested to
be registered by each such Holder bears to the total number of shares requested
to be registered by all such Holders then desiring to have Issuer Common Stock
registered for sale.
(c) Conditions to Required Registration. Issuer shall use all
reasonable efforts to cause each registration statement referred to in Section
9(a) to become effective and to obtain all consents or waivers of other parties
which are required therefor and to keep such registration statement effective;
provided, however, that Issuer may delay any registration of Option Shares
required pursuant to Section 9(a) for a period not exceeding 90 days if
11
<PAGE> 72
Issuer shall in good faith determine that any such registration would adversely
affect an offering or contemplated offering of other securities by Issuer, and
Issuer shall not be required to register Option Shares under the Securities Act
pursuant to Section 9(a):
(i) prior to the earliest of (A) termination of the Plan pursuant
to Article VII thereof, and (B) a Purchase Event or a Preliminary
Purchase Event;
(ii) on more than one occasion during any calendar year and on
more than two occasions in total;
(iii) within 90 days after the effective date of a registration
referred to in Section 9(b) pursuant to which the Holder or Holders
concerned were afforded the opportunity to register such shares under
the Securities Act and such shares were registered as requested; and
(iv) unless a request therefor is made to Issuer by the Holder or
Holders of at least 25% or more of the aggregate number of Option
Shares (including shares of Issuer Common Stock issuable upon exercise
of the Option) then outstanding.
In addition to the foregoing, Issuer shall not be required to maintain
the effectiveness of any registration statement after the expiration of nine
months from the effective date of such registration statement. Issuer shall use
all reasonable efforts to make any filings, and take all steps, under all
applicable state securities laws to the extent necessary to permit the sale or
other disposition of the Option Shares so registered in accordance with the
intended method of distribution for such shares, provided, however, that Issuer
shall not be required to consent to general jurisdiction or to qualify to do
business in any state where it is not otherwise required to so consent to such
jurisdiction or to so qualify to do business.
(d) Expenses. Issuer will pay all expenses (including without
limitation registration fees, qualification fees, blue sky fees and expenses,
accounting expenses, legal expenses and printing expenses incurred by it) in
connection with each registration pursuant to Section 9(a) or (b) and all other
qualifications, notifications or exemptions pursuant to Section 9(a) or (b).
Underwriting discounts and commissions relating to Option Shares, fees and
disbursements of counsel to the Holder(s) of Option Shares being registered and
any other expenses incurred by such Holder(s) in connection with any such
registration shall be borne by such Holder(s).
(e) Indemnification. In connection with any registration under Section
9(a) or (b), Issuer hereby indemnifies each Holder, and each underwriter
thereof, including each person, if any, who controls such Holder or underwriter
within the meaning of Section 15 of the Securities Act, against all expenses,
losses, claims, damages and liabilities caused by any untrue, or alleged untrue,
statement of a material fact contained in any registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission,
or alleged
12
<PAGE> 73
omission, to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
expenses, losses, claims, damages or liabilities of such indemnified party are
caused by any untrue statement or alleged untrue statement that was included by
Issuer in any such registration statement or prospectus or notification or
offering circular (including any amendments or supplements thereto) in reliance
upon, and in conformity with, information furnished in writing to Issuer by such
indemnified party expressly for use therein, and Issuer and each officer,
director and controlling person of Issuer shall be indemnified by such Holder,
or by such underwriter, as the case may be, for all such expenses, losses,
claims, damages and liabilities caused by any untrue, or alleged untrue,
statement that was included by Issuer in any such registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) in reliance upon, and in conformity with, information
furnished in writing to Issuer by such Holder or such underwriter, as the case
may be, expressly for such use.
Promptly upon receipt by a party indemnified under this Section 9(e) of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 9(e), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but,
except to the extent of any actual prejudice to the indemnifying party, the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 9(e). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably satisfactory
to such indemnified party. The indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (i) the
indemnifying party agrees to pay the same, (ii) the indemnifying party fails to
assume the defense of such action with counsel reasonably satisfactory to the
indemnified party, or (iii) the indemnified party has been advised by counsel
that one or more legal defenses may be available to the indemnifying party that
may be contrary to the interest of the indemnified party, in which case the
indemnifying party shall be entitled to assume the defense of such action
notwithstanding its obligation to bear fees and expenses of such counsel. No
indemnifying party shall be liable for any settlement entered into without its
consent, which consent may not be unreasonably withheld.
If the indemnification provided for in this Section 9(e) is unavailable
to a party otherwise entitled to be indemnified in respect of any expenses,
losses, claims, damages or liabilities referred to herein, then the indemnifying
party, in lieu of indemnifying such party otherwise entitled to be indemnified,
shall contribute to the amount paid or payable by such party to be indemnified
as a result of such expenses, losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative benefits received by
Issuer, the
13
<PAGE> 74
selling Holders and the underwriters from the offering of the securities and
also the relative fault of Issuer, the selling Holders and the underwriters in
connection with the statement or omissions which results in such expenses,
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The amount paid or payable by a party as a result of the
expenses, losses, claims, damages and liabilities referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any action or claim;
provided, however, that in no case shall the selling Holders be responsible, in
the aggregate, for any amount in excess of the net offering proceeds
attributable to its Option Shares included in the offering. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(g) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Any obligation by any Holder to
indemnify shall be several and not joint with other Holders.
In connection with any registration pursuant to Section 9(a) or (b)
above, Issuer and each selling Holder (other than Grantee) shall enter into an
agreement containing the indemnification provisions of this Section 9(e).
(f) Miscellaneous Reporting. Issuer shall comply with all reporting
requirements and will do all such other things as may be necessary to permit the
expeditious sale at any time of any Option Shares by the Holder(s) in accordance
with and to the extent permitted by any rule or regulation permitting
nonregistered sales of securities promulgated by the Commission from time to
time, including, without limitation, Rule 144A. Issuer shall at its expense
provide the Holder with any information necessary in connection with the
completion and filing of any reports or forms required to be filed by them under
the Securities Act or the Exchange Act, or required pursuant to any state
securities laws or the rules of any stock exchange.
(g) Issue Taxes. Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save any Holder harmless, without limitation as to time,
against any and all liabilities, with respect to all such taxes.
10. Quotation; Listing. If Issuer Common Stock or any other securities
to be acquired upon exercise of the Option are then authorized for quotation or
trading or listing on NASDAQ/NMS or any securities exchange, Issuer, upon the
request of Holder, will promptly file an application, if required, to authorize
for quotation or trading or listing the shares of Issuer Common Stock or other
securities to be acquired upon exercise of the Option on NASDAQ/NMS or such
other securities exchange and will use its best efforts to obtain approval, if
required, of such quotation or listing as soon as practicable.
11. Division of Option. Upon the occurrence of a Purchase Event or a
Preliminary Purchase Event, this Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the
14
<PAGE> 75
principal office of the Issuer for other Agreements providing for Options of
different denominations entitling the holder thereof to purchase in the
aggregate the same number of shares of Issuer Common Stock purchasable
hereunder. The terms "Agreement" and "Option" as used herein include any other
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
12. Miscellaneous.
(a) Expenses. Except as otherwise provided in Section 9, 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 Beneficiaries; Severability. This
Agreement, together with the Plan and the other documents and instruments
referred to herein and therein, between Grantee and Issuer (i) 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 (ii) is not intended to confer upon any person other than the parties hereto
(other than the indemnified parties under Section 9(e) and any transferee of the
Option Shares or any permitted transferee of this Agreement pursuant to Section
12(h)) any rights or remedies hereunder. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or a
federal or state regulatory agency to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Option does not permit Holder 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 (as adjusted pursuant to Section 7), it is the express
intention of Issuer to allow Holder to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible without any
amendment or modification hereof.
15
<PAGE> 76
(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Maine 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 sent by overnight mail service or mailed by registered or
certified mail (return receipt requested) postage prepaid, to the parties at the
following address (or at such other address for a party as shall be specified by
like notice):
If to Grantee:
Peoples Heritage Financial Group, Inc.
One Portland Square
Portland, Maine 04112-9540
Attn: William J. Ryan
Chairman, President and Chief Executive Officer
Fax: 207-761-8587
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, DC 20005
Attn: Gerard L. Hawkins, Esq.
Fax: 202-347-2172
If to Issuer:
Family Bancorp
153 Merrimack Street
Haverhill, Massachusetts 01830
Attn: David D. Hindle
President and Chief Executive Officer
Fax: 508-374-5319
With a required copy to:
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Peter W. Coogan, Esq.
Fax: 617-832-7000
16
<PAGE> 77
(g) Counterparts. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(h) Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder or under 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 Holder may assign this Agreement
to a wholly-owned subsidiary of Holder and Holder may assign its rights
hereunder in whole or in part after the occurrence of a Purchase Event. Subject
to the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
(i) Further Assurances. In the event of any exercise of the Option by
Holder, Issuer and Holder 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.
17
<PAGE> 78
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.
Attest: FAMILY BANCORP
By:
- -------------------------------------- ------------------------------------
Name: George E. Fahey Name: David D. Hindle
Title: Executive Vice President, Title: President and Chief
Treasurer and Chief Financial Executive Officer
Officer
PEOPLES HERITAGE
FINANCIAL GROUP, INC.
Attest:
By:
- -------------------------------------- -----------------------------------
Name: Peter J. Verrill Name: William J. Ryan
Title: Executive Vice President, Title: Chairman, President
Chief Operating Officer and Chief Executive Officer
and Chief Financial Officer
18
<PAGE> 79
EXHIBIT B
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of May 30, 1996, by and among Peoples
Heritage Financial Group, Inc. (the "Acquiror"), a Maine corporation, and
certain stockholders of Family Bancorp (the "Company"), a Massachusetts
corporation, named on Schedule I hereto (collectively the "Stockholders").
WITNESSETH:
WHEREAS, the Acquiror, Peoples Heritage Merger Corp. (the "Acquiror
Sub") and the Company have entered into an Agreement and Plan of Merger, dated
as of the date hereof (the "Agreement"), which is being executed simultaneously
with the execution of this Stockholder Agreement and provides for, among other
things, the merger of the Company with and into the Acquiror Sub (the "Merger");
and
WHEREAS, in order to induce the Acquiror to enter into the Agreement,
each of the Stockholders agrees to, among other things, vote in favor of the
Agreement in his or her capacities as stockholders of the Company;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements set forth herein and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. OWNERSHIP OF COMPANY COMMON STOCK. Each Stockholder represents and
warrants that the Stockholder has or shares the right to vote and dispose of the
number of shares of common stock of the Company, par value $.10 per share
("Company Common Stock"), set forth opposite such Stockholder's name on Schedule
I hereto.
2. AGREEMENTS OF THE STOCKHOLDERS. Each Stockholder covenants and
agrees that:
(a) such Stockholder shall, at any meeting of the Company's
stockholders called for the purpose, vote, or cause to be voted, all
shares of Company Common Stock in which such stockholder has the right
to vote (whether owned as of the date hereof or hereafter acquired) in
favor of the Agreement and against any plan or proposal pursuant to
which the Company is to be acquired by or merged with, or pursuant to
which the Company proposes to sell all or substantially all of its
assets and liabilities to, any person entity or group (other than the
Acquiror or any subsidiary thereof);
(b) except as otherwise expressly permitted hereby, such Stockholder
shall not, prior to the meeting of the Company's stockholders referred
to in Section 2(a) hereof or the earlier termination of the Agreement
in accordance with its terms, sell, pledge, transfer or otherwise
dispose of the Stockholder's shares of Company Common Stock; and
<PAGE> 80
(c) such Stockholder shall not in his capacity as a stockholder of
the Company directly or indirectly encourage or solicit or hold
discussions or negotiations with, or provide any information to, any
person, entity or group (other than the Acquiror or an affiliate
thereof) concerning any merger, sale of substantial assets or
liabilities not in the ordinary course of business, sale of shares of
capital stock or similar transactions involving the Company or any
subsidiary of the Company (provided that nothing herein shall be deemed
to affect the ability of any Stockholder to fulfill his duties as a
director or officer of the Company).
Each Stockholder further agrees that the Company's transfer agent shall
be given an appropriate stop transfer order and shall not be required to
register any attempted transfer of shares of Company Common Stock, unless the
transfer has been effected in compliance with the terms of this letter
agreement.
3. SUCCESSORS AND ASSIGNS. A Stockholder may sell, pledge, transfer or
otherwise dispose of his shares of Company Common Stock, provided that, with
respect to any sale, transfer or disposition which would occur on or before the
meeting of the Company's stockholders referred to in Section 2(a) hereof, such
Stockholder obtains the prior written consent of the Acquiror and that any
acquiror of such Company Common Stock agree in writing to be bound by the terms
of this Stockholder Agreement.
4. TERMINATION. The parties agree and intend that this Stockholder
Agreement be a valid and binding agreement enforceable against the parties
hereto and that damages and other remedies at law for the breach of this
Stockholder Agreement are inadequate. This Stockholder Agreement may be
terminated at any time prior to the consummation of the Merger by mutual written
consent of the parties hereto and shall be automatically terminated in the event
that the Agreement is terminated in accordance with its terms.
5. NOTICES. Notices may be provided to the Acquiror and the
Stockholders in the manner specified in Section 8.4 of the Agreement, with all
notices to the Stockholders being provided to them at the Company in the manner
specified in such section.
6. GOVERNING LAW. This Stockholder Agreement shall be governed by the
laws of the State of Maine without giving effect to the principles of conflicts
of laws thereof.
7. COUNTERPARTS. This Stockholder Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same and each of
which shall be deemed an original.
8. HEADINGS AND GENDER. The Section headings contained herein are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Stockholder Agreement. Use of the masculine gender herein
shall be considered to represent the masculine, feminine or neuter gender
whenever appropriate.
2
<PAGE> 81
IN WITNESS WHEREOF, the Acquiror, by a duly authorized officer, and
each of the Stockholders have caused this Stockholder Agreement to be executed
as of the day and year first above written.
PEOPLES HERITAGE FINANCIAL
GROUP, INC.
By:
------------------------------------
Name: William J. Ryan
Title: Chairman, President and Chief
Executive Officer
COMPANY STOCKHOLDERS:
----------------------------------------
John E. Veasey
----------------------------------------
Elkin B. McCallum
----------------------------------------
David D. Hindle
----------------------------------------
George E. Fahey
3
<PAGE> 82
----------------------------------------
Ronald G. Trombley
----------------------------------------
Bruce Fenn, III
----------------------------------------
David J. LaFlamme
----------------------------------------
Kenneth L. Paul
----------------------------------------
Charles George, Jr.
4
<PAGE> 83
SCHEDULE I
<TABLE>
<CAPTION>
Number of Shares of
Company Common Stock
Name of Stockholder Beneficially Owned
- ----------------------------------------- --------------------
<S> <C>
John E. Veasey 120,962
Elkin B. McCallum 57,150
David D. Hindle 28,122
George E. Fahey 23,859
Ronald G. Trombley 21,983
Bruce Fenn, III 11,120
David J. LaFlamme 33,182
Kenneth L. Paul 7,800
Charles George, Jr. 3,750
</TABLE>
5
<PAGE> 84
EXHIBIT C
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of May 30, 1996 (the "Agreement"), by
and between Peoples Heritage Financial Group, Inc., a Maine corporation
("Issuer"), and Family Bancorp, a Massachusetts corporation ("Grantee").
WITNESSETH:
WHEREAS, Grantee, Issuer and Peoples Heritage Merger Corp. ("PHMC"), a
wholly-owned subsidiary of Issuer, have entered into an Agreement and Plan of
Merger, dated as of May 30, 1996 (the "Plan"), providing for, among other
things, the merger of Grantee with and into PHMC (the "Merger"), with PHMC as
the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Plan and Grantee's agreement referred to in the next WHEREAS clause, Grantee has
required that Issuer agree, and Issuer has agreed, to grant to Grantee the
Option (as hereinafter defined); and
WHEREAS, as a condition and inducement to Issuer's execution of the
Plan and this Agreement, Grantee has agreed to grant an option to Issuer on
terms and conditions which are substantially identical to those of the Option
and this Agreement with respect to approximately 19.9% of the common stock of
Grantee;
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, 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 Plan.
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 1,500,000 shares (as adjusted as set forth herein) (the "Option
Shares," which shall include the Option Shares before and after any transfer of
such Option Shares) of Common Stock, par value $0.01 per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (the "Purchase Price")
of $19.75, provided, however, that in no event shall the number of Option Shares
for which the Option is exercisable exceed 6.0% of the issued and outstanding
shares of Issuer Common Stock without giving effect to any shares subject to or
issued pursuant to the Option. Each Option Share issued upon exercise of the
Option shall be accompanied by Acquiror Rights as provided in the Acquiror
Rights Agreement.
3. Exercise of Option.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of the agreements or covenants
contained in this Agreement
<PAGE> 85
or the Plan, and (ii) no preliminary or permanent injunction or other order
against the delivery of shares covered by the Option issued by any court of
competent jurisdiction in the United States shall be in effect, Holder 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 hereinafter defined); provided
that the Option shall terminate and be of no further force and effect upon the
earliest to occur of (A) the Effective Time of the Merger, (B) termination of
the Plan in accordance with the terms thereof prior to the occurrence of a
Purchase Event or a Preliminary Purchase Event, other than a termination of the
Plan by Grantee pursuant to Section 7.1(b)(i) (a "Default Termination"), (C) 12
months after the termination of the Plan by Grantee pursuant to a Default
Termination, and (D) 12 months after termination of the Plan (other than
pursuant to a Default Termination) following the occurrence of a Purchase Event
or a Preliminary Purchase Event; and provided, further, that any purchase of
shares upon exercise of the Option shall be subject to compliance with
applicable laws, including without limitation the Bank Holding Company Act of
1956, as amended (the "BHC Act"), and the Home Owners' Loan Act, as amended
("HOLA"). The term "Holder" shall mean the holder or holders of the Option from
time to time, and which is initially Grantee. The rights set forth in Section 8
hereof shall terminate when the right to exercise the Option terminates (other
than as a result of a complete exercise of the Option) as set forth above.
(b) As used herein, a "Purchase Event" means any of the following
events:
(i) Without Grantee's prior written consent, Issuer shall have
authorized, recommended or publicly-proposed, or publicly announced an
intention to authorize, recommend or propose, or entered into an
agreement with any person (other than Grantee or any subsidiary of
Grantee) to effect (A) a merger, consolidation or similar transaction
involving Issuer or any of its subsidiaries, (B) the disposition, by
sale, lease, exchange or otherwise, of assets of Issuer or any of its
subsidiaries representing in either case 15% or more of the
consolidated assets of Issuer and its subsidiaries, 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 of its
subsidiaries (any of the foregoing an "Acquisition Transaction"); or
(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 Exchange Act) of or the right to
acquire beneficial ownership of, or any "group" (as such term is
defined in Section 13(d)(3) of the Exchange Act) shall have been formed
which beneficially owns or has the right to acquire beneficial
ownership of, 25% or more of the then outstanding shares of Issuer
Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
2
<PAGE> 86
(i) 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 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 10% or more of the then
outstanding shares of Issuer Common Stock (such an offer being referred
to herein as a "Tender Offer" and an "Exchange Offer," respectively);
or
(ii) (A) the holders of Issuer Common Stock shall not have
approved the Plan at the meeting of such stockholders held for the
purpose of voting on the Plan, (B) such meeting shall not have been
held or shall have been canceled prior to termination of the Plan or
(C) Issuer's Board of Directors shall have withdrawn or modified in a
manner adverse to Grantee the recommendation of Issuer's Board of
Directors with respect to the Plan, in each case after it shall have
been publicly announced that any person (other than Grantee or any
subsidiary of Grantee) shall have (x) made, or disclosed an intention
to make, a proposal to engage in an Acquisition Transaction, (y)
commenced a Tender Offer or filed a registration statement under the
Securities Act with respect to an Exchange Offer, or (z) filed an
application (or given notice), whether in draft or final form, under
the BHC Act, the HOLA, the Bank Merger Act, as amended, or the Change
in Bank Control Act of 1978, as amended, for approval to engage in an
Acquisition Transaction; or
(iii) Issuer shall have breached any representation, warranty,
covenant or obligation contained in the Plan and such breach would
entitle Grantee to terminate the Plan under Section 7.1(b) thereof
(without regard to the cure period provided for therein unless such
cure is promptly effected without jeopardizing consummation of the
Merger pursuant to the terms of the Plan) after (x) a bona fide
proposal is made by any person (other than Grantee or any subsidiary of
Grantee) to Issuer or its stockholders to engage in an Acquisition
Transaction, (y) any person (other than Grantee or any subsidiary of
Grantee) states its intention to Issuer or its stockholders to make a
proposal to engage in an Acquisition Transaction if the Plan terminates
or (z) any person (other than Grantee or any subsidiary of Grantee)
shall have filed an application or notice with any Governmental Entity
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.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Preliminary Purchase Event or Purchase Event, it being understood that
the giving of such notice by Issuer shall not be a condition to the right of
Holder to exercise the Option.
(e) In the event Holder 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
3
<PAGE> 87
(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"), the Office of Thrift Supervision ("OTS") or any other Governmental
Entity is required in connection with such purchase, Issuer shall cooperate with
Grantee in the filing of the required notice of application for approval and the
obtaining of such approval and the Closing shall occur immediately following
such regulatory approvals (and any mandatory waiting periods).
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Holder 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 Issuer at the address of Issuer specified in Section 12(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), (i)
Issuer shall deliver to Holder (A) a certificate or certificates representing
the Option Shares to be purchased at such Closing, which Option Shares shall be
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever and subject to no preemptive rights, 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, and (ii) Holder shall deliver to Issuer a
letter agreeing that Holder shall not offer to sell or otherwise dispose of such
Option Shares in violation of applicable federal and state law or of the
provisions of this Agreement.
(c) In addition to any other legend that is required by applicable law,
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 MAY 30, 1996. A COPY OF SUCH AGREEMENT WILL BE PROVIDED
TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY 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 Holder shall have
delivered to Issuer a copy of a letter from the staff of the Commission, or an
opinion of counsel in form and substance
4
<PAGE> 88
reasonably satisfactory to Issuer and its counsel, to the effect that such
legend is not required for purposes of the Securities Act.
(d) Upon the giving by Holder to Issuer of the written notice of
exercise of the Option provided for under Section 3(e), the tender of the
applicable purchase price in immediately available funds and the tender of this
Agreement to Issuer, Holder shall be deemed to be the holder of record of the
shares of Issuer Common Stock issuable upon such exercise, notwithstanding that
the stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Issuer Common Stock shall not then be actually
delivered to Holder.
(e) Issuer agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Issuer Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Issuer Common
Stock, (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer, (iii) promptly to take all action as may from time to time be required
(including (A) complying with all premerger notification, reporting and waiting
period requirements and (B) in the event prior approval of or notice to any
Governmental Entity is necessary before the Option may be exercised, cooperating
fully with Holder in preparing such applications or notices and providing such
information to such Governmental Entity as it may require) in order to permit
Holder to exercise the Option and Issuer duly and effectively to issue shares of
Issuer Common Stock pursuant hereto, and (iv) promptly to take all action
provided herein to protect the rights of Holder against dilution.
5. Representations and Warranties of Issuer. Issuer hereby represents
and warrants to Grantee (and Holder, if different than Grantee) as follows:
(a) Due Authorization. Issuer has all requisite corporate power and
authority to enter into this Agreement, and subject to any approvals 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 Issuer, and this Agreement has been duly executed and delivered by Issuer.
(b) No Violations. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by Issuer
with any of the provisions hereof will not (i) conflict with or result in a
breach of any provision of its Articles of Agreement or Bylaws or a default (or
give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any note, bond, debenture, mortgage,
indenture, license, material agreement or other material
5
<PAGE> 89
instrument or obligation to which Issuer is a party, or by which it or any of
its properties or assets may be bound, or (ii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Issuer or any of
its properties or assets.
(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 hereof 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 that number of shares of Issuer Common Stock equal to the
maximum number of shares of Issuer Common Stock at any time and from time to
time purchasable upon exercise of the Option, and all such shares, upon issuance
pursuant to the Option, will be duly and validly issued, fully paid and
nonassessable, and will be delivered free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever and not subject to any
preemptive rights.
6. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that Grantee has all requisite corporate power
and authority to enter into this Agreement and, subject to any approvals or
consents referred to herein, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee, and this Agreement has been duly
executed and delivered by Grantee.
7. Adjustment upon Changes in Issuer Capitalization, etc.
(a) In the event 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, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transactions so that Holder shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that Holder 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 6.0% of
the number of shares of Issuer Common Stock then issued and outstanding, without
giving effect to any shares subject to or issued pursuant to the Option.
(b) In the event that Issuer shall enter in 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
6
<PAGE> 90
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 Holder, of any of (x) the
Acquiring Corporation (as hereinafter defined), (y) any person that controls the
Acquiring Corporation or (z) in the case of a merger described in clause (ii),
Issuer (such person being referred to as "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 Holder. Substitute Option Issuer also shall enter
into an agreement with Holder in substantially the same form as this Agreement,
which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock (as 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 Substitute
Option per share of Substitute Common Stock (the "Substitute Option Price")
shall then be equal to the Purchase Price multiplied by a fraction in which the
numerator is the number of shares of 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:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if
other than Issuer), (ii) Issuer in a merger in which Issuer is the
continuing or surviving person, or (iii) the transferee of all or
substantially all of Issuer's assets (or a substantial part of the
assets of its subsidiaries taken as a whole).
(2) "Substitute Common Stock" shall mean the shares of capital
stock (or similar equity interest) with the greatest voting power in
respect of the election of directors (or persons similarly responsible
for the direction of the business and affairs) of the Substitute Option
Issuer.
(3) "Assigned Value" shall mean the highest of (w) the price per
share of Issuer Common Stock at which a Tender Offer or an Exchange
Offer therefor has
7
<PAGE> 91
been made, (x) the price per share of Issuer Common Stock to be paid by
any third party pursuant to an agreement with Issuer, (y) the highest
closing price for shares of Issuer Common Stock within the six-month
period immediately preceding the consolidation, merger or sale in
question and (z) in the event of a sale of all or substantially all of
Issuer's assets or deposits, an amount equal to (i) the sum of the
price paid in such sale for such assets (and/or deposits) and the
current market value of the remaining assets of Issuer, as determined
by a nationally-recognized investment banking firm selected by Holder,
divided by (ii) the number of shares of Issuer Common Stock outstanding
at such time. In the event that a Tender Offer or an Exchange Offer is
made for 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 Issuer Common Stock shall be determined by a
nationally-recognized investment banking firm selected by Holder.
(4) "Average Price" shall mean the average closing price of a share
of Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than
the closing price of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that if Issuer
is the issuer of the Substitute Option, the Average Price shall be
computed with respect to a share of common stock issued by Issuer, the
person merging into Issuer or by any company which controls such
person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 6.0% of the aggregate of the
shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 6.0% of the aggregate of the shares of Substitute Common Stock but
for the limitation in the first sentence of this Section 7(f), Substitute Option
Issuer shall make a cash payment to Holder equal to the excess of (i) the value
of the Substitute Option without giving effect to the limitation in the first
sentence of this Section 7(f) over (ii) the value of the Substitute Option after
giving effect to the limitation in the first sentence of this Section 7(f). This
difference in value shall be determined by a nationally-recognized investment
banking firm selected by Holder.
(g) Issuer shall not enter into any transaction described in Section
7(b) 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 holders of the other shares of common stock issued
by Substitute Option Issuer are not entitled to exercise any rights by reason of
the issuance or exercise of the Substitute Option and the shares of Substitute
Common Stock are otherwise in no way distinguishable from or have lesser
economic value (other than any diminution in value resulting from the fact that
the shares of Substitute
8
<PAGE> 92
Common Stock are restricted securities, as defined in Rule 144 under the
Securities Act or any successor provision) than other shares of common stock
issued by Substitute Option Issuer).
8. Repurchase at the Option of Holder.
(a) Subject to the last sentence of Section 3(a), at the request of
Holder at any time commencing upon the first occurrence of a Repurchase Event
(as defined in Section 8(d)) and ending 12 months immediately thereafter, Issuer
shall repurchase from Holder (i) the Option and (ii) all shares of Issuer Common
Stock purchased by Holder pursuant hereto with respect to which Holder then has
beneficial ownership. The date on which Holder 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 Holder for any shares of
Issuer Common Stock acquired pursuant to the Option with respect to
which Holder 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 Holder for
each share of Issuer Common Stock with respect to which the Option has
been exercised and with respect to which Holder then has beneficial
ownership, multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer shall,
within 10 business days after the Request Date, pay the Section 8 Repurchase
Consideration to Holder in immediately available funds, and contemporaneously
with such payment Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock purchased thereunder
with respect to which Holder then has beneficial ownership, and 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, the OTS or any other
Governmental Entity is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Holder shall have the ongoing
option to revoke its request for repurchase pursuant to Section 8, in whole or
in part, or to require that Issuer deliver from time to time that portion of the
Section 8 Repurchase Consideration that it is not then so prohibited
9
<PAGE> 93
from paying and promptly file the required notice or application for approval
and expeditiously process the same (and each party shall cooperate with the
other in the filing of any such notice or application and the obtaining of any
such approval). If the Federal Reserve Board, the OTS or any other Governmental
Entity disapproves of any part of Issuer's proposed repurchase pursuant to this
Section 8, Issuer shall promptly give notice of such fact to Holder. If the
Federal Reserve Board, the OTS or any other Governmental Entity prohibits the
repurchase in part but not in whole, then Holder shall have the right (i) to
revoke the repurchase request or (ii) to the extent permitted by the Federal
Reserve Board, the OTS or other Governmental Entity, determine whether the
repurchase should apply to the Option and/or Option Shares and to what extent to
each, and Holder shall thereupon have the right to exercise the Option as to the
number of Option Shares for which the Option was exercisable at the Request Date
less the sum of the number of shares covered by the Option in respect of which
payment has been made pursuant to Section 8(a)(ii) and the number of shares
covered by the portion of the Option (if any) that has been repurchased. Holder
shall notify Issuer of its determination under the preceding sentence within
five business days of receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Grantee's
rights under this Section 8 shall terminate on the date of termination of the
Option pursuant to Section 3(a).
(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), (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), or (iii) the highest closing sales
price per share of Issuer Common Stock quoted on the Nasdaq Stock Market's
National Market ("NASDAQ/NMS") (or if Issuer Common Stock is not quoted on
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 chosen by Holder) 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 Holder, divided by the number of shares of Issuer Common Stock outstanding at
the time of such sale. If the consideration to be offered, paid or received
pursuant to either of the foregoing clauses (i) or (ii) shall be other than in
cash, the value of such consideration shall be determined in good faith by an
independent nationally-recognized investment banking firm selected by Holder and
reasonably acceptable to Issuer, which determination shall be conclusive for all
purposes of this Agreement.
(d) As used herein, a "Repurchase Event" shall occur if (i) any person
(other than Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act), or the right to acquire
10
<PAGE> 94
beneficial ownership of, or any "group" (as such term is defined in Section
13(d)(3) of the Exchange Act) shall have been formed which beneficially owns or
has the right to acquire beneficial ownership of, 50% or more of the then
outstanding shares of Issuer Common Stock, or (ii) any of the transactions
described in Section 7(b)(i), Section 7(b)(ii) or Section 7(b)(iii) shall be
consummated.
9. Registration Rights.
(a) Demand Registration Rights. Issuer shall, subject to the conditions
of Section 9(c), if requested by any Holder, as expeditiously as possible
prepare and file a registration statement 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 Holder upon exercise of the Option in accordance
with the intended method of sale or other disposition stated by Holder in such
request, including without limitation 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 for sale under
any applicable state securities laws.
(b) Additional Registration Rights. If Issuer at any time after the
exercise of the Option proposes to register any shares of Issuer Common Stock
under the Securities Act in connection with an underwritten public offering of
such Issuer Common Stock, Issuer will promptly give written notice to Holder of
its intention to do so and, upon the written request of Holder given within 30
days after receipt of any such notice (which request shall specify the number of
shares of Issuer Common Stock intended to be included in such underwritten
public offering by Holder), Issuer will cause all such shares for which a Holder
shall have requested participation in such registration to be so registered and
included in such underwritten public offering; provided, however, that Issuer
may elect to not cause any such shares to be so registered (i) if the
underwriters in good faith object for valid business reasons, or (ii) in the
case of a registration solely to implement an employee benefit plan or a
registration filed on Form S-4 under the Securities Act or any successor form;
provided, further, however, that such election pursuant to clause (i) may only
be made one time. If some but not all the shares of Issuer Common Stock with
respect to which Issuer shall have received requests for registration pursuant
to this Section 9(b) shall be excluded from such registration, Issuer shall make
appropriate allocation of shares to be registered among Holders permitted to
register their shares of Issuer Common Stock in connection with such
registration pro rata in the proportion that the number of shares requested to
be registered by each such Holder bears to the total number of shares requested
to be registered by all such Holders then desiring to have Issuer Common Stock
registered for sale.
(c) Conditions to Required Registration. Issuer shall use all
reasonable efforts to cause each registration statement referred to in Section
9(a) to become effective and to obtain all consents or waivers of other parties
which are required therefor and to keep such registration statement effective;
provided, however, that Issuer may delay any registration of Option Shares
required pursuant to Section 9(a) for a period not exceeding 90 days if
11
<PAGE> 95
Issuer shall in good faith determine that any such registration would adversely
affect an offering or contemplated offering of other securities by Issuer, and
Issuer shall not be required to register Option Shares under the Securities Act
pursuant to Section 9(a):
(i) prior to the earliest of (A) termination of the Plan pursuant
to Article VII thereof, and (B) a Purchase Event or a Preliminary
Purchase Event;
(ii) on more than one occasion during any calendar year and on
more than two occasions in total;
(iii) within 90 days after the effective date of a registration
referred to in Section 9(b) pursuant to which the Holder or Holders
concerned were afforded the opportunity to register such shares under
the Securities Act and such shares were registered as requested; and
(iv) unless a request therefor is made to Issuer by the Holder or
Holders of at least 25% or more of the aggregate number of Option
Shares (including shares of Issuer Common Stock issuable upon exercise
of the Option) then outstanding.
In addition to the foregoing, Issuer shall not be required to maintain
the effectiveness of any registration statement after the expiration of nine
months from the effective date of such registration statement. Issuer shall use
all reasonable efforts to make any filings, and take all steps, under all
applicable state securities laws to the extent necessary to permit the sale or
other disposition of the Option Shares so registered in accordance with the
intended method of distribution for such shares, provided, however, that Issuer
shall not be required to consent to general jurisdiction or to qualify to do
business in any state where it is not otherwise required to so consent to such
jurisdiction or to so qualify to do business.
(d) Expenses. Issuer will pay all expenses (including without
limitation registration fees, qualification fees, blue sky fees and expenses,
accounting expenses, legal expenses and printing expenses incurred by it) in
connection with each registration pursuant to Section 9(a) or (b) and all other
qualifications, notifications or exemptions pursuant to Section 9(a) or (b).
Underwriting discounts and commissions relating to Option Shares, fees and
disbursements of counsel to the Holder(s) of Option Shares being registered and
any other expenses incurred by such Holder(s) in connection with any such
registration shall be borne by such Holder(s).
(e) Indemnification. In connection with any registration under Section
9(a) or (b), Issuer hereby indemnifies each Holder, and each underwriter
thereof, including each person, if any, who controls such Holder or underwriter
within the meaning of Section 15 of the Securities Act, against all expenses,
losses, claims, damages and liabilities caused by any untrue, or alleged untrue,
statement of a material fact contained in any registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission,
or alleged
12
<PAGE> 96
omission, to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
expenses, losses, claims, damages or liabilities of such indemnified party are
caused by any untrue statement or alleged untrue statement that was included by
Issuer in any such registration statement or prospectus or notification or
offering circular (including any amendments or supplements thereto) in reliance
upon, and in conformity with, information furnished in writing to Issuer by such
indemnified party expressly for use therein, and Issuer and each officer,
director and controlling person of Issuer shall be indemnified by such Holder,
or by such underwriter, as the case may be, for all such expenses, losses,
claims, damages and liabilities caused by any untrue, or alleged untrue,
statement that was included by Issuer in any such registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) in reliance upon, and in conformity with, information
furnished in writing to Issuer by such Holder or such underwriter, as the case
may be, expressly for such use.
Promptly upon receipt by a party indemnified under this Section 9(e) of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 9(e), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but,
except to the extent of any actual prejudice to the indemnifying party, the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 9(e). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably satisfactory
to such indemnified party. The indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (i) the
indemnifying party agrees to pay the same, (ii) the indemnifying party fails to
assume the defense of such action with counsel reasonably satisfactory to the
indemnified party, or (iii) the indemnified party has been advised by counsel
that one or more legal defenses may be available to the indemnifying party that
may be contrary to the interest of the indemnified party, in which case the
indemnifying party shall be entitled to assume the defense of such action
notwithstanding its obligation to bear fees and expenses of such counsel. No
indemnifying party shall be liable for any settlement entered into without its
consent, which consent may not be unreasonably withheld.
If the indemnification provided for in this Section 9(e) is unavailable
to a party otherwise entitled to be indemnified in respect of any expenses,
losses, claims, damages or liabilities referred to herein, then the indemnifying
party, in lieu of indemnifying such party otherwise entitled to be indemnified,
shall contribute to the amount paid or payable by such party to be indemnified
as a result of such expenses, losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative benefits received by
Issuer, the
13
<PAGE> 97
selling Holders and the underwriters from the offering of the securities and
also the relative fault of Issuer, the selling Holders and the underwriters in
connection with the statement or omissions which results in such expenses,
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The amount paid or payable by a party as a result of the
expenses, losses, claims, damages and liabilities referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any action or claim;
provided, however, that in no case shall the selling Holders be responsible, in
the aggregate, for any amount in excess of the net offering proceeds
attributable to its Option Shares included in the offering. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(g) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Any obligation by any Holder to
indemnify shall be several and not joint with other Holders.
In connection with any registration pursuant to Section 9(a) or (b)
above, Issuer and each selling Holder (other than Grantee) shall enter into an
agreement containing the indemnification provisions of this Section 9(e).
(f) Miscellaneous Reporting. Issuer shall comply with all reporting
requirements and will do all such other things as may be necessary to permit the
expeditious sale at any time of any Option Shares by the Holder(s) in accordance
with and to the extent permitted by any rule or regulation permitting
nonregistered sales of securities promulgated by the Commission from time to
time, including, without limitation, Rule 144A. Issuer shall at its expense
provide the Holder with any information necessary in connection with the
completion and filing of any reports or forms required to be filed by them under
the Securities Act or the Exchange Act, or required pursuant to any state
securities laws or the rules of any stock exchange.
(g) Issue Taxes. Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save any Holder harmless, without limitation as to time,
against any and all liabilities, with respect to all such taxes.
10. Quotation; Listing. If Issuer Common Stock or any other securities
to be acquired upon exercise of the Option are then authorized for quotation or
trading or listing on NASDAQ/NMS or any securities exchange, Issuer, upon the
request of Holder, will promptly file an application, if required, to authorize
for quotation or trading or listing the shares of Issuer Common Stock or other
securities to be acquired upon exercise of the Option on NASDAQ/NMS or such
other securities exchange and will use its best efforts to obtain approval, if
required, of such quotation or listing as soon as practicable.
11. Division of Option. Upon the occurrence of a Purchase Event or a
Preliminary Purchase Event, this Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the
14
<PAGE> 98
principal office of the Issuer for other Agreements providing for Options of
different denominations entitling the holder thereof to purchase in the
aggregate the same number of shares of Issuer Common Stock purchasable
hereunder. The terms "Agreement" and "Option" as used herein include any other
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
12. Miscellaneous.
(a) Expenses. Except as otherwise provided in Section 9, 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 Beneficiaries; Severability. This
Agreement, together with the Plan and the other documents and instruments
referred to herein and therein, between Grantee and Issuer (i) 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 (ii) is not intended to confer upon any person other than the parties hereto
(other than the indemnified parties under Section 9(e) and any transferee of the
Option Shares or any permitted transferee of this Agreement pursuant to Section
12(h)) any rights or remedies hereunder. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or a
federal or state regulatory agency to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Option does not permit Holder 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 (as adjusted pursuant to Section 7), it is the express
intention of Issuer to allow Holder to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible without any
amendment or modification hereof.
15
<PAGE> 99
(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Maine 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 sent by overnight mail service or mailed by registered or
certified mail (return receipt requested) postage prepaid, to the parties at the
following address (or at such other address for a party as shall be specified by
like notice):
If to Grantee:
Family Bancorp
153 Merrimack Street
Haverhill, Massachusetts 01830
Attn: David D. Hindle
President and Chief Executive Officer
Fax: 508-374-5319
With a required copy to:
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Peter W. Coogan, Esq.
Fax: 617-832-7000
If to Issuer:
Peoples Heritage Financial Group, Inc.
One Portland Square
Portland, Maine 04112-9540
Attn: William J. Ryan
Chairman, President and Chief Executive Officer
Fax: 207-761-8587
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, DC 20005
Attn: Gerard L. Hawkins, Esq.
Fax: 202-347-2172
16
<PAGE> 100
(g) Counterparts. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(h) Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder or under 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 Holder may assign this Agreement
to a wholly-owned subsidiary of Holder and Holder may assign its rights
hereunder in whole or in part after the occurrence of a Purchase Event. Subject
to the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
(i) Further Assurances. In the event of any exercise of the Option by
Holder, Issuer and Holder 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.
17
<PAGE> 101
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 HERITAGE
FINANCIAL GROUP, INC.
Attest:
By:
- -------------------------------------- ------------------------------------
Name: Peter J. Verrill Name: William J. Ryan
Title: Executive Vice President, Title: Chairman, President
Chief Operating Officer and Chief Executive Officer
and Chief Financial Officer
Attest: FAMILY BANCORP
By:
- -------------------------------------- ------------------------------------
Name: George E. Fahey Name: David D. Hindle
Title: Executive Vice President, Title: President and Chief
Treasurer and Chief Financial Executive Officer
Officer
18
<PAGE> 102
EXHIBIT D
[MATTERS TO BE COVERED IN OPINION OF COUNSEL TO BE DELIVERED TO THE COMPANY
PURSUANT TO SECTION 6.2(D) OF THE AGREEMENT]
(a) Each of the Acquiror, the Acquiror Sub and the Acquiror New
Hampshire Bank is duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, and the Acquiror is duly
registered as a bank holding company under the BHCA.
(b) The authorized capital stock of the Acquiror consists of
100,000,000 shares of Acquiror Common Stock, of which ___________ were issued
and outstanding of record as of the date hereof, and 5,000,000 shares of
Acquiror Preferred Stock, none of which are issued and outstanding as of the
date hereof. All of the outstanding shares of Acquiror Common Stock have been
duly authorized and validly issued and are fully paid and nonassessable, and the
shareholders of the Acquiror have no preemptive rights with respect to any
shares of capital stock of the Acquiror. All of the outstanding shares of
capital stock of the Acquiror Subsidiaries which are Significant Subsidiaries
have been duly authorized and validly issued, are fully paid and nonassessable
(except as otherwise provided with respect to the capital stock of the Acquiror
Maine Bank and the Acquiror National Bank by the MRSA and the National Bank Act,
respectively) and, to the knowledge of such counsel, are directly or indirectly
owned by the Acquiror free and clear of all liens, claims, encumbrances,
charges, restrictions or rights of third parties of any kind whatsoever. To such
counsel's knowledge, except (i) for shares of Acquiror Common Stock issuable
pursuant to the Acquiror Employee Stock Benefit Plans, (ii) Rights issued by the
Acquiror pursuant to the Acquiror Rights Agreement and (iii) by virtue of the
Agreement and the Acquiror Stock Option Agreement, there were no Rights
authorized, issued or outstanding with respect to the capital stock of the
Acquiror as of the date of the Agreement.
(c) The Agreement has been duly authorized, executed and delivered by
the Acquiror and the Acquiror Sub and, assuming due authorization, execution and
delivery by the Company, constitutes a valid and binding obligation of the
Acquiror and the Acquiror Sub enforceable in accordance with its terms, except
that the enforceability of the obligations of the Acquiror and the Acquiror Sub
may be limited by (i) bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting the rights of creditors, (ii) equitable principles
limiting the right to obtain specific performance or other similar equitable
relief and (iii) considerations of public policy, and except that certain
remedies may not be available in the case of a nonmaterial breach of the
Agreement.
(d) The Branch Sale Agreement has been duly authorized, executed and
delivered by the Acquiror New Hampshire Bank and, assuming due authorization,
execution and delivery by the Bank, constitutes a valid and binding obligation
of the Acquiror New Hampshire Bank enforceable in accordance with its terms,
except that enforceability of the
<PAGE> 103
obligations of the Acquiror New Hampshire Bank may be limited by (i) bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting the rights of
creditors, (ii) equitable principles limiting the right to obtain specific
performance or other similar equitable relief and (iii) considerations of public
policy, and except that certain remedies may not be available in the case of a
nonmaterial breach of the Branch Sale Agreement.
(e) All corporate and shareholder actions required to be taken by the
Acquiror and the Acquiror Sub by law and their respective Articles of
Incorporation and Bylaws to authorize the execution and delivery of the
Agreement and consummation of the Merger have been taken, and all corporate and
shareholder actions required to be taken by the Acquiror New Hampshire Bank by
law and its Certificate of Incorporation and Bylaws to authorize the execution
and delivery of the Branch Sale Agreement and consummation of the Branch Sale
have been taken.
(f) All consents or approvals of or filings or registrations with any
federal or state banking agency which are necessary to be obtained by (i) the
Acquiror and the Acquiror Sub to permit the execution, delivery and performance
of the Agreement and consummation of the Merger have been obtained and (ii) the
Acquiror New Hampshire Bank to permit the execution, delivery and performance of
the Branch Sale Agreement and consummation of the Branch Sale have been
obtained.
(g) The shares of Acquiror Common Stock to be issued pursuant to the
terms of the Agreement have been duly authorized by all necessary corporate
action on the part of the Acquiror and, when issued in accordance with the terms
of the Agreement, will be validly issued, fully paid and nonassessable and not
in violation of the preemptive rights of any person.
(h) Each Company Option outstanding and in effect immediately preceding
consummation of the Merger shall have become an option to purchase shares of
Acquiror Common Stock on the terms provided in Section 2.9 of the Agreement.
(i) To such counsel's knowledge, and except as Previously Disclosed or
as disclosed in the Acquiror's Securities Documents, there are no material legal
or governmental proceedings pending to which the Acquiror or any Acquiror
Subsidiary is a party or to which any property of the Acquiror or any Acquiror
Subsidiary is subject and no such proceedings are threatened by governmental
authorities or by others.
Such counsel also shall state that it has no reason to believe that the
information relating to the Acquiror or an Acquiror Subsidiary contained or
incorporated by reference in (i) the Form S-4, at the time the Form S-4 and any
amendment thereto became effective under the Securities Act, contained any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (ii) the Proxy Statement, as of the
date(s) such Proxy Statement was mailed to shareholders of the Company and the
Acquiror and up
2
<PAGE> 104
to and including the date(s) of the meetings of shareholders to which such Proxy
Statement relates, contained any untrue statement of a material fact or omitted
to state a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
In rendering their opinion, such counsel may rely, to the extent such
counsel deems such reliance necessary or appropriate, upon (i) certificates of
governmental officials and, as to matters of fact, certificates of officers of
the Acquiror or any Acquiror Subsidiary and (ii) New Hampshire counsel
reasonably satisfactory to the Company with respect to matters of New Hampshire
law. The opinion of such counsel need refer only to matters of Maine, New
Hampshire and federal law, and may add other qualifications and explanations of
the basis of their opinion as may be reasonably acceptable to the Company.
Note: The receipt of an opinion covering the matters set forth above
relating to the Branch Sale and the Branch Sale Agreement shall not be a
condition to the Company's obligation to consummate the Merger.
3
<PAGE> 105
[MATTERS TO BE COVERED IN OPINION OF COUNSEL TO BE DELIVERED TO THE ACQUIROR
PURSUANT TO SECTION 6.3(D) OF THE AGREEMENT]
(a) Each of the Company and the Bank is duly incorporated and validly
existing under the laws of the Commonwealth of Massachusetts and the United
States, respectively, and the Company is duly registered as a savings and loan
holding company under the HOLA.
(b) The authorized capital stock of the Company consists of 20,000,000
shares of Company Common Stock, of which _________ shares are issued and
outstanding of record as of the date hereof, and 10,000,000 shares of Company
Preferred Stock, of which no shares are issued and outstanding as of the date
hereof. All of the outstanding shares of Company Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable, and the
shareholders of the Company have no preemptive rights with respect to any shares
of capital stock of the Company. All of the outstanding shares of capital stock
of the Bank have been duly authorized and validly issued, are fully paid and
nonassessable, and, to the knowledge of such counsel, are directly or indirectly
owned by the Company free and clear of all liens, claims, encumbrances, charges,
restrictions or rights of third parties of any kind whatsoever. To such
counsel's knowledge, except for the Company Stock Option Agreement and
outstanding Company Options to purchase ______ shares of Company Common Stock as
of the date hereof, there are no Rights authorized, issued or outstanding with
respect to the capital stock of the Company or a Company Subsidiary.
(c) The Agreement has been duly authorized, executed and delivered by
the Company and, assuming due authorization, execution and delivery by the
Acquiror and the Acquiror Sub, constitutes a valid and binding obligation of the
Company enforceable in accordance with its terms, except that the enforceability
of the obligations of the Company may be limited by (i) bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the rights of creditors,
(ii) equitable principles limiting the right to obtain specific performance or
other similar equitable relief and (iii) considerations of public policy, and
except that certain remedies may not be available in the case of a nonmaterial
breach of the Agreement.
(d) The Branch Sale Agreement has been duly authorized, executed and
delivered by the Bank and, assuming due authorization, execution and delivery by
the Acquiror New Hampshire Bank, constitutes a valid and binding obligation of
the Bank enforceable in accordance with its terms, except that enforceability of
the obligations of the Bank may be limited by (i) bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the rights of creditors,
(ii) equitable principles limiting the right to obtain specific
4
<PAGE> 106
performance or other similar equitable relief and (iii) considerations of public
policy, and except that certain remedies may not be available in the case of a
nonmaterial breach of the Branch Sale Agreement.
(e) All corporate and shareholder actions required to be taken by the
Company by law and the Articles of Organization and Bylaws of the Company to
authorize the execution and delivery of the Agreement and consummation of the
Merger have been taken, and all corporate and shareholder actions required to be
taken by the Bank by law and its Charter and Bylaws to authorize the execution
and delivery of the Branch Sale Agreement and consummation of the Branch Sale
have been taken.
(f) All consents or approvals of or filings or registrations with any
federal or state banking agency which are necessary to be obtained by (i) the
Company to permit the execution, delivery and performance of the Agreement and
consummation of the Merger have been obtained and (ii) the Bank to permit the
execution, delivery and performance of the Branch Sale Agreement and
consummation of the Branch Sale have been obtained.
(g) To such counsel's knowledge, and except as Previously Disclosed or
as disclosed in the Company's Securities Documents, there are no material legal
or governmental proceedings pending to which the Company or a Company Subsidiary
is a party or to which any property of the Company or a Company Subsidiary is
subject and no such proceedings are threatened by governmental authorities or by
others.
Such counsel also shall state that it has no reason to believe that the
information relating to the Company or a Company Subsidiary contained or
incorporated by reference in (i) the Form S-4, at the time the Form S-4 and any
amendment thereto became effective under the Securities Act, contained any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (ii) the Proxy Statement, as of the
date(s) such Proxy Statement was mailed to shareholders of the Company and the
Acquiror and up to and including the date(s) of the meetings of shareholders to
which such Proxy Statement relates, contained any untrue statement of a material
fact or omitted to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
In rendering their opinion, such counsel may rely, to the extent such
counsel deems such reliance necessary or appropriate, upon certificates of
governmental officials, certificates or opinions of other counsel to the Company
or a Company Subsidiary reasonably satisfactory to the Acquiror and, as to
matters of fact, certificates of officers of the Company or a Company
Subsidiary. The opinion of such counsel need refer only to matters of
Massachusetts and federal law and may add other qualifications and explanations
of the basis of their opinion as may be reasonably acceptable to the Acquiror.
Note: The receipt of an opinion covering the matters set forth above
relating to the Branch Sale and the Branch Sale Agreement shall not be a
condition to the Acquiror's obligation to consummate the Merger.
5
<PAGE> 1
Exhibit 10(a)
Stock Option Agreement,
dated as of May 30, 1996,
between Peoples Heritage (as grantee)
and Family (as issuer)
<PAGE> 2
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of May 30, 1996 (the "Agreement"), by
and between Family Bancorp, a Massachusetts corporation ("Issuer"), and Peoples
Heritage Financial Group, Inc., a Maine corporation ("Grantee").
WITNESSETH:
WHEREAS, Issuer, Grantee and Peoples Heritage Merger Corp. ("PHMC"), a
wholly-owned subsidiary of Grantee, have entered into an Agreement and Plan of
Merger, dated as of May 30, 1996 (the "Plan"), providing for, among other
things, the merger of Issuer with and into PHMC (the "Merger"), with PHMC as the
surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Plan and Grantee's agreement referred to in the next WHEREAS clause, Grantee has
required that Issuer agree, and Issuer has agreed, to grant to Grantee the
Option (as hereinafter defined); and
WHEREAS, as a condition and inducement to Issuer's execution of the
Plan and this Agreement, Grantee has agreed to grant an option to Issuer on
terms and conditions which are substantially identical to those of the Option
and this Agreement with respect to approximately 6% of the common stock of
Grantee;
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, 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 Plan.
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 832,000 shares (as adjusted as set forth herein) (the "Option
Shares," which shall include the Option Shares before and after any transfer of
such Option Shares) of Common Stock, par value $0.10 per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (the "Purchase Price")
of $20.50, provided, however, that in no event shall the number of Option Shares
for which the Option is exercisable exceed 19.9% of the issued and outstanding
shares of Issuer Common Stock without giving effect to any shares subject to or
issued pursuant to the Option.
3. Exercise of Option.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of the agreements or covenants
contained in this Agreement or
<PAGE> 3
the Plan, and (ii) no preliminary or permanent injunction or other order against
the delivery of shares covered by the Option issued by any court of competent
jurisdiction in the United States shall be in effect, Holder 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 hereinafter defined); provided that the
Option shall terminate and be of no further force and effect upon the earliest
to occur of (A) the Effective Time of the Merger, (B) termination of the Plan in
accordance with the terms thereof prior to the occurrence of a Purchase Event or
a Preliminary Purchase Event, other than a termination of the Plan by Grantee
pursuant to Section 7.1(b)(i) (a "Default Termination"), (C) 12 months after the
termination of the Plan by Grantee pursuant to a Default Termination, and (D) 12
months after termination of the Plan (other than pursuant to a Default
Termination) following the occurrence of a Purchase Event or a Preliminary
Purchase Event; and provided, further, that any purchase of shares upon exercise
of the Option shall be subject to compliance with applicable laws, including
without limitation the Bank Holding Company Act of 1956, as amended (the "BHC
Act"), and the Home Owners' Loan Act, as amended ("HOLA"). The term "Holder"
shall mean the holder or holders of the Option from time to time, and which is
initially Grantee. The rights set forth in Section 8 hereof shall terminate when
the right to exercise the Option terminates (other than as a result of a
complete exercise of the Option) as set forth above.
(b) As used herein, a "Purchase Event" means any of the following
events:
(i) Without Grantee's prior written consent, Issuer shall have
authorized, recommended or publicly-proposed, or publicly announced an
intention to authorize, recommend or propose, or entered into an
agreement with any person (other than Grantee or any subsidiary of
Grantee) to effect (A) a merger, consolidation or similar transaction
involving Issuer or any of its subsidiaries, (B) the disposition, by
sale, lease, exchange or otherwise, of assets of Issuer or any of its
subsidiaries representing in either case 15% or more of the
consolidated assets of Issuer and its subsidiaries, 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 of its
subsidiaries (any of the foregoing an "Acquisition Transaction"); or
(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 Exchange Act) of or the right to
acquire beneficial ownership of, or any "group" (as such term is
defined in Section 13(d)(3) of the Exchange Act) shall have been formed
which beneficially owns or has the right to acquire beneficial
ownership of, 25% or more of the then outstanding shares of Issuer
Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
2
<PAGE> 4
(i) 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 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 10% or more of the then
outstanding shares of Issuer Common Stock (such an offer being referred
to herein as a "Tender Offer" and an "Exchange Offer," respectively);
or
(ii) (A) the holders of Issuer Common Stock shall not have
approved the Plan at the meeting of such stockholders held for the
purpose of voting on the Plan, (B) such meeting shall not have been
held or shall have been canceled prior to termination of the Plan or
(C) Issuer's Board of Directors shall have withdrawn or modified in a
manner adverse to Grantee the recommendation of Issuer's Board of
Directors with respect to the Plan, in each case after it shall have
been publicly announced that any person (other than Grantee or any
subsidiary of Grantee) shall have (x) made, or disclosed an intention
to make, a proposal to engage in an Acquisition Transaction, (y)
commenced a Tender Offer or filed a registration statement under the
Securities Act with respect to an Exchange Offer, or (z) filed an
application (or given notice), whether in draft or final form, under
the BHC Act, the HOLA, the Bank Merger Act, as amended, or the Change
in Bank Control Act of 1978, as amended, for approval to engage in an
Acquisition Transaction; or
(iii) Issuer shall have breached any representation, warranty,
covenant or obligation contained in the Plan and such breach would
entitle Grantee to terminate the Plan under Section 7.1(b) thereof
(without regard to the cure period provided for therein unless such
cure is promptly effected without jeopardizing consummation of the
Merger pursuant to the terms of the Plan) after (x) a bona fide
proposal is made by any person (other than Grantee or any subsidiary of
Grantee) to Issuer or its stockholders to engage in an Acquisition
Transaction, (y) any person (other than Grantee or any subsidiary of
Grantee) states its intention to Issuer or its stockholders to make a
proposal to engage in an Acquisition Transaction if the Plan terminates
or (z) any person (other than Grantee or any subsidiary of Grantee)
shall have filed an application or notice with any Governmental Entity
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.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Preliminary Purchase Event or Purchase Event, it being understood that
the giving of such notice by Issuer shall not be a condition to the right of
Holder to exercise the Option.
(e) In the event Holder 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
3
<PAGE> 5
(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"), the Office of Thrift Supervision ("OTS") or any other Governmental
Entity is required in connection with such purchase, Issuer shall cooperate with
Grantee in the filing of the required notice of application for approval and the
obtaining of such approval and the Closing shall occur immediately following
such regulatory approvals (and any mandatory waiting periods).
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Holder 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 Issuer at the address of Issuer specified in Section 12(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), (i)
Issuer shall deliver to Holder (A) a certificate or certificates representing
the Option Shares to be purchased at such Closing, which Option Shares shall be
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever and subject to no preemptive rights, 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, and (ii) Holder shall deliver to Issuer a
letter agreeing that Holder shall not offer to sell or otherwise dispose of such
Option Shares in violation of applicable federal and state law or of the
provisions of this Agreement.
(c) In addition to any other legend that is required by applicable law,
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 MAY 30, 1996. A COPY OF SUCH AGREEMENT WILL BE PROVIDED
TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY 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 Holder shall have
delivered to Issuer a copy of a letter from the staff of the Commission, or an
opinion of counsel in form and substance
4
<PAGE> 6
reasonably satisfactory to Issuer and its counsel, to the effect that such
legend is not required for purposes of the Securities Act.
(d) Upon the giving by Holder to Issuer of the written notice of
exercise of the Option provided for under Section 3(e), the tender of the
applicable purchase price in immediately available funds and the tender of this
Agreement to Issuer, Holder shall be deemed to be the holder of record of the
shares of Issuer Common Stock issuable upon such exercise, notwithstanding that
the stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Issuer Common Stock shall not then be actually
delivered to Holder.
(e) Issuer agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Issuer Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Issuer Common
Stock, (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer, (iii) promptly to take all action as may from time to time be required
(including (A) complying with all premerger notification, reporting and waiting
period requirements and (B) in the event prior approval of or notice to any
Governmental Entity is necessary before the Option may be exercised, cooperating
fully with Holder in preparing such applications or notices and providing such
information to such Governmental Entity as it may require) in order to permit
Holder to exercise the Option and Issuer duly and effectively to issue shares of
Issuer Common Stock pursuant hereto, and (iv) promptly to take all action
provided herein to protect the rights of Holder against dilution.
5. Representations and Warranties of Issuer. Issuer hereby represents
and warrants to Grantee (and Holder, if different than Grantee) as follows:
(a) Due Authorization. Issuer has all requisite corporate power and
authority to enter into this Agreement, and subject to any approvals 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 Issuer, and this Agreement has been duly executed and delivered by Issuer.
(b) No Violations. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by Issuer
with any of the provisions hereof will not (i) conflict with or result in a
breach of any provision of its Articles of Agreement or Bylaws or a default (or
give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any note, bond, debenture, mortgage,
indenture, license, material agreement or other material
5
<PAGE> 7
instrument or obligation to which Issuer is a party, or by which it or any of
its properties or assets may be bound, or (ii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Issuer or any of
its properties or assets.
(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 hereof 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 that number of shares of Issuer Common Stock equal to the
maximum number of shares of Issuer Common Stock at any time and from time to
time purchasable upon exercise of the Option, and all such shares, upon issuance
pursuant to the Option, will be duly and validly issued, fully paid and
nonassessable, and will be delivered free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever and not subject to any
preemptive rights.
6. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that Grantee has all requisite corporate power
and authority to enter into this Agreement and, subject to any approvals or
consents referred to herein, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee, and this Agreement has been duly
executed and delivered by Grantee.
7. Adjustment upon Changes in Issuer Capitalization, etc.
(a) In the event 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, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transactions so that Holder shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that Holder 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 to or issued pursuant to the Option.
(b) In the event that Issuer shall enter in 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
6
<PAGE> 8
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 Holder, of any of (x) the
Acquiring Corporation (as hereinafter defined), (y) any person that controls the
Acquiring Corporation or (z) in the case of a merger described in clause (ii),
Issuer (such person being referred to as "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 Holder. Substitute Option Issuer also shall enter
into an agreement with Holder in substantially the same form as this Agreement,
which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock (as 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 Substitute
Option per share of Substitute Common Stock (the "Substitute Option Price")
shall then be equal to the Purchase Price multiplied by a fraction in which the
numerator is the number of shares of 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:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if
other than Issuer), (ii) Issuer in a merger in which Issuer is the
continuing or surviving person, or (iii) the transferee of all or
substantially all of Issuer's assets (or a substantial part of the
assets of its subsidiaries taken as a whole).
(2) "Substitute Common Stock" shall mean the shares of capital
stock (or similar equity interest) with the greatest voting power in
respect of the election of directors (or persons similarly responsible
for the direction of the business and affairs) of the Substitute Option
Issuer.
(3) "Assigned Value" shall mean the highest of (w) the price per
share of Issuer Common Stock at which a Tender Offer or an Exchange
Offer therefor has
7
<PAGE> 9
been made, (x) the price per share of Issuer Common Stock to be paid by
any third party pursuant to an agreement with Issuer, (y) the highest
closing price for shares of Issuer Common Stock within the six-month
period immediately preceding the consolidation, merger or sale in
question and (z) in the event of a sale of all or substantially all of
Issuer's assets or deposits, an amount equal to (i) the sum of the
price paid in such sale for such assets (and/or deposits) and the
current market value of the remaining assets of Issuer, as determined
by a nationally-recognized investment banking firm selected by Holder,
divided by (ii) the number of shares of Issuer Common Stock outstanding
at such time. In the event that a Tender Offer or an Exchange Offer is
made for 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 Issuer Common Stock shall be determined by a
nationally-recognized investment banking firm selected by Holder.
(4) "Average Price" shall mean the average closing price of a share
of Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than
the closing price of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that if Issuer
is the issuer of the Substitute Option, the Average Price shall be
computed with respect to a share of common stock issued by Issuer, the
person merging into Issuer or by any company which controls such
person, as Holder 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 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 the limitation in the first sentence of this Section 7(f), Substitute
Option Issuer shall make a cash payment to Holder equal to the excess of (i) the
value of the Substitute Option without giving effect to the limitation in the
first sentence of this Section 7(f) over (ii) the value of the Substitute Option
after giving effect to the limitation in the first sentence of this Section
7(f). This difference in value shall be determined by a nationally-recognized
investment banking firm selected by Holder.
(g) Issuer shall not enter into any transaction described in Section
7(b) 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 holders of the other shares of common stock issued
by Substitute Option Issuer are not entitled to exercise any rights by reason of
the issuance or exercise of the Substitute Option and the shares of Substitute
Common Stock are otherwise in no way distinguishable from or have lesser
economic value (other than any diminution in value resulting from the fact that
the shares of Substitute
8
<PAGE> 10
Common Stock are restricted securities, as defined in Rule 144 under the
Securities Act or any successor provision) than other shares of common stock
issued by Substitute Option Issuer).
8. Repurchase at the Option of Holder.
(a) Subject to the last sentence of Section 3(a), at the request of
Holder at any time commencing upon the first occurrence of a Repurchase Event
(as defined in Section 8(d)) and ending 12 months immediately thereafter, Issuer
shall repurchase from Holder (i) the Option and (ii) all shares of Issuer Common
Stock purchased by Holder pursuant hereto with respect to which Holder then has
beneficial ownership. The date on which Holder 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 Holder for any shares of
Issuer Common Stock acquired pursuant to the Option with respect to
which Holder 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 Holder for
each share of Issuer Common Stock with respect to which the Option has
been exercised and with respect to which Holder then has beneficial
ownership, multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer shall,
within 10 business days after the Request Date, pay the Section 8 Repurchase
Consideration to Holder in immediately available funds, and contemporaneously
with such payment Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock purchased thereunder
with respect to which Holder then has beneficial ownership, and 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, the OTS or any other
Governmental Entity is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Holder shall have the ongoing
option to revoke its request for repurchase pursuant to Section 8, in whole or
in part, or to require that Issuer deliver from time to time that portion of the
Section 8 Repurchase Consideration that it is not then so prohibited
9
<PAGE> 11
from paying and promptly file the required notice or application for approval
and expeditiously process the same (and each party shall cooperate with the
other in the filing of any such notice or application and the obtaining of any
such approval). If the Federal Reserve Board, the OTS or any other Governmental
Entity disapproves of any part of Issuer's proposed repurchase pursuant to this
Section 8, Issuer shall promptly give notice of such fact to Holder. If the
Federal Reserve Board, the OTS or any other Governmental Entity prohibits the
repurchase in part but not in whole, then Holder shall have the right (i) to
revoke the repurchase request or (ii) to the extent permitted by the Federal
Reserve Board, the OTS or other Governmental Entity, determine whether the
repurchase should apply to the Option and/or Option Shares and to what extent to
each, and Holder shall thereupon have the right to exercise the Option as to the
number of Option Shares for which the Option was exercisable at the Request Date
less the sum of the number of shares covered by the Option in respect of which
payment has been made pursuant to Section 8(a)(ii) and the number of shares
covered by the portion of the Option (if any) that has been repurchased. Holder
shall notify Issuer of its determination under the preceding sentence within
five business days of receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Grantee's
rights under this Section 8 shall terminate on the date of termination of the
Option pursuant to Section 3(a).
(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), (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), or (iii) the highest closing sales
price per share of Issuer Common Stock quoted on the Nasdaq Stock Market's
National Market ("NASDAQ/NMS") (or if Issuer Common Stock is not quoted on
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 chosen by Holder) 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 Holder, divided by the number of shares of Issuer Common Stock outstanding at
the time of such sale. If the consideration to be offered, paid or received
pursuant to either of the foregoing clauses (i) or (ii) shall be other than in
cash, the value of such consideration shall be determined in good faith by an
independent nationally-recognized investment banking firm selected by Holder and
reasonably acceptable to Issuer, which determination shall be conclusive for all
purposes of this Agreement.
(d) As used herein, a "Repurchase Event" shall occur if (i) any person
(other than Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act), or the right to acquire
10
<PAGE> 12
beneficial ownership of, or any "group" (as such term is defined in Section
13(d)(3) of the Exchange Act) shall have been formed which beneficially owns or
has the right to acquire beneficial ownership of, 50% or more of the then
outstanding shares of Issuer Common Stock, or (ii) any of the transactions
described in Section 7(b)(i), Section 7(b)(ii) or Section 7(b)(iii) shall be
consummated.
9. Registration Rights.
(a) Demand Registration Rights. Issuer shall, subject to the conditions
of Section 9(c), if requested by any Holder, as expeditiously as possible
prepare and file a registration statement 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 Holder upon exercise of the Option in accordance
with the intended method of sale or other disposition stated by Holder in such
request, including without limitation 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 for sale under
any applicable state securities laws.
(b) Additional Registration Rights. If Issuer at any time after the
exercise of the Option proposes to register any shares of Issuer Common Stock
under the Securities Act in connection with an underwritten public offering of
such Issuer Common Stock, Issuer will promptly give written notice to Holder of
its intention to do so and, upon the written request of Holder given within 30
days after receipt of any such notice (which request shall specify the number of
shares of Issuer Common Stock intended to be included in such underwritten
public offering by Holder), Issuer will cause all such shares for which a Holder
shall have requested participation in such registration to be so registered and
included in such underwritten public offering; provided, however, that Issuer
may elect to not cause any such shares to be so registered (i) if the
underwriters in good faith object for valid business reasons, or (ii) in the
case of a registration solely to implement an employee benefit plan or a
registration filed on Form S-4 under the Securities Act or any successor form;
provided, further, however, that such election pursuant to clause (i) may only
be made one time. If some but not all the shares of Issuer Common Stock with
respect to which Issuer shall have received requests for registration pursuant
to this Section 9(b) shall be excluded from such registration, Issuer shall make
appropriate allocation of shares to be registered among Holders permitted to
register their shares of Issuer Common Stock in connection with such
registration pro rata in the proportion that the number of shares requested to
be registered by each such Holder bears to the total number of shares requested
to be registered by all such Holders then desiring to have Issuer Common Stock
registered for sale.
(c) Conditions to Required Registration. Issuer shall use all
reasonable efforts to cause each registration statement referred to in Section
9(a) to become effective and to obtain all consents or waivers of other parties
which are required therefor and to keep such registration statement effective;
provided, however, that Issuer may delay any registration of Option Shares
required pursuant to Section 9(a) for a period not exceeding 90 days if
11
<PAGE> 13
Issuer shall in good faith determine that any such registration would adversely
affect an offering or contemplated offering of other securities by Issuer, and
Issuer shall not be required to register Option Shares under the Securities Act
pursuant to Section 9(a):
(i) prior to the earliest of (A) termination of the Plan pursuant
to Article VII thereof, and (B) a Purchase Event or a Preliminary
Purchase Event;
(ii) on more than one occasion during any calendar year and on
more than two occasions in total;
(iii) within 90 days after the effective date of a registration
referred to in Section 9(b) pursuant to which the Holder or Holders
concerned were afforded the opportunity to register such shares under
the Securities Act and such shares were registered as requested; and
(iv) unless a request therefor is made to Issuer by the Holder or
Holders of at least 25% or more of the aggregate number of Option
Shares (including shares of Issuer Common Stock issuable upon exercise
of the Option) then outstanding.
In addition to the foregoing, Issuer shall not be required to maintain
the effectiveness of any registration statement after the expiration of nine
months from the effective date of such registration statement. Issuer shall use
all reasonable efforts to make any filings, and take all steps, under all
applicable state securities laws to the extent necessary to permit the sale or
other disposition of the Option Shares so registered in accordance with the
intended method of distribution for such shares, provided, however, that Issuer
shall not be required to consent to general jurisdiction or to qualify to do
business in any state where it is not otherwise required to so consent to such
jurisdiction or to so qualify to do business.
(d) Expenses. Issuer will pay all expenses (including without
limitation registration fees, qualification fees, blue sky fees and expenses,
accounting expenses, legal expenses and printing expenses incurred by it) in
connection with each registration pursuant to Section 9(a) or (b) and all other
qualifications, notifications or exemptions pursuant to Section 9(a) or (b).
Underwriting discounts and commissions relating to Option Shares, fees and
disbursements of counsel to the Holder(s) of Option Shares being registered and
any other expenses incurred by such Holder(s) in connection with any such
registration shall be borne by such Holder(s).
(e) Indemnification. In connection with any registration under Section
9(a) or (b), Issuer hereby indemnifies each Holder, and each underwriter
thereof, including each person, if any, who controls such Holder or underwriter
within the meaning of Section 15 of the Securities Act, against all expenses,
losses, claims, damages and liabilities caused by any untrue, or alleged untrue,
statement of a material fact contained in any registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission,
or alleged
12
<PAGE> 14
omission, to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
expenses, losses, claims, damages or liabilities of such indemnified party are
caused by any untrue statement or alleged untrue statement that was included by
Issuer in any such registration statement or prospectus or notification or
offering circular (including any amendments or supplements thereto) in reliance
upon, and in conformity with, information furnished in writing to Issuer by such
indemnified party expressly for use therein, and Issuer and each officer,
director and controlling person of Issuer shall be indemnified by such Holder,
or by such underwriter, as the case may be, for all such expenses, losses,
claims, damages and liabilities caused by any untrue, or alleged untrue,
statement that was included by Issuer in any such registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) in reliance upon, and in conformity with, information
furnished in writing to Issuer by such Holder or such underwriter, as the case
may be, expressly for such use.
Promptly upon receipt by a party indemnified under this Section 9(e) of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 9(e), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but,
except to the extent of any actual prejudice to the indemnifying party, the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 9(e). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably satisfactory
to such indemnified party. The indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (i) the
indemnifying party agrees to pay the same, (ii) the indemnifying party fails to
assume the defense of such action with counsel reasonably satisfactory to the
indemnified party, or (iii) the indemnified party has been advised by counsel
that one or more legal defenses may be available to the indemnifying party that
may be contrary to the interest of the indemnified party, in which case the
indemnifying party shall be entitled to assume the defense of such action
notwithstanding its obligation to bear fees and expenses of such counsel. No
indemnifying party shall be liable for any settlement entered into without its
consent, which consent may not be unreasonably withheld.
If the indemnification provided for in this Section 9(e) is unavailable
to a party otherwise entitled to be indemnified in respect of any expenses,
losses, claims, damages or liabilities referred to herein, then the indemnifying
party, in lieu of indemnifying such party otherwise entitled to be indemnified,
shall contribute to the amount paid or payable by such party to be indemnified
as a result of such expenses, losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative benefits received by
Issuer, the
13
<PAGE> 15
selling Holders and the underwriters from the offering of the securities and
also the relative fault of Issuer, the selling Holders and the underwriters in
connection with the statement or omissions which results in such expenses,
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The amount paid or payable by a party as a result of the
expenses, losses, claims, damages and liabilities referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any action or claim;
provided, however, that in no case shall the selling Holders be responsible, in
the aggregate, for any amount in excess of the net offering proceeds
attributable to its Option Shares included in the offering. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(g) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Any obligation by any Holder to
indemnify shall be several and not joint with other Holders.
In connection with any registration pursuant to Section 9(a) or (b)
above, Issuer and each selling Holder (other than Grantee) shall enter into an
agreement containing the indemnification provisions of this Section 9(e).
(f) Miscellaneous Reporting. Issuer shall comply with all reporting
requirements and will do all such other things as may be necessary to permit the
expeditious sale at any time of any Option Shares by the Holder(s) in accordance
with and to the extent permitted by any rule or regulation permitting
nonregistered sales of securities promulgated by the Commission from time to
time, including, without limitation, Rule 144A. Issuer shall at its expense
provide the Holder with any information necessary in connection with the
completion and filing of any reports or forms required to be filed by them under
the Securities Act or the Exchange Act, or required pursuant to any state
securities laws or the rules of any stock exchange.
(g) Issue Taxes. Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save any Holder harmless, without limitation as to time,
against any and all liabilities, with respect to all such taxes.
10. Quotation; Listing. If Issuer Common Stock or any other securities
to be acquired upon exercise of the Option are then authorized for quotation or
trading or listing on NASDAQ/NMS or any securities exchange, Issuer, upon the
request of Holder, will promptly file an application, if required, to authorize
for quotation or trading or listing the shares of Issuer Common Stock or other
securities to be acquired upon exercise of the Option on NASDAQ/NMS or such
other securities exchange and will use its best efforts to obtain approval, if
required, of such quotation or listing as soon as practicable.
11. Division of Option. Upon the occurrence of a Purchase Event or a
Preliminary Purchase Event, this Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the
14
<PAGE> 16
principal office of the Issuer for other Agreements providing for Options of
different denominations entitling the holder thereof to purchase in the
aggregate the same number of shares of Issuer Common Stock purchasable
hereunder. The terms "Agreement" and "Option" as used herein include any other
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
12. Miscellaneous.
(a) Expenses. Except as otherwise provided in Section 9, 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 Beneficiaries; Severability. This
Agreement, together with the Plan and the other documents and instruments
referred to herein and therein, between Grantee and Issuer (i) 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 (ii) is not intended to confer upon any person other than the parties hereto
(other than the indemnified parties under Section 9(e) and any transferee of the
Option Shares or any permitted transferee of this Agreement pursuant to Section
12(h)) any rights or remedies hereunder. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or a
federal or state regulatory agency to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Option does not permit Holder 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 (as adjusted pursuant to Section 7), it is the express
intention of Issuer to allow Holder to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible without any
amendment or modification hereof.
15
<PAGE> 17
(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Maine 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 sent by overnight mail service or mailed by registered or
certified mail (return receipt requested) postage prepaid, to the parties at the
following address (or at such other address for a party as shall be specified by
like notice):
If to Grantee:
Peoples Heritage Financial Group, Inc.
One Portland Square
Portland, Maine 04112-9540
Attn: William J. Ryan
Chairman, President and Chief Executive Officer
Fax: 207-761-8587
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, DC 20005
Attn: Gerard L. Hawkins, Esq.
Fax: 202-347-2172
If to Issuer:
Family Bancorp
153 Merrimack Street
Haverhill, Massachusetts 01830
Attn: David D. Hindle
President and Chief Executive Officer
Fax: 508-374-5319
With a required copy to:
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Peter W. Coogan, Esq.
Fax: 617-832-7000
16
<PAGE> 18
(g) Counterparts. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(h) Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder or under 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 Holder may assign this Agreement
to a wholly-owned subsidiary of Holder and Holder may assign its rights
hereunder in whole or in part after the occurrence of a Purchase Event. Subject
to the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
(i) Further Assurances. In the event of any exercise of the Option by
Holder, Issuer and Holder 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.
17
<PAGE> 19
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.
Attest: FAMILY BANCORP
/s/ George E. Fahey By: /s/ David D. Hindle
- ------------------------------------------ -----------------------------
Name: George E. Fahey Name: David D. Hindle
Title: Executive Vice President, Treasurer Title: President and Chief
and Chief Financial Officer Executive Officer
PEOPLES HERITAGE
FINANCIAL GROUP, INC.
Attest:
/s/ Peter J. Verrill By: /s/ William J. Ryan
- ------------------------------------------ -----------------------------
Name: Peter J. Verrill Name: William J. Ryan
Title: Executive Vice President, Title: Chairman, President
Chief Operating Officer and Chief Executive
and Chief Financial Officer Officer
18
<PAGE> 1
Exhibit 10(b)
Stock Option Agreement,
dated as of May 30, 1996,
between Peoples Heritage (as issuer)
and Family (as grantee)
<PAGE> 2
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of May 30, 1996 (the "Agreement"), by
and between Peoples Heritage Financial Group, Inc., a Maine corporation
("Issuer"), and Family Bancorp, a Massachusetts corporation ("Grantee").
WITNESSETH:
WHEREAS, Grantee, Issuer and Peoples Heritage Merger Corp. ("PHMC"), a
wholly-owned subsidiary of Issuer, have entered into an Agreement and Plan of
Merger, dated as of May 30, 1996 (the "Plan"), providing for, among other
things, the merger of Grantee with and into PHMC (the "Merger"), with PHMC as
the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Plan and Grantee's agreement referred to in the next WHEREAS clause, Grantee has
required that Issuer agree, and Issuer has agreed, to grant to Grantee the
Option (as hereinafter defined); and
WHEREAS, as a condition and inducement to Issuer's execution of the
Plan and this Agreement, Grantee has agreed to grant an option to Issuer on
terms and conditions which are substantially identical to those of the Option
and this Agreement with respect to approximately 19.9% of the common stock of
Grantee;
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, 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 Plan.
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 1,500,000 shares (as adjusted as set forth herein) (the "Option
Shares," which shall include the Option Shares before and after any transfer of
such Option Shares) of Common Stock, par value $0.01 per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (the "Purchase Price")
of $19.75, provided, however, that in no event shall the number of Option Shares
for which the Option is exercisable exceed 6.0% of the issued and outstanding
shares of Issuer Common Stock without giving effect to any shares subject to or
issued pursuant to the Option. Each Option Share issued upon exercise of the
Option shall be accompanied by Acquiror Rights as provided in the Acquiror
Rights Agreement.
3. Exercise of Option.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of the agreements or covenants
contained in this Agreement
<PAGE> 3
or the Plan, and (ii) no preliminary or permanent injunction or other order
against the delivery of shares covered by the Option issued by any court of
competent jurisdiction in the United States shall be in effect, Holder 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 hereinafter defined); provided
that the Option shall terminate and be of no further force and effect upon the
earliest to occur of (A) the Effective Time of the Merger, (B) termination of
the Plan in accordance with the terms thereof prior to the occurrence of a
Purchase Event or a Preliminary Purchase Event, other than a termination of the
Plan by Grantee pursuant to Section 7.1(b)(i) (a "Default Termination"), (C) 12
months after the termination of the Plan by Grantee pursuant to a Default
Termination, and (D) 12 months after termination of the Plan (other than
pursuant to a Default Termination) following the occurrence of a Purchase Event
or a Preliminary Purchase Event; and provided, further, that any purchase of
shares upon exercise of the Option shall be subject to compliance with
applicable laws, including without limitation the Bank Holding Company Act of
1956, as amended (the "BHC Act"), and the Home Owners' Loan Act, as amended
("HOLA"). The term "Holder" shall mean the holder or holders of the Option from
time to time, and which is initially Grantee. The rights set forth in Section 8
hereof shall terminate when the right to exercise the Option terminates (other
than as a result of a complete exercise of the Option) as set forth above.
(b) As used herein, a "Purchase Event" means any of the following
events:
(i) Without Grantee's prior written consent, Issuer shall have
authorized, recommended or publicly-proposed, or publicly announced an
intention to authorize, recommend or propose, or entered into an
agreement with any person (other than Grantee or any subsidiary of
Grantee) to effect (A) a merger, consolidation or similar transaction
involving Issuer or any of its subsidiaries, (B) the disposition, by
sale, lease, exchange or otherwise, of assets of Issuer or any of its
subsidiaries representing in either case 15% or more of the
consolidated assets of Issuer and its subsidiaries, 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 of its
subsidiaries (any of the foregoing an "Acquisition Transaction"); or
(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 Exchange Act) of or the right to
acquire beneficial ownership of, or any "group" (as such term is
defined in Section 13(d)(3) of the Exchange Act) shall have been formed
which beneficially owns or has the right to acquire beneficial
ownership of, 25% or more of the then outstanding shares of Issuer
Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
2
<PAGE> 4
(i) 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 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 10% or more of the then
outstanding shares of Issuer Common Stock (such an offer being referred
to herein as a "Tender Offer" and an "Exchange Offer," respectively);
or
(ii) (A) the holders of Issuer Common Stock shall not have
approved the Plan at the meeting of such stockholders held for the
purpose of voting on the Plan, (B) such meeting shall not have been
held or shall have been canceled prior to termination of the Plan or
(C) Issuer's Board of Directors shall have withdrawn or modified in a
manner adverse to Grantee the recommendation of Issuer's Board of
Directors with respect to the Plan, in each case after it shall have
been publicly announced that any person (other than Grantee or any
subsidiary of Grantee) shall have (x) made, or disclosed an intention
to make, a proposal to engage in an Acquisition Transaction, (y)
commenced a Tender Offer or filed a registration statement under the
Securities Act with respect to an Exchange Offer, or (z) filed an
application (or given notice), whether in draft or final form, under
the BHC Act, the HOLA, the Bank Merger Act, as amended, or the Change
in Bank Control Act of 1978, as amended, for approval to engage in an
Acquisition Transaction; or
(iii) Issuer shall have breached any representation, warranty,
covenant or obligation contained in the Plan and such breach would
entitle Grantee to terminate the Plan under Section 7.1(b) thereof
(without regard to the cure period provided for therein unless such
cure is promptly effected without jeopardizing consummation of the
Merger pursuant to the terms of the Plan) after (x) a bona fide
proposal is made by any person (other than Grantee or any subsidiary of
Grantee) to Issuer or its stockholders to engage in an Acquisition
Transaction, (y) any person (other than Grantee or any subsidiary of
Grantee) states its intention to Issuer or its stockholders to make a
proposal to engage in an Acquisition Transaction if the Plan terminates
or (z) any person (other than Grantee or any subsidiary of Grantee)
shall have filed an application or notice with any Governmental Entity
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.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Preliminary Purchase Event or Purchase Event, it being understood that
the giving of such notice by Issuer shall not be a condition to the right of
Holder to exercise the Option.
(e) In the event Holder 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
3
<PAGE> 5
(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"), the Office of Thrift Supervision ("OTS") or any other Governmental
Entity is required in connection with such purchase, Issuer shall cooperate with
Grantee in the filing of the required notice of application for approval and the
obtaining of such approval and the Closing shall occur immediately following
such regulatory approvals (and any mandatory waiting periods).
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Holder 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 Issuer at the address of Issuer specified in Section 12(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), (i)
Issuer shall deliver to Holder (A) a certificate or certificates representing
the Option Shares to be purchased at such Closing, which Option Shares shall be
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever and subject to no preemptive rights, 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, and (ii) Holder shall deliver to Issuer a
letter agreeing that Holder shall not offer to sell or otherwise dispose of such
Option Shares in violation of applicable federal and state law or of the
provisions of this Agreement.
(c) In addition to any other legend that is required by applicable law,
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 MAY 30, 1996. A COPY OF SUCH AGREEMENT WILL BE PROVIDED
TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY 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 Holder shall have
delivered to Issuer a copy of a letter from the staff of the Commission, or an
opinion of counsel in form and substance
4
<PAGE> 6
reasonably satisfactory to Issuer and its counsel, to the effect that such
legend is not required for purposes of the Securities Act.
(d) Upon the giving by Holder to Issuer of the written notice of
exercise of the Option provided for under Section 3(e), the tender of the
applicable purchase price in immediately available funds and the tender of this
Agreement to Issuer, Holder shall be deemed to be the holder of record of the
shares of Issuer Common Stock issuable upon such exercise, notwithstanding that
the stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Issuer Common Stock shall not then be actually
delivered to Holder.
(e) Issuer agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Issuer Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Issuer Common
Stock, (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer, (iii) promptly to take all action as may from time to time be required
(including (A) complying with all premerger notification, reporting and waiting
period requirements and (B) in the event prior approval of or notice to any
Governmental Entity is necessary before the Option may be exercised, cooperating
fully with Holder in preparing such applications or notices and providing such
information to such Governmental Entity as it may require) in order to permit
Holder to exercise the Option and Issuer duly and effectively to issue shares of
Issuer Common Stock pursuant hereto, and (iv) promptly to take all action
provided herein to protect the rights of Holder against dilution.
5. Representations and Warranties of Issuer. Issuer hereby represents
and warrants to Grantee (and Holder, if different than Grantee) as follows:
(a) Due Authorization. Issuer has all requisite corporate power and
authority to enter into this Agreement, and subject to any approvals 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 Issuer, and this Agreement has been duly executed and delivered by Issuer.
(b) No Violations. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by Issuer
with any of the provisions hereof will not (i) conflict with or result in a
breach of any provision of its Articles of Agreement or Bylaws or a default (or
give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any note, bond, debenture, mortgage,
indenture, license, material agreement or other material
5
<PAGE> 7
instrument or obligation to which Issuer is a party, or by which it or any of
its properties or assets may be bound, or (ii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Issuer or any of
its properties or assets.
(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 hereof 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 that number of shares of Issuer Common Stock equal to the
maximum number of shares of Issuer Common Stock at any time and from time to
time purchasable upon exercise of the Option, and all such shares, upon issuance
pursuant to the Option, will be duly and validly issued, fully paid and
nonassessable, and will be delivered free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever and not subject to any
preemptive rights.
6. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that Grantee has all requisite corporate power
and authority to enter into this Agreement and, subject to any approvals or
consents referred to herein, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee, and this Agreement has been duly
executed and delivered by Grantee.
7. Adjustment upon Changes in Issuer Capitalization, etc.
(a) In the event 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, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transactions so that Holder shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that Holder 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 6.0% of
the number of shares of Issuer Common Stock then issued and outstanding, without
giving effect to any shares subject to or issued pursuant to the Option.
(b) In the event that Issuer shall enter in 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
6
<PAGE> 8
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 Holder, of any of (x) the
Acquiring Corporation (as hereinafter defined), (y) any person that controls the
Acquiring Corporation or (z) in the case of a merger described in clause (ii),
Issuer (such person being referred to as "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 Holder. Substitute Option Issuer also shall enter
into an agreement with Holder in substantially the same form as this Agreement,
which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock (as 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 Substitute
Option per share of Substitute Common Stock (the "Substitute Option Price")
shall then be equal to the Purchase Price multiplied by a fraction in which the
numerator is the number of shares of 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:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if
other than Issuer), (ii) Issuer in a merger in which Issuer is the
continuing or surviving person, or (iii) the transferee of all or
substantially all of Issuer's assets (or a substantial part of the
assets of its subsidiaries taken as a whole).
(2) "Substitute Common Stock" shall mean the shares of capital
stock (or similar equity interest) with the greatest voting power in
respect of the election of directors (or persons similarly responsible
for the direction of the business and affairs) of the Substitute Option
Issuer.
(3) "Assigned Value" shall mean the highest of (w) the price per
share of Issuer Common Stock at which a Tender Offer or an Exchange
Offer therefor has
7
<PAGE> 9
been made, (x) the price per share of Issuer Common Stock to be paid by
any third party pursuant to an agreement with Issuer, (y) the highest
closing price for shares of Issuer Common Stock within the six-month
period immediately preceding the consolidation, merger or sale in
question and (z) in the event of a sale of all or substantially all of
Issuer's assets or deposits, an amount equal to (i) the sum of the
price paid in such sale for such assets (and/or deposits) and the
current market value of the remaining assets of Issuer, as determined
by a nationally-recognized investment banking firm selected by Holder,
divided by (ii) the number of shares of Issuer Common Stock outstanding
at such time. In the event that a Tender Offer or an Exchange Offer is
made for 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 Issuer Common Stock shall be determined by a
nationally-recognized investment banking firm selected by Holder.
(4) "Average Price" shall mean the average closing price of a share
of Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than
the closing price of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that if Issuer
is the issuer of the Substitute Option, the Average Price shall be
computed with respect to a share of common stock issued by Issuer, the
person merging into Issuer or by any company which controls such
person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 6.0% of the aggregate of the
shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 6.0% of the aggregate of the shares of Substitute Common Stock but
for the limitation in the first sentence of this Section 7(f), Substitute Option
Issuer shall make a cash payment to Holder equal to the excess of (i) the value
of the Substitute Option without giving effect to the limitation in the first
sentence of this Section 7(f) over (ii) the value of the Substitute Option after
giving effect to the limitation in the first sentence of this Section 7(f). This
difference in value shall be determined by a nationally-recognized investment
banking firm selected by Holder.
(g) Issuer shall not enter into any transaction described in Section
7(b) 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 holders of the other shares of common stock issued
by Substitute Option Issuer are not entitled to exercise any rights by reason of
the issuance or exercise of the Substitute Option and the shares of Substitute
Common Stock are otherwise in no way distinguishable from or have lesser
economic value (other than any diminution in value resulting from the fact that
the shares of Substitute
8
<PAGE> 10
Common Stock are restricted securities, as defined in Rule 144 under the
Securities Act or any successor provision) than other shares of common stock
issued by Substitute Option Issuer).
8. Repurchase at the Option of Holder.
(a) Subject to the last sentence of Section 3(a), at the request of
Holder at any time commencing upon the first occurrence of a Repurchase Event
(as defined in Section 8(d)) and ending 12 months immediately thereafter, Issuer
shall repurchase from Holder (i) the Option and (ii) all shares of Issuer Common
Stock purchased by Holder pursuant hereto with respect to which Holder then has
beneficial ownership. The date on which Holder 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 Holder for any shares of
Issuer Common Stock acquired pursuant to the Option with respect to
which Holder 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 Holder for
each share of Issuer Common Stock with respect to which the Option has
been exercised and with respect to which Holder then has beneficial
ownership, multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer shall,
within 10 business days after the Request Date, pay the Section 8 Repurchase
Consideration to Holder in immediately available funds, and contemporaneously
with such payment Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock purchased thereunder
with respect to which Holder then has beneficial ownership, and 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, the OTS or any other
Governmental Entity is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Holder shall have the ongoing
option to revoke its request for repurchase pursuant to Section 8, in whole or
in part, or to require that Issuer deliver from time to time that portion of the
Section 8 Repurchase Consideration that it is not then so prohibited
9
<PAGE> 11
from paying and promptly file the required notice or application for approval
and expeditiously process the same (and each party shall cooperate with the
other in the filing of any such notice or application and the obtaining of any
such approval). If the Federal Reserve Board, the OTS or any other Governmental
Entity disapproves of any part of Issuer's proposed repurchase pursuant to this
Section 8, Issuer shall promptly give notice of such fact to Holder. If the
Federal Reserve Board, the OTS or any other Governmental Entity prohibits the
repurchase in part but not in whole, then Holder shall have the right (i) to
revoke the repurchase request or (ii) to the extent permitted by the Federal
Reserve Board, the OTS or other Governmental Entity, determine whether the
repurchase should apply to the Option and/or Option Shares and to what extent to
each, and Holder shall thereupon have the right to exercise the Option as to the
number of Option Shares for which the Option was exercisable at the Request Date
less the sum of the number of shares covered by the Option in respect of which
payment has been made pursuant to Section 8(a)(ii) and the number of shares
covered by the portion of the Option (if any) that has been repurchased. Holder
shall notify Issuer of its determination under the preceding sentence within
five business days of receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Grantee's
rights under this Section 8 shall terminate on the date of termination of the
Option pursuant to Section 3(a).
(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), (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), or (iii) the highest closing sales
price per share of Issuer Common Stock quoted on the Nasdaq Stock Market's
National Market ("NASDAQ/NMS") (or if Issuer Common Stock is not quoted on
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 chosen by Holder) 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 Holder, divided by the number of shares of Issuer Common Stock outstanding at
the time of such sale. If the consideration to be offered, paid or received
pursuant to either of the foregoing clauses (i) or (ii) shall be other than in
cash, the value of such consideration shall be determined in good faith by an
independent nationally-recognized investment banking firm selected by Holder and
reasonably acceptable to Issuer, which determination shall be conclusive for all
purposes of this Agreement.
(d) As used herein, a "Repurchase Event" shall occur if (i) any person
(other than Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act), or the right to acquire
10
<PAGE> 12
beneficial ownership of, or any "group" (as such term is defined in Section
13(d)(3) of the Exchange Act) shall have been formed which beneficially owns or
has the right to acquire beneficial ownership of, 50% or more of the then
outstanding shares of Issuer Common Stock, or (ii) any of the transactions
described in Section 7(b)(i), Section 7(b)(ii) or Section 7(b)(iii) shall be
consummated.
9. Registration Rights.
(a) Demand Registration Rights. Issuer shall, subject to the conditions
of Section 9(c), if requested by any Holder, as expeditiously as possible
prepare and file a registration statement 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 Holder upon exercise of the Option in accordance
with the intended method of sale or other disposition stated by Holder in such
request, including without limitation 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 for sale under
any applicable state securities laws.
(b) Additional Registration Rights. If Issuer at any time after the
exercise of the Option proposes to register any shares of Issuer Common Stock
under the Securities Act in connection with an underwritten public offering of
such Issuer Common Stock, Issuer will promptly give written notice to Holder of
its intention to do so and, upon the written request of Holder given within 30
days after receipt of any such notice (which request shall specify the number of
shares of Issuer Common Stock intended to be included in such underwritten
public offering by Holder), Issuer will cause all such shares for which a Holder
shall have requested participation in such registration to be so registered and
included in such underwritten public offering; provided, however, that Issuer
may elect to not cause any such shares to be so registered (i) if the
underwriters in good faith object for valid business reasons, or (ii) in the
case of a registration solely to implement an employee benefit plan or a
registration filed on Form S-4 under the Securities Act or any successor form;
provided, further, however, that such election pursuant to clause (i) may only
be made one time. If some but not all the shares of Issuer Common Stock with
respect to which Issuer shall have received requests for registration pursuant
to this Section 9(b) shall be excluded from such registration, Issuer shall make
appropriate allocation of shares to be registered among Holders permitted to
register their shares of Issuer Common Stock in connection with such
registration pro rata in the proportion that the number of shares requested to
be registered by each such Holder bears to the total number of shares requested
to be registered by all such Holders then desiring to have Issuer Common Stock
registered for sale.
(c) Conditions to Required Registration. Issuer shall use all
reasonable efforts to cause each registration statement referred to in Section
9(a) to become effective and to obtain all consents or waivers of other parties
which are required therefor and to keep such registration statement effective;
provided, however, that Issuer may delay any registration of Option Shares
required pursuant to Section 9(a) for a period not exceeding 90 days if
11
<PAGE> 13
Issuer shall in good faith determine that any such registration would adversely
affect an offering or contemplated offering of other securities by Issuer, and
Issuer shall not be required to register Option Shares under the Securities Act
pursuant to Section 9(a):
(i) prior to the earliest of (A) termination of the Plan pursuant
to Article VII thereof, and (B) a Purchase Event or a Preliminary
Purchase Event;
(ii) on more than one occasion during any calendar year and on
more than two occasions in total;
(iii) within 90 days after the effective date of a registration
referred to in Section 9(b) pursuant to which the Holder or Holders
concerned were afforded the opportunity to register such shares under
the Securities Act and such shares were registered as requested; and
(iv) unless a request therefor is made to Issuer by the Holder or
Holders of at least 25% or more of the aggregate number of Option
Shares (including shares of Issuer Common Stock issuable upon exercise
of the Option) then outstanding.
In addition to the foregoing, Issuer shall not be required to maintain
the effectiveness of any registration statement after the expiration of nine
months from the effective date of such registration statement. Issuer shall use
all reasonable efforts to make any filings, and take all steps, under all
applicable state securities laws to the extent necessary to permit the sale or
other disposition of the Option Shares so registered in accordance with the
intended method of distribution for such shares, provided, however, that Issuer
shall not be required to consent to general jurisdiction or to qualify to do
business in any state where it is not otherwise required to so consent to such
jurisdiction or to so qualify to do business.
(d) Expenses. Issuer will pay all expenses (including without
limitation registration fees, qualification fees, blue sky fees and expenses,
accounting expenses, legal expenses and printing expenses incurred by it) in
connection with each registration pursuant to Section 9(a) or (b) and all other
qualifications, notifications or exemptions pursuant to Section 9(a) or (b).
Underwriting discounts and commissions relating to Option Shares, fees and
disbursements of counsel to the Holder(s) of Option Shares being registered and
any other expenses incurred by such Holder(s) in connection with any such
registration shall be borne by such Holder(s).
(e) Indemnification. In connection with any registration under Section
9(a) or (b), Issuer hereby indemnifies each Holder, and each underwriter
thereof, including each person, if any, who controls such Holder or underwriter
within the meaning of Section 15 of the Securities Act, against all expenses,
losses, claims, damages and liabilities caused by any untrue, or alleged untrue,
statement of a material fact contained in any registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission,
or alleged
12
<PAGE> 14
omission, to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
expenses, losses, claims, damages or liabilities of such indemnified party are
caused by any untrue statement or alleged untrue statement that was included by
Issuer in any such registration statement or prospectus or notification or
offering circular (including any amendments or supplements thereto) in reliance
upon, and in conformity with, information furnished in writing to Issuer by such
indemnified party expressly for use therein, and Issuer and each officer,
director and controlling person of Issuer shall be indemnified by such Holder,
or by such underwriter, as the case may be, for all such expenses, losses,
claims, damages and liabilities caused by any untrue, or alleged untrue,
statement that was included by Issuer in any such registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) in reliance upon, and in conformity with, information
furnished in writing to Issuer by such Holder or such underwriter, as the case
may be, expressly for such use.
Promptly upon receipt by a party indemnified under this Section 9(e) of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 9(e), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but,
except to the extent of any actual prejudice to the indemnifying party, the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 9(e). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably satisfactory
to such indemnified party. The indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (i) the
indemnifying party agrees to pay the same, (ii) the indemnifying party fails to
assume the defense of such action with counsel reasonably satisfactory to the
indemnified party, or (iii) the indemnified party has been advised by counsel
that one or more legal defenses may be available to the indemnifying party that
may be contrary to the interest of the indemnified party, in which case the
indemnifying party shall be entitled to assume the defense of such action
notwithstanding its obligation to bear fees and expenses of such counsel. No
indemnifying party shall be liable for any settlement entered into without its
consent, which consent may not be unreasonably withheld.
If the indemnification provided for in this Section 9(e) is unavailable
to a party otherwise entitled to be indemnified in respect of any expenses,
losses, claims, damages or liabilities referred to herein, then the indemnifying
party, in lieu of indemnifying such party otherwise entitled to be indemnified,
shall contribute to the amount paid or payable by such party to be indemnified
as a result of such expenses, losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative benefits received by
Issuer, the
13
<PAGE> 15
selling Holders and the underwriters from the offering of the securities and
also the relative fault of Issuer, the selling Holders and the underwriters in
connection with the statement or omissions which results in such expenses,
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The amount paid or payable by a party as a result of the
expenses, losses, claims, damages and liabilities referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any action or claim;
provided, however, that in no case shall the selling Holders be responsible, in
the aggregate, for any amount in excess of the net offering proceeds
attributable to its Option Shares included in the offering. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(g) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Any obligation by any Holder to
indemnify shall be several and not joint with other Holders.
In connection with any registration pursuant to Section 9(a) or (b)
above, Issuer and each selling Holder (other than Grantee) shall enter into an
agreement containing the indemnification provisions of this Section 9(e).
(f) Miscellaneous Reporting. Issuer shall comply with all reporting
requirements and will do all such other things as may be necessary to permit the
expeditious sale at any time of any Option Shares by the Holder(s) in accordance
with and to the extent permitted by any rule or regulation permitting
nonregistered sales of securities promulgated by the Commission from time to
time, including, without limitation, Rule 144A. Issuer shall at its expense
provide the Holder with any information necessary in connection with the
completion and filing of any reports or forms required to be filed by them under
the Securities Act or the Exchange Act, or required pursuant to any state
securities laws or the rules of any stock exchange.
(g) Issue Taxes. Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save any Holder harmless, without limitation as to time,
against any and all liabilities, with respect to all such taxes.
10. Quotation; Listing. If Issuer Common Stock or any other securities
to be acquired upon exercise of the Option are then authorized for quotation or
trading or listing on NASDAQ/NMS or any securities exchange, Issuer, upon the
request of Holder, will promptly file an application, if required, to authorize
for quotation or trading or listing the shares of Issuer Common Stock or other
securities to be acquired upon exercise of the Option on NASDAQ/NMS or such
other securities exchange and will use its best efforts to obtain approval, if
required, of such quotation or listing as soon as practicable.
11. Division of Option. Upon the occurrence of a Purchase Event or a
Preliminary Purchase Event, this Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the
14
<PAGE> 16
principal office of the Issuer for other Agreements providing for Options of
different denominations entitling the holder thereof to purchase in the
aggregate the same number of shares of Issuer Common Stock purchasable
hereunder. The terms "Agreement" and "Option" as used herein include any other
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
12. Miscellaneous.
(a) Expenses. Except as otherwise provided in Section 9, 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 Beneficiaries; Severability. This
Agreement, together with the Plan and the other documents and instruments
referred to herein and therein, between Grantee and Issuer (i) 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 (ii) is not intended to confer upon any person other than the parties hereto
(other than the indemnified parties under Section 9(e) and any transferee of the
Option Shares or any permitted transferee of this Agreement pursuant to Section
12(h)) any rights or remedies hereunder. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or a
federal or state regulatory agency to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Option does not permit Holder 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 (as adjusted pursuant to Section 7), it is the express
intention of Issuer to allow Holder to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible without any
amendment or modification hereof.
15
<PAGE> 17
(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Maine 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 sent by overnight mail service or mailed by registered or
certified mail (return receipt requested) postage prepaid, to the parties at the
following address (or at such other address for a party as shall be specified by
like notice):
If to Grantee:
Family Bancorp
153 Merrimack Street
Haverhill, Massachusetts 01830
Attn: David D. Hindle
President and Chief Executive Officer
Fax: 508-374-5319
With a required copy to:
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Peter W. Coogan, Esq.
Fax: 617-832-7000
If to Issuer:
Peoples Heritage Financial Group, Inc.
One Portland Square
Portland, Maine 04112-9540
Attn: William J. Ryan
Chairman, President and Chief Executive Officer
Fax: 207-761-8587
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, DC 20005
Attn: Gerard L. Hawkins, Esq.
Fax: 202-347-2172
16
<PAGE> 18
(g) Counterparts. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(h) Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder or under 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 Holder may assign this Agreement
to a wholly-owned subsidiary of Holder and Holder may assign its rights
hereunder in whole or in part after the occurrence of a Purchase Event. Subject
to the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
(i) Further Assurances. In the event of any exercise of the Option by
Holder, Issuer and Holder 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.
17
<PAGE> 19
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 HERITAGE
FINANCIAL GROUP, INC.
Attest:
/s/ Peter J. Verrill By: /s/ William J. Ryan
- --------------------------------------------- ----------------------------
Name: Peter J. Verrill Name: William J. Ryan
Title: Executive Vice President, Title: Chairman, President
Chief Operating Officer and Chief Executive
and Chief Financial Officer Officer
Attest: FAMILY BANCORP
/s/ George E. Fahey By: /s/ David D. Hindle
- --------------------------------------------- ----------------------------
Name: George E. Fahey Name: David D. Hindle
Title: Executive Vice President, Treasurer Title: President and Chief
and Chief Financial Officer Executive Officer
18
<PAGE> 1
Exhibit 10(c)
Stockholder Agreement, dated
as of May 30, 1996, among
Peoples Heritage and certain
stockholders of Family
<PAGE> 2
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of May 30, 1996, by and among Peoples
Heritage Financial Group, Inc. (the "Acquiror"), a Maine corporation, and
certain stockholders of Family Bancorp (the "Company"), a Massachusetts
corporation, named on Schedule I hereto (collectively the "Stockholders").
WITNESSETH:
WHEREAS, the Acquiror, Peoples Heritage Merger Corp. (the "Acquiror
Sub") and the Company have entered into an Agreement and Plan of Merger, dated
as of the date hereof (the "Agreement"), which is being executed simultaneously
with the execution of this Stockholder Agreement and provides for, among other
things, the merger of the Company with and into the Acquiror Sub (the "Merger");
and
WHEREAS, in order to induce the Acquiror to enter into the Agreement,
each of the Stockholders agrees to, among other things, vote in favor of the
Agreement in his or her capacities as stockholders of the Company;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements set forth herein and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. OWNERSHIP OF COMPANY COMMON STOCK. Each Stockholder represents and
warrants that the Stockholder has or shares the right to vote and dispose of the
number of shares of common stock of the Company, par value $.10 per share
("Company Common Stock"), set forth opposite such Stockholder's name on Schedule
I hereto.
2. AGREEMENTS OF THE STOCKHOLDERS. Each Stockholder covenants and
agrees that:
(a) such Stockholder shall, at any meeting of the Company's
stockholders called for the purpose, vote, or cause to be voted, all
shares of Company Common Stock in which such stockholder has the right
to vote (whether owned as of the date hereof or hereafter acquired) in
favor of the Agreement and against any plan or proposal pursuant to
which the Company is to be acquired by or merged with, or pursuant to
which the Company proposes to sell all or substantially all of its
assets and liabilities to, any person entity or group (other than the
Acquiror or any subsidiary thereof);
(b) except as otherwise expressly permitted hereby, such
Stockholder shall not, prior to the meeting of the Company's
stockholders referred to in Section 2(a) hereof or the earlier
termination of the Agreement in accordance with its terms, sell,
pledge, transfer or otherwise dispose of the Stockholder's shares of
Company Common Stock; and
1
<PAGE> 3
(c) such Stockholder shall not in his capacity as a stockholder of
the Company directly or indirectly encourage or solicit or hold
discussions or negotiations with, or provide any information to, any
person, entity or group (other than the Acquiror or an affiliate
thereof) concerning any merger, sale of substantial assets or
liabilities not in the ordinary course of business, sale of shares of
capital stock or similar transactions involving the Company or any
subsidiary of the Company (provided that nothing herein shall be deemed
to affect the ability of any Stockholder to fulfill his duties as a
director or officer of the Company).
Each Stockholder further agrees that the Company's transfer agent shall
be given an appropriate stop transfer order and shall not be required to
register any attempted transfer of shares of Company Common Stock, unless the
transfer has been effected in compliance with the terms of this letter
agreement.
3. SUCCESSORS AND ASSIGNS. A Stockholder may sell, pledge, transfer or
otherwise dispose of his shares of Company Common Stock, provided that, with
respect to any sale, transfer or disposition which would occur on or before the
meeting of the Company's stockholders referred to in Section 2(a) hereof, such
Stockholder obtains the prior written consent of the Acquiror and that any
acquiror of such Company Common Stock agree in writing to be bound by the terms
of this Stockholder Agreement.
4. TERMINATION. The parties agree and intend that this Stockholder
Agreement be a valid and binding agreement enforceable against the parties
hereto and that damages and other remedies at law for the breach of this
Stockholder Agreement are inadequate. This Stockholder Agreement may be
terminated at any time prior to the consummation of the Merger by mutual written
consent of the parties hereto and shall be automatically terminated in the event
that the Agreement is terminated in accordance with its terms.
5. NOTICES. Notices may be provided to the Acquiror and the
Stockholders in the manner specified in Section 8.4 of the Agreement, with all
notices to the Stockholders being provided to them at the Company in the manner
specified in such section.
6. GOVERNING LAW. This Stockholder Agreement shall be governed by the
laws of the State of Maine without giving effect to the principles of conflicts
of laws thereof.
7. COUNTERPARTS. This Stockholder Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same and each of
which shall be deemed an original.
8. HEADINGS AND GENDER. The Section headings contained herein are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Stockholder Agreement. Use of the masculine gender herein
shall be considered to represent the masculine, feminine or neuter gender
whenever appropriate.
2
<PAGE> 4
IN WITNESS WHEREOF, the Acquiror, by a duly authorized officer, and
each of the Stockholders have caused this Stockholder Agreement to be executed
as of the day and year first above written.
PEOPLES HERITAGE FINANCIAL
GROUP, INC.
By: /s/ William J. Ryan
------------------------------------
Name: William J. Ryan
Title: Chairman, President and Chief
Executive Officer
COMPANY STOCKHOLDERS:
/s/ John E. Veasey
----------------------------------------
John E. Veasey
/s/ Elkin B. McCallum
----------------------------------------
Elkin B. McCallum
/s/ David D. Hindle
----------------------------------------
David D. Hindle
/s/ George E. Fahey
----------------------------------------
George E. Fahey
3
<PAGE> 5
/s/ Ronald G. Trombley
-----------------------------
Ronald G. Trombley
/s/ Bruce Fenn, III
-----------------------------
Bruce Fenn, III
/s/ David J. LaFlamme
-----------------------------
David J. LaFlamme
/s/ Kenneth L. Paul
-----------------------------
Kenneth L. Paul
/s/ Charles George, Jr.
-----------------------------
Charles George, Jr.
4
<PAGE> 6
SCHEDULE I
<TABLE>
<CAPTION>
Number of Shares of
Company Common Stock
Name of Stockholder Beneficially Owned
- ---------------------------- --------------------
<S> <C>
John E. Veasey 120,962
Elkin B. McCallum 57,150
David D. Hindle 28,122
George E. Fahey 23,859
Ronald G. Trombley 21,983
Bruce Fenn, III 11,120
David J. LaFlamme 33,182
Kenneth L. Paul 7,800
Charles George, Jr. 3,750
</TABLE>
5
<PAGE> 1
Exhibit 20
Press Release issued
on May 31, 1996
with respect to the Agreement
<PAGE> 2
For Immediate Release
For Further Information, Contact:
At Peoples Heritage Financial Group:
Brian Arsenault, AVP, Corporate Communications
(207) 761-8517
At Family Bancorp:
David D. Hindle, President and Chief Executive Officer
(508) 374-1911
Peoples Heritage to Acquire Family Bancorp
Portland, Maine and Haverhill, Massachusetts; May 31, 1996. Peoples
Heritage Financial Group, Inc. (NASDAQ: PHBK) and Family Bancorp (NASDAQ: FMLY)
today announced a definitive agreement under which Peoples Heritage will acquire
Family.
The acquisition will result in Peoples Heritage becoming a $5.1 billion
bank and financial services holding company by adding Family's 17 banking
offices in the Merrimack Valley area of Greater Haverhill and Greater Lowell,
Massachusetts and six banking offices in southern New Hampshire to Peoples
Heritage's existing statewide franchises in Maine and New Hampshire. Family
Bancorp conducts business through Family Bank, a federally-chartered savings
bank which will continue to conduct business under the Family name. The
acquisition is anticipated to be completed by year-end 1996.
The transaction is structured as a tax-free exchange of 1.26 shares of
Peoples Heritage common stock for each share of Family common stock. Based on a
20 trading day average per share closing price of the Peoples Heritage common
stock on May 30, 1996 of $20.32, the transaction would be valued at $113.2
million and Family shareholders would receive $25.60 in Peoples Heritage common
stock for each share of Family common stock. This price equates to a price to
fully-diluted book value ratio of 1.64 (primary book value ratio of 1.52) at
March 31, 1996, a price to fully-diluted tangible book value ratio of 1.79
(primary tangible book value ratio of 1.66) at the same date, and a price equal
to 13.1 times trailing 12-month earnings.
The transaction will be accounted for under the purchase method of
accounting and, subject to market conditions, Peoples Heritage intends to
repurchase on the open market approximately half, or about 2.6 million shares,
of the shares to be issued in the acquisition.
<PAGE> 3
William J. Ryan, Chairman, President and Chief Executive Officer of
Peoples Heritage, said: "The acquisition of Family will provide Peoples Heritage
with a strong presence in the important, growing markets in northeastern
Massachusetts, as well as enhance our existing statewide New Hampshire
franchise. We view this acquisition as an effective means of managing our
capital in order to increase earnings per share and return on equity."
David D. Hindle, President and Chief Executive Officer of Family,
stated: "By affiliating with a highly profitable and strongly capitalized
institution such as Peoples Heritage, Family Bank will be able to offer a
greater range of products and services to our customers while maintaining our
community banking orientation."
The agreement is subject to approval by shareholder votes of both
companies and regulatory authorities. As part of the agreement, Family provided
Peoples Heritage an option to purchase approximately 19.9% of its outstanding
common stock under certain circumstances and Peoples Heritage provided Family an
option to purchase approximately 6% of its outstanding common stock under
certain circumstances.
Peoples Heritage is a $4.3 billion multi-bank and financial services
holding company with headquarters in Portland, Maine. The Company's Maine bank,
Peoples Heritage Bank, operates 62 banking centers throughout the state. In New
Hampshire, Peoples Heritage is combining the Bank of New Hampshire and The First
National Bank of Portsmouth in late June to operate a 45-branch network
throughout New Hampshire. Peoples Heritage also operates a mortgage services
company, Peoples Heritage Mortgage Corporation, Inc., a financial planning
company, Heritage Investment Planning Group, Inc., and a leasing subsidiary,
Peoples Heritage Leasing Corporation.
Family is an $887 million savings and loan holding company which
operates Family Bank. Family Bank became a federally-chartered savings bank in
1995 when Family combined its two formerly state-chartered savings banks to
allow its customers to bank at its offices in either Massachusetts or New
Hampshire.
-2-
